U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________
Commission file number 0-5887
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RTI INC.
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(Exact name of small business issuer as specified in its charter)
NEW YORK 11-2163152
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O.BOX 3048, 301 ANTONE, SUNLAND PARK, NEW MEXICO 88063
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(Address of principal executive offices) (Zip Code)
(505) 589-5431
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(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section l3 or l5(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [ ] No
[X]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
October 31, 1997 - 1,481,166 shares of common stock
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Transitional Small Business Disclosure Form Yes [ ] No [X]
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
RTI INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1997 1996
ASSETS (unaudited)
----------------------------------- ---------- ----------
CURRENT:
Cash and cash equivalents $ 22,433 $2,578,180
Accounts receivable, net of allowance
for doubtful accounts of $11,482 in 1997 371,916 --
Restricted deposits 16,393 482,944
Inventories 2,227,441 --
Prepaid expenses and Other 123,433 27,760
Other current assets 58,214 --
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TOTAL CURRENT ASSETS 2,820,054 3,088,884
Property, plant and equipment,
net of accumulated depreciation and
amortization of $1,797,617 1,897,379 476,235
Patents and Goodwill (Note 2) 1,276,857 --
Note receivable 80,000 670,000
Other assets 16,532 9,565
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TOTAL ASSETS $6,090,822 $4,244,684
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See accompanying notes to consolidated financial statements.
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RTI INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited)
------------------------------------ ------------ ------------
CURRENT:
Accounts payable $ 807,735 $ 19,811
Short-term borrowings (Note 5) 593,000 --
Current portion of long term debt 44,990 --
Accrued expenses 174,975 74,433
TOTAL CURRENT LIABILITIES 1,620,700 94,244
Long-term debt, net of current portion
and discount of $5,500 and $22,000 259,500 265,000
Other liabilities (Notes 3 and 4) 1,032,035 970,935
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TOTAL LIABILITIES 2,912,235 1,330,179
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STOCKHOLDERS' EQUITY:
Preferred stock, $.05 par value -
shares authorized 2,000,000;
issued and outstanding: 100,000 5,000 --
Common stock, $.08 par value -
shares authorized 15,000,000;
issued and outstanding, 1,481,166 118,495 88,094
Additional paid-in capital 17,679,624 16,053,542
Deficit (14,624,532)
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TOTAL STOCKHOLDERS' EQUITY 3,178,587 2,914,505
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 6,090,822 $ 4,244,684
============ ============
See accompanying notes to consolidated financial statements.
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RTI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS ENDED
SEPTEMBER,
1997 1996
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REVENUES
Net sales $ 976,467 --
Rental income 20,558 15,512
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TOTAL REVENUES 997,025 15,512
COST OF SALES 1,012,581 --
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GROSS PROFIT (LOSS) (15,556) --
OPERATING EXPENSES:
Selling, general and administrative
expenses 509,497 40,612
Product development 32,491 --
Expenses of Rockaway Industrial
Park, including interest expense
of $5,500 in 1997 and 1996 11,371 114,574
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LOSS FROM OPERATIONS (568,915) (139,674)
OTHER INCOME (EXPENSE):
Income (loss) from discontinued
operations (Note 6) -- (16,873)
Other interest income (expense) (14,250) 22,273
Other income -- --
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NET LOSS $ (583,165) $ (134,274)
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NET LOSS PER SHARE $ (.39) $ (.12)
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WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,481,166 1,076,887
=========== ===========
See accompanying notes to consolidated financial statements.
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RTI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
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REVENUES
Net sales $ 2,291,640 --
Rental income 62,603 21,112
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TOTAL REVENUES 2,354,243 21,112
COST OF SALES 2,406,869 --
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GROSS PROFIT (LOSS) (52,626) 21,112
OPERATING EXPENSES:
Selling, general and administrative
expenses 1,330,614 100,766
Product development 79,626 --
Expenses of Rockaway Industrial
Park, including interest expense
of $16,500 in 1997 and 1996 40,422 642,183
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INCOME (LOSS) FROM OPERATIONS 1,503,288) (721,837)
OTHER INCOME (EXPENSE):
Income (loss) from discontinued
operations (Note 6) (427) (87,253)
Environmental insurance settlement -- 580,000
Other interest income (expense) 13,769 28,204
Other income 46,071 --
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NET LOSS $ 1,443,875) $ (200,886)
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NET LOSS PER SHARE $ (1.01) $ (.18)
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WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,424,471 1,076,887
=========== ===========
See accompanying notes to consolidated financial statements.
