BC FORM 51-901F
RTICA CORPORATION
999 BARTON STREET,
STONEY CREEK, ONTARIO
L8E 5H4
CONTACT NAME: NICK TSIMIDIS, CONTROLLER
TEL: 905-643-8669
REPORTING ON ANNUAL YEAR END FINANCIALS
DATED MAY 31, 2001.
REPORTS INCORPORATED AS PART: X SCHEDULE A
---
X SCHEDULE B
---
X SCHEDULE C
---
CERTIFICATE
THE THREE SCHEDULES REQUIRED TO COMPLETE THIS ANNUAL REPORT ARE ATTACHED AND THE
DISCLOSURE CONTAINED THEREIN HAS BEEN APPROVED BY THE BOARD OF DIRECTORS. A COPY
OF THIS ANNUAL REPORT WILL BE PROVIDED TO ANY SHAREHOLDER WHO REQUESTS IT.
"WARREN ARSENEAU",SIGNED "ROBERT STIKEMAN", SIGNED
------------------------------------ -------------------------------
SIGNATURE OF DIRECTOR SIGNATURE OF DIRECTOR
WARREN ARSENEAU ROBERT STIKEMAN
------------------------------------ -------------------------------
PRINT NAME OF DIRECTOR PRINT NAME OF DIRECTOR
2001/10/02 2001/10/02
------------------------------------ -------------------------------
DATE SIGNED (YR/MO/DY) DATE SIGNED (YR/MO/DY)
RTICA CORPORATION
BC FORM 51-901F
MAY 31, 2001 - FINANCIAL YEAR END
SCHEDULE A:
The consolidated audited financial statements for the year ended May 31, 2001
are attached.
SCHEDULE B:
1. ANALYSIS OF EXPENSES
DEVELOPMENT EXPENSES:
Product and Process Testing, and Independent Labs $ 371,526
Production Supplies, Dies, Repairs and Projects 310,168
Labour and Benefits, Corporate Staff 265,957
---------
TOTAL $ 947,651
=========
CONSULTING EXPENSES:
Machine and Process Development $ 170,814
Engineering and Technical 265,232
Corporate and Financial 174,308
---------
TOTAL $ 610,354
=========
PROFESSIONAL:
Legal $ 225,688
Audit 219,450
---------
TOTAL $ 445,138
=========
SALES AND MARKETING EXPENSES:
VP Sales $ 173,988
Marketing, Printing 56,413
Advertising and Promotion 32,494
---------
TOTAL $ 262,895
=========
GENERAL AND ADMINISTRATIVE EXPENSES:
Office services and supplies $ 38,908
Printing, Shareholder Communication, Telephone, computer,
internet, other communication activities 82,204
Consultants 63,451
Corporate expenses and other 28,063
Insurance, Dues, Fees, Transfer Agent 25,650
---------
TOTAL $ 238,276
=========
2. RELATED PARTY TRANSACTIONS:
As disclosed in note 7 of the audited consolidated financial statements, the
following related party transaction occurred during the year ended May 31, 2001:
--------------------------------------------------------------------------------
Type of service Nature of relationship May 31, 2001
--------------------------------------------------------------------------------
Sales and marketing Shareholder and officer $ 174,000
Management fees Shareholder, director and officer 127,000
Development charges Shareholders, officer and director 117,000
Consulting Shareholder and director 90,000
Professional fees Shareholder, director and officer 69,000
--------------------------------------------------------------------------------
3. SUMMARY OF SECURITIES ISSUED AND OPTIONS GRANTED:
a) SECURITIES ISSUED:
# $
---- ----
Balances, May 31, 2000 27,973,135 $ 5,613,805
Shares issued on exercise of share
purchase warrants 850,418 553,541
Shares issued on conversion of special warrants 4,033,333 2,202,700
Shares issued on exercise of Company stock options 15,000 3,000
Shares issued on Registration Statement not being
filed And declared effective by December 31, 2000
No additional consideration 280,750 --
Shares issued on conversion of debentures,
May 29, 2001 900,000 370,722
---------- -----------
Balances, May 31, 2001 34,052,636 $ 8,743,768
