United States Securities and Exchange Commission
WASHINGTON, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from ____________ to ___________
Commission file number : 0-30463
R-Tec Holding, Inc.
(Exact name of business issuer in its charter)
Idaho 82-0515707
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1471 E. Commercial Ave., Meridian, Idaho 83642
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (208)-887-0953 Fax: (208) 888-1757
- --------------------------------------------------------------------------------
(Former Address)
The number of shares of common stock outstanding as of June 30, 2000, is 8, 533,
594.
Transitional Small Business Disclosure Format. Yes [ ] No [X]
1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The following financial statements are filed as part of this report:
The Consolidated Financial Statements of the Company for the three months
and six months ended of June 30, 2000, reviewed by Balukoff, Lindstrom & Co.,
P.A., certified public accountants.
ITEM 2. MANAGEMENT'S DISCUSSION AND PLAN OF OPERATION:
RESULTS OF OPERATIONS: Second quarter revenues of $392,330 and an operating loss
of $74,457 were essentially as expected by Management with the contracts in
process. Management is of the opinion that the projected sales of $2,000,000 for
the year are on target with projected net income in excess of $150,000 expected.
The projected revenues and net income are based on the expected completion of
contracts in process, and any delay in obtaining parts from other suppliers
could delay completion of a contract into the first quarter of 2001, however, at
present Management expects all contracts to be timely completed. Management
anticipates that the third quarter will have revenues essentially the same as
the first two quarters, and that the operating results will be close to break
even, with the fourth quarter completion of existing contracts resulting in the
final revenues and profits from the existing contacts in process.
FUNDING AND CAPITAL RESOURCES: Management is of the opinion that present cash
reserves, together with receivables will be sufficient to carry the Company at
its present level of operations through the current year. During the second
quarter the Company received $144,100 in Preferred Stock subscriptions to
supplement the cash of the Company.
PLAN OF OPERATION: The Company continues to emphasize its primary business of
custom automation, which is continuing with the growth rate established in prior
years. Management recognizes the profit and growth constraints involved with
custom contracts, and continues to develop its second area of focus on
fabrication of products developed in custom engineering contracts, but which
will have appeal as standard items to several customers. Such shelf items will
have a greater profit potential and immediate revenue recognition when sold. The
third area of focus, high-tech interconnect devices, is continuing to develop,
but is being delayed because of the involvement and complications of other
supplier parties.
INTORCORP MOTOR: IntorCorp is in the process of completing the filing of patents
for its inventions in the IntorCorp Motor. Management of IntorCorp is currently
evaluating patent documents, and potential conflicts with existing patents,
which evaluation is expected to be completed during the third quarter. The
manner in which the development of the IntorCorp Motor will continue will depend
on the evaluation and strength of the patent position.
2
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. None
ITEM 2. CHANGES IN SECURITIES.
During the second quarter the Company received additional subscriptions
from Series "A" Preferred Stock sold to existing shareholders of such stock,
namely:
DATE SHARES CASH CONSIDERATION SHAREHOLDER
---- ------ ------------------ -----------
04/04/00 42,668 $10,000 Robert Montgomery
04/04/00 128,003 $30,000 Ronald J. Tolman
04/04/00 197,764 $46,350 Rulon L. Tolman
04/14/00 75,735 $17,750 Ronald J. Tolman
06/26/00 85,335 $20,000 George W. Wadsworth
06/26/00 85,335 $20,000 John E. Smith
The described stock transactions were exempt from registration under the
provisions of Section 4(2) of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None
ITEM 5. OTHER INFORMATION. None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) No exhibits
(b) No Form 8K filings
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
R-TEC HOLDING, INC.
(Registrant)
Date: August 14, 2000 By /s/
-----------------------------------
Douglas G. Hastings, President and CEO
3
CONSOLIDATED FINANCIAL STATEMENTS
R-TEC HOLDING, INC.
