UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ 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 EXCHANGE ACT
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 of organization) Identification No.)
1471 E. Commercial Ave., Meridian, Idaho 83642
(Address of principal executive offices) (Zip Code)
Issuers Telephone Number: (208) 887-0953 Fax : (208) 888-1757
The number of shares of common stock outstanding as of March 31, 2001, is
17,688,072.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X]
PART I - FINANCIAL INFORMATION
Forward Looking Statements and Risk Factors
This form 10-Q contains certain forward-looking statements which are based
on management's current expectations. The Company has identified risk factors
which could cause actual results to differ substantially from the forward
looking statements. These risk factors include, but are not limited to: general
economic conditions, current industry specific trends, variability in time line
of new product developments, new product acceptance, economic viability of our
customers and vendors, changes in legislation, the ability to obtain adequate
capital funding for product development and expansion, and the availability of
qualified employees.
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 ended March 31, 2001 and 2000.
Item 2. Management's Discussion and Analysis or Plan of Operation:
Financial Results of Operations:
Revenues for the first quarter of 2001 of $699,171 are comprised mostly of
stronger than expected sales within the engineered automation sector but reflect
a slower than expected growth within the IC (Integrated Circuit) testing sector
due, at least in part, to longer than expected delays in market testing and
introduction of the new GCI(TM) product. Net loss of ($52,153) reflects a net
loss available to shareholders of ($ 0.00) per common share.
Sales for the three months ended March 31, 2001 were $699,171, compared to
$359,337 for the period ending March 31, 2000, resulting in an increase of
$339,834 or 95%. Operating expenses are comprised mostly of direct costs for
materials and labor for design and production. Operating expenses were 64% of
sales for the period ending March 31, 2001 and 79% of sales for the period
ending March 31, 2000.
Selling, general and administrative expenses were $285,153, or 41% of sales
for the three months ending March 31, 2000, compared to $177,703 or 49% of sales
for the same period ended March 31, 2000. The increase in selling, general and
administrative expenses was due primarily to the addition of three marketing
personnel to promote sales and the addition of other technical personnel as
needed.
Net loss for the three months ended March 31, 2001 was ($52,153), compared
to a net loss of ($104,895) for the same period ended March 31, 2000. Management
believes the decrease is due to a stronger than expected increase in sales in
the engineered automation and engineering software development sectors.
Management expects the increase in sales to continue in both of these sectors
due to increased exposure to and contacts with potential
customers from the Company's marketing personnel. Management does not expect
substantial growth in sales to occur in the IC Interconnect Testing sector
within the next quarter, ending June 30, 2001, due to longer than expected
delays in the introduction of its proprietary GCI(TM) products. Management is
also aware of the measurable economic downturn in the technology sectors in
general which may impact future sales of engineered automation and IC testing
devices.
Changes in Financial Condition:
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere herein for March
31, 2001 and March 31, 2000.
Current assets were $1,285,711 for the period ending March 31, 2001,
compared to $815,664, for the period ending December 31, 2000, an increase of
$477,047, or 58%, respectively. The resulting current ratio was 2.59 at March
31, 2001, compared to 1.27 at December 31, 2000.
The increase in current assets at March 31, 2001, over December 31, 2000,
was due primarily to an increase in cash accounts of $442,228, and from an
increase in receivables of $146,762, for the same respective periods. Cash
accounts were increased due to receipts from outstanding receivables and from
capital infusions from common stock sales as discussed below in "Funding and
Capital Resources."
Liquidity:
Management believes that adequate funding exists for current operations,
but will seek additional funding for future product development and expansions.
Funding and Capital Resources:
Capital resources have been increased by the sale of common stock through a
Private Placement Memorandum. Sales of common stock for the period ending March
31, 2001, yielded capital funding of $701,000.
