AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 2004
REGISTRATION NO: ____________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PROTEC INDUSTRIES, INC.
-----------------------
Washington 1311 and 1400 98-037463
- ---------------------- ------------------------- ----------------
(State of jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification
organization) Code Number) Number)
2200 112th Avenue NE, Suite 200, Bellevue, Washington 98004,
(425) 452-8639, fax (425) 452-8622
(Address and Telephone Number of Principal Executive Offices)
Mr. Arne Przybillia, President and Board Chairman
2200 112th Avenue NE, Suite 200, Bellevue, Washington 98004,
(425) 452-8639, fax (425) 452-8622
(Name, address and telephone number of agent for service)
Copy to: Tolan S. Furusho, Attorney at Law
2200 112th Avenue NE, Suite 200, Bellevue, Washington 98004,
(425) 452-8639, fax (425) 452-8622
Approximate date of commencement of proposed sale to the public:
(____________________) Date this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration number of the
earlier effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION
<Table>
<Caption>
- ------------------------------------------------------------------------------------
Title of Proposed Proposed
Each Class of Amount Maximum Maximum Amount of
Securities to to be Offering Price Aggregate Registration
be Registered Registered Per Share Offering Price Fee
- ------------------------------------------------------------------------------------
Common Stock Minimum $8.00 $ 400,000
$.001 par 50,000 $ 3,167.50
value per Maximum $8.00 $25,000,000
share 3,125,000
</Table>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there by any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such state.
PROSPECTUS
May 6, 2004
PROTEC INDUSTRIES, INC.
The registration statement of which this Prospectus is a part relates to
the offer and sale by Protec Industries, Inc., a Washington corporation
("Protec" "the Company" "We" or "Our"), of our securities. Our common
stock offered is listed on the National Quotations Board Pink Sheets but
not on any other national securities exchange or the NASDAQ stock market.
This offering consists of minimum of 50,000 shares of common stock and a
maximum of 3,125,000 shares of common stock with a par value of $0.001
offered by us for $8.00 per share.
Protec's president and vice-president are the only officers who can offer
these securities on a best efforts minimum / maximum basis. The offering
will end one hundred eighty (180) days after the effective date of the
registration statement. There are no minimum or maximum purchase
requirements of shares of common stock per investor, pending availability.
Additionally, Protec will make arrangements to place the funds in an
escrow, trust or similar account segregated from the Company's operating
account.
<Table>
<Caption>
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Underwriting
Discounts and Offering Net Proceeds
Shares Offering Price Commissions Costs to Protec
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3,125,000 $ 25,000,000 $0.00 $35,000 $24,965,000
50,000 $ 400,000 $0.00 $35,000 $ 365,000
Per share $ 8
</Table>
FINANCIAL SUMMARY INFORMATION
The following summary financial information and operating data have been
derived from the financial statements of Protec for the periods indicated.
The following financial data should be read in conjunction with our
financial statements and the notes thereto included elsewhere in this
registration statement.
<Table>
<Caption> Year Ended Year Ended
2003 2002
----------- -----------
Statement of Operations
Income statement data:
Revenues $ -0- $ -0-
Expenses 134,701 23,661
----------- -----------
Income (loss) from operations (134,701) (23,661)
Net Loss Per Common Share $ (.03) $ (.09)
</Table>
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED
ONLY BY PERSONS WHO CAN AFFORD A COMPLETE LOSS OF THEIR INVESTMENT. SEE
"RISK FACTORS" BEGINNING ON PAGE .
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this prospectus is May 6, 2004
The information in this prospectus is not complete and may be changed.
Protec Industries, Inc. may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it
is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
1 This is a self-underwritten "best efforts" minimum/maximum
offering, which is not underwritten by a registered
broker/dealer, of a minimum of 50,000 and a maximum of 3,125,000
shares of Protec 's common stock, at an offering price of $8.00
per share.
2 Protec's President and Vice President will be the only officers
and directors selling these shares of common stock, pursuant to
Rule 3(a)4-1. Protec will receive all of the proceeds from the
sale of up to 3,125,000 shares. There is no selling commission
associated with the sale of these shares of common stock.. See
"Plan of Distribution", page 22.
3 All funds derived from this Offering will be held by Protec in an
account entitled "Protec Industries, Inc. Special Account", and
under control of the President, Mr. Arne Przybilla and Vice
President, Wolfgang Benneckenstein, until the minimum proceeds
are received and accepted by Protec. This account is a non-
interest bearing account and has no escrow or trust provisions.
In the event that the minimum amount of shares of common stock
has not been sold by the Termination Date of December 31, 2004,
then all funds will be promptly returned to the investor(s)
without interest or deduction on or before ten days following the
Termination Date. In the event that the minimum amount of shares
of common stock is sold, then all subsequent sales of common
stock will be deposited to the "Protec Industries, Inc. Special
account" and transferred to the general account once the share
certificates are issued to the investor(s). The termination date
will not be extended.
4 An investor is not limited to a minimum or maximum amount of
shares of common stock to be purchased, pending availability.
5 No officer, director, affiliates or any related party of Protec
may purchase these securities offered to meet the minimum of
shares offered.
6 The shares of common stock of Protec is currently quoted on the
National Quotations Bureau's Pink Sheets under the symbol "PTCS".
Protec intends to apply through a registered broker/dealer to
list its shares on the OTC Bulletin Board or a regional stock
exchange under the symbol "PTCS", however there is no assurance
that Protec will be assigned that symbol.
