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 3, 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 July 18, 2001 with the Securities and Exchange Commission. This
report amends Item 7, FINANCIAL STATEMENTS, PRO-FORMA INFORMATION AND EXHIBITS,
for the purchase of R-Tec Machine Tool, Inc., an Idaho corporation, within 60
days of July 18, 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
R-TEC MACHINE TOOL, INC.
December 31, 2000
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
R-Tec Machine Tool, Inc.
Boise, Idaho
We have audited the accompanying balance sheet of R-Tec Machine Tool, 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 R-Tec Machine Tool, Inc. as of
December 31, 2000, and the results of its operations, changes in shareholders'
equity and its cash flows for the year December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.
Boise, Idaho
July 25, 2001
Balukoff, Lindstrom & Co., P.A.
-1-
R-TEC MACHINE TOOL, INC.
BALANCE SHEET
December 31, 2000
Current assets
Cash $ 15,326
Certificates of deposit 15,518
Accounts receivable (net of $ -- allowance
for doubtful accounts) 47,022
Costs and estimated earnings in excess
of billings on uncompleted contracts 8,634
--------
Total current assets 86,500
Equipment, net of accumulated depreciation 183,882
--------
Total assets $270,382
========
Current liabilities
Accounts payable $ 3,589
Accrued expenses 5,873
Capital lease payable, current portion 42,826
Notes payable, related parties 2,500
--------
Total current liabilities 54,788
Capital lease payable, less current portion 93,011
--------
Total liabilities 147,799
Shareholders' equity
Common stock, no par value,
100,000 authorized, 4,000 shares
issued and outstanding 20,525
Retained earnings 102,058
--------
Total shareholders' equity 122,583
--------
Total liabilities and shareholders' equity $270,382
========
See accompanying notes
-2-
R-TEC MACHINE TOOL, INC.
STATEMENT OF OPERATIONS
Year Ended December 31, 2000
Revenues $ 428,413
Cost of revenues 238,638
---------
Gross profit 189,775
Selling, general and administrative expenses 129,556
---------
Operating income 60,219
Interest expense (14,606)
Interest income 1,163
---------
(13,443)
---------
Net income $ 46,776
=========
Net income per common share $ 0.05
Weighted average shares outstanding 4,000
See accompanying notes
-3-
R-TEC MACHINE TOOL, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Year Ended December 31, 2000
Common Retained
Stock Earnings Total
------- --------- ---------
Balance at January 1, 2000 $20,525 $ 89,282 $ 109,807
Net income -- 46,776 46,776
Dividends -- (34,000) (34,000)
------- --------- ---------
Balance at December 31, 2000 $20,525 $ 102,058 $ 122,583
======= ========= =========
See accompanying notes
-4-
R-TEC MACHINE TOOL, INC.
STATEMENT OF CASH FLOWS
Year Ended December 31, 2000
Cash flows from operating activities
Net income $ 46,776
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 44,270
Changes in assets and liabilities
Accounts receivable 36,692
Costs and estimated earnings in excess
of billings on uncompleted contracts 23,482
Accounts payable (13,251)
Accrued expense 2,456
---------
Net cash provided by operating activities 140,425
Cash flows from investing activities
Dividends paid (34,000)
Purchase of certificates of deposit (15,000)
Purchase of equipment and other assets (8,655)
---------
Net cash used by investing activities (57,655)
Cash flows from financing activities
Payments on capital leases and notes payable (72,711)
---------
Net cash used by financing activities (72,711)
---------
Net increase in cash 10,059
Beginning cash 5,267
---------
Ending cash $ 15,326
=========
Supplemental disclosures of cash flow information
Interest paid $ 14,606
Noncash investing and financing activities
Equipment acquired through related party note $ 2,500
Equipment acquired through note payable $ 33,749
See accompanying notes
-5-
R-TEC MACHINE TOOL, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Organization
R-Tec Machine Tool, Inc., (the Company), an S-Corporation formed April 7, 1998,
is a machine shop specializing in applications for automation and manufacturing
equipment, primarily for the high-tech industry.
Revenue Recognition
The Company, under contract from the respective customers, machines high-tech
custom automation manufacturing equipment robotics, as well as custom machining
other types of manufacturing equipment and/or parts for installation in customer
products. The Company recognizes revenues on the percentage-of-completion
method, measured by the percentage of cost incurred to date to estimated total
cost for each contract. Management considers total cost to be the best available
measure of progress on the contracts.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies, tools,
repairs and depreciation. Selling, general and administrative costs are charged
to expense as incurred. Provisions for estimated losses on uncompleted contracts
are made in the period in which such losses are determined. Changes in job
performance, job conditions and estimated profitability may result in revisions
to costs and income, which are recognized in the period in which the revisions
are determined.
