SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 17, 2001
Commission File Number 001112279
R-TEC HOLDING, INC.
(Exact name of registrant as specified in its charter)
IDAHO 82-0515707
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1471 E. COMMERCIAL AVE., BOISE, IDAHO 83642
(Address of Principal Executive Office) (Zip Code)
(208) 887-0953
Registrant's Telephone No., including area code:
Indicate by a check mark whether Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days.
YES (X) NO ( )
EXPLANATION OF AMENDMENT
The Registrant, R-Tec Holding, Inc., ("The Company"), filed an initial report on
Form 8-K on August 01, 2001 with the Securities and Exchange Commission. This
report amends Item 7, FINANCIAL STATEMENTS, PRO-FORMA INFORMATION AND EXHIBITS,
for the purchase of assets of Broward, LaMeire & Associates, Inc., an Oregon
corporation, within 60 days of August 01, 2001, the date the initial report on
Form 8-K was required to be filed.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) Financial Statements of Business Acquired.
Financial Statements
BROWAND, LAMEIRE & ASSOCIATES, INC.
December 31, 2000
2
INDEPENDENT AUDITORS' REPORT
To the Shareholders
Browand, LaMeire & Associates, Inc.
Forest Grove, Oregon
We have audited the accompanying balance sheet of Browand, LaMeire & Associates,
Inc. as of December 31, 2000, and the related statements of operations, changes
in shareholders' equity, and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards 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. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Browand, LaMeire & Associates,
Inc. as of December 31, 2000, and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States.
Balukoff, Lindstrom, & Co., P.A.
Boise, Idaho
September 18, 2001
3
BROWAND, LAMEIRE & ASSOCIATES, INC.
BALANCE SHEET
December 31, 2000
Current assets
Cash $ 8,966
Accounts receivable 176,855
Notes receivable 23,938
Other assets 1,274
--------
Total current assets 211,033
Fixed assets, net of accumulated depreciation 9,394
Investment in partnership 80,000
--------
Total assets $300,427
========
Current liabilities
Accounts payable $ 56,717
Notes payable, related parties 89,731
--------
Total current liabilities 146,448
Shareholders' equity
Common stock, no par value,
1,000 authorized, 1,000 shares
issued and outstanding 1,000
Retained earnings 152,979
--------
Total shareholders' equity 153,979
--------
Total liabilities and shareholders' equity $300,427
========
See accompanying notes
4
BROWAND, LAMEIRE & ASSOCIATES, INC.
STATEMENT OF OPERATIONS
Year Ended December 31, 2000
Revenues $450,040
Cost of revenues 64,169
--------
Gross profit 385,871
Selling, general and administrative expenses 214,352
--------
Operating income 171,519
Interest income 2,506
--------
Net income $174,025
========
Net income per common share $ 0.17
Weighted average shares outstanding 1,000
See accompanying notes
5
BROWAND, LAMEIRE & ASSOCIATES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Year Ended December 31, 2000
Common Retained
Stock Earnings Total
------ --------- ---------
Balance at January 1, 2000 $1,000 $ 73,442 $ 74,442
Net income -- 174,025 174,025
Dividends -- (94,488) (94,488)
------ --------- ---------
Balance at December 31, 2000 $1,000 $ 152,979 $ 153,979
====== ========= =========
See accompanying notes
6
BROWAND, LAMEIRE & ASSOCIATES, INC.
STATEMENT OF CASH FLOWS
Year Ended December 31, 2000
Cash flows from operating activities
Net income $ 174,025
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 4,617
Changes in assets and liabilities
Accounts receivable (119,903)
Other assets (450)
Accounts payable 36,846
---------
Net cash provided by operating activities 95,135
Cash flows from investing activities
Loans made (24,000)
Collection on loans 62
Dividends paid (94,488)
Purchase of fixed assets (2,043)
---------
Net cash used by investing activities (120,469)
Cash flows from financing activities
Proceeds from notes payable 134,386
Payments on notes payable (110,580)
---------
Net cash provided by financing activities 23,806
---------
Net decrease in cash (1,528)
Beginning cash 10,494
---------
Ending cash $ 8,966
=========
See accompanying notes
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BROWAND, LAMEIRE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Organization
Browand, LaMeire & Associates, Inc., (the Company), an S-Corporation formed in
1990, is a company specializing in marketing and sales of test interface devices
to the high tech industry.
