UNITED STATES
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): December 5, 2001
----------------
RTIN HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Texas
(State of Other Jurisdiction of Incorporation)
001-13559 75-2337102
(Commission File Number) (IRS Employer Identification No.)
2101 E. Loop 281
Longview, Texas 75605
(Address of Principal Executive Offices) (Zip Code)
(903) 295-6800
(Registrant's Telephone Number, Including Area Code)
RESTAURANT TEAMS INTERNATIONAL, INC.
(Former Name or Former Address, if Changed since Last Report)
Item 2. Acquisition or Disposition of Assets.
On December 5, 2001, the Company signed a Stock Purchase Agreement (the
"Agreement") with MedEx Systems, Inc., Pegasus Pharmacy, Inc., Laurence Solow
and Ann E. Rau, under which the Company will acquire, on or before December 21,
2001, all of the issued and outstanding shares of capital stock of MedEx
Systems, Inc. and Pegasus Pharmacy, Inc. in exchange for 3,521,127 shares (after
giving effect to a 50 to one reverse stock split) of the common stock, $.01 par
value, of the Company. Pursuant to the terms of the Agreement Mr. Solow
continued as the President of MedEx Systems, Inc. and Ms. Rau became a director
of the Company and continued as the President of Pegasus Pharmacy, Inc. MedEx
Systems, Inc. and Pegasus Pharmacy, Inc. are engaged in the business of
providing hardware and software solutions for writing, transmitting and
fulfilling prescriptions for pain management medications. The Company intends to
continue the development of this business.
Item 5. Other Events.
On December 7, 2001, the Company's shareholders approved a 50 to one
reverse stock split, recapitalization of the Company with 25,000,000 shares of
common stock, $.01 par value, and the change of the Company's name to RTIN
Holdings, Inc.
Item 7. Exhibits.
(a) Financial statements of businesses acquired.
To be filed by amendment within 60 days after the date of this Report
on Form 8-K.
(b) Pro forma financial information.
To be filed by amendment within 60 days after the date of this Report
on Form 8-K.
(c) Exhibits.
2.1 Stock Purchase Agreement by and among Restaurant Teams
International, Inc., MedEx Systems, Inc., Pegasus Pharmacy,
Inc., Laurence Solow and Ann E. Rau, dated as of December 6,
2001.
MEDEX SYSTEMS, INC.
PEGASUS PHARMACY, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Certified Public Accountants F - 1
Financial Statements
Combined Balance Sheets as of December 31, 2001 and 2000 F - 2
Combined Statements of Operations for the year ended
December 31, 2001 and the Period from April 18, 2000
(Inception) to December 31, 2000 F - 4
Combined Statements of Stockholders' Deficit for the year
ended December 31, 2001 and the Period from April 18,
2000 (Inception) to December 31, 2000 F - 5
Combined Statements of Cash Flows for the year ended
December 31, 2001 and the Period from April 18,
2000 (Inception) to December 31, 2000 F - 6
Notes to Combined Financial Statements F - 8
Killman, Murrell & Company, P.C.
Certified Public Accountants
505 N. Big Spring, Suite 603 1931 E. 37th, Suite 7 4049 St. Christopher Lane
Midland, Texas 79701 Odessa, Texas 79762 Dallas Texas 75287
(915) 686-9381 (915) 363-0067/550-4910 (972) 862-3975
Fax (915) 684-6722 Fax (915) 363-0376 Fax (915) 363-0376
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Medex Systems, Inc.
We have audited the accompanying combined balance sheets of Medex Systems, Inc.
(a Louisiana Corporation) and Pegasus Pharmacy, Inc. (a Louisiana Corporation)
collectively called "Companies" as of December 31, 2001 and 2000, and the
related combined statement of operations, stockholders' deficit and cash flows
for the year ended December 31, 2001 and the period April 18, 2000 (Inception)
to December 31, 2000. These combined financial statements are the responsibility
of the Companies' management. Our responsibility is to express an opinion on
these combined financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the combined
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the combined 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
audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Medex Systems, Inc.
and Pegasus Pharmacy, Inc. as of December 31, 2001 and 2000 and the results of
their operations and their cash flows for the year ended December 31, 2001 and
the period April 18, 2000 (Inception) to December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Companies will continue as going concerns. As discussed in Note 11 to the
financial statements, the Companies' significant operating losses raise
substantial doubt about their ability to continue as going concerns.
Management's plans regarding those matters also are described in Note 11. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
KILLMAN, MURRELL & COMPANY, P.C.