7 Neither the SEC nor any state securities commission has approved
or disapproved of these securities or passed upon the adequacy or
accuracy of this Prospectus. Any representation to the contrary
is a criminal offense. An investor should only rely on the
information contained in this document. Protec has not
authorized anyone to provide any investor information that is
different. This document may only be used where it is legal to
sell these securities. THIS INVESTMENT INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
4
TABLE OF CONTENTS
Part I Prospectus
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Determination of Offering Price. . . . . . . . . . . . . . . . . . . . . 24
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Directors, Executive Officers, Promoters and
Control Persons. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 29
Security Ownership of Officers, Directors and
Certain Beneficial Owners. . . . . . . . . . . . . . . . . . . . . . . 31
Description of Securities . . . . . . . . . . . . . . . . . . . . . . . 31
Description of Business. . . . . . . . . . . . . . . . . . . . . . . . . 33
Management's Discussion and Analysis or Plan of Operation. . . . . . . . 39
Description of Property. . . . . . . . . . . . . . . . . . . . . . . . . 44
Certain Relationships and Related Transactions . . . . . . . . . . . . . 45
Market for Common Equity and Related Stockholder Matters . . . . . . . . 45
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Available Information and Reports to Securities Holders. . . . . . . . . 46
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Interest of Named Experts and Counsel. . . . . . . . . . . . . . . . . . 47
Investors May Only Rely Upon the Information in This Prospectus. . . . . 47
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Part II Information Not Required in Prospectus
Indemnification of Directors and Officers. . . . . . . . . . . . . . . . 60
Other Expenses of Issuance and Distribution. . . . . . . . . . . . . . . 61
Recent Sales of Unregistered Securities. . . . . . . . . . . . . . . . . 61
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5
PROSPECTUS SUMMARY
This prospectus summary highlights selected information contained elsewhere
in this prospectus. An investor should read the following summary in
conjunction with the more detailed financial information together with the
more detailed information regarding Protec Industries, Inc. and the shares
of common stock being sold in this offering, which information appears
elsewhere in this prospectus.
Protec Industries, Inc.
Protec Industries, Inc., ("Protec" the "Company" "we" "our") is a
corporation formed under the laws of the state of Washington, whose
principal executive offices are located in Bellevue, Washington. The
Company was originally incorporated in the State of Arizona on September 9,
2002 under the name "ANF Telecast, Inc". We then changed our name to
Protec Industries, Inc. on December 13, 2002. The domicile of Protec was
changed to the State of Washington on March 2, 2004. The primary objective
of the business is to develop natural resources of oil and gas, talc and a
specific real estate project. Protec Industries, Inc. intends to market or
sell its raw products to processors and distributors. Protec will develop
its real estate project of the La Guadalupe Ranch in Cancun, Mexico upon
adequate financing.
Business Background
Protec is in its development stage and has not started any significant
operations. The Company has had no operating revenues to date. The
Company incurred operating losses of $23,661. from Inception to December
31, 2002, the end of its previous fiscal year and losses of $134,701. in
the year ended 2003. Since inception, Protec has incurred a deficit of
$158,362. to the end of 2003. Protec is in the business of the development
of natural resources business, specifically in oil, gas, talc, and land
resources. Protec's immediate business objective is the exercise of its
options to purchase 49% of the Rozmine Talc mine holdings in Slovockia and
49% of the common voting stock of Epic Energy, Inc. of Canada, an oil and
gas development and recovery affiliate.
Protec holds a contract to convert the $26 million USD Rozmine Talc option
into purchase contract for an initial payment of $5 million USD. Protec
has the option to pay $15 million USD for 49% of the Epic Energy, Inc.
common voting shares of the company. Epic Energy has licensing and
development rights to the oil and gas in the Crimean Peninsula (7 million
acres approximately) region and the Black Sea and Azov Sea regions of the
Ukraine. Protec holds development rights in La Guadalupe Ranch, a beach
front property in the area of Cancun, Mexico. Protec plans to develop this
property into a resort facility upon the completion of adequate financing
or with suitable potential joint venture partner. See "DESCRIPTION OF
BUSINESS", page 33.
Market Opportunity
The general oil and gas industry is projected to increase in overall
demand due to the general population increase. The talc industry is one of
increasing overall demand due to the general population increase. Protec
plans to market their talc mainly in Europe from Protec's Rozmine Talc
Project. Protec will develop the La Guadalupe ranch in Cancun, Mexico upon
adequate financing or with a suitable joint venture partner.
6
Name, Address and Telephone Number of the Registrant
Protec Industries, Inc., 2200, 112th Avenue, NE, Suite 200,
Bellevue, Washington 98004
(425) 452-8639, fax (425) 452-8622
The Offering
Protec is offering a minimum of 50,000 shares of common stock and a maximum
of 3,125,000 shares of common stock @$8.00 per share. This offering is
self-underwritten and not underwritten by a registered broker/dealer and is
on a "best efforts" basis. An investor is not limited to a minimum or
maximum amount of shares to be purchased, pending availability. All funds
will be deposited into a non-interest bearing, segregated account entitled
"Protec Industries, Inc. Special Account", under control of the Company's
President, Mr. Arne Przybilla, and Vice-President, Edgar Luber, until the
minimum amount of the offering has been received and accepted by the
Company. In the event that the minimum amount of 781,250 shares of common
stock is not sold by the termination date of December 31, 2004, all funds
will be returned to the investor(s), without interest or deduction,
promptly within ten days following the termination date. The termination
date will not be extended. The only persons allowed to sell this offering
are Mr. Arne Przybilla, Protec's President and Board Chairman and Edgar
Luber, Protec's Vice-President and Director. See "PLAN OF DISTRIBUTION",
page 22. There are no commissions being charged to Protec in connection
with this offering.