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RTI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
NINE MONTHS ENDED SEPTEMBER 30,
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,443,875) $ (200,886)
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Adjustments to reconcile net loss
to net cash provided (used) by operating activities:
Depreciation and amortization 165,388 41,115
Discount of note payable 16,500 16,500
(Increase) decrease in:
Accounts receivable (371,916) (110,294)
Restricted deposits 466,551 (714,692)
Inventories (2,227,441) --
Prepaid expenses and other (147,887) --
Increase (decrease) in:
Accounts payable 787,924 16,953
Accrued expenses 100,542 (205,557)
Other liabilities 24,043 (136,398)
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TOTAL ADJUSTMENTS (1,186,296) (1,091,790)
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (2,630,171) (1,293,259)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of irradiation operations -- 4,601,726
Purchases of fixed assets (1,421,144) --
Reduction in notes receivable 590,000 --
Purchase of business, net of cash acquired (710,922) --
Purchase (sale) of other assets -- (81,002)
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NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (1,542,066) 4,520,724)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in short-term borrowings 593,000 --
Changes in long term debt 22,990 (575,000)
Proceeds from sale of preferred stock 580,000 --
Proceeds from sale of common stock 420,500 43,750
Payments for fractional shares
of common stock -- (563)
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 1,616,490 (531,813)
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NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (2,555,747) 2,695,652
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,578,180 77,631
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 22,433 $ 2,773,283
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See accompanying notes to consolidated financial statements.
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RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 1997 and 1996, and
for the three and nine months then ended is unaudited)
1. BASIS OF PRESENTATION
In the opinion of management of RTI Inc. (with its Subsidiaries, the
"Company"), the accompanying unaudited consolidated financial statements include
all adjustments necessary to present fairly, in all material respects, the
Company's financial position as of September 30, 1997, its results of operations
and its cash flows for the three and nine months ended September 30, 1997 and
1996. Results of operations for the three and nine month periods ended September
30, 1997 are not necessarily indicative of the results to be expected for the
year ending December 31, 1997.
Information included in the consolidated balance sheet as of December
31, 1996 has been derived from the Company's audited consolidated financial
statements in its Annual Report on Form 10-KSB for the year ended December 31,
1996, to which reference is made. Certain information included in the audited
consolidated financial statements and related notes prepared in accordance with
generally accepted accounting principles may have been condensed or omitted.
2. NEW OPERATIONS
With its acquisition of the business of Quality Air Inc. on February
24, 1997, the Company is now engaged in the manufacture, marketing and selling
of residential coolers and of central air conditioning equipment. The
acquisition cost has been allocated first to identifiable assets, with the
remainder of the purchase price assigned to goodwill, representing mainly the
cost price of patents and patent pending, which will be amortized over 15 years.
3. ROCKAWAY INDUSTRIAL PARK
The Company owns a 248 acre parcel of land ("Parcel I") in Rockaway,
New Jersey (47 acres of which have been leased to SteriGenics International),
that is contiguous to a 15 acre operating parcel that is the site of an
irradiation processing facility leased to SteriGenics International("Parcel II"
and, with Parcel I, the "Rockaway Industrial Park"). Since 1985, the Company has
been seeking a buyer for Parcel I. However, the Company's ability to sell Parcel
I is impaired until the completion of an
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RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 1997 and 1996, and
for the three and nine months then ended is unaudited)
environmental cleanup and remediation program (Note 4), and its ability to
recover its net investment of $50,000 in 201 acres of Parcel I is impaired by
unpaid outstanding non-recourse property taxes for the years 1993, 1994, 1995,
1996 and 1997 totaling $203,873, which have been accrued in the financial
statements under "Other liabilities".
4. ENVIRONMENTAL INVESTIGATION AND REMEDIATION
As a result of engineering tests that commenced in 1981, the New Jersey
Department of Environmental Protection (the "DEP") issued a directive in 1986
ordering a remedial investigation and feasibility study (the "Study") designed
to determine the nature and extent of contamination on the Rockaway Industrial
Park property. The Company agreed to pay the costs of the Study and entered into
an Administrative Consent Order with the DEP. In 1989, the DEP issued a Second
Directive to pay for an additional environmental study and DEP oversight costs.
