- -----------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from ______ to ______.
Commission File No.: 0-20101
-------
URECOATS INDUSTRIES INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3545304
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4100 North Powerline Road, Suite F-1
Pompano Beach, Florida 33021
---------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(954)977-5428
--------------------------------------------------
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. As of May 15,
2001, the registrant had 108,120,984 shares of common stock, par value $.01
outstanding.
- -----------------------------------------------------------------------------
URECOATS INDUSTRIES INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 2001
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
- -------------------------------
ITEM 1. FINANCIAL STATEMENTS.......................................... 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..................................... 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.... 14
PART II. OTHER INFORMATION
- ----------------------------
ITEM 1. LEGAL PROCEEDINGS............................................. 15
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS..................... 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................... 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 16
ITEM 5. OTHER INFORMATION............................................. 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................. 16
SIGNATURES................................................................. 17
EXHIBIT INDEX.............................................................. 18
Page 2
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
PAGE
----
CONSOLIDATED BALANCE SHEET.................................. 4
CONSOLIDATED STATEMENTS OF OPERATIONS....................... 6
CONSOLIDATED STATEMENTS OF CASH FLOWS....................... 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................. 9
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are not applicable, and therefore have been
omitted.
Page 3
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
------
MARCH 31 DECEMBER 31
------------- -------------
2001 2000
------------- -------------
CURRENT ASSETS:
Cash $ 38,778 $ 16,998
Accounts and Loans Receivable 105,606 22,312
Inventory 21,047 ---
Prepaid Expenses 48,867 82,503
------------- -------------
TOTAL CURRENT ASSETS 214,298 121,813
------------- -------------
PROPERTY AND EQUIPMENT, NET 1,241,206 951,452
------------- -------------
OTHER ASSETS:
Intangibles, Net 1,100,343 1,051,564
Deposits 27,437 24,476
------------- -------------
TOTAL OTHER ASSETS 1,127,780 1,076,040
------------- -------------
TOTAL ASSETS $ 2,583,284 $ 2,149,305
============= =============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page 4
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
---------------------------------------
MARCH 31 DECEMBER 31
------------- -------------
2001 2000
------------- -------------
CURRENT LIABILITIES:
Current Maturities of Long Term Debt $ 187,118 $ 130,334
Accounts Payable and Accrued Expenses 814,666 589,999
Loans Payable 5,880 5,880
------------- -------------
TOTAL CURRENT LIABILITIES 1,007,664 726,213
------------- -------------
LONG-TERM DEBT 261,898 131,920
CAPITALIZED LEASE, LONG TERM 4,345 5,454
DUE TO RELATED PARTIES --- 2,507,000
DEFERRED INCOME 50,000 50,000
------------- -------------
TOTAL LIABILITIES 1,323,907 3,420,587
------------- -------------
COMMITMENTS AND CONTINGENCIES 672,439 670,939
------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred Stock, $1.00 Par Value, 2,000,000
Shares Authorized, of which Series A
Convertible, 750,000 Shares Authorized;
Issued & Outstanding, 62,500 Shares
Unconverted (Less Offering Costs of $7,465) 55,035 55,035
Common Stock $.01 Par Value, 140,000,000
shares Authorized; 108,104,734 Shares Issued
and Outstanding 1,081,047 993,420
Additional Paid-In-Capital 25,547,471 21,776,138
Accumulated (Deficit)-Continuing Operations (12,479,806) (10,996,326)
Accumulated (Deficit)-Discontinued Operations (13,616,809) (13,770,488)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 586,938 (1,942,221)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 2,583,284 $ 2,149,305
============= =============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page 5
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31