Dallas, Texas
January 26, 2002 (except for Note 12, as to which is
the date is February 19, 2002)
F - 1
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
ASSETS
2001 2000
----------- -----------
CURRENT ASSETS
Cash $ 8,215 $ 23,779
Accounts Receivable, Trade, Net of Allowance for Uncollectible
Accounts of $2,312 in 2001 55,125 --
Inventories, Net of Allowance for Obsolescence of $25,000 in 2001 109,996 --
Prepaid Consulting Fees 187,793 --
----------- -----------
TOTAL CURRENT ASSETS 361,129 23,779
----------- -----------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost 561,469 21,703
Less Accumulated Depreciation (122,899) (845)
----------- -----------
NET EQUIPMENT AND LEASEHOLD IMPROVEMENTS 438,570 20,858
----------- -----------
OTHER ASSETS
Deposits 60,603 5,861
Software Cost, Net of Amortization of $1,718 and $195 2,851 4,374
Prepaid Consulting Fees - Non Current - Note 10 375,587 --
----------- -----------
TOTAL OTHER ASSETS 439,041 10,235
----------- -----------
TOTAL ASSETS $ 1,238,740 $ 54,872
=========== ===========
The accompanying notes are an integral part
of these combined financial statements
F - 2
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
COMBINED BALANCE SHEETS
(CONTINUED)
DECEMBER 31, 2001 AND 2000
2001 2000
----------- -----------
CURRENT LIABILITIES
Cash Overdrafts $ 34,613 $ --
Current Portion of Capital Lease Obligations 118,828 --
Revolving Credit Card Balances 34,651 21,545
Accounts Payable 487,050 10,071
Accrued Expenses 265,742 23,823
Advances From RTIN Holdings, Inc. 112,263 --
----------- -----------
TOTAL CURRENT LIABILITIES 1,053,147 55,439
----------- -----------
DEFERRED LIABILITIES 10,668 1,821
CAPITALIZED LEASE OBLIGATIONS, Less Current Portion 198,506 --
----------- -----------
TOTAL LIABILITIES 1,262,321 57,260
----------- -----------
STOCKHOLDERS' DEFICIT
Members Deficit -- (2,388)
Common Stock, No Par Value, 1,100 Shares Authorized,
Issued and Outstanding in 2001 116,327 --
Additional Paid-In Capital 1,617,860 --
Retained Deficit (1,757,768) --
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (23,581) (2,388)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,238,740 $ 54,872
=========== ===========
The accompanying notes are an integral part
of these combined financial statements
F - 3
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001 AND THE PERIOD FROM
APRIL 18, 2000 (INCEPTION) TO DECEMBER 31, 2000
2001 2000
----------- -----------
PHARMACY SALES $ 921,403 $ --
COSTS OF DRUGS 696,162 --
----------- -----------
GROSS PROFIT 225,241 --
----------- -----------
COSTS AND EXPENSES
Employee Compensation 1,100,303 48,488
General and Administrative 595,027 111,319
Depreciation and Amortization 123,577 1,040
Research and Development 294,426 53,484
----------- -----------
TOTAL COSTS AND EXPENSES 2,113,333 214,331
----------- -----------
NON-OPERATING INCOME (EXPENSE):
Interest Expense (78,613) (529)
Income Tax Expense - Note 7 -- --
----------- -----------
NET LOSS $(1,966,705) $ (214,860)
=========== ===========
The accompanying notes are an integral part of these
combined financial statements
F - 4
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 2001 AND THE PERIOD FROM
APRIL 18, 2000 (INCEPTION) TO DECEMBER 31, 2000
Common Stock Additional
------------------------- Paid-In Retained Members'
Shares Amount Capital (Deficit) (Deficit) Total
----------- ----------- ----------- ----------- ----------- -----------
Balance, April 18, 2000 -- $ -- $ -- $ -- $ -- $ --
Members Contributions - Cash -- -- -- -- 317,474 317,474
Members Contributions -
Non Cash -- -- -- -- 7,000 7,000
Members Withdrawals -- -- -- -- (112,002) (112,002)
Net Loss -- -- -- -- (214,860) (214,860)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 2000 -- -- -- -- (2,388) (2,388)
Members' Contribution - Cash -- -- -- -- 290,975 290,975
Members' Contribution -
Non Cash -- -- -- -- 84,177 84,177
Members' Withdrawals -- -- -- -- (47,500) (47,500)
Formation of Corporations
Issuance of 1,100 Shares of
No Par Value Common
Stock and Merger of LLC's
Into Corporations 1,100 116,327 -- -- (116,327) --
Former Stockholders' Cash
Contributions -- -- 464,232 -- -- 464,232
Former Stockholders' Non Cash
Contributions -- -- 193,743 -- -- 193,743
Cash Contributions Made By
RTIN -- -- 396,505 -- -- 396,505
Contribution of 140,485 Shares
Of RTIN Common Stock by
RTIN -- -- 563,380 -- -- 563,380
Net Loss -- -- -- (1,757,768) (208,937) (1,966,705)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 2001 1,100 $ 116,327 $ 1,617,860 $(1,757,768) $ -- $ (23,581)
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these
combined financial statements
F - 5
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2001 AND THE PERIOD FROM
APRIL 18, 2000 (INCEPTION) TO DECEMBER 31, 2000
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $(1,966,705) $ (214,860)
Adjustments to Reconcile Net Loss to Net Cash From Operating
Activities
Depreciation and Amortization 123,577 1,040
Increase In Allowance for Doubtful Accounts Receivable 2,312 --
Increase In Allowance for Obsolete Inventory 25,000 --
Write Off of Contributed Software 20,000 --
Changes in Operating Assets and Liabilities
Increase in Accounts Receivable (57,437) --
Increase in Inventory (134,996) --
Deposits (54,742) (5,861)
Change in Cash Overdrafts 34,613 --
Increase in Accounts Payable 476,979 10,071
Increase in Deferred Revenue 8,847 1,821
Increase in Accrued Liabilities 241,919 23,823
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,280,633) (183,966)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Leasehold Improvements (19,275) (9,570)
Purchase of Equipment (46,465) (5,133)
Purchase of Computer Software -- (4,569)
Sale of Contributed Computer Equipment 173,413 --
----------- -----------
NET CASH FROM (USED) IN INVESTING