In 1993, the Company entered into an Administrative Consent Order ("ACO") with
the DEP. Cost reimbursement to the DEP under the ACO includes applicable DEP
expenditures beginning July 1, 1982 and future DEP oversight costs. In August
1996, the Company made a payment of $575,000 to the DEP as full settlement of
all outstanding claims asserted under the ACO. The Company subsequently paid
additional claims by the DEP for oversight costs through October 31, 1996.
In April 1996, the DEP responded to the Company's petition to change
the Remedial Action Work Plan under the Record of Decision, and advised the
Company that a pilot test of the CleanOx remediation program, undertaken by the
Company on its Rockaway property, was not considered conclusive. In September
1996, the Company completed a second CleanOx test, which reduced the
contamination, but did not result in remediation of the groundwater. On March 7,
1997, the DEP reaffirmed its requirement that the Company comply with the ROD.
In October 1997, the Company submitted a remediation proposal to the DEP, the
cost of which would approach $1 million over an eight year period. The Company
has accrued $747,315 for long term environmental expenses under "Other
liabilities".
The Company had also been named a respondent by the EPA in
environmental proceedings relating to the "Nascolite" Superfund site in New
Jersey. In May 1997, the Company paid $32,247 in settlement of EPA's Nascolite
claims.
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RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 1997 and 1996, and
for the three and nine months then ended is unaudited)
Considering the ongoing remediation and DEP involvement in these
matters, there can be no assurances that the cleanup, remediation, and DEP
oversight accruals will represent the Company's ultimate liability.
5. SHORT TERM BORROWINGS
The Company has borrowed $593,000 from its chairman and an affiliate
corporation to fund part of the acquisition and equipment of the Company's AC2
manufacturing facility. These loans are unsecured, payable on demand and carry
an interest rate of one percent over the prime rate as published from time to
time in the Wall Street Journal, Eastern Edition.
6. DISCONTINUED OPERATIONS
On August 8, 1996, the Company sold to SteriGenics International the
assets and liabilities related to its irradiation business, except for its
Rockaway facility, which was leased for six years to SteriGenics International.
Results from irradiation operations are shown as Income or Loss from
discontinued operations.
7. STATEMENT OF CASH FLOWS
Supplemental disclosures of cash flow information are as follows:
Nine months ended September 30,
1997 1996
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Interest paid $1,938 $ 844
Income taxes paid -- --
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED SEPTEMBER
30, 1997 AND 1996.
Net sales for the three months ended September 30, 1997, were $976,467,
mostly from the new AC2 water cooled air conditioners sold during the month of
August. In the third quarter of 1996, all sales were from the Company's
discontinued operations, which were eliminated from the presentation. For the
quarter, the company had rental income of $20,558 in 1997, up from $15,512 in
1996.
Cost of sales of $1,012,581 in the 1997 period exceeded net sales
because of initial price concessions and plant break-in problems. In third
quarter of 1996, there was no cost of sales after elimination of the costs of
the discontinued business. Product development costs totaled $32,491 in the
quarter ended September 30, 1997; there were no such costs in 1996.
Selling, general and administrative expenses totaled $509,497 for the
second quarter of 1997. In the third quarter of last year, the Company had
general and administrative expenses of $40,612. These expense totals are not
comparable, as the Company did not have an active business in last year's
quarter.
Expenses of Rockaway Industrial Park were $11,371 in the third quarter
of 1997, as compared with $114,574 in the same period last year, when the
Company incurred groundwater remediation expenses.
Because of the costs described above, the Company incurred a loss from
operations of $568,915 in the third quarter of 1997. This compares with an
operating loss of $139,674 for the same period last year.
For the three months ended September 30, 1997 the Company incurred net
interest expenses of $14,250, as compared with net interest income of $22,273
received in the third quarter of 1996, when the Company also incurred a loss
from discontinued operations of $16,873.
The net loss of $583,165 or 39 cents per share for the third quarter
this year compares with a loss of $134,274 or 12 cents per share in 1996.
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COMPARISON OF OPERATIONS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER
30, 1997 AND 1996.
Net sales for the nine months ended September 30, 1997 were $2,291,640,
and rental income was $62,603. In the same period last year, all of the
company's sales were from discontinued operations, while rental income totaled
$21,112.