---------- -----------
b) OPTIONS GRANTED:
NAME DATE AMOUNT EXERCISE PRICE EXPIRY DATE
---- ---- ------ -------------- -----------
Consultants Jun 6/00 450,000 $ 0.75 Jun 6/03
Consultants Jun 28/00 65,000 $ 0.75 Dec 31/03
Consultants Oct 25/00 10,000 $ 0.66 Oct 25/03
Consultants Nov 1/00 85,000 $ 0.68 Nov 1/03
Director Nov 15/00 100,000 $ 0.72 Nov 15/03
Director Dec 1/00 100,000 $ 0.70 Dec 1/03
Consultant Dec 1/00 10,000 $ 0.70 Dec 1/03
Director Jan 15/01 100,000 $ 0.57 Jan 15/04
Consultants March 1/01 95,000 $ 0.53 Mar 1/04
Consultants Mar 30/01 100,000 $ 0.70 Mar 30/04
---------
1,115,000
---------
4. SUMMARY OF SECURITIES:
a) AUTHORIZED SHARE CAPITAL:
Unlimited number of preference shares issuable in series and unlimited number of
common shares
b) NUMBER AND RECORDED VALUE FOR SHARES ISSUED AND OUTSTANDING:
See 3 (A)
c) DESCRIPTION OF OPTIONS AND WARRANTS:
Outstanding at year end are 3,115,250 Company Stock Options exercisable at
weighted average price of $0.38 with weighted average remaining contractual life
of 1.75 to 2.36 years as disclosed in note 6c) to the audited financial
statements.
d) SHARES SUBJECT TO ESCROW
In connection with the major transaction which occurred on April 28, 1998,
9,298,939 shares are held in escrow to be release at the rate of 1 share for
every $0.20 of cash flow generated to a maximum of 1/3 per year. No shares have
been released from escrow since the date of the major transaction.
5. DIRECTORS AND OFFICERS
Directors and Officers:
Warren Arseneau, President and Director
Martin H. Beck, Director
Michael Boyd, Director
Roger J. Short, Director
Robert H. Stikeman, Director and Chief Financial Officer
Steven Letwin, Director
SCHEDULE C:
DESCRIPTION OF BUSINESS
RTICA Corporation is involved in the commercial development of patented
technology of insulation made from polyethylene terephthalate. RTICA insulation
is made in a one step process that creates fibers and a high performance
insulating structure. Multiple filaments of molten polymer are introduced into a
high-speed airflow through proprietary dies to create thin fibers that become
entangled to form a veil. These fibers are then further processed to form batts,
loose fill (blow in) material, or other products.
The company operates a research and testing facility at 999 Barton Street,
Stoney Creek Ontario, L8E 5H4. The Company manages its own research, development
and product development activities. Certain research projects are contracted to
the National Research Council of Canada, Industrial Materials Institute in
Boucherville, Quebec. Technologically, the Company's priority is to advance
RTICA insulation material and process for full scale commercial production.
The Company has two wholly owned subsidiaries; however, the entity is managed as
a consolidated entity.
DISCUSSIONS OF OPERATING RESULTS AND FINANCIAL CONDITION
Consolidated assets of RTICA Corporation during the fiscal year ended May 31,
2001 decreased from $2,401,330 to $1,938,395. Cash, short-term investments and
cash in trust comprises $1,394,051 and $1,712,725 of total assets at May 31,
2001 and 2000 respectively.
During the year, RTICA raised a total of $2,759,241 from the issuance of special
warrants, share purchase warrants and the exercise of stock options. On May 29,
2001, convertible debentures of $370,722 were converted into common shares of
the Company. In the prior year, the Company raised $1,715,854 pursuant to a
private placement.