Revenue Recognition
The Company's revenue is derived primarily from providing marketing services to
clients in the high tech industry. Revenues are recognized at the time the
actual product is sold by the Company's clients.
Credit Risk
The Company grants credit to customers primarily in the technology industry
throughout the United States. The accounting loss incurred if all parties failed
entirely to perform on their obligation is equal to the balance outstanding for
trade accounts receivable.
Cash Equivalents
The Company considers all highly liquid investments maturing in three months or
less as cash equivalents.
Fixed Assets
Capital additions are classified as fixed assets and are recorded at cost.
Depreciation is recorded by use of the straight-line method. The book value of
each asset is reduced by equal amounts over its estimated useful life.
Maintenance and repairs are charged to operations as incurred. When an asset is
disposed of, accumulated depreciation is deducted from the original cost, and
any gain or loss arising from its disposal is credited or charged to operations.
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BROWAND, LAMEIRE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
Significant Customers and Suppliers
The Company recorded revenue from services provided to customers that exceeded
ten percent of total revenue as follows:
2000
---------
Connect2it (related party) $ 148,169
Gamma Technologies 61,350
R-Tec Corporation 197,056
---------
$ 406,575
=========
Income Taxes
The shareholders have elected to be taxed as an "S" Corporation as defined by
the Internal Revenue Code, wherein the shareholders report net earnings of the
Corporation on their personal tax returns. Accordingly, no provision or
liability for income taxes has been included in the financial statements.
Value of Financial Instruments
The Company estimates that the fair value of all financial instruments, at
December 31, 2000, do not differ materially from the aggregate carrying values
of its financial instruments recorded in the accompanying balance sheet. The
estimated fair value amounts have been determined by the Company using available
market information and appropriate valuation methodologies. Considerable
judgment is required in interpreting market data to develop the estimates of
fair value, and accordingly, the estimates are not necessarily indicative of the
amounts that the Company could realize in a current market exchange.
Estimates
Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and reported
revenues and expenses. Significant estimates used in preparing these financial
statements include those assumed in determining the collectibility of
receivables. It is at least reasonably possible that the significant estimates
used will change within the next year.
Earnings Per Share
Earnings per share are computed by dividing net income available to common
shareholders by the weighted average number of shares outstanding.
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BROWAND, LAMEIRE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
NOTE B - FIXED ASSETS
Fixed assets consists of:
2000
--------
Furniture and fixtures $ 40,140
Software 977
--------
41,117
Accumulated depreciation and amortization (31,723)
--------
$ 9,394
========
The estimated useful lives of furniture and fixtures is five to seven years and
software is three years.
NOTE C - NOTES RECEIVABLE
During 2000, the Company made an advance to a Company representative. The
advance was recorded as a note receivable. The note bears interest at 15% and is
payable from future commissions owed to the representative.
NOTE D - INVESTMENT IN PARTNERSHIP
The Company purchased a 5% interest in Connect2it, LLC for $30,000 during 1998,
which was accounted for using the cost method. During 1999, the Company
purchased an additional 15% of Connect2it, LLC for $50,000. The investment
continued to be accounted for using the cost method. Subsequent to year end,
July 13, 2001, the Company sold their share of the investment back to
Connect2it, LLC for $109,742.
NOTE E - NOTES PAYABLE TO SHAREHOLDERS
At December 31, 2000 the Company owes the shareholders $89,731. The note does
not bear interest and is due on demand.
NOTE F - RELATED PARTY TRANSACTIONS
As described in Note D, the Company owns 20% of Connect2it, LLC. Sales to
Connec2it, LLC for 2000 were $148,168. The Company has accounts receivable from
Connect2it, LLC at December 31, 2000 in the amount of $34,050.
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BROWAND, LAMEIRE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
NOTE G - SUBSEQUENT EVENT
On July 17, 2001, R-Tec Holding, Inc. acquired certain assets from the Company
pursuant to an Asset Purchase Agreement by and between R-Tec Holding, Inc. and
the two individual shareholders of the Company.
Under the terms of the Agreement, R-Tec Holding, Inc. agreed to acquire certain
assets, which include the client list and industry contacts and certain items of
office equipment. Consideration for the acquisition was 380,000 shares of the
common stock of R-Tec Holding, Inc. valued at $1.00 per share, which the parties
agree and acknowledge was the fair market value of R-Tec Holding, Inc.'s shares
as of the date of the Agreement. The Agreement provides for each of the two
Company's shareholders to receive equal shares of R-Tec Holding, Inc.'s common
stock in the transaction.