The assets and liabilities relating to the "costs and estimated earnings in
excess of billings on uncompleted contracts" and the "billings in excess of
costs and estimated earnings on uncompleted contracts" on these contracts are
recorded as current assets and current liabilities on the balance sheet as they
will be liquidated in the normal course of contract completion.
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.
-6-
R-TEC MACHINE TOOL, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
Equipment
Capital additions are classified as equipment and are recorded at cost.
Depreciation and amortization 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.
Significant Customers and Suppliers
The Company recorded revenue from services provided to customers that exceeded
10 percent of total revenue as follows:
2000
--------
Micron Technology $144,661
Pacific Stainless Products 113,520
R-Tec Corporation (related party) 155,100
--------
$413,281
========
The Company recorded purchases from vendors that supplied 10% or more of total
purchases as follows:
2000
-------
Interstate Plastics $18,138
Metals USA 25,005
-------
$43,143
=======
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.
-7-
R-TEC MACHINE TOOL, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
Value of Financial Instruments
The Company has a number 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, and computing profit percentages under the percentage-of-completion
revenue recognition method. 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.
NOTE B - UNCOMPLETED CONTRACTS
Costs, estimated earnings and billings on uncompleted contracts consist of:
2000
---------
Costs incurred on uncompleted contracts $ 1,868
Estimated earnings 6,766
---------
8,634
Billings to date --
---------
$ 8,634
=========
2000
---------
Balance sheet captions are:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 8,634
-8-
R-TEC MACHINE TOOL, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
NOTE C - EQUIPMENT
Equipment and consists of:
2000
---------
Manufacturing equipment $ 236,399
Furniture and fixtures 1,044
Office equipment 8,658
Vehicles 2,633
---------
248,734
Accumulated depreciation and amortization (64,852)
---------
$ 183,882
=========
The estimated useful lives of equipment is five to seven years.
NOTE D - NOTES PAYABLE TO RELATED PARTIES
During 2000, the Company purchased a vehicle from an owner for $2,500 on a note
payable. The note was repaid subsequent to year-end.
NOTE E - CAPITAL LEASE PAYABLE
The Company leases equipment under capital leases as follows:
2000
--------
Capitalized cost $189,960
Accumulated amortization, included in accumulated depreciation 55,047
Amortization expense, included in depreciation expense 37,992
-9-
R-TEC MACHINE TOOL, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
Future minimum lease payments due as of December 31, 2000 under the capital
lease agreements are as follows:
2001 $ 53,569
2002 53,568
2003 37,791
2003 10,380
--------
Total minimum lease payments 155,308
Less amount representing interest 19,471
--------
Present value of minimum lease payments 135,837
Less current portion 42,826
--------
Long-term portion $ 93,011
========
NOTE F - LEASES
The Company leases its office and manufacturing space from a related party,
H2C2. H2C2 is owned by Doug and Rena Hastings and Gary and Patricia Clayton. The
lease is month to month at $1,030 per month with an additional utility payment
of $165 per month paid to R-Tec Corporation. Doug Hastings and Gary Clayton are
Executive Officers of the Company.
Rent expense for 2000 was $10,472.
NOTE G - PENSION PLANS
The Company has a SIMPLE Pension Plan covering all employees who worked at the
Company for a minimum of 2 years and made at least $5,000 in each of the
previous two-year periods. The Plan allows the employee to make elective
deferrals up to a maximum of $6,000. The Company is required to make matching
contributions of up to 3% of employee wages or $6,000. During the year ended
December 31, 2000, the Company recorded $2,280 in contributions.
NOTE H - RELATED PARTY TRANSACTIONS
The Company conducts business with other entities affiliated through common
ownership or control.
-10-
R-TEC MACHINE TOOL, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
As described in Note E, the Company leases office and manufacturing space from
H2C2. Amounts paid during 2000 for rent were $10,472. The Company also pays
R-Tec Corporation, a wholly owned subsidiary of R-Tec Holding, Inc., for
utilities. These costs amounted to $3,755 for 2000.
The Company provides machine tooling for R-Tec Corporation. Doug Hastings and
Gary Clayton own significant interests in R-Tec Holding, Inc. Sales to R-Tec
Corporation for 2000 were $155,100. The Company has accounts receivable from
R-Tec Corporation at December 31, 2000 in the amount of $24,772.
NOTE I - SUBSEQUENT EVENTS
On July 3, 2001, R-Tec Holding, Inc. acquired the Company pursuant to a Share
Exchange and Reorganization Agreement by and between R-Tec Holding, Inc. and the
four individual shareholders of the Company.
Under the terms of the Agreement, the parties agreed to be bound by and accept
the fair market value placed on the Company obtained from an independent
business appraisal. Consideration for the acquisition was 291,248 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 four
Company's shareholders to receive equal shares of R-Tec Holding, Inc.'s common
stock in the transaction.
The Company made shareholder distributions totaling $60,000 prior to the
exchange of shares discussed above.
NOTE J - 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.