----------------------------
2001 2000
----------------------------
REVENUES $ 245,466 $ -0-
------------- -------------
COSTS AND EXPENSES:
Cost of Sales 338,579 ---
Selling, General and Administrative 1,095,940 414,200
Professional Fees 73,094 33,431
Depreciation and Amortization 91,067 53,868
Research and Development 42,956 198,862
Consulting Fees 87,310 798,881
------------- -------------
TOTAL COSTS AND EXPENSES 1,728,946 1,499,242
------------- -------------
NET (LOSS) FROM CONTINUING OPERATIONS (1,483,480) (1,499,242)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS 153,679 (3,617)
------------- -------------
NET (LOSS) $ (1,329,801) $ (1,502,859)
============= =============
NET (LOSS) INCOME PER COMMON SHARE
Basic
Continuing Operations $ (.014) (.016)
Discontinued Operations .001 (.000)
------------- -------------
TOTAL $ (.013) $ (.016)
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 103,723,352 94,750,844
------------- -------------
NET (LOSS) INCOME PER COMMON SHARE
Dilutive
Continuing Operations $ (.014) (.015)
Discontinued Operations .001 (.000)
------------- -------------
TOTAL $ (.013) $ (.015)
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 106,867,094 97,074,844
------------- -------------
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page 6
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31
----------------------------
2001 2000(1)
----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)
Continuing Operations $ (1,483,480) $ (1,499,242)
Discontinued Operations 153,679 (3,616)
ADJUSTMENTS TO RECONCILE NET (LOSS) TO NET CASH
(REQUIRED) BY OPERATING ACTIVITIES:
Depreciation and Amortization
Continuing Operations 91,033 53,868
Discontinued Operations 34 34
NON-CASH CONTINUING OPERATIONS 274,263 913,549
Changes in Assets and Liabilities:
Prepaid Expenses 33,636 (5,288)
Accounts and Loans Receivable (83,294) (17,254)
Inventory (21,047) ---
Deposits (2,961) (40,635)
Accounts Payable and Accrued Expenses 163,134 12,767
Commitments and Contingencies 1,500 1,959
------------- -------------
NET CASH (REQUIRED) BY OPERATING ACTIVITIES (873,503) (583,858)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Acquisition) of Property and Equipment
Continuing Operations (380,375) (324,860)
(Acquisition) of Intangibles
Continuing Operations (19,225) (11,489)
------------- -------------
NET CASH (REQUIRED) BY INVESTING ACTIVITIES (399,600) (336,349)
------------- -------------
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page 7
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
THREE MONTHS ENDED
MARCH 31
----------------------------
2001 2000(1)
----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock 3,230 21,250
Proceeds from Issuance of Notes 279,562 199,338
(Payment) of Notes (93,909) ---
Proceeds of Loans from Related Parties 1,106,000 735,000
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,294,883 955,588
------------- -------------
Net (Decrease)Increase in Cash
Continuing Operations 21,804 35,429
Discontinued Operations (24) (48)
------------- -------------
Net (Decrease)Increase in Cash 21,780 35,381
CASH AT BEGINNING OF QUARTER 16,998 15,026
------------- -------------
CASH AT END OF QUARTER $ 38,778 $ 50,407
============= =============
Supplemental Disclosure of Cash Flow Information:
Non-Cash Financing Activities:
Board of Director Fees $ 29,475 $ 67,852
Interest 64,899 ---
Settlement of Litigation 106,800 ---
Consultant Fees 39,635 718,437
Employee Compensation 33,454 127,260
-------------- -------------
Total Non-Cash Operations $ 274,263 $ 913,549
Repayment of Debts 3,551,467 132,000
Acquisition 30,000 ---
-------------- -------------
$ 3,855,730 $ 1,045,549
============== =============
NOTE
- ----
(1) Items described herein as "Continuing Operations" for the March 31, 2000
period were previously reported as "Development-Stage Operations".
(2) The consolidated cash flows for the three months ended March 31, 2000 have
been restated to conform with the March 31, 2001 presentation.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page 8
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
NOTE A - BASIS OF PRESENTATION
- ------------------------------
These statements are unaudited, but reflect all adjustments that, in the
opinion of management, are necessary to provide a fair presentation of the
financial position, results of operations and cash flows for the dates and
periods covered. All such adjustments are of a normal recurring nature.