As of May 6, 2004, there are 99,939,080 shares of common stock; no shares
of preferred stock. There will be no affiliates of Protec allowed to
purchase shares of common stock to achieve the minimum amount of the
offering or for any other reason.
Use of Proceeds Protec will utilize the proceeds from the sale of the
shares of common stock for business development. See "Use of Proceeds",
page 21.
Trading Symbol There is only a small volume market for the Protec shares
of common stock, trading under the symbol "PTCS" on the National Quotations
Bureau's Pink Sheets. However, Protec intends to apply through a registered
broker/dealer to trade its shares on the OTC Bulletin Board and to file its
Form 8A to become fully reporting under the Securities and Exchange Act of
1934 in the event that Protec intends to apply to a regional stock exchange
under the same symbol "PTCS". However, there is no assurance that Protec
will be assigned that symbol.
RISK FACTORS
An investment in the shares of Protec's common stock is highly speculative
and involves a high degree of risk. Therefore, an investor should consider
all of the risk factors discussed below, as well as the other information
contained in this document. An investor should not invest in Protec's
shares of common stock unless he or she can afford to lose all or part of
the entire investment.
7
RISK FACTORS RELATED TO PROTEC'S OPERATIONS:
PROTEC IS A "DEVELOPMENT STAGE" COMPANY, HAS NO REVENUES, AN ACCUMULATED
- ------------------------------------------------------------------------
DEFICIT, AND MAY HAVE CONTINUED LOSSES FOR THE FORESEEABLE FUTURE.
- ------------------------------------------------------------------
Protec is in the development stage and, to date, has not earned any
revenues from operations since its inception on September 9, 2002. The
Company has continued to incur losses of $158,362 since inception. Since
new management was nominated and installed as the officers and directors of
Protec on April 10, 2004, the Company's principal activities have been
organizational and developmental in nature. As of December 31, 2003, the
Company had an accummulated net loss of $158,362. Protec has generated no
revenues from operations, has incurred expenses and has sustained losses.
In addition, Protec expects to continue to incur operating expenses. As a
result, Protec will need to generate significant revenues to achieve
profitability, which may not occur. Protec expects its operating expenses
to increase significantly as a result of the further implementation of
Protec's business plan. Since Protec has not yet completed developing its
website and as the Company has no operating history of marketing and
redistribution of the oil, gas, talc, Mexican resort, etc., Protec's
business may never generate sufficient revenues to meet its expenses or
achieve profitability. Even if Protec does achieve profitability, the
Company may be unable to sustain or increase profitability on a quarterly
or annual basis in the future. It is possible that Protec may never achieve
profitability or continue as an operating business.
PROTEC'S AUDITOR'S REPORT HAS A "GOING CONCERN" QUALIFICATION.
- --------------------------------------------------------------
The Company's independent auditor's report on the Company's financial
statements includes an explanatory paragraph in Note 7 that states: "The
Company intends to acquire interests in various business opportunities
which, in the opinion of management, will provide a profit to the Company,
however there is insufficient working capital for any future planned
activity, and to service its debt, which raises substantial doubt about its
ability to continue as a going concern."
PROTEC IS SOLELY DEPENDENT UPON THIS OFFERING TO COMMENCE MEANINGFUL
- --------------------------------------------------------------------
BUSINESS OPERATIONS.
- --------------------
Protec is solely dependent upon obtaining a minimum of 25% of the
proceeds ($6,250,000) from this offering to commence any meaningful
business operations. The Company must have sufficient working capital to
be able to commence and sustain its business operations for the first 24
months. It is highly unlikely that the Company will be able to continue any
meaningful business operations unless the Company is successful in
financing of operations by way of the minimum sale of 25% of the shares of
common stock in this offering.
8
PROTEC MAY INCUR PROBLEMS IN THE RESOURCE DEVELOPMENT AND DISTRIBUTION
- ----------------------------------------------------------------------
BUSINESS THAT COULD RESULT IN LACK OF PRODUCT SALES, BUSINESS DELAYS AND
- ------------------------------------------------------------------------
THE FUTURE ECONOMIC VIABILITY.
- ------------------------------
Potential investors should be aware of the problems, delays, expenses,
difficulties, and risks encountered by a resource development and
distribution company, particularly in a rapidly changing industry,
dependent on weather, other forces of nature and the environment, all of
which are beyond the control of the Company. These risks are the
anticipated and unanticipated problems relating to the development of
natural resources and distribution of oil, gas, talc, etc., to potential
customers. The risks are as follows for the following natural resource
categories:
(1) Oil:
(a) availability of raw resources in a volatile market;
(b) quality of product due to adverse or natural geological
conditions;
(c) pricing of oil in a competitive market resulting in poor profit
margins or no profit at all;
(d) political risk associated with new and developing governments,
etc.
(2) Gas:
(a) availability of raw resources in a volatile market;
(b) quality of product due to adverse or natural geological
conditions;
(c) pricing of gas in a competitive market resulting in poor profit
margins or no profit at all;
(d) political risk associated with new and developing governments,
etc.
9
(3) Talc:
(a) Poor qualities of talc that would make processing difficult or
uncompetitive;
(b) talc product not to customer specifications or acceptance;
(c) political risk associated with new and developing governments,
etc.