ACTIVITIES 107,673 (19,272)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Capital Contributions From Members 290,975 317,474
Withdrawals Made by Members (47,500) (112,002)
Capital Contributions From Stockholders 860,737 --
Advances From Stockholders 143,532 --
Repayment of Advances From Stockholders (143,532) --
Advances From RTIN Holdings, Inc. 112,263 --
Borrowings Under Revolving Credit Card Accounts 24,152 24,352
Payments Made Under Revolving Credit Card Accounts (11,046) (2,807)
Payments Made Under Capital Lease Obligations (72,185) --
----------- -----------
NET CASH FLOWS FROM FINANCING ACTIVITIES 1,157,396 227,017
----------- -----------
(Continued)
The accompanying notes are an integral part of these
combined financial statements
F - 6
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
COMBINED STATEMENTS OF CASH FLOWS
(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2001 AND THE PERIOD FROM
APRIL 18, 2000 (INCEPTION) TO DECEMBER 31, 2000
2001 2000
--------- ---------
NET INCREASE (DECREASE) IN CASH $ (15,564) $ 23,779
CASH AT BEGINNING OF YEAR 23,779 --
--------- ---------
CASH AT END OF YEAR $ 8,215 $ 23,779
========= =========
SUPPLEMENTAL DISCLOSURE OFCASH FLOW
INFORMATION
Cash Paid During the Period For:
Interest $ 257 $ 529
========= =========
Income Taxes $ -- $ --
========= =========
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Marketable Securities Received From RTIN $ 563,380 $ --
Increase in Equity From Prepaid Consulting Agreement (563,380) --
Equipment Acquired Under Capital Leases (389,519) --
Increase In Capital Lease Obligations 389,519 --
Fixed Assets Contributed By Members (84,177) (7,000)
Software Contributed By Members (20,000) --
Increase In Members Equity From Contributed Assets 104,177 7,000
Fixed Assets Contributed By Stockholders (173,743) --
Increase In Equity From Contributed Fixed Assets 173,743 --
--------- ---------
$ -- $ --
========= =========
The accompanying notes are an integral part of these
combined financial statements
F - 7
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS
Business
--------
Medex Systems, LLC ("Medex LLC") and Pegasus Pharmacy, LLC ("Pegasus LLC")
were formed on April 18, 2000 and November 6, 2000, respectively by Mr.
Solow and Ms. Rau to explore the possibilities of developing a
pharmaceutical prescription writing system that would allow enrolled
doctors to submit patient prescriptions to a pharmacy on a wireless and
paperless basis. Such a system became a reality in early 2001 and on March
1, 2001, Medex Systems, Inc. ("Medex") and Pegasus Pharmacy, Inc.
("Pegasus") were formed by Mr. Solow and Ms. Rau ("Stockholders") for the
purpose of merging with Medex LLC and Pegasus LLC.
In March of 2001, Pegasus began filling prescriptions from doctors, which
were submitted by facsimile or patient carry in. During 2001, Pegasus
filled prescriptions from approximately 780 doctors. In July of 2001,
Pegasus began accepting wireless prescriptions from doctors in the New
Orleans, Louisiana area and at December 31, 2001, had ten doctors who
regularly submit wireless prescriptions to Pegasus. The wireless
prescriptions account for approximately fifty five percent (55%) of sales
during 2001.
On December 18, 2001, all of the issued and outstanding stock of Medex and
Pegasus were acquired by RTIN Holdings, Inc., ("RTIN") a publicly traded
company with headquarters in Longview, Texas.
The accompanying combined financial statements include the accounts of
Medex LLC, Medex, Pegasus LLC and Pegasus (collectively called "Company"),
which are related through common ownership and management. All significant
intercompany balances and transactions have been eliminated in the
accompanying financial statement.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial Instruments
---------------------
Management believes that the fair value of the Company's financial
instruments approximate their carrying value due to their short term
nature.
Cash and Equivalents
--------------------
For financial reporting purposes, the Company considers all highly liquid
investments purchased with original maturities of three months or less to
be cash equivalents.
Inventories
-----------
All inventories are valued at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method. Inventories consist
of pharmaceutical drugs held for resale to the public. As of December 31,
2001, an allowance for obsolescence in the amount of $25,000 was
established for inventory items on which the expiration date may expire
before such items are sold.
(Continued)
F - 8
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leasehold Improvements
----------------------
Equipment and leasehold improvements are stated at cost. Maintenance and
repairs are charged to expenses as incurred. Major betterments and
improvements, which extend the useful life of the related items, are
capitalized and depreciated. Depreciation is provided for over the
estimated useful life of the asset using the straight-line method.
Equipment and leasehold improvements consisted of the following:
December 31, Useful Lives
---------------------------- ------------
2001 2000 (Years)
------------ ------------ ------------
Computer Equipment Owned Under Capital
Leases $ 389,518 $ -- 3
Furniture and Other Equipment 133,275 5,133 5
Leasehold Improvements 38,676 16,570 5-6
------------ ------------
Total 561,469 21,703
Accumulated Depreciation (122,899) (845)
------------ ------------
Equipment and Leasehold Improvements, Net $ 438,570 $ 20,858
============ ============
Computer Software Cost
----------------------
The cost for computer software acquired is being amortized over three
years. Amortization expense was $1,523 and $195 for the years ended
December 31, 2001 and 2000, respectively.
