<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ A Prospectus relating to these securities has been filed with the United +
+ States Securities and Exchange Commission. These securities may not be sold +
+ nor may any offers to buy be accepted prior to the time this Registration +
+ Statement becomes effective. This Prospectus shall not constitue an offer to +
+ sell or soliciation to buy nor shall there be any sale of these securities +
+ in any state in which such offer solicitation, or sale would be unlawful +
+ prior to registration or qualification under the securities laws of any such +
+ state. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
As filed with the Securities and Exchange Commission on December 22, 2000.
Registration No. 333-________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Retractable Technologies, Inc.
(Name of Small Business Issuer in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Texas 3841 75-2599762
----
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
511 Lobo Lane, Little Elm, Texas 75068-0009 (972) 294-1010
(Address and Telephone Number of Principal Executive Offices)
511 Lobo Lane, Little Elm, Texas 75068-0009
(Address of Principal Place of Business or Intended Place of Business)
Thomas J. Shaw
Chairman, President, and Chief Executive Officer
511 Lobo Lane
Little Elm, Texas 75068-0009
Telephone: (972) 294-1010
(Name, Address, and Telephone Number of Agent for Service)
Copy to:
Ralph S. Janvey, Esq.
Krage & Janvey, L.L.P.
2600 San Jacinto Tower
2121 San Jacinto Street
Dallas, Texas 75201
(214) 969-7500
Approximate Date of Commencement of Proposed Sale to Public: As soon as
practicable after the effective date of this Prospectus.
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act Registration Statement number of the earlier effective
Registration Statement for the same offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier Registration Statement for the same
offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering: [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434, check
the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Dollar Amount Proposed Maximum Amount of
Class of Securities to be Proposed Maximum Offering Aggregate Offering Registration
to be Registered Registered* Price Per Share ** Price Fee
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $110,372,250 $15 $110,372,250 $27,593.07
===================================================================================================================
</TABLE>
(*) This amount assumes the sale of 5,358,150 shares by selling security
holders.
(**) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457(c) under the Securities Act.
RTI hereby amends this Prospectus on such date or dates as may be necessary to
delay its effective date until RTI shall file a further amendment which
specifically states that this Prospectus shall thereafter become effective in
accordance with Section 8(a) of the Securities Act, or until this Prospectus
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
SUBJECT TO COMPLETION
----------
PROSPECTUS
----------
RETRACTABLE TECHNOLOGIES, INC.
7,358,150 Shares of Common Stock
Retractable Technologies, Inc., a Texas corporation ("RTI"), hereby offers
(the "Offering") for sale up to 2,000,000 shares (the "Shares") of its Common
Stock, no par value (the "Common Stock"). This Prospectus also covers the
Offering and sale of up to an additional 5,358,150 shares of Common Stock by
certain selling security holders.
Currently, the Common Stock of RTI is eligible to trade upon the Over-the-
Counter Bulletin Board (the "Bulletin Board"). RTI anticipates applying to
trade on the Bulletin Board under the ticker symbol "RTI" in the near future
until RTI is eligible to list on the American Stock Exchange (the "AMEX").
Prior to the Offering there has been no public market for the Common Stock.
However, RTI is in the process of applying to have the Common Stock listed on
the AMEX in conjunction with this Offering. RTI believes that, if 1,000,000
shares of the Common Stock offered herewith is sold, RTI may satisfy the AMEX
qualifications for its Common Stock to be listed thereupon. Please note there
can be no assurance that such listing on the AMEX can or will be obtained by
RTI. See "RISK FACTORS-RISKS RELATED TO THIS OFFERING." If RTI does not obtain
AMEX listing approval, RTI anticipates that the Common Stock will be listed for
trading on the Bulletin Board.
----------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD THE
LOSS OF YOUR ENTIRE INVESTMENT. SEE "RISK FACTORS" COMMENCING ON PAGE 5 AND
"DILUTION."
----------
THESE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================================================
Gross Proceeds to
Gross Selling
Price to Public Commissions Proceeds to RTI Shareholders
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share $15 0 $15 $15
---------------------------------------------------------------------------------------------------------------
Total Minimum Offered by RTI 30,000 0 $450,000 $0
---------------------------------------------------------------------------------------------------------------
Total Maximum Offered by RTI 2,000,000 0 $30,000,000 $0
---------------------------------------------------------------------------------------------------------------
Total Offered by Selling Shareholders 5,358,150 Unknown $0 $80,372,250
===============================================================================================================
</TABLE>
As of the date of this Prospectus, the Shares are being offered directly by
RTI without the assistance of an underwriter. However, RTI reserves the right
to enter into an agreement with underwriters. RTI will receive all proceeds
from the Offering less proceeds from the sales by selling shareholders and less
Offering expenses.
The Offering period will terminate on ________, 2001, (one year after the
effective date of this Prospectus) unless RTI, in its sole and absolute
discretion, extends the period for an additional 90 days to __________________.
RTI may terminate the Offering earlier if 2,000,000 Shares (the Maximum Number
of Shares offered) are sold before the end of the Offering period.
All funds received from investors will be deposited in a non-interest
bearing escrow account with Texas Bank. Texas Bank will release the funds to
RTI only after $450,000 (the Minimum Offering amount) is collected.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SHARES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SHARES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SHARES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
The Date of this Prospectus is _______________, 2001
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Prospectus Summary................................................................... 3
Risk Factors......................................................................... 5
A Note About Forward-Looking Statements.............................................. 8
Use of Proceeds...................................................................... 9
Capitalization....................................................................... 9
Dilution............................................................................. 10
Management's Discussion and Analysis or Plan of Operation............................ 11
Description of Business.............................................................. 15
Description of Property.............................................................. 22
Management........................................................................... 22
Executive Compensation............................................................... 26
Security Ownership of Certain Beneficial Owners and Management....................... 28
Plan of Distribution................................................................. 29
Selling Security Holders............................................................. 29
Determination of Offering Price...................................................... 40
Description of Securities............................................................ 40
Market for Common Equity and Related Stockholder Matters............................. 51
Certain Relationships and Related Transactions....................................... 52
Legal Proceedings.................................................................... 52
Disclosure of Commission Position on Indemnification for Securities Act Liabilities.. 52
Legal Matters........................................................................ 53
Accountants.......................................................................... 53
Experts.............................................................................. 53
Where to Find Additional Information................................................. 53
Financial Statements................................................................. 54
PART II-INFORMATION NOT REQUIRED IN A PROSPECTUS
Indemnification of Directors and Officers............................................ 80
Other Expenses of Issuance and Distribution.......................................... 81
Recent Sales of Unregistered Securities.............................................. 81
Exhibits............................................................................. 83
Undertakings......................................................................... 85
Signatures........................................................................... 86
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
------------------
YOU SHOULD READ THIS SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION IN THE FINANCIAL STATEMENTS AND NOTES APPEARING ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY MAY NOT CONTAIN ALL THE INFORMATION THAT YOU SHOULD
CONSIDER BEFORE INVESTING IN OUR SHARES. YOU SHOULD READ THE ENTIRE PROSPECTUS
CAREFULLY.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
OR UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS
DISCLOSED IN THE FORWARD-LOOKING STATEMENTS. YOU ARE URGED TO READ THIS
PROSPECTUS CAREFULLY AND IN ITS ENTIRETY.
THE COMPANY
We design, develop, manufacture, and market patented safety needle devices
for the healthcare industry. Our VanishPoint(R) products utilize a unique
friction ring mechanism patented by Thomas J. Shaw, our Founder, President, and
Chief Executive Officer. VanishPoint(R) products are designed specifically to
prevent needlestick injuries and to prevent reuse. The friction ring mechanism
permits the automated retraction of the syringe needle into the barrel of the
syringe, directly from the patient, after delivery of the medication is
completed. The VanishPoint(R) blood collection tube holder utilizes the same
mechanism to retract the needle after blood has been drawn from the patient.
Closure of an attached end cap on the blood collection tube holder causes the
needle to retract directly from the patient into the closed tube holder.
Advantages of our products include protection from needlestick injuries,
prevention of cross contamination through reuse, and reduction of disposal and
other associated costs. Our patented VanishPoint(R) products include 3cc
syringes, 1cc tuberculin, insulin, and allergy antigen syringes; 5cc and 10cc
syringes; a blood collection tube holder, small tube adapter, a dental syringe,
a self retracting IV catheter introducer and a full displacement syringe. We
began commercial production of our 3cc VanishPoint(R) syringe in 1997. We began
commercial production of the blood collection tube holder in 1998.
We have an exclusive license granted by Thomas J. Shaw for the patent
rights for a worldwide exclusive license to manufacture, market, sell, and
distribute our products until the expiration of the last of the patents. We
can't sublicense our rights without Mr. Shaw's permission and our license
becomes a non-exclusive license in the event we are the subject of a hostile
take-over. Our goal is to become a leading provider of automated retraction
safety devices.
The VanishPoint(R) syringe and needle device products are sold to and used
by healthcare providers (primarily in the United States with limited sales
outside the United States), which include, but are not limited to, acute care
hospitals, alternate care facilities, doctors' offices, clinics, emergency
centers, surgical centers, convalescent hospitals, Veterans' Administration
("VA") facilities, military organizations, public health facilities, and
prisons. Accordingly, we attempt to market our products directly and through
distributors to the individual end-users (nurses, doctors, and testing
personnel) and their purchaser representatives so that they request their Group
Purchasing Organizations ("GPOs") add our products to their list of approved
products. We also market our products directly to the GPOs themselves. Our
products are available through contracts with the following: Abbott Laboratories
("Abbott"), Scripps; McKessonHBOC; Health Services Corporation of America
("HSCA"); Premier Health Systems, Inc.; AmeriNet, Inc.; InSource Health
Services; and Managed Healthcare Associates ("MHA")/MedEcon. RTI also pursues
General Services Administration ("GSA"), VA, Federal Supply Schedule ("FSS"),
and other federal government contracts for the purchase of VanishPoint(R)
products.
We distribute our products in the United States and its territories through
7 general line and 20 specialty distributors. We utilize 12 international
distributors. We entered into an agreement with Abbott Laboratories (the
"Abbott Agreement") whereby Abbott agreed to act as a nonexclusive marketer and
distributor of our 1cc, 3cc, 5cc, and 10cc syringes, blood collection tube
holders, and small tube adapters to acute care facilities in the United States.
The Abbott Agreement is for an initial five-year term. We will continue to
utilize our current general line and specialty distributors in other market
segments, such as primary care and alternate care facilities.
The syringe and needle device market is a market dominated by three main
competitors. According to the 1998 Theta report, the three leading
manufacturers are Becton Dickinson and Company ("B-D") with a market share of
approximately 71 percent; Sherwood/Davis & Geck Division of American Home
Products Company which was acquired by Tyco International Ltd. ("Sherwood") with
approximately 22 percent, and Terumo Medical Corporation ("Terumo") with a
market share of approximately 7 percent. We currently have less than 1/4 of 1
percent of the market for syringe and needle devices.
THE OFFERING
Maximum Amount of Shares
Offered by RTI: 2,000,000 shares
Shares Offered by Selling
Security Holders: 5,358,150 shares
Underwriter: We are offering the Shares directly,
without the assistance of an
underwriter, although we reserve the
right to enter into an agreement with
underwriters.
Price Per Share: $15 per share which, was based upon an
evaluation performed by Business
Valuation Services, an independent
evaluation company.
Common Stock Outstanding
Before the Offering: 19,358,150 shares
3
<PAGE>
Common Stock Outstanding
After the Offering: 19,388,150 shares if the Minimum number
of Shares is sold and 21,358,150 shares
if the Maximum number of Shares is sold
Selling Expenses: We estimate total selling expenses to be
approximately $___________ (including
those for legal, filing, accounting,
printing, taxes, transfer agent, escrow
agent, and related insurance premiums).
In the event that selling agents are
retained, we anticipate no more than 10%
of the proceeds from the Offering will
be used to pay commissions. In the event
that we enter into an agreement with
underwriters, this Prospectus will be
amended.
Use of Proceeds: General capital needs, including, but
not limited to, those needed for
expansion of manufacturing operations,
working capital, funding research and
development, paying dividends to
preferred shareholders, increasing sales
and marketing efforts, and funding
worldwide patent rights.
Risk Factors: This Offering involves a high degree of
risk (including, but not limited to,
dependence on single technology, a
history of operating losses, limited
production capacity, less than 1% market
share, voting control by two
shareholders, no underwriter for this
Offering, and no assurance that we will
be able to list on an exchange as well
as immediate dilution). See "RISK
FACTORS" and "DILUTION" for a more
complete discussion.
Proposed Symbol: RTI
Exchange Listing: We are in the process of applying (in
conjunction with this Offering) to have
the Common Stock listed on the AMEX,
which is contingent upon the sale of
1,000,000 Shares. We believe that if
1,000,000 Shares offered herewith are
sold, we may satisfy the AMEX
qualifications for our Common Stock to
be listed thereupon.
Summary Financial and Operating Data:
The financial data presented below under the captions "Balance Sheet Data" and
"Statements of Operations Data" are derived from our audited financial
statements as of and for each of the years ended, December 31, 1999 and 1998 and
the period from inception (May 9, 1994) to December 31, 1999. These financial
statements have been audited by PricewaterhouseCoopers LLP, independent
accountants. It is important that you also read "Selected Financial Data"
"Management's Discussion and Analysis or Plan of Operation" and the financial
statements for the years ended December 31, 1999 and 1998 and the period from
inception (May 9, 1994) to December 31, 1999, the related notes and the report
of independent accountants.
The summary unaudited financial data presented below as of September 30, 2000
and for the nine months ended September 30, 2000, and 1999 are derived from our
unaudited financial statements included elsewhere in this Prospectus. The
unaudited financial statements include all adjustments, consisting of normal
recurring adjustments, that Management considers necessary for a fair
presentation of financial position and
4
<PAGE>
results of operations. Operating results for the nine-month period ended
September 30, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.
BALANCE SHEET DATA
<TABLE>
<CAPTION>
September 30, 2000
December 31, 1999 (Unaudited)
---------------------- -----------------------
<S> <C> <C>
Cash and cash equivalents $ 646,005 $ 4,468,533
Property, plant and equipment, net 10,101,524 11,099,491
Intangible assets and deferred charges, net 536,014 542,021
Long-term debt 2,506,335 5,301,959
Current portion of long term debt 463,329 953,078
Total stockholders' equity 8,687,553 10,459,226
</TABLE>
STATEMENTS OF OPERATIONS DATA
<TABLE>
<CAPTION>
Cumulative From
Inception Nine Months Nine Months
Year Year (May 9, 1994) Ended Ended
Ended Ended to September 30, September 30,
December 31, December 31, December 31, 2000 1999
1999 1998 1999 Unaudited Unaudited
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales, net $ 3,375,158 $ 845,559 $ 4,483,032 $ 6,109,417 $ 1,965,944
Cost of sales 2,331,070 765,448 3,570,665 5,782,287 1,361,590
Operating expenses:
Preproduction manufacturing 1,837,830 1,004,828 5,457,201 627,200 1,272,578
Other operating expenses 7,448,830 4,723,333 18,182,011 6,474,064 5,311,590
Loss from operations (8,242,572) (5,648,050) (22,726,845) (6,774,134) (5,979,814)
Net loss (8,233,508) (5,704,088) (22,852,247) (6,739,196) (5,971,998)
Basic and diluted earnings per
share $(0.80) $(0.56) $(2.17) $(.69) $(.58)
</TABLE>
RISK FACTORS
------------
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE
INVESTING IN OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR,
OUR BUSINESS COULD BE HARMED. THIS COULD CAUSE THE PRICE OF OUR COMMON STOCK TO
DECLINE, AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT. THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES,
INCLUDING STATEMENTS ABOUT FUTURE PLANS, OBJECTIVES, AND INTENTIONS.
RISKS RELATED TO OUR BUSINESS
BECAUSE WE DEPEND ON A SINGLE TECHNOLOGY, WE ARE VULNERABLE TO SUPERIOR
COMPETING PRODUCTS OR NEW TECHNOLOGIES THAT COULD MAKE OUR PRODUCT OBSOLETE.
Our strategy is to develop a series of safety needles and related products
based upon our patented technology. Because we have a narrow focus on a
particular product line and technology (retractable needles), we are vulnerable
to the development of superior competing products and to changes in technology
which could eliminate or reduce the need for our products. While we believe
there will be no significant change in the need for, or the desirability of, our
products in the foreseeable future, there can be no assurance that those changes
will not occur.
WE DEPEND UPON PATENTS AND PROPRIETARY RIGHTS TO PROTECT THE INTELLECTUAL
PROPERTY WHICH FORMS THE BASIS OF OUR LIMITED PRODUCT LINE. IF WE LOSE ANY
DISPUTE REGARDING THIS INTELLECTUAL PROPERTY, OUR COMPETITIVE POSITION WOULD BE
WEAKENED.
Our success depends on our ability to maintain the proprietary nature of
our technology through a combination of patents and other intellectual property
protection devices. We have been granted 16 patents in the United States and
numerous patents in a number of foreign
5
<PAGE>
countries as well as have multiple applications pending. Although we believe
these patents will be sufficient to protect the structure and design of our
current and proposed products, there are additional concerns. There can be no
assurance that the protection provided by these patents will be broad enough to
prevent competitors from introducing similar devices or that the courts of any
jurisdiction, if challenged, will uphold these patents. Patent infringement
litigation, either to enforce our patents or defend against patent infringement
suits, would be expensive, and if it occurs, would divert our resources from
other planned uses. Any adverse outcome in such litigation could similarly
deplete our resources and tarnish our reputation. Patent applications filed in
foreign countries and patents granted in those countries are subject to laws,
rules and procedures that differ from those in the United States. Patent
protection in those countries may be different from patent protection provided
by U.S. laws and may not be as favorable to us. We also attempt to protect our
proprietary information by limiting access to our facilities and by requiring
the execution of a confidentiality agreement by any person (including
contractors and employees) receiving proprietary information. There can be no
assurance that our program of patent protection, confidentiality agreements and
restricted access to our facilities will be sufficient to protect our
proprietary technology from competitors nor whether we will be able to secure
patents on any future products.
OUR PRODUCTS MAY PROVE TOO EXPENSIVE TO MARKET SUCCESSFULLY, WHICH MAY INHIBIT
OUR GROWTH AND COULD RESULT IN NET LOSSES
Using safety medical products, including safety needle products, is
relatively new. Although the market for needle products is large and safety
needle legislation has been passed in seventeen states and federal legislation
was recently passed and signed into law, actual future sales of our products may
be much less than the market's potential. The higher purchase price of safety
medical products in general as well as the fact that the initial cost of our
safety needles is higher than that of other safety needles may be an impediment
to full market acceptance. To date, safety needle products represent a small
percentage of total syringe sales, compared to standard needles. There can be no
assurance that our products will achieve full market acceptance. Market
acceptance of our products will depend in large part upon our ability to
demonstrate the operational and safety advantages of our products as well as the
cost effectiveness of our products compared to both standard and other safety
needle products (after the costs of a needlestick are included in the
calculation).
WE HAVE A HISTORY OF OPERATING LOSSES AND A LIMITED OPERATING HISTORY
We have experienced net losses of $29,591,443 since we began operations.
These losses were not unexpected because we were a development stage company
until May 2000. Since we incorporated in 1994 and operations began in 1997
there is limited operating history for use to project future operations. See
"DESCRIPTION OF BUSINESS."
WE HAVE LIMITED PRODUCTION CAPACITY
Currently, demand for safety products exceeds our ability to produce
products. Although we are working to increase production by outsourcing
production of sub-components of our products, increasing the efficiency of our
assembly equipment, and expanding our factory and internal production, there is
a risk that larger GPO contracts will be unavailable because of our current
inability to provide products in sufficient numbers so as to meet the full
demands of larger contracts.
WE NEED ADDITIONAL FINANCING TO EXPAND OUR PRODUCTION CAPACITY AND PRODUCT LINE
We are dependent upon the net proceeds of this Offering, currently
available financing and anticipated cash flow from operations to implement our
business plan. There can be no assurance that we will be able to raise
additional capital on terms satisfactory to us or the holders of Shares (see
"USE OF PROCEEDS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION").
CONTROL BY EXISTING MANAGEMENT
Thomas J. Shaw, our President, and Lillian E. Salerno, a Director, own
57.9% and 14.5%, respectively, of the Common Stock as of the date of this
Prospectus and will continue to own such percentages if the Minimum number of
Shares is sold through this Offering. These two shareholders will therefore
have the ability to direct our operations and financial affairs and to
substantially influence the election of members of our Board of Directors. Of
the remaining 5,358,150 Shares of Common Stock outstanding as of the date of
this Prospectus, Officers and Directors own 62,500 of the Shares (less than 1%
of all outstanding Common Stock).
WE HAVE NOT PAID DIVIDENDS ON COMMON STOCK IN THE PAST AND DO NOT PLAN TO PAY
DIVIDENDS ON COMMON STOCK IN THE NEAR FUTURE
We have never paid dividends on Common Stock and do not presently
intend to pay any dividends on Common Stock in the foreseeable future. Instead,
we intend to apply any earnings to the expansion and development of our business
as well as the other uses set forth in "USE OF PROCEEDS".
WE HAVE BEGUN TO PAY LIMITED DIVIDENDS ON THE PREFERRED STOCK
We have begun a systematic pay-down of the accrued dividends on the
Series A Convertible Preferred Stock (the "Series A Stock") at such times as our
Board of Directors has determined to be in our best interest. We intend to pay
down the dividends on all preferred stock (beginning with the Series A Stock)
from time to time as the company's financial condition allows. We have also
begun a systematic redemption of the preferred stock. We intend to continue to
redeem the preferred stock (beginning with the Series A). Under the provisions
of the respective certificates of designation, the shareholders whose shares are
chosen for redemption have the right to be paid the redemption price plus
accrued and unpaid dividends. In the alternative, such shareholders have the
right to convert their preferred shares into Common Stock prior to the
redemption date. Stockholders are then entitled to payment of accrued dividends
through the date of conversion, payable if and when the Board of Directors
declares them, when those shares are converted upon being called for redemption.
6
<PAGE>
MANAGEMENT HAS DISCRETION IN ALLOCATING PROCEEDS FROM THIS OFFERING
Investors should be aware that our Management has broad discretion in the
allocation of the proceeds received in this Offering. Although Management has
stated herein the general allocation of the proceeds (See "USE OF PROCEEDS"),
there can be no assurance that funds received shall be allocated according to
Management's current plan.
THE BOARD OF DIRECTORS IS AUTHORIZED TO ISSUE UP TO A TOTAL OF 10,000,000 SHARES
OF PREFERRED STOCK, WITHOUT STOCKHOLDER APPROVAL, WHICH WILL HAVE SUPERIOR
RIGHTS AND PREFERENCES TO THOSE ASSOCIATED WITH OWNING COMMON STOCK.
We are authorized to issue up to 10,000,000 Shares of preferred stock with
rights and preferences established by the various certificates of designation
for the Series A Stock and the Series I, II, III, and IV of the Class B
Convertible Preferred Stock of RTI. The Board of Directors has issued 5,000,000
shares of the Series A Stock and 4,294,245 shares of the various series of Class
B preferred stock. We have also reserved the right to issue an additional
500,000 shares of Class B stock as a dividend. However, 22,000 shares of the
Series A Stock have been redeemed and 5,358,150 shares of the preferred stock
have been converted. Those redeemed and converted shares are now eligible to be
re-issued to other shareholders. Accordingly, as of the date of this
Prospectus, we have the right to sell 5,585,905 shares of the various series and
classes of preferred stock in order to raise additional monies. Furthermore, if
we issue any of the 5,585,905 shares of preferred stock currently available to
us, those shares will have superior rights (regarding payment of dividends,
preferences in payment in the event of liquidation, and dilution of voting
rights in certain instances) to those of the Common Stock being Offered by this
Prospectus. See "DESCRIPTION OF SECURITIES."
WE HAVE TWO PROVISIONS IN OUR SECOND AMENDED AND RESTATED ARTICLES OF
INCORPORATION WHICH COULD DETER SHAREHOLDERS FROM ATTEMPTING TO CHANGE THE
MEMBERS OF THE BOARD OF DIRECTORS AND CHANGING THE DECISIONS OF MANAGMENT
We have provisions in our Second Amended and Restated Articles of
Incorporation that prohibit cumulative voting (having more than one vote per
share) by shareholders and provisions which provide that the Board of Directors
shall consist of two classes which are elected in alternating years. These two
provisions make it more difficult for anyone to change the members of our Board
of Directors and the policies it endorses.
RISKS RELATED TO OUR INDUSTRY
BECAUSE WE ARE SIGNIFICANTLY SMALLER THAN THE THREE MAIN COMPETITORS IN THIS
INDUSTRY, WE MAY LACK THE FINANCIAL RESOURCES TO CAPTURE INCREASED MARKET SHARE.
The syringe and needle device market is a market dominated by three main
competitors. According to the 1998 (the most recent report) from Theta
Corporation ("Theta"), a publisher of comprehensive market research reports on
the medical device, diagnostic, biotech and pharmaceutical industries, the three
leading manufacturers of hypodermic syringes and blood collection products are
B-D with a market share of approximately 71 percent, Sherwood with approximately
22 percent, and Terumo with a market share of approximately 7 percent. Forty-
two percent of B-D's fiscal 1999 sales were from the sales of injection systems.
All three companies offer both standard syringes (a majority of their sales) and
a safety syringe alternative. B-D and Sherwood have greater financial
resources, larger and more established sales and marketing and distribution
organizations and greater market influence, including long-term contracts with
GPOs. These competitors may be able to use these resources to improve their
products through research and acquisitions or develop new products, which may
compete more effectively with our products. There can be no assurance that our
competitors will not succeed in developing or marketing products that are
technologically superior or more effective or commercially attractive than any
that we are developing. Based on a licensing agreement B-D has entered into with
Med-Design, it is possible that B-D may in the future manufacture retractable
needle products. Med-Design asserts patent rights to manufacture a line of
retractable needle products.
WE ARE VULNERABLE TO PRODUCTION DISRUPTIONS AND INCREASED PRICE FLUCTUATIONS.
There are components of our products that are manufactured by separate
single suppliers. We own the molds used by those suppliers to manufacture the
component parts of our products and could establish alternative supply
arrangements if necessary. However, some of these components have lead times of
several months, and changes in suppliers would disrupt production schedules. We
are also subject to the risks of increased supplier prices. Recently, we have
not experienced any significant cost increases as a result of these risks.
WE FACE INHERENT PRODUCT LIABILITY RISKS AS A MANUFACTURER OF SAFETY MEDICAL
PRODUCTS. PRODUCT LIABILITY CLAIMS EXCEEDING OUR PRODUCT LIABILITY INSURANCE
COVERAGE COULD RESULT IN NET LOSSES.
As a manufacturer and seller of safety needle products we face an inherent
business risk of exposure to product liability claims in the event of product
failure or claim of harm caused by product operation. Product failure could
result in injury to the patient or loss of blood and could expose healthcare
workers to the risk of blood borne pathogens. We are not aware of any legal
claim against us based upon the use or the failure of any of our products.
However, there can be no assurance that material product liability losses will
not occur in the future. In addition, if any of our products prove to be
defective, we may be required to recall those products. We maintain product
liability insurance against any of those claims in amounts we believe to be
adequate. There can be no assurance that if we are found liable, the claim will
not exceed our insurance limits. There is also no assurance that we will be able
to continue to obtain product liability insurance on acceptable terms or at all.
7
<PAGE>
RISKS RELATED TO THIS OFFERING
THERE IS NO UNDERWRITER ASSISTING IN THE SALE OF THE SHARES AND THEREFORE THERE
HAS BEEN NO INDEPENDENT DUE DILIGENCE INVESTIGATION ON YOUR BEHALF
Since we are attempting to sell the Shares without the aid of an
underwriter, our chances of success in selling the Minimum number of Shares are
reduced. We are not experienced in the business of selling Shares. We may,
therefore, not be able to complete the Minimum Offering. In addition to
providing selling expertise, an underwriter is also required to conduct a "due
diligence" evaluation of any company whose securities it underwrites. In this
situation, there is no underwriter, and no one is providing due diligence
evaluations on your behalf.
THERE IS NO ASSURANCE WE CAN LIST OUR COMMON STOCK ON THE AMEX
Our Common Stock is currently eligible to be traded upon the Bulletin
Board. We intend to apply to have the Common Stock listed upon the AMEX (the
American Stock Exchange) in conjunction with the Offering. We believe that
unless 1,000,000 of the shares of Common Stock are sold, we will not satisfy the
AMEX listing requirements and the Common Stock will not be listed. There can be
no assurance that either the Minimum or the Maximum will be sold, that the
successful sale of 1,000,000 shares will result in the Common Stock being
approved for listing on AMEX, or that approval of such listing will be timely
forthcoming or not conditioned on our continued satisfaction of other equity or
net revenue requirements.
If we do not obtain AMEX listing approval, the Common Stock will be listed
for trading on the Bulletin Board. As a consequence, investors could find it
more difficult to sell or dispose of, or obtain accurate quotations as to the
price of the Common Stock. The continued listing of the Common Stock on the
Bulletin Board may result in reduced liquidity of the Common Stock. In
addition, reduced liquidity and difficulty in establishing an accurate or
current market price may result in the inability or difficulty of prospective
sellers of the Common Stock to receive a sale price at or near to the actual
then current value of the Common Stock.
WE ARE NOT REQUIRED TO MEET OR MAINTAIN ANY LISTING STANDARDS FOR OUR COMMON
STOCK TO BE TRADED ON THE BULLETIN BOARD.
The Bulletin Board is separate and distinct from The NASDAQ Stock Market.
Although the Bulletin Board is a regulated quotation service operated by The
NASDAQ Stock Market that displays real-time quotes, last sale prices, and volume
information in over-the-counter equity securities like our Common Stock, we are
not required to meet or maintain any qualitative or quantitative standards for
our Common Stock to be traded on the Bulletin Board. Our Common Stock does not
presently meet the Minimum listing standards for listing on The NASDAQ Stock
Market and may not, depending on the success of this Offering, meet those for
listing on the AMEX.
THERE IS ONLY A LIMITED TRADING MARKET FOR OUR COMMON STOCK AND IT IS POSSIBLE
THAT YOU MAY NOT BE ABLE TO SELL YOUR SHARES EASILY.
There is currently no trading market for our Common Stock. There can be no
assurance that a substantial trading market will ever develop (or be sustained,
if developed) for our Common Stock upon completion of this Offering or that
purchasers will be able to resell their Shares or otherwise liquidate their
investment without delay. Potential investors should be aware that there might
not be an extensive public market in the near future. Accordingly, an investor
may be unable to liquidate an investment in the Shares and should be prepared to
withstand the economic risk of an investment in the Shares for an indefinite
period.
The market price of the Common Stock could be subject to significant
fluctuations in response to variations in quarterly or annual operating results
and other factors such as technological advances in the industry and expansion
or the loss of GPO contracts. In addition, the securities markets in general
have experienced significant price and volume fluctuations from time to time in
recent years that may have been unrelated to the operating performances of
certain industries or individual companies. These broad fluctuations may
adversely affect the market price of the Common Stock.
FUTURE SALES OF COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE.
After the effective date of this Prospectus, there will be 14,000,000
shares of Common Stock and 3,914,095 Shares of preferred stock outstanding which
are "restricted securities" as that term is defined by Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"). Such shares are
eligible for public sale only if registered under the Securities Act or if sold
in accordance with Rule 144. Under Rule 144, a non-affiliated person who has
held restricted shares for a period of one year may sell a limited number of
shares to the public in ordinary brokerage transactions. Sales under Rule 144
may cause the future market price of our Common Stock to decline due to the
potential increased number of publicly held securities. The timing and amount
of sales of Common Stock that are currently restricted securities could have a
depressive effect on the future market price of our Common Stock.
DILUTION
Assuming a purchase price of $15, the pro-forma net tangible book value per
share of Common Stock will be $1.87 assuming the Maximum number of Shares are
sold and $.53 assuming the Minimum number of Shares are sold. Purchasers of
Shares under this Offering shall receive an immediate and substantial dilution
of $13.13 or 87.5% of the share price if the Maximum number of Shares are sold
and $14.47 or 96.5% if the Minimum number of Shares is sold. See "DILUTION."
A NOTE ABOUT FORWARD-LOOKING STATEMENTS
---------------------------------------
The statements, other than statements of historical fact, included in
this Prospectus are forward-looking statements. Forward-looking statements
generally can be identified by the use of forward-looking terminology such as
"may," "will," "expect," "intend," "estimate," "anticipate," "plan," "seek," or
"believe." We believe that the expectations reflected in such forward-looking
statements are accurate. However,
8
<PAGE>
we cannot assure you that such expectations will occur. Our actual future
performance could differ materially from such statements. Factors that could
cause or contribute to such differences include, but are not limited to: the
impact of dramatic increases in demand, our ability to quickly increase our
production capacity in the event of a dramatic increase in demand, our ability
to continue to finance research and development as well as operations and
expansion of production through equity and debt financing, as well as sales, and
the increased interest of larger market players in providing safety needle
devices.
USE OF PROCEEDS
---------------
The net proceeds to us from this Offering under the Minimum and Maximum
Shares to be sold, is estimated to be $__________ and $__________, respectively,
after giving effect to the anticipated selling costs and expenses of $_________
payable by us.
The proceeds from this Offering are not allocated to a specific purpose.
The general purpose for this Offering is to provide capital to us so that we
can, among other things, continue to: expand our manufacturing operations, fund
research and development, pay dividends to preferred stockholders that may be
declared by the Board of Directors, increase sales and marketing efforts, fund
selective worldwide patent rights and provide for other general working capital
needs. Our Management will have total discretion as to how to allocate the funds
received as a result of this Offering. We will not receive any proceeds from
the sale of the selling security holders' Common Stock.
We presently have limited cash and working capital and will be
dependent upon the net proceeds from sales of these registered Shares for the
continuation and expansion of our operations. We anticipate that proceeds from
the Maximum Offering, together with the funds generated from operations, will be
sufficient to support our operations and planned capital expenditures at least
through 2001, without the need for additional financing. However, we believe
that if only the Minimum Offering is completed, additional funds may be required
which may not be available to us or, if available, not on reasonable terms. In
addition, if we experience a change in circumstances or business conditions we
may need additional financing even if the Maximum Offering is completed.
Our future liquidity and capital requirements will depend upon numerous
factors, including the progress of our actions relating to regulatory matters;
costs and timing of expansion of marketing, sales, manufacturing and product
development activities; the extent to which our products gain full market
acceptance; and competition. Any additionally required financing may not be
available on satisfactory terms, if at all. Future equity financing may result
in dilution to the holders of our Common and preferred Stock. Unless and until
our product development and marketing activities are successful and an adequate
amount of its products are sold, of which there can be no assurance, we will not
have enough revenue to cover our operating expenses and we will continue to
incur losses.
CAPITALIZATION
--------------
The following table sets forth the capitalization of RTI as of
December 31, 1999 and September 30, 2000 and the pro-forma capitalization of RTI
after giving effect to the sale of 2,000,000 shares (the Maximum number of
Shares) and 30,000 shares (the Minimum number of Shares) offered hereby at an
assumed public offering price of $15 per Share and the application of the gross
proceeds (before offering expenses are taken into account) therefrom as
described under "USE OF PROCEEDS."
<TABLE>
<CAPTION>
MAXIMUM SHARES SOLD MINIMUM SHARES SOLD
December 31, 1999 September 30, 2000 December 31, 1999 September 30, 2000
Actual Pro Forma Actual Pro Forma Actual Pro Forma Actual Pro Forma
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short term
debt $ 463,329 $ 463,329 $ 953,078 $ 953,078 $ 463,329 $ 463,329 $ 953,078 $ 953,078
----------------------------------------- --------------------------- --------------------------- ----------------------------
Long term
debt 2,506,335 2,506,335 5,301,959 5,301,959 2,506,335 2,506,335 5,301,959 5,301,959
----------------------------------------- --------------------------- --------------------------- ----------------------------
Series A 5,000,000 5,000,000 4,974,000 4,974,000 5,000,000 5,000,000 4,974,000 4,974,000
Series I,
Class B 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
Series II,
Class B 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
Series III,
Class B 1,160,200 1,160,200 1,160,445 1,160,445 1,160,200 1,160,200 1,160,445 1,160,445
Series IV, - - - -
Class B 1,133,800 1,133,800 1,133,800 1,133,800
Common
stock - - - - - - - -
Additional
paid in
capital 23,565,235 53,565,235 31,011,580 61,011,580 23,565,235 24,015,235 31,011,580 31,461,580
Unearned
compensation (185,635) (185,635) (229,156) (229,156) (185,635) (185,635) (229,156) (229,156)
Accumulated
deficit (22,852,247) (22,852,247) (29,591,443) (29,591,443) (22,852,247) (22,852,247) (29,591,443) (29,591,443)
----------------------------------------- --------------------------- --------------------------- ----------------------------
Shareholders'
equity 8,687,553 38,687,553 10,459,226 40,459,226 8,687,553 9,137,553 10,459,226 10,909,226
----------------------------------------- --------------------------- --------------------------- ----------------------------
Capital-
ization $ 11,657,217 $ 41,657,217 $ 16,714,263 $ 46,714,263 $ 11,657,217 $ 12,107,217 $ 16,714,263 $ 17,164,263
========================================= =========================== =========================== ============================
</TABLE>
9
<PAGE>
The above numbers do not take into account 7,725 shares of preferred stock
(convertible into shares of Common Stock on a one-for-one basis) reserved for
issuance upon the exercise of warrants, 1,781,655 Shares reserved for issuance
upon the exercise of options under any of our three stock option plans, and
500,000 shares of preferred stock (convertible into Common Stock on a one-for-
one basis) reserved for issuance in partial payment of dividends to preferred
shareholders. The calculation of total number of Shares outstanding and
resulting dilution assumes no exercise of rights to purchase additional shares
by preferred shareholders. Owners of Series A and Class B Convertible Preferred
Stock have the right to purchase Common Stock not covered by this Prospectus
from us at the Offering Price, based on a formula set out in the appropriate
certificate of designation for each of the five classes and series. Assuming
that all owners of Series A and Class B Convertible Preferred Stock exercise
their conversion rights, we would issue an additional 3,914,095 Shares of Common
Stock, for aggregate effective consideration of $20,869,450 which was initially
paid for the preferred stock.
DILUTION
--------
Purchasers of registered Shares will suffer immediate and substantial
dilution of their per share investments. Prior to the Offering, we had
19,358,150 Shares of Common Stock issued and outstanding. Initially, 1,000
shares of Common Stock were issued to Thomas J. Shaw, our Chief Executive
Officer, in exchange for $1,000 value in services rendered in 1994. In April
1995, Mr. Shaw exchanged all 1,000 shares outstanding for 14,000,000 shares of
Common Stock. In May 1996, Mr. Shaw transferred 2,800,000 of the 14,000,000
then issued and outstanding shares of Common Stock to Lillian E. Salerno, a
Director, in exchange for services rendered. In September 2000, we issued a
mandatory redemption of 541,500 shares of the Series A Stock. Pursuant to that
redemption, 519,500 shares of Series A Stock were converted into 519,500 shares
of Common Stock. In October 2000, we gave all preferred shareholders notice of
a registration of Common Stock for public sale. Pursuant to the rights granted
under the various certificates of designation, 668 shareholders converted an
aggregate of 4,838,650 shares of preferred stock into 4,838,650 shares of Common
Stock and have given notice of their intent to sell their shares.