All or some of these risks are inherent in the development of natural
resources, and distribution business and could result in the lack of sales
and the overall potential success of Protec's business plan and business
operations.
PROTEC MAY ENCOUNTER DIFFICULTIES IN IDENTIFYING AND SECURING A JOINT
- ---------------------------------------------------------------------
VENTURE PARTNER TO DEVELOP THE REAL ESTATE PROJECT.
- ---------------------------------------------------
Protec has the rights to develop the La Guadalupe Ranch near Cancun,
Mexico as a beach resort. Protec is not capitalized to proceed with this
project without a well-financed joint venture partner. Protec is solely
dependent upon securing a joint venture partner to proceed with the
project.
PROTEC MAY ENCOUNTER OTHER DIFFICULTIES IN THE REAL ESTATE PROJECT BEYOND
- -------------------------------------------------------------------------
THE CONTROL OF THE MANAGEMENT OF PROTEC WHICH WOULD HAVE A MATERIAL ADVERSE
- ---------------------------------------------------------------------------
AFFECT ON THE BUSINESS OF THE COMPANY.
- --------------------------------------
Even with Protec being able to attract and secure a well-financed and
suitable joint venture partner to develop the La Guadalupe Ranch, there are
other difficulties beyond the control of the Company which may have a
material adverse affect on the business of the Company. These other
difficulties are:
(a) demand for facilities decreased due to unknown travel risks,
political risks, threat of terrorism, etc.;
(b) the cost of construction could exceed sales potential;
(c) excessive supply of resorts in future, etc.
PROTEC MAY ENCOUNTER MARKETING RESISTANCE FOR ITS PRODUCT OR PRODUCT
- --------------------------------------------------------------------
COMPONENTS IN THE INDUSTRY WHICH COULD RESULT IN LACK OF PRODUCT SALES AND
- ---------------------------------------------------------------------------
BUSINESS LOSSES FOR THE COMPANY.
- --------------------------------
Protec's products, which are comprised of raw natural resources, upon
the harvesting of such resources will be suitable for sales to
manufacturers and distributors. Protec may encounter resistance in the
developing and marketing of Protecs raw products to the industry. The
industry is relatively volatile and is presently confined to a few major
producers. Protec could experience a lack of product sales to
manufacturers and distributors if those manufacturers and distributors are
unable to successfully sell the finished products in the marketplace. The
Company may also fail to develop an acceptable level of product quality and
sales to manufacturers and distributors.
10
PROTEC IS IN THE EARLY STAGES OF MARKET DEVELOPMENT WITH MONOPOLISTIC
- ---------------------------------------------------------------------
INDUSTRY INFRASTRUCTURE WHICH COULD RESULT IN A LACK OF PRODUCT SALES AND
- -------------------------------------------------------------------------
HAVE A MATERIAL ADVERSE AFFECT ON THE OVERALL BUSINESS OPERATIONS.
- ------------------------------------------------------------------
The natural resources industry is well established with several
dominant leaders, however the market, suitable for sales of the Protec's
raw products, is at a growing stage of development, is evolving rapidly,
and is characterized by an increasing number of market entrants who have
introduced, or are developing similar or competing products. As is typical
of a new and rapidly evolving industry, the demand and market acceptance
for recently introduced product suppliers is subject to a certain level of
acceptance and consumer demand and trends which are reflected in the market
acceptance of the finished product. In the initial phases of the Protec 's
business plan, the Company intends to have approximately 50% of its total
sales to raw talc processors and increasing to over 755% of its total sales
in the course of five years. However, if Protec's wholesale market to
manufacturers and processors fails to develop or develops more slowly than
expected, or if Protec's products do not achieve market acceptance by a
significant number of wholesale product purchasers, Protec's projected
sales will not be realized which will materially adversely affect the
overall Company's business plan.
PROTEC IS SUBJECT TO RAPID AND SIGNIFICANT CHANGES IN THE GENERAL NATURAL
- -------------------------------------------------------------------------
RESOURCES INDUSTRY, THE MARKET ACCEPTANCE OF CERTAIN PRODUCTS AND THE
- ---------------------------------------------------------------------
CONTINUATION OF CERTAIN EXISTING PRODUCTS WHICH COULD RESULT IN LACK OF
- -----------------------------------------------------------------------
SALES WHICH WOULD MATERIALLY ADVERSELY AFFECT THE COMPANY'S BUSINESS.
- ---------------------------------------------------------------------
The general and functional natural resources industry is subject to
change in consumer tastes, products improvement and improved process
technologies which may render Protec Industries, Inc.'s raw products not
competitive. Further, the acceptance of general and functional raw
products and their contents is changing continually. Such rapid change
may, in a very short period of time, impose additional, unforeseen costs to
Protec Industries, Inc. in that Protec Industries, Inc. may be required to
modify its product sales to adapt to such changes. Protec Industries, Inc.
may not be able to successfully modify its products for the sales of raw
oil, gas, talc, and hospitality services as may be necessary in a timely
manner, or at all.
PROTEC MAY BE SUBJECT TO A "CLOSED STANDARD" IN THE SALE OF ITS PRODUCTS
- ------------------------------------------------------------------------
WHICH COULD PRECLUDE ENTRY BY PROTEC IN THIS SEGMENT OF THE MARKET.