-11-
R-TEC MACHINE TOOL, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
(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 R-Tec Machine Tool,
Inc. (RTMT) that might have occurred had the RTMT 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 RTMT and give effect to
marking certain assets to fair market value. The Company has made
reclassifications to certain liabilities of RTMT 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 RTMT, 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 RTMT 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.
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 RTMT RTMT PRO FORMA
HISTORICAL HISTORICAL Acquisition FINANCIAL
(Note 1) (Note 2) (Note 3) STATEMENTS
---------- ---------- -------------- ------------
CURRENT ASSETS:
Cash and certificates of deposit $ 76,634 $ 30,844 $ -- $ 107,478
Accounts receivable 511,524 47,022 (24,782)(a) 533,764
Costs and estimated earnings in excess of billings
on uncompleted contracts 202,530 8,634 -- 211,164
Income taxes receivable 15,295 -- -- 15,295
Prepaid expenses 3,094 -- -- 3,094
Notes receivable, current portion 6,587 -- (2,500)(b) 4,087
-------- -------- --------- ----------
Total current assets 815,664 86,500 (27,282) 874,882
Property, plant and equipment, net 106,834 183,882 44,253(c) 334,969
Other assets 17,397 -- 173,000(c) 190,397
Notes receivable, less current portion 14,663 -- -- 14,663
-------- -------- --------- ----------
Total assets $954,558 $270,382 $ 189,971 $1,414,911
======== ======== ========= ==========
LIABILITY AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of capital leases payable $ 12,020 $ 42,826 $ -- $ 54,846
Accounts payable 334,142 3,589 (24,782)(a) 312,949
Accrued liabilities 102,161 5,873 -- 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 2,500 (2,500)(b) 65,000
-------- -------- --------- ----------
Total current liabilities 644,503 54,788 (27,282) 672,009
Long term capital leases payable 28,036 93,011 -- 121,047
Notes payable to related parties 100,000 -- -- 100,000
Shareholders' equity 182,019 122,583 217,253(c) 521,855
-------- -------- --------- ----------
Total Liabilities and Shareholders' Equity $954,558 $270,382 $ 189,971 $1,414,911
======== ======== ========= ==========
The accompanying notes are an integral part of these pro forma financial
statements
II-2
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 RTMT R-TEC PRO FORMA
HISTORICAL HISTORICAL Acquisition FINANCIAL
(Note 1) (Note 2) (Note 3) STATEMENTS
------------ ---------- -------------- -----------
Revenue $ 1,552,587 $ 428,413 $ (155,100)(d) $ 1,825,900
Direct operating costs 1,442,764 238,638 (155,100)(d) 1,526,302
------------ --------- ------------ -----------
Gross profit 109,823 189,775 -- 299,598
Selling, general and administrative expenses 492,537 129,556 -- 622,093
Research and development expenses 22,710 -- -- 22,710
------------ --------- ------------ -----------
Income (loss) from operations (405,424) 60,219 -- (345,205)
Interest expense (13,189) (14,606) -- (27,795)
Interest income 2,080 1,163 -- 3,243
------------ --------- ------------ -----------
(11,109) (13,443) -- (24,552)
------------ --------- ------------ -----------
Income (loss) before income taxes (416,533) 46,776 -- (369,757)
Income tax benefit 12,893 -- -- 12,893
------------ --------- ------------ -----------
Net income (loss) (403,640) 46,776 -- (356,864)
Preferred stock dividends 36,517 -- -- 36,517
------------ --------- ------------ -----------
Net income (loss) available to common shareholders $ (440,157) $ 46,776 $ -- $ (393,381)
============ ========= ============ ===========
Basic earnings (loss) per share $ (0.03) $ (0.03)
============ ===========
Diluted earnings (loss) per share $ (0.03) $ (0.03)
============ ===========
Dividends paid per common share
$ -- $ 0.01
============ ===========
Weighted average shares outstanding-
Common shares outstanding at year end 17,114,174 291,248 17,405,422
The accompanying notes are an integral part of these pro forma financial
statements
II-3
R-TEC HOLDING, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
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 historical
consolidated financial statements of R-TEC.
NOTE 2. R-TEC MACHINE TOOL, INC. HISTORICAL
The historical balances represent the balance sheet and results of operations
for RTMT, 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, 2001. The pro forma adjustments related to the purchase allocation of RTMT
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 RTMT 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
RTMT.
I-4
The pro forma adjustments reflected in the pro forma combined financial
statements give effect to the following:
a) Intercompany Receivables To eliminate all intercompany for
the combined financial statement
position between R-TEC and the
Seller.
b) Notes Receivable To eliminate a loan between R-TEC
and the Seller.
c) Property, plant and equipment, Other Assets, Shareholders' Equity
To adjust pro forma combined assets
To fair market value of RTMT.
d) Revenue, Direct Operating Costs To eliminate intercompany sales
between R-TEC and the Seller.
I-5
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