NOTE B - SEGMENT INFORMATION - CONTINUING OPERATIONS
- ----------------------------------------------------
THREE MONTHS ENDED
MARCH 31
----------------------------
2001 2000(1)
----------------------------
SEGMENT REVENUES
----------------
ADHESIVES, SEALANTS AND COATINGS $ 49,286 $ -0-
ROOFING AND WATERPROOFING(2) 245,466 ---
------------- -------------
TOTAL SEGMENT REVENUES 294,752 -0-
ELIMINATION OF INTERSEGMENT TRANSFERS (49,286) -0-
------------- -------------
REVENUES $ 245,466 $ -0-
============= =============
AFTER-TAX OPERATING INCOME (LOSS)
---------------------------------
ADHESIVES, SEALANTS AND COATINGS $ (411,813) $ (713,059)
ROOFING AND WATERPROOFING (344,788) ---
------------- -------------
TOTAL SEGMENT ATOI (756,601) $ (713,059)
INTEREST AND EXCHANGE GAINS AND (LOSSES) (73,043) (17,645)
CORPORATE EXPENSES (653,836) (768,538)
------------- -------------
INCOME (LOSS) FROM CONTINUING OPERATIONS $ (1,483,480) $ (1,499,242)
============= =============
COMMENTS TO NOTE B
------------------
(1) Items described herein as "Continuing Operations" for the March 31,
2000 period for the adhesives, sealants and coatings segment were
previously reported as "Development-Stage Operations".
(2) The Company began roofing and waterproofing operations on January 1,
2001.
Page 9
URECOATS INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
NOTE C - EARNINGS PER SHARE
- ---------------------------
Basic earnings per share is computed by dividing income available to common
stockholders (the numerator) by the weighted-average number of common shares
(the denominator) for the period. For diluted earnings per share, the
denominator is based on the following weighted-average number of common shares
and includes the additional common shares that would have been outstanding of
potentially dilutive common shares had been issued:
THREE MONTHS ENDED
MARCH 31
----------------------------
BASIC DILUTED
------------- -------------
2001 103,723,352 106,867,094
2000 94,750,844 97,074,844
NOTE D - INVENTORIES
- --------------------
MARCH 31 DECEMBER 31
2001 2000
------------- -------------
FINISHED PRODUCTS $ 4,826 $ ---
RAW MATERIALS AND SUPPLIES 16,221 ---
------------- -------------
TOTAL $ 21,047 $ ---
============= =============
NOTE E - ACQUISITION
- --------------------
During first quarter 2001, the Company completed purchase accounting for the
Rainguard Roofing Corporation acquisition. In connection with the purchase of
Rainguard Roofing, the Company effectively commenced its roofing and
waterproofing segment operations.
NOTE F - SEGMENT INFORMATION
- ----------------------------
The Company's operations are grouped into two industry segments or divisions
as defined under Statement of Financial Accounting Standards (SFAS) No. 131.
The results of operations from the Company's three operating divisions that are
reportable under SFAS No. 131 for the three months ended March 31, 2001, as
compared to the three months ended March 31, 2000, are more fully described
below, with the exception of the roofing and waterproofing operations, which
cannot be compared to any prior corresponding period due to operations beginning
on January 1, 2001. Included in all divisions are Urecoats Technologies, Inc.,
Urecoats International, Inc., and Rainguard Roofing Corporation.
Page 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------
The following discussion of our results of operations and liquidity and
capital resources should be read in conjunction with our condensed
consolidated financial statements and related notes thereto appearing
elsewhere in this report. All information in the discussion and references
to the year and quarters are based on our fiscal year and first quarter,
which end on December 31 and March 31, respectively.
The Company has exited its development-stage and commenced operations in
both of its segments, effective January 1, 2001, as described hereinbelow. We
have reclassified and attributed prior development-stage operations figures
for the year 2000, to our adhesives, sealants and coatings segment, when
applicable.
OVERVIEW
As a result of the global recycling movement and legislation aimed at the
extraction of raw materials from solid waste, management's view of the future
growth of the adhesive, sealant and coating industry is that there will be an
increasing market demand for quality and cost-effective products utilizing
recycled components. We are committed to acquiring and developing secondary
use products, to supply the emerging market demands for such products.
We acquired all right, title and interest in two formulas, including
certain technologies for their manufacture and application pursuant to a
Purchase and Sale Agreement dated October 30, 1997, from Creative Chemical
Company(3C), which form the foundation of our developing line of products that
incorporate recycled materials in their composition. We refer to our products
that are made from the formulas as rubber sealant membranes.