- -------------------------------------------------------------------
While Protec intends that its products will be compatible with the
government standards promulgated by leading industry participants, there
is widespread adoption of a proprietary or "closed" standard. A "closed
standard' is a standard of product and/or its processing process that
precludes all participants other than those it was specifically designed to
accommodate. These standards, being patented processes preclude
competition. This "closed standard" could preclude Protec from effectively
selling its products to manufacturers in the general industry. In
addition, even if a non-proprietary industry standard is established, it is
possible that Protec's products will not be acceptable to that standard or
on commercially reasonable terms which could have a material adverse effect
on Protec's sales prospects and its general business.
11
PROTEC COMPLIANCE WITH INDUSTRY STANDARDS MAY NOT BE SUFFICIENT TO ACHIEVE
- --------------------------------------------------------------------------
MARKET ACCEPTANCE WHICH COULD RESULT IN LACK OF PRODUCT SALES WHICH WOULD
- -------------------------------------------------------------------------
RESULT IN THE OVERALL VIABILITY OF THE BUSINESS.
- ------------------------------------------------
Even if Protec's products are compatible with industry standards, it
is possible that Protec's products will not achieve market acceptance to
the general industry or to manufacturers and processors. It is not known
whether Protec will be able to respond to technological changes or evolving
industry standards in a timely manner, if at all. The potential inability
of Protec to respond to changing market conditions, technological
developments, evolving industry standards or changing customer
requirements, would have a material adverse effect on Protec's overall
viability of the business, its financial condition, and operating results.
PROTEC EXPECTS TO HAVE QUARTER-TO-QUARTER FLUCTUATIONS IN REVENUES,
- -------------------------------------------------------------------
EXPENSES, LOSSES AND CASH FLOW, SOME OF WHICH COULD BE SIGNIFICANT AND
- ----------------------------------------------------------------------
COULD ADVERSELY MATERIALLY AFFECT THE BUSINESS AND FUTURE OPERATIONS.
- ---------------------------------------------------------------------
Results of operations will depend upon certain recovery, processing
and sale factors, some of which are beyond Protec's control, including
market acceptance of the Company's products and services, new product and
service introductions, and competition. Therefore, the Company may have
significant fluctuations in revenue from quarter to quarter based on
several issues which are:
(2) contract basis of obtaining orders as there are two methods for
obtaining contracts. The first and most common is the commodity
market, which is essentially the price per unit divided by
production costs, processing costs and the profit to the
processor. The second method is strictly based on supply where
the supplier and the processor negotiate a price in advance of
the delivery in order to secure supply for an individual customer
or all customers. This price will generally be higher than the
average of the previous two years and takes into consideration
the carry-over of inventory volumes from the previous year into
the pricing formula. While the Company will pay more for this
option, the advantage is that the availability of product is
guaranteed so that the Company can meet its own contractual
obligations. This will have a great effect on which quarters
will reflect sales and which quarters will not reflect sales.
(3) seasonal nature of availability of products commercially
recovered outdoors require certain optimum weather conditions.
There is only one supply period per year. In harsh weather
months, product must be imported from other continents such as
South America and are more expensive. This will have a great
effect on which quarters will have more profitable sales and
which quarters will have less profitable sales, if at all, since
all Protec's natural resources are in the Northern Hemisphere.
(4) possible inadequate quality of products to meet order
specifications, inadequate quantity of products to meet order
specifications. Maximum recovery, yield, and quality and are
greatly affected by weather. The weather and other conditions of
nature will contribute to the quality and quantity of the product
that the Company intends to sell and in which quarter of the
Company's business year that the sale is consummated.
12
(5) the sourcing of sales opportunities (the identification and
finding of suitable customers). In the event that the Company is
not able to find suitable customers for the product, and at
certain times of the year, the Company will not be able to obtain
sales contracts or to sell its products in a particular quarter
or quarters of the Company's business year.
PROTEC IS MATERIALLY DEPENDENT UPON ITS KEY PERSONNEL AND THE LOSS OF SUCH
- --------------------------------------------------------------------------
KEY PERSONNEL COULD RESULT IN BUSINESS DELAYS IN THE FURTHER IMPLEMENTATION
- ---------------------------------------------------------------------------
OF ITS BUSINESS PLAN OR BUSINESS FAILURE.
- -----------------------------------------
Protec depends upon the continued involvement of Mr. Arne Przybilla,
the Company's President, Chief Executive Officer and Board Chairman, and
Edgar Luber, the Company's Vice President and Director. As Protec is a
"start-up" or development stage company, the further implementation of the
Company's business plan is dependent on the entrepreneurial skills and
direction of management. The position of the president and vice-president
of Protec is to guide and direct the activity and vision of the Company.
This direction requires an awareness of the market, the competition,
current and future markets and technologies that would allow the Company to
continue its operations. The loss or lack of availability of these
individuals would significantly and materially adversely affect Protec's
business and operations. Protec does not carry "key person" life insurance
for either of these officers and directors and Protec would be adversely
affected by the loss of either of these two key employees. Presently there
are no employment agreements with either Mr. Arne Przybilla or Edgar Luber.
PROTEC MUST ACHIEVE A MINIMUM OF 25% OF THE PROCEEDS FROM THIS OFFERING FOR
- ---------------------------------------------------------------------------
KEY PERSONNEL TO BE ABLE TO DEVOTE MINIMAL TIME AND ATTENTION TO THE
- --------------------------------------------------------------------
FURTHER IMPLEMENTATION OF THE COMPANY'S BUSINESS PLAN.