AND SUBSIDIARY
JUNE 30, 2000 AND 1999
TABLE OF CONTENTS
PAGE NO.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT ................................ 1
FINANCIAL STATEMENTS
Consolidated Balance Sheet .......................................... 2
Consolidated Statements of Operations ............................... 3
Consolidated Statements of Cash Flows ............................... 4
Notes to Consolidated Financial Statements .......................... 5
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
To the Shareholders and Board of Directors
R-Tec Holdings, Inc.
Boise, Idaho
We have reviewed the balance sheet of R-Tec Holdings, Inc. as of June 30, 2000
and the related statements of income and cash flows for the three-month and
six-month periods ended June 30, 2000 and 1999. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
BALUKOFF, LINDSTROM & CO., P.A.
July 28, 2000
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R-TEC HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
R-TEC HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
June 30, 2000
-------------
Current assets
Cash $ 51,092
Accounts receivable (net of $-- allowance
for doubtful accounts) 96,382
Costs and estimated earnings in excess
of billings on uncompleted contracts 32,777
Prepaid expenses 3,798
Notes receivable, current portion 5,078
---------
Total current assets 189,127
Equipment, at cost, net of accumulated depreciation 80,371
Other assets 11,254
Notes receivable, less current portion 21,035
Total assets $ 301,787
=========
Current liabilities
Accounts payable $ 1,579
Accrued expenses 27,289
Accrued dividends payable 10,137
Income taxes payable 4,761
Billings in excess of costs and estimated
earnings on uncompleted contracts 8,394
Notes payable 39,137
Notes payable, related parties 100,000
---------
Total current liabilities 191,297
Shareholders' equity
Series A cumulative convertible preferred stock, par value
$0.23437 per share, 5,000,000 authorized, 1,679,609
shares issued and outstanding 393,650
Common stock, no par value per share,
30,000,000 authorized, 8,533,594 shares
issued and outstanding 221,729
Additional paid-in capital 107,439
Accumulated deficit (612,328)
---------
Total shareholders' equity 110,490
---------
Total liabilities and shareholders' equity $ 301,787
=========
See accompanying notes and accountants' report
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R-TEC HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
Revenues $ 392,330 $ 207,759 $ 751,667 $ 757,187
Operating costs 265,379 124,397 550,815 489,595
----------- ----------- ----------- -----------
Gross profit 126,951 83,362 200,852 267,592
Selling, general and administrative expenses 201,408 127,779 379,111 243,683
----------- ----------- ----------- -----------
Operating income (loss) (74,457) (44,417) (178,259) 23,909
Interest expense (6,217) (876) (7,840) (7,801)
Other 471 (2,958) 1,001 529
----------- ----------- ----------- -----------
(5,746) (3,834) (6,839) (7,272)
----------- ----------- ----------- -----------
Income (loss) before income taxes (80,203) (48,251) (185,098) 16,637
Income taxes -- (10,519) -- 40,381
----------- ----------- ----------- -----------
Net income (loss) (80,203) (37,732) (185,098) (23,744)
Preferred stock dividends 10,137 -- 10,137 --
----------- ----------- ----------- -----------
Net income (loss) available
to common shareholders $ (90,340) $ (37,732) $ (195,235) $ (23,744)
Net income (loss) per common share $ (0.01) $ -- $ (0.02) $ --
Weighted average shares outstanding 8,533,594 8,533,594 8,533,594 8,533,594
See accompanying notes and accountants' report
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R-TEC HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
2000 1999
--------- --------
Cash flows from operating activities
Net income (loss) $(185,098) $(23,744)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities
Depreciation and amortization 11,437 21,731
Sale refund through issuance of note payable 58,706 --
Changes in assets and liabilities
Accounts receivable 9,098 24,271
Costs and estimated earnings in excess
of billings on uncompleted contracts 30,428 46,667
Prepaid expenses (468) 184
Accounts payable (86,260) (81,460)
Accrued expense (27,611) (12,623)
Billings in excess of costs and estimated
earnings on uncompleted contracts (17,584) 51,109
Income taxes payable (7,640) 18,765
Deferred income taxes -- 18,048
Net cash provided (used) by operating activities (214,992) 62,948
--------- --------
Cash flows from investing activities
Purchase of equipment and other assets (48,629) (19,336)
Purchase of investment -- (8,428)
--------- --------
Net cash used by investing activities (48,629) (27,764)
--------- --------
Cash flows from financing activities
Collections on loans 1,023 70,130
Proceeds from preferred stock 393,650 --
Borrowings on line of credit 36,000 --
Payments on debt (119,569) (84,201)
--------- --------
Net cash provided (used) by financing activities 311,104 (14,071)
--------- --------
Net increase (decrease) in cash 47,483 21,113
Beginning cash 3,609 3,338
--------- --------
Ending cash $ 51,092 $ 24,451
========= ========
Supplemental disclosures of cash flow information
Interest paid $ 2,633 $ 6,310
Noncash investing and financing activities
Sale refund through issuance of note payable $ 58,706 $ --
See accompanying notes and accountants' report
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R-TEC HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
NOTE A - UNAUDITED INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting solely of normal recurring adjustments)
necessary to present fairly the financial position of R-Tec Holdings, Inc. (the
Company) and the results of operations and cash flows. Certain reclassifications
of prior quarter amounts were made to conform with current quarter presentation,
none of which affect previously recorded net income.