The remaining preferred stock was purchased in private placements for
prices ranging from $1 to $10 per share. 3,151,500 shares of Common Stock were
purchased by conversion of Series A Stock, which was originally obtained for $1
per share. 633,400 shares of Common Stock were purchased by conversion of
Series I Stock, which was originally obtained for $5 per share. 510,750 shares
were purchased by conversion of Series II Stock which, was originally obtained
at $10 per share. 994,700 shares were purchased by conversion of Series III
Stock, which was originally obtained at $10 per share. 67,800 shares were
purchased by conversion of Series IV Stock, which was originally obtained at $10
per share.
We had a net tangible book value of $9,917,202, or approximately $.51 per
share of Common Stock as of September 30, 2000. Net tangible book value per
share is equal to the net tangible assets of RTI (total assets less total
liabilities and intangible assets), divided by the number of Shares outstanding
as of September 30, 2000. Without taking into account any changes in net book
value of RTI at September 30, 2000, other than to give effect to the sale of
Common Stock hereby (before deduction of the Offering expenses), the pro-forma
net tangible book value of RTI at September 30, 2000, if the Maximum or Minimum
Shares under this Offering is sold would have been $39,917,202 and $10,367,202,
respectively. This represents an immediate increase in net book value of $1.36
or $.02 per share should the Maximum or Minimum number of Shares be sold,
respectively, of Common Stock to existing shareholders and an immediate dilution
of approximately $13.13 or $14.47, respectively, per share of Common Stock to
new investors purchasing Shares in this Offering. The following table
illustrates the per share dilution to new investors:
<TABLE>
<CAPTION>
Maximum Shares Sold Minimum Shares Sold
------------------- -------------------
<S> <C> <C> <C> <C>
Assumed initial Offering price per share of Common Stock..... $ 15 100% $ 15 100%
Net tangible book value per share
as of September 30, 2000.................................. $ .51 3.4% $ .51 3.4%
Increase in per share attributable to new investors*......... $ 1.36 9.1% $ .02 .1%
Pro-forma net tangible book value per share after Offering*.. $ 1.87 12.5% $ .53 3.5%
Dilution per share to new investors*......................... $13.13 87.5% $14.47 96.5%
</TABLE>
* This number includes the 5,358,150 shares of Common Stock held by
selling security holders.
The following table summarizes, on a pro-forma basis as of September 30,
2000, the number of Shares of Common Stock purchased from RTI, the total
consideration paid to RTI, and the average price per share of Common Stock paid
by the selling stockholders and by the new investors participating in this
Offering if the Maximum or Minimum Shares under this Offering are sold:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
MAXIMUM SHARES SOLD:
Selling Shareholders 5,358,150 72.8% N/A N/A N/A
New Investors 2,000,000 27.2% $30,000,000 100% $15
MINIMUM SHARES SOLD:
Selling Shareholders 5,358,150 99.4% N/A N/A N/A
New Investors 30,000 .6% $450,000 100% $15
</TABLE>
10
<PAGE>
The foregoing table excludes 7,725 shares of preferred stock (convertible
into Common Stock on a one-for-one basis) reserved for issuance upon the
exercise of warrants, 1,781,655 Shares reserved for issuance upon the exercise
of options under any of our three stock option plans and 500,000 shares of
preferred stock (convertible into Common Stock on a one for one basis) reserved
for a possible issuance as a dividend to preferred stock holders. The
calculation of total number of Shares outstanding and resulting dilution assumes
no exercise of rights to purchase additional shares by preferred shareholders.
Assuming that all owners of Series A Convertible Preferred and Class B
Convertible Preferred Stock exercise their conversion rights, we would issue an
additional 3,914,095 Shares of Common Stock, for effective aggregate
consideration of $20,869,450, which was paid for the preferred stock. Purchases
of Common Stock by owners of preferred stock would have a material impact on
dilution suffered initially by persons purchasing registered Shares in this
Offering. See "DESCRIPTION OF SECURITIES."
As noted previously, we intend to Offer the registered Shares, without use
of an underwriter, but reserve the right to employ brokers, dealers and/or
underwriters to complete this Offering. The calculation of net tangible book
value (giving effect to completion of the Offering) makes no provision for
payment of commissions or other expenses to such persons. Because commissions
and expenses, if paid, will total at most 10% of the Offering, such payments
would have only a slight impact on dilution, which we consider immaterial. If
we enter into an agreement with an underwriter this Prospectus will be amended.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Certain statements included by reference in this Prospectus containing the
words "believes," "anticipates," "intends," "expects," and similar such words
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. Any forward-looking statements involve known
and unknown risks, uncertainties, and other factors that may cause actual
results, performance, or achievements of RTI to be materially different from any
future results, performance, or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the impact of
dramatic increases in demand, our ability to quickly increase production
capacity in the event of a dramatic increase in demand, our ability to continue
to finance research and development as well as operations and expansion of
production through equity and debt financing, as well as sales, and the
increased interest of larger market players in providing safety needle devices.
Given these uncertainties, undue reliance should not be placed on forward-
looking statements.
EXTERNAL SOURCES OF LIQUIDITY
We have funded operations primarily from proceeds from private placements
and bank loans. We were capitalized with approximately $42,000,000 raised from
five separate Private Placement Offerings. As of September 30, 1995, we sold
5,000,000 Shares of Series A Stock at $1 per share, for an aggregate of
$5,000,000. As of October 31, 1996, we sold 1,000,000 Shares of Series I Class
B Convertible Preferred Stock ("Series I Stock") at $5 per share for an
aggregate of $5,000,000. As of January 31, 1998, we sold 1,000,000 Shares of
Series II Class B Convertible Stock ("Series II Stock") at $10 per share for an
aggregate of $10,000,000. As of September 30, 1999, we sold 1,160,200 Shares of
Series III Class B Convertible Preferred Stock ("Series III Stock") at $10 per
share for an aggregate of $11,600,200. Finally, as of June 10, 2000, we sold
1,133,800 Shares of Series IV Class B Convertible Preferred Stock ("Series IV
Stock") at $10 per share for an aggregate of $11,338,000. We obtained
$1,200,000, $710,000, and $2,000,000 in 1996, 1997, and 2000, respectively, from
bank loans. Additionally, we received a Small Business Administration loan of
$1,000,000 in 1996 to pay for portions of automated assembly equipment, multi-
cavity molds, and other equipment. Furthermore, we borrowed $3,000,000 in August
2000 and $2,000,000 in December 2000 under our Credit Agreement with Abbott.
SELECTED FINANCIAL DATA
The following selected financial data for fiscal years ended December 31,
1999 and 1998, is derived from financial statements, which were audited by
independent accountants. The following selected data for the nine months ended
September 30, 2000 and 1999, is derived from our unaudited financial statements.
The data should be read in conjunction with the audited financial statements and
selected notes and the following discussion of results of operations.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31 Nine Months Ended Nine Months Ended
---------------------- September 30, 2000 September 30, 1999
1999 1998 (Unaudited) (Unaudited)
---- ---- ----------- -----------
<S> <C> <C> <C> <C>
Sales, net $ 3,375,158 $ 845,559 $ 6,109,417 $ 1,965,944
Cost of sales 2,331,070 765,448 5,782,287 1,361,590
------------ ------------ ------------ ------------
Gross margin 1,044,088 80,111 327,130 604,354
------------ ------------ ------------ ------------
Operating Expenses
Preproduction manufacturing 1,837,830 1,004,828 627,200 1,272,578
Sales and marketing 3,742,779 1,539,822 3,180,353 2,603,431
Research and development 842,062 763,690 467,786 613,215
General and administrative 2,863,989 2,419,821 2,825,925 2,094,944
------------ ------------ ------------ ------------
Total operating expenses 9,286,660 5,728,161 7,101,264 6,584,168
------------ ------------ ------------ ------------
Loss from operations (8,242,572) (5,648,050) (6,774,134) (5,979,814)
Interest income (expense) 9,064 (56,038) 34,938 7,816
------------ ------------ ------------ ------------
Net loss $(8,233,508) $(5,704,088) $(6,739,196) $(5,971,998)
============ ============ ============ ============
Dividend requirement $ 2,999,848 $ 2,141,701 $ 2,905,323 $ 2,182,414
Basic earnings per share $ (.80) $ (.56) $ (.69) $ (.58)
</TABLE>
11
<PAGE>
RESULTS OF OPERATIONS
The following discussion contains trend information and other forward-
looking statements that involve a number of risks and uncertainties. Our actual
future results could differ materially from our historical results of operations
and those discussed in the forward-looking statements. All period references
are to our fiscal year ended December 1999 or 1998 or periods ended September
30, 2000 and 1999.
Comparison of Nine Months Ended
September 30, 2000 and Nine Months Ended September 30, 1999.
Net sales increased to $6,109,417 from $1,965,944, an increase of
$4,143,473 for the nine months ended September 30, 2000 from the nine months
ended September 30, 1999. This 211% increase was due principally to the Abbott
Agreement as almost one half of the revenues during the period were attributable
to sales to Abbott. The remaining revenue increase was attributable to increased
sales to other distributors. Syringe revenue increased almost $900,000 and
blood collection tube holder revenues increased approximately $150,000 due to
sales to other distributors.
Cost of sales increased to $5,782,287 from $1,361,590 or $4,420,697. Of the
variable costs, labor costs increased approximately $2,000,000, material costs
increased $1,400,000, and royalty costs were up $237,000. Depreciation increased
$207,000 and repairs and maintenance expense increased approximately $250,000.
Consulting costs increased about $84,000 and supplies increased by $88,000.
Coincident with the signing of the Abbott Agreement, we ceased reporting as a
development stage enterprise, and we no longer classify any manufacturing costs
as preproduction expenses.
Preproduction expenses decreased from $1,272,578 to $627,200, or $645,378,
for the nine months ended September 30, 2000 compared to the nine months ended
September 30, 1999. The decrease was due to decreased production time
attributable to mold and piece part validation than for the same period in the
previous year. This resulted in a decrease in labor cost of approximately
$334,000, depreciation costs declined $149,000, and supplies were $103,000 less
than for the same period in the previous year.
Research and development expense decreased from $613,215 to $467,786, or
$145,429. This 24% decrease is largely due to a $95,000 decrease in consulting
expenses on the 3cc-syringe product line.
Sales and marketing expense increased from $2,603,431 to $3,180,353, or
$576,922, for the nine months ended September 30, 2000 compared to the nine
months ended September 30, 1999. An increase in marketing fees of $1,140,000
was due to the higher sales volumes and the effect of the obligation of
marketing fees to the distributors, which began in June 1999. These increases
were partially offset by decreases in contract sales expense of $290,000 and
travel expenses of $166,000. In 1999, the contract sales expense was incurred
to market our products in California in conjunction with the safe needle
legislation becoming effective in that state.
General and administrative expenses increased from $2,094,944 to
$2,825,925, an increase of $730,981 or 35%. The increased expenses were due to
outside legal and accounting fees of $196,000. Additionally, increases in
staffing were $330,000.
Interest income increased $40,497 or 37% for the nine months ended
September 30, 2000 compared to the nine months ended September 30, 1999 due to
higher invested cash balances.
Interest expense increased $13,376 or 13% for the nine months ended
September 30, 2000 compared to the nine months ended September 30, 1999 due to
higher debt. Increases in interest expense were partially offset by an
increase in capitalized interest of $106,933 over the same period in the
previous year.
Comparison of Year Ended
December 31, 1999, and Year Ended December 31, 1998
Net sales were $3,375,158 and $845,559 for the years ended December 31,
1999, and December 31, 1998, respectively. The increase of $2,529,599, or 300%,
was principally due to increased sales of $1,879,599 to customers with
distribution in California. The increase was a result of the safe needle
legislation in California.
Cost of sales increased from $765,448 in 1998 to $2,331,070 in 1999, or an
increase of 205%. As a percentage of revenue, cost of sales decreased from 91
percent in 1998, to 69% in 1999. The improvement is due to achieving higher
production volumes while some costs remained relatively fixed. Material costs
increased $939,000, and labor costs increased $289,000 from 1998 to 1999 due
principally to increased sales volume.
Preproduction costs increased from $1,004,828 to $1,837,830. Increases were
due to validation of new equipment and piece parts to fulfill the need for
increased production volumes. Preproduction labor increased $585,000 and
material costs were up $93,000 from 1998 to 1999.
Sales and marketing expenses increased 143% to $3,742,779 in 1999 from
$1,539,822 in 1998 but decreased as a percentage of revenue from 182% to 111%.
The increase in expenses is principally due to the increased effort to market
VanishPoint(R) products in California, including retaining a marketing company
that provided contract sales representatives to supplement the marketing effort.
The expense in 1999 for contract sales representatives was $460,000.
Additionally, the Company began paying marketing fees in 1999. This represents
$600,000 of the increase. There was no comparable expense in 1998 for outside
contract sales representatives or marketing fees in 1998. Additional staffing
costs were approximately $540,000. Travel and entertainment expense increased
$215,000.
Research and development costs increased, primarily in staffing, as
more resources were committed to the 1cc syringe.
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General and administrative costs increased 18 percent due to increases in
staffing and consulting services, offset somewhat by decreases in legal fees.
Interest income decreased due to lower average outstanding cash balances.
Interest expense decreased due to lower outstanding debt and more interest
being capitalized.
Comparison of Year Ended
December 31, 1998, and Year Ended December 31, 1997
Net sales were $845,559 and $262,315 for the years ended December 31, 1998,
and December 31, 1997, respectively. Shipments of the 3cc VanishPoint(R) syringe
began in February 1997, with 66 percent of the sales occurring during the last
four months of the year.
Cost of sales in 1998 increased 61% while sales volume increased 222%. The
percentage improvement is due to achieving higher production volumes with
automated equipment, while labor costs decreased $20,000. Depreciation increased
$317,000 year to year.
Preproduction manufacturing costs decreased $491,590 from 1997 to 1998,
because operations shifted more to a manufacturing environment from a
preproduction environment. Labor costs decreased $215,000 and materials used for
preproduction decreased $237,000 from 1997 to 1998.
Sales and marketing expense increased to $1,539,822 in 1998 from $1,394,024
in 1997, an increase of 10%. The sales force was expanded in 1998, resulting in
additional salary expense of $171,000, a 12% increase over 1997. Travel expense
increased $95,000, or 7%. These costs were incurred in order to increase sales
and product awareness. These increases were partially offset by a reduction of
$105,000 in sales and marketing consulting expenses as we expanded our own
workforce and by a reduction in costs associated with developing marketing and
advertising materials.
Research and development costs increased from $266,029 in 1997 to $763,690
in 1998, an increase of $497,661. This increase was due to the increase in time
spent in the manufacturing facility to further develop, refine, and validate the
production process using automated assembly equipment, so that our products can
be produced efficiently while maintaining our high standards for quality.
General and administrative expenses increased 24 percent in 1998, to
$2,419,821 from $1,952,561 in 1997. The increase was primarily an increase in
salaries of $208,000 and consulting services of $155,000 over 1997. These
increases were reduced by decreases in legal fees of $57,000.
Interest income increased due to higher average outstanding cash balances.
Interest expense decreased $118,595 due to an increase in the
capitalization of interest expense on construction in progress expenditures for
production equipment that we are having manufactured.
LIQUIDITY AND FUTURE CAPITAL REQUIREMENTS
We believe we will be able to sustain operations for our existing products
without additional financing. We believe that we will achieve our breakeven
point in the year 2001. We believe that the existing cash and cash equivalents
and cash flow from operations will be sufficient to meet our presently
anticipated working capital needs through 2001. To the extent we use all of our
cash resources, we will be required to obtain additional funds, if available,
through additional borrowing or equity financing. There can be no assurance that
such capital will be available on acceptable terms. If we are unable to obtain
sufficient financing, we may be unable to implement our long-term plan of
operation. We anticipate strengthening our capital structure over the next four
years by increasing capital through debt and equity offerings, improving
profitability, and participating in joint ventures or licensing arrangements,
where possible, to accelerate the manufacture and distribution of our products.
We currently produce products at a rate of 24 million 3cc syringes and 8
million blood collection tube holders annually. In order to ramp up production
to meet the expected demand for safe needle devices, we have raised a little
over $18 million in debt and equity funds in 2000. We obtained these funds
from: (1) two loans given by 1st International Bank totaling $2,000,000, (2) a
right to borrow up to $5,000,000 from Abbott, and (3) the sale of $11,338,000 of
our Series IV Stock. We obtained $2,000,000 of the $18,000,000, from 1st
International Bank in the form of two loans. The loan for $1,500,000 matures on
February 18, 2005. Monthly payments are based on a twenty-year amortization and
the loan bears interest at prime plus 1%. The $500,000 loan matures on February
18, 2001 with only interest being paid monthly. Interest is prime plus 1%.
We obtained $5,000,000 of the $18,000,000 as a result of an agreement with
Abbott. On May 4, 2000, we entered into a National Marketing and Distribution
Agreement with Abbott for an initial five-year term. Pursuant to the Abbott
Agreement, Abbott agreed to act as a non-exclusive marketer and distributor of
our 1cc, 3cc, 5cc, and 10cc syringes, blood collection tube holders, and small
tube adapters to acute care facilities in the United States. As part of the
consideration for the Abbott Agreement, Abbott agreed to make periodic loans to
us prior to June 30, 2005, in increments of $1,000,000 in an aggregate amount of
up to $5,000,000 at an interest rate of prime plus one percent with any and all
amounts lent to be due and payable on June 30, 2005. Accounts receivable and
contracts secure any loans made where Abbott is the account debtor, payments due
to Abbott under the Abbott Agreement, and certain equipment already owned by us.
We have borrowed $5 million under the Abbott Agreement. Pursuant to the Abbott
Agreement, we gave Abbott the right, at its option, to convert any and all
principal amounts owed into Common Stock at a price of $10 per share. Abbott
also holds registration rights with respect to the shares of Common Stock issued
upon conversion of any principal amount lent. As part of the consideration paid
to us under the Abbott Agreement, Abbott purchased $5 million of Series IV Stock
under the same terms and conditions as all other investors in the Series IV
Stock offering. We expect to fund future expansion through a combination of
debt, a public offering, and internally generated funds. Capital needs are
expected to require an additional $87 million over the next five years for
expansion of production discussed in greater detail in Material Commitments for
Expenditures.
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We obtained the remainder of the $18,000,000 from the sale of $11,338,000
of our Series IV Stock.
Internal Sources of Liquidity and Anticipated Trends in Sales
-------------------------------------------------------------
The increase in sales is primarily due to legislation requiring safety
needles, which has been passed in seventeen states. Demand for safety products
is increasing in the United States and internationally. The National Institute
for Occupational Safety and Health ("NIOSH") issued a safety alert calling on
employers to adopt safer needles to reduce needlestick injuries. The Federal
Occupational Safety and Health Administration ("OSHA") issued a Compliance
Directive which instructs OSHA inspectors to cite employers who fail to evaluate
and buy safety needle devices. The Service Employees International Union
("SEIU") has taken a proactive stance with regard to promoting the use of
automated retraction needle devices in member hospitals and by participating in
federal and state legislation protests. Due to recent legislation, the
California Occupational Safety and Health Administration ("Cal OSHA") mandates
that healthcare employers provide their workers with safe needle devices. In
addition, 16 other states have adopted, and more than 20 states have introduced,
legislation containing language similar to that passed in California, and
federal legislation has passed in the House and the Senate and was signed into
law on November 6, 2000. The recognition for the urgency of safe needle devices
in parts of Europe and Africa has echoed the United States model. In France,
England, Germany, and Italy, organized healthcare worker unions have taken
action to force hospitals and government agencies to place safety as a priority.
France has led Western Europe in its recognition of safety and has implemented
VanishPoint(R) blood collection tube holders in several hospitals and clinical
laboratories.
Also, as a result of the Abbott Agreement, sales are expected to increase.
Demand could also dramatically increase in the event we are successful in our
antitrust suit, but we have not based any of our financing plans on a positive
result from that suit. See "LEGAL PROCEEDINGS." We are also ramping up our
production and continuing to introduce new products. We anticipate being able
to sell all the products that we are able to produce.
External Sources of Liquidity
-----------------------------
We have obtained several loans over the past four years, which have,
together with proceeds from sales of equities, enabled us to pursue development
and production of our products.
In January 1996, we obtained two loans from Western Bank & Trust in the
principal amount of $1,200,000 for the purpose of financing construction
improvements and the purchase of manufacturing equipment, which matures on
October 24, 2001. One loan was in the amount of $800,000 and one loan in the
amount of $400,000. The larger note carried interest at a rate of prime as
defined by The Wall Street Journal plus 1 percent adjustable annually, while the
smaller loan carried interest at a rate of CD rate plus 2 percent. The loans
were secured by land, building, and equipment and by a certificate of deposit in
the amount of $400,000 to be released upon achievement of certain financial
ratios (with interest payable at the certificate of deposit rate plus 2
percent). Thomas J. Shaw, our President and Chief Executive Officer, and
Suzanne M. August, his wife, guaranteed these loans. The $800,000 loan was paid
off in February 2000 with funds provided by a loan from 1st International Bank.
The $400,000 loan was paid by the certificate of deposit, which had been held as
collateral.
In July 1996, we obtained a United States Small Business Administration
note payable to Texas Bank in the principal amount of $1,000,000, which matures
on July 1, 2003. The note is payable monthly at an annual interest rate of
prime plus 1.5 percent adjustable quarterly. The loan is collateralized by
manufacturing equipment and guaranteed by Thomas J. Shaw, our President and
Chief Executive Officer, and Suzanne M. August, his wife. This loan is in good
standing. We have agreed not to make any distribution upon our capital stock,
purchase any of our capital stock, or merge without prior written consent.
Such permission was obtained for the payment of dividends on the Series A
Convertible Preferred Stock and the recent partial redemption of Series A Stock.
In April 1997, we obtained a loan from Legacy Bank of Texas (formerly
Plano Bank & Trust) in the principal amount of $710,000 at an interest rate of
prime plus 1 percent (adjustable daily) for reimbursement for the purchase of
equipment, which matures on July 10, 2004. The loan is collateralized by
certain machinery and equipment, a certificate of deposit in the amount of
$200,000, and restrictions on the transfer of certain patents. This certificate
of deposit has been applied to the loan balance. The loan is (continuously and
without limit) guaranteed by Thomas J. Shaw, the President and Chief Executive
Officer. This loan is in good standing.
In February 2000, we obtained loans of $2 million through the 1st
International Bank. The proceeds from these loans were used to pay off the
Western Bank loan and also for working capital purposes. $1,500,000 of the loan
is secured by a lien on the land, building, and building improvements and
matures on February 18, 2005. The remaining $500,000 is secured by our accounts
receivable and matures on February 18, 2001. Both loans are guaranteed by a
continuing guaranty by Thomas J. Shaw, the President and Chief Executive
Officer. The interest rate on both loans is the prime rate as defined in The
Wall Street Journal plus 1 percent. This loan is in good standing.
In May 2000,we entered into an Agreement with Abbott. As part of the
consideration for the Abbott Agreement, Abbott agreed to make periodic loans
prior to June 30, 2005, in increments of $1,000,000 in an aggregate amount of up
to $5,000,000 at an interest rate of prime plus 1 percent with any and all
amounts lent to be due and payable on June 30, 2005. We borrowed $3 million in
August 2000 and $2 million in December 2000 under the Abbott Agreement. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION-LIQUIDITY AND FUTURE
CAPITAL REQUIREMENTS" for a more detailed description.
Material Commitments for Expenditures
-------------------------------------
We anticipate capital expenditures in the amount of $87 million over the
next five years for the purpose of expanding capacity by adding equipment and
additional space (for 14 assembly lines for syringe production and 5 lines for
blood collection tube holder production), expanding the current building by an
additional 60,000 square feet, constructing a 15,000 square foot warehouse, and
constructing another facility for additional assembly, equipment, and
warehousing needs in order to meet our target production of syringes and blood
collection tube holders by 2005. We need this capital to fund equipment and
facilities expansion for additional 1cc, 3cc, and blood collection tube holders,
as well as equipment to manufacture 5cc and 10cc syringes. The equipment will
include a 1cc printer, 1cc packaging machine, 5cc/10cc assembly equipment, blood
collection tube holder assembly equipment, and blood collection tube holder
molds. This production target equates to our
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obtaining 6 percent of the United States' 6.6 billion-unit syringe annual market
and less than 1 percent of the world's 24 billion-unit annual syringe market. We
have obtained $18 million in a combination of debt and equity financing in 2000
and expect to raise $60 million through equity financing over a period of time.
We anticipate other funding requirements to be paid from debt or operations.
Management anticipates $3,500,000; $25,447,000; and $16,897,000 in capital
expenditures for the manufacturing facility, equipment, and machinery in fiscal
2000, 2001, and 2002, respectively.
We are in the process of purchasing additional automated blood collection
tube holder equipment. We have increased capacity by outsourcing the molding of
certain sub-components of our products. We have entered into an agreement with
Anura Plastic Engineering Corporation ("APEC") for the provision of additional
molding capacity for both parts and warehousing space in California. We have
also outsourced assembly of the sub-components of our 5cc and 10cc syringes. We
are also pursuing licensing agreements and/or joint venture agreements for the
provision of manufacturing services.
DESCRIPTION OF BUSINESS
-----------------------
BUSINESS DEVELOPMENT
General Description
-------------------
We design, develop, manufacture, and market innovative patented safety
needle devices for the healthcare industry. Our VanishPoint(R) products utilize
a unique friction ring mechanism patented by Thomas J. Shaw, our Founder,
President, and Chief Executive Officer. VanishPoint(R) products are designed
specifically to prevent needlestick injuries and to prevent reuse. The friction
ring mechanism permits the automated retraction of the syringe needle into the
barrel of the syringe, directly from the patient, after delivery of the
medication is completed. The VanishPoint(R) blood collection tube holder
utilizes the same mechanism to retract the needle after blood has been drawn
from the patient. Closure of an attached end cap of the blood collection tube
holder causes the needle to retract directly from the patient into the closed
tube holder. Advantages of our products include protection from needlestick
injuries, prevention of cross contamination through reuse, and reduction of
disposal and other associated costs. We have an exclusive license from Thomas J.
Shaw, our President and Chief Executive Officer, for the patent rights for our
safety needle products.
We and Thomas J. Shaw entered into a Technology License Agreement dated
effective as of the 23rd day of June 1995, whereby Mr. Shaw granted us a
worldwide exclusive license to manufacture, market, sell and distribute
'Licensed Products' and 'Improvements' without right to sublicense until the
expiration of the last to expire of the last 'Licensed Patents' unless sooner
terminated under certain conditions. 'Licensed Products', 'Improvements' and
'Licensed Patents' are all terms that are extensively defined in the Technology
License Agreement which is incorporated herein to this Prospectus by reference
as indicated in the Exhibit Index. In exchange, we paid Mr. Shaw a $500,000
initial licensing fee and a 5 percent royalty on gross sales of 'Licensed
Products'. See Patents and Proprietary Rights for a more detailed discussion.
Our goal is to become a leading provider of automated retraction safety devices.
We began commercial production of our 3cc VanishPoint(R) syringe in 1997.
Our additional patented VanishPoint(R) products include 1cc tuberculin, insulin,
and allergy antigen syringes; 5cc and 10cc syringes; a blood collection tube
holder, small tube adapter, a dental syringe, a self retracting IV catheter
introducer and a full displacement syringe. We manufacturer 3cc syringes and
blood collection tube holders with automated assembly. We began commercial
production of the blood collection tube holder in the fourth quarter of 1998.
5cc and 10cc syringes are being manufactured in lesser quantities utilizing
semi-automated equipment. We submitted a pre-market notification and received
510(k) clearance from the FDA (which is granted automatically upon the filing of
the requisite paperwork) for the 1cc, 3cc, 5cc, and 10cc syringes and the blood
collection tube holder and small tube holder adapter. After submitting all
requisite documentation, the clearance to market products is granted. This
clearance allows us to put products into interstate commerce for commercial
distribution.
Development of RTI
------------------
While owning and operating Checkmate Engineering, a sole proprietorship,
Thomas J. Shaw, our President and Chief Executive Officer, developed and
patented the idea and early prototypes of the syringe that were to become the
VanishPoint(R) safety syringe. On May 9, 1994, RTI was incorporated in Texas to
design, develop, manufacture, and market medical safety devices for the
healthcare industry. In April 1995, Mr. Shaw, who owned all 1,000 of the then
issued and outstanding shares of the Common Stock, exchanged all 1,000 Shares
then outstanding for 14,000,000 shares of Common Stock. In May 1996, Mr. Shaw
transferred 2,800,000 shares of the 14,000,000 then issued and outstanding
Common Stock to Lillian E. Salerno, a Director.
In 1996, we purchased assets and hired personnel from Checkmate
Engineering. We had limited production and no sales in 1996, but focused our
attention on general and administrative activities including implementing
Quality System Regulation, developing a human resource department, and obtaining
an Order of Substantial Equivalence from the FDA allowing us to manufacture and
sell the blood collection tube holder, 5cc, 10cc, and 1cc VanishPoint(R)
syringes. In 1997, we began selling products to emergency medical service
centers, federal prison systems, homecare facilities, small hospitals, and VA
hospitals. During the second half of 1997, we took delivery of our 3cc
automated assembly equipment and began automated assembly. Production molds for
the 5cc and 10cc syringes and the blood collection tube holder were ordered in
1997. A prototype mold for the 1cc syringe was ordered and received in 1997.
Automated assembly equipment for the blood collection tube holder was ordered at
the end of 1997 and installed in July 1998. We began commercial production of
the blood collection tube holder in 1998. In the fourth quarter of 2000, we
received our 1cc syringe assembly equipment.
We received our ISO 9001 Certificate in July 1998, and the VanishPoint(R)
syringe received its CE Mark Certificate on July 31, 1998. ISO 9001 standard is
a model created by International Standard Organization ("ISO"), an international
agency consisting of almost 100 member countries that provides guidance in the
development and implementation of an effective quality management system through
a series of five international standards. This model is used by organizations
to certify their quality system from initial design and development of a desired
product or service through production, installation, and servicing. The CE mark
allows us to sell our products in Europe. In 1999, we focused our
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development on improvement of manufacturing processes, continuation of design
and development of the manufacturing process for the 1cc syringe, and conceptual
design of additional safe needle products utilizing automated retraction
technology.
On May 4, 2000, we entered into a National Marketing and Distribution
Agreement (the "Abbott Agreement") with Abbott Laboratories ("Abbott") for an
initial five-year term. Furthermore, we have agreed to the formation of a New
Product Team, consisting of key personnel from both companies, which will
develop new safety products that incorporate our patented, proprietary
technology.
We have not been involved in any bankruptcy or similar proceedings and have
not merged or consolidated a significant amount of assets other than in the
ordinary course of business except as discussed above.
BUSINESS OF ISSUER
Principal Products
------------------
Our products with pre-market notification to the FDA include 1cc
tuberculin, insulin, and allergy antigen VanishPoint(R) syringes; 3cc, 5cc, and
10cc VanishPoint(R) syringes; and the VanishPoint(R) blood collection tube
holder and small tube adapter. In October 1999, ECRI (formerly known as the
Emergency Care Research Institute), a recognized authority in evaluating medical
devices, awarded the VanishPoint(R) syringe and blood collection tube holder its
highest possible rating. The VanishPoint(R) blood collection tube holder
received Risk and Insurance magazine's 1997 "Top of the Line" Award for
excellence.
Our 1cc VanishPoint(R) tuberculin, insulin, and allergy antigen syringes
will be produced in various needle lengths and gauges and packaging styles. They
are expected to be available in commercial quantities in the first half of 2001.
The 3cc VanishPoint(R) syringe reached the market in the first quarter of 1997.
It is available in various needle lengths and gauges. The 5cc and 10cc
VanishPoint(R) syringes are being produced in various needle lengths and gauges
and are currently being sold in limited quantities. Sales of the VanishPoint(R)
blood collection tube holder and a small tube adapter for use with small sample
collection tubes began in the third quarter of 1998.
The manufacture and sale of medical devices entails an inherent risk of
liability in the event of product failure or claim of harm caused by the
product's operation. We believe that we have adequate product liability
insurance against any such claims. In March, 1998, the Journal of Healthcare
Safety, Compliance and Infection Control published a survey of 26 medical
facilities having used a total of 86,000 3cc syringes, during which no
needlestick injuries from using the VanishPoint(R) syringes were reported.
Industry Overview
-----------------
The VanishPoint(R) syringe and needle device products are sold to and used
by healthcare providers (primarily in the United States with limited sales
outside the United States), which include, but are not limited to, acute care
hospitals, alternate care facilities, doctors' offices, clinics, emergency
centers, surgical centers, convalescent hospitals, VA facilities, military
organizations, public health facilities, and prisons.
Based on the most recent (1998) report from Theta Corporation ("Theta"), a
publisher of comprehensive market research reports on the medical device,
diagnostic, biotech, and pharmaceutical industries, the number of unit sales of
disposable hypodermic needles and syringes for 1997 was 6.6 billion in the
United States alone, with $1 billion in projected sales. According to Theta
estimates, 94 percent of the 1997 United States syringe market was made up of
standard syringes at an average price of $.11 per unit, and 6 percent was safety
syringes at an average price of $.30 per unit. Of the 6.6 billion syringes sold
in 1997, 4.3 billion were purchased by hospitals and 2.3 billion were purchased
by alternate care facilities. The alternate care market includes 1 billion
units for retail customers who use primarily 1cc allergy antigen and insulin
syringes, 600 million units for physicians' offices--which use a mixture of all
types of syringes, and 700 million units for extended care facilities.
According to market leader B-D, approximately 20 percent of the United States
market has converted to safety-engineered products and, according to their
projections, 85 percent of the market will be converted within the next few
years. Theta projections indicate that by 2001, 75 percent of syringes sold in
the United States will be safety syringes and 25 percent will be standard with
estimated pricing resulting in revenues of $1.35 billion.
Blood collection devices are used (most often by phlebotomists and
laboratory technicians) to collect samples of blood from patients for diagnostic
procedures. An evacuated vacuum tube used to contain the drawn blood is inserted
into the tube holder, which is a plastic device with a needle attached that is
designed for that purpose. Because the hollow-bore needles used for blood
collection are filled with patients' blood, and because insertion of the needle
into a patient's vein often requires several attempts, the ratio of needlestick
injuries to number of units used is higher for blood collection tube holders
than for syringes, and the risk of infection is greater. Consequently, some
blood collection tube holders now incorporate safety features similar to those
used in syringes. Industry resources indicate that annually there are 800
million medical procedures conducted to collect blood specimens. Based on
Theta's 1998 report, the number of unit sales of blood collection tubes for 1997
was 1.3 billion in the United States alone, with $170 million in projected
sales.
The syringe and needle device market is a market in transition. The nature
of the products comprising the market is changing from standard to safety
devices. The impetus for the change to safety devices is the risk that is
carried with each needlestick injury which includes the transmission of over 20
bloodborne pathogens, including the human immunodeficiency virus (HIV, which
causes AIDS), hepatitis B, and hepatitis C. Because of the occupational and
public health hazards posed by conventional disposable syringes, public health
policy makers and the following domestic organizations and government agencies
are involved, or are becoming involved, in the current effort to get more
effective safety needle products to healthcare workers:
NIOSH issued a safety alert calling on employers to adopt safer
needles to reduce needlestick injuries. The federal agency is a
division of the Centers for Disease Control and Prevention ("CDC"). In
its alert, "Preventing Needlestick Injuries in Health Care Settings,"
NIOSH provides the latest scientific information available about the
risk of needlestick injuries. This alert adds momentum to the growing
safety movement and supports the rules issued by the Federal
Occupational Safety and Health Administration ("OSHA"), on November 5,
1999.
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OSHA issued a Compliance Directive, which instructs OSHA inspectors to
cite employers who fail to evaluate and buy the safety needle devices
available on the market. The directive states that where engineering
controls will reduce employee exposure either by removing,
eliminating, or isolating the hazard, they must be used.
The SEIU has taken a proactive stance with regard to promoting the use
of automated retraction needle devices in member hospitals. Events,
including introduction of state and federal legislation protests by
SEIU members at San Francisco General Hospital, attest to the type of
support from the community that the safety products and VanishPoint(R)
product line, in particular, attract. Members of the SEIU have
specifically requested VanishPoint(R) products in order to make their
members aware of the availability of VanishPoint(R) technology and the
need for it at other facilities with union membership. Unionized
healthcare workers provide healthcare staffing for 12.5 percent of
United States hospital facilities.
Under California's groundbreaking legislation, Cal OSHA mandates
healthcare employers to provide their workers with safe needle
devices. This action was taken in response to events that transpired
at San Francisco General Hospital and pressure from the SEIU and
various federal, state, and local elected officials in California who
demanded change. Our representatives served on the Advisory Committee
for developing the amendments. California was the first state to
successfully pass legislation mandating the use of safety needle
products. The bill, signed into law by Governor Pete Wilson on
September 30, 1998, directed Cal OSHA to amend California's bloodborne
pathogens standard. Beginning July 1, 1999, this regulation requires
the use of needle products that effectively eliminate or reduce injury
rates. Employers are also required to create and maintain a log of
all needlestick injuries by the type of device and the manufacturer's
brand. Noncompliance with this Cal OSHA standard can result in
misdemeanor and/or felony charges that carry penalties of up to three
years in prison and fines up to $250,000.
Seventeen states have now enacted safety needle laws. California,
Tennessee, Maryland, Texas, New Jersey, Ohio, West Virginia,
Minnesota, Maine, Georgia, New Hampshire, Iowa, Alaska, Connecticut,
Oklahoma, Massachusetts, and New York have all enacted safety needle
laws. In addition, numerous states have introduced legislation
containing language similar to that passed in California. Federal
legislation was passed by both Houses and then signed into law on
November 6, 2000, by President Clinton.
Marketing and Distribution
--------------------------
The vast majority of decisions relating to the purchase of medical supplies
are made by the purchaser representatives of the various healthcare
organizations rather than the end-users of the product (nurses, doctors, and
testing personnel). Furthermore, many of these organizations have entered into
agreements with group purchasing organizations ("GPOs") which contract for the
purchase of supplies on behalf of their member organizations in order to obtain
the lowest possible prices. The GPOs individually negotiate prices with
manufacturers of medical devices and supplies and thus their healthcare provider
members are only able to select their medical supplies and equipment from a list
of pre-negotiated suppliers. According to "The Role of Group Purchasing
Organizations in the US Health Care System," a report prepared by Muse &
Associates for the Health Industry Group Purchasing Association ("HIGPA"), the
potential hospital marketplace for medical/surgical equipment and supplies in
1998 and 1999 was $32.8 billion and $34.1 billion, respectively. HIGPA and
other industry representatives estimate that 80 percent of these hospital
expenditures were channeled through GPOs. There can be no assurance that future
GPO contracts will not continue to limit our share of the market and have a
material adverse effect on our long-term financial condition. The reluctance to
purchase products outside GPO contracts is due in part to the exclusivity of the
contracts and the hospital administrators' concern about losing manufacturers'
rebates.
Accordingly, we attempt to market our products to the individual end-users
(nurses, doctors, and testing personnel) and their purchaser representatives so
that they request their GPOs add our products to their list of available
products and also market our products directly to the GPOs themselves. Our
products are available through contracts with the following: Abbott, Scripps;
McKessonHBOC; Health Services Corporation of America ("HSCA"); Premier Health
Systems, Inc.; AmeriNet, Inc.; InSource Health Services; and Managed Healthcare
Associates ("MHA")/MedEcon. We also pursue General Services Administration
("GSA"), VA, Federal Supply Schedule (FSS), and other federal government
contracts for the purchase of VanishPoint(R) products.