- ------------------------------------------------------
In the event that does not achieve a minimum of 25% of the proceeds of
this offering the president and vice president will not be able to devote
full time to the Company's business and operations. If 25% of proceeds are
achieved, i.e. the sale of 781,250 shares of common stock at $8.00 per
share or $6,250,000, then the president will be able to devote
approximately 10 hours per week on the Company's business and operations
and the vice-president will be able to devote approximately 8 hours per
week on the Company's business and operations. The Company's
Secretary/Treasurer and Director, Tolan Furusho, spends approximately 2
hours per month on the secretarial /treasurer duties at the Company's
monthly board of directors meeting and will continue to spend only
approximately 2 hours per month on the secretarial / treasurer duties of
the Company.
13
PROTEC'S COMPETITION ARE MEDIUM TO LARGE SIZED COMPANIES WHICH MAY BE ABLE
- --------------------------------------------------------------------------
TO USE THEIR FINANCIAL STRENGTH TO DOMINATE THE MARKET WHICH WOULD
- ------------------------------------------------------------------
MATERIALLY ADVERSELY AFFECT THE COMPANY'S ABILITY TO COMPETE EFFECTIVELY.
- -------------------------------------------------------------------------
The market for all raw products is highly competitive and rapidly
evolving, resulting in a dynamic competitive environment with several
dominant national and multi-national leaders. Protec will have to compete
with companies that have substantially greater financial, marketing,
technical and human resources capabilities. In addition, new companies may
enter the market with new products and services that may be competitive
with products and services offered or to be offered by Protec. Because
there are potential entrants to the raw materials fields, it is extremely
difficult to assess which companies are likely to offer competitive
products and services in the future, and in some cases it is difficult to
discern whether an existing product is competitive with Protec's products.
Competitive factors in the natural resource recovery industry include
product quality, marketing and distribution resources, customer service and
support and price of product. Protec expects competition to persist and
intensify in the future.
Some of Protec's competitors are much larger companies than Protec
that are very well capitalized and can utilize their strong market share
for further growth that may impede the Company's ability to generate enough
sales to cover the costs of marketing the product. Several of the
Company's competitors have operating histories which have been for over a
period of several decades, greater name recognition, larger client bases
and significantly greater financial, technical and marketing resources than
Protec. Such competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies and make more attractive
offers to potential clients. In addition, many of Protec's current or
potential competitors, such as Chevron, Amoco, Texaco, Shell, etc., have
broad distribution channels that may be used to distribute competing
products directly to end-users or purchasers. It is possible that Protec
will not be able to compete effectively with current or future competitors
resulting in a loss of business or entire business failure.
PROTEC NEEDS TO RECEIVE 50% OF THE PROCEEDS OF THIS OFFERING OR THE COMPANY
- ---------------------------------------------------------------------------
WILL NOT BE ABLE TO ESTABLISH THEIR OWN VALUE ADDED PROCESSES WHICH WOULD
- -------------------------------------------------------------------------
MAKE IT DIFFICULT FOR PROTEC TO READILY ADAPT TO THE MARKETPLACE.
- -----------------------------------------------------------------
Protec is researching the possibility of developing its own value-
added processes. If Protec is not able to receive 50% of the proceeds in
this offering, Protec will not be able to establish its own value added
processes of "on site" equipment to further treat and process the product
for specialized product processors and manufacturers. The natural
resources recovery science technology is characterized by constant
technological developments, evolving industry standards, changing customer
demands and frequent introductions of new and improved products and product
enhancements. Because Protec has no present financial resources and is
totally dependent upon this selling of its common shares to implement its
business plan, management believes that the Company's success depends upon
its ability to improve the quality, content and reliability of the product
in response to both evolving demands of the general natural resources
industry with competitive product. If Protec does not receive adequate
financing, Protec will not be able to establish their raw material
processes to be able to continue operations.
14
PROTEC IS SUBJECT TO RISKS OF DEFECTS AND DEVELOPMENT DELAYS IN THE
- -------------------------------------------------------------------
BUSINESS OPERATIONS.
- --------------------
Protec has not sold any existing product and there are a number of
proposed products. Products based on sophisticated process recovery
technologies, such as the mass recovery production in the general industry
and in the recently developed industry of raw materials sciences, etc.,
often encounter development delays and may lack processor acceptance when
introduced. Even though the consumer acceptance is more of a hardship on
the manufacturer as Protec will only provide the raw material components
for manufacturing or processing, if the consumer acceptance does not create
a viable market for the finished products, then Protec will not be able to
sell the product to the processor or manufacturer. As a result, Protec may
experience delays in the business objective of the Company and the further
sale of the Protec products. It is possible that Protec will experience
development delays, which could result in the lack of sales of the product
which could have a material adverse effect on the overall viability of
Protec's business and operating results.
PROTEC NEED FOR ADDITIONAL PERSONNEL COULD CAUSE DELAYS IN THE FURTHER
- ----------------------------------------------------------------------
IMPLEMENTATION OF THE COMPANY'S BUSINESS PLAN.
- ----------------------------------------------
The ability to further implement the Protec's business plan, of which
the essential elements are research and development and sales and marketing
activities, will depend upon Protec's ability to hire and retain senior and
middle level, highly-skilled individuals. Such individuals must be
experienced in the operation of certain aspects of Protec's business. The
additional personnel required will include research and development
technologists, recovery and process production system specialists,
accounting and business development experts and a sales and marketing team.
Competition for such personnel is intense and it is possible that Protec
will not be successful in attracting and retaining qualified personnel.