Plan of Operation:
The Company continues to work on the development and expansion of its two
core businesses, i.e., R-Tec Corporation and R-Tec Interconnect, both wholly
owned subsidiaries. R-Tec Corporation continues to focus on the custom
engineered, automation and services markets and R-Tec Interconnect continues to
focus on the IC interconnect testing markets.
Within the first quarter of 2001, R-Tec Interconnect has introduced its
proprietary interconnect device, GCI(TM). The GCI(TM) is complimentary to
existing testing devices within the product line, namely custom engineered
sockets. Management anticipates some required engineering re-design of its
GCI(TM) to allow it to be more adaptive to testing environments as continued
market penetration occurs. Within this re-design parameter, management will also
examine new additional market applications for the GCI(TM) technology to broaden
its product lines within the IC Testing industry.
The Company is planning to seek additional funding for the further
development of the IntorCorp motor. Management is currently reviewing the patent
positions of the IntorCorp motor patents. With a successful review of the patent
positions, management expects to develop a new business plan aimed at moving the
IntorCorp motor project towards viability and market acceptance.
The R-Tec Corporation Test Solutions Division is now actively seeking and
attracting contracts for application software development at its Utah office.
For the period ending March 31, 2001, several, initial contracts have been
awarded to the division which will help offset divisional expenses. The R-Tec
Corporation Test Solutions Division will continue to support application
software development for R-Tec Corporation at its Meridian, Idaho, offices, but
will also be pursuing separate contracts to increase revenues.
In anticipation of increased production needs, the Company has also
invested in a new, interactive financial and production software program to
augment systems needs. It is anticipated that the new software program will
become operational and will replace the existing software system by the third
quarter of 2001. Implementation plans and schedules have been formalized for the
new system to minimize financial and production disruptions.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Changes in Securities:
During the first quarter of 2001, the Company received additional
subscriptions for its common stock through its Private Placement Memorandum, as
follows:
Date Shares Cash Consideration Shareholder
- ---- ------ ------------------ -----------
01/17/01 100,000 $100,000 Relawk Capital, LLP
01/22/01 10,000 $ 10,000 Harold Bowers
01/26/01 31,000 $ 31,000 Williard G. Nelson
01/29/01 100,000 $100,000 Barry Barnett
03/02/01 25,000 $ 25,000 Michael Calhoun
03/05/01 400,000 $400,000 LOMAP LP
03/14/01 25,000 $ 25,000 Roy Phillips
03/28/01 10,000 $ 10,000 Keith Cline
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.
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: May 10, 2001 By / s / Douglas G. Hastings
______________________________________
Douglas G. Hastings, President and CEO
By / s / Michael T. Montgomery
______________________________________
Michael T. Montgomery, CFO
R-TEC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
As of March 31, 2001 (Unaudited) and December 31, 2000
March 31, 2001 December 31, 2000
-------------- -----------------
Current assets
Cash $ 518,862 $ 76,634
Accounts receivable (net of $-- allowance
for doubtful accounts) 658,286 511,524
Costs and estimated earnings in excess
of billings on uncompleted contracts 74,079 202,530
Income taxes receivable 15,295 15,295
Inventory 15,503 --
Prepaid expenses 1,630 3,094
Notes receivable, current portion 2,056 6,587
----------- ---------
Total current assets 1,285,711 815,664
Equipment and leasehold improvements, at cost,
net of accumulated depreciation 102,481 106,834
Other assets 46,237 17,397
Notes receivable, less current portion 18,647 14,663
----------- ---------
Total assets $ 1,453,076 $ 954,558
=========== =========
Current liabilities
Accounts payable $ 181,241 $ 334,142
Accrued expenses 146,594 102,161
Accrued preferred dividends payable 50,966 36,517