We distribute our products in the United States and its territories through
7 general line and 20 specialty distributors. We utilize 12 international
distributors. We entered into an agreement with Abbott whereby Abbott agreed to
act as a nonexclusive marketer and distributor of our 1cc, 3cc, 5cc, and 10cc
syringes, blood collection tube holders, and small tube adapters to acute care
facilities in the United States. The Abbott Agreement is for an initial five-
year term. We will continue to utilize our current general line and specialty
distributors in other market segments, such as primary care and alternate care
facilities.
We have developed a national direct marketing network in order to market
our products to end-users and their purchaser representatives of approximately
15 employees located across Texas, Georgia, California, Missouri, Tennessee, New
Jersey, and Arizona. We employ this marketing force of product specialists and
nurses who are strategically placed in order to take full advantage of emerging
legislation concerning safety products in healthcare. Our marketers make calls
on target markets and segments that are high volume users of syringes and blood
collection tube holders. Our marketers penetrate all of the departments that
affect the decision-making process for safety products, including the purchasing
agents. They also call on alternate care sites and talk directly with the
decision-makers of the facility. In addition to the marketers, we employ a team
of registered nurses who educate healthcare providers and healthcare workers
through accredited continuing education units for in-service training, exhibits
at related trade shows, and publications of relevant articles in trade journals
and magazines. These nurses provide clinical support to customers. In addition
to marketing our products, the network demonstrates the safety and cost
effectiveness of the VanishPoint(R) automated retraction products to end-users.
We provide to healthcare facilities, through our own representatives and
Abbott's
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representatives, cost analysis software developed by Arthur Andersen LLP which,
after entry of data for their particular facility, provides healthcare
professionals an analysis of the cost savings provided by using VanishPoint(R)
syringes compared to the costs of standard syringes. We have also developed
user-friendly product evaluation kits, which allow smaller facilities to conduct
on-site clinical evaluations with the aid of off-site company nursing
coordinators. These kits allow us to familiarize and educate a facility's
healthcare workers regarding VanishPoint(R) products.
We have nonexclusive distribution agreements with various organizations for
the distribution of our products in: Western Europe, Japan, Australia, Canada,
Ireland, France, Germany, Switzerland, Belgium, Netherlands, Luxembourg, Korea,
South Africa, Tanzania, Uganda, Zimbabwe, Botswana, Namibia, Mozambique, Angola,
Zaire, Kenya, Nigeria, Mauritius, and Madagascar. In addition, we have exclusive
distribution agreements for the distribution of our products in Puerto Rico,
South Africa, Mexico, Korea, United States Virgin Islands, British Virgin
Islands, Antigua, Barbados, St. Martin, Cuba, Ireland, the Dominican Republic,
Saudi Arabia, Syria, Iraq, Turkey, Iran, Pakistan, Kuwait, Morocco, Algeria,
Tunisia, Egypt, Sudan, Afghanistan, Oman, Yemen, and the United Arab Emirates.
However, we currently utilize only 12 of these international distributors.
Sales to foreign markets are limited at this time, as the marketing efforts are
in their early stages. The total population of Western Europe exceeds 310
million, and the recognition for the urgency of safe needle devices in parts of
Europe has echoed the United States model. In France, England, Germany, and
Italy, organized healthcare worker unions have taken action to force hospitals
and government agencies to place safety as a priority. France has led Western
Europe in its recognition of safety and has implemented VanishPoint(R) blood
collection tube holders in several hospitals and clinical laboratories.
Key components of our strategy to increase our market share are to (a)
continue marketing emphasis in states that have implemented safe needle
legislation; (b) continue to add VA facilities, health departments, emergency
medical services, federal prisons, and home healthcare facilities as customers;
(c) educate healthcare providers, insurers, healthcare workers, government
agencies, government officials, and the general public on the reduction of risk
and the cost effectiveness afforded by our VanishPoint(R) products; (d) supply
product through GPOs and Integrated Delivery Networks ("IDNs"); (e) explore
possibilities for future licensing agreements and joint venture agreements for
the manufacture and distribution of safety products in the United States and
abroad; (f) offer a full product line on existing products; (g) introduce new
products; and (h) continue to increase international sales, particularly in
Europe, where safety legislation appears to be moving parallel to the United
States, with a one to two year lag time.
Several factors could materially affect the marketability of our products.
Demand could be dramatically increased by current legislation encouraging the
use of safety syringes. Demand could also be increased if we were successful in
the antitrust lawsuit we have filed against B-D. See "LEGAL PROCEEDINGS."
Marketability of our products would depend, in part, on our ability to meet a
dramatic and sudden increase in demand and on our ability to quickly find
additional production capacity through licensing agreements and joint ventures,
the purchase of appropriate facilities, or manufacturing and storage services.
We are currently increasing shifts, improving machine performance, and planning
an expansion of its modular facility in order to increase production.
Additionally, the 1cc assembly equipment was delivered in the fourth quarter of
2000.
Status of Publicly Announced New Products
-----------------------------------------
We have received FDA pre-market notification, which allows these products
to be put into interstate commerce, for the 1cc tuberculin, insulin, and allergy
antigens syringes and anticipate producing them in the earlier part of 2001. We
have received patents for the application of automated retraction to dental
syringes, winged IV's, and catheter introducers. We anticipate seeking FDA pre-
market notification and introducing these products in the near future.
Competition
-----------
According to Theta's 1998 report, the leading manufacturers of hypodermic
syringes and blood collection products are B-D, with a market share of
approximately 71 percent, Sherwood, with a market share of approximately 22
percent, and Terumo, with a market share of approximately 7 percent.
Founded in 1897, B-D is headquartered in New Jersey. B-D's medical device
division accounts for approximately 1.9 billion, or 56 percent, of B-D's total
fiscal 1999 sales. The injection systems segment accounts for 42 percent of B-
D's fiscal 1999 device division sales. B-D currently manufactures the
SafetyLok(TM), a syringe that utilizes a tubular plastic sheath that must be
manually slid over the needle after an injection, and the SafetyGlide(TM), a
syringe, which utilizes a hinged lever to cover the needle tip. B-D also
manufactures a safety blood collection tube holder that utilizes the
SafetyLok(TM) sheath. B-D's "Vacutainer(R)" blood collection tube holder is
commonly used as industry jargon to refer to blood collection tube holders in
general.
Sherwood was one of five major acquisitions by Tyco International Ltd., a
company headquartered in Bermuda. Sherwood manufactures the Monoject(R), a
safety syringe that utilizes a sheath similar to the B-D SafetyLok(TM) syringe,
but currently does not manufacture a safety blood collection tube holder.
Founded in 1974, Terumo was the first company to sell disposable syringes
in Japan. Today Terumo manufacturers standard syringes and blood collection
tube holders, operates internationally, and has sales in some 120 countries.
Both B-D's and Sherwood's safety syringes require the use of two hands and
several extra steps to activate the tubular plastic shield which must be slid
and locked into place to protect the needle. In contrast, use of the
VanishPoint(R) syringe is identical to that of a standard syringe until the end
of an injection, when the automated retraction mechanism retracts the needle
directly from the patient safely into the barrel of the syringe. This allows the
second hand to remain safely out of harm's way.
B-D and Sherwood have greater financial resources, larger and more
established sales and marketing and distribution organizations, and greater
market influence, including the long-term contracts with GPOs described earlier.
These competitors may be able to use these resources to improve their products
through research or acquisitions or develop new products, which may compete more
effectively with our products. There can be no assurance that our competitors
will not succeed in developing or marketing products that are technologically
superior or more effective or commercially attractive than any that are being
developed by us. Based on the licensing agreement B-D has entered into with
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<PAGE>
Med-Design, it is possible that B-D may in the future attempt to manufacture
retractable needle products. Med-Design asserts patent rights to manufacture a
line of retractable needle products.
In addition to B-D and Sherwood, there are companies that manufacture
needlestick injury prevention products that our products will compete against
for market share. Among those companies are: Bio-Plexus, Inc. ("Bio-Plexus"),
Smiths Industries Medical Systems ("SIMS"), and New Medical Technologies, Inc.
("NMT"). Bio-Plexus utilizes a recessed internal hollow blunt safety technology
where the internal blunt is advanced and locked into place beyond the sharp
outer tip of the needle. SIMS utilizes a patented sheath whereupon completion of
the procedure, the healthcare worker presses the sheath against a hard surface
to lock the needle into the sheath. NMT manufactures a syringe that utilizes
automated retraction of the used needle within the barrel of the syringe. NMT
currently manufactures and makes commercially available one syringe size in
limited needle lengths.
Other events that are having an impact on our competitiveness include class
action lawsuits by healthcare workers and our decision to pursue our claims for
damages against B-D and Sherwood, among others. Class action suits on behalf of
healthcare workers have been filed in several states against B-D and Sherwood,
et al. The success of such lawsuits could, obviously, be materially beneficial
to any company that provides a safer alternative technology to the standard
needle products, which cause as many as 800,000 reported needlestick injuries
each year. We have filed a lawsuit against B-D; Tyco International (U.S.),
Inc.; Tyco Healthcare Group, L.P.; Novation, LLC; VHA, Inc.; Premier, Inc.;
Premier Purchasing Partners, L.P.; The Community Hospital of Brazosport; and
Sweeny Community Hospital to pursue claims for damages for restraint-of-trade
and anti-trust violations. See "LEGAL PROCEEDINGS."
Our competitive strengths include that the VanishPoint(R) syringe is the
only safety syringe given the highest possible rating by ECRI. Our blood
collection tube holder is one of only two safety products given the highest
possible rating. Our products also have an advantage because minimal training
and changes to practitioners' normal routines are required. Use of our products
also prevents unfortunate and improper reuse. Our competitive position is
strengthened by our agreements with the following: Scripps; McKessonHBOC; HSCA;
Premier Health Systems, Inc.; AmeriNet, Inc.; InSource Health Services;
MHA/MedEcon; and Abbott.
Our competitive weaknesses include our current lack of market share (less
than 1 percent) because three well-established companies control most of the
market. Our competitive position is also weakened by our higher initial price
per unit and the method that providers use for making purchasing decisions. Our
products are initially more expensive. However, the price per unit is
competitive or even lower than the competition once all the costs incurred
during the life cycle of a syringe are considered. Such life cycle costs
include disposal costs, testing and treatment costs for needlestick injuries,
and treatment for contracted illnesses through needlestick injuries.
Dependence Upon Key Suppliers
-----------------------------
We purchase most of our product components from single suppliers, including
needle adhesives, and packaging materials. There are multiple sources of these
materials, and we own the molds that are used to manufacture the plastic
components of our products. Changes in suppliers such as Magor Molds (mold
supplier), Sortimat Technology GmBHd Co. ("Sortimat") (assembly machine
supplier), Nissho Corporation (needle supplier), Multivac, Inc. (packaging
supplier), and/or Sterigenics (sterilization company) could disrupt production
schedules. In addition, shortages may occur from some suppliers, creating
delays or reductions in product shipments, which could have a material adverse
effect on our operating results. Further, delays in filling orders could cause
problems with customers, resulting in a permanent loss in sales.
Dependence on Certain Customers
-------------------------------
Sales from the first half of fiscal 1999 to the second half-increased 261
percent due to increased sales in California principally due to the safe needle
law, which went into effect July 1, 1999. Purchases made by California
customers during this period did not appreciably increase for locations outside
California. We anticipate that Abbott will account for the majority of sales of
our products to acute care end-user facilities in the second half of 2000. We
maintain distribution agreements to serve our nonacute care end-user facilities.
Our current significant acute care and nonacute care end-user facilities
include: Scripps Healthcare System, Riverside Memorial Hospital, Mississippi
Department of Health, and California Department of Health.
Manufacturing
--------------
We currently manufacture our 3cc, 5cc, and 10cc VanishPoint(R) syringes and
the VanishPoint(R) blood collection tube holder and small tube adapter in a
controlled environment in Little Elm, Texas. We recently signed an agreement
with NYPRO Precision Assemblies, a California corporation, to provide
subassembly services for the 5cc and 10cc syringes. We have also outsourced
molding to APEC, also a California company. The size of the facility in Little
Elm, Texas, is 22,500 square feet, with 18,000 square feet dedicated to
production. The facility was designed to be modular so that, as new product
lines are added or duplicate production lines are built, it can be expanded to
house this new equipment without disrupting production. Assembly of the 3cc
syringe uses a fully automated process, developed by Sortimat, a leading
equipment manufacturer, with a manufacturing capacity of approximately 3 1/2
million units per month. The automated blood collection tube holder assembly
has the manufacturing capacity of approximately 1 million units per month.
All components of our products, except needles, can be produced at our
Little Elm manufacturing facility. Currently, in order to increase production
capacity, we are outsourcing some of the molding and assembly processes.
Technologically advanced molding machines, using a combination of hot-runner and
cold-runner molds (depending primarily on the size of the part being molded)
produce the molded parts for VanishPoint(R) products. We own all of the molds we
use. Cold runner molds have a lower initial purchase price and require less
maintenance than hot runner molds. Furthermore, hot runner molds are not
suitable for all molded parts. These additional costs must be evaluated against
the cost of the scrap material to justify purchasing higher priced molds. Cold
runner molds receive the material directly from the heated barrel on the molding
machine. The molten plastic is injected into the back of the mold through a
sprue and flows through channels called runners through the mold to the cavities
that form the part. A sprue is the part of the scrap the runners are attached
to. The molten material runs through a central point and then continues through
small channels to fill the cavities of the mold. The material left in the
central entry point is called a sprue and the material left in the smaller
channels is called a runner. When the molten material is cooled, the runners,
which are attached to the sprue, are discarded during the manufacturing process.
The finished molded component is sent to the assembly line. The runners are
discarded during the
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<PAGE>
manufacturing process. The cold runner mold, itself, is not scrapped. Because of
the increased complexity of hot runner molds, they tend to have a higher initial
cost as well as higher maintenance cost.
When the cooling time is complete, the mold opens and the parts and runner
are ejected. Semi-hot runner molds receive the molten material similar to cold
runner molds. The difference is the mold has a manifold inside that the
material is injected into, then to individual hot tips that feed a smaller
runner system that feed the cavities. This type of system creates less scrap
than a conventional cold runner system. Hot runner molds are similar to semi-
hot molds with the exception that all the cavities are fed with the material
through individual hot tips which results in no scrap at all.
We purchase the needles used in VanishPoint(R) products from Nissho
Corporation, one of the world's larger suppliers. We wind the retraction springs
in-house using a high-grade stainless steel spring wire. All parts are tested
for biocompatibility and radiation tolerance. After automated assembly, products
are sealed in blister packages, boxed and sent out for sterilization at one of
two outside radiation facilities. Our packaging equipment was manufactured by
MultiVac, Inc., a leading packaging machine manufacturer. We also have an
automated assembly process for manufacturing our blood collection tube holders.
We have limited experience in manufacturing the VanishPoint(R) product line
in commercial quantities. Manufacturers often encounter difficulties in scaling
up production of new products, including problems involving production yields,
quality control and assurance, component supply and shortages of qualified
personnel, compliance with FDA regulations, and the need for further FDA pre-
market notification of new manufacturing processes. Difficulties encountered by
us in manufacturing scaleup could have a material adverse effect on our
business, financial condition, and results of operations. Our manufacture of
retractable medical devices relies on sophisticated and intricate processes.
While we devote substantial time and expense to continuous refinement of our
manufacturing processes and quality control and testing throughout the
manufacturing process, you should recognize that numerous factors, including
machinery calibration, product engineering, employee training, and training of
the end user will impact the usefulness and acceptance of the devices we make
and market. Earlier in the year we received isolated reports of needle
separation from end users; these incidences were limited to a small number of
3cc syringes with small gauge needles. RTI responded to these reports by
performing investigations on all relevant manufacturing processes and involved
components. In addition, we voluntarily removed affected lots of syringes from
the market. The FDA has reviewed our removal process and has classified it as a
Class II recall which requires no further action. A Class II recall is defined
as a, "temporary or medically reversible adverse health consequences," such that
the "probability of serious adverse health consequences is remote." The cost
of the recalled product was not material to us, and we expect no further
activity in this matter.
Production Capacity
-------------------
We are currently operating at a production rate of 24 million syringes and
8 million blood collection tube holders annually. Currently, market demand for
safety outpaces our production capacity. We are working to increase our
production capacity in the 3cc syringe and blood collection tube holders by
increasing the number of operating shifts and improving machine performance. We
have increased production capacity for our 5cc and 10cc syringes by outsourcing
the subassembly for these products. We have outsourced molding to provide
better operating efficiencies. Other methods we are currently reviewing to
increase capacity include: joint ventures with manufacturers of medical
equipment, the expansion of our current manufacturing facility, short-term
mobile buildings to hold inventory, and the outsourcing of production and
subassembly of subcomponents. We have executed an agreement with NYPRO Precision
Assemblies, Inc., a California corporation, for the provision of subassembly
services for components of the 5cc and 10cc syringes, which will enable us to
increase our current manufacturing capacity. We are considering licensing and/or
sublicensing of our patent rights, as well as joint ventures to achieve
additional production. Our current facilities have been augmented by an
outsourcing agreement with APEC which provides us with additional molding
capacity for parts and warehousing space in California. Our long-term plans
include ordering additional assembly equipment and building an additional
manufacturing facility.
Patents and Proprietary Rights
------------------------------
Thomas J. Shaw and RTI entered into a Technology License Agreement dated
effective as of the 23rd day of June, 1995, whereby Mr. Shaw granted us "... a
worldwide exclusive license and right under the `Licensed Patents' and
`Information,' to manufacture, market, sell and distribute `Licensed Products'
and `Improvements' without right to sublicense and subject to such nonexclusive
rights as may be possessed by the Federal Government..." 'Licensed Patents',
'Information', 'Licensed Products', and 'Improvements' are all defined
extensively in the Technology License Agreement which is incorporated into this
Prospectus by reference in the Exhibit Index. We may enter into licensing
arrangements with Mr. Shaw's written approval of the terms and conditions of the
licensing agreement. The 'Licensed Products' include all retractable syringes
and retractable fluid sampling devices and components thereof, assembled or
unassembled, which comprise an invention described in 'Licensed Patents', and
improvements thereof including any and all 'Products' which employ the inventive
concept disclosed or claimed in the 'Licensed Patents'.
In exchange, we paid Mr. Shaw a $500,000 initial licensing fee which was
fully paid in 1997. Furthermore, we agreed to pay a 5 percent royalty on gross
sales after returned inventory based on the price to the end-user or
intermediary as appropriate. The license terminates upon expiration of the last
licensed patents unless sooner terminated under certain circumstances. The
licensing fee and royalties have been paid in accordance with this agreement.
We have the right and obligation to obtain protection of the invention and
have full and complete control over prosecution of patent properties. The
license unilaterally changes to a nonexclusive license in the event of a hostile
takeover. Also, if Mr. Shaw involuntarily loses control of RTI, the license
becomes a nonexclusive license and a right to information.
We have sought foreign patent protection through the Patent Cooperation
Treaty, and have filed applications for regional and national patent protection
in selective countries. These regional patents include Western Europe and
Africa. In addition, we have made application for national patents in selective
countries where we believe the VanishPoint(R) syringe can be utilized most.
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<PAGE>
We hold 16 United States patents related to our automated retraction
technology, including patents for dental syringes, catheters, winged IV sets,
syringes, and blood collection tube holders. In addition, we have multiple
applications for patents currently pending.
We have also registered the following trade names and trademarks:
VanishPoint(R), RT with a circle mark, and the Spiral Logo used in packaging our
products. We also have an application pending for trademark protection for the
color-coded spots on the ends of our syringes.
There are currently no patent infringement claims pending against the
VanishPoint(R) retraction technology. We have decided, on the advice of patent
counsel, not to purchase patent insurance because it would require inappropriate
disclosure of information that is currently proprietary and confidential.
Pursuant to the terms of a loan from Legacy Bank (formerly Plano Bank &
Trust) in the amount of $710,000, we have agreed to a negative pledge on (an
agreement not to engage in) the sale of patents without prior written
permission.
Reliance on Patents, Licenses, and Protection of Proprietary Technology
-----------------------------------------------------------------------
Our success will depend, in part, on our ability to protect our
intellectual property and maintain the proprietary nature of our technology
through a combination of patents and other intellectual property arrangements.
We believe these patents will be sufficient to protect the design of our current
and proposed products. Litigation, either to enforce our patent rights or
defend from patent infringement suits, would be expensive and would divert our
resources from other planned uses. Any adverse outcome in such litigation could
have an adverse effect on us. In addition, patent applications filed in foreign
countries and patents granted in such countries are subject to laws which differ
from those in the United States. Patent protection in such countries may be
different from patent protection provided by United States laws and may not be
favorable to us. There is no assurance that our program for patent protection,
confidentiality, and restricted access to our facilities and product
specifications will be sufficient to protect our proprietary technology from all
competitors.
Regulatory Status and Effect of Regulation
------------------------------------------
We and our products are regulated by the FDA. The syringe is a Class II
medical device which requires assurance by the manufacturer that the device is
safe and effective and that it meets certain performance standards. The FDA
issued its "Order of Substantial Equivalence" declaring the Vanishpoint(R)
syringe products to be substantially equivalent to a legally marketed predicate
device (i.e., granted us permission to market our safety syringes in interstate
commerce) for the 3cc VanishPoint(R) syringe in December 1995; for the 5cc and
10cc VanishPoint(R) syringes in May 1997; for the 1cc allergy and insulin
syringes in November 1997; for the 1cc VanishPoint(R) tuberculin syringe in
February 1998; and for the VanishPoint(R) blood collection tube holder and small
tube adapter in August 1997.
In addition to pre-market notification, (which results in obtaining the
right to put products into interstate commerce) we must register with the FDA on
an annual basis and provide the FDA with a list of commercially distributed
products. Texas has similar registration requirements. The FDA is required to
inspect all medical device manufacturing facilities at least once every two
years to determine the extent to which they are complying with Quality System
Regulation. The most recent inspection occurred in April 2000, after which the
auditor determined No Action Indicated.
TUV Essen, a subsidiary of RWTUV Germany certified for ISO 9001 our quality
system. The certification was deemed in compliance with ISO 9001, and EN46001
and the Medical Device Directive 93/42/EEC. In addition, RWTUV certified the
VanishPoint(R) product line for the CE mark according to Annex II of the council
directive 93/42/EEC of 1993 relating to medical device design, production, and
final control. Since the original certification in 1997, we have undergone
annual surveillance audits with no major noncompliances noted. The CE Mark
authorizes us to sell in 18 different countries. We have engaged a European
regulatory affairs company to be our authorized representative in Europe
according to Medical Device Directive 93/42/EEC. We are currently pursuing
registration with the Ministries of Health in additional countries in order to
sell products in those countries.
Government Funding of Research and Right to License
---------------------------------------------------
Thomas J. Shaw developed his initial version of a safety syringe with the
aid of grants by the National Institute of Drug Abuse, a subsidiary of the
National Institutes of Health. As a result, the federal government has the
right, where the public interest justifies it, to disperse the technology to
multiple manufacturers so that the safety syringe can be made widely available
to the public. However, the funding was only used to develop and patent the
earlier syringe design as of 1991. That syringe was a bulkier, less effective,
and more expensive version of the current product. Accordingly and on the
advice of counsel, Management believes that the risk of the government demanding
manufacture of this alternative product is minimal.
Research and Development
-------------------------
We spent $266,029, $763,690, and $842,062 in fiscal 1997, 1998, and 1999,
respectively, on research and development, primarily on development of prototype
molds and manufacturing processes for the following products: 1cc syringe, 5cc
syringe, 10cc syringe, and a blood collection tube holder. Prior to May, 2000,
our ongoing research and development activities were performed by an internal
research and development staff. This team of engineers developed automated line
assembly for the syringe and blood collection tube holder and established
processes to meet regulatory requirements. Pursuant to the Abbott Agreement
entered into between us and Abbott, a New Product Team, made up of no fewer than
two representatives each from Abbott and RTI, has been established for the
purpose of developing new products utilizing the automated retraction
technology. Products currently in development include the winged butterfly IV,
the catheter introducer, and the dental syringe. Possible future products
include all needle medical devices to which the automated retraction mechanism
can be applied.
Environmental Compliance
------------------------
We believe that we do not incur material costs in connection with
compliance with environmental laws. Our manufacturing waste (predominantly made
up of hard plastic materials) is sold to Penn Tex Plastics, which recycles the
materials.
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<PAGE>
Employees
---------
As of December 1, 2000, we had 193 full-time employees and two
independently contracted consultants. Of the 193 full-time employees,
approximately five persons were engaged in research and development activities,
102 persons were engaged in manufacturing and engineering, 40 persons were
engaged in quality assurance and regulatory affairs, 18 persons were engaged in
sales and marketing, 20 persons were engaged in general and administrative
functions, and eight persons in facilities. No employees are covered by
collective bargaining agreements, and we believe we maintain good relations with
our employees. We are dependent upon a number of key Management and technical
personnel, and the loss of services of one or more key employees could have a
material adverse effect on us. Our President and Chief Executive Officer, Thomas
J. Shaw, has an employment contract. In addition to Mr. Shaw's employment
contract, we have a one year employment contract with Phillip Zweig, Director of
Communications. We have entered into two consulting agreements with independent
contractors, one of which, Lillian E. Salerno, is a Director. See "EMPLOYMENT
AGREEMENTS" and "INDEPENDENT CONSULTING AGREEMENTS" for more details.
DESCRIPTION OF PROPERTY
-----------------------
Our 22,500 square foot headquarters is located on 35 acres, which we own,
overlooking Lake Lewisville in Little Elm, Texas. The building is a modular
portion of a larger planned building for which the engineering design has been
finalized. The headquarters are in good condition and house our administrative
offices and manufacturing facility. Our current expansion plans do not include
going outside the 35 acres on which the headquarters is located. We anticipate
that any future development of facilities beyond that 35 acres will be in areas
closer to the East and West Coast customer base. The land and building on which
the headquarters is located are the subject of a lien by 1st International Bank
as collateral on payment of a loan in the amount of $1,500,000.
We also lease Suites 618, 620, and 622 S. Mill Street, Lewisville, Texas,
as well as storage stalls located at 102 E. Purnell, Lewisville, Texas, from
Mill Street Enterprises, a sole proprietorship owned by Lillian E. Salerno, a
Director. This lease is for 4,365 square feet of office space in good
condition. The storage facility is used to store office documents. The lease
is for five years commencing July 1, 1997, and ending June 30, 2002, at a
monthly rate of $1,900. An additional lease has been signed for 628 Mill Street
for a one-year period commencing April 1, 2000. The monthly rate is $1,000.
This property is used exclusively for general office and marketing purposes. We
do not hold any real estate or related securities for investment purposes.
In the opinion of Management, all the properties and equipment are suitable
for their intended use and are adequately covered by an insurance policy which
lists Textron, Fleet Capital, Texas Bank, 1st International Bank, and Legacy
Bank as the loss payees.
We plan to expand the headquarters by 60,000 square feet in fiscal 2001 at
an approximate cost of $6,000,000 for additional manufacturing space as well as
office space. This expanded facility will be capable of accommodating six
syringe assembly lines and two blood collection tube holder lines. In 2001, we
anticipate building a 100,000 square foot facility at an approximate cost of $12
million which will be utilized for manufacture of the projected eight syringe
assembly lines and three blood collection tube holder assembly lines.
Management plans to finance the expansion by raising up to $60 million through
public offerings and $10 million in debt.
MANAGEMENT
----------
The following table sets forth information concerning our Directors,
executive officers, and certain of our significant employees as of the date of
this Prospectus. Our Board of Directors consists of a total of nine members,
four members of which are Class 1 Directors which serve for an initial one year
term and five of which are Class 2 Directors which serve for two year terms.
Upon the expiration of the Class 1 Directors' current term, the term of office
of the Class 1 Directors will be for two years.
<TABLE>
<CAPTION>
Term as
Name Age Position Director Expires
---- --- -------- ----------------
<S> <C> <C> <C>
EXECUTIVES
Thomas J. Shaw 50 Chairman, President, Chief Executive Officer, and Class 2 Director 2002
Steven R. Wisner 43 Executive Vice President, Engineering & Production and Class 2 2002
Director
Lawrence G. Salerno 41 Director of Operations N/A
James A. Hoover 52 Production Manager N/A
Russell B. Kuhlman 46 Vice President, New Markets and Class 1 Director 2001
Kathryn M. Duesman 37 Director of Clinical Services N/A
Douglas W. Cowan 57 Chief Financial Officer, Treasurer, and Class 2 Director 2002
Michele M. Larios 34 Director of Legal and Legislative Policy and Secretary N/A
Outside Directors
Lillian E. Salerno 39 Class 1 Director 2001
Jimmie Shiu, M.D. 66 Class 1 Director 2001
Clarence Zierhut 71 Class 2 Director 2002
Marwan Saker 44 Class 2 Director 2002
Edith A. Zagona 50 Class 1 Director 2001
Significant Employees
Phillip L. Zweig 54 Communications Director N/A
Peter B. Hegi 26 Product Development Manager N/A
Judy Ni Zhu 42 Senior Research Design Engineer N/A
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Name Age Position Director Expires
---- --- -------- ----------------
<S> <C> <C> <C>
S. Kristie Haddox 29 Quality Assurance Manager N/A
Shelley K. Walley 47 Manager of Regulatory Affairs N/A
Stephen C. Bezner 50 Director of Accounting N/A
Weldon Evans 59 Manager of Manufacturing Engineering N/A
-----------------------------------------------------------------------------------------------------------------
</TABLE>
EXECUTIVES
Thomas J. Shaw, the Founder of RTI, has served as Chairman of the Board,
President, Chief Executive Officer, and as a Director since RTI's inception. In
addition to his duties overseeing the management of the company, he continues to
lead our design team in product development of other medical safety devices that
utilize his unique patented friction ring technology. Mr. Shaw has 20 years of
experience in industrial product design and has developed several solutions to
complicated mechanical engineering challenges. He has been granted multiple
patents and has additional patents pending. Mr. Shaw received a Bachelor of
Science in Civil Engineering from the University of Arizona and a Master of
Science in Accounting from the University of North Texas.
Steven R. Wisner joined us in October 1999 as Executive Vice President,
Engineering and Production and as a Director. Mr. Wisner's responsibilities
include the management of engineering, production, regulatory affairs, quality
assurance, and human resources. Mr. Wisner has 23 years of experience in
product design and development. Before joining us, Mr. Wisner was the Director
of Operations for Flextronics International in Richardson, Texas, an electronic
manufacturing services company, from May 1998 to October 1999, where he had
complete responsibility for taking product ideas from the concept stage through
full design and into the manufacturing process. Mr. Wisner worked as Design
Services Manager at Altatron Technologies, an electronic manufacturing service
company, from August 1997 to May 1998, and as Director of Engineering with
Responsive Terminal Systems, a medical reporting device manufacturing company,
from 1984 to 1997. While working at Texas Instruments, a leading electronics
manufacturing company, from 1982 to 1984, Mr. Wisner was the team leader of a
product development that successfully integrated several thousand personal
computers into the worldwide Texas Instruments data network. As a project
leader with Mostek Corporation, a semiconductor manufacturing company, from 1980
to 1982, he oversaw the development of automated manufacturing control systems
for semiconductor assembly. Mr. Wisner began his engineering career with
Rockwell-Collins, an avionics division of Rockwell International, in 1977,
where he was involved in the design of flight navigation equipment, including
the first GPS (Global Positioning System). Mr. Wisner holds a Bachelor of
Science in Computer Engineering from Iowa State University.
Lawrence G. Salerno has served as Director of Operations for us since 1995
and is responsible for the manufacture of all VanishPoint(R) products, as well
as all product development and process development projects. Mr. Salerno is our
Management Representative, assuring that the Quality Systems are established and
implemented according to ISO 9001, MDD, and FDA mandated standards. In
addition, he supervised all aspects of the construction of our new facilities in
Little Elm, Texas. Prior to joining us, Mr. Salerno worked for Checkmate
Engineering, an engineering firm, from 1991 to 1995 and was responsible for
engineering site design and supervision of structural engineering products. Mr.
Salerno is the brother of Lillian E. Salerno.
James A. Hoover joined us in February 1996 and is our Production Manager.
He is responsible for supervision of the production of our products. Mr. Hoover
has also developed and implemented FDA required procedures and has been involved
in the FDA inspection process. Mr. Hoover joined us after working for Sherwood
for 26 years. During his tenure with Sherwood, a medical device manufacturing
company, he gained hands-on experience in all aspects of the medical device
manufacturing process. Mr. Hoover began his career with Sherwood as a materials
handler and worked his way up through a series of positions with added
responsibilities to his final position there as Production Manager of Off-Line
Molding, Operating Room/Critical Care. In this capacity, he managed several
departments, ran several product lines, and hired and supervised over 200
employees. While at Sherwood, he also gained experience with one of the
country's first safety syringes, the Monoject(R).
Russell B. Kuhlman joined us in February 1997 and is our Vice President,
New Markets and Director. Mr. Kuhlman is responsible for developing new markets
and product training for our sales organization, as well as distribution. Mr.
Kuhlman's efforts with us have resulted in bringing onboard Specialty
Distributors, influencing legislation, and educating influential healthcare
representatives about the benefits of the VanishPoint(R) product line. Mr.
Kuhlman is respected throughout the industry and is a main contributor to the
safety effort in this country. He has a sales background in the medical service
industry that includes his most recent work for Bio-Plexus, a medical device
manufacturing company, from 1994 to 1997, where he developed strategic marketing
plans for new safety products. Prior to his work there, Mr. Kuhlman worked as
Director of Sales and Marketing for Winfield Medical, Inc., a medical device
manufacturing company, from 1989 to 1994, where he launched several new
products, developed strategic sales territories, and was the trainer for Sales
and Regional Managers. Mr. Kuhlman also worked for B-D Vacutainer(R) Systems, a
medical products company, in the Houston Territory from 1980 to 1989, where he
was recognized as the National Sales Representative for the year 1987. Mr.
Kuhlman holds a Bachelor of Science in Finance from the University of Tennessee.
Kathryn M. Duesman, joined us in 1996 as the Director of Clinical Services
and provides clinical expertise on existing VanishPoint(R) products as well as
those in development. She has assisted in the development of training and
marketing materials. Ms. Duesman has also contributed to the design of two new
products. Ms. Duesman is well recognized as one of the key authorities on the
prevention of needlestick injuries and has spoken and been published on this
issue. In 1996, Ms. Duesman served as a Registered Nurse ("RN") at Denton
Community Hospital. From 1995 to part of 1996, Ms. Duesman served as a RN at
Pilot Point Home Health, an agency for home healthcare. From 1992 to 1995, Ms.
Duesman served as a RN for Denton Community Hospital. Ms. Duesman is a 1985
graduate of Texas Woman's University with a Bachelor of Science in Nursing.
Douglas W. Cowan is our Chief Financial Officer, Treasurer, and a Director.
He is responsible for the financial, accounting, and forecasting functions of
RTI. Prior to joining us in 1999, Mr. Cowan served as a consultant to us and
other companies from 1996 to 1999 on various accounting and other business
matters. Before becoming a consultant, he served as the Chief Financial Officer
of Wedge-Dialog Company, an oil field services company, from 1995 to 1996. In
addition, Mr. Cowan served in various capacities, including Vice President and
Controller at El Paso Natural Gas Company, an interstate pipeline company.
After leaving El Paso Natural Gas, Mr. Cowan formed a public accounting practice
that provided tax and accounting services, as well as litigation support. Mr.
Cowan has a Bachelor of Business Administration from Texas Technological
College. He is a CPA licensed in Texas.
23
<PAGE>
Michele M. Larios joined us in February 1998 as an attorney, and now serves
as the Director of Legal and Legislative Policy and as Secretary of RTI. Ms.
Larios is responsible for the legal and legislative functions of RTI. In
addition to working on legal matters and with outside counsel, Ms. Larios works
with legislators on pertinent issues and relevant legislation. Prior to joining
us, Ms. Larios served as the Legal Analyst for Applied Risk Management Inc., a
third party claims administration company, from 1995 through 1997. Ms. Larios
received a Bachelor of Arts in Political Science from Saint Mary's College in
Moraga, California, and a Juris Doctorate from Pepperdine University School of
Law in Malibu, California.
OUTSIDE DIRECTORS
Lillian E. Salerno has served on the Board of Directors since 1996. Ms.
Salerno began serving as a consultant to us effective June 1, 2000. Her
responsibilities include the development of foreign marketing, distribution, and
licensing agreements, principally in Europe. Previously, Ms. Salerno served us
since RTI's inception in a variety of positions. She most recently served as
our Executive Vice President, Sales and Marketing. Prior to RTI's incorporation,
Ms. Salerno was an attorney with a growing private law practice while she served
as a consultant, administrator of grants, and legal consultant to Checkmate
Engineering, an engineering firm. Ms. Salerno assisted with the start-up of
RTI. Ms. Salerno received a Bachelor of Arts from the University of Texas at
Austin, a Master of Arts from the University of North Texas, and a Juris
Doctorate from Southern Methodist University School of Law. Ms. Salerno is the
sister of Lawrence G. Salerno.
Jimmie Shiu, M.D. has served on our Board of Directors since 1996. Prior to
retirement in 1998, Dr. Shiu was in private practice as a Board Certified
Otolaryngologist at Presbyterian Hospital in Dallas for 31 years. Although
retired from private practice, Dr. Shiu continues to serve as a clinical
professor for the Department of Otolaryngology at the University of Texas
Southwestern Medical Center at Dallas. He has served on the Board of Trustees
of Presbyterian Healthcare Foundation of Dallas since 1996 and the Board of
Directors of MOTO1, Inc. since 1999. Dr. Shiu completed his undergraduate work
at Abilene Christian University and received his medical degree from University
of Texas Southwestern Medical Center at Dallas, Texas.
Clarence Zierhut has served on our Board of Directors since April 1996.
Since 1955, Mr. Zierhut has operated an industrial design firm, Zierhut Design
now Origin Design, that develops new products from concept through final
prototypes. During his professional career, Mr. Zierhut has created over 3,000
product designs for more than 350 companies worldwide, in virtually every field
of manufacturing, and has won many international awards for design excellence.
His clients have included Johnson & Johnson, Abbott, Gould, and McDonnell
Douglas. He received a Bachelor of Arts from Art Center College of Design in
Los Angeles, California.
Marwan Saker joined our Board of Directors in June 2000. Since 1983, Mr.
Saker has served as Chief Executive Officer of Sovana, Inc., an export
management company. As a representative for United States companies seeking
distribution, licensing, and franchising in the Middle East, Europe, and North
Africa, Mr. Saker was instrumental in developing successful partnerships in more
than 15 countries. He offices in Dallas, Texas.
Edith A. Zagona, Ph.D. joined our Board of Directors as a Director in
August 2000. Dr. Zagona has conducted water resources research at the
University of Colorado's Center for Advanced Decision Support for Water and
Environmental Systems since 1988. She has led the development of RiverWare, a
commercially available water basin management software modeling tool that is
widely used by leading water management agencies. She received a Bachelor of
Arts in Philosophy and a Bachelor of Science in Civil Engineering at the
University of Arizona, a Master of Science in Civil Engineering, emphasis in
hydraulics, from Colorado State University, and a Ph.D. in Civil Engineering
from the University of Colorado at Boulder with an emphasis in automation in
water resources management.