Protec's potential failure to attract and retain such additional personnel
would slow down the further implementation of the Company's business plan
and strategies that Protec intends to develop.
PROTEC MAY NOT BE ABLE TO MANAGE GROWTH WHICH COULD RESULT IN DELAYS IN
- -----------------------------------------------------------------------
BUSINESS OPERATIONS.
- --------------------
In the event that there is acceptance for the product by the general
processors, etc. purchasers and manufacturers, management of Protec
anticipates that it will potentially be required to expand its operations
to address such market demand. In addition, Protec anticipates
significantly increasing the size of its sales and marketing staff
following the completion of the Company receiving and accepting a minimum
of 25% of the proceeds of this offering. It is possible that such internal
expansion will not be successfully completed, that such expansion will not
enable Protec to generate sufficient revenues, and/or that Protec will not
be able to compete successfully against the significantly more extensive
and well-funded sales and marketing operations of Prrotec's existing and
potential competitors. Protec's potential growth and the integration of
operations are expected to place a significant strain on Protec's
managerial, operational and financial resources. The inability of Protec to
promptly address and respond to these circumstances could have a material
adverse effect on Protec's overall business.
15
PROTEC MAY ENTER INTO POTENTIAL BUSINESS COMBINATIONS THAT COULD BE
- -------------------------------------------------------------------
DIFFICULT TO INTEGRATE AND MAY DISRUPT BUSINESS OPERATIONS AND MAY HAVE A
- -------------------------------------------------------------------------
MATERIAL ADVERSE ON THE BUSINESS.
- ---------------------------------
Protec may also seek foreign entities for the distribution of the
product in the Far East and other specific locations outside of North
America. There may be business combinations with industry products
manufacturers and distributors. Protec may wish to acquire certain
manufacturers and/or distributors in the general business of Protec .
In the event of an acquisition in the recovery business or processing
products manufacturing business, any business combination may be difficult
to integrate into Protec's day-to-day operations. If Protec does enter
into a business combination, it is possible that the key personnel of such
business will not want to integrate with Protec's management and/or
business operations which may disrupt business operation and have an
adverse material affects of the business.
PROTEC MAY NEED ADDITIONAL CAPITAL TO FURTHER FINANCE ITS BUSINESS PLAN AND
- ---------------------------------------------------------------------------
SUCH FINANCING MAY BE UNAVAILABLE OR TOO COSTLY AND COULD REDUCE THE
- --------------------------------------------------------------------
CURRENT STOCKHOLDERS OWNERSHIP.
- -------------------------------
Protec's ability to research and develop the core process technologies
the Company is planning to utilize, to sustain operation and successfully
market the product is dependent upon the Company's ability to secure
additional financing and allocate sufficient funds required to support the
Company's research and marketing activity. Additional financing may not be
available on favorable terms or even at all. If the Company raises
additional funds by selling shares of common or preferred stock, the
percentage ownership of the Company's then current stockholders will be
reduced. If the Company cannot raise adequate funds to satisfy its capital
requirements, the Company may have to limit its operations significantly.
The Company's ability to raise additional funds may diminish if the public
equity markets become less supportive of the industry and other food
industry factors.
PROTEC HAS ITS OPERATIONAL OFFICE IN VADUZ, LIECHTENSTEIN, WHICH MAY BE
- -----------------------------------------------------------------------
DIFFICULT TO EFFECT SERVICE OF PROCESS AND TO ENFORCE ANY JUDGMENTS FROM
- ------------------------------------------------------------------------
UNITED STATES COURTS.
- ---------------------
As Protec is a Washington corporation and has its operational office
in the jurisdiction of Vaduz, Liechtenstein, it is possible that any party
wishing to file an action or to enforce a judgment granted in the United
States of America courts will have a more difficult time than with an
entity solely residing within the United States of America. Such potential
legal service or notification and enforcement of judgment must be
represented by a State of Washington entity to affect such process of
service and notification and enforcement of judgment. The costs to retain
legal counsel to effect service of process and to enforce any judgment from
the United States courts may be too excessive for a prevailing party to
incur in the service of process and enforcement of such judgments.
16
PROTEC PRINCIPAL OFFICE IS WITHIN THE COUNTRY OF THE UNITED STATES AND IT
- -------------------------------------------------------------------------
IS POSSIBLE THAT AN ACTION AGAINST PROTEC MAY NEED TO BE ORIGINATED IN THE
- --------------------------------------------------------------------------
UNITED STATES COURTS.
- ---------------------
As Protec is a Washington corporation, has its principal office in
Bellevue Washington, it is possible that a legal action may need to be
originated in that jurisdiction and served upon the Company, both in the
state of Washington, which could be more difficult and more costly than an
action initiated solely in the United States courts. Additionally, an
investor, creditor or other plaintiff may not be able to obtain an original
action in a Vaduz, Liechtenstein court to enforce liabilities based on the
U.S. federal securities laws against the Company or any of the non-U.S.
resident executive officers and directors.
PROTEC OFFICERS AND DIRECTORS WHO ARE NOT UNITED STATES CITIZENS COULD BE
- -------------------------------------------------------------------------
MORE DIFFICULT TO EFFECT SERVICE OF PROCESS AND TO ENFORCE ANY JUDGMENTS
- ------------------------------------------------------------------------
FROM UNITED STATES COURTS.