Cost of sales for the first nine months of 1997 totaled $2,406,869.
This includes certain break-in costs related to the manufacturing of the
company's new AC2 air conditioner, which were previously classified as general
and administrative expenses. In the first nine months of 1996, cost of goods
sold were eliminated, as they were related entirely to discontinued operations.
Selling, general and administrative expenses totaled $1,330,614 for the
first nine months of 1997, after reclassification of certain prior period
expenses as Cost of sales. In the same period in 1996, these expenses were
limited to $100,766, entirely in corporate administration expenses, as all other
expenses related to discontinued operations and were therefore eliminated from
the comparison.
Product development expenses were $79,626 in the first nine months of
1997. There were no such expenses in 1996.
Expenses of the Rockaway, New Jersey site totaled $40,422 for the first
nine months of 1997, as compared with $642,183 in the same period of 1996, when
the company incurred remediation costs and reserved $559,647 for future
remediation expenses.
The company incurred a loss from operations of $1,503,288 in the first
nine months of 1997, as compared with an operating loss of $721,837 for the same
period in 1996.
Other income for the first half of 1997 consisted of net interest
income of $13,769 and other income totaling $46,071. In the same period of 1996,
the company had a net loss from discontinued operations of $87,253, received an
environmental insurance settlement of $580,000 and had net interest income of
$28,204.
As a result of the foregoing, the company had net losses in the first
nine months, amounting to $1,443,875 or 97 cents per share in 1997 and $200,886
or 18 cents per share in 1996.
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LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1997, the Company invested $2.6 million
in receivables and inventories for its new operations, and invested $1.4 million
in fixed assets, consisting mainly of the acquisition and equipment of its El
Paso, Texas AC2 air conditioner manufacturing facility.
The net cash of $1,616,490 provided by financing activities came from
unsecured borrowings and from the sale in private placements of 145,000 common
shares of the Company at $2.90 net per share, and 100,000 Series B Preferred
Shares at $5.80 per share. This totaled less than the cash used in operating and
investing activities, causing a reduction in cash and equivalent from $1,270,579
at December 31, 1996 to $22,433 at September 30, 1997.
The late introduction of the AC2 air conditioner at the end of the
cooling sales season and the seasonality of the air conditioning business make
it necessary for the Company to seek additional financing. After the end of the
third quarter, the Company signed an agreement for a $600,000 mortgage on its El
Paso facility, of which $350,000 had been drawn down as of November 3, 1997. The
Company is also negotiating for additional debt and/or equity financing, but
there can be no assurance that these negotiations will be successful. If the
Company cannot obtain any such financing, it may have to limit its operations
and inventories, and hence its future sales volume.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no new legal proceedings during the quarter.
ITEM 2. CHANGES IN SECURITIES
In June and July 1997, the Company issued a total of 100,000 of 9%
Series B Preferred Shares at $5.80 per share, for a total of $580,000, in a
private placement that was not registered under the Securities Act. Said shares
were sold directly to accredited investors by the Company without underwriting
discounts or commissions. Each Series B Preferred share is convertible into two
common shares and callable by the Company, at par, after June 15, 1999 if the
price of the common stock at that time exceeds $4.75 for ten successive business
days. The terms of the Series B Preferred Shares are detailed in the amendment
to the Company's Certificate of Incorporation attached herewith as Annex A.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K/A dated February 24,
1997, reporting the consummation of the acquisition of the business
of Quality Air Inc. An Amendment No.1 to this Current Report was
filed with the Securities and Exchange Commission on May 9, 1997.
It contained a Pro Forma Condensed Consolidated Balance Sheet of
the Company as of December 31, 1996.
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RTI INC.
Date: November 3, 1997 By: /s/ THEO W. MULLER
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Theo W. Muller
Chief Executive Officer
By: /s/ JAMES M. CAYLOR
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James M. Caylor
Controller and Principal
Accounting Officer
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ANNEX A
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
RTI INC.
Under Section 805 of the Business Corporation Law
It is hereby certified that:
FIRST: The name of the Corporation is RTI Inc. The name under which
the Corporation was formed is Radiation Technology, Inc.
SECOND: The certificate of incorporation of the Corporation was filed
by the Department of State of the State of New York on August 27, 1968.