SIGNIFICANT EMPLOYEES
Phillip L. Zweig joined us in December 1999 as Communications Director.
Mr. Zweig is a prize winning financial journalist who has worked as a staff
reporter at The American Banker, The Wall Street Journal, and Bloomberg Business
News and other media organizations. From 1993 to 1998, he served as Corporate
Finance Editor at Business Week where he wrote a major article on RTI. Before
joining us, he worked as a freelance financial writer and editorial consultant.
His clients included Andersen Consulting and Boston Consulting Group. Mr. Zweig
received a Bachelor of Arts in Behavioral Psychology from Hamilton College and a
Master of Business Administration from the Baruch College Graduate School of
Business.
Peter B. Hegi joined us in August 1996 and is our Product Development
Manager. His responsibilities include development of new products from
conception through production implementation supporting production in the
manufacturing of products and managing continual production improvement efforts.
This process includes design input and control, manufacturing feasibility, and
FDA pre-market notification of the product. Product Development also assists in
continually improving existing devices. He has created product and component
specifications for the blood collection tube holder, 5cc syringe, and 10cc
syringe. Mr. Hegi is a 1996 Mechanical Engineering graduate of Stanford
University, where he was a member of Tau Beta Pi National Engineering Honor
Society. His new product development responsibilities include establishing
device design requirements and controls, determining product manufacturing
feasibility, and assisting in the preparation of device documentation for FDA
510(k) Submission. FDA 510(k) Submissions are summaries, submitted under section
513(i) of the Federal Food, Drug, and Cosmetic Act, of the safety and
effectiveness information contained in a pre-market notification submission
(document required to be filed by persons desiring to introduce into interstate
commerce a device intended for human use) upon which a determination of
substantial equivalence can be based ("510[k] Submission"). He has assisted in
the development of the VanishPoint(R) blood collection tube holder and the 1cc,
3cc, 5cc, and 10cc VanishPoint(R) syringe product lines.
Judy Ni Zhu has served as a Senior Research Design Engineer since joining
us in 1995. Her primary focus is on new product development and improvement of
current products. Prior to joining us, Ms. Zhu worked with Checkmate
Engineering, an engineering firm, as a design engineer on the original 3cc
syringe and other SBIR grant projects. Ms. Zhu received her Bachelor of Science
from Northwest Polytechnic University in Xian, China, and her Master of
Engineering from University of Texas at Arlington. Ms. Zhu has assisted in
design modifications for the 3cc syringe, which have maximized both product
reliability and production efficiency. She also designed and developed a manual
needle assembly machine and an automatic lubricating and capping system for the
3cc syringe and developed and assisted in the design of automated blood
collection tube holder assembly equipment. Ms. Zhu has collaborated with Ms.
Duesman and Mr. Shaw in the filing of several
24
<PAGE>
patent applications. Prior to joining Checkmate Engineering in 1991, Ms. Zhu
worked for Shenyang Airplane Corporation, an airplane design company, in
Shenyang, China, where she was responsible for airplane control system design
and its stress computation and analysis. Ms. Zhu also worked for Mactronix,
Inc., an assembly equipment manufacturing semiconductor company, in Dallas,
Texas, where she was responsible for the design, modification, and production
drawing of an automatic wafer transfer system.
S. Kristie Haddox joined us in July 1996, is our Quality Assurance Manager
and is responsible for QA testing, document control, and validation. She
formerly worked as Quality Assurance Validation Scientist at Alcon Laboratories,
a pharmaceutical and medical device manufacturing company, in Fort Worth, Texas,
from 1995 to 1996. Ms. Haddox holds a Bachelor of Science degree from Texas A&M
University and is a member of the American Society for Quality Control.
Shelley K. Walley joined us in April 1999 as our Manager of Regulatory
Affairs and is responsible for our 510(k) Submissions, handling customer
complaints, internal/external audits, training, and the Corrective and
Preventive Action system. Ms. Walley served in several regulatory and quality
capacities prior to joining us. She was the Compliance Coordinator with Sandoz
Agro, Inc. (formerly Zoecon Corporation), an animal healthcare products
manufacturer, for 11 years from January 1985 to July 1995 and gained valuable
experience working with the EPA and the FDA to establish compliance with GMP and
GLP guidelines for us. Ms. Walley's experience as Senior Regulatory Specialist
for almost four years at Mentor (from July 1995 to April 1999), a Class III
implantable medical device company, furthered her regulatory knowledge in the
medical device arena. At Mentor, she provided regulatory guidance for
submissions, validations and audits, and worked closely with the FDA, the ISO,
and third party investigations. Ms. Walley majored in Business Management at
East Texas State University and is a Certified Quality Auditor.
Stephen C. Bezner joined us in March 2000 as the Director of Accounting.
He is responsible for keeping personnel, systems, and procedures in place to
produce an orderly and timely accounting of all business activities. Prior to
his employment with us, Mr. Bezner served as Vice President Finance for CBI
Laboratories, a public subsidiary of Thermo Electron Corporation, an electronic
equipment manufacturing company, from 1992 to 2000. Mr. Bezner has 24 years'
experience in accounting management and cost accounting, all of which were for
manufacturing operations of public companies. Previous employers include
Overhead Door Corporation and Texas Instruments. He has a Bachelor of Science
Degree from the University of Texas at Dallas.
Weldon G. Evans joined us in October, 2000 as Manager of Manufacturing
Engineering. His responsibilities include the support of new product development
and current production, as well as the creation of new and improved
manufacturing processes. Prior to joining us he served as a senior project
engineer with B-D, a medical technology company, since 1974. He received a
Bachelor of Science degree in Mechanical Engineering and a Master of Science
degree in Engineering Administration from Southern Methodist University. Mr.
Evans is a member of Pi Tau Sigma National Honorary Mechanical Engineering
Society and the American Society of Mechanical Engineering.
COMMITTEES OF DIRECTORS
The Board of Directors has the following committees:
Committee Members
-----------------
Executive Committee
Thomas J. Shaw
Steven R. Wisner
Dr. Jimmie Shiu
Audit Committee
Clarence Zierhut
Marwan Saker
Dr. Jimmie Shiu
Compensation and Benefits Committee
Thomas J. Shaw
Lillian E. Salerno
Douglas W. Cowan
The Executive Committee possesses and may exercise all the powers and
authority of the Board of Directors in the control and management of the
business and affairs of RTI during intervals between regular meetings of the
Board of Directors. These powers are limited as follows: the committee cannot
fill any of its vacancies, the committee does not have the power to declare
dividends, amend Bylaws, elect or remove any Officer or Director, to submit to
shareholders actions that require approval of shareholders, amend any resolution
of the Board of Directors, to act on matters assigned to other committees, to
create or fill any vacancies on the Board of Directors, to authorize
distributions or to issue shares.
The Audit Committee assists the Board of Directors in monitoring the
integrity of the financial statements, our compliance with securities
regulations and the independence and performance of our auditors.
The Compensation and Benefits Committee recommends to the Board of
Directors the compensation of Officers and significant employees and the
granting of stock options.
FAMILY RELATIONSHIPS
There are no family relationships among the above persons except as set
forth above.
25
<PAGE>
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
None of the above persons or any business in which such person was an
executive officer have been involved in a bankruptcy petition, been subject to a
criminal proceeding (excluding traffic violations and other minor offenses),
been subject to any order enjoining or suspending their involvement in any type
of business, or been found to have violated a securities law.
DIRECTORSHIPS IN OTHER COMPANIES
No Directors hold Directorships in reporting companies other than as set
forth above.
EXECUTIVE COMPENSATION
----------------------
The following summary compensation table sets forth the total annual
compensation paid or accrued by us to or for the account of the Chief Executive
Officer and each other executive officer whose total cash compensation exceeded
$100,000 for any of the past three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ------------------------
Awards Payout(s)
----------------------- -------------------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Principal Compen- Award(s) Options/ Payouts Compen-
Position Year Salary($) Bonus($) sation($) ($) SARs (#) ($) sation ($)
------------------ ---- -------- -------- --------- ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas J. Shaw, 1997 130,400 50,000 0 0 0 0 0
President and CEO 1998 125,000 0
1999 162,019 0
Lillian E. Salerno, 1997 88,846 50,000 0 0 0 0 0
Former Executive 1998 90,000 0
Vice President, 1999 143,461 0
Sales & Marketing
Edward S. Aarons, 1997 0 0 0 0 0 0 0
Former Director 1998 0 0
of Sales 1999 108,598 0
</TABLE>
In 1998, Mr. Shaw should have received a raise under the terms of his
Employment Agreement. However, the 1998 portion of his raise in the amount of
$12,019 was paid in 1999. Officers, Directors, and significant employees hold
options exercisable for the purchase of 57,000; 110,000; 228,700; 172,075, and
34,375 shares of common stock in the years 1999, 2000, 2001, 2002, and 2003,
respectively. To date, no options or long-term incentive plan awards have been
issued to Mr. Shaw or Ms. Salerno, the controlling Common Stockholders. Former
Directors were granted options as follows: Allen Cheesman, 38,100; John H.
Wilson, III, 5,000; F. John Deuschle, III, 5,000; Bob Stathopulos, 5,000; and
Joe Reeder, 25,000. Options granted to Messrs. Wilson and Deuschle terminated
as a result of their departure from the Board of Directors. The Board of
Directors subsequently issued options for the purchase of 5,000 shares of Common
Stock of RTI to each.
Officers, Directors, and significant employees hold stock options for the
purchase of Common Stock exercisable beginning in the year indicated below and
for three subsequent years:
1999 Plan NQSOs 1999 2000 2001 2002 2003
Steven R. Wisner 65,000 65,000 5,000
Lawrence G. Salerno 5,150 2,000
James A. Hoover 3,150
Kathryn M. Duesman 5,300 5,000
Douglas W. Cowan 2,500 2,500 15,000
Jimmie Shiu, M.D. 25,000
Clarence Zierhut 10,000
Edith Zagona 5,000
Michele M. Larios 7,700 15,000
Marwan Saker 5,000 30,500 30,500
Phillip L. Zweig 20,000 10,000
---------------------------------------
0 20,000 143,800 98,000 72,500
=======================================
26
<PAGE>
1999 Plan ISOs 1999 2000 2001 2002 2003
Steven R. Wisner 10,000 10,000 10,000
Lawrence G. Salerno 2,500 7,650 10,000
James A. Hoover 2,500 5,650 8,000
Russell B. Kuhlman 7,800 7,800 10,000
Kathryn M. Duesman 2,500 7,800 10,000
Douglas W. Cowan 10,000 10,000 10,000
Michele M. Larios 7,700 10,000
Peter B. Hegi 3,800 3,800 8,100
Judy Ni Zhu 3,350 3,350 7,000
S. Kristie Haddox 3,950 3,950 6,600
Stephen C. Bezner 3,875 3,875
Shelley K. Walley 2,500 2,500 3,300
---------------------------------------
0 0 48,900 74,075 96,875
=======================================
1996 Plan NQSOs 1999 2000 2001 2002 2003
Steven R. Wisner 2,500
Lawrence G. Salerno 5,000 15,000
James A. Hoover 5,000 14,000
Russell B. Kuhlman 7,500 10,000
Kathryn M. Duesman 1,500 10,000
Jimmie Shiu, M.D. 15,000 15,000 15,000
Clarence Zierhut 10,000 5,000 1,000
Peter B. Hegi 1,500 7,000
Judy Ni Zhu 7,500 10,000
S. Kristie Haddox 1,500 4,000
---------------------------------------
57,000 90,000 16,000 0 0
=======================================
1996 Plan ISOs 1999 2000 2001 2002 2003
Lawrence G. Salerno 7,500
James A. Hoover 7,500
Russell B. Kuhlman 7,500
Kathryn M. Duesman 7,500
Michele M. Larios 10,000
Peter B. Hegi 5,000
Judy Ni Zhu 5,000
S. Kristie Haddox 5,000
---------------------------------------
0 0 55,000 0 0
=======================================
COMPENSATION OF DIRECTORS
We pay each non-employee Director a meeting fee of $250 for each Board
meeting attended and have granted to each Director (except Mr. Shaw and Ms.
Salerno) stock options for Common Stock each year. We do not pay any additional
amounts for committee participation or special assignment.
EMPLOYMENT AGREEMENTS
There are no other employment agreements in place involving other Officers
or Directors, except as set forth below:
Thomas J. Shaw
--------------
We have a written employment agreement with Thomas J. Shaw, our President
and Chief Executive Officer, for an initial period of three years ending
September 2002 with an automatic and continuous renewal for consecutive two-year
periods. The agreement is terminable either by us or Thomas J. Shaw upon 30
days' written notice. The agreement provides for an annual salary of at least
$150,000 with an annual salary increase equal to no less than the percentage
increase in the Consumer Price Index during the previous calendar year. Thomas
J. Shaw's
27
<PAGE>
salary shall be reviewed by the Board of Directors each January, which shall
make such increases as it considers appropriate. Thomas J. Shaw is also entitled
to participate in all executive bonuses as the Board of Directors, in its sole
discretion, shall determine.
Under the Employment Agreement, we will also provide certain fringe
benefits, including, but not limited to, participation in pension plans, profit-
sharing plans, employee stock ownership plans, stock appreciation rights,
hospitalization and health insurance, disability and life insurance, paid
vacation, and sick leave. We also reimburse him for any reasonable and
necessary business expenses, including travel and entertainment expenses,
necessary to carry on his duties. Pursuant to the employment agreement, we have
agreed to indemnify Thomas J. Shaw for all legal expenses and liabilities
incurred with any proceeding involving him by reason of his being an Officer or
agent. We have further agreed to pay reasonable attorney fees and expenses in
the event that, in Thomas J. Shaw's sole judgment, he needs to retain counsel or
otherwise expend his personal funds for his defense.
Thomas J. Shaw has agreed to a one-year non-compete, not to hire or
attempt to hire employees for one year and to not make known our customers or
accounts or to call on or solicit our accounts or customers in the event of
termination of his employment for one year unless the termination is without
cause or pursuant to a change of control of RTI. Furthermore, Mr. Shaw has the
right to resign in the event that there is a change in control which is defined
as a change in the majority of Directors within any twelve month period without
2/3 approval of the shares outstanding and entitled to vote, or a merger where
less than 50 percent of the outstanding stock survives and a majority of the
Board of Directors remains, or the sale of substantially all of our assets, or
any other person acquires more than 50 percent of the voting capital. Mr. Shaw
retained the right to participate in other businesses as long as they do not
compete with us and so long as he devotes the necessary working time to the
company.
Phillip L. Zweig
----------------
We entered into an employment agreement with Phillip L. Zweig, our
Communications Director, effective December 13, 2000 which expires on June 12,
2001. Mr. Zweig's duties include obtaining and authoring favorable coverage of
RTI and issues important to us in local and national media outlets throughout
the United States. Mr. Zweig also agreed not to write articles about us for
independent publications and shall not provide any services relating to
marketing strategy, healthcare policy, publicity, or media coverage, or any
other services in the United States to any manufacturer of needle products,
healthcare group purchasing organizations, or any individual or business entity
that is in direct competition with our business during his employment and for
three years hereafter. In exchange, we agreed to pay Mr. Zweig a bi-weekly
salary of $4,615.38 and to grant Mr. Zweig options for the purchase of 10,000
shares of our Common Stock under the 1999 Stock Option Plan. We also agreed to
pay reasonable travel, entertainment, and related expenses as well as to provide
Mr. Zweig with standard benefits. Mr. Zweig shall be considered for bonuses on
the same terms as other management employees. This contract may be terminated by
either party with thirty days written notice.
INDEPENDENT CONSULTING AGREEMENTS
Lillian E. Salerno, d/b/a MediTrade International
-------------------------------------------------
We entered into a consulting agreement with Lillian E. Salerno, d/b/a
MediTrade International, a sole proprietorship, on June 1, 2000. The contract
was amended on August 23, 2000 and now expires on May 31, 2001. Ms. Salerno has
agreed to establish contacts with major European entities to develop marketing
and distribution channels as well as licensing agreements. Ms. Salerno will be
paid $16,667 per month and reimbursed for business expenses incurred on behalf
of RTI, not to exceed $5,000 without prior approval for the term of the
contract.
International Export and Consulting
-----------------------------------
We entered into a Consulting Agreement on March 15, 2000, with
International Export and Consulting where International Export and Consulting
agreed to advise us with respect to selection of an international distribution
network, potential strategic partners, and future licensing for VanishPoint(R)
technology in the Middle East. In exchange, we agreed to pay a consulting fee in
the amount of $2,000 a month for ten months as well as issue nonqualified stock
options ("NQSOs") for 61,000 Shares of our Common Stock at an exercise price of
$10 per share. Marwan Saker, a principal in International Export and Consulting,
is a Director.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth certain information regarding the beneficial
ownership of the capital stock as of the date of this Prospectus (excluding
exercisable options) for (a) each person known by us to own beneficially 5
percent or more of the voting capital stock, and (b) each Director and executive
officer (earning in excess of $100,000 annually) who owns capital stock. Except
pursuant to applicable community property laws and except as otherwise
indicated, each shareholder identified in the table possesses sole voting and
investment power with respect to his or her Shares.
<TABLE>
<CAPTION>
Title of Class Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Owner Class(1)
------------------------------------------------------------------------------------------------
Common Stock
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
As a Group Officers and Directors
511 Lobo Lane, P.O. Box 9
Little Elm, TX 75068-0009 14,062,500 72.6%
As Individuals Thomas J. Shaw 11,200,000 57.9%
Lillian E. Salerno 2,800,000 14.5%
Edith A. Zagona(2) 50,000 less than 1%
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Title of Class Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Owner Class(1)
Jimmie Shiu 10,000 less than 1%
Steve Wisner 2,500 less than 1%
------------------------------------------------------------------------------------------------
Series A Stock
------------------------------------------------------------------------------------------------
As a Group Officers and Directors
511 Lobo Lane, P.O. Box 9
Little Elm, TX 75068-0009 150,000 8.2%
As Individuals Jimmie Shiu 150,000 8.2%
------------------------------------------------------------------------------------------------
Series I-IV Class B Stock
------------------------------------------------------------------------------------------------
As a Group Officers and Directors
511 Lobo Lane, P.O. Box 9
Little Elm, TX 75068-0009 40,000 1.9%
As Individuals Thomas J. Shaw 5,000 Less than 1%
Marwan Saker(3) 30,000 1.4%
Edith A. Zagona(2) 5,000 Less than 1%
</TABLE>
(1) The percentages of each class are based on 19,358,150 shares of Common
Stock, 1,826,500 shares of Series A Stock, and 2,087,595 shares of Series I
through IV Class B Stock outstanding as of the date of this Prospectus.
(2) The 50,000 shares of Common Stock and the 5,000 shares of Class B Stock are
held in joint tenancy with Dr. Zagona's husband.
(3) The 30,000 Shares are beneficially held as follows: 14,500 Shares by My
Investments and 15,500 Shares by Saker Investments, which are companies
controlled by Mr. Saker.
There are no arrangements the operation of which would result in a change
in control of RTI.
PLAN OF DISTRIBUTION
--------------------
As of the date of this Prospectus, the Shares are being Offered directly by
us without the assistance of an underwriter. However, we reserve the right to
enter into an agreement with underwriters. We will receive all proceeds from
the Offering, less proceeds from the sales by selling shareholders and less
Offering expenses. We have reserved the ability to retain and pay brokers and
dealers registered with the National Association of Securities Dealers, Inc.
("NASD") to assist in placing these Shares. If we permit NASD-registered
brokers or dealers to Offer and sell those registered Shares offered by us, they
may do so only by timely delivery of a Prospectus, and we will pay or reimburse
the brokers or dealers with sales concessions (e.g., fees, expenses, and
commissions) not to exceed 10% of the aggregate purchase price of Shares sold by
such persons.
We intend to offer and sell through our Officers, Directors and employees,
none of whom will be paid any commission, or any form of compensation related,
directly or indirectly, to such sales efforts Shares directly to the public.
Offers to sell, and subscriptions to purchase the registered Shares will be made
entirely by this Prospectus. We will not employ or offer compensation to
finders or other non-NASD registered persons, and will disclaim any
responsibility for statements made by persons not authorized as its agents, or
not contained in this Prospectus.
We cannot give any assurance that any of the Shares will be sold. After we
sell the Minimum number of Shares, the Offering will continue until we sell all
2,000,000 Shares (the Maximum Offered) or _____________ (one year after the
effective date of this Prospectus), whichever occurs earlier or at such earlier
date as determined by us. All subscription payments must be sent to us along
with a separate sheet indicating the name, address and social security number of
the subscriber(s), and the number of Shares for which subscription is being
made. Payments must be by check made payable to "Texas Bank, as escrow agent for
Retractable Technologies, Inc." We will then send the subscription payments, no
later than noon of the next business day following receipt, to an escrow account
maintained by Texas Bank. Texas Bank is only acting as escrow agent in
connection with this Offering and has made no investigation of us or this
Offering nor makes any recommendation concerning this Offering. Texas Bank will
hold all subscriptions payments pending the sale of $450,000 worth of the Shares
(the Minimum number of Shares). Subscription payments will only be withdrawn
from the escrow account for the purpose of paying us for the Shares sold if we
sell less than the Minimum number of Shares, or for the purpose of refunding
subscription payments to subscribers. Subscribers will not earn interest on the
funds held in escrow and will not have use or right to return of such funds
during the escrow period, which may last as long as _______ days. If we sell
the Minimum number of Shares within the escrow period as may be extended,
payments from subscribers will be deposited into the escrow account for
collection and all funds will be periodically disbursed to us.
SELLING SECURITY HOLDERS
------------------------
The selling security holders are shareholders who have acquired
unregistered shares of Common Stock from conversion of the Series A Stock or
Series I through IV of the Class B Stock to Common Stock. Selling security
holders also include persons selling Shares received from a named selling
shareholder after the date of this Prospectus who received their Shares as a
gift from a selling shareholder.
No underwriter is obligated to sell or repurchase any of the Shares. The
shares of Common Stock being offered by selling security holders are being
registered to permit public secondary trading, and the selling security holders
may offer all or part of the Shares for resale from
29
<PAGE>
time to time. However, such selling security holders are under no obligation to
sell all or any portion of such shares of Common Stock immediately under this
Prospectus for any particular price. Because the selling security holders may
sell all or a portion of their shares of Common Stock, no estimate can be given
as to the exact number of shares of Common Stock that will be held by any
selling security holder upon termination of this Offering. Accordingly, the
following table assumes that each selling stockholder is offering for sale all
of their shares of Common Stock previously issued and for which they have given
notice of their intention to participate in this registration and sell their
Shares. We have agreed to update the information contained in this Prospectus to
reflect any facts or events arising after the date of this Prospectus, that,
individually or in the aggregate, represents a fundamental change in the
information set forth in this Prospectus and to include any material information
respecting a plan of distribution materially different from the plan of
distribution disclosed in this Prospectus. We have agreed to pay all expenses in
connection therewith (other than brokerage commissions and fees and expenses to
the various selling shareholders' respective counsel).
Except as otherwise noted below, during the past three years no selling
security holder has been an Officer, Director or affiliate of RTI or had any
other material relationship with us.
<TABLE>
<CAPTION>
Number of Percentage of Percentage of
Number of Shares of Shares of Common Shares of Common
Selling Security Holder and Shares of Number of Shares Common Stock Stock Owned After Stock Owned After
Relationship to RTI Within Past Common of Common Stock Owned After Sale of Minimum Sale of Maximum
Three Years Stock Owned Offered for Sale Offering Number of Shares Number of Shares
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Abelow, Richard 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Achterberg, Melvin F. and Gloria J. 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First Union Securities Cust. FBO
Catherine F. Anderson IRA 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Anderson, Rick and Donna 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Anderson, Rick and Michelle 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Arbaugh, George 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Arthur, Randall 3,000 3,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Bair, John and Jeanne 20,000 20,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Bair, Ted and Linda 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Baliga, Buntval 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Bangs, Edward 1,800 1,800 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Bangs, John 1,600 1,600 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Bangs, Nelson 1,600 1,600 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Barry, Thomas 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Bates, Evan and Susan 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Beall, James Leber 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Beckham, C. T. 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Behr, Kevin 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Bellissmo, Anthony 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Retirement accounts & Co. FBO Joseph
L. Belsky 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Benjamin, Roy 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Bennett, Richard 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Blackburn, David and Pamela 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Blaine, Dean W. 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Radiology Consultants of Little Rock,
P.A. Pension Plan FBO Lindy Book 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First National Bank of Onaga,
Custodian FBO James L. Bomberger 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Bornstein, Maureen 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Botty, Carlos 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First National Bank of Onaga ,
Custodian FBO N. Jeanette Bradley 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
DCGT for the Benefit of: Cathy Bryan 2,000 2,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
DCGT for the Benefit of: James W.
Bryan 2,000 2,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Bryant, Bob 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Bucy, Roy 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Bunney, Benjamin 20,000 20,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Burke, Jim and Kathryn 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Burman, Sudeep and Sita 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Burrus, John 160,000 160,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
John R. Burrus, U.S. Clearing Corp.,
Custodian IRA Department 22,000 22,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Cadigan, Cathleen 500 500 0 less than 1% less than 1%
==================================================================================================================================
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Number of Percentage of Percentage of
Number of Shares of Shares of Common Shares of Common
Selling Security Holder and Shares of Number of Shares Common Stock Stock Owned After Stock Owned After
Relationship to RTI Within Past Common of Common Stock Owned After Sale of Minimum Sale of Maximum
Three Years Stock Owned Offered for Sale Offering Number of Shares Number of Shares
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Callas, Catherine 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Caribbean Financial Ventures 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Carter, Daniela 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
In trust to Joseph C. Carter IV 1,500 1,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Carter, Joseph IV 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First Trust Corp. TTEE FBO Gary
Graham Chamblee 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Chandler, Daniel 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Charney, Innis, Evans & Nemeroff 4,000 4,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Cheesman, Allen and Susan (Former
Dir. & Officer) 13,000 13,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Childers, Bert 15,000 15,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Childers, Thelbert 56,000 56,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Childers, Thelbert and Linda 20,000 20,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Chistovao, Mario 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Clemons, Jr., Billy R. 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Cohen, Donald 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Cohen, Samuel 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Cole, Sidney 20,000 20,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Colvin, Erlene 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Constantine, Bassima 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Constantine, Sami 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Conte, Harry 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Contreras, Maria del Carmen 4,000 4,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Coody, Ronald and Jeannette 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Crooks, James and Margaret 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Culang, Michael 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Culang, Sheila 9,000 9,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Dale, David 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Pediatric Surgical Associates Amended
and Restated Plan for benefit of
William Dammert, M.D. 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Dane Partners 100,000 100,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Danna, Angie 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Dataglobe, Inc. 220,000 220,000 0 1.1% 1.0%
----------------------------------------------------------------------------------------------------------------------------------
Davenport, Wilma 4,000 4,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Davidson, John 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Davidson, Robert and Mary 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Davidson, Scott 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Davis, Bernard Living Trust 9,000 9,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Dean, Steven 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
DeCherney, Alan 7,500 7,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Deep, Anthony and Careme 7,500 7,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Delk, George and Cathy 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Deroche, Georgette 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Radiology Consultants of Little Rock,
P.A. Pension Plan FBO Doyne Dodd 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Dodson, Lisa 12,500 12,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Dozzo, David 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
ARTX, Inc. 3,000 3,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Duesman, Jeff and Kathryn 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Dugan, Daniel 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Duncan, Robert and Elizabeth 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Eberhard, Margaret and Van 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Eclectic Services Limited
50,000 50,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Edgington, Jack 2,000 2,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Edgington, Jack and Cathy 3,000 3,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Elben Partners 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Elias, Belen 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Elias, James 1,250 1.250 0 less than 1% less than 1%
==================================================================================================================================
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Number of Percentage of Percentage of
Number of Shares of Shares of Common Shares of Common
Selling Security Holder and Shares of Number of Shares Common Stock Stock Owned After Stock Owned After
Relationship to RTI Within Past Common of Common Stock Owned After Sale of Minimum Sale of Maximum
Three Years Stock Owned Offered for Sale Offering Number of Shares Number of Shares
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Herwig, Larry 1,250 1.250 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Elias, James M. 2,500 2,500 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Elias, Richard 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Elmer, Dana and Carol 2,000 2,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Engel, Diane 3,334 3,334 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Diamond, Stuart 3,333 3,333 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Pearl-Kraut, Ellen 3,333 3,333 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Erler, Richard and Mary 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Erwin, Bill and Gloria 15,000 15,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Fagagau Energy Corporation 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Fahey, Michael 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Ferguson, Jim and Lillian 50,000 50,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Ferree, Michael and Joyce 6,000 6,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Fincannon, Tony 12,500 12,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Fishkind, Gregory and Jayne 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Fleming, Byford and Marcella 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Fleming, Dale and Kathi 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First National Bank of Onaga,
Custodian FBO Paul B. Fletcher,
Jr. Fletcher, Paul 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Foltz, Gary L., Trustee FBO G7F
Consultants Profit Sharing Plan 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Forest, David 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Fosdick, Deborah 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Frankel, Allan 3,000 3,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Frankel, Betty 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
John E. Franklin, Jr. Trustee FBO
John E. Franklin, Jr. Profit Sharing
Plan 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Freeman Family Trust 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Frenkel & Frenkel 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Friedel, Ronald and Sheila 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Friedland, Gail 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Friedman, Barry and Laura 40,000 40,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Fry, JoAnn 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
L. Madison Galbraith and Jo Haden
Galbraith, trust, under the Madison
and Jo Haden Galbraith Living Trust 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Gardner, Gary and Helen 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Garoutte, Steven and Jenny 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Gawley, Hugh 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Ghossein News Distributing 9,000 9,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Gibbs, Carol 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Gilbert, Jimmy and Joyce 15,000 15,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Gilbert, Robert W. and Arlene 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Gilbert, Timothy and Sue Ann 15,000 15,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Gilbert, Tommy and Barbara 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Giordano, Alfred 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Goetz, Abraham and Natalie 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Retirement Accounts & Co. FBO Emanuel
Goldberg 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
L&D Goldfarb Family Limited
Partnership 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
M&H Goldfarb Family Limited
Partnership 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Gonzalez, Erwin 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Goodman, Kerry 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Goodman, Rona 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Gould, Thomas and Deborah 1,500 1,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Graham, Milton and Harryette 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Graham, Terry and Wanda 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Granite Opportunities 14,500 14,500 0 less than 1% less than 1%
==================================================================================================================================
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Number of Percentage of Percentage of
Number of Shares of Shares of Common Shares of Common
Selling Security Holder and Shares of Number of Shares Common Stock Stock Owned After Stock Owned After
Relationship to RTI Within Past Common of Common Stock Owned After Sale of Minimum Sale of Maximum
Three Years Stock Owned Offered for Sale Offering Number of Shares Number of Shares
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
V.D.G. Investments, a Texas
Partnership 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Griffo, John 100,000 100,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
John A. Griffo, IRA Rollover U.S.
Clearing House, Custodian 32,000 32,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Gruber, Michael and Diane (Former
Director) 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Gunther, Michael 125,000 125,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Michael S. Gunther, IRA Account U.S.
Clearing House, Custodian 5,400 5,400 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Guyer, Richard 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Haiken, Mark 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
The Don and Kay Halsey Living Trust
dtd 10/8/1993 D.J. & Kathrine H.
Halsey, Trustees 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Harris, David 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
RMH Trust, Robert M. Hartnett, Trustee 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Lois A. Haselwood Liv. Trust UAD
11/30/83 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Presbyterian Healthcare System
Section 83 Trust FBO Douglas D.
Hawthorne 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hawthorne, Martha 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First Trust Corporation TTEE FBO
Ronald H. Hayward IRA UA dtd 11/25/92 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Herson, Rodney 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hertzman, Phillip 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hilburn, David and Karen 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hill, Jon 3,500 3,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First National Bank of Onaga,
Custodian FBO Lois A. Hinson IRA 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hirsch, Robert 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hodde, Arthur Dean 7,500 7,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hodge, Bill 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hodge, C.E. and Brownie 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hodge, Clifford and Shelia 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Ken Hodge Profit Sharing Plan: Ken
Hodge Trustee 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hoffman, William and Holly 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
IRA FBO Frank L. Holaday DLJSC as
Custodian 20,000 20,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Honderick, Timothy and Valerie 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Horn, Robert 1,500 1,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hughes, Billy and Celeste 27,500 27,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hughes, Joe B and Patricia 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Huntington, Constance 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hurt, Edward and Marjorie 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hutton, William 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Iannini, Mark 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Inman, George and Judith 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Iselin, Audrey 5,500 5,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Retirment Accounts & Company CFBO
David R. Iselin 4,500 4,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Isom, Roddy 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Jacobs, Dennis 7,200 7,200 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Jacobs, Johnny 5,200 5,200 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Jacobs, JP and Geni 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Jacobs, Margie 1,200 1,200 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Jacobs, Troy 1,200 1,200 0 less than 1% less than 1%
==================================================================================================================================
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Number of Percentage of Percentage of
Number of Shares of Shares of Common Shares of Common
Selling Security Holder and Shares of Number of Shares Common Stock Stock Owned After Stock Owned After
Relationship to RTI Within Past Common of Common Stock Owned After Sale of Minimum Sale of Maximum
Three Years Stock Owned Offered for Sale Offering Number of Shares Number of Shares
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Trust Corporation FBO Ali
Jafarian 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Jahani, Sam 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
JCS Holding 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Jenkins, John and Jana 45,000 45,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Jensen, Robert 35,000 35,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
JMSJ Partners 4,300 4,300 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Joffe, Hannenberg, Nadelberg 3,000 3,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Johnson, Bendel and Jean 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Johnson, Charles 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Johnson, Danny and Terri 3,250 3,250 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Johnson, James and Sherry 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Johnson, Suzanne 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Joiner, Keith 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Jones, Cary 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Jones, Gerry 7,500 7,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Jones, Richard and Susan 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Kahrs, Daniel H. 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Kane, Raymond 15,000 15,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Kaplan, Moreson 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Kelton, Leslie and Cynthia 7,500 7,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Kimball, Gene and Jody 1,200 1,200 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Janet N. Kinzer TTEE FBO Janet N.
Kinzler Trsut #2 7,000 7,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Kirchner, John 3,000 3,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Klein, Michael and Marina 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Kmiecik, Thomas and Elaine 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Knickel, Rebecca 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Knight, Craig and Judy 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Knochel, James and Jolene 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Koonce, Thomas 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Kusman, Barry and Michelle 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Lancaster, Joe 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Larios, Michele M. (officer) 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First National Bank of Onaga,
Custodian FBO Dr. Max Gordon Latham
IRA 2,000 2,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Lawrence, Lloyd and Judy 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Lee, David and Diane 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Lee, Esther 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Leffert, Jonathan and Carla 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Lett, Barbara and Marcy, David 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Levy, Mickey 195,000 195,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
U.S. Clearing House as Custodian FBO
Mickey D. Levy IRA 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Lieberman, Jeffrey 3,000 3,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Lieberman, Julius 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
radiology Consultants of Little Rock
PA P/S trust FBO Henry A. Lile 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Locklear Irrevocable Trust 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Locklear, Danny and Jill 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Locklear, Danny J. 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Locklear, J. W. and Claudine 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Jim Locklear, Custodian 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First Trust Corporation TTEE Jimmy
Gayle Locklear IRA 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First Trust Corporation Roth IRA FBO
Jimmy Gayle Locklear 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Locklear, Meloyde 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Loflin, Linda & Williams, Charlotte 25,000 25,000 0 less than 1% less than 1%
==================================================================================================================================
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Number of Percentage of Percentage of
Number of Shares of Shares of Common Shares of Common
Selling Security Holder and Shares of Number of Shares Common Stock Stock Owned After Stock Owned After
Relationship to RTI Within Past Common of Common Stock Owned After Sale of Minimum Sale of Maximum
Three Years Stock Owned Offered for Sale Offering Number of Shares Number of Shares
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Long, Carl and Christi 55,000 55,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Longino, George 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Lu, Xiaohua and Xue Yonghong 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
F/B/O E. Ralph Lupin, M.D. IRA
Rollover Neuberger-Berman Trust
Company, Trustee 4,000 4,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Maale, Gerhard and Kim 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Madri, Joseph and Lucille 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Magiera, Jack and Nancy 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Mahar, James 11,800 11,800 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First Trust Corporation, Trustee FBO
Franlklin C. Mahlo 5,400 5,400 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Makler, T. Todd 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Mandel, Aileen 2,000 2,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Martin, Frederick and Carol 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Martin, Scott 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First Trust Corp. TTEE FBO Thomas E.
Maxwell 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
McAnally, Bruce 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
McCallion, Debbie 2,000 2,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
McCaskill, Bernie and Barbara 129,000 129,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
McClinton, Dennis and Jean 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
McCrary, Marjorie 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First Trust Corp. TTEE FBO James
Larry McReynolds 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
McWhorter, Candace 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
McWhorter, Duncan 3,000 3,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Means, William 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Meeker, Charles and Nanette 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Meron, Diane 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Messinger, Richard 12,500 12,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Meyer, Kathryn and James 1,500 1,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Meyerson, Mirian and Ronald 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Meyerson, Ron 2,000 2,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Miller, Robert 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Mills, Christine 35,000 35,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Mills, Lawrence and Christine 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First Trust Corp. TTEE FBO Mary Lou
Mills IRA Acct 4,000 4,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Mitchell, Janis and Stanley 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Mitchell, Kenny and Tommi 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Morgan, Terry 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Morgenstein, Karl and Carol 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Mower, Morton 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Mukamal, Steven 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Munster, Loes 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
PaineWebber, Inc. FBO David and
Kellie Murphy 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Mussina, Hugh 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Nardiello, William 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Nell, Thomas 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Armen Ness, Trustee FBO Greenwich
Gynecology and Obstetrics P.C.
Profit Sharing Plan 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Netburn, Susan 3,500 3,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Hamlet Newsome Profit Sharing Plan
Plastic Surgery Group 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Nissenbaum, Michael 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Norman, Cynthia 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Norman, Daniel 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Norman, Steven 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Norman, Thomas and Bertha 2,500 2,500 0 less than 1% less than 1%
==================================================================================================================================
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Number of Percentage of Percentage of
Number of Shares of Shares of Common Shares of Common
Selling Security Holder and Shares of Number of Shares Common Stock Stock Owned After Stock Owned After
Relationship to RTI Within Past Common of Common Stock Owned After Sale of Minimum Sale of Maximum
Three Years Stock Owned Offered for Sale Offering Number of Shares Number of Shares
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Norman, Timothy 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Numeroff, Marvin and Susan 70,000 70,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Nussbaum, Moses 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Oglesby, Timothy and Kimberly 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Osborne, Joel and Mary 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Parmer Family Trust 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Patel, Pratul M. 6,500 6,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Patterson Real Estate 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Pendley Family Living Trust 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
MLPF&S Cust. FBO Hal R. Pettigrew IRA 50,000 50,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Peyton, Cathy 2,000 2,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Pickrell, Lester and Linda 3,250 3,250 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Platt, Jody 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Pogorelec and Simon 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Evan J. Pogorelec, Minor Child, Dr.
Eugene D. Pogorelec, Custodian 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Jeremy M. Pogorelec , minor child Dr.
Eugene D. Pogorelec , Custodian 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Jordan M. Pogorelec, Minor Child Dr.
Eugene D. Pogorelec Custodian 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Pogorelec, Joshua 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Lauren M. Pogorelec, Minor Child Dr.