Accounting for Long-Lived Assets
--------------------------------
The Company evaluates long-lived assets and certain identifiable
intangibles, to be held and used in the business, for impairment whenever
events and changes in circumstances indicate that the carrying amount of an
asset may be impaired. In these circumstances, the estimated future
undiscounted cash flows associated with the asset are compared with the
asset's carrying value to determine if a write down to market value or
discounted cash flow is required.
Revenue Recognition
-------------------
Sales and related costs are recognized by the Company upon the filling of
the prescriptions at Pegasus.
(Continued)
F - 9
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Advertising Costs
-----------------
All advertising and promotional costs are expensed when incurred. The
Company incurred approximately $5,450 in marketing and advertising costs in
2001.
Comprehensive Income
--------------------
As of December 31, 2001 and 2000, the Company had no items that represented
other comprehensive income and, therefore has not included a schedule of
comprehensive income in the financial statements.
Income Taxes
------------
The Company accounts for income taxes using the liability method. Under
this method, deferred tax assets and liabilities are determined based on
differences between the financial reporting basis and the tax basis of
assets and liabilities, and are measured using enacted tax rates and laws
which will be in effect when the differences are expected to reverse. An
allowance is recorded when it is more likely than not that any or all of
the deferred tax asset will not be recognized. The provision for income
taxes includes taxes currently payable plus the net change during the
accounting period in deferred tax assets and liabilities recorded by the
Company.
Per Share Data
--------------
Per share data is not shown because the Company is a private company.
Use of Estimates
----------------
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period and disclosures of contingent
assets and liabilities. Actual results could differ from those estimates.
(Continued)
F - 10
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentration of Credit Risk
----------------------------
The Company places its cash in what it believes to be credit-worthy
financial institutions. Cash balances may exceed FDIC insured levels at
times during the year. As of December 31, 2001, no balance exceeded the
FDIC insured limits.
Included in accounts receivable at December 31, 2001, is $52,213 of
accounts receivable from insurance companies for prescriptions filled. No
significant amount is due from one insurance carrier and management
believes the balances are fully collectible. The Company generally collects
any co-payments due from customers before prescriptions are released.
The Company acquired the majority of its drug inventory from three
suppliers during the year ended December 31, 2001. In November 2001, the
Company made a concentrated effort to acquire its drug inventory from
Mckesson Drug Co. ("McKesson") and $50,000 was deposited with Mckesson to
secure inventory shipments.
NOTE 3: NOTE PAYABLE
The note payable at December 31, 2001, consists of $112,263 of advances
under an intercompany loan agreement with RTIN. The loan is due on demand,
is unsecured and bears interest at the rate of six percent (6%) per annum
from December 31, 2001.
NOTE 4: ACCRUED EXPENSES
Accrued expenses at December 31, 2001 and 2000 are as follows:
2001 2000
-------- --------
Accrued Payroll $131,238 $ 8,600
Accrued Vacation 31,539 --
Accrued General Expenses 74,584 15,223
Accrued Interest 16,899 --
Sales Taxes Liability 11,482 --
-------- --------
$265,742 $ 23,823
======== ========
F - 11
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 5: OPERATING LEASES
The Company leases building space for its home office and the pharmacy
under non-cancelable operating lease agreements having terms that expire at
various dates through fiscal year 2006. The Company has options to renew
the leases upon expiration for the periods ranging from five to ten years.
Total rental expense for operating leases amounted to approximately
$133,000 and $38,500 in 2001 and 2000, respectively. The Company also pays
real estate taxes, insurance and maintenance expenses associated with these
leases.
Future minimum lease commitments and rentals at December 31, 2001, under
operating leases having an initial or remaining non-cancelable term of one
year or more are:
Years Ended December 31, Lease Commitments
------------------------ -----------------
2002 $ 91,234
2003 93,485
2004 83,653
2005 81,991
2006 62,867
---------
Total $ 413,230
=========
NOTE 6: CAPITAL LEASE OBLIGATIONS
On February 13, 2001, Medex entered into a master lease agreement with an
equipment leasing company. Mr. Solow contributed computer equipment to the
Company valued at $173,413. This computer equipment was immediately sold to
the leasing company for $173,413. No gain or loss was recognized on the
sale of this computer equipment to the leasing company. Under the terms of
the lease agreement, Medex leases the equipment sold to the leasing company
plus other equipment purchased directly by the leasing company at the
request of Medex. Obligations under capital leases have been recorded in
the accompanying financial statements at the present value of future
minimum lease payments, discounted at twenty and one half percent (20.5%).
The capitalized cost and accumulated depreciation of this equipment at
December 31, 2001 was $389,519 and $92,195, respectively.
(Continued)
F - 12
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 6: CAPITAL LEASE OBLIGATIONS (CONTINUED)
Future minimum payments under capital leases and the asset purchase
agreement are as follows:
Year Ending
December 31,
------------
2002 $ 172,101
2003 172,101
2004 51,709
2005 4,109
2006 342
---------
Total 400,362
Less Amount Representing Interest (83,028)
---------
Present Value of Net Minimum Lease Payments 317,334
Less Current Portion (118,828)
---------
Amounts Due After One Year $ 198,506
=========
NOTE 7: INCOME TAXES
Through February 28, 2001, Medex LLC and Pegasus LLC were taxed as
partnerships for federal and state income tax purposes. The Company is not
entitled to any tax benefits from the operating losses generated through
February 28, 2001, as any losses will be included in the tax returns of the
individual members.