THIRD: The amendment of the certificate of incorporation of the
Corporation effected by this certificate of amendment is as follows:
To add a provision stating the number, designation, relative
rights, preferences and limitations of the shares of Series B Preferred Stock as
fixed by the Board of Directors of the Corporation pursuant to the authorization
contained in the certificate of incorporation of the Corporation
FOURTH: To accomplish the foregoing amendment, the following new
Article SEVENTH is added to the certificate of incorporation of the Corporation
as follows:
"SEVENTH" (a) DESIGNATION OF SERIES. The series of Preferred
Shares established herein shall be designated "Series B Preferred Stock"
(hereinafter called "Series B Preferred Stock") and the authorized number of
shares of Series Preferred Stock shall be 100,000 shares. The shares of Series B
Preferred Stock, upon issuance for a consideration of $5.80 per share, shall be
fully-paid and non-assessable. All shares of Series B Preferred Stock redeemed
or otherwise purchased or acquired by the Corporation including shares of Series
B Preferred Stock acquired upon conversion in accordance with clause (e) of this
Article SEVENTH) shall have the status of authorized but unissued shares of
Preferred Shares and any such shares may be reissued as shares of such series of
Preferred Shares as may be designated by the Board of Directors of the
Corporation.
(b) DIVIDENDS. The holders of shares of Series B Preferred
Stock shall be entitled to receive, when and
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as declared by the Board of Directors out of funds legally available for the
purpose, dividends in cash at the rate of $0.522 per share per annum. Dividends
on shares of Series B Preferred Stock will accumulate and will be payable
quarterly on March 31, June 30, September 30 and December 31 of each year;
provided, however, that dividends of a fraction of one cent shall not be
payable, but shall continue to accrue. Dividends on shares of Series B Preferred
Stock will be cumulative whether or not earned or declared and whether or not
there shall be funds of the Corporation legally available for the payment of
such dividends. Accruals and accumulations of dividends shall not bear interest.
So long as any shares of Series B Preferred Stock shall be
outstanding, the Corporation shall not declare or pay, or set apart for payment,
any dividends or make any distribution in cash or other property on any Common
Shares of the Corporation, or shall any Common Shares of the Corporation be
redeemed or purchased by the Corporation, nor shall any monies be paid to or
made available for a sinking fund for the redemption or purchase of any Common
Shares of the Corporation, unless in each instance all dividends accrued on all
outstanding shares of Series B Preferred Stock as of the record date for the
taking of any such actions shall have been paid or provided for.
(c) LIQUIDATION RIGHTS. In the event of any liquidation,
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
after payment or provision for the payment of the debts and other liabilities of
the Corporation, the Corporation shall pay to the holders of shares of Series B
Preferred Stock, before any distribution shall be made to the holders of any
other capital stock of the Corporation, an amount equal to $5.80 per share of
Series B Preferred Stock held by each such holder, plus an amount equal to all
accrued dividends unpaid thereon to the date of final distribution to such
holders. For the purposes of this section (c), any sale, conveyance, exchange or
transfer (for cash, shares of stock, securities, or other consideration) of all
or substantially all of the property or assets of the Corporation,
reorganization of the Corporation, or consolidation or merger of the Corporation
with one or more corporations, shall be deemed to be a liquidation, dissolution
or winding up, voluntary, or involuntary.
(d) VOTING. Except as otherwise provided by law, the holders
of record of shares of Series B Preferred Stock shall be entitled to vote at any
election of directors and on any other matter submitted to the holders of Common
Shares, voting together with the holders of Common Shares (and any other class
or series which may similarly be entitled to vote with the Common Shares) as a
single class, and shall be entitled to one vote per share of Series B Preferred
Stock held by them; provided, however, that so long as any shares of Series B
Preferred Stock are outstanding, the Corporation shall not,
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without the affirmative vote of the holders of a majority of the outstanding
shares of this series, consolidate or merge into or with another corporation.
(e) CONVERSION INTO COMMON STOCK.