Eugene D. Pogorelec Custodian 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Pollock, Harlan 15,000 15,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First National Bank of Onaga FBO
James E. Powdrill IRA 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Robert S. and Virginia G. Powers,
Trustees, The Robert S. and Virginia
G. Powers Trust 4,500 4,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Prengler, Craig 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Presbyterian Healthcare System
Section 83 Trust FBO Douglas D.
Hawthorne 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Price, Ricky 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Prizio, Joseph and Zagona, Edith,
(Director) 50,000 50,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Pruett, Marsha 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Pugh, Donna 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Pun, Karen 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Purpora, Ronald 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Quagliarello, Vicent 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Rachael, Rosemary 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Retirement Accounts & Co. CFBO
Jeffrey Rachlin 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Asset Allocation Securities Corp. 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Rachlin, Robert 7,500 7,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Charles L. Radbill & Francesca Radbill 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Rashbaum, Ralph 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Ray, Robert and Suzanne 50,000 50,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Reed, Rikki and Lida 6,000 6,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Reinarz, James Allen 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Renick, B. Coleman Jr. 20,000 20,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Rhoads, Claude and Patricia 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
M. Rippley Family Limited Partnership 50,000 50,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Roman, Anthony and Nancy 30,000 30,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Rosbruch, Ronald 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Rosen, William and Eddy 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Rosenberg, Donald 5,000 5,000 0 less than 1% less than 1%
==================================================================================================================================
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Number of Percentage of Percentage of
Number of Shares of Shares of Common Shares of Common
Selling Security Holder and Shares of Number of Shares Common Stock Stock Owned After Stock Owned After
Relationship to RTI Within Past Common of Common Stock Owned After Sale of Minimum Sale of Maximum
Three Years Stock Owned Offered for Sale Offering Number of Shares Number of Shares
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Trust Corp. TTEE FBO Henry H.
Ross 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Ryan, Patrick J. 22,000 22,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Piper Jaffrey Inc. FBO Patrick J. Ryan 4,000 4,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Salem, John and Betty 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Salerno, Anthony & Carol 12,500 12,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Salerno, Frank 3,000 3,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Salerno, Larry and Judith 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Salerno, Nicholas and Faye 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
The Sass Family Living Trust dated
7/29/1997 William C. Sass & Evelyn
Sass, Trustees 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Savitz, Jonathan 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Savitz, Peter 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Schaller, John 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Schaller Family Limited Partnership 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Schaum, Paul W. 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith
Incorporated FBO Paul W. Schaum 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Scheinberg, Robert 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Schleiter, Gary 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Schneider (PickNPack) 100,000 100,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Schneider, Judith 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Schreck, Muriel 6,000 6,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Schultz, Kenneth and Deborah 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Seashore, John 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Rita Sendra Mata and Jaime Sendra
Joint Tenancy 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Shapiro, Robert 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Robert Shapiro IRA Chase Custodian
for Morgan Stanley and Company, Inc. 12,500 12,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Shaw, Elizabeth 105,000 105,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Shaw, Ellsworth 105,000 105,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Shaw, Mary 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Shaw, Rebecca Salome 6,400 6,400 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Victoria E. Shaw Family Trust
Victoria E. Shaw Trustee 28,000 28,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Victoria E. Shaw Family Trust 90,000 90,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Shelokov, Alexis 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Sher, Gerald and Susan 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Booth & Co. TI#:36-6033750 c/o The
Northern Trust Company 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Sherry, Dean and Cynthia 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Shine, Daniel 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Shiu, Jimmie (Director) 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Fong, Samuel 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Neff, Monroe C. 3,500 3,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Zhang, Chuh Fan S. 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First Trust Corp. TTEE FBO Raymond
Earl Sloan 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Small, Gregg L. 30,000 30,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Smith, Barry and Tina 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Smith, Ray and Linda 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Smith, Timothy 12,500 12,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Smith, Van A. and Ann S. 50,000 50,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Snelick, Walter and Bernadette 2,000 2,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Solomon, Elliott and Marianne 30,000 30,000 0 less than 1% less than 1%
==================================================================================================================================
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Number of Percentage of Percentage of
Number of Shares of Shares of Common Shares of Common
Selling Security Holder and Shares of Number of Shares Common Stock Stock Owned After Stock Owned After
Relationship to RTI Within Past Common of Common Stock Owned After Sale of Minimum Sale of Maximum
Three Years Stock Owned Offered for Sale Offering Number of Shares Number of Shares
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Solomon, Paul 6,500 6,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Sowka, Michael and Marion 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Spitzberg, Jack and Marian 1,250 1,250 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Sprague, Charles C. and Alayne 21,600 21,600 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Standridge, Stacy 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Stark, James 1,250 1,250 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First Trust Corp. TTEE FBO Roger N.
Stark 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Steinberg, Steven and Esther 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First National Bank of Onaga,
Custodian FBO Robert D. Stephens,
Jr. Roth IRA 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Steplock, Jr. A. L. 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Stone, Samuel and Carol 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Stoutenburgh, Dennis & Cynthia 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Stripling, Dennis 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Sudderth, Jerry 650 650 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Sudderth, Jerry and Judith 8,635 8,635 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Sudderth, Judith 715 715 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Susat, George 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Sutker, William 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Craig S. Sutton, D.D.S. Inc,. Pension
and Profit Sharing Plan 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Swedrow Family Limited Partnership 15,000 15,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Symington, Ann 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Symington, J. Fife 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Taylor, Jack L. and Onelia F. 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Taylor, Kevin 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Terranova, George J. 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Theisen, Michael and Marjorie 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Theobalt, Ricky and Elaine 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Thompson, Susan 25,000 25,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Retirement Accounts, Inc. FBO Robert
Toffler 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Retirement Accounts & Co. FBO Robert
B. Toffler 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Torrance, Sandra 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First National Bank of Onaga C/F
Robert L. Troike, IRA 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Troy, Michael 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
True, Robert 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Tuinstra, Theodore 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First Trust Corporation FBO Theodore
J. Tuinstra 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Tullock, Thomas and Sherry 2,000 2,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Tunnell, Laura 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Turner, Stuart and Clemencia 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Radcliffes Trustee Co., S.A. as
trustee of the Turquoise trust 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Smith Barney as IRA custodian FBO Jon
M. Vilmar 7,500 7,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
First Trust Corp. TTEE FBO Allen D.
Walker 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Wang, Ying and Lu, Sheng 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Warner, Linda 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Warnkin, William 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Warshaw, Joseph 3,000 3,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Warshaw, Lawrence 1,500 1,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Watson, Theo and Elizabeth 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Watt, Howard 60,500 60,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Watt, Howard and Brown, Marion 5,000 5,000 0 less than 1% less than 1%
==================================================================================================================================
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Number of Percentage of Percentage of
Number of Shares of Shares of Common Shares of Common
Selling Security Holder and Shares of Number of Shares Common Stock Stock Owned After Stock Owned After
Relationship to RTI Within Past Common of Common Stock Owned After Sale of Minimum Sale of Maximum
Three Years Stock Owned Offered for Sale Offering Number of Shares Number of Shares
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Waugh, Frances 75,250 75,250 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Webb, Clyde 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Webb, Gary L. 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Webb, Gary L. and Wanda C. 30,000 30,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Weber, James J. & Alford, Carl S 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Independent Trust Corporation FBO
Wade P. Webster Trust 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Webster, Wade P. 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Wehrmacher, John 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Weinstein, Sheldon & Joan 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Gruntal & Co., LLC Custodian FBO
Harold Weiss, IRA 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Welch, James and Jane 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Wheeler, Dale and Laurie 500 500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
White, Le Gros III 50,000 50,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Wien, George and Todd 6,000 6,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Wien, Todd and George 8,500 8,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Wilcox, Kinzler, McCain & Terry 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Wildman, Frank 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Wilhite, Velaska 2,000 2,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Williams, Robert 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Williams, M. Wayne 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Williamson, Van and John 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Wilner, Matthew and Lauren 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Wilson, Herbert and Janice 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Wisner, Helene 1,000 1,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Wisner, Steve and Jean (Director and
Officer) 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Wood, Cary E. and Susan M. 2,000 2,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Woodard, Roger and Georgann 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Woody, Kay Gibert 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Wright, Mark and Mary Lou 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Yang, Liming and Ziaoquin Zheng 5,000 5,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Yost, Syble T. 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Zak, Francis and Claire 1,500 1,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Zale, John 3,000 3,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Zembsch, J. Brandt 7,500 7,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
David B. Zenoff and Associates Profit
Sharing Plan 2,500 2,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Zook, William 3,500 3,500 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Zou, Gene and Sun, Xiaojin 6,000 6,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
Retirement Accounts & Co. FBO Barnett
Zenoff 10,000 10,000 0 less than 1% less than 1%
----------------------------------------------------------------------------------------------------------------------------------
TOTAL 5,358,150 5,358,150 0
==================================================================================================================================
</TABLE>
Selling shareholders may engage in sales in one or more types of
transactions which include but are not limited to block transactions,
transactions in the over-the-counter market, in negotiated transactions, through
put or call transactions relating to the Shares, through short sales of the
Shares, or a combination of such methods of sales at market conditions
prevailing at the time of sale, or at negotiated prices. Such transactions may
or may not involve brokers or dealers. The selling security holders may sell
their Shares directly to purchasers or to or through broker-dealers, which may
act as agents or principals. Such broker-dealers may receive compensation in
the form of discounts, concessions, or commissions from the selling security
holders or the purchasers of the Shares for whom such broker-dealers may act as
agents or to whom they sell as principal or both. Such compensation as to a
particular broker-dealer might be in excess of customary commissions.
Upon our being notified by a selling security holder that any material
arrangement has been entered into with a broker-dealer for the sale of such
selling shareholder's Common Stock through a block-trade, special offering,
exchange distribution or secondary distribution or a purchase by a broker-
dealer, we will, if required, file a supplement or amendment to this Prospectus
disclosing the name of each such selling shareholder and of the participating
broker-dealer, the number of Shares involved, the price at which such Shares
were sold, the commissions paid or discounts or concessions allowed to such
broker-dealer, where applicable, that such broker-dealers did not conduct any
investigation to verify the information set out in this Prospectus and the other
facts material to the transaction. In addition, upon our being notified by a
selling shareholder that a donee or pledgee intends to sell more than 500
Shares, we will file a supplement to this Prospectus.
39
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, there will be 14,000,000 shares of Common
Stock and 3,914,095 shares of preferred stock outstanding that are "restricted
securities" as that term is defined in Rule 144 promulgated under the Securities
Act. In general, under Rule 144, and providing we are current in all reports
which are required to be filed by the Exchange Act, a person (or persons whose
shares are aggregated) who has satisfied a one-year holding period may, under
certain circumstances, sell within any three-month period that number of shares
which does not exceed the greater of one percent of the then outstanding shares
or the average weekly trading volume during the four calendar weeks prior to
such sale. Rule 144 also permits, under certain circumstances, the sale of
shares without any quantity limitation by a person who has satisfied a two-year
holding period and who is not, and has not been for the preceding three months,
an affiliate of RTI. All 14,000,000 shares of Common Stock are held by Thomas
J. Shaw, our Chief Executive Officer and Lillian E. Salerno, a Director. Both
Mr. Shaw and Ms. Salerno have executed Lock-Up Agreements, which specify that
for one-year (beginning December 3 and December 4, 2000, respectively), neither
individual can sell more than an aggregate 3% of their Common Stock.
Furthermore, for one consecutive year, neither individual can sell more than an
aggregate 7% of their shares of Common Stock. 2,847,850 shares of preferred
stock may be sold immediately, 1,066,000 shares of Series IV Stock may be sold
beginning in June 2001 and 245 shares of Series III Stock may be sold beginning
in April 2001.
DETERMINATION OF OFFERING PRICE
-------------------------------
We do not have a publicly traded market for our Common Stock. Our
19,358,150 shares of outstanding Common Stock are currently held 57.9% by our
Chief Executive Officer, Thomas J. Shaw, and 14.5% by Lillian E. Salerno, a
Director. As of the date of this Prospectus 1,781,655 shares of Common Stock are
subject to outstanding options and 3,914,095 Shares are reserved for issuance
upon conversion of both classes of preferred stock. An additional 7,725 shares
of Series IV Stock (convertible into Common Stock on a one-for-one basis) are
reserved for issuance upon exercise of warrants.
We have retained the services of Business Valuation Services, Inc. ("BVS"),
in Dallas, Texas, to provide an opinion as to both the value of RTI in whole,
and the reasonableness of the Offering price for the Shares. We provided BVS
with full access to our books and records, its physical plant, and the time of
our Officers and key employees. BVS considered, among other things, our
financial condition as of June 30, 2000, including our previous securities sales
activities and past operations; our likely business prospects, including our
current sales and material contracts, public education and lobbying efforts, and
the ability and expertise of our Management; the status of the pending B-D
litigation, the prospects of increased competition from other manufacturers of
similar or related safety injection devices (current and prospective); the
current and likely market for our products, specifically, safety injection
devices, and the prospects for the healthcare products market in general; and
the value and market pricing of other similar companies and their securities,
and the securities markets in general. BVS concluded that our Offering price for
the Shares was reasonable. The factors used in pricing the shares of Common
Stock are not necessarily predictive of the market price for the Shares. You
should be aware that the market price of our Common Stock may decline below the
market price of the Shares in this Offering.
DESCRIPTION OF SECURITIES
-------------------------
As of the date of this Prospectus, our authorized capital consists of
100,000,000 shares of Common Stock, no par value, 5,000,000 shares of Series A
Stock, par value of $1 per share, and 5,000,000 shares of Class B Convertible
Preferred Stock, par value of $1 per share. No capital stock carries preemptive
rights although owners of the preferred stock have the right to purchase
additional shares of Common Stock in the event we ever sell Common Stock for a
price below that which they paid for their preferred stock. Those prices ranged
from $1 per share to $10 per share. There are no provisions in the Second
Amended and Restated Articles of Incorporation and Amended and Restated Bylaws
that would delay, defer, or prevent a change in control of RTI other than
provisions in the Second Amended and Restated Articles of Incorporation that
prohibit cumulative voting by shareholders and provisions which provide that the
Board of Directors shall consist of two classes with each class elected every
two years (except this initial year) in alternating years. We serve as our own
registrar and transfer agent but are in the process of retaining the services of
American Stock Transfer & Trust Company as registrar and transfer agent.
COMMON STOCK
We are authorized to issue 100,000,000 shares of no par value Common Stock.
As of the date of this Prospectus, there are 19,358,150 shares of Common Stock
issued and outstanding. Additionally, 1,000,000 shares are set aside under both
1996 Stock Option Plans and 2,000,000 shares of Common Stock have been set aside
under the 1999 Stock Option Plan for employees, Directors, and other qualified
individuals. These shares are issuable upon the exercise of options. As of
September 30, 2000, options for the purchase of 359,655 shares of Common Stock
are exercisable. Options for the purchase of 369,655 shares of Common Stock
become exercisable by December 31, 2000. No shares are held as treasury stock.
Shares of our Common Stock have no conversion rights, no preemptive rights,
and no restrictions on alienation and are fully paid and are not liable to
further call or assessment. Each share of our Common Stock is entitled to share
ratably in any asset available for distribution to holders of its equity
securities upon liquidation of RTI, subject to the preference of the holders of
each class and series of the preferred stock. Pursuant to the requirements of a
loan from Texas Bank, we have agreed not to return capital to the shareholders
or redeem outstanding shares without the bank's prior consent.
Voting Rights
-------------
All shares of our Common Stock have equal voting rights and, when validly
issued and outstanding, have one vote per share on all matters to be voted upon
by stockholders. The holders of the Common Stock elect the Directors subject to
certain limited voting rights of the holders of the Series A Stock and Series II
Stock where dividends are in arrears for 12 consecutive quarters. See "SERIES A
CONVERTIBLE PREFERRED STOCK" and "SERIES II CLASS B CONVERTIBLE PREFERRED
STOCK." Cumulative voting in the election of Directors is prohibited.
40
<PAGE>
Dividends
---------
Holders of our Common Stock are entitled to receive dividends when and if
declared by the Board of Directors out of funds available therefor. We have not
paid any dividends on the Common Stock since RTI's inception and presently
anticipates that all earnings, if any, will be retained for development of our
business and that no dividends on its Common Stock will be declared in the
foreseeable future. Any future dividends will be subject to the discretion of
the Board of Directors and will depend upon, among other things, future
earnings, full payment of dividends on the Series A Stock, and Series I, Series
II, Series III, and Series IV Stock, our operating and financial condition, our
capital requirements, and general business conditions.
SERIES A CONVERTIBLE PREFERRED STOCK
We are authorized to issue not more than 5,000,000 shares of Series A Stock
at $1.00 par value and have 1,826,500 shares issued and outstanding held by 54
shareholders. The Board of Directors has the authority to divide the Series A
Stock into series and to set the relative rights and preferences among the
series, within the limitations provided by Article 2.13 of the Texas Business
Corporation Act. This summary is not intended to be complete and is subject to,
and qualified in its entirety by reference to, the Certificate of Designation,
Preferences, Rights, and Limitations of Series A Convertible Preferred Stock of
RTI, filed with the Secretary of the State of Texas, amending RTI's Articles of
Incorporation, and setting forth the rights, preferences, and limitations of the
Series A Convertible Preferred Stock.
Dividends
---------
Holders of shares of Series A Stock will be entitled to receive, if, when,
and as declared by the Board of Directors out of funds legally available
therefor, cumulative cash dividends of $.12 per share per annum, payable
quarterly, commencing September 1, 1995. If a dividend upon any shares of Series
A Stock is in arrears, no dividends may be paid or declared and set aside for
payment, or other distribution made upon the Common Stock or any other stock of
RTI ranking junior to the Series A Stock as to dividends. In addition, no Common
Stock or any other stock ranking junior to the Series A Stock as to dividends,
may be redeemed, purchased, or otherwise acquired for any consideration except
in certain circumstances. As of November 15, 2000, no dividends are in arrears.
Voting Rights
-------------
Except as required by the laws of the State of Texas, the holders of the
Series A Stock are generally not entitled to vote. In the event dividends
payable on the Series A Stock shares shall be in arrears for 12 consecutive
quarterly dividend periods, the holders of the majority of the outstanding
Series A shares shall have the exclusive right (voting separately as a class
with one vote per Series A share) to elect one-third of the Board of Directors
which Directors shall serve until the next annual meeting or so long as such
arrearage shall continue. As of March 31, 1999, dividends to Series A
shareholders were in arrears for 12 consecutive dividend periods and
accordingly, on October 4, 1999, the Series A shareholders elected three (one-
third) of the Directors to the Board of Directors. The term of office of these
Directors terminated by payment of all dividends due.
So long as any shares of Series A Stock remain outstanding, we shall not,
without the affirmative vote or consent of the holders of at least 51 percent of
the shares of the Series A Stock outstanding at the time: (a) authorize, create,
issue, or increase the authorized or issued amount of any class or series of
stock ranking equal to or senior to the Series A Stock with respect to payment
of dividends or the distribution of assets on liquidation, dissolution, or
winding up of RTI; or (b) amend, alter, or repeal the provisions of the Articles
of Incorporation, or of the rights of the Series A Stock, so as to alter or
change the powers, preferences, or special rights of the shares of the Series A
Stock so as to affect them adversely.
Conversion Rights
-----------------
Each share of Series A Stock will be convertible at any time subsequent to
three years after issuance, at the option of the holder thereof into Common
Stock at a conversion rate of one share of Common Stock for each share of Series
A Stock. The conversion price is subject to adjustment in certain events.
Redemption Provisions
---------------------
RTI prior to three years from the date of issuance may not redeem the
Series A Stock. On and after such date, we may redeem the Series A Stock at our
option, in whole or in part, at any time and from time to time, on at least 30
days' and not more than 60 days' written notice at the redemption price of $1.70
per share, together with accrued and unpaid dividends to the date fixed for
redemption.
Liquidation Rights
------------------
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of RTI, the holders of outstanding shares of Series A Stock are
entitled to receive liquidating distributions equivalent to $1.50 per share,
plus accrued and unpaid dividends to the date of distribution, out of our assets
available for distribution to stockholders, before any distribution of assets is
made to holders of Common Stock or any stock ranking junior to the Series A
Stock upon liquidation, dissolution, or winding up. If upon any liquidation,
dissolution, or winding up of RTI, the amounts available for distribution with
respect to the Series A Stock are not sufficient to satisfy the full liquidation
rights of the Series A Stock, the holders of the Series A Stock will share
ratably in any such distribution of assets.
Registration Rights
-------------------
Until six months after the last shares of the Series A Stock are redeemed,
retired, converted, or otherwise no longer outstanding, we will give notice to
the holders of the Series A Stock no less than 20 days before filing a
registration statement under the Securities Act (excluding registrations
pertaining to securities issuable pursuant to employee stock option or stock
purchase plans, or pursuant to the acquisition of a business). We will also
afford the holders of the Series A Stock the opportunity to have included in any
one, but not more than two registrations shares of Common Stock acquired upon
conversion of the Series A Stock. We are entitled to exclude the shares of any
holder from a Maximum
41
<PAGE>
of one registration (on the advice of our investment banking firm that inclusion
would materially interfere with the orderly sale of securities offered under
such registration statement) so long as no other holder's shares are included in
the registration.
CLASS B CONVERTIBLE PREFERRED STOCK (SERIES I, II, III, AND IV)
We are authorized to issue 5,000,000 shares of Class B Convertible
Preferred Shares at $1 par value per share. The Board of Directors of RTI has
the authority to divide the Class B preferred shares into series and to set the
relative rights and preferences among the series, within the limitations
provided by Texas Business Corporation Act, Article 2.13. This summary is not
intended to be complete and is subject to, and qualified in its entirety by,
reference to the Certificates of Designation, Preferences, Rights, and
Limitations of Series I, II, III, and IV Class B Convertible Preferred Stock of
RTI, filed with the Secretary of the State of Texas, amending RTI's Articles of
Incorporation, and setting forth the rights, preferences, and limitations of the
Series I, II, III, and IV Class B Convertible Preferred Stock.
SERIES I CLASS B CONVERTIBLE PREFERRED STOCK
We are authorized to issue not more than 5,000,000 shares and have 366,600
shares outstanding held by 78 shareholders as of the date of this Prospectus.
The Series I Stock ranks senior to the Common Stock with respect to dividends
and upon liquidation, dissolution, or winding up and RTI treats them as junior
to the 5,000,000 shares of Series A Stock.
Dividends
---------
Holders of shares of Series I Stock will be entitled to receive, if, when,
and as declared by the Board of Directors out of funds legally available
therefor, cumulative cash dividends of $.50 per share per annum, payable
quarterly, commencing December 31, 1996. If a dividend upon any shares of Series
I Stock is in arrears, no dividends may be paid or declared and set aside for
payment, or other distribution made upon the Common Stock or any other stock
ranking junior to the Series I Stock as to dividends. In addition, no Common
Stock, or any other stock ranking junior to the Series I Stock as to dividends,
may be redeemed, purchased, or otherwise acquired for any consideration except
in certain circumstances. As of November 15, 2000, $2,065,292 in dividends was
in arrears.
Voting Rights
-------------
Except as required by the laws of the State of Texas, the holders of the
Series I Stock are not entitled to vote.
So long as any shares of Series I Stock remain outstanding, we shall not,
without the affirmative vote or consent of the holders of at least 51 percent of
the shares of the Series I Stock outstanding at the time: (a) authorize, create,
issue, or increase the authorized or issued amount of any class or series of
stock ranking equal to or senior to the Series I Stock with respect to payment
of dividends or the distribution of assets on liquidation, dissolution, or
winding up of RTI; or (b) amend, alter, or repeal the provisions of RTI's
Articles of Incorporation, or of the rights of the Series I Stock so as to alter
or change the powers, preferences, or special rights of the shares of the Series
I Stock so as to affect them adversely.
Conversion Rights
-----------------
Each share of Series I Stock will be convertible at any time subsequent to
three years after issuance, at the option of the holder thereof into Common
Stock at a conversion rate of one share of Common Stock for each share of Series
I Stock. The conversion price is subject to adjustment in certain events.
Redemption Provisions
---------------------
Prior to three years from the date of issuance, we may not redeem the
Series I Stock. On and after such date, we may redeem the Series I Stock at our
option, in whole or in part, at any time and from time to time, on at least 30
days' and not more than 60 days' written notice, at the redemption price of
$7.50 per share, together with accrued and unpaid dividends to the date fixed
for redemption.
Liquidation Rights
------------------
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of RTI, the holders of outstanding shares of Series I Stock are
entitled to receive liquidating distributions equivalent to $6.25 per share,
plus accrued and unpaid dividends to the date of distribution, out of our assets
available for distribution to stockholders, before any distribution of assets is
made to holders of Common Stock or any stock ranking junior to the Series I
Stock upon liquidation, dissolution, or winding up. If, upon any liquidation,
dissolution, or winding up of RTI, the amounts available for distribution with
respect to the Series I Stock are not sufficient to satisfy the full liquidation
rights of the Series I Stock, the holders of the Series I Stock will share
ratably in any such distribution of assets in proportion to the full respective
preferential amounts to which they are entitled.
Registration Rights
-------------------
Until six months after the last shares of the Series I Stock are redeemed,
retired, converted, or otherwise no longer outstanding, we will give notice to
the holders of the Series I Stock no less than 20 days before filing a
registration statement under the Securities Act (excluding registrations
pertaining to securities issuable pursuant to employee stock option or stock
purchase plans, or pursuant to the acquisition of a business). We will also
afford the holders of the Series I Stock the opportunity to have included in any
one, but not more than two registrations shares of Common Stock acquired upon
conversion of the Series I Stock. We are entitled to exclude the shares of any
holder from a Maximum of one registration (on the advice of our investment
banking firm that inclusion would materially interfere with the orderly sale of
securities offered under such registration statement) so long as no other
holder's shares are included in the registration.
42
<PAGE>
SERIES II CLASS B CONVERTIBLE PREFERRED STOCK
We are authorized to issue not more than 5,000,000 shares and have 489,250
shares outstanding held by 88 shareholders as of the date of this Prospectus.
The Series II Stock ranks senior to the Common Stock with respect to dividends
and upon liquidation, dissolution, or winding up, and RTI treats them as junior
to the 5,000,000 shares of Series A Stock and Series I Stock.
Dividends
---------
Holders of shares of Series II Stock will be entitled to receive, if, when,
and as declared by the Board of Directors out of funds legally available
therefor, cumulative cash dividends of $1 per share per annum, payable
quarterly, commencing December 31, 1997. If a dividend upon any shares of Series
II Stock is in arrears, no dividends may be paid or declared and set aside for
payment, or other distribution made upon the Common Stock or any other stock
ranking junior to the Series II Stock as to dividends. In addition, no Common
Stock, or any other stock ranking junior to the Series II Stock as to dividends,
may be redeemed, purchased, or otherwise acquired for any consideration except
in certain circumstances. As of November 15, 2000, $2,977,862 in dividends were
in arrears.
Voting Rights
-------------
Except as required by the laws of the State of Texas, the holders of the
Series II Stock are generally not entitled to vote. In the event that dividends
payable on the Series II Stock shall be in arrears for 12 consecutive quarterly
dividend periods, the holders of a majority of the Series II Shares shall have
the exclusive right (voting separately as a class with one vote per share of
Series II Stock) to elect one-third of the Board of Directors to serve until the
next annual meeting or so long as such arrearage shall continue.
So long as any shares of Series II Stock remain outstanding, we shall not,
without the affirmative vote or consent of the holders of at least 51 percent of
the shares of the Series II Stock outstanding at the time: (a) authorize,
create, issue, or increase the authorized or issued amount of any class or
series of stock ranking equal to or senior to the Series II Stock with respect
to payment of dividends or the distribution of assets on liquidation,
dissolution, or winding up of RTI; or (b) amend, alter, or repeal the provisions
of RTI's Articles of Incorporation, or of the rights of the Series II Stock so
as to alter or change the powers, preferences, or special rights of the shares
of the Series II Stock so as to affect them adversely.
Conversion Rights
-----------------
Each share of Series II Stock will be convertible at any time subsequent to
three years after issuance, at the option of the holder thereof into Common
Stock at a conversion rate of one share of Common Stock for each share of Series
II Stock. The conversion price is subject to adjustment in certain events.
In the event we file a registration statement, the holders of the Series II
Stock will have the opportunity to convert their shares prior to the three-year
holding period.
Redemption Provisions
---------------------
Prior to three years from the date of issuance, we may not redeem the
Series II Stock. On and after such date, we may redeem the Series II Stock, in
whole or in part, at any time and from time to time, on at least 30 days' and
not more than 60 days' written notice at the redemption price of $15 per share,
together with accrued and unpaid dividends to the date fixed for redemption.
In the event we file a registration statement, we may, at our option,
accelerate our redemption rights.
Liquidation Rights
------------------
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of RTI, the holders of outstanding shares of Series II Stock are
entitled to receive liquidating distributions equivalent to $12.50 per share,
plus accrued and unpaid dividends to the date of distribution, out of our assets
available for distribution to stockholders, before any distribution of assets is
made to holders of Common Stock or any stock ranking junior to the Series II
Stock upon liquidation, dissolution, or winding up. If upon any liquidation,
dissolution, or winding up of RTI, the amounts available for distribution with
respect to the Series II Stock are not sufficient to satisfy the full
liquidation rights of the Series II Stock, the holders of the Series II Stock
will share ratably in any such distribution of assets in proportion to the full
respective preferential amounts to which they are entitled.
Registration Rights
-------------------
Until six months after the last shares of the Series II Stock are redeemed,
retired, converted, or otherwise no longer outstanding, we will give notice to
the holders of the Series II Stock no less than 20 days before filing a
registration statement under the Securities Act (excluding registrations
pertaining to securities issuable pursuant to employee stock option or stock
purchase plans, or pursuant to the acquisition of a business). We will also
afford the holders of the Series II Stock the opportunity to have included in
any one, but not more than two registrations shares of Common Stock acquired
upon conversion of the Series II Stock. We are entitled to exclude the shares of
any holder from a Maximum of one registration (on the advice of our investment
banking firm that inclusion would materially interfere with the orderly sale of
securities offered under such registration statement) so long as no other
holder's shares are included in the registration.
In the event we file a registration statement, the holders of the Series II
Stock will have the opportunity to convert their shares prior to the three-year
holding period, and we may, at our option, accelerate our redemption rights.
43
<PAGE>
SERIES III CLASS B CONVERTIBLE PREFERRED STOCK
We are authorized to issue not more than 2,000,000 shares and have 165,745
shares outstanding held by 45 shareholders as of the date of this Prospectus.
The Series III Stock ranks senior to the Common Stock with respect to dividends
and upon liquidation, dissolution, or winding up, and we treat them as junior to
the 5,000,000 shares of Series A Stock and Series I and II Stock.
Dividends
---------
Holders of shares of Series III Stock will be entitled to receive, if,
when, and as declared by the Board of Directors out of funds legally available
therefor, cumulative cash dividends of $1 per share per annum, payable
quarterly, commencing December 31, 1998. If a dividend upon any shares of Series
III Stock is in arrears, no dividends may be paid or declared and set aside for
payment, or other distribution made upon the Common Stock or any other stock
ranking junior to the Series III Stock as to dividends. In addition, no Common
Stock or any other stock ranking junior to the Series III Stock as to dividends,
may be redeemed, purchased, or otherwise acquired for any consideration except
in certain circumstances. As of November 15, 2000, $1,812,603 in dividends were
in arrears.
Voting Rights
-------------
Except as required by the laws of the State of Texas, the holders of the
Series III Stock are not entitled to vote.
So long as any shares of Series III Stock remain outstanding, we shall not,
without the affirmative vote or consent of the holders of at least 51 percent of
the shares of the Series III Stock outstanding at the time: (a) authorize,
create, issue, or increase the authorized or issued amount of any class or
series of stock ranking equal to or senior to the Series III Stock with respect
to payment of dividends or the distribution of assets on liquidation,
dissolution, or winding up of RTI; or (b) amend, alter, or repeal the provisions
of RTI's Articles of Incorporation, or of the rights of the Series III Stock so
as to alter or change the powers, preferences, or special rights of the shares
of the Series III Stock so as to affect them adversely.
Conversion Rights
-----------------
Each share of Series III Stock will be convertible at any time subsequent
to three years after issuance, at the option of the holder thereof into Common
Stock at a conversion rate of one share of Common Stock for each share of Series
III Stock. The conversion price is subject to adjustment in certain events.
In the event we file a registration statement, the holders of the Series
III Stock will have the opportunity to convert their shares prior to the three-
year holding period. We may, at our option at any time within 180 days after the
registration statement is deemed effective, demand the conversion of the Series
III Stock.
Redemption Provisions
---------------------
Prior to three years from the date of issuance, we may not redeem the
Series III Stock. On and after such date, we may redeem the Series III Stock at
our option, in whole or in part, at any time and from time to time, on at least
30 days' and not more than 60 days' written notice at the redemption price of
$15 per share, together with accrued and unpaid dividends to the date fixed for
redemption.
In the event we file a registration statement, we may, at our option at any
time within 180 days after the registration statement is deemed effective,
demand the conversion of the Series III Stock.
Liquidation Rights
------------------
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of RTI, the holders of outstanding shares of Series III Stock are
entitled to receive liquidating distributions equivalent to $12.50 per share,
plus accrued and unpaid dividends to the date of distribution, out of our assets
available for distribution to stockholders, before any distribution of assets is
made to holders of Common Stock or any stock ranking junior to the Series III
Stock upon liquidation, dissolution, or winding up. If upon any liquidation,
dissolution, or winding up of RTI, the amounts available for distribution with
respect to the Series III Stock are not sufficient to satisfy the full
liquidation rights of the Series III Stock, the holders of the Series III Stock
will share ratably in any such distribution of assets in proportion to the full
respective preferential amounts to which they are entitled.
Registration Rights
-------------------
Until six months after the last shares of the Series III Stock is redeemed,
retired, converted, or otherwise no longer outstanding, we will give notice to
the holders of the Series III Stock no less than 20 days before filing a
registration statement under the Securities Act (excluding registrations
pertaining to securities issuable pursuant to employee stock option or stock
purchase plans, or pursuant to the acquisition of a business). We will also
afford the holders of the Series III Stock the opportunity to have included in
any one, but not more than two registrations shares of Common Stock acquired
upon conversion of the Series III Stock. We are entitled to exclude the shares
of any holder from a Maximum of one registration (if in our sole discretion we
decides that the inclusion of such shares will materially interfere with the
orderly sale of the securities being offered under such registration statement)
so long as no other holder's shares are included in the registration.
In the event we file an initial registration statement, the holders of the
Series III Stock will have the opportunity to convert their shares prior to the
three-year holding period. We may, at our option at any time within 180 days
after the registration statement is deemed effective, demand the conversion of
the Series III Stock.
44
<PAGE>
SERIES IV CLASS B CONVERTIBLE PREFERRED STOCK
We are authorized to issue not more than 1,300,000 shares and have
1,066,000 shares outstanding held by 14 shareholders as of the date of this
Prospectus. The Series IV Stock ranks senior to the Common Stock with respect to
dividends and upon liquidation, dissolution, or winding up, but we treat them as
junior to the 5,000,000 shares of Series A Stock and Series I, II, and III
Stock.
Dividends
---------
Holders of shares of Series IV Stock will be entitled to receive, if, when,
and as declared by the Board of Directors out of funds legally available
therefor, cumulative cash dividends of $1 per share per annum, payable
quarterly, commencing December 31, 2000. If a dividend upon any shares of Series
IV Stock is in arrears, no dividends may be paid or declared and set aside for
payment or other distribution made upon the Common Stock or any other stock
ranking junior to the Series IV Stock as to dividends. In addition, no Common
Stock or any other stock ranking junior to the Series IV Stock as to dividends
may be redeemed, purchased, or otherwise acquired for any consideration except
in certain circumstances.
Voting Rights
-------------
Except as required by the laws of the State of Texas, the holders of the
Series IV Stock are not entitled to vote.
So long as any shares of Series IV Stock remain outstanding, we shall not,
without the affirmative vote or consent of the holders of at least 51 percent of
the shares of the Series IV Stock outstanding at the time: (a) authorize,
create, issue, or increase the authorized or issued amount of any class or
series of stock ranking equal to or senior to the Series IV Stock with respect
to payment of dividends or the distribution of assets on liquidation,
dissolution, or winding up of RTI; or (b) amend, alter, or repeal the provisions
of RTI's Articles of Incorporation, or of the rights of the Series IV Stock so
as to alter or change the powers, preferences, or special rights of the shares
of the Series IV Stock so as to affect them adversely.
Conversion Rights
-----------------
Each share of Series IV Stock will be convertible at any time subsequent to
three years after issuance, at the option of the holder thereof into Common
Stock at a conversion rate of one share of Common Stock for each share of Series
IV Stock. The conversion price is subject to adjustment in certain events.
In the event that we file an initial registration statement, the holders of
Series IV Stock may convert their shares prior to the three-year holding period.
We may also, at our option any time within 180 days after the registration
statement is deemed effective, demand the conversion of the Series IV Stock.
Redemption Provisions
---------------------
Prior to three years from the date of issuance, we may not redeem the
Series IV Stock. On and after such date, we may redeem the Series IV Stock at
our option, in whole or in part, at any time and from time to time, on at least
30 days' and not more than 60 days' written notice to convert or redeem the
shares, at the redemption price of $11 per share, together with accrued and
unpaid dividends to the date fixed for redemption.
In the event that we file an initial registration statement, we may, at our
option any time within 180 days after the registration statement is deemed
effective, demand the conversion of the Series IV Stock.
Liquidation Rights
------------------
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of RTI, the holders of outstanding shares of Series IV Stock are
entitled to receive liquidating distributions equivalent to $11 per share, plus
accrued and unpaid dividends to the date of distribution, out of our assets
available for distribution to stockholders, before any distribution of assets is
made to holders of Common Stock or any stock ranking junior to the Series IV
Stock upon liquidation, dissolution, or winding up. If upon any liquidation,
dissolution, or winding up of RTI, the amounts available for distribution with
respect to the Series IV Stock are not sufficient to satisfy the full
liquidation rights of the Series IV Stock, the holders of the Series IV Stock
will share ratably in any such distribution of assets in proportion to the full
respective preferential amounts to which they are entitled.
Registration Rights
-------------------
Until six months after the last shares of the Series IV Stock are redeemed,
retired, converted, or otherwise no longer outstanding, we will give notice to
the holders of the Series IV Stock no less than 20 days before filing a
registration statement under the Securities Act (excluding registrations
pertaining to securities issuable pursuant to employee stock option or stock
purchase plans, or pursuant to the acquisition of a business). We will also
afford the holders of the Series IV Stock the opportunity to have included in
any one, but not more than two registrations shares of Common Stock acquired
upon conversion of the Series IV Stock. We are entitled to exclude the shares of
any holder from a Maximum of one registration (if in our sole discretion we
decide that inclusion would materially interfere with the orderly sale of
securities offered under such registration statement) so long as no other
holder's shares are included in the registration.
In the event that we file an initial registration statement, the holders of
Series IV Stock may convert their shares prior to the three-year holding period.
We may also, at our option any time within 180 days after the initial
registration statement is deemed effective, demand the conversion of the Series
IV Stock.