The following is a reconciliation of income tax benefit to the expected tax
rate of thirty four (34) percent for the year ended December 31, 2001:
Loss From Operations $ 1,966,705
===========
Tax Benefit at Statutory Rate (34%) (668,680)
Loss Attributed To Partners 71,039
Change In Valuation Allowance 597,641
-----------
TOTAL TAX BENEFIT $ --
===========
(Continued)
F - 13
29
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 7: INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
deferred tax assets and deferred tax liabilities are as follows as of
December 31, 2001:
Property and Equipment Depreciation $ 8,542
Deferred Rent Revenue 3,627
Net Operating Loss 585,472
---------
Total Deferred Tax Assets 597,641
Valuation Allowance For Deferred Tax Assets (597,641)
---------
NET DEFERRED TAX ASSETS $ --
=========
At December 31, 2001, the Company had net operating losses generated
subsequent to February 28, 2001, available to offset future taxable income
of approximately $1,721,975, which begin to expire in 2021.
F - 14
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 8: EMPLOYMENT AGREEMENTS
On December 18, 2001, the Company entered into executive employment
agreements with Laurence Solow (Medex's Chief Executive Officer and 67.7%
owner of both Medex and Pegasus) and Ann Rau (Pegasus' Chief Executive
Officer and 33.3% owner of both Medex and Pegasus). The employment
agreements provide for an initial term of two years with automatic
extensions of one year periods unless notice of non-extension is given by
either party 30 days before expiration. Under the agreements, each
executive officer is entitled to a base salary of $200,000, plus 1.5% of
the adjusted net profits of Medex and Pegasus, as defined, plus automobile
allowances and life and health insurance coverage. The executives are also
entitled to options to acquire a total of 125,000 shares each of RTIN's
post split common stock at $4.00 per share. The options are exercisable,
40,000 shares each on December 18, 2002, 40,000 shares each on December 18,
2003 and 45,000 shares each on December 31, 2004, if still employed by the
Company on the exercise dates.
NOTE 9: RELATED PARTY TRANSACTIONS
During the year ended December 31, 2000, Mr. Solow contributed cash in the
amount of $317,474 and leasehold improvements in the amount of $7,000 to
the Company, and withdrew $112,002 in cash from the Company.
During the year ended December 31, 2001, Mr. Solow contributed cash in the
amount of $898,754 and withdrew $191,032 in cash from the Company. In
addition, Mr. Solow contributed furniture, computer software and computer
equipment to the Company. Computer equipment in the amount of $173,413,
contributed by Mr. Solow, was immediately sold to a leasing company and
leased back to the Company. The value assigned to the contributed equipment
was $173,413, which is the same as the sales price received from the
leasing company. No gain or loss was recognized on the sale of these assets
to the leasing company. Furniture valued at $84,177 and computer software
valued at $20,000 were contributed by Mr. Solow.
During the year ended December 31, 2000, Medex applied for and received a
Visa revolving credit card from Whitney National Bank of New Orleans,
Louisiana, which had an outstanding balance of $21,545 as of December 31,
2000. For the period of January 1, 2001 through May 28, 2001 additional
charges in the amount of $16,721 and payments in the amount of $9,315 were
made on the account leaving a balance of $28,920 as of May 28, 2001. Since
that time no statements have been received by the Company. This account,
along with other matters, is the subject of a dispute between Mr. Solow and
Whitney Bank.
(Continued)
F - 15
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 9: RELATED PARTY TRANSACTIONS (CONTINUED)
Prior to November 8, 2001, RTIN had loaned to Medex and Pegasus a total of
$265,000 under the terms of certain capital notes called "Bridge Loans"
which were secured by one hundred percent of the issued and outstanding
capital stock of Medex and Pegasus and bore interest at eighteen percent
(18%) per annum. On November 8, 2001, RTIN, Medex, Pegasus, and the
shareholders of Medex and Pegasus, entered into a letter agreement which
(a) acknowledged the Bridge Loans, (b) granted RTIN an option to purchase
100% of Medex and Pegasus until December 18, 2001, for the issuance by RTIN
of $25,000,000 worth of post reverse split common stock of RTIN.
On December 5, 2001, RTIN, Medex, Pegasus, Mr. Solow and Ms. Rau entered
into a Stock Purchase agreement ("Agreement"). The Agreement provided (a)
that RTIN would issue 3,521,127 shares of its post split common stock to
Mr. Solow, Ms. Rau or their designees, (b) at closing, the Bridge Loans in
the amount of $265,000, plus accrued interest in the amount of $6,505 would
be canceled and such amounts would be contributed by RTIN to Medex and
Pegasus as capital contributions, (c) RTIN would make additional paid in
capital contributions of $328,495 ($38,580 per week for 10 weeks) to Medex
and Pegasus, (d) RTIN would loan Medex and Pegasus an additional $500,000
($350,000 on December 18, 2001 and $ 15,000 a week for ten weeks) under the
terms of a loan agreement which provides for interest at six percent (6%)
per annum and (e) provided that if RTIN in its sole discretion, elects not
to or fails to fulfill its funding obligations, Mr. Solow may elect to
rescind the purchase transaction. In the event of rescission, Medex and
Pegasus will retain any capital contributions ($396,490) at December 31,
2001 from RTIN as liquidated damages, but not the loans in the amount of
$112,263 at December 31, 2001.