(i) Each share of Series B Preferred Stock shall be
convertible at any time, at the option of the holder thereof, into two Common
Shares, subject to the adjustments hereinafter provided
(ii) Each holder of record of outstanding shares of
Series B Preferred Stock may exercise the conversion right provided in clause
(i) of this section (e) as to all or any portion of such shares by delivering to
the Corporation during regular business hours, at the principal office of the
Corporation or at such other place as may be designated in writing by the
Corporation, the certificate or certificates for the shares to be converted,
duly endorsed and assigned to the Corporation, accompanied by written notice
stating that the holder elects to convert such shares into Common Shares. A
conversion shall be deemed to have been effected on the date (the "Conversion
Date') when such delivery is made. As promptly as practicable thereafter, the
Corporation shall issue and deliver to such holder, at such office or other
place designated by the Corporation, a certificate or certificates for the
number of Common Shares to which such holder is entitled. For all purposes, the
rights of a converting holder of shares of Series B Preferred Stock, as such,
shall cease as to the shares converted and such person shall be deemed to have
become the record holder of such Common Shares, at the close of business on the
day on which delivery of such notice shall be made. The Corporation shall pay
all issue and transfer taxes, if any, incurred in respect of Common Shares
delivered on conversion.
In the event of the liquidation, dissolution or winding up of the
Corporation, such right of conversion shall end at the close of business on the
10th business day prior to the date fixed for the first distribution of the
assets of the Corporation to the holders of shares of Series B Preferred Stock.
Upon conversion, the Corporation shall pay a dividend on the shares of Series B
Preferred Stock surrendered for conversion in an amount per share equal to the
amount accrued at the applicable dividend rate for the number of days in the
period between (i) the end of the last completed dividend period as to which
dividends have been paid, and (ii) the Conversion Date.
(f) ADJUSTMENTS. The number of Common Shares into which each
share of the Series B Preferred Stock is convertible shall be subject to the
following adjustments from time to time and after the happening of each of the
following events only as follows:
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(i) If the Corporation shall (w) pay a dividend or make
a distribution on the outstanding Common Shares payable in Common Shares, (x)
subdivide the outstanding Common Shares into a larger number of shares, (y)
combine the outstanding Common Shares into a smaller number of shares, or (z)
issue by reclassification of the Common Shares any shares of the Corporation,
each holder shall thereafter be entitled upon conversion to receive for each
share of the Series B Preferred Stock held by such holder the number of Common
Shares which such holder would have owned or have been entitled to receive after
the happening of any of the events described above in this clause (i) had such
shares of the Series B Preferred Stock been converted immediately prior to the
happening of such event. Such adjustment shall become effective on the day next
following (x) the record date of such dividend or distribution, or (y) the day
upon which such subdivision, combination or reclassification shall become
effective.
(ii) If the Corporation shall consolidate or merge into
or with another corporation or other entity, or if the Corporation shall sell or
convey to any other person or persons all or substantially all of the property
of the Corporation, then each holder of shares of Series B Preferred Stock then
outstanding shall have the right thereafter to convert each share of Series B
Preferred Stock held by such holder into the kind and amount of any shares of
stock, other securities, cash, and property receivable upon such consolidation,
merger, sale or conveyance by a holder of the number of Common Shares into which
such share might have been converted immediately prior to such consolidation,
merger, sale or conveyance, and shall have no other conversion rights. In any
such event, effective provision shall be made, in the certificate or articles of
incorporation of the resulting or surviving corporation or otherwise in any
contracts of sale and conveyance such that, insofar as appropriate and as nearly
as reasonably may be, the provisions set forth herein for the protection of the
conversion rights of the Series B Preferred Stock shall thereafter be made
applicable.
(iii) No fractional Common Shares shall be issued upon
any conversion but, in lieu thereof, there shall be paid to each holder of
shares of the Series B Preferred Stock surrendered for conversion who but for
the provisions of this clause (iii) would be entitled to receive a fraction of a
Common Share on such conversion, as soon as practicable after the date such
shares are surrendered for conversion, an amount in cash equal to the same
fraction of the market value of a full Common Share. For purposes of this clause
(iii), the market value of a share shall be (x) the last sale price per Common
Share on the date immediately preceding the Conversion Date on the principal
stock exchange or The Nasdaq Stock Market, as the case may be, on which the
Common Shares are then traded or, if there is no such price on such date, then
the last price on such exchange or The Nasdaq Stock Market on the date nearest
preceding such date,
-18-
<PAGE>
or (y) if the Common Shares are not listed on any stock exchange or The Nasdaq
Stock Market, the average of the bid and asked price for a Common Share in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), or (z) if the Common Shares are not publicly traded, the fair
market value of a Common Share as determined by the Board of Directors of the
Corporation in good faith.