45
<PAGE>
OVERVIEW OF RTI'S 1999 STOCK OPTION PLAN
On September 14, 1999, the Board of Directors adopted the 1999 Stock Option
Plan effective as of July 1, 1999 (the "Plan" for purposes of this section
only). In order to qualify options under the Plan as incentive stock options
("ISOs"), the shareholders must approve the Plan on or before September 14,
2000. The shareholders approved the Plan on September 14, 1999. The Plan
provides for the granting of ISOs and Non Qualified Stock Options ("NQSOs") as
defined in the Plan and collectively referred to in this section only as
"Awards." The purpose of the Plan is to encourage stock ownership by key
employees, to provide an incentive for such employees to expand and improve the
profitability of RTI, and to assist RTI in attracting and retaining key
personnel through the grant of ISOs and NQSOs to purchase shares of common
stock. The following description is intended to be a summary of the Plan's
principal terms and is qualified in its entirety by reference to the complete
text.
General
-------
The Plan authorizes the Compensation and Benefits Committee or, in the
absence of a committee, the Board of Directors to grant ISOs to key employees
and NQSOs to other employees, independent contractors, and non-employee
Directors. No Directors have options vesting within 60 days of this Prospectus.
As of the date of this Prospectus, we have granted ISOs to purchase 825,300
shares of Common Stock and NQSOs to purchase 271,550 shares to employees under
the 1999 Stock Option Plan. ISOs to purchase 119,750 shares and employee NQSOs
to purchase 5,300 shares were cancelled under the terms of the Plan. 43,500
employee NQSOs were exercisable as of the date of this Prospectus. No ISOs were
exercisable. The exercise price for the ISOs is $10. The NQSOs have exercise
prices from $1 to $10. We granted NQSOs to purchase 358,200 shares to non-
employees, 10,000 of which have been cancelled and none are exercisable as of
the date of this Prospectus.
Exercisable options under the 1999 Stock Option Plan are shown below:
<TABLE>
<S> <C> <C> <C> <C> <C>
All Options, Including Officers and
Significant Employees 1999 2000 2001 2002 2003
ISOs
- - 161,200 207,075 337,275
Employee NQSOs 26,000 27,500 101,250 67,500 44,000
Nonemployee Directors NQSOs - - 45,000 30,500 30,500
Nonemployee NQSOs - 10,000 147,200 67,498 17,502
------ ------ ------- ------- -------
Total 26,000 37,500 454,650 372,573 429,277
====== ====== ======= ======= =======
Officers and significant employees 1999 2000 2001 2002 2003
ISOs 0 0 48,900 74,075 96,875
Nonemployee Directors NQSOs 0 0 45,000 30,500 30,500
Employee NQSOs 0 20,000 98,800 67,500 42,000
------ ------ ------- ------- -------
Total 0 20,000 192,700 172,075 169,375
====== ====== ======= ======= =======
</TABLE>
A Maximum of 2 million shares of Common Stock are reserved and available
for distribution pursuant to Awards granted under the Plan, subject to
adjustment to reflect a subdivision or consolidation of shares or any other
capital adjustment, payment of a stock dividend, or other increase or decrease
in such shares effected without consideration. Shares may be distributed under
the Plan, in whole or in part, from authorized and unissued shares or treasury
shares. The Compensation and Benefits Committee shall be responsible to the
Board of Directors for the operation of the Plan and shall make recommendations
to the Board of Directors with respect to participation in the Plan and with
respect to the terms, limitations, restrictions, conditions, and extent of that
participation. The interpretation and construction of a provision of the Plan by
the Compensation and Benefits Committee shall be final unless otherwise
determined by the Board of Directors. The Board of Directors, upon
recommendation by the Compensation and Benefits Committee or upon its own
action, may grant stock options. Options may not be exercised by tendering
outstanding shares except as permitted by the Compensation and Benefits
Committee, in its sole discretion.
Awards
------
Options granted under the Plan may be ISOs, as defined under and subject to
Section 422 of the Internal Revenue Code (the "Code"), or NQSOs.
The options will be exercisable at such times and subject to such terms and
conditions as the Board of Directors or the Compensation and Benefits Committee
may determine. All options must expire no later than ten years from the date of
grant in the case of ISOs held by a non-10 percent shareholder, no later than
five years from the date of grant in the case of a 10 percent shareholder, and
as determined by the Board of Directors/Compensation and Benefits Committee at
the date of grant in the case of NQSOs.
Generally, ISOs will terminate three months after termination of the
optionee's employment without cause and automatically upon termination for
cause, or one year following the termination of employment due to death or
permanent disability; provided, however, that options will expire prior to said
times if and at such time that the original option exercise term otherwise
expires. Generally, options may be exercised only to the extent exercisable on
the date of termination, death, or disability. Generally, NQSOs will terminate
automatically upon termination of the optionee's employment for cause and one
year following termination of employment due to death. Nonvested NQSOs are
forfeited upon
46
<PAGE>
termination of employment with or without cause, permanent disability, or death;
provided, however, that options will expire prior to said times if and at such
time that the original option exercise term otherwise expires.
The option price for any ISO will not be less than 100 percent of the fair
market value of the Common Stock as of the date of grant. In the event the
optionee is a 10 percent shareholder, the price of the ISO shall be 110 percent
of the fair market value of the Common Stock as of the date of grant. In the
event the optionee is not a 10 percent shareholder, the price of the ISO shall
be 100 percent of the fair market value of the Common Stock as of the date of
grant. The Board of Directors has set $10 as the fair market value of RTI's
Common Stock for ISOs granted to date. The option price for an NQSO will be
determined by the Board of Directors or Compensation and Benefits Committee on
the date of grant. The holder of an NQSO must, prior to issuance of a stock
certificate, remit to us the amount, if any, of any taxes required to be
withheld upon exercise of the NQSO.
The ISOs are not transferable except by will or the laws of descent and
distribution. NQSOs may not be transferred for a period of one year from the
date of grant to a nonaffiliate and may not be transferred for a period of two
years from the date of grant to affiliates.
Miscellaneous
-------------
The Plan may be amended or discontinued by the Board of Directors or the
Compensation and Benefits Committee provided that the Board of Directors may
not, without the approval of the stockholders: (a) except as expressly provided
in the Plan, increase the total number of shares reserved for the purposes of
the Plan, (b) decrease the option price of an ISO to less than the amounts
provided for in the Plan, and (c) extend the duration of the Plan. No amendment,
alteration, or discontinuation may impair the rights of an optionee without his
consent.
Under the Plan, the Board of Directors and Compensation and Benefits
Committee has wide discretion and flexibility, enabling it to administer the
Plan in the manner it determines to be in the best interest of RTI. Thus, Awards
may be granted in various combinations and sequences and may be subject to
various conditions, restrictions, and limitations at grant or upon exercise or
payment not inconsistent with the terms of the Plan. The Board of Directors' and
Compensation and Benefits Committee's determinations with respect to which
employees will receive Awards, and the form, amount and frequency, and the terms
and conditions thereof, need not be uniform as to similarly situated persons.
The designation of an employee to receive one form of an Award under the Plan
does not require the Board of Directors or Compensation and Benefits Committee
to designate or entitle such employee to receive any other form of Award.
The Plan limits the number of ISOs that can be issued to key employees.
Other than limiting Awards to key employees, there are no restrictions on the
number of Officers or other employees eligible to receive Awards or the Awards
that may be granted to one person. In addition, the Plan does not limit the
aggregate number of Awards that may be granted except that the number of shares
reserved for distribution under the Plan cannot exceed 2 million shares.
OVERVIEW OF THE 1996 INCENTIVE STOCK OPTION PLAN OF RTI
On January 30, 1996, the Board of Directors adopted the 1996 Incentive
Stock Option Plan of RTI (the "Plan" for purposes of this section only). The
shareholders adopted the Plan on April 26, 1996. The Plan provides for the
granting of ISOs as defined in the Plan and collectively referred to in this
section only as "Awards." The purpose of the Plan is to encourage stock
ownership by certain Officers and key employees, in attracting qualified
personnel to RTI, and to provide additional incentives for such employees to
promote and contribute to our success. The following description is intended to
be a summary of the Plan's principal terms and is qualified in its entirety by
reference to the complete text.
General
-------
The Plan authorizes the Compensation and Benefits Committee to grant ISOs
to current, full-time employees. As of the date of this Prospectus, ISOs for the
right to purchase 184,550 shares of Common Stock have been granted of which
73,800 have terminated under the provisions of the Plan. The exercise price for
the ISOs is $10. As of the date of this Prospectus, options for the purchase of
47,500 shares granted to Directors have vested. Stock options, which were
granted under the Plan but which do not meet certain statutory requirements for
ISOs, are classified as NQSOs.
As of December 15, 2000, we had granted NQSOs for the purchase of 344,205
shares to employees under the 1996 Incentive Stock Option Plan of which 178,800
have terminated under the provisions of the Plan. The NQSOs have exercise prices
from $1 to $10.
47
<PAGE>
Exercisable Options under the 1996 Incentive Stock Option Plan are as follows:
<TABLE>
<S> <C> <C> <C>
All Options, Including Officers and
Significant Employees 1999 2000 2001
ISOs 0 1,750 109,000
NQSOs 41,105 124,300 0
------ ------- -------
41,105 126,050 109,000
====== ======= =======
Officers and significant employees
1999 2000 2001
ISOs 0 0 55,000
NQSOs 29,500 70,000 0
------ ------- -------
29,500 70,000 55,000
====== ======= =======
</TABLE>
Under the 1996 Incentive Stock Option Plan, a Maximum of 800,000 shares of
Common Stock are reserved and available for distribution pursuant to Awards
granted under the Plan, subject to adjustment to reflect a subdivision or
consolidation of shares, payment of a stock dividend on Common Stock or other
increase or decrease in such shares effected without consideration. If shares
subject to an Award granted under the Plan ceases to be subject to such Awards,
such shares will again be available for distribution under the Plan. Shares may
be distributed under the Plan, in whole or in part, from authorized and unissued
shares. The Compensation and Benefits Committee shall be responsible to the
Board of Directors for the operation of the Plan and shall make recommendations
to the Board of Directors with respect to participation in the Plan and with
respect to the terms, limitations, restrictions, conditions, and extent of that
participation. The interpretation and construction of a provision of the Plan by
the Compensation and Benefits Committee shall be final unless otherwise
determined by the Board of Directors.
Awards
------
Options granted under the Plan shall be ISOs as defined under and subject
to Section 422 of the Code.
The options will be exercisable at such times and subject to such terms and
conditions as the Compensation and Benefits Committee may determine. In no event
shall an option be exercisable prior to three years from the date of grant or
after the expiration of ten years from the date of grant.
Generally, ISOs will terminate three months after termination of the
optionee's employment if termination is for a reason other than death or
disability. If termination is by disability, the Compensation and Benefits
Committee has the right to extend the exercise period for up to one year from
termination. If the termination is a result of death, the option may be
exercised within three months after death. Generally, options may be exercised
only to the extent exercisable on the date of termination, death, or disability.
The option price for any ISO will not be less than 100 percent of the fair
market value of the Common Stock as of the date of grant. In the event the
optionee is a 10 percent shareholder, the price of the ISO shall be 110 percent
of the fair market value of the Common Stock as of the date of grant. In the
event the optionee is not a 10 percent shareholder, the price of the ISO shall
be 100 percent of the fair market value of the Common Stock as of the date of
grant.
The options are not transferable except by will or the laws of descent and
distribution. In the event an optionee exercises his option and we issue shares
as a result of that exercise, no disposition of the resulting shares by the
optionee may be made within three years from the date of the grant of the option
or within one year after transfer of such shares to the optionee. We shall not
be required upon exercise of an option to issue or deliver shares prior to
completion of registration or other qualification under any state or federal law
as we shall determine to be desirable. In the event the optionee exercises his
option and receives a bona fide offer for all or a portion of the shares, he
shall give us the exclusive right and option within 15 days of the date of
notice to us to purchase the shares on the same terms. In the event of a
dissolution of RTI or a merger where we are not the surviving entity, each
option shall terminate but not before we give 30 days' notice of the optionee's
right to exercise his option.
Miscellaneous
-------------
The Plan may be amended or discontinued by the Board of Directors or the
Compensation and Benefits Committee provided that they may not modify an
outstanding option so as to specify a lower price or accept the surrender of
outstanding options and authorize the granting of new options in substitution
thereof specifying a lower price. The Plan may be modified or amended by
affirmative vote of the majority of the Common Stock plus the affirmative vote
of all the remaining stock. No amendment, alteration, or discontinuation may
impair the rights of an optionee without his consent.
Under the Plan, the Compensation and Benefits Committee has wide discretion
and flexibility, enabling it to administer the Plan in the manner it determines
to be in our best interest. Thus, Awards may be granted in various combinations
and sequences and may be subject to various conditions, restrictions, and
limitations at grant or upon exercise or payment not inconsistent with the terms
of the Plan. The Compensation and Benefits Committee's determinations, with
respect to which employees will receive Awards, and the form, amount and
frequency, and the terms and conditions thereof, are subject to wide discretion.
The designation of an employee to receive one form of an Award
48
<PAGE>
under the Plan does not require the Board of Directors or Compensation and
Benefits Committee to designate or entitle such employee to receive any other
form of Award.
The Plan does limit the employees eligible to receive Awards to certain
Officers and key employees and contain limits on the number of shares which may
be subject to options which may be granted to any one person. However, the Plan
does not limit the aggregate number of Awards that may be granted except that
the number of shares reserved for distribution under the Plan cannot exceed
800,000 shares.
OVERVIEW OF RTI'S 1996 STOCK OPTION PLAN FOR DIRECTORS AND OTHER INDIVIDUALS
On April 23, 1996, the Board of Directors adopted RTI's 1996 Stock Option
Plan for Directors and Other Individuals (the "Plan" for purposes of this
section only). The Plan provides for the granting of NQSOs as defined in the
Plan and collectively referred to in this section only as "Awards." The purpose
of the Plan is to encourage stock ownership by certain Directors and other
individuals, in attracting qualified Directors to our Board of Directors and to
provide additional incentives for such Directors to promote and contribute to
our success. The following description is intended to be a summary of the Plan's
principal terms and is qualified in its entirety by reference to the complete
text.
General
-------
The Plan authorizes the Compensation and Benefits Committee to grant NQSOs
to members of our current Board of Directors and other individuals who have made
a contribution toward our success, who have served continuously as a Director
for not less than three years from grant, or who have continuously provided
services as a consultant, independent contractor, or otherwise for not less than
three years from grant and who before such option is not the holder of more than
10 percent of the total combined voting power or value of all classes of stock.
As of December 15, 2000, we granted 283,500 NQSOs for the purchase of
283,500 shares to non-employees, and options for the purchase of 98,000 shares
have been cancelled. The prices ranged from $1 to $10. Exercisable Options under
the 1996 Stock Option Plan for Directors and Other Individuals are as follows:
<TABLE>
<S> <C> <C> <C>
All Options, Including Officers and
Significant Employees 1999 2000 2001
Nonemployee Directors NQSOs 25,000 20,000 16,000
Employee Directors NQSOs 2,500 0 0
Nonemployee NQSOs 46,500 45,000 30,500
------ ------ ------
Total 74,000 65,000 46,500
====== ====== ======
Officers and significant employees 1999 2000 2001
Employee Directors NQSOs 2,500 0 0
Nonemployee Directors NQSOs 25,000 20,000 16,000
------ ------ ------
Total 27,500 20,000 16,000
====== ====== ======
</TABLE>
A Maximum of 200,000 shares of Common Stock are reserved and available for
distribution pursuant to Awards granted under the Plan, subject to adjustment to
reflect a subdivision or consolidation of shares payment of a stock dividend on
Common Stock or other increase or decrease in such shares effected without
consideration. If shares subject to an Award granted under the Plan ceases to be
subject to such Awards, such share will again be available for distribution
under the Plan. Shares may be distributed under the Plan, in whole or in part,
from authorized and unissued shares. The Compensation and Benefits Committee
shall be responsible to the Board of Directors for the operation of the Plan and
shall make recommendations to the Board of Directors with respect to
participation in the Plan and with respect to the terms, limitations,
restrictions, conditions, and extent of that participation. The interpretation
and construction of a provision of the Plan by the Compensation and Benefits
Committee shall be final unless otherwise determined by the Board of Directors.
Awards
------
Options granted under the Plan shall be NQSOs.
The options will be exercisable at such times and subject to such terms and
conditions as the Compensation and Benefits Committee may determine. In no event
shall an option be exercisable prior to three years from the date of grant or
after the expiration of ten years from the date of grant.
Generally, the options will terminate three months after termination of the
optionee's service if termination is for a reason other than death or
disability. If termination is by disability, the Compensation and Benefits
Committee has the right to extend the exercise period for one year from
termination. If the termination is a result of death, the option may be
exercised within three months after death. Generally, options may be exercised
only to the extent exercisable on the date of termination, death, or disability.
The option price for any option will not be less than 100 percent of the
fair market value of the Common Stock as of the date of grant. In the event the
optionee is a 10 percent shareholder, the price of the option shall be 110
percent of the fair market value of the Common Stock as of the date of grant. In
the event the optionee is not a 10 percent shareholder, the price of the option
shall be 100 percent of the fair market value of the Common Stock as of the date
of grant.
The NQSOs are not transferable except by will or the laws of descent and
distribution. In the event an optionee exercises his option and we issue shares
as a result of that exercise, no disposition of the resulting shares by the
optionee may be made within three years from the
49
<PAGE>
date of the grant of the option. We are not required upon exercise of an option
to issue or deliver shares prior to completion of registration or other
qualification under any state or federal law as we shall determine to be
desirable. In the event the optionee exercises his option and receives a bona
fide offer for all or a portion of the shares, he shall give us the exclusive
right and option within 15 days of the date of notice to us to purchase the
shares on the same terms. In the event of a dissolution of RTI or a merger where
we are not the surviving entity, each option shall terminate but not before we
give 30 days' notice of the optionee's right to exercise his option.
Miscellaneous
-------------
The Plan may be amended or discontinued by the Board of Directors or the
Compensation and Benefits Committee provided that it may not modify an
outstanding option so as to specify a lower price or accept the surrender of
outstanding options and authorize the granting of new options in substitution
thereof specifying a lower price. The Plan may be modified or amended by
affirmative vote of the majority of the Common Stock plus the affirmative vote
of all the remaining stock. No amendment, alteration, or discontinuation may
impair the rights of an optionee without his consent.
Under the Plan, the Compensation and Benefits Committee has wide discretion
and flexibility, enabling it to administer the Plan in the manner it determines
to be in our best interest. Thus, Awards may be granted in various combinations
and sequences and may be subject to various conditions, restrictions, and
limitations at grant or upon exercise or payment not inconsistent with the terms
of the Plan. The Compensation and Benefits Committee's determinations with
respect to which employees will receive Awards, and the form, amount and
frequency, and the terms and conditions thereof, are subject to wide discretion.
The designation of an employee to receive one form of an Award under the Plan
does not require the Board of Directors or Compensation and Benefits Committee
to designate or entitle such employee to receive any other form of Award.
The Plan does not limit either the number of persons eligible to receive
Awards or the type or number of shares which may be subject to options or other
Awards which may be granted to any one person. In addition, the Plan does not
limit the aggregate number of Awards that may be granted except that the number
of shares reserved for distribution under the Plan cannot exceed 200,000 shares.
OPTION FOR CONVERSION OF LOAN PRINCIPAL INTO COMMON STOCK
Pursuant to the agreement between RTI and Abbott, Abbott agreed to make
periodic loans to us prior to June 30, 2005, in increments of $1,000,000 in an
aggregate amount of up to $5,000,000. Pursuant to the Abbott Agreement, we gave
Abbott the right, at its option, to convert any and all principal amounts owed
into Common Stock at a price of $10 per share (adjustable for events affecting
the number of outstanding shares of Common Stock). We have borrowed $5 million
under the Abbott Agreement. Abbott also holds registration rights with respect
to the shares of Common Stock issued upon conversion of any principal amount
lent pursuant to the Abbott Agreement. Subject to limitations contained in the
Abbott Agreement and related Registration Rights Agreement, these registration
rights include the following:
. Any time after we become eligible to file a registration statement on Form
S-3, Abbott may require that we use our best efforts to effect a
registration of Abbott Common Stock acquired by conversion of any principal
amounts owed (the "Registerable Securities") only where Abbott agrees to
abide by the terms of the underwriting as agreed upon by the underwriters
and us. The right to request registration may not be exercised more than
three times. This right is subject to the ability of the underwriters to
limit the number of shares included in the offering in view of market
conditions.
. If we register any Common Stock in a public offering for cash whether as a
primary or secondary offer or pursuant to registration rights granted to
other holders (not including a registration relating solely to employee
benefit plans on Form S-8 or registration on Form S-4 relating solely to a
transaction subject to Rule 145), Abbott is entitled to request and we must
take reasonable efforts to include the Registerable Securities in the
registration. This right is subject to the ability of the underwriters to
limit the number of shares included in the offering in view of market
conditions.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
The following is a brief summary of our understanding of the principal
anticipated federal income tax consequences of Awards made under the Plans based
upon the applicable provisions of the Code in effect on the date hereof. This
summary is not intended to be exhaustive and does not describe foreign, state,
or local tax consequences.
Incentive Stock Options Generally
---------------------------------
An optionee will not realize taxable income at the time an ISO is granted
or exercised. Common Stock is issued to an optionee pursuant to the exercise of
an ISO, and if no disqualifying disposition of the shares is made by the
optionee within two years of the date of grant or within one year after exercise
of the option, then (a) any gain upon the subsequent sale of the shares will be
taxed to the optionee as a capital gain, and any loss sustained will be a
capital loss, and (b) no deduction will be allowed to us for federal income tax
purposes. The spread between the ISO price and the fair market value of the
shares at the time of exercise is a preference item for purposes of the
alternative Minimum tax.
If an optionee disposes of shares acquired upon the exercise of an ISO
before the expiration of the holding periods described above, then generally (a)
the optionee will be taxed as if he had received compensation income in the year
of disposition in an amount equal to the excess, if any, of the fair market
value of the shares on the exercise date (or, if less, the amount realized on
value of the shares on the disposition of the shares) over the option price paid
for such shares, and (b) we will generally be entitled to a corresponding
deduction in that year. Any further gain or loss realized by the participant
will be taxed as short-term or long-term capital gain or loss, as the case may
be, and will not result in any deduction by us.
Exercise of an ISO may cause the optionee to incur alternative Minimum tax
liability even if he has no taxable income from the exercise under general
income tax principles.
50
<PAGE>
Stock acquired through exercise of an ISO must be held for more than 12
months to obtain long-term capital gains treatment.
All stock acquired pursuant to the exercise of an ISO is subject to the
holding period rules and disqualifying disposition rules described above.
Pursuant to the Plan, an ISO can only be exercised by payment of the
consideration in cash.
To the extent that the fair market value of the Common Stock (determined as
of the date of grant) subject to ISOs exercisable for the first time by an
optionee during any calendar year exceeds $100,000, those options will not be
considered ISOs.
Nonqualified Stock Options Generally
------------------------------------
An optionee will generally not recognize taxable income at the time an NQSO
is granted, but taxable income will be realized, and we will generally be
entitled to a deduction, at the time of exercise of the NQSO. The amount of
income and our deduction will be equal to the difference between the fair market
value of the shares on the date of exercise and the NQSO exercise price. The
income realized will be taxed to the optionee at the ordinary income tax rates
for federal income tax purposes. Withholding is required upon exercise of an
NQSO. On subsequent disposition of the shares acquired upon exercise of an NQSO,
capital gain or loss as determined under the normal capital asset holding period
rules will be realized in the amount of the difference between the proceeds of
sale and the fair market value of the shares on the date of exercise.
Withholding Generally
---------------------
Under the Plans, a participant must pay to us, no later than the date on
which an amount first becomes includable in the participant's gross income for
federal income tax purposes with respect to an Award, any taxes required to be
withheld with respect to such amount. Such withholding may generally not be
settled with shares that constitute part of the Award giving rise to the
withholding obligation unless the Compensation and Benefits Committee grants
special permission. Otherwise, withholding must be made in a manner that
provides cash to us. The amount of income recognized is not reduced by the
retention by us of shares issuable under an Award to satisfy withholding
obligations; the transaction is taxed as if the shares were sold.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
SHAREHOLDERS
Currently, there is no public trading market for our Common Stock. The
19,358,150 shares of outstanding Common Stock are currently held 57.9% by our
Chief Executive Officer, Thomas J. Shaw, and 14.5% by Lillian E. Salerno, a
Director. As of December 17, 2000 1,781,655 shares of Common Stock are subject
to outstanding options and 3,914,095 Shares are reserved for issuance upon
conversion of both the Series A and Class B stock. 7,725 shares of Series IV
Stock (convertible into Common Stock on a one-for-one basis) are reserved for
issuance upon exercise of warrants. 500,000 shares of Class B stock are reserved
for issuance as a dividend.
DIVIDENDS
We have not ever declared or paid any dividends on the Common Stock. We
have no current plans to pay any cash dividends on the Common Stock. We intend
to retain all earnings, except those required to be paid to the holders of the
preferred sock, to support operations and future growth. As of December 15,
2000, approximately $6,855,756 in dividends were in arrears on the Class B
Preferred Stock. We have the right to issue 500,000 Shares of Class B Shares as
a dividend. Pursuant to the requirements of a loan from Texas Bank, we have
agreed not to return capital to the shareholders or redeem outstanding Shares
without the bank's prior consent. We did have permission from the bank for the
dividends and the recent redemption of Series A Stock.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16 of the Exchange Act requires our Directors, executive officers,
and persons who own more than 10% of a registered class of our equity securities
to file with the Commission initial reports of beneficial ownership (Form 3) and
reports of changes in beneficial ownership (Forms 4 and 5) of our Common Stock
and our other equity securities. Officers, Directors, and greater than 10%
shareholders are required by the Commission's regulations to furnish us with
copies of all Section 16(a) reports they file.
To our knowledge, all Directors, Officers and holders of more than 10% of
our Common Stock filed all reports required by Section 16(a) of the Exchange Act
during the current fiscal year as of the date of this Prospectus, summarized as
follows:
<TABLE>
<CAPTION>
===========================================================================
NAME OF REPORTING PERSON FORM FILED DATE FILED
---------------------------------------------------------------------------
<S> <C> <C>
Thomas J. Shaw Form 3 August 22, 2000
---------------------------------------------------------------------------
Steven R. Wisner Form 3 August 22, 2000
---------------------------------------------------------------------------
Douglas W. Cowan Form 3 August 22, 2000
---------------------------------------------------------------------------
Michele M. Larios Form 3 August 22, 2000
---------------------------------------------------------------------------
Lillian E. Salerno Form 3 August 22, 2000
---------------------------------------------------------------------------
Jimmie Shiu, M.D. Form 3 August 22, 2000
---------------------------------------------------------------------------
Clarence Zierhut Form 3 August 22, 2000
---------------------------------------------------------------------------
Marwan Saker Form 3 August 22, 2000
---------------------------------------------------------------------------
Edith A. Zagona Form 3 August 22, 2000
---------------------------------------------------------------------------
Russell B. Kuhlman Form 3 August 22, 2000
===========================================================================
</TABLE>
51
<PAGE>
REPORTS ON 8-K
We have not filed any reports on Form 8-K.
TRANSFER AGENT
We currently serve as our own transfer agent but are in the process of
retaining American Stock Transfer & Trust Co. as our transfer agent and
registrar.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Management believes that all of the transactions set forth below were made
on terms no less favorable to us than could have been obtained from unaffiliated
third parties. There are no preset limits on payments to related parties.
Payments are made after services are provided.
Thomas J. Shaw, our President and Chief Executive Officer who beneficially
owns 57.9 percent of the Common Stock, was paid a licensing fee of $500,000
(amortized over 17 years) by us for the exclusive worldwide licensing rights to
manufacture, market, sell, and distribute all the retractable medical safety
products. In addition, Mr. Shaw receives a 5 percent gross royalty on all
licensed products sold to customers over the life of the technology licensing
agreement. Mr. Shaw was paid a royalty of $110,197 and $42,571 for 1999 and
1998, respectively. Mr. Shaw was paid $429,077 in royalties from January 1,
2000, to the date of this Prospectus. As of the date of this Prospectus, Mr.
Shaw has been paid $539,274 as a royalty for the two years ended December 15,
2000.
In September 1996, we purchased the 3cc prototype molds from Thomas J.
Shaw, d/b/a Checkmate Engineering, a sole proprietorship. The purchase was
financed by a note for the full purchase price of $108,252. The note provided
for no interest for the first 305 days and, subsequently, interest at a rate of
12 percent per annum. Interest expense related to this note was $1,400 and
$5,258 for the years ended December 31, 1999 and 1998, respectively. The note
was paid in full in 1999.
Lillian E. Salerno, a Director, d/b/a Mill Street Enterprises ("Mill
Street"), a sole proprietorship, leases offices at 618, 620, and 622 S. Mill
Street, in Lewisville, Texas, to us for our marketing and sales department. The
lease is for a five-year term commencing July 1, 1997, and ending June 30, 2002,
at an annual rental rate of $22,800. We also have a lease for additional office
space with Mill Street for one year commencing April 1, 2000, at a rate of
$1,000 per month. Lease payments for $30,500 have been paid in 2000.
A former Director, Robert Stathopulos, was paid consulting fees by us of
$96,372 in 1999 and $129,817 in 2000 through the date of this Prospectus.
Douglas W. Cowan, a Director and the Chief Financial Officer and Treasurer,
received $76,651 and $58,345 in 1998 and 1999, respectively, for accounting and
other consulting services prior to becoming a Director and employee.
We paid $23,381 and $30,258 in 1999 and 1998, respectively, and $10,537 has
been paid in 2000, to family members of our Chief Executive Officer for various
consulting services.
Pursuant to a Consulting Agreement between RTI and Lillian E. Salerno
d/b/a MediTrade International, Ms. Salerno, a Director, was advanced $37,500 in
September, 2000 for setting up operations in Europe. This advance will be
recouped over the remaining period of the contract.
LEGAL PROCEEDINGS
-----------------
We filed a lawsuit on September 30, 1998, in the District Court of Brazoria
County in the 239th Judicial District against B-D, Tyco International (U.S.),
Inc., VHA, Inc., The Community Hospital of Brazosport, Angleton-Danbury General
Hospital, and Sweeny Community Hospital. We are alleging an antitrust conspiracy
between the defendants whereby they contracted among themselves and many other
hospitals, doctors, and healthcare organizations in order to exclude us from
selling the safety syringes and to maintain their own market share in violation
of Texas Free Enterprise and Antitrust Act ("TFEAA"). The case is still in the
discovery stage. We are not a party to any other legal proceeding. As of the
date of this Prospectus, we have dropped Angleton-Danbury General Hospital from
the lawsuit. We have added TYCO Healthcare Group, L.P., Premier, Inc., Novation,
LLC, and Premier Purchasing Partners L.P. to the lawsuit. We are seeking all
damages to which we are entitled, including actual damages, exemplary damages,
injunctive relief, attorneys' fees, costs of court and pre-and post- judgment
interest. The amount of damages incurred is being researched and cannot be
stated with certainty at this time.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
---------------------------------------------------------
SECURITIES ACT LIABILITIES
--------------------------
Our Directors and Officers are indemnified as provided in the Texas
Corporation Act and our Second Amended and Restated Articles of Incorporation
and Amended and Restated Bylaws as well as by contract. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to our Directors, Officers, and Controlling Persons pursuant to the
foregoing provisions, or otherwise, we have been advised that, in the opinion of
the SEC, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by us of
expenses incurred or paid by a Director or Officer in the successful defense of
any action, suit, or proceeding) is asserted by such Director or Officer in
connection with the securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
52
<PAGE>
LEGAL MATTERS
-------------
Krage & Janvey, L.L.P. will pass upon the validity of the Common Stock and
certain other legal matters for us.
ACCOUNTANTS
-----------
The Board of Directors appointed PricewaterhouseCoopers LLP as our
independent accountants.
EXPERTS
-------
The financial statements as of December 31, 1999 and 1998 and for each of
the three years in the period ended December 31, 1999 and the period from
inception (May 9, 1994) to December 31, 1999 included in this Prospectus have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
No expert or counsel named in this Prospectus as having prepared or
certified any part of this Prospectus or having given an opinion upon the
validity of the securities being registered or upon other legal matters in
connection with the registration or Offering of the Common Stock was employed on
a contingency basis, or had, or is to receive, in connection with the Offering,
a substantial interest, direct or indirect, in RTI or any of its affiliates. Nor
was any such person connected with RTI or any of its affiliates as a promoter,
underwriter, voting trustee, Director, Officer, or employee.
WHERE TO FIND ADDITIONAL INFORMATION
------------------------------------
As of August 22, 2000, we are a reporting company as defined under the
Exchange Act. Accordingly, we have and will file Forms 10K-SB, 10Q-SB, proxy
statements, and any other periodic reports required by the Exchange Act.
The public may read and copy any materials filed with the Commission at the
Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. The public may obtain information on the operation of the Public
Reference Room by calling the Commission at 1-800-SEC-0330. The Commission
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the Commission. The address of that site is (http://www.sec.gov). RTI's web
------------------
page is currently under construction. The Internet address for RTI is
(http://www.vanishpoint.com/).
---------------------------
53
<PAGE>
FINANCIAL STATEMENTS
--------------------
54
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
INDEX TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants 56
Financial Statements:
Balance Sheets as of December 31, 1999 and 1998 57
Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 and inception
(May 9, 1994) through December 31, 1999 58
Statements of Changes in Stockholders' Equity
for the years ended December 31, 1999, 1998 and 1997 59
Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 and inception
(May 9, 1994) through December 31, 1999 62
Notes to Financial Statements 63
</TABLE>
55
<PAGE>
Report of Independent Accountants
To the Board of Directors and
the Stockholders of Retractable Technologies, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, of changes in stockholders' equity and of cash flows present fairly,
in all material respects, the financial position of Retractable Technologies,
Inc. (a development stage enterprise) at December 31, 1999 and 1998, and the
results of its operations, its changes in stockholders' equity and its cash
flows for each of the three years in the period ended December 31, 1999 and the
period from inception (May 9, 1994) to December 31, 1999, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Dallas, Texas
September 12, 2000
56
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
------------ ------------
ASSETS 1999 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 646,005 $ 1,627,863
Accounts receivable, net of allowance for doubtful accounts of
$10,972 and $0, respectively 599,424 100,728
Inventories 677,962 653,958
Other current assets 47,800 51,103
------------ ------------
Total current assets 1,971,191 2,433,652
Property, plant and equipment, net 10,101,524 8,923,842
Restricted certificates of deposit 600,000 600,000
Intangible assets and deferred charges, net 536,014 554,757
------------ ------------
Total assets $ 13,208,729 $ 12,512,251
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 844,165 $ 332,241
Current portion of long-term debt 463,329 431,743
Note payable to related party - 25,966
Accrued compensation 118,038 107,226
Marketing fees payable 338,526 -
Other accrued liabilities 250,783 52,491
------------ ------------
Total current liabilities 2,014,841 949,667
Long term debt, net of current maturities 2,506,335 2,870,959
Stockholders' equity:
Preferred stock $1 par value:
Class A; authorized, issued and outstanding: 5,000,000 shares
(liquidation preference of $7,500,000) 5,000,000 5,000,000
Class B; authorized: 5,000,000 shares
Series I Class B; issued and outstanding:
1,000,000 shares, (liquidation preference of $6,250,000) 1,000,000 1,000,000
Series II Class B; issued and outstanding:
1,000,000 shares, (liquidation preference of $12,500,000) 1,000,000 1,000,000
Series III Class B; issued and outstanding:
1,160,200 and 301,800 shares, respectively, (liquidation
preference of 1,160,200 301,800
$14,502,500 and $3,772,500, respectively)
Common stock, no par value; authorized: 40,000,000 shares; issued and
outstanding: 14,000,000 shares - -
Additional paid-in capital 23,565,235 16,379,481
Unearned compensation (185,635) (370,917)
Deficit accumulated during the development stage (22,852,247) (14,618,739)
------------ ------------
Total stockholders' equity 8,687,553 8,691,625
------------ ------------
Total liabilities and stockholders' equity $ 13,208,729 $ 12,512,251
============ ============
</TABLE>
See accompanying notes to the financial statements.
57
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
Years ended December 31, From
------------------------------------------------- Inception
1999 1998 1997 (May 9, 1994)
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales, net $ 3,375,158 $ 845,559 $ 262,315 $ 4,483,032
Cost of sales 2,331,070 765,448 474,147 3,570,665
-------------- -------------- ------------- -------------
Gross margin (deficit) 1,044,088 80,111 (211,832) 912,367
Operating expenses
Preproduction manufacturing 1,837,830 1,004,828 1,496,418 5,457,201
Sales and marketing 3,742,779 1,539,822 1,394,024 7,047,952
Research and development 842,062 763,690 266,029 2,326,127
General and administrative 2,863,989 2,419,821 1,952,561 8,807,932
-------------- -------------- ------------- -------------
Total operating expenses 9,286,660 5,728,161 5,109,032 23,639,212
Loss from operations (8,242,572) (5,648,050) (5,320,864) (22,726,845)
Interest income 122,028 162,116 133,413 647,042
Interest expense, net (112,964) (218,154) (336,749) (772,444)
-------------- -------------- ------------- -------------
Net loss incurred during development stage $ (8,233,508) (5,704,088) (5,524,200) (22,852,247)
============== ============== ============= =============
Net loss per share (basic and diluted) $ (0.80) $ (0.56) $ (0.49) $ (2.17)
============== ============== ============= =============
Weighted average common shares outstanding 14,000,000 14,000,000 14,000,000 14,000,000
============== ============== ============= =============
</TABLE>
See accompanying notes to the financial statements.
58
<PAGE>
<TABLE>
<CAPTION>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
------------------------------------------------------------------------------------------------------------------------------------
Class A Series I Class B Series II Class B
-------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1996 5,000,000 $ 5,000,000 983,000 $ 983,000 $
Issued Preferred Series I Class B
9,000 shares, $1 par 9,000 9,000
Issued Preferred Series II Class B
945,700 shares, $1 par 945,700 945,700
Issuance of compensatory stock options
Recognition of stock option compensation
Collections of notes receivable
Reclassification of note receivable
to reflect collection
Net loss incurred during development stage
-------------------------------------------------------------------------------
Balance as of December 31, 1997 5,000,000 $ 5,000,000 992,000 $ 992,000 945,700 $ 945,700
-------------------------------------------------------------------------------
Issued Preferred Series I Class B
8,000 shares, $1 par 8,000 8,000
Issued Preferred Series II Class B
54,300 shares, $1 par 54,300 54,300
Issued Preferred Series III Class B
301,800 shares, $1 par (net of
commissions and other expenses
of $290,221)
Issuance of compensatory stock options
Recognition of stock option compensation
Terminations of stock options
Net loss incurred during development stage
-------------------------------------------------------------------------------
Balance as of December 31, 1998 5,000,000 $ 5,000,000 1,000,000 $ 1,000,000 1,000,000 $ 1,000,000
-------------------------------------------------------------------------------
Issued Preferred Series III Class B
858,400 shares, $1 par
Issuance of compensatory stock options
Recognition of stock option compensation
Terminations of stock options
Net loss incurred during development stage
-------------------------------------------------------------------------------
Balance as of December 31, 1999 5,000,000 $ 5,000,000 1,000,000 $ 1,000,000 1,000,000 $ 1,000,000
-------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the financial statements.