NOTE H - RECENTLY ISSUED ACCOUNTING STATEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivatives as assets or liabilities in the statement of
financial position and measurement of those instruments at fair value. In June
1999, the FASB issued SFAS No. 137 "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133"
which delays the effective date of SFAS No. 133 to fiscal years beginning after
June 15, 2000. In June 2000 the FASB issued SFAS No. 138 "Accounting for Certain
Derivative Instruments and Certain Hedging Activities" which amends some of the
provisions of FASB 133. The Company believes that the adoption of these
accounting standards will not have any material effect on the financial
statements of the Company.
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(B) Pro Forma Financial Information
These financial statements do not purport to represent the combined results of
operations of R-Tec Holding, Inc. (R-TEC or The Company) and Browand, LaMeire &
Associates, Inc. (BLA) that might have occurred had the BLA acquisition been
completed on such dates, nor are they indicative of future results of
operations. The pro forma adjustments relate to the purchase allocation of and
give effect to marking certain assets to fair market value. The Company has made
reclassifications to certain liabilities of BLA consistent with the purchase
method of accounting. Other adjustments may be recorded based upon information
received in the future. Such adjustments may have a significant impact on total
assets and liabilities, cost of operations, depreciation and amortization, and
other expense accounts.
Any purchase accounting adjustments, or related costs and possible charges
arising from the purchase of BLA, may materially impact the Company's future
combined financial position and combined financial results of operations. These
pro forma financial statements also do not give effect to possible future sales
of assets or certain of the operations or to any cost savings of other benefits
of the business combination that may result from the integration of BLA and the
Company.
The unaudited pro forma combined financial statements should be read in
conjunction with the notes to the unaudited pro forma combined financial
statements, the historical consolidated financial statements of the Company and
related notes as previously filed with the Securities and Exchange Commission
and incorporated herein.
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R-TEC HOLDING, INC. AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2000
Pro Forma
Adjustments
Related to the COMBINED
R-TEC BLA BLA PRO FORMA
HISTORICAL HISTORICAL Acquisition FINANCIAL
(Note 1) (Note 2) (Note 3) STATEMENTS
---------- ---------- ----------- ----------
CURRENT ASSETS:
Cash and certificates of deposit $ 107,478 $ 8,966 $ (8,966)(c) $ 107,478
Accounts receivable 533,764 176,855 (176,855)(c) 533,764
Costs and estimated earnings in excess of billings
on uncompleted contracts 211,164 -- -- 211,164
Income taxes receivable 15,295 -- -- 15,295
Prepaid expenses 3,094 -- -- 3,094
Other assets -- 1,274 -- 1,274
Notes receivable, current portion 4,087 23,938 (23,938)(c) 4,087
---------- -------- --------- ----------
Total current assets 874,882 211,033 (209,759) 876,156
Property, plant and equipment, net 334,969 9,394 -- 344,363
Other assets 190,397 -- 295,466 (a) 485,863
Investment in partnership -- 80,000 (80,000)(c) --
Notes receivable, less current portion 14,663 -- -- 14,663
---------- -------- --------- ----------
Total assets $1,414,911 $300,427 $ 5,707 $1,721,045
========== ======== ========= ==========
LIABILITY AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of capital leases payable $ 54,846 $ -- $ -- $ 54,846
Accounts payable 312,949 56,717 (56,717)(c) 312,949
Accrued liabilities 108,034 -- -- 108,034
Billings in excess of costs and estimated earnings
on incomplete contracts 94,663 -- -- 94,663
Accrued preferred dividends payable 36,517 -- -- 36,517
Notes payable to related parties, current portion 65,000 89,731 (89,731)(c) 65,000
---------- -------- --------- ----------
Total current liabilities 672,009 146,448 (146,448) 672,009
Long term capital leases payable 121,047 -- -- 121,047
Notes payable to related parties 100,000 -- -- 100,000
Shareholders' equity 521,855 153,979 152,155 (a),(c) 827,989
---------- -------- --------- ----------
Total Liabilities and Shareholders' Equity $1,414,911 $300,427 $ 5,707 $1,721,045
========== ======== ========= ==========
The accompanying notes are an integral part of these pro forma
financial statements
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R-TEC HOLDING, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
R-TEC HOLDING, INC. AND SUBSIDIARIES