NOTE B - EQUIPMENT
Equipment consists of:
Equipment $ 43,933
Vehicles 31,171
Office equipment and furnishings 60,630
---------
135,734
Accumulated depreciation and amortization (55,363)
---------
$ 80,371
=========
NOTE C - NOTES PAYABLE
The Company entered into a $58,706 note payable with a customer during March
2000. The note was created as a result of a product return. Terms of the note
require twelve monthly payments of $4,892, commencing in April 2000. The Company
does not allow for product returns within the terms of their contracts. However,
to satisfy this customer, the product was repurchased. The balance of the note
payable at June 30, 2000 is $39,137.
NOTE D - NOTES PAYABLE, RELATED PARTIES
The Company redeemed stock from the shareholders on November 4, 1999 by issuing
a note for $100,000. The redemption represented the 20% minority interest as of
that date. The note is payable only from available earnings of R-Tec and is not
scheduled to commence until January 1, 2001. Interest accrues at the prime
lending rate.
NOTE E - INCOME TAXES
The Company is in a net operating loss carryforward position as of June 30,
2000. The net
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R-TEC HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
operating loss approximates $176,000. A full valuation allowance has been
provided to offset the deferred tax assets related to the net operating loss
carryforward.
NOTE F - PREFERRED STOCK
The Company has issued $500,000 of stock subscriptions for preferred stock. The
Board of Directors adopted an amendment to the Articles of Incorporation in
January 2000 to provide for the original preferred stock to be divided into
series, with the first series, Series A Preferred Stock, consisting of 2,133,399
shares of cumulative convertible preferred stock with a par value of $.23437.
Dividends on this preferred stock are cumulative from the date of issuance at
the rate of $.0222 per share, per annum, payable out of funds legally available.
Such dividends are payable only when, as, and if declared by the Board of
Directors, and shall accumulate from the date of issue, payable annually. Unpaid
dividends are not interest bearing. Dividends on Common Stock can not be paid
until all dividends on the Series A Preferred Stock have been paid. Each Series
A Preferred stock is convertible, at the option of the holder, at any time on or
before the fifth day before any redemption date (January 31 each year) to the
Company's Common Stock. The conversion price is $.23437 per share of Common
Stock. The Series A Preferred Stock shall be automatically converted on the
earlier of the date specified by vote or written consent or agreement of at
least two-thirds of the outstanding shares of such series or immediately on the
closing of the sale of public offering of Common Stock in excess of $5.00 per
share and $1,000,000 in proceeds. At the option of each holder of Series A
Preferred stock, the Company shall redeem, on the redemption date starting with
the year 2006 and continuing thereafter, the number of shares requested by the
holder, by paying cash at the rate of $.23437 per share.
The remaining preferred shares outstanding, 2,866,601, shall be designated, as
the Board of Directors shall determine into classes, series, and preferences,
limitations, restrictions and relative rights of each class or series of
preferred stock.
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