(iv) No adjustment in the number of Common Shares into
which each share of the Series B Preferred Stock is convertible shall be
required unless such adjustment would require an increase or decrease of more
than one-quarter of a share in the number of Common Shares into which such share
is then convertible; provided, however, that any adjustments which by reason of
this clause (iv) are not required to be made shall be carried forward
cumulatively and taken into account in any subsequent calculation.
(v) Whenever any adjustment is required in the shares
into which each share of the Series B Preferred Stock is convertible, the
Corporation shall keep available at its principal office and the principal
office of each of the transfer agent or transfer agents for the Series Preferred
Stock and for the Common Shares a statement describing in reasonable detail the
adjustment and the method of calculation used.
In the event cash, property or securities other than Common
Shares shall, be payable, deliverable, or issuable by the Corporation upon
conversion as aforesaid, then references to Common Shares in this section (f)
shall be deemed to apply so far as appropriate and as nearly as may be, to such
cash, property or other securities.
(h) REDEMPTION BY THE CORPORATION.
(i) The Series Preferred Stock may be redeemed, at the
option of the Corporation, in whole but not in part: (A) at any time after June
15, 1999, at a price of $5.80 per share, in cash; provided that the closing bid
price for the Common Shares has equaled or exceeded $4.75 for 10 consecutive
business days ending not more than 30 business days prior to the date of the
notice of redemption and (B) at any time at a price of $10.00 per share in cash.
(ii) If the Corporation desires to redeem the shares of
Series B Preferred Stock, the Corporation shall give the holders thereof notice
of such redemption, which notice shall set forth the number of shares to be
redeemed and the place and date fixed for redemption, which date shall be not
less than five days after the date of such notice. On the date fixed for
redemption (the "Corporation Redemption Date"), the
-19-
<PAGE>
holders of shares of Series B Preferred Stock shall surrender the certificates
therefor and, as promptly as practicable thereafter, the Corporation shall issue
and deliver to or upon the written order of such holder, at such office or other
place designated by the Corporation, an amount per share equal to (A) $5.80, in
the case of a redemption pursuant to clause (i)(A) of this section (h) or (B)
$10.00, in the case of a redemption pursuant to clause (i)(B) of this section
(h). For all purposes, the rights of a holder of shares of Series B Preferred
Stock, as such, shall cease as to the shares redeemed at the close of business
on the Corporation Redemption Date.
(iii) If less than all of the shares of Series B
Preferred Stock then outstanding shall be called for redemption, the shares to
be redeemed shall be selected by lot in a manner determined by the Board of
Directors of the Corporation.
FIFTH: The foregoing amendment of the certificate of incorporation was
authorized by the Board of Directors of the Corporation pursuant to the
authority vested in said Board under the provisions of the certificate of
incorporation of the Corporation and of Section 502 of the Business Corporation
Law.
IN WITNESS WHEREOF, we have subscribed this document on the date set
forth below and do hereby affirm, under the penalties of perjury, that the
statements contained herein have been examined by us and are true and correct.
Dated: June 12, 1997
/s/ THEO W. MULLER
--------------------------------
Theo W. Muller
Chief Executive Officer
and Chairman
/s/ ROCKNEY D. BACCHUS
--------------------------------
Rockney D. Bacchus
Secretary
-20-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 AND
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS THEN ENDED AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000081699
<NAME> RTI INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 22,433
<SECURITIES> 0
<RECEIVABLES> 371,916
<ALLOWANCES> 11,482
<INVENTORY> 2,227,441
<CURRENT-ASSETS> 2,820,054
<PP&E> 3,694,996
<DEPRECIATION> 1,797,617
<TOTAL-ASSETS> 6,090,822
<CURRENT-LIABILITIES> 1,620,700
<BONDS> 299,500
0
5,000
<COMMON> 118,495
<OTHER-SE> 17,679,624
<TOTAL-LIABILITY-AND-EQUITY> 6,090,822
<SALES> 2,291,640
<TOTAL-REVENUES> 2,354,243
<CGS> 2,406,869
<TOTAL-COSTS> 3,857,531
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,731
<INCOME-PRETAX> (1,443,448)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,443,448)
<DISCONTINUED> (427)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,443,875)
<EPS-PRIMARY> (1.01)
<EPS-DILUTED> (1.01)
</TABLE>