On December 18, 2001, all of the issued and outstanding stock of Medex and
Pegasus were acquired by RTIN under the terms of the agreement.
In connection with the acquisition of Medex and Pegasus by RTIN, Pegasus is
required to designate fifty two percent of its cash collections for the
sole purpose of funding pharmaceutical payments to drug wholesalers.
NOTE 10: COMMITMENTS AND CONTINGENCIES
Under the terms of the consulting agreement the Company agreed to assist
Mr. Stolier in making his quarterly tax payments by either (a) purchasing
from Mr. Stolier a sufficient number of shares to meet his quartherly tax
payments at the greater of the $3.50 per share or the current market price
per share on the date of acquisition by the Company or (b) registering such
shares so that Mr. Stolier can sell the shares in the open market.
In connection with the acquisition by RTIN of the Company, RTIN issued
140,845 shares of its post split common stock to Mr. Jack Stolier in
exchange for consulting services to be provided by Mr. Stolier to Medex.
The consulting agreement covers services to be rendered between January 1,
2002 and through December 31, 2004. The value of the 140,845 shares
($563,380) is carried as prepaid consulting fees at December 31, 2001 and
will be amortized to be expense over the three years beginning January 1,
2002.
During March of 2001, Pegasus ordered and received from Bergen Brunswig
Drug Company ("Bergen") $250,136 of prescription drug merchandise. Payment
for the merchandise has not been made as of December 31, 2001. On September
24, 2001, Bergen filed suit against Medex, Pegasus and Mr. Solow for
payment, together with interest at eighteen percent, costs of collection
and reasonable attorney's fees.
F - 16
MEDEX SYSTEMS, INC
PEGASUS PHARMACY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE 11: GOING CONCERN
The Company's financial statements have been prepared on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
As shown in the accompanying financial statements, the Company has
experienced significant operating losses since its inception on April 18,
2000. The continuance of such losses creates an uncertainty as to the
Company's ability to continue as a going concern. From inception through
March of 2001, the Company was in the development stage and had no revenue.
Beginning in March of 2001, the Company began having revenue from the sales
of pharmaceutical prescription drugs but the Company continued to recognize
losses as it attempted to build sales of pharmaceutical drugs. In October
2001, management knew that it must raise additional working capital, and
began working with RTIN to raise working capital. As of December 31, 2001,
RTIN has infused $508,753 of cash into the Company, but that was not enough
to guarantee success of the Company. RTIN, which does not have additional
cash to support the Company's losses until operations turn positive cash
flow, is in the process of trying to raise additional capital. RTIN has
several prospects for raising capital, but such funds have not come about
as of the date of this report. The ability of the Company to continue as a
going concern is dependent on RTIN's ability to raise additional capital
until the Company's operations turn positive. The financial statements do
not include any adjustments relating to the recoverability of recorded
asset amounts or the amounts of liabilities that may be necessary, should
the Company be unable to continue as a going concern.
NOTE 12: SUBSEQUENT EVENT
RTIN has made $911,297 of the capital contributions and loans to Medex and
Pegasus through February 19, 2002, but has not made the funding in
accordance with the terms of the Stock Purchase Agreement mentioned in Note
9.
On February 6, 2002, RTIN and the Stockholders entered into a Registration
Rights Agreement whereby the Stockholders granted RTIN until February 28,
2002, to complete its funding obligations under the terms of the Stock
Purchase Agreement in exchange for RTIN granting to the Stockholders the
right to demand registration by RTIN at RTIN's expense of up to ten percent
(10%) of the registrable securities held by the Stockholders at any time
after February 6, 2002, and the right to demand registration of the
remaining registrable securities held by the Stockholders after January 1,
2003.
F - 17
RTIN HOLDINGS, INC.
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(Unaudited)
On December 18, 2001, RTIN Holdings, Inc. ("RTIN") acquired all of the
outstanding stock of Medex Systems, Inc. ("Medex") and Pegasus Pharmacy,
Inc. ("Pegasus") in exchange for issuing 3,521,127 shares of RTIN's post
reverse split common stock valued at $4.00 per share. The acquisition of
Medex and Pegasus will be accounted for as purchases whereby, the basis for
accounting for Medex and Pegasus will be based upon their fair market value
at the date of acquisition.
The unaudited Pro Forma Combined Condensed Statements of Operations (Pro
Forma Statements of Operations) for the years ended December 31, 2000 and
2001, gives pro forma effect to the acquisition of Medex and Pegasus as if
they had occurred on April 18, 2000 (their inception). The Pro Forma
Statements of Operations are based on the historical results of operations
of RTIN, Medex and Pegasus.
The unaudited Pro Forma Combined Condensed Balance Sheet as of December 31,
2001, (Pro Forma Balance Sheet) gives pro forma effect to the acquisition
of Medex and Pegasus as if it had occurred on December 31, 2001. The Pro
Forma Statement of Operations, the Pro Forma Balance Sheet and the
accompanying notes (Pro Forma Financial Information) should be read in
conjunction with and are qualified by historical financial statements of
RTIN and notes thereto, and the historical financial statements of Medex
and Pegasus and the notes thereto appearing elsewhere herein.