Pro Forma Combined Statement Of Operations
Year Ended December 31, 2000
Pro Forma
Adjustments
Related to the COMBINED
R-TEC BLA BLA PRO FORMA
HISTORICAL HISTORICAL Acquisition FINANCIAL
(Note 1) (Note 2) (Note 3) STATEMENTS
------------ --------- ------------ -----------
Revenue $ 1,825,900 $ 450,040 $ (197,056)(b) $ 2,078,884
Direct operating costs 1,526,302 64,169 (197,056)(b) 1,393,415
------------ --------- ------------ -----------
Gross profit 299,598 385,871 -- 685,469
Selling, general and administrative expenses 622,093 214,352 73,866 (a) 910,311
Research and development expenses 22,710 -- -- 22,710
------------ --------- ------------ -----------
Income (loss) from operations (345,205) 171,519 (73,866) (247,552)
Interest expense (27,795) -- -- (27,795)
Interest income 3,243 2,506 -- 5,749
------------ --------- ------------ -----------
(24,552) 2,506 -- (22,046)
------------ --------- ------------ -----------
Income (loss) before income taxes (369,757) 174,025 (73,866) (269,598)
Income tax benefit 12,893 -- -- 12,893
------------ --------- ------------ -----------
Net income (loss) (356,864) 174,025 (73,866) (256,705)
Preferred stock dividends 36,517 -- -- 36,517
------------ --------- ------------ -----------
Net income (loss) available to common shareholders $ (393,381) $ 174,025 $ (73,866) $ (293,222)
============ ========= ============ ===========
Basic earnings (loss) per share $ (0.03) $ (0.02)
============ ===========
Diluted earnings (loss) per share $ (0.03) $ (0.02)
============ ===========
Dividends paid per common share $ -- $ --
============ ===========
Weighted average shares outstanding-
Common shares outstanding at year end 17,405,422 380,000 17,785,422
The accompanying notes are an integral part of these pro forma
financial statements
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NOTE 1. R-TEC HOLDING, INC. AND SUBSIDIARIES HISTORICAL.
The historical balances represent the balance sheet and results of operations
for R-TEC as of each period indicated as previously reported in the combined pro
forma financial statements (including the stock acquisition of R-Tec Machine
Tool, Inc. (RTMT)) of R-TEC reported pursuant to Form 8-KA filed on September
17, 2001.
NOTE 2. BROWAND, LAMEIRE & ASSOCIATES, INC. HISTORICAL
The historical balances represent the balance sheet and results of operations
for BLA, as of December 31, 2000 and each period indicated as reported.
NOTE 3. PRO FORMA ADJUSTMENTS.
The pro forma adjustments were made to reflect the purchase price paid for the
assets by R-TEC and to reflect the acquisition as if it had occurred on January
1, 2000. The pro forma adjustments related to the purchase allocation of BLA
give effect to the marking of certain assets to fair market value, consistent
with the purchase method of accounting. R-TEC will consider future operational
activities and results to determine if appraisals to both asset and liability
accounts are required due to circumstances which may arise in the ordinary
course of business. Other adjustments may be recorded based upon information to
be received in the future and may have a significant impact on total assets,
total liabilities, cost of operations, depreciation and amortization, and other
expense accounts.
Any purchase accounting adjustments, or related costs and possible charges
arising from the purchase of BLA may materially impact the Company's future
combined financial position and combined financial results of operations. These
pro forma financial statements do not give effect to possible future sales of
assets or certain of the operations or to any cost savings or other benefits of
the business combination, which may result from the integration of R-TEC and
BLA.
The pro forma adjustments reflected in the pro forma combined financial
statements give effect to the following:
15
a) Other assets, Shareholders' Equity To adjust pro forma combined assets
to fair market value of BLA assets
acquired. Other assets to include
customer lists amortized over a
five year time period.
b) Revenue, Direct Operating Costs To eliminate intercompany sales
between R-TEC and the BLA.
c) Non-acquired Assets and Liabilities To eliminate non-acquired assets
and liabilities not acquired and not
assumed in the asset purchase.
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(C) Exhibits
23.1 Consent of Balukoff, Lindstrom & Co., P.A.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
R-Tec Holding, Inc.
(Registrant)
Date: September 14, 2001 By: /s/ Douglas G. Hastings
--------------------------
Douglas G. Hastings
President / CEO
By: /s/Michael T. Montgomery
--------------------------
Michael T. Montgomery
Chief Financial Officer
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