59
<PAGE>
<TABLE>
<CAPTION>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
------------------------------------------------------------------------------------------------------------------------------------
Series III Class B Common
----------------------------------------------------
Shares Amount Shares Amount
----------------------------------------------------
<S> <C> <C> <C> <C>
Balance as of December 31, 1996 $ 14,000,000 $ -
Issued Preferred Series I Class B
9,000 shares, $1 par
Issued Preferred Series II Class B
945,700 shares, $1 par
Issuance of compensatory stock options
Recognition of stock option compensation
Collections of notes receivable
Reclassification of note receivable
to reflect collection
Net loss incurred during development stage
----------------------------------------------------
Balance as of December 31, 1997 - $ - 14,000,000 $ -
----------------------------------------------------
Issued Preferred Series I Class B
8,000 shares, $1 par
Issued Preferred Series II Class B
54,300 shares, $1 par
Issued Preferred Series III Class B
301,800 shares, $1 par (net of
commissions and other expenses
of $290,221) 301,800 301,800
Issuance of compensatory stock options
Recognition of stock option compensation
Terminations of stock options
Net loss incurred during development stage
----------------------------------------------------
Balance as of December 31, 1998 301,800 $ 301,800 14,000,000 $ -
----------------------------------------------------
Issued Preferred Series III Class B
858,400 shares, $1 par 858,400 858,400
Issuance of compensatory stock options
Recognition of stock option compensation
Terminations of stock options
Net loss incurred during development stage
----------------------------------------------------
Balance as of December 31, 1999 1,160,200 $ 1,160,200 14,000,000 $ -
----------------------------------------------------
</TABLE>
See accompanying notes to the financial statements.
60
<PAGE>
<TABLE>
<CAPTION>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
------------------------------------------------------------------------------------------------------------------------------------
Deficit
Notes Accumulated
Receivable Additional During
from Paid-in Unearned Development
Stockholders Capital Compensation Stage Total
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance as of December 31, 1996 $ (257,500) $ 4,304,213 $ (287,290) $ (3,390,451) $ 6,351,972
Issued Preferred Series I Class B
9,000 shares, $1 par 36,000 45,000
Issued Preferred Series II Class B
945,700 shares, $1 par 8,436,300 9,382,000
Issuance of compensatory stock options 748,539 (748,539)
Recognition of stock option compensation 286,540 286,540
Collections of notes receivable 207,500 207,500
Reclassification of note receivable
to reflect collection 50,000 50,000
Net loss incurred during development stage (5,524,200) (5,524,200)
---------------------------------------------------------------------------------
Balance as of December 31, 1997 $ - $13,525,052 $ (749,289) $ (8,914,651) $10,798,812
---------------------------------------------------------------------------------
Issued Preferred Series I Class B
8,000 shares, $1 par 32,000 40,000
Issued Preferred Series II Class B
54,300 shares, $1 par 488,700 543,000
Issued Preferred Series III Class B
301,800 shares, $1 par (net of
commissions and other expenses
of $290,221) 2,425,979 2,727,779
Issuance of compensatory stock options 70,000 (70,000)
Recognition of stock option compensation 286,122 286,122
Terminations of stock options (162,250) 162,250
Net loss incurred during development stage (5,704,088) (5,704,088)
---------------------------------------------------------------------------------
Balance as of December 31, 1998 $ - $16,379,481 $ (370,917) $(14,618,739) $ 8,691,625
---------------------------------------------------------------------------------
Issued Preferred Series III Class B
858,400 shares, $1 par 7,266,914 8,125,314
Issuance of compensatory stock options 214,354 (214,354)
Recognition of stock option compensation 104,122 104,122
Terminations of stock options (295,514) 295,514
Net loss incurred during development stage (8,233,508) (8,233,508)
---------------------------------------------------------------------------------
Balance as of December 31, 1999 $ - $23,565,235 $ (185,635) $(22,852,247) $ 8,687,553
---------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the financial statements.
61
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
Years ended December 31, From
------------------------------------------- Inception
1999 1998 1997 (May 9, 1994)
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities
------------------------------------
Net loss incurred during development stage $ (8,233,508) $ (5,704,088) $ (5,524,200) $ (22,852,247)
Depreciation and amortization 950,471 807,060 455,909 2,765,730
Provision for doubtful accounts 10,972 - - 10,972
Recognition of stock option compensation 104,122 286,122 286,540 760,707
Adjustments to reconcile net loss to net cash
used in operating activities:
Increase in inventories (24,004) (173,308) (308,188) (677,962)
(Increase) decrease in accounts and note
receivable (509,668) 6,320 (102,048) (610,396)
Increase in deferred charges - - - (25,931)
(Increase) decrease in other current 3,303 (34,603) (16,500) (47,800)
assets
Increase (decrease) in accounts payable
and note payable to related party 485,958 (647,460) 738,725 780,699
Increase in other accrued liabilities 547,630 70,811 57,994 707,347
------------ ------------ ------------ -------------
Net cash used by operating activities (6,664,724) (5,389,146) (4,411,768) (19,188,881)
------------ ------------ ------------ -------------
Cash flows from investing activities
------------------------------------
Purchase of property, plant and equipment (1,960,609) (1,179,547) (3,252,731) (11,445,793)
Acquisition of patents, trademarks and licenses (39,077) (45,095) - (182,595)
Purchase of restricted certificate of deposit - - (200,000) (600,000)
Organization costs paid - - (15,291) (20,851)
------------ ------------ ------------ -------------
Net cash used by investing activities (1,999,686) (1,224,642) (3,468,022) (12,249,239)
------------ ------------ ------------ -------------
Cash flows from financing activities
------------------------------------
Borrowing under long-term debt and notes payable - 25,749 986,242 3,065,362
Repayments of long-term debt and notes payable (442,762) (438,000) (350,675) (1,297,830)
Proceeds from issuance of preferred stock 8,584,000 3,601,000 9,427,000 31,307,000
Proceeds from issuance of common stock - - - 1,000
Commissions and other expenses related to
preferred stock issuance (458,686) (290,221) - (748,907)
Collections of notes receivable from stockholders - - 257,500 257,500
Obligation under license agreement - - (56,175) (500,000)
------------ ------------ ------------ -------------
Net cash provided by financing activities 7,682,552 2,898,528 10,263,892 32,084,125
------------ ------------ ------------ -------------
Net increase (decrease) in cash (981,858) (3,715,260) 2,384,102 646,005
Cash and cash equivalents at:
Beginning of period 1,627,863 5,343,123 2,959,021 -
------------ ------------ ------------ -------------
End of period $ 646,005 $ 1,627,863 $ 5,343,123 $ 646,005
============ ============ ============ =============
Supplemental disclosures of cash flow
Information:
Interest paid $ 281,905 $ 324,116 $ 321,887 $ 1,025,443
------------ ------------ ------------ -------------
Supplemental schedule of noncash financing
activities:
Preferred stock issued in exchange for notes
receivable $ - $ - $ - $ 257,500
------------ ------------ ------------ -------------
Offering costs to be settled with warrants $ - $ - $ 37,500 $ 37,500
------------ ------------ ------------ -------------
Acquisition of equipment through capital lease $ 109,724 $ 50,435 $ 380,485 $ 1,228,097
------------ ------------ ------------ -------------
</TABLE>
See accompanying notes to the financial statements.
62
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. BUSINESS OF THE COMPANY
Retractable Technologies, Inc. (the "Company") was incorporated in Texas on
May 9, 1994, to design, develop, manufacture and market safety syringes and
other safety medical products for the health care profession. The Company
began to develop its manufacturing operations in 1995. The Company's
manufacturing and administrative facilities are located in Little Elm, Texas.
The Company's primary products are the VanishPoint/TM/ Syringe in the 3cc,
5cc and 10cc sizes and Blood Collection Tube Holders. The Company has
conducted preliminary clinical evaluations and worked with national
distributors to encourage healthcare facilities to transition from the use of
standard syringes to the VanishPoint/TM/ Syringe. Preliminary shipments,
which commenced in February 1997, included syringes for hospital product
evaluations as well as for sale in clinics and other healthcare settings. The
Company has been considered a development stage enterprise for financial
reporting purposes as significant efforts have been devoted to financial
planning, raising capital, research and development, acquiring equipment,
training personnel, developing markets and starting up production. Coincident
with the agreement with Abbott Laboratories (see Note 11), effective May 4,
2000, the Company completed its development stage.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ significantly from those estimates.
Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents include
unrestricted cash and investments with original maturities of three months or
less.
Inventories
Inventories are valued at the lower of cost or market, with cost being
determined using a standard cost method, which approximates average cost.
Provision is made for any excess or obsolete inventories.
Property, plant and equipment
Property, plant and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to operations as incurred. Cost includes
major expenditures for improvements, and replacements, which extend useful
lives or increase capacity and interest cost associated with significant
capital additions. For the years ended December 31, 1999 and 1998, the
Company capitalized interest of approximately $169,000 and $105,000,
respectively, and none in fiscal year 1997. Gains or losses from property
disposals are included in income.
Depreciation and amortization is calculated using the straight-line method
over the following useful lives:
Production equipment 7 to 10 years
Office furniture and equipment 3 to 10 years
Building 39 years
Building improvements 15 years
Automobiles 7 years
Long-lived assets
When events or changes in circumstances indicate that the carrying amount of
long-lived assets may not be recoverable, the Company will review the net
realizable value of the long-lived assets through an assessment of the
estimated future cash flows related to such assets. In the event that assets
are found to be carried at amounts which are in excess of estimated gross
future cash flows, the assets will be adjusted for impairment to a level
commensurate with a discounted cash flow analysis of the underlying assets.
Restricted certificates of deposit
Investments in certificates of deposit are restricted in accordance with the
terms of certain notes payable.
Intangible assets and deferred charges
Intangible assets are stated at cost and consist primarily of patents, a
license agreement granting exclusive rights to use patented technology, and
trademarks which are amortized using the straight-line method over 17 years.
Other intangible assets consist of deferred charges for loan origination
fees, which are amortized over the life of the debt (seven years).
63
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Financial instruments
The fair market value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate. The
Company believes that the fair value of financial instruments approximate
their recorded values.
Concentrations of credit risk
The Company's financial instruments exposed to concentrations of credit risk
consist primarily of cash, cash equivalents and accounts receivable. Cash
balances, which may exceed the federally insured limits, are maintained in
financial institutions; however, management believes the institutions are of
high credit quality. The majority of accounts receivable are due from
companies which are well-established entities. As a consequence, management
considers any exposure from concentrations of credit risks to be limited.
Revenue recognition
Revenue is recognized for sales to distributors when title and risk of
ownership passes to the distributor, generally upon shipment. Revenue is
recorded on the basis of sales price to distributors. Revenues on sales to
distributors for federal or GPO contracts are recorded net of contractual
pricing allowances to those end customers. Revenue for shipments directly to
end-users is recognized when title and risk of ownership passes from the
Company. Any product shipped or distributed for evaluation purposes is
expensed.
Income taxes
The Company provides for deferred income taxes in accordance with Statement
of Financial Accounting Standard No. 109, "Accounting for Income Taxes"
("SFAS 109"). SFAS 109 requires an asset and liability approach for
financial accounting and reporting for income taxes based on the tax effects
of differences between the financial statement and tax bases of assets and
liabilities, based on enacted rates expected to be in effect when such basis
differences reverse in future periods. Deferred tax assets are periodically
reviewed for reliability. Valuation allowances are recorded when
realizability of deferred tax assets is not likely.
Earnings per share
The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," that established standards for computing and presenting
earnings per share. Basic earnings per share is computed by dividing net
earnings for the period (adjusted for any cumulative dividends for the
period) by the weighted average number of common shares outstanding during
the period. The weighted average number of shares outstanding for all
periods presented was 14,000,000. The Company's potentially dilutive common
stock equivalents including warrants, options, and convertible debt are all
antidilutive as the Company is in a loss position. Accordingly, basic loss
per share is equal to diluted loss per share and is presented on the same
line for income statement presentation. Cumulative preferred dividends of
approximately $3,000,000, $2,100,000, $1,300,000, and $7,500,000 have been
added to net losses for the periods ended December 31, 1999, 1998, 1997 and
cumulative from inception (May 9, 1994) to December 31, 1999, respectively,
to arrive at net loss per share.
Research and development costs
Research and development costs are expensed as incurred.
Stock-based compensation
The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which establishes accounting and reporting
standards for stock-based employee compensation plans. As permitted by SFAS
123, the Company has elected not to adopt the fair value based method of
accounting for stock-based employee compensation and will account for such
arrangements under Accounting Principles Board Opinion No. 25. Accordingly,
compensation cost for stock options issued to directors, officers and
employees is measured as the excess, if any, of the fair market value of the
Company's stock at the date of grant over the amount the director, officer or
employee must pay to acquire the stock. Expense is recognized ratably from
the date of grant over the vesting period of the option. Unearned
compensation reflected in the Stockholders' Equity section of the balance
sheet is the portion of such compensation that has not been charged to
operations.
3. INVENTORIES
Inventories consist of the following:
December 31
-------------------------------
1999 1998
----------- ------------
Raw materials $ 405,823 $ 348,053
Work in process 27,699 5,464
Finished goods 268,766 300,441
----------- ------------
702,288 653,958
Inventory reserve (24,326) -
----------- ------------
$ 677,962 $ 653,958
=========== ============
64
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
NOTES TO FINANCIAL STATEMENTS
-----------------------------
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
December 31
-------------------------------
1999 1998
----------- ------------
Land $ 261,893 $ 261,893
Building and improvements 1,767,185 1,752,115
Production equipment 7,719,979 6,692,236
Office furniture and equipment 596,058 464,945
Construction in progress 2,306,916 1,410,509
Automobiles 21,858 21,858
----------- -----------
12,673,889 10,603,556
Accumulated depreciation and
amortization (2,572,365) (1,679,714)
----------- -----------
$10,101,524 $ 8,923,842
----------- -----------
Acquisition costs of production equipment financed through capital leases
were $1,118,556 and $1,008,832 at December 31, 1999, and 1998, respectively.
Accumulated amortization on these leases was $358,552 and $255,852 at
December 31, 1999 and 1998, respectively.
Depreciation expense and capital lease amortization expense for the years
ended December 31, 1999, 1998 and 1997 was $892,651, $761,282 and $414,894,
respectively.
5. INTANGIBLE ASSETS AND DEFERRED CHARGES
Intangible assets and deferred charges consist of the following:
December 31
-------------------------------
1999 1998
----------- ------------
License agreement $ 500,000 $ 500,000
Trademarks and patents 182,590 143,513
Loan origination fees 25,938 25,938
Organization costs - 20,851
----------- ------------
708,528 690,302
Accumulated amortization (172,514) (135,545)
----------- ------------
$ 536,014 $ 554,757
----------- ------------
In 1995, the Company entered into the license agreement with an officer of
the Company for the exclusive right to manufacture, market and distribute
products utilizing automated retraction technology. This technology is the
subject of various patents and patent applications owned by the officer of
the Company. The initial licensing fee of $500,000 is being amortized over
17 years. The license agreement also provides for quarterly payments of a 5%
royalty fee to the officer on gross sales. The royalty fee expense is
recognized in the period in which it is earned. Royalty fees of $194,247,
$46,098 and $9,284 are included in cost of sales for the years ended December
31, 1999, 1998 and 1997, respectively.
Amortization expense for the years ended December 31, 1999, 1998 and 1997 was
$57,820, $45,778 and $41,015, respectively.
65
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
---------- ----------
1999 1998
---------- ----------
<S> <C> <C>
Small Business Administration note payable to Texas Bank for a maximum of
$1,000,000, all of which was drawn during 1997. Payable in monthly principal and
interest installments of approximately $16,000. Interest at prime plus 1.5%; 10% on
December 31, 1999; adjustable quarterly. Matures on July 1, 2003. Collateralized by
equipment. Guaranteed by an officer. $ 569,630 $ 705,566
Notes payable to Western Bank and Trust. Interest adjustable annually on October 24.
Matures on October 24, 2001. Secured by land, building and equipment, and by a
certificate of deposit to be released upon achievement of certain financial ratios.
Guaranteed by an officer.
- Interest only payable until October 24, 1996; thereafter, monthly
principal and interest payments of approximately $8,000. Interest at prime
plus 1%; 9.5% on December 31, 1999.
750,789 767,960
- Interest payable monthly at Bank's certificate of deposit rate plus 2%; 7%
on December 31, 1999. 400,000 400,000
Notes payable to Legacy Bank of Texas. Payable in monthly installments of
approximately $8,000 plus interest. Interest at prime plus 1%; 9.5% on December 31,
1999; adjustable daily. Matures on July 10, 2004. Collateralized by certain
machinery and equipment, a certificate of deposit of $200,000 and restrictions on the
transfer of certain patents. Covenants require the company to achieve defined debt
coverage ratios or maintain a defined ratio of total liabilities to total net worth.
Guaranteed by an officer. 464,881 566,309
Note payable to First State Bank of Texas in monthly principal and interest
installments of approximately $400. Interest at 7.5%. Matures on August 13, 2000.
Collateralized by company vehicle. 3,333 8,119
Note payable to AFCO. Payable in monthly principal and interest installments of
approximately $2,000. Interest at 8.8%. Matures on May 28, 2000. 7,491 24,403
Capital lease obligations payable in monthly installments ranging from approximately
$500 to $10,000 through October 2004. Interest at rates from 9.98% to 14.18%.
Collateralized by certain machinery and equipment. Covenants require the Company
to maintain a minimum net worth of $3,750,000 and a defined ratio of total liabilities
to total net worth. Guaranteed by an officer. The Company is not in compliance with
obligations to deliver documents under this agreement. The lessor has provided a
waiver related to this noncompliance. 773,540 830,345
---------- ----------
2,969,664 3,302,702
Less current portion (463,329) (431,743)
---------- ----------
$2,506,335 $2,870,959
========== ==========
</TABLE>
The aggregate maturities of long-term debt as of December 31, 1999 are as
follows:
2000 $ 463,329
2001 1,572,041
2002 467,577
2003 373,358
2004 93,359
Thereafter -
-------------
Total $ 2,969,664
=============
Subsequent to December 31, 1999, the Company obtained two new loans from 1st
International Bank totaling $2,000,000. Land, building and improvements secure
$1,500,000, and the remaining $500,000 is secured by accounts receivable. The
proceeds, along with a release of $400,000 of restricted cash by Western Bank
subsequent to December 31, 1999, were used to pay off indebtedness to Western
Bank. Remaining proceeds provided funds for equipment and operating needs. The
building loan matures on February 18, 2005 and the note secured by accounts
receivable matures February 18, 2001.
66
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
7. INCOME TAXES
The provision for income taxes consists of the following:
December 31,
------------------------------
1999 1998
------------- -------------
Current $ - $ -
Deferred benefit (2,932,189) (2,096,602)
Increase in valuation allowance 2,932,189 2,096,602
------------- -------------
$ - $ -
============= =============
The Company has net operating loss carryforwards of approximately $24,129,273,
and $15,600,527 at December 31, 1999 and 1998, respectively, which will begin to
expire in 2010. The Company has established a valuation allowance to the extent
of its deferred tax assets since presently it is more likely than not that a tax
benefit will not be realized prior to the expiration of related carry forward
periods.
The provision for income taxes varies from the statutory income tax rate as
follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1999 1998
-------- ---------
<S> <C> <C>
Income tax benefit at the U.S. federal statutory rate (35.0)% (35.0)%
Valuation allowance 35.6 36.8
Permanent differences 0.6 1.9
State income tax, net of federal benefits (2.7) (2.6)
Other 1.5 (1.1)
-------- ---------
Effective tax (benefit) provision rate - -
======== =========
</TABLE>
Temporary differences between the financial statement carrying amounts and the
tax basis of assets and liabilities that gave rise to significant portions of
deferred tax amounts related to the following:
<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998
------------- --------------
<S> <C> <C>
Net operating loss carry forwards $ 9,084,478 $ 5,873,269
Property, plant, and equipment (1,007,274) (714,913)
Deferred charges 142,155 159,883
Accrued expenses and reserves 54,213 23,144
------------ --------------
Net noncurrent deferred tax asset before valuation allowance 8,273,572 5,341,383
Valuation allowance (8,273,572) (5,341,383)
------------ -------------
Net deferred tax asset $ - $ -
============ =============
</TABLE>
8. STOCKHOLDERS' EQUITY
Preferred stock
The Company has two classes of preferred stock, Class A and Class B. The
Class B Preferred Stock has three series: Series I, Series II and Series
III. Subsequent to December 31, 1999, the Company began taking subscriptions
for a fourth series, Series IV Class B (see Note 11).
Class A
-------
The Company authorized 5,000,000 shares of $1 par value Class A Convertible
Preferred Stock ("Class A Stock") in April 1995. These shares were
outstanding at December 31, 1999 and 1998. Holders of Class A Stock are
entitled to receive a cumulative annual cash dividend of $.12 per share,
payable quarterly if declared by the board of directors. Holders of Class A
Stock generally have no voting rights until dividends are in arrears and
unpaid for twelve consecutive quarters. In such case, the holders of Class A
Stock have the right to elect one-third of the board of directors of the
Company At December 31, 1999 and 1998, approximately $2,616,983 and
$2,016,983, respectively, of dividends which have not been declared were in
arrears. Accordingly, Class A shareholders elected three members to the
Board during 1999.
Class A Stock is redeemable after three years from the date of issuance at
the option of the Company at a price of $1.70 per share, plus all accrued
and unpaid dividends. Each share of Class A Preferred Stock may be converted
to one share of common stock after three years from the date of issuance at
the option of the shareholder. In the event of voluntary or involuntary
dissolution, liquidation or winding up of the Company, holders of Class A
Stock then outstanding are entitled to $1.50 per share plus all accrued and
unpaid dividends, prior to any distributions to holders of Class B preferred
stock or of common stock.
67
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
Class B
-------
The Company has authorized 5,000,000 shares of $1 par value Convertible
Preferred Stock which have been allocated among Series I, II, III and IV
in the amounts of 1,000,000, 1,000,000, 1,160,200 and 1,300,000 shares,
respectively. The remaining 539,800 authorized shares have not been
assigned a series.
Series I Class B
----------------
There were 1,000,000 shares of $1 par value Series I Class B Convertible
Preferred Stock ("Series I Class B Stock") issued and outstanding at
December 31, 1999 and 1998. Holders of Series I Class B Stock are
entitled to receive a cumulative annual dividend of $.50 per share,
payable quarterly if declared by the board of directors. At December 31,
1999 and 1998 approximately $1,689,949 and $1,185,552, respectively, of
dividends which have not been declared were in arrears.
Series I Class B Stock is redeemable after three years from the date of
issuance at the option of the Company at a price of $7.50 per share, plus
all accrued and unpaid dividends. Each share of Series I Class B Stock
may, at the option of the stockholder, be converted to one share of
common stock after three years from the date of issuance or in the event
the Company files an initial registration statement under the Securities
Act of 1933. In the event of voluntary or involuntary dissolution,
liquidation or winding up of the Company, holders of Series I Class B
Stock then outstanding are entitled to $6.25 per share, plus all accrued
and unpaid dividends, after distribution obligations to Class A Stock
have been satisfied and prior to any distributions to holders of Series
II Class B Convertible Preferred Stock ("Series II Class B Stock"),
Series III Class B Convertible Preferred Stock ("Series III Class B
Stock") or common stock.
Series II Class B
-----------------
There were 1,000,000 shares of $1 par value Series II Class B Stock
issued and outstanding at December 31, 1999 and 1998, respectively.
Holders of Series II Class B Stock are entitled to receive a cumulative
annual dividend of $1.00 per share, payable quarterly if declared by the
board of directors. Holders of Series II Class B Stock generally have no
voting rights until dividends are in arrears and unpaid for twelve
consecutive quarters. In such case, the holders of Series II Class B
Stock have the right to elect one-third of the board of directors of the
Company. At December 31, 1999 and 1998 approximately $2,227,177 and
$1,256,981, respectively, of dividends which have not been declared were
in arrears.
Series II Class B Stock is redeemable after three years from the date of
issuance at the option of the Company at a price of $15.00 per share plus
all accrued and unpaid dividends. Each share of Series II Class B Stock
may, at the option of the stockholder, be converted to one share of
common stock after three years from the date of issuance or in the event
the Company files an initial registration statement under the Securities
Act of 1933. In the event of voluntary or involuntary dissolution,
liquidation or winding up of the Company, holders of Series II Class B
Stock then outstanding are entitled to $12.50 per share, plus all accrued
and unpaid dividends, after distribution obligations to holders of Class
A Stock and Series I Class B Stock have been satisfied and prior to any
distributions to holders of Series III Class B Stock or common stock.
Series III Class B
------------------
There were 1,160,200 shares and 301,800 shares of $1 par value Series III
Class B Stock issued and outstanding at December 31, 1999 and 1998,
respectively. Holders of Series III Class B Stock are entitled to receive
a cumulative annual dividend of $1.00 per share, payable quarterly if
declared by the board of directors. At December 31, 1999 and 1998,
approximately $941,549 and $41,701, respectively, of dividends which have
not been declared were in arrears.
Series III Class B Stock is redeemable after three years from the date of
issuance at the option of the Company at a price of $15.00 per share,
plus all accrued and unpaid dividends. Each share of Series III Class B
Stock may, at the option of the stockholder, be converted to one share of
common stock after three years from the date of issuance or in the event
the Company files an initial registration statement under the Securities
Act of 1933. In the event of voluntary or involuntary dissolution,
liquidation or winding up of the Company, holders of Series III Class B
Stock then outstanding are entitled to $12.50 per share, plus all accrued
and unpaid dividends, after distribution obligations to Class A Stock,
Series I Class B Stock and Series II Class B Stock have been satisfied
and prior to any distributions to holders of common stock.
Series IV Class B
-----------------
On January 11, 2000, the Company issued a Private Placement Memorandum
offering up to 1,300,000 shares of its Series IV Class B Convertible
Preferred Stock ("Series IV Class B Stock") at $10 per share.
As of May 22, 2000, subscriptions for 1,133,800 shares of the Series IV
Class B Stock had been received. Series IV Class B Stock ranks senior to
the Company's common stock with respect to dividends and upon
liquidation, dissolution or winding up, but secondary to the Company's
Class A Stock; and Series I Class B, Series II Class B and Series III
Class B Stock. Holders of Series IV Class B Stock will be entitled to
receive a cumulative annual dividend of $1.00 per share, payable
quarterly, if declared by the board of directors. Holders of Series IV
Class B Stock generally have no voting rights.
68
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
Series IV Class B Stock is redeemable after three years from the date of
issuance at the option of the Company at a price of $11.00 per share plus
all accrued and unpaid dividends. Each share of Series IV Class B Stock
may, at the option of the stockholder any time subsequent to three years
from date of issuance, be converted into common stock at a conversion
price of $10 per share, or in the event the Company files an initial
registration statement under the Securities Act of 1933.
In the event of voluntary or involuntary liquidation, dissolution or
winding up of the Company, holders of Series IV Class B Stock then
outstanding are entitled to receive liquidating distributions of $11.00
per share, plus accrued and unpaid dividends.
Common stock
The Company is authorized to issue 40,000,000 shares of no par value
common stock, of which 14,000,000 shares are issued and outstanding at
December 31, 1999 and 1998. Subsequent to December 31, 1999, the board of
directors approved an increase in the number of authorized shares to
100,000,000.
9. RELATED PARTY TRANSACTIONS
In September 1996, the Company purchased the 3cc-prototype mold from
Checkmate Engineering, a sole proprietorship of an officer of the
Company. The purchase was financed by a note for the full purchase price
of $108,252. The note provided for no interest for the first 305 days
and, subsequently, for interest at a rate of 12% per annum. Interest
expense related to this note was $1,357, $5,258 and $4,092 for the years
ended December 31, 1999, 1998 and 1997, respectively. The balance of the
note was $25,966 as of December 31, 1998. The remaining balance on the
note was paid in full in 1999.
The Company has a lease with Mill Street Enterprises ("Mill Street"), a
sole proprietorship owned by a Board member, for sales and marketing
offices in Lewisville, Texas. During 1999, 1998 and 1997, the Company
paid $22,800 each year under this lease. The Company also has a lease
with Mill Street for additional office space for one year commencing
April 1, 2000, at a rate of $1,000 per month.
During 1999, 1998 and 1997, the Company paid $23,381, $30,258 and
$49,615, respectively, to family members of its chief executive officer
for various consulting services. During 1999, 1998 and 1997, the Company
paid $96,372, $127,921 and $77,430, respectively, to a former director
for various consulting services.
The Company has a license agreement with an officer of the Company. See
Note 5.
See Note 11 for related party subsequent event.
10. STOCK OPTIONS AND WARRANTS
Stock options
The Company has three stock option plans that provide for the granting of
stock options to officers, employees and other individuals. During 1999,
the Company approved the 1999 Stock Option Plan. The 1999 Plan is the
only plan with stock option awards available for grant and the Company
has reserved 2,000,000 shares of common stock for use upon the exercise
of options under this plan.
The Company also has shares outstanding under the 1996 Incentive Stock
Option Plan and the 1996 Stock Option Plan for Directors and Other
Individuals. All plans are administered and exercise prices at which
options are granted are determined by a committee appointed by the board
of directors. Shares exercised come from the Company's authorized but
unissued common stock. The options vest over periods up to three years
from the date of grant and generally expire ten years after the date of
grant. All options issued under the 1996 plans expire three months after
termination of employment or service to the Company. No options have been
exercised under these plans.
Director, officer and employee options
Pro forma information regarding net income is required by SFAS 123. This
information has been derived as if the Company had accounted for its
directors, officers and employee stock options under the fair value
method in accordance with SFAS 123. The fair value of each option grant
is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions used for grants in
1999, 1998 and 1997: no dividend yield; expected volatility of 0%; risk-
free interest rates of 5.9%, 5.4% and 6.4%, respectively; and expected
lives of 5.3 years. For purposes of pro forma disclosures, the estimated
fair value of the options is amortized to expense over the option
vesting periods. The Company's pro forma information follows:
<TABLE>
<CAPTION>
Years Ended December 31
---------------------------------------------------------------------------------------------------
1999 1998 1997
------------------------------ ------------------------------ ------------------------------
As As As
Reported Pro Forma Reported Pro Forma Reported Pro Forma
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net loss $(8,233,508) $(8,341,433) $(5,704,088) $(5,842,497) $(5,524,200) $(5,627,602)
</TABLE>
69
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The effects of applying FAS 123 in this pro forma disclosure are not indicative
of future amounts as FAS 123 does not consider additional awards anticipated in
the future.
A summary of director, officer and employee options granted and outstanding
under the Plans is presented below:
<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------------------------------------------------
1999 1998 1997
------------------------ ----------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------------------------ ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period 566,855 $ 6.01 460,305 $ 4.28 130,105 $ 1.53
Granted at prices in excess
of fair market value 715,950 10.00 177,800 10.00 22,750 10.00
Granted at prices below fair
market value 8,500 4.53 - - 345,700 5.00
Exercised - - - - - -
Forfeited (294,700) (7.63) (71,250) (4.78) (38,250) (4.90)
------------------------ ----------------------- -----------------------
Outstanding at end of period 996,605 $ 8.38 566,855 $ 6.01 460,305 4.28
------------------------ ----------------------- -----------------------
Exercisable at end of period 117,105 3.41 - - - -
Weighted average fair value
of options granted during - $ .04 - - - $ 3.45
period
</TABLE>
The following table summarizes information about director, officer and
employee options outstanding under the Plans at December 31, 1999:
<TABLE>
<CAPTION>
Weighted
Average
Exercise Shares Remaining Shares
Prices Outstanding Contractual Exercisable
Life
------------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
$ 1.00 77,780 6.32 77,780
$ 5.00 182,125 7.31 14,325
$ 10.00 736,700 9.42 25,000
</TABLE>
Compensation expense has been recognized for the years ended December 31,
1999, 1998 and 1997 in connection with options which were granted with
exercise prices less than the fair market value of the common stock of
the Company on the date of grant as determined by the board of directors.
Non-employee options
Options were granted to non-employees during the years ended December 31
as follows:
<TABLE>
<CAPTION>
Years Ended December 31
1999 1998 1997
------------------------ ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
Price Price Price
---------- -------------- --------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of 152,500 $ 6.91 67,000 $ 2.97 34,000 $ 1.00
period
Granted 75,000 10.00 86,500 10.00 33,000 5.00
Exercised - - - - - -
Forfeited (42,000) (9.05) (1,000) (10.00) - -
---------- -------------- --------- ------------- -------- --------------
Outstanding at end of period 185,500 $ 7.54 152,500 $ 6.91 67,000 $ 2.97
---------- -------------- --------- ------------- -------- --------------
Exercisable at end of period 34,000 $ 1.00 - - - -
Weighted average fair value
of options granted during period - $ 1.79 - $ 1.71 - $ 3.88
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 1999, 1998 and 1997: no dividend
yield; expected volatility of 30%, 30% and 60%, respectively; risk-free
interest rates of 5.9%, 5.4% and 6.3%, respectively; and expected lives
of 5.3 years, 5.3 years and 3 years, respectively. The expense related to
these grants is reflected in periods up to three years, in which services
must be completed, for these options to become exercisable. Unearned
compensation reflects the portion of the grant that has not yet been
charged to operations.
70
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
A Development Stage Enterprise
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Warrants
The Company has an obligation to issue warrants in connection with the
underwriting of the Series II Class B Stock sales. Ten warrants entitle
the holder to purchase one share of common stock at an exercise price of
$1.00 per warrant. The fair market value of the warrants was recorded as
part of the fees for the preferred stock offering.
11. SUBSEQUENT EVENTS
On May 4, 2000, the Company entered into four agreements with Abbott
Laboratories ("Abbott"): 1) National Marketing and Distribution
Agreement; 2) Registration Rights Agreement; 3) Credit Agreement and 4)
Security Agreement. The National Marketing and Distribution Agreement
provides that Abbott will purchase and market the Company's Vanish
Point/R/ automated retraction syringes and blood collection devices to
its U.S. acute care hospital customers. The agreement is for a five-year
term. The agreement also calls for the establishment of a new product
team comprised by key personnel from both companies designed to
concentrate on development of new safety products that incorporate the
Company's patented, proprietary technology.
The Credit Agreement provides that Abbott will extend to the Company a
credit line in the amount of $5 million. Disbursement amounts shall be in
multiples of $1 million. Interest accrues at a rate of prime rate plus 1%
and is payable quarterly beginning June 30, 2001. The Credit Agreement
also provides that Abbott may, at its option, convert the note balance
into common stock at a specified conversion price. The loan matures on
June 30, 2005. In connection with the Credit Agreement, the Security
Agreement grants Abbott a continuing security interest in certain of the
Company's assets.
The Registration Rights Agreement gives Abbott certain registration
rights if the conversion privilege in the Credit Agreement is exercised.
On April 7, 2000, the Company entered into a manufacturing agreement with
an unrelated party to outsource the assembly of its 5cc and 10cc
syringes. The agreement calls for the Company to purchase and consign
machinery and equipment to the unrelated party and provide training for
its employees. The Company is obligated under the agreement to purchase a
minimum volume of product from the unrelated party at mutually agreed
upon prices. The volume and price for the initial contract year ended
April 30, 2001 resulted in a purchase commitment of $100,000 for the
Company.
Effective June 1, 2000, the Company entered into a Consulting Agreement
("Agreement") with a Board member, formerly Executive Vice President of
Sales and Marketing, who is also related to an employee of the Company.
The Agreement is for a one-year term, renewable with consent of both
parties, whereby the Board member has agreed to establish contacts with
major European entities, approved by the Company, to develop marketing
and distribution channels as well as licensing agreements. The Agreement
calls for an annual payment of $200,000, payable in equal monthly
installments and an expense allowance of up to $5,000 for expenses
incurred on behalf of the Company.
See footnotes 6 and 8 for subsequent event activity related to debt and
equity, respectively.
71
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
CONDENSED FINANCIAL STATEMENTS
(Unaudited)
QUARTER ENDED SEPTEMBER 30, 2000
INDEX TO FINANCIAL STATEMENTS
Page
----
Condensed Financial Statements:
Condensed Balance Sheets 73
Condensed Statements of Operations 74
Condensed Statements of Cash Flows 75
Notes to Condensed Financial Statements 76
72
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS
Unaudited
<TABLE>
<CAPTION>
December 31, 1999 September 30, 2000
Unaudited
----------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 646,005 $ 4,468,533
Accounts receivable, net 599,424 2,043,342
Inventories 677,962 938,517
Other current assets 47,800 379,329
------------------------------------- ----------------------------------
Total current assets 1,971,191 7,829,721
Property, plant and equipment, net 10,101,524 11,099,491
Restricted cash 600,000 -
Intangible assets and deferred charges, net 536,014 542,021
------------------------------------- ----------------------------------
Total assets $ 13,208,729 $ 19,471,233
===================================== ==================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 844,165 $ 768,887
Current portion of long-term debt 463,329 953,078
Accrued compensation 118,038 208,382
Marketing fees payable 338,526 1,144,757
Other accrued liabilities 250,783 634,944
------------------------------------- ----------------------------------
Total current liabilities 2,014,841 3,710,048
------------------------------------- ----------------------------------
Long-term debt, net of current maturities 2,506,335 5,301,959
------------------------------------- ----------------------------------
Stockholders' equity
Preferred Stock $1 par value
Series A 5,000,000 4,974,000
Series I, Class B 1,000,000 1,000,000
Series II, Class B 1,000,000 1,000,000
Series III, Class B 1,160,200 1,160,445
Series IV, Class B 1,133,800
Common stock - -
Additional paid-in capital 23,565,235 31,011,580
Unearned compensation (185,635) (229,156)
Accumulated deficit (22,852,247) (29,591,443)
------------------------------------- ----------------------------------
Total stockholders' equity 8,687,553 10,459,226
------------------------------------- ----------------------------------
Total liabilities and stockholders' equity $ 13,208,729 $ 19,471,233
===================================== ==================================
</TABLE>
See accompanying notes to the financial statements.
73
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
ended ended ended ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales, net $ 3,753,110 $ 1,233,721 $ 6,109,417 $ 1,965,944
Cost of sales 3,445,695 841,682 5,782,287 1,361,590
------------------------------- -------------------------------
Gross margin 307,415 392,039 327,130 604,354
------------------------------- -------------------------------
Operating expenses:
Preproduction manufacturing - 347,946 627,200 1,272,578
Sales and marketing 1,543,914 1,122,247 3,180,353 2,603,431
Research and development 207,186 186,010 467,786 613,215
General and administrative 1,221,775 652,900 2,825,925 2,094,944
------------------------------- -------------------------------
Total operating expenses 2,972,875 2,309,103 7,101,264 6,584,168
------------------------------- -------------------------------
Loss from operations (2,665,460) (1,917,064) (6,774,134) (5,979,814)
Interest income 75,087 39,450 150,415 109,917
Interest expense (72,581) (30,079) (115,477) (102,101)
------------------------------- -------------------------------
Net loss $(2,662,954) $(1,907,693) $(6,739,196) $(5,971,998)
=============================== ===============================
Basic and diluted loss per share $(0.27) $(0.19) $(0.69) $(0.58)
=============================== ===============================
Weighted average shares outstanding 14,004,333 14,000,000 14,001,444 14,000,000
=============================== ===============================
</TABLE>
See accompanying notes to the financial statements.