The Pro Forma Information is intended for informational purposes only and
is not necessarily indicative of the future financial position or results
of operations of RTIN after the acquisition of Medex and Pegasus, or the
financial position or results of operations of RTIN that would have
actually occurred had the acquisition of Medex and Pegasus been effected on
the date of the periods presented.
F - 18
RTIN HOLDINGS, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 2001 (UNAUDITED)
Medex and Pro Forma Pro Forma
RTIN Pegasus Adjustments Total
------------ ------------ ------------ ------------
CURRENT ASSETS
Cash $ 8,356 $ 8,215 $ -- $ 16,571
Accounts Receivable, Net -- 55,125 -- 55,125
Inventories, Net 6,504 109,996 -- 116,500
-- 187,793 -- 187,793
------------ ------------ ------------ ------------
TOTAL CURRENT ASSETS 14,860 361,129 -- 375,989
------------ ------------ ------------ ------------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS,
At Cost 3,250,123 561,469 (122,899)(E) 3,688,693
Less Accumulated Depreciation (875,496) (122,899) 122,899 (E) (875,496)
------------ ------------ ------------ ------------
NET EQUIPMENT AND LEASEHOLD
IMPROVEMENTS 2,374,627 438,570 -- 2,813,197
------------ ------------ ------------ ------------
OTHER ASSETS
Prepaid Expenses -- 375,587 -- 375,587
Deposits -- 60,603 -- 60,603
Software Cost, Net -- 2,851 -- 2,851
Goodwill -- 14,504,579 (A) 14,504,579
Investment in Medex 14,593,261 -- (14,084,508)(B) --
-- -- (112,263)(C) --
-- -- (396,490)(D) --
------------ ------------ ------------ ------------
TOTAL OTHER ASSETS 14,593,261 439,041 (88,682) 14,943,620
------------ ------------ ------------ ------------
TOTAL ASSETS $ 16,982,748 $ 1,238,740 $ (88,682) $ 18,132,806
============ ============ ============ ============
F - 19
RTIN HOLDINGS, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 2001 (UNAUDITED)
Medex and Pro Forma Pro Forma
RTIN Pegasus Adjustments Total
------------ ------------ ------------ ------------
Cash Overdrafts $ 14,539 $ 34,613 $ -- $ 49,152
Notes Payable 2,579,641 -- -- 2,579,641
Convertible Debentures 1,996,301 -- -- 1,996,301
Accounts Payable 295,292 487,050 -- 782,342
Current Portion of Capital Lease Obligations -- 118,828 -- 118,828
Revolving Credit Card Balances -- 34,651 -- 34,651
Accrued Expenses 1,501,165 265,742 -- 1,766,907
Advances From RTIN Holdings, Inc. -- 112,263 (112,263)(C) --
------------ ------------ ------------ ------------
TOTAL CURRENT LIABILITIES 6,386,938 1,053,147 (112,263) 7,327,822
------------ ------------ ------------ ------------
DEFERRED LIABILITIES 48,958 10,668 -- 59,626
CAPITALIZED LEASE OBLIGATIONS -
Less Current Portion -- 198,506 -- 198,506
TOTAL LIABILITIES 6,435,896 1,262,321 (112,263) 7,585,954
------------ ------------ ------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock 44,002 116,327 (116,327)(B) 44,002
Additional Paid-In-Capital 27,296,134 1,617,860 14,504,579 (A) --
-- -- (396,490)(D) --
-- -- (15,725,949)(B) 27,296,134
Retained Deficit (16,019,828) (1,757,768) 1,757,768 (B) (16,019,828)
Treasury Stock (773,456) -- -- (773,456)
------------ ------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT) 10,546,852 (23,581) 23,581 10,546,852
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 16,982,748 $ 1,238,740 $ (88,682) $ 18,132,806
============ ============ ============ ============
F - 20
RTIN HOLDINGS, INC.
NOTES TO THE PRO FORMA BALANCE SHEET
DECEMBER 31, 2001
(UNAUDITED)
(A) Records the goodwill generated upon the acquisition by RTIN of Medex and
Pegasus.
RTIN issued 3,521,127 shares of its post
reverse split common stock for Medex and
Pegasus (3,521,127 at $4.00 (market value
on December 18, 2001) equals) $14,084,508
Cash capital contributions made to Medex and Pegasus
before acquisition
396,490
Negative net book value of Medex and Pegasus on
December 31, 2001
23,581
Net goodwill acquired $14,504,579
(B) Eliminates RTIN's investment in Medex and Pegasus against Medex's and
Pegasus's capital accounts.
(C) Eliminates advances made by RTIN to Medex and Pegasus, which are carried as
a receivable by RTIN and as a payable by Medex and Pegasus.
(D) Eliminates advances made by RTIN to Medex and Pegasus, which were recorded
as capital contributions by Medex and Pegasus.
(E) Eliminates the accumulated depreciation of Medex's and Pegasus's against
the cost basis of the assets on the date of acquisition since the fair
market value of the assets approximates their net book value.
F - 21
RTIN HOLDINGS, INC.
PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001
(UNAUDITED)
Medex and Pro Forma Pro Forma
RTIN Pegasus Adjustments Total
----------- ----------- ----------- -----------
REVENUES
Restaurant Sales $ 1,502,139 $ -- $ -- $ 1,502,139
Rental Income 312,912 -- -- 312,912
Pharmacy Sales -- 921,403 -- 921,403
----------- ----------- ----------- -----------
TOTAL REVENUES 1,815,051 921,403 -- 2,736,454
----------- ----------- ----------- -----------
OPERATING COSTS AND EXPENSES
Cost of Sales 1,315,671 696,162 -- 2,011,833
General and Administrative Expenses 1,345,145 1,883,380 -- 3,228,525
Depreciation and Amortization 310,361 123,577 -- 433,938
Research and Development -- 106,376 -- 106,376
Impairment of Assets 80,000 -- -- 80,000
----------- ----------- ----------- -----------
TOTAL OPERATING COST AND EXPENSES 3,051,177 2,809,495 -- 5,860,672
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS
-----------
(1,236,126) (1,888,092) -- (3,124,218)
----------- ----------- ----------- -----------
NON-OPERATING INCOME AND (EXPENSES)
Interest (Expense) (900,520) (78,613) 6,505(A) (972,628)
Interest Income 6,505 -- (6,505)(A) --
Loss on Foreclosure of Restaurant Building (119,483) -- -- (119,483)
Gain on Sale of Assets 105,823 -- -- 105,823
----------- ----------- ----------- -----------
TOTAL NON-OPERATING INCOME AND
EXPENSES (907,675) (78,613) -- (986,288)
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES (2,143,801) (1,966,705) -- (4,110,506)
INCOME TAXES -- -- -- --
----------- ----------- ----------- -----------
NET LOSS $(2,143,801) $(1,966,705) $ -- $(4,110,506)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (B) 718,969 3,521,127 4,240,096
=========== =========== ===========
LOSS PER COMMON SHARE $ (2.98) $ (0.56) $ (0.97)
=========== =========== ===========
F - 22
RTIN HOLDINGS, INC.
PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
(UNAUDITED)
Medex and Pro Forma Pro Forma
RTIN Pegasus Adjustments Total
----------- ----------- ------------- -----------
REVENUES
Restaurant Sales $ 5,072,079 $ -- $ -- $ 5,072,079
Rental Income 284,218 -- -- 284,218
----------- ----------- ------------- -----------
TOTAL REVENUES 5,356,297 -- -- 5,356,297
----------- ----------- ------------- -----------
OPERATING COSTS AND EXPENSES
Cost of Sales 5,168,719 -- -- 5,168,719
General and Administrative Expenses 909,365 159,807 -- 1,069,172
Depreciation and Amortization 390,942 1,040 -- 391,982
Research and Development -- 53,484 -- 53,484
Impairment of Assets 301,431 -- -- 301,431
----------- ----------- ------------- -----------
-----------
TOTAL OPERATING COST AND EXPENSES 6,770,457 214,331 -- 6,984,788
----------- ----------- ------------- -----------
LOSS FROM OPERATIONS (1,414,160) (214,331) -- (1,628,491)
----------- ----------- ------------- -----------
NON-OPERATING INCOME AND (EXPENSES)
Interest (1,015,481) (529) -- (1,016,010)
Loss on Foreclosure of Restaurant Building (557,363) -- -- (557,363)
Loss on Abandonment of Fat Burger Acquisition (4,156,632) -- -- (4,156,632)
Loss on Foreclosure of Corporate Building (1,286,155) -- -- (1,286,155)
Loss on RSI Acquisition (1,269,043) -- -- (1,269,043)
Gain on Sale of Assets 100,268 -- -- 100,268
----------- ----------- ------------- -----------
TOTAL NON-OPERATING INCOME AND
EXPENSES (8,184,406) (529) -- (8,184,935)
----------- ----------- ------------- -----------
LOSS BEFORE INCOME TAXES (9,598,566) (214,860) -- (9,813,426)
INCOME TAXES -- -- -- --
----------- ----------- ------------- -----------
NET LOSS $(9,598,566) $ (214,860) $ -- $(9,813,426)
=========== =========== ============= ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (B) 281,303 2,479,259 2,760,562
=========== ============= ===========
LOSS PER COMMON SHARE $ (34.12) $ (.09) $ (3.55)
=========== ============= ===========
F - 23
RTIN HOLDINGS, INC.
NOTES TO THE PRO FORMA STATEMENT OF OPERATIONS
DECEMBER 31, 2001 AND 2000
(UNAUDITED)
(A) Eliminates intercompany interest income and expense between RTIN and Medex
and Pegasus.
(B) The following is a summary of shares on a pro forma basis:
2001 2000
---------- ----------
Weighted Average Shares Outstanding 35,948,442 14,065,163
The Effect of a 50 to 1 Reverse Stock Split Effected
December 16, 2001 /50 /50
---------- ----------
Shares Outstanding After Reverse Stock Split 718,969 281,303
Issuance of 3,521,127 Shares In Acquisition of Medex and Pegasus
(Shares Outstanding Since April 18, 2000, 257 Out of 365 Days
in 2000) 3,521,127 2,479,259
---------- ----------
Weighted Average Shares Outstanding After Reverse Split 4,240,096 2,760,562
========== ==========
F - 24
30
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 hereto duly authorized.
RTIN HOLDINGS, INC.
Date: By: /s/ Curtis A. Swanson
---------------------- ----------------------------
Curtis A. Swanson, President
EXHIBIT INDEX
2.1 Stock Purchase Agreement by and among Restaurant Teams International,
Inc., MedEx Systems, Inc., Pegasus Pharmacy, Inc., Laurence Solow and
Ann E. Rau, dated as of December 6, 2001.