We recently commenced manufacturing and distribution of our flagship
URECOATS 100(TM) RUBBER SEALANT MEMBRANE(RSM)(TM) product and spray system for
its application, for use in our roofing and waterproofing operations, and are
using technologies acquired and developed during our initial research and
development phase for sales and marketing purposes. We are currently expanding
with application of our products in Florida and are preparing for national
expansion. In addition, we are exploring additional applications for our
formulas.
Our primary purpose for entering the roofing and waterproofing business,
through our Rainguard Roofing Corporation subsidiary, is to promote, test and
perfect the URECOATS 100(TM) RUBBER SEALANT MEMBRANE(RSM) (TM) product and
spray application system, as well as future products acquired, developed
and/or manufactured by us. We also apply conventional roofing products to
generate revenues.
We are exploring strategic relationships and acquisitions in order to
accommodate our planned expansion of sales, marketing, manufacturing, and
distribution operations with respect to both of segments of our business.
Page 11
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 VS. THREE MONTHS ENDED MARCH 31, 2001
REVENUES. The Company reported record first quarter revenues for the
three months ended March 31, 2001. Revenues and other income (hereafter called
revenues) for the first quarter of 2001 were $245,466. We cannot compare the
current period to any corresponding prior period due to the revenue being the
first recorded for these operations.
TOTAL COSTS AND EXPENSES. Total costs and expenses increased from
$1,499,242 for the first quarter of 2000 to $1,728,946 in the first quarter of
2001. The increase of $229,704 related to establishing operations in both of
the Company's segments of business.
COST OF SALES. The Company's cost of sales for the first quarter of
2001 was $338,579. These costs include direct labor, materials, and other job
related costs. We cannot compare the costs of sales for the current period to
any corresponding prior period due to these costs being the first recorded for
non-development-stage operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the first quarter of 2001 were $1,095,940 compared
to $414,200 for the corresponding three months of 2000. The increase in selling,
general and administrative expenses of $681,740 for the three months ended
March 31, 2001, compared to that same period in 2000, is primarily due to
salaries, expenses and costs associated with the start-up of the roofing and
waterproofing company and to initiate manufacturing of the URECOATS 100(TM)
RUBBER SEALANT MEMBRANE(RSM)(TM) product.
CONSULTING FEES. Consulting fees for the first quarter of 2001 were
$87,310 as compared to $798,881 for the same period in 2000. The decrease was
primarily due to the restructuring of contracts relating to consultants in the
technological arm of the company.
OTHER INCOME AND EXPENSES, NET. Interest expense was $73,043 for the
first quarter of 2001 compared to $17,645 for the same period in 2000, an
increase of $55,398. This increase was primarily due to higher weighted average
borrowings for capital expenditures and working capital required to establish
business operations in both of the Company's segments during the first quarter
of 2001.
INCOME TAX. The pre-tax loss for the first quarter of 2001 was
$(1,329,801) as compared to $(1,502,859) in the same quarter of 2000, a decrease
of $173,058.
ACQUISITION
The operating results of Rainguard Roofing Corporation acquired, effective
January 1, 2001, have been included in the accompanying condensed consolidated
financial statements from its respective date of acquisition. This acquisition
was accounted for under the purchase method of accounting.
Page 12
We acquired Rainguard Roofing Corporation, a Florida corporation organized
on May 28, 1997, which had minimal assets and liabilities, because it maintained
an active roofing contracting license since 1997, which was needed to enter into
the roofing and waterproofing business.
ESTABLISHMENT OF NEW SUBSIDIARIES
We established two new subsidiaries, in addition to acquiring Rainguard
Roofing Corporation, during the first quarter of 2001 as part of our plan to
enter the roofing and waterproofing markets. Urecoats Roofing Corporation, a
Delaware corporation, was established on February 6, 2001, to be a holding
company for our new roofing and waterproofing operations. Urecoats Roofing of
Florida, Inc., a Florida corporation, was established, effective January 1,
2001, for the purpose of selling, marketing, and applying our products in
Florida.