74
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
ended ended ended ended
Sept 30, Sept 30, Sept 30, Sept 30,
2000 1999 2000 1999
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net loss $(2,662,954) $(1,907,693) $(6,739,196) $(5,971,998)
Depreciation and amortization 217,067 242,708 716,094 694,498
Provision for doubtful accounts - - - -
Recognition of stock option compensation 51,441 (51,416) 144,211 138,377
Adjustments to reconcile net loss to net cash
provided by operating activities:
(Increase) decrease in inventories 558,473 23,990 (260,558) 228,906
(Increase) decrease in accounts and note (1,086,796) (368,989) (1,443,918) (659,045)
receivable
(Increase) decrease in deferred charges - - -
-
(Increase) decrease in other current assets (194,058) 147,649 (331,528) (35,355)
Increase (decrease) in accounts payable 302,149 251,132 (92,278) 123,020
Increase (decrease) in other accrued liabilities 968,712 360,633 1,147,736 539,201
-----------------------------------------------------------
Net cash used by operating activities (1,845,966) (1,301,986) (6,859,437) (4,942,396)
-----------------------------------------------------------
Cash flows from investing activities
Purchase of property, plant and equipment (545,776) (405,036) (1,675,246) (1,695,514)
Acquisition of patents, trademarks and licenses (2,140) (8,640) (44,823) (20,945)
Sale of restricted certificates of deposit - - 600,000 -
Stock subscriptions held in escrow - - - -
Organization costs paid - - - -
-----------------------------------------------------------
Net cash used by investing activities (547,916) (413,676) (1,120,069) (1,716,459)
-----------------------------------------------------------
Cash flows from financing activities
Borrowings under long-term debt and notes payable 3,000,000 4,431 5,079,851 29,149
Repayments of long-term debt and notes payable (133,746) (111,293) (1,794,475) (387,949)
Proceeds from issuance of preferred stock 2,450 663,695 11,335,200 8,072,407
Dividends paid (2,818,542) - (2,818,542) -
-----------------------------------------------------------
Net cash provided by financing activities 50,162 556,833 11,802,034 7,713,607
-----------------------------------------------------------
Net increase in cash (2,343,720) (1,158,829) 3,822,528 1,054,752
Cash and cash equivalents at:
Beginning of period 6,812,253 3,841,444 646,005 1,627,863
-----------------------------------------------------------
End of period $ 4,468,533 $ 2,682,615 $ 4,468,533 $ 2,682,615
===========================================================
</TABLE>
See accompanying notes to the financial statements.
75
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary to fairly present the Company's financial
position and results of operations for the interim periods. All adjustments
contained herein are of a normal recurring nature.
1. BUSINESS OF THE COMPANY, RECENT DEVELOPMENTS, AND BASIS OF PRESENTATION
Business
--------
Retractable Technologies, Inc. (the "Company") was incorporated in Texas on
May 9, 1994, to design, develop, manufacture and market safety syringes and
other safety medical products for the healthcare profession. The Company
began to develop its manufacturing operations in 1995. The Company's
manufacturing and administrative facilities are located in Little Elm,
Texas. The Company's primary products are the VanishPoint(R) syringe in the
3cc, 5cc and 10cc sizes and blood collection tube holders. The Company has
conducted preliminary clinical evaluations and worked with national
distributors to encourage healthcare facilities to transition from the use
of standard syringes to the VanishPoint(R) syringe. Shipments commenced in
February 1997 and included syringes for hospital product evaluations as
well as for sale in clinics and other healthcare settings.
Recent Developments
-------------------
On May 4, 2000, the Company entered into four agreements with Abbott
Laboratories ("Abbott"): 1) National Marketing and Distribution Agreement;
2) Registration Rights Agreement; 3) Credit Agreement and 4) Security
Agreement. The National Marketing and Distribution Agreement provides that
Abbott will purchase and market the Company's VanishPoint(R) automated
retraction syringes and blood collection devices to its U.S. acute care
hospital customers. The agreement is for a five-year term. The agreement
also calls for the establishment of a new product team comprised by key
personnel from both companies designed to concentrate on development of new
safety products that incorporate the Company's patented, proprietary
technology.
The Credit Agreement provides that Abbott will extend to the Company a
credit line in the amount of $5 million. Disbursement amounts shall be in
multiples of $1 million. Interest accrues at a rate of prime rate plus 1%
and is payable quarterly beginning June 30, 2001. The Credit Agreement also
provides that Abbott may, at its option, convert the note balance into
common stock at a specified conversion price. The loan matures on June 30,
2005. In connection with the Credit Agreement, the Security Agreement
grants Abbott a continuing security interest in certain of the Company's
assets. The Company borrowed $ 3 million in August 2000 and $2 million in
December 2000.
The Registration Rights Agreement gives Abbott certain registration rights
if the conversion privilege in the Credit Agreement is exercised.
Effective June 1, 2000, the Company entered into a Consulting Agreement
("Agreement") with a Board member and former Executive Vice President of
Sales and Marketing, who is also related to an employee of the Company. The
Agreement is for a one-year term, renewable with consent of both parties,
whereby the Board member has agreed to establish contacts with major
European entities, approved by the Company, to develop marketing and
distribution channels as well as licensing agreements. The Agreement calls
for an annual payment of $200,000 payable in equal monthly installments and
an expense allowance of up to $5,000 per month for expenses incurred on
behalf of the Company.
On October 26, 2000, the Company filed a Form 10SB-A with the Securities
and Exchange Commission.
Basis of Presentation
---------------------
The accompanying condensed financial statements are unaudited and, in the
opinion of management, reflect all adjustments that are necessary for a
fair presentation of the financial position and results of operations for
the periods presented. All of such adjustments are of a normal and
recurring nature. The results of operations for the periods presented are
not necessarily indicative of the results to be expected for the entire
year. The condensed financial statements should be read in conjunction
with the financial statement disclosures contained in the Company's audited
financial statements for the year ended December 31, 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ significantly from
those estimates.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
unrestricted cash and investments with original maturities of three months
or less.
76
<PAGE>
RETRACTABLE TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Inventories
Inventories are valued at the lower of cost or market, with cost being
determined using a standard cost method, which approximates average cost.
Provision is made for any excess or obsolete inventories.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to operations as incurred. Cost
includes major expenditures for improvements, and replacements, which
extend useful lives or increase capacity and interest cost associated with
significant capital additions. For the quarters ended September 30, 2000
and 1999, the Company capitalized interest of $72,667 and $44,156,
respectively. Gains or losses from property disposals are included in
income.
Depreciation and amortization is calculated using the straight-line method
over the following useful lives:
Production equipment 7 to 13 years
Office furniture and equipment 3 to 10 years
Building 39 years
Building improvements 15 years
Automobiles 7 years
Long-lived Assets
When events or changes in circumstances indicate that the carrying amount
of long-lived assets may not be recoverable, the Company will review the
net realizable value of the long-lived assets through an assessment of the
estimated future cash flows related to such assets. In the event that
assets are found to be carried at amounts which are in excess of estimated
gross future cash flows, the assets will be adjusted for impairment to a
level commensurate with a discounted cash flow analysis of the underlying
assets.
Intangible Assets and Deferred Charges
Intangible assets are stated at cost and consist primarily of patents, a
license agreement granting exclusive rights to use patented technology, and
trademarks which are amortized using the straight-line method over 17
years. Other intangible assets consist of deferred charges for loan
origination fees, which are amortized over the life of the debt.
Financial Instruments
The fair market value of financial instruments is determined by reference
to various market data and other valuation techniques as appropriate. The
Company believes that the fair value of financial instruments approximate
their recorded values.
Concentrations of Credit Risk
The Company's financial instruments exposed to concentrations of credit
risk consist primarily of cash, cash equivalents and accounts receivable.
Cash balances, which may exceed the federally insured limits, are
maintained in financial institutions; however, management believes the
institutions are of high credit quality. The majority of accounts
receivable are due from companies which are well-established entities. As a
consequence, management considers any exposure from concentrations of
credit risks to be limited.
Revenue Recognition
Revenue is recognized for sales to distributors when title and risk of
ownership passes to the distributor, generally upon shipment. Revenue is
recorded on the basis of sales price to distributors. Revenues on sales to
distributors for federal or GPO contracts are recorded net of contractual
pricing allowances to those end customers. Revenue for shipments directly
to end-users is recognized when title and risk of ownership passes from the
Company. Any products shipped or distributed for evaluation purposes is
expensed.
Income Taxes
The Company provides for deferred income taxes in accordance with Statement
of Financial Accounting Standard No. 109, "Accounting for Income Taxes"
("SFAS 109"). SFAS 109 requires an asset and liability approach for
financial accounting and reporting for income taxes based on the tax
effects of differences between the financial statement and tax bases of
assets and liabilities, based on enacted rates expected to be in effect
when such basis differences reverse in future periods. Deferred tax assets
are periodically reviewed for reliability. Valuation allowances are
recorded when realizability of deferred tax assets is not likely.
Earnings per share
The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share," that established standards for computing and
presenting earnings per share. Basic earnings per share is computed by
dividing net earnings for the period (adjusted for any cumulative dividends
for the period) by the weighted average number of common shares outstanding
during the period. The weighted average number of shares outstanding for
the nine-month periods ended September 30, 2000, and 1999, is 14,001,444
and
77
<PAGE>
14,000,000, respectively. The Company's potentially dilutive common
stock equivalents including warrants, options, and convertible debt are all
antidilutive as the Company is in a loss position. Accordingly, basic loss
per share is equal to diluted loss per share and is presented on the same
line for income statement presentation. Cumulative preferred dividends of
$2,905,323 and $2,182,414 have been added to net losses for the nine-month
periods ended September 30, 2000, and 1999, respectively.
Research and Development Costs
Research and development costs are expensed as incurred.
Stock-Based Compensation
The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123"), which establishes accounting and reporting
standards for stock-based employee compensation plans. As permitted by SFAS
123, the Company has elected not to adopt the fair value based method of
accounting for stock-based employees compensation and will account for such
arrangements under Accounting Principles Board Opinion No. 25. Accordingly,
compensation cost for stock options issued to directors, officers, and
employees is measured as the excess, if any, of the fair market value of
the Company's stock at the date of grant over the amount the director,
officer or employee must pay to acquire the stock. Expense is recognized
ratably from the date of grant over the vesting period of the option.
Unearned compensation reflected in the Stockholder's Equity section of the
balance sheet is the portion of such compensation that has not been charged
to operations.
3. LONG TERM DEBT
On February 18, 2000, the Company obtained two new loans from 1st
International Bank totaling $2,000,000. Land, building and improvements
secured $1,500,000, and the remaining $500,000 is secured by accounts
receivable. The proceeds, along with a release of $400,000 of restricted
cash by Western Bank subsequent to December 31, 1999, were used to pay off
indebtedness to Western Bank. Remaining proceeds provided funds for
equipment and operating needs. The building loan matures on February 18,
2005, and the note secured by accounts receivable matures February 18,
2001.
On August 8, 2000, the Company borrowed $3,000,000 under its Credit
Agreement with Abbott. The Company borrowed an additional $2,000,000 on
December 11, 2000 under the Credit Agreement with Abbott.
4. STOCKHOLDERS' EQUITY
On January 11, 2000, the Company issued a Private Placement Memorandum
offering up to 1,300,000 shares of its Series IV Class B Convertible
Preferred Stock ("Series IV, Class B Stock") at $10 per share.
As of May 22, 2000, subscriptions for 1,133,800 shares of the Series IV
Class B had been received.
Series IV Class B stock ranks senior to the Company's common stock with
respect to dividends and upon liquidation, dissolution or winding up, but
secondary to the Company's Class A Stock, and Series I Class B, Series II
Class B, and Series III Class B. Dividends of $1.00 per share are payable
quarterly, if declared by the board of directors.
Holders of Series IV Class B Stock generally have no voting rights. Series
IV Class B Stock is redeemable after three years from the date of issuance
at the option of the Company at a price of $11.00 per share plus all
accrued and unpaid dividends. Each share of Series IV Class B Stock may, at
the option of the stockholder any time subsequent to three years from date
of issuance, be converted into common stock at a conversion price of $10
per share, or in the event the Company files an initial registration
statement under the Securities Act of 1933.
In the event of voluntary or involuntary liquidation, dissolution or
winding up of the Company, holders of Series IV Class B Stock then
outstanding are entitled to receive liquidating distributions of $11.00 per
share, plus accrued and unpaid dividends.
Under the Certificate of Designation, Preferences, Rights and Limitations
of Series A Convertible Preferred Stock ("Series A Stock") the Board of
Directors approved the redemption of Series A Stock to be drawn by lot
until the draw exceeded 500,000 shares. The draw was held on September 19,
2000, where 541,500 shares were drawn for redemption.
As of September 30, 2000, 26,000 shares of Series A Stock had been
converted into Common Stock. Subsequent to September 30, 2000, 22,000
shares have been redeemed and the remaining 493,500 shares have been
converted into Common Stock. Dividends attributable to the redemption in
the amount of $3,435 have been paid as of the date of this Prospectus.
In accordance with the appropriate Certificates of Designation, 40,000
shares of Class A Convertible Preferred Stock and 20,000 shares of Series I
Class B Convertible Preferred Stock were voluntarily converted to Common
Stock subsequent to September 30, 2000.
As a result of the redemption and conversions, the Series A outstanding
shares are 4,418,500; Series I Class B has 980,000 shares outstanding; and
there are 14,579,500 shares of Common Stock outstanding as of the date of
this Prospectus.
On July 24, 2000 the Board of Directors declared a dividend covering all
dividend arrearages on the Series A Preferred Stock. The dividend of
$2,818,542 was paid on July 27, 2000.
On September 1, 2000 the Board of Directors declared the third quarter
dividend of $150,000 on the Series A Preferred Stock. These dividends were
accrued as of September 30, 2000. The dividends were paid on October 12,
2000.
78
<PAGE>
================================================================================
No dealer, salesperson or any other person has been authorized by RTI to
give any information or to make any representations other than those contained
in this Prospectus in connection with the Offering made hereby, and, if given or
made, such information or representations may not be relied upon. This
Prospectus does not constitute an offer to sell or the solicitation of an offer
to buy any securities other than those specifically offered hereby or an offer
to sell, or a solicitation of an offer to buy, to any person in any jurisdiction
in which such offer or solicitation would be unlawful. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of RTI since
any of the dates as of which information is furnished or since the date of this
Prospectus.
____________________
TABLE OF CONTENTS
Page
----
Prospectus Summary...................................................... 3
Risk Factors............................................................ 5
A Note About Forward-looking Statements................................. 8
Use of Proceeds......................................................... 9
Capitalization.......................................................... 9
Dilution................................................................ 10
Management's Discussion and Analysis or Plan of Operation............... 11
Description of Business................................................. 15
Description of Property................................................. 22
Management.............................................................. 22
Executive Compensation.................................................. 26
Security Ownership of Certain Beneficial Owners and
Management............................................................. 28
Plan of Distribution.................................................... 29
Selling Security Holders................................................ 29
Determination of Offering Price......................................... 40
Description of Securities............................................... 40
Market for Common Equity and Related Stockholder Matters................ 51
Certain Relationships and Related Transactions.......................... 52
Legal Proceedings....................................................... 52
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities............................................. 52
Legal Matters........................................................... 53
Accountants............................................................. 53
Experts................................................................. 53
Where to Find Additional Information.................................... 53
Financial Statements.................................................... 54
Until ________________, 2001 (25 days after the date of this Prospectus),
all dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligations of dealers to deliver a Prospectus when
acting as Underwriters.
================================================================================
================================================================================
2,000,000 Shares
RETRACTABLE TECHNOLOGIES, INC.
Common Stock
____________________
PROSPECTUS
____________________
_____________, 2001
================================================================================
79
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
Indemnification Under the Amended and Restated Bylaws
-----------------------------------------------------
Our Amended and Restated Bylaws provide that we shall indemnify each of our
Directors and Officers to the maximum extent allowed by the Texas Business
Corporation Act ("TBCA") for expenses incurred in proceedings where the Officer
or Director is a party by reason of holding his position as an Officer or
Director subject to not being found liable for negligence or misconduct.
Expenses incurred in anticipation of litigation or in settlement of anticipated
litigation are also covered. The TBCA permits such indemnification, so long as
such person acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of RTI. Such indemnification may be
made only upon a determination by the Board of Directors that such
indemnification is proper in the circumstances because the person to be
indemnified has met the applicable standard of conduct to permit indemnification
under the law. We are also permitted to advance to such persons payment for
their expenses incurred in defending a proceeding to which indemnification might
apply, provided the recipient provides an undertaking agreeing to repay all such
advanced amounts if it is ultimately determined that he or she is not entitled
to be indemnified.
Indemnification by Contract
---------------------------
EMPLOYMENT PRACTICES LIABILITY INSURANCE
We obtained an Employment Practices Liability Insurance Policy ("Employment
Policy") from Executive Risk Indemnity Inc. (the "Underwriter" for purposes of
this section only) for the policy period August 22, 2000 to 2001. The
Employment Policy covers 100% of Losses (damage awards including punitive,
interest amounts and settlements but not including civil or criminal fines, most
multiple damage awards, costs of bringing RTI into compliance with the American
Disabilities Act, non-monetary awards, severance pay, payment of insurance plan
benefits, or amounts awarded pursuant to labor arbitration) and Defense Expenses
(reasonable legal fees incurred through counsel to the Underwriter). The
Underwriter pays for the amount of such liabilities in excess of RTI's retention
($50,000 per claim). We have the option to extend the Employment Policy for an
additional two years for an additional premium.
Generally, the Underwriter has agreed to pay on behalf of the Insureds
(RTI, its Officers, Directors, and employees acting in the scope of their
duties) 100% of the Defense Expenses and Loss in excess of the retention of
$50,000 per claim due from RTI from claims first made against the Insureds
during the period from November 28, 1997 for Employment Practices Wrongful Acts
occurring subsequent to RTI's incorporation and before expiration of the
Employment Policy. No Insured may incur Defense Expenses or settle any Claim
without the Underwriter's consent. Furthermore, if the Insured refuses to agree
to a settlement negotiated by the Underwriter, the amount of coverage is
materially reduced.
Claims are defined to mean any written notice that a person intends to hold
an Insured liable for an Employment Practices Wrongful Act, a judicial or
administrative proceeding (including civil and criminal) for such an act or any
written request to toll or waive the statute of limitations relating to such
judicial or administrative proceeding excepting claims including labor or
grievance arbitration pursuant to a collective bargaining agreement. An
Employment Practices Wrongful Act is defined to mean any of the following
alleged actions (which are all defined in the Employment Policy): 1) Wrongful
Termination, 2) Discrimination, 3) Harassment, 4) Retaliation, 5) Workplace
Tort, 6) Third Party Discrimination, or 7) Third Party Sexual Harassment. Costs
for claims for liability regarding violations of Employee Retirement Income
Security Act of 1974 and liability arising out of violation of workers'
compensation or unemployment acts are not covered. Such exclusions do not apply
to claims based on retaliation for pursuing rights under those acts. The
Employment Policy also excludes from coverage costs for claims arising out of
bodily injury except the Employment Policy does cover claims for emotional
distress resulting from an Employment Practices Wrongful Act. The Employment
Policy does not cover claims for non-monetary relief. Furthermore, the
Employment Policy does not cover claims arising out of a claim, which was the
subject of notice under any prior policy regarding any act for which a
supervisor of RTI had knowledge prior to December 28, 1997. This Employment
Policy does not cover claims that Insureds are obligated to pay by assumption of
another's liability. Finally, the Employment Policy does not cover costs
associated with actions in connection with labor disputes or negotiations.
EXECUTIVE LIABILITY INSURANCE POLICY
We obtained an Executive Liability Insurance Policy from Executive Risk
Indemnity Inc. (the "Underwriter for purposes of this section only") for the
policy period August 22, 2000 to 2001 (the "Policy Period" for purposes of this
section only) (the "Executive Policy"). Coverage per claim begins after payment
of the retention amount for any given claim. We owe a retention amount of $0
per Insured Person, $50,000 per Claim for Loss as to which indemnification by
RTI is permissible, and $125,000 per Claim for Losses arising out of Securities
Claims. No Defense Expenses can be incurred and no settlement of any Claim may
be made without the Underwriter's consent. The maximum aggregate liability may
be reinstated after exhaustion of all coverage but may only be reinstated once.
The reinstated amount shall be only for non-securities based claims. No
retention will be paid by RTI in the event Defense Expenses are incurred in
connection with a Securities Claim and such claim is dismissed or there is a
final judgment of no liability. In the event that we intend to sell securities
in a public Offering, the Underwriter shall be entitled to impose such terms and
limitations of coverage and add such additional premium in its sole discretion
that it may require.
The Executive Policy covers Insured Persons (any past, present, or future
Officer or Director and employee (employees are only covered for Securities
Claims) of RTI for Loss (Defense Expenses [reasonable legal fees] and judgments
and settlements including punitive awards against an Insured Person or that RTI
is obligated to pay as a result of any Securities Claim against an Insured
Person in excess of the retention amount owed by RTI and except wages, fines,
and multiplied portion of damage awards) from Claims (any civil proceedings
including appeals commenced by filing of a complaint, any criminal proceeding,
any administrative or regulatory proceeding, or any written demand to an Insured
describing circumstances likely to give rise to the commencement of any such
proceeding) first made during the Policy Period against the Insured Persons for
Wrongful Acts except for Loss which RTI pays to the Insured Person in
indemnification.
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The Executive Policy provides coverage of RTI for Losses from Claims during
the Policy Period against the Insured Persons for Wrongful Acts (misstatement,
omission, or breach of duty by an Insured Person or any other matter asserted
against an Insured Person solely by reason of his or her status as an Insured
Person and any Securities Wrongful Act) which we pay to the Insured Person as
indemnification. Furthermore, the Executive Policy provides coverage of Loss
from Securities Claims (claims for Securities Activity Wrongful Acts [violation
of any securities laws, violation of any law asserted by a shareholder of RTI,
or claims arising as a result of any act in connection with the offer and sale
or purchase of securities issued by RTI]) made during the Policy Period against
us.
The Executive Policy does not cover Loss for Claims against an Insured
Person contributed to in fact by intentional dishonest or fraudulent act or by
the gaining of an Insured of any profit to which they are not entitled. Defense
expenses associated with defending such actions, however, are covered. The
Executive Policy does not cover any Losses including Defense Expenses for Claims
for any alleged bodily sickness, libel, defamation or destruction of tangible
property or any threatened exposure, storage, discharge, treatment, removal and
related issues regarding smoke, vapors, toxic chemicals or other pollutants or
any related regulation. The Executive Policy does not cover: Losses, including
Defense Expenses, for Claims 1) based upon any situation or Wrongful Act alleged
prior (to November 28, 1997) litigation, 2) any fact which was the subject of
notice given under any other policy, 3) any alleged violation of Employee
Retirement Income Security Act of 1974 or any similar law, 4) any alleged
nuclear or radioactive substance, or 5) the service of an Insured Person as a
Director or Officer of any entity other than RTI or a charitable corporation.
The Executive Policy does not cover Losses, including Defense Expenses, for
Claims by or on behalf RTI excepting derivative actions brought by a security
holder and brought independent of solicitation of RTI or an Insured Person or
any Claim in the form of a cross-claim for contribution by an Insured Person or
any Claim for the alleged wrongful termination of an Insured Person.
EMPLOYMENT AGREEMENT
Pursuant to a written employment agreement with Thomas J. Shaw, we have agreed
to indemnify Thomas J. Shaw for all legal expenses and liabilities incurred with
any proceeding involving him by reason of his being an Officer or agent of RTI.
We have further agreed to pay reasonable attorney fees and expenses in the event
that, in Thomas J. Shaw's sole judgment, he needs to retain counsel or otherwise
expend his personal funds for his defense.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
-------------------------------------------
The following table sets forth various expenses, which will be incurred in
connection with this Offering of Shares.
SEC Registration and Filing Fee $___
Federal Taxes* ___
States Taxes* ___
Listing Fees ___
Legal Fees and Expenses* ___
Accounting Fees and Expenses* ___
Printing ___
Transfer Agent Fees* ___
Blue Sky Fees and Expenses* ___
Premium to Indemnify Officers and Directors ___
Miscellaneous* ___
TOTAL $___
*Estimated
RECENT SALES OF UNREGISTERED SECURITIES
---------------------------------------
The following discussion outlines all securities sold by us for cash or
services rendered during the previous three years. Unless otherwise described,
all of the shares sold or granted were issued pursuant to the authority granted
by the private offering exemption outlined in Section 4(2) of the Securities
Act. None of the below mentioned "sales" were made to more than 35
nonaccredited investors and none were made with a view toward distribution. All
shares issued were restricted and contained a Rule 144 legend.
In 1997, we issued ISOs for the purchase of 1,750 Shares of Common Stock
and employee NQSOs for the purchase of 273,200 Shares of Common Stock under the
1996 Incentive Stock Option Plan. We issued NQSOs for the purchase of 100,500
shares under the 1996 Stock Option Plan for Directors and Other Individuals.
From May 10, 1997, to November 15, 1997, we, with the assistance of
Southwest Merchant Group, Offered and sold pursuant to Rule 506 of the
Securities Act to 131 accredited and 14 nonaccredited investors 1,000,000 shares
of Series II Stock at a price of $10 per share for a total payment of
$10,000,000. We entered into an agreement with Southwest Merchant Group
effective July 16, 1997, whereby Southwest Merchant agreed to provide best
efforts to sell up to 1,000,000 shares of Series II Stock. In return we agreed
to pay a combined financial advisory, investment banking, and selling commission
equal to 5 percent of the value of the shares sold with an option to take,
instead of cash, 2 1/2 percent of the gross funds in warrants. Southwest
Merchant Group was to receive two warrants for each dollar of compensation owed
to Southwest Merchant Group. Each warrant gave Southwest Merchant Group the
right to purchase 1/10 of a share of Series IV Stock. $37,500 in compensation
was paid to Southwest Merchant Group in the form of cash. Southwest Merchant
Group was issued 75,000 warrants for the purchase of a total of 7,500 Shares of
Series IV Stock. No warrants have been exercised and none have expired.
In 1998, we issued ISOs for the purchase of 182,800 shares of Common Stock
under the 1996 Incentive Stock Option Plan and NQSOs for the purchase of 86,500
shares of Common Stock under the 1996 Stock Option Plan for Directors and Other
Individuals.
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From July 10, 1998, to September 30, 1999, we, with the assistance of
Northstar Securities Corporation (and its Colorado affiliate, CCP Management),
Asset Allocations Securities Corp., and Ameriprop Inc. ("broker-dealers"),
offered and sold pursuant to Rule 506 of the Securities Act to 225 accredited
and 21 nonaccredited investors 1,160,200 Shares of Series III Stock at a price
of $10 per share for a total payment of $11,602,000. We entered into an
agreement with the broker-dealers that, in exchange for the best efforts of the
broker to sell the shares, the brokers would be entitled to a combined due
diligence fee and selling commission equal to 7 percent of the value of each
share sold by the brokers. Northstar Securities Corporation was paid $279,580,
Asset Allocations Securities Corp. was paid 247,450, and Ameriprop was paid
$25,550.
In 1999 and in connection with an employment agreement, we issued NQSOs for
the purchase of 20,000 shares of our Common Stock under the 1999 Stock Option
Plan to Phillip Zweig. Half of the options vest on the 180th day of the
agreement (June 10, 2000) and the other half vest on the day prior to the
expiration of the agreement (December 11, 2000).
In 1999, we issued ISOs for the purchase of 451,900 shares and NQSOs for
the purchase of 357,550 shares of Common Stock under the 1999 Stock Option Plan.
From January 11, 2000, to May 10, 2000, we, with the assistance of Asset
Allocations Securities Corp. and Northstar Securities Corporation, offered and
sold 1,138,800 shares of Series IV Stock to 25 accredited and 3 nonaccredited
investors pursuant to Rule 506 at a price of $10 per share for a total of
$11,388,000. Pursuant to individual Selling Agreements dated March 9, 2000, and
March 1, 2000, respectively, warrants for the purchase of 75 and 150 shares of
Series IV Stock were issued to Asset Allocations Securities Corp. and Northstar
Securities Corporation as partial commissions. Three warrants were issued for
each 100 Shares sold. Asset Allocations Corp. and Northstar Securities
Corporation sold 2,500 and 5,000 Shares of Series IV Stock, respectively. Each
warrant entitles the holder to purchase one share of the Series IV Stock at an
exercise price of $10 per share. The warrants expire on March 15, 2002. Asset
Allocations Securities Corp. and Northstar Securities Corporation received
$1,750 and $3,500 in cash commissions, respectively.
From January 2000 through December 15, 2000, we have issued ISOs for the
purchase of 373,400 shares and NQSOs for the purchase of 272,200 shares of
Common Stock under the 1999 Stock Option Plan.
In connection with a consulting agreement, we issued NQSOs for the purchase
of 61,000 shares of the Common Stock at an exercise price of $10 per share to
Saker Investments.
In March 2000, we entered into a letter agreement with New Horizons
International ("NHI") and Colebrand Limited whereby NHI and Colebrand Limited
would provide consulting services regarding marketing advice. In the event they
provide us with a contact that resulted in a proposed investment in any amount
up to $60 million which terms are acceptable to us in our sole and absolute
discretion, NHI was entitled to receive 5 percent of the total amount of capital
invested in cash, and Colebrand Limited would receive the issuance of a number
and type of securities equal to 2 1/2 percent of the total number and type of
securities issued and a warrant for the right to purchase up to an amount of
securities equal to 2 1/2 percent of the total number and type of securities
sold. This relationship was terminated in early 2000. No shares were issued.
In April 2000, we issued 245 shares of the Series III Stock to CCP
Management, the Colorado affiliate of Northstar Securities, in payment of
commissions owed in the amount of $2,450 for assistance in selling the Series
III Stock.
In May 2000, we entered into an agreement with Abbott. Pursuant to the
Abbott Agreement, Abbott agreed to lend to us, in increments of $1,000,000, an
aggregate of up to $5,000,000 at an interest rate of prime plus 1% per year up
to the maturity date of June 30, 2005. In consideration, we agreed that any and
all principal amounts borrowed could be converted into Common Stock at a price
of $10 per share. As of the date of this Prospectus, we have borrowed
$5,000,000 of funds under this Agreement. No Common Stock has been issued.
In September 2000, we issued a mandatory redemption of 541,500 shares of
the Series A Stock pursuant to our rights under the appropriate certificate of
designation. According to the provisions of the appropriate certificate of
designation, we redeemed 22,000 shares of the Series A Stock for an aggregate
price of $37,624 which was equal to the redemption price of $1.70 per share plus
accrued and unpaid dividends through the redemption date. Pursuant to the
appropriate certificate of designation, shareholders owning any of the
certificates selected for redemption were entitled to convert their shares into
Common Stock on a one for one share basis and payment of accrued and unpaid
dividends in lieu of being paid the redemption price. Accordingly, 519,500
shares of Series A Stock were converted into 519,500 shares of Common Stock.
In October 2000, we issued an Important Notice of Registration of Public
Sale of Common Stock to all holders of the preferred stock in accordance with
the requirements of each of the certificates of designation. Pursuant to the
rights set forth in the various certificates of designation, the preferred
stockholders had the right to give us notice of their desire to have the shares
of Common Stock (attained through conversion of their preferred stock)
participate in the registration. Pursuant to these rights, 128 Series A
shareholders, 151 Series I shareholders, 119 Series II shareholders, 235 Series
III shareholders, and 21 Series IV shareholders converted their preferred shares
into shares of Common Stock on a one for one basis. The Series A shareholders
originally purchased their preferred stock for $1 per share. The Series I
shareholders originally purchased their shares for $5 per share. Series II
shareholders originally purchased their shares for $10 per share. Series III
shareholders originally purchase their shares for $10 per share. The Series IV
shareholders originally purchased their shares for $10 per share. In exchange
for each share of the preferred stock, the shareholders were entitled to one
share of Common Stock plus all dividends accrued through the dates of
conversion, which amounts to an aggregate amount of $4,504,995. These accrued
dividends will be paid if and when declared by the Board of Directors. An
aggregate of 4,838,650 shares of Common Stock was issued as a result of
converting preferred shareholders.
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<TABLE>
<CAPTION>
EXHIBITS
--------
Exhibit No. Description of Document
------------ -----------------------
<S> <C>
3.1 Second Amended and Restated Articles of Incorporation of RTI filed August 14, 2000 *
3.2 Amended and Restated Bylaws of RTI dated as of the 11th day of August 2000 *
4.1 Sample Common Stock certificate **
4.2 Exhibit A to Second Amended and Restated Articles of Incorporation of RTI filed August 14, 2000 (Certificate of
Designation, Preferences, Rights and Limitations of Series A Convertible Preferred Stock of RTI) *
4.3 Sample Series A Convertible Preferred Stock Certificate **
4.4 Exhibit B to Second Amended and Restated Articles of Incorporation of RTI filed August 14, 2000 (Certificate of
Designation, Preferences, Rights, and Limitations of Class B Convertible Preferred Stock of RTI) *
4.5 Sample Series I Class B Convertible Preferred Stock Certificate **
4.6 Exhibit C to Second Amended and Restated Articles of Incorporation of RTI filed August 14, 2000 (Certificate of
Designation, Preferences, Rights and Limitations of the Series II Class B Convertible Preferred Stock of RTI)*
4.7 Sample Series II Class B Convertible Preferred Stock Certificate **
4.8 Exhibit D to Second Amended and Restated Articles of Incorporation of RTI filed August 14, 2000 (Certificate of
Designation, Preferences, Rights and Limitations of the Series III Class B Convertible Preferred Stock of RTI) *
4.9 Sample Series III Class B Convertible Preferred Stock Certificate **
4.10 Exhibit E to Second Amended and Restated Articles of Incorporation of RTI filed August 14, 2000 (Certificate of
Designation, Preferences, Rights and Limitations of the Series IV Class B Convertible Preferred Stock of RTI)*
4.11 Sample Series IV Class B Convertible Preferred Stock Certificate**
4.12 Pages 6 though 10 of as well as exhibits A through E to the Second Amended and Restated Articles of Incorporation of
RTI filed August 14, 2000 *
4.13 Pages 1 through 7, and 15 through 19 of the Amended and Restated Bylaws of RTI dated as of the 11th day of August
2000. *
4.14 Form of Southwest Merchant Group Warrant to Purchase 7,500 Shares of Series IV Class B Preferred Stock issued **
4.15 Selling Agreement between RTI and Northstar Securities Corporation dated March 1, 2000 **
4.16 Selling Agreement between RTI and Asset Allocations Securities Corp. dated March 9, 2000 **
4.17 National Marketing and Distribution Agreement between RTI and Abbott Laboratories dated as of May 4, 2000 and
Registration Rights Agreement between RTI and Abbott Laboratories dated as of May 4, 2000**
4.18 RTI's 1999 Stock Option Plan **
4.19 1996 Incentive Stock Option Plan of RTI **
4.20 1996 Stock Option Plan for Directors and Other Individuals **
5 Opinion on Legality dated December 22, 2000 ****
10.1 Lock Up Agreement by and between RTI and Thomas J. Shaw dated as of December 3, 2000. ***
10.2 Lock Up Agreement by and between RTI and Lillian E. Salerno dated as of December 4, 2000. ***
10.3 National Marketing and Distribution Agreement between RTI and Abbott Laboratories dated as of May 4, 2000 with
exhibits **
10.4 Contract Manufacturing Agreement Between RTI and Nypro Precision Assemblies, Inc. dated as of April 7, 2000 **
10.5 Sample United States Distribution Agreement **
10.6 Sample Foreign Distribution Agreement **
</TABLE>
83
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<TABLE>
<CAPTION>
Exhibit No. Description of Document
------------ -----------------------
<S> <C>
10.7 Amended Consulting Agreement between RTI and Lillian E. Salerno dba/MediTrade International dated August 23, 2000*
10.8 Employment Agreement between RTI and Thomas J. Shaw dated as of September 28, 1999 **
10.9 Technology License Agreement between Thomas J. Shaw and RTI dated the 23rd day of June 1995**
10.10 Consulting Agreement by and between RTI and International Export and Consulting dated March 15, 2000 **
10.11 Employment Agreement by and between RTI and Phillip L. Zweig dated effective as of December 13, 2000 ****
23.1 Consent of Independent Accountants dated December 22, 2000 ****
23.2 Consent of Business Valuation Services dated December 21, 2000 ****
23.3 Consent of Krage & Janvey, L.L.P. dated December 22, 2000. See Exhibit No. 5 ****
27 Financial Data Schedule ****
99 Opinion by Business Valuation Services ****
* Incorporated herein by reference to RTI's Registration Statement on Form 10SB-A filed on October 25, 2000.
** Incorporated herein by reference to RTI's Registration Statement on Form 10SB filed on June 23, 2000.
*** Incorporated herein by reference to RTI's Form 10-QSB filed on November 14, 2000.
**** Filed herewith.
</TABLE>
84
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UNDERTAKINGS
------------
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our Directors, Officers, and controlling persons pursuant to
the foregoing provisions or otherwise, we have been advised that, in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than our
payment of expenses incurred or paid by a Director, Officer, or controlling
person in the successful defense of any action, suit, or proceeding) is asserted
by our Directors, Officers, or controlling persons in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether indemnification is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
We also undertake that we will:
(a) File, during any period in which we Offer or sell Shares, a post-
effective amendment to this Prospectus to:
(i) Include any Prospectus required by section 10(a)(3) of
the Securities Act;
(ii) Reflect in the Prospectus any facts or events which,
individually or together, represent a fundamental change
in the information in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of Shares Offered (if the total dollar value of
Shares Offered would not exceed that which was registered)
and any deviation from the low or high end of the
estimated Maximum Offering range may be reflected in the
form of Prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a twenty percent change
in the Maximum aggregate Offering price set forth in the
"CALCULATION OF REGISTRATION FEE" table in the effective
Registration Statement;
(iii) Include any additional or changed material information on
the plan of distribution;
(b) For determining any liability under the Securities Act, treat
each post-effective amendment as a new Registration Statement of
the securities Offered, and the Offering of the securities at
that time to be the initial bona fide offering; and
(c) File a post-effective amendment to remove from registration any
of the Shares that remain unsold at the end of the Offering.
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SIGNATURES
----------
In accordance with the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2, and authorized this Prospectus
to be signed on its behalf by the undersigned in the city of Little Elm, state
of Texas, on December 22, 2000.
RETRACTABLE TECHNOLOGIES, INC.
(Registrant)
By: /s/ THOMAS J. SHAW
------------------------------------
THOMAS J. SHAW
CHAIRMAN, PRESIDENT, AND
CHIEF EXECUTIVE OFFICER
In accordance with the requirements of the Securities Act of 1933, as amended,
this Prospectus has been signed by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/Steven R. Wisner Executive Vice President, Engineering & Production 12/21/00
--------------------------------- and Director
Steven R. Wisner
/s/Russell B. Kuhlman Vice President, New Markets and Director 12/21/00
---------------------------------
Russell B. Kuhlman
/s/Douglas W. Cowan Chief Financial Officer, Treasurer, and Director 12/21/00
---------------------------------
Douglas W. Cowan
/s/Lillian E. Salerno Director 12/21/00
---------------------------------
Lillian E. Salerno
/s/Jimmie Shiu, M.D. Director 12/21/00
---------------------------------
Jimmie Shiu, M.D.
/s/Clarence Zierhut Director 12/21/00
---------------------------------
Clarence Zierhut
/s/Marwan Saker Director 12/21/00
---------------------------------
Marwan Saker
/s/Edith A. Zagona Director 12/21/00
---------------------------------
Edith A. Zagona
</TABLE>
86