Billings in excess of costs and estimated
earnings on uncompleted contracts 40,836 94,663
Leases payable, current portion 12,639 12,020
Notes payable to related parties, current portion 65,000 65,000
----------- ---------
Total current liabilities 497,276 644,503
Lease payable, less current portion 24,934 28,036
Notes payable to related parties, less current portion 100,000 100,000
----------- ---------
Total liabilities 622,210 772,539
Shareholders' equity
Series A cumulative convertible preferred stock, par value $0.234 per
share, 5,000,000 authorized, 2,781,564
shares issued and outstanding 651,100 651,100
Common stock, no par value per share,
30,000,000 authorized, 18,074,128 and 17,373,128
shares issued and outstanding at March 31, 2001
and December 31, 2000, respectively 981,731 280,731
Additional paid-in capital 107,439 107,439
Accumulated deficit (909,404) (857,251)
----------- ---------
Total shareholders' equity 830,866 182,019
----------- ---------
Total liabilities and shareholders' equity $ 1,453,076 $ 954,558
=========== =========
See accompanying notes
-1-
R-TEC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Periods Ended March 31, 2001 and March 31, 2000 (Unaudited)
Three Months Ended March 31,
2001 2000
------------ -----------
Revenues $ 699,171 $ 359,337
Operating costs 447,665 285,436
------------ -----------
Gross profit 251,506 73,901
Selling, general and administrative expenses 285,153 177,703
------------ -----------
Operating loss (33,647) (103,802)
Interest expense (4,842) (1,623)
Interest income 1,435 --
Other -- 530
------------ -----------
(3,407) (1,093)
------------ -----------
Loss before income taxes (37,054) (104,895)
Income taxes expense 650 --
------------ -----------
Net loss (37,704) (104,895)
Preferred stock dividends 14,449 --
------------ -----------
Net loss available to common shareholders $ (52,153) $ (104,895)
============ ===========
Net loss per common share $ (0.00) $ (0.01)
Weighted average shares outstanding 17,688,072 8,533,594
See accompanying notes
-2-
R-TEC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended March 31, 2001 and March 31, 2000 (Unaudited)
Three Months Ended March 31,
2001 2000
--------- ---------
Cash flows from operating activities
Net income (loss) $ (37,704) $(104,895)
Adjustments to reconcile net loss to net
cash provided used by operating activities
Depreciation and amortization 11,023 5,690
Sale refund through issuance of note payable 58,706
Changes in assets and liabilities
Accounts receivable (146,762) (194,151)
Costs and estimated earnings in excess
of billings on uncompleted contracts 128,451 49,579
Inventory (15,503) --
Prepaid expenses 1,464 (1,977)
Accounts payable (152,901) (22,207)
Accrued expenses 44,433 12,104
Billings in excess of costs and estimated
earnings on uncompleted contracts (53,827) 91,402
Income taxes payable -- (10,000)
--------- ---------
Net cash used by operating activities (221,326) (115,749)
Cash flows from investing activities
Purchase of equipment and other assets (35,510) (48,629)
--------- ---------
Net cash used by investing activities (35,510) (48,629)
--------- ---------
Cash flows from financing activities
Collections on loans 547 397
Proceeds from preferred stock -- 249,550
Proceeds from common stock 701,000 --
Net borrowings on line of credit -- 36,000
Payments on debt (2,483) --
--------- ---------
Net cash provided by financing activities 699,064 285,947
--------- ---------
Net increase in cash 442,228 121,569
Beginning cash 76,634 3,609
--------- ---------
Ending cash $ 518,862 $ 125,178
========= =========
Supplemental disclosures of cash flow information
Interest paid $ 2,506 $ 1,623
Noncash investing and financing activities
Sale refund through issuance of note payable $ -- $ 58,706
Preferred stock dividends payable $ 14,449 $ --
See accompanying notes
-3-
R-TEC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001 and 2000
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 loss.
NOTE B - EQUIPMENT
Equipment consists of:
Equipment $ 87,623
Vehicles 31,171
Office equipment and furnishings 14,910
Leasehold improvements 45,720
---------
179,424
Accumulated depreciation and amortization (76,943)
---------
$ 102,481
=========
-4-