After these subsidiaries were formed, however, we underwent a change in
executive management, which eliminated the need for these additional
subsidiaries. All roofing and waterproofing operations will be carried out
solely through our Rainguard Roofing Corporation subsidiary. The only activity
that took place with regard to these new subsidiaries related to organizational
costs and they will either be dissolved or remain inactive subject to future
use in keeping with our present plans, strategies and goals.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures during the first three months of fiscal 2001 totaled
$399,600 compared to $336,349 in the corresponding period of the prior year.
Additions to plant and equipment increased from $324,860 during the first three
months of fiscal 2000 to $380,375 during the current period. There were
expenditures for acquisitions of $30,000 during the current period compared to
no expenditures during the first three months of fiscal 2000.
Total liabilities decreased from $3,420,587 at December 31, 2000 to
$1,323,907 at March 31, 2001, primarily due to the Chairman of the Board and
CEO converting short-term loans payable, including interest, into equity
described elsewhere in this report. The total amount converted was $3,616,617,
of which $2,408,000 in principal and $37,467 in interest was outstanding at
December 31, 2000. Total debt for the first quarter of 2001 and December 31,
2000, expressed as a percentage of the sum of total debt and shareholders'
equity, was 77.3% and 190.4%, respectively. Total debt decreased from
$4,091,526 at December 31, 2000 to $1,996,346 at March 31, 2001.
Net loss for the first quarter of 2001 was $(1,329,801), a decrease of
11.5% from the net loss of $(1,502,589) for the first quarter of 2000. Diluted
net loss per common share fell 13.3% to $(.013) for the first quarter of 2001
compared to $(.015) for the same period in 2000. The net loss per share
calculation for the first quarter of 2001 includes an increase in actual and
equivalent shares outstanding.
Page 13
We currently do not have the liquidity or capital resources to fund our
operations without raising capital either from borrowing or from the sale
of additional shares of stock. We anticipate further financing through short-
term and long-term loans and/or the sale of additional restricted common stock
to accredited sophisticated investors. The Chairman of the Board has confirmed
a financial guarantee to provide up to $3,000,000 to us for operating expenses
incurred or to be incurred during the year 2001.
SEGMENT INFORMATION
Revenues for our adhesives, sealants and coatings operations were $49,286
during the first quarter of 2001 as a result of beginning operations and demand
for the URECOATS 100(TM) RUBBER SEALANT MEMBRANE(RSM)(TM) product, through our
roofing and waterproofing operations. We cannot compare the revenues in the
current period to any corresponding prior period due to the revenues being the
first recorded by us for these operations. We just came out of research and
development with our flagship product on January 1, 2001. We did not have any
operating profits during the first quarter of 2001.
Revenues for our roofing and waterproofing operations were $245,466 during
the first quarter of 2001 as a result of demand for the URECOATS 100(TM) RUBBER
SEALANT MEMBRANE(RSM)(TM) and other conventional roofing products, in the South
Florida local market. We cannot compare the revenues in the current period
to any corresponding prior period due to the revenues being the first recorded
by us for these operations. We began our roofing and waterproofing operations
on January 1, 2001. We did not have any operating profits during the first
quarter of 2001.
FORWARD-LOOKING STATEMENTS
We have included forward-looking statements in this report. For this
purpose, any statements contained in this report that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "estimate" or "continue" or the negative or other variations
thereof or comparable terminology are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, and actual results may differ materially depending on a variety
of factors. Factors that might cause forward-looking statements to differ
materially from actual results include, among other things, overall economic
and business conditions; demand for our goods and services; competitive
factors in the industries in which we compete or intend to compete; raw
materials availability and costs; success of implementing cost reduction
programs; and timing, impact and other uncertainties of our future acquisition
plans.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------
The Company does not issue or invest in financial instruments or their
derivatives for trading or speculative purposes. The operations of the Company
are conducted primarily in the United States, and, as such, are not subject to
material foreign currency exchange risk. Although the Company has outstanding
debt and related interest expense, market risk in interest rate exposure in the
United States is currently not material.
Page 14
PART II. OTHER INFORMATION
----------------------------
ITEM 1. LEGAL PROCEEDINGS
- ---------------------------
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- ---------------------------------------------------
RECENT SALES OF UNREGISTERED SECURITIES
During the quarterly period ended March 31, 2001, we issued restricted
common stock, for certain private transactions, in reliance on Section 4(2) of
the Act, as described below:
(1) We issued 50,000 shares of restricted common stock, pursuant to an
acquisition agreement, effective January 1, 2001, in exchange for all of the
issued and outstanding common stock of Rainguard Roofing Corporation, valued
and recorded at $30,000.