RTICA has generated NIL revenues from the sale of product during the year.
Interest income of $97,101 was earned during the year versus $7,095 in the prior
year, as a result of higher cash balances following the share issuance
previously discussed.
Operating expenses of $3,061,814 were significantly higher than the prior year
of $1,318,579, as a result of product and market development activities
undertaken.
During the year, RTICA has received $200,694 in repayable contributions received
from the National Research Council ("NRC") to assist in pre-commercialization.
In addition, RTICA has been reimbursed for $156,000 in the current year for
research and development projects carried out by the NRC.
ACCOUNTING TREATMENT FOR DEVELOPMENT EXPENDITURES
RTICA has adopted generally accepted accounting pronouncements for development
costs requiring that these items be expensed in the period incurred until
technical feasibility has been obtained, adequate resources exist to market the
technologies, and recoverability of costs incurred is assured, at which time
development costs are capitalized.
During the year ended May 31, 2001, RTICA expended $947,651 on development,
$610,354 on consulting fees, $262,895 on sales and marketing initiatives, in
developing these technologies to commercial production.
Besides development costs, no capital assets or other intangible assets have
been written off during the year. Capital assets acquired during the year
included computer hardware, office furniture and delivery vehicles.
RELATED PARTY AGREEMENTS
The Company has entered into consulting agreements with certain directors,
officers and shareholders for services, as described in schedule B. Due to the
nature of the company, the use of consultant agreements limits the Company's
commitments which would arise in the case of employee contracts.
MATERIAL COMMITMENTS
On June 21, 1999, the Company signed a contract with the National Research
Council of Canada. The Company is committed to pay NRC $745,000 to June 2002.
The Company is eligible to be reimbursed up to 40% of total expenditures
incurred, to a maximum of $200,000. For the year ended May 31, 2001, the Company
has paid NRC $385,000 and has been reimbursed for $156,000.
On November 1, 2000, the Company signed a contract with the NRC whereby the
Company is eligible to receive up to $445,000 as a repayable contribution for
various research and development projects carried out by the Company. Repayment
of these contributions begins on January 1, 2004 based on 1% of the Company's
gross revenues up to a maximum of $667,500. The Company is required to
contribute two-thirds of the total cost of the work, otherwise its
reimbursements will be proportionately reduced.
INVESTOR RELATIONS ARRANGEMENTS
The Company has entered into an agreement with First Canadian Capital
Corporation for corporate communications and investor relations, including
communicated with present and interest shareholders and media, relating to the
affairs of the Company. During the year ended May 31, 2001, this consultant
received $43,558 for fees and expenses.
OTHER MATERIAL ITEMS
During the period ended May 31, 2001, there have been:
a) no material legal proceedings against the Company
b) except as described elsewhere, no contingent liabilities
c) no defaults under debt or other contractual obligations
d) no breach of corporate, securities or other laws
e) no regulatory approvals required
f) no significant management changes
g) no special resolutions passed by shareholders and not otherwise communicated
to appropriate regulatory bodies
SUBSEQUENT EVENTS
Subsequent to May 31, 2001, there have been no significant events requiring
disclosure
FINANCINGS, PRINCIPAL PURPOSES AND MILESTONES
Not applicable
LIQUIDITY AND SOLVENCY
As at May 31, 2001, the Company has working capital of $1,177,425, and is able
to satisfy ongoing obligations as of that date. As stated in note 1 to the
audited financial statements, the ability of the Company to continue as a going
concern is depending upon the ongoing support of its shareholders, the
attainment of financing necessary to complete the technology and begin
commercial production and the achievement of profitable operations from the
commercial production and licensing of the insulating products and sale of
licensing rights.
The Company plans to enter into private placement and/or other financing
arrangements during the next fiscal year in order to finance continued
development of Company technologies and commence commercial production. As of
the date thereof, no arrangements have been consummated for such financing
activities.