(2) We issued 50,000 shares of restricted common stock, as employee
compensation, to a former officer of the Company, valued and recorded at
$15,525.
(3) We issued an aggregate of 22,500 shares of restricted common stock,
as employee bonuses, valued and recorded at $7,128.75.
(4) We issued 75,000 shares of restricted common stock, for board of
director compensation, to a director of the Company, valued and recorded at
$29,475.
(5) We issued 200,000 shares of restricted common stock, pursuant to a
legal settlement, valued and recorded at $106,800.
(6) We issued an aggregate of 48,750 shares of restricted common stock,
for consulting services rendered, to a director of the Company, valued and
recorded at $17,160.
(7) We issued 8,219,015 shares of restricted common stock, pursuant to
the partial exercise of a restricted stock option, to the Chairman of the
Board and CEO of the Company, in exchange for cancellation of $3,616,367 in
short-term interest bearing loans he made to the Company up to and including
March 31, 2001. We granted the 3-year restricted stock option on January 8,
2001, for the purchase of 12,000,000 shares of restricted common stock at $.44
per share, as consideration for his agreement to continue funding the working
capital requirements of the Company up to $3,0000,000 and forbearing repayment
of funds he advanced to the Company during the year 2000, through the 2001
calendar year.
Page 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- -----------------------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
None
ITEM 5. OTHER INFORMATION
- ---------------------------
TIMOTHY M. KARDOK
Urecoats Roofing Corporation and Timothy M. Kardok entered into an
Employment Agreement beginning March 1, 2001 and ending February 28, 2003.
Pursuant to this agreement, Mr. Kardok became President of Urecoats Roofing
Corporation and was appointed to the Board of Directors of Urecoats Industries
Inc. Mr. Kardok became President and Chief Operating Officer of Urecoats
Industries Inc. on March 19, 2001. His Employment Agreement dated March 1,
2001 was terminated effective March 19, 2001 pursuant to the change in his
capacities and he entered into a new Employment Agreement, effective March 19,
2001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
EXHIBITS
10(i) Employment Agreement between Urecoats Roofing Corporation and
Timothy M. Kardok dated March 1, 2001.
10(ii) Termination Agreement between Urecoats Roofing Corporation and
Timothy M. Kardok, effective as of March 19, 2001.
10(iii) Employment Agreement between Urecoats Industries Inc. and
Timothy M. Kardok, effective as of March 19, 2001.
10(iv) Restricted Stock Option Agreement between the Company and
Richard J. Kurtz dated January 8, 2001.
99(i) Acquisition Agreement between Urecoats International, Inc.,
Rainguard Roofing Corporation, and Urecoats Industries Inc.
entered into January 5, 2001, effective January 1, 2001.
REPORTS ON FORM 8-K
The Company filed a Form 8-K on February 7, 2001 on the settlement of
outstanding litigation between the Company and the Smith & Wesson Corp.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
URECOATS INDUSTRIES INC.
(Registrant)
May 15, 2001 /s/ Timothy M. Kardok
------------ ---------------------
Date Timothy M. Kardok
President and COO
May 15, 2001 /s/ John G. Barbar
------------ ---------------------
Date John G. Barbar
Treasurer and CFO
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EXHIBIT INDEX
-------------
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- ------------------------------------------------------------
10(i) Employment Agreement between Urecoats Roofing Corporation
and Timothy M. Kardok dated March 1, 2001.
10(ii) Termination Agreement between Urecoats Roofing Corporation
and Timothy M. Kardok, effective as of March 19, 2001.
10(iii) Employment Agreement between Urecoats Industries Inc. and
Timothy M. Kardok, effective as of March 19, 2001.
10(iv) Restricted Stock Option Agreement between the Company and
Richard J. Kurtz dated January 8, 2001.
99(i) Acquisition Agreement between Urecoats International, Inc.,
Rainguard Roofing Corporation, and Urecoats Industries Inc.
entered into January 5, 2001, effective January 1, 2001.
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