- --------------------------
Any officer and director or significant employee of Protec who is not
a United States citizen or resident could be more difficult to effect
service of process and to enforce any judgments obtained by a United States
court. There will be additional costs incurred for a lawsuit to effect
service of process and enforcement of judgment against non United States
citizens. These costs could be too costly for an injured party to effect
service of process and enforcement of judgment.
RISKS RELATED TO OFFERING:
PROTEC'S PROCEEDS FROM THE MINIMUM OFFERING WILL NOT BE SUFFICIENT TO
- ---------------------------------------------------------------------
ENABLE THE COMPANY TO FURTHER IMPLEMENT ITS BUSINESS PLAN IN ANY MEANINGFUL
- ---------------------------------------------------------------------------
WAY.
- ----
Should Protec only receive the minimum proceeds from this offering of
$400,000 less the costs of the offering of $35,000, Protec would only be
able to pay the offering costs, apply for a listing through a registered
broker/dealer on the OTC Bulletin Board and have the balance for general
corporate expense. Protec would then use this capital to further finance
the Company and could not further implement its business plan and commence
operations in a meaningful way.
PROTEC DOES NOT HAVE ANY ESCROW OR TRUST PROVISIONS IN THE DEPOSITORY BANK
- --------------------------------------------------------------------------
ACCOUNT WHICH COULD CAUSE THE INVESTOR TO LOSE ALL OR PART OF THE
- -----------------------------------------------------------------
INVESTMENT.
- -----------
The depository account in which the investors will be depositing their
funds does not have any trust or escrow provisions and is under control of
the Company's President and Board Chairman, Mr. Arne Przybilla, and the
Company's Vice President and Director, Edgar Luber. There is no responsible
or bonded unrelated third party that is providing a guarantee for those
funds to be returned to the investor if the minimum amount of the sale of
the offering of 50,000 shares of common stock at an offering price of $8.00
is not achieved by the termination date of December 31, 2004. The investor
can only rely upon Mr. Arne Przybilla and Edgar Luber to return their funds
in the event that the minimum amount of the offering is not achieved.
17
PROTEC MANAGEMENT AND AFFILIATES BENEFICIALLY OWN 12% OF THE SHARES OF
- ----------------------------------------------------------------------
COMMON STOCK AND THEIR INTEREST COULD CONFLICT WITH THE INVESTORS WHICH
- -----------------------------------------------------------------------
COULD CAUSE THE INVESTOR TO LOSE ALL OR PART OF THE INVESTMENT.
- ---------------------------------------------------------------
Protec's directors and executive officers and other family members
and/or affiliates beneficially own 12% of the shares of the Company's
outstanding common stock. As a result, the directors and executive
officers collectively are able to substantially influence all matters
requiring stockholder approval, including the election of directors and
approval of significant corporate transactions. Such concentration of
ownership may also have the effect of delaying or preventing a change in
control, which may be to the benefit of the directors and executive
officers but not in the interest of the shareholders. This beneficial
ownership and potential effective control on all matters relating to the
business and operations of the Company could eliminate the possibility of
shareholders changing the management in the event that the shareholders did
not agree with the conduct of the officers and directors. Additionally,
the shareholders would potentially not be able to obtain the necessary
shareholder vote to affect any change in the course of business of the
Company. This lack of shareholder control could cause the investor to lose
all or part of the investment.
PROTEC'S OFFERING OF THE SHARES OF COMMON STOCK WILL CAUSE IMMEDIATE
- --------------------------------------------------------------------
SUBSTANTIAL DILUTION TO THE CURRENT SHAREHOLDERS.
- -------------------------------------------------
Upon completion of this offering, purchasers of the shares of common
stock offered hereby will experience immediate and substantial dilution of
the net tangible book value of their investment in the Company as
additional shares offered are sold. For example, if an investor purchases
shares in the beginning of the sale of the shares of common stock he or she
will own a greater percentage of the issued and outstanding shares of
common stock in the Company than when more investors purchase shares of
common stock. As more shares of common stock are purchased that dilution
is increased as there are then more shares of common stock issued and
outstanding. See "Dilution Table" on page 23.
PROTEC HAS THE ABILITY TO ISSUE PREFERRED STOCK WHICH COULD ADVERSELY
- ---------------------------------------------------------------------
MATERIALLY AFFECT THE RIGHTS OF THE COMMON SHAREHOLDER.
- -------------------------------------------------------
Protec's Board of Directors has the ability to potentially issue up to
10,000,000 shares of preferred stock, with a par value of $0.001, in one or
more series and to determine the number of shares in each series, as well
as the designations, preferences, rights and qualifications or restrictions
of those shares without any further vote or action by the stockholders. The
rights of the holders of common stock will be subject to, and may be
adversely affected by, the rights of the holders of any shares of preferred
stock that may be issued in the future. The issuance of shares of preferred
stock could have the effect of making it more difficult for a third party
to acquire a majority of the outstanding voting stock of Protec. The
issuance of shares of preferred stock could carry a conversion value to
convert to a substantial amount of shares of common stock that could
substantially dilute the investors share position in the Company.
18
PROTEC EXPECTS TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND THESE FUTURE
- --------------------------------------------------------------------------
SALES OF SHARES OF COMMON STOCK BY THE COMPANY'S EXISTING STOCKHOLDERS
- ----------------------------------------------------------------------
COULD ADVERSELY AFFECT THE COMPANY'S STOCK PRICE AND DILUTION OF AN
- -------------------------------------------------------------------
INVESTOR'S STOCK POSITION.
- --------------------------
As of the date of the filing, has 99,939,080 issued and outstanding
shares of common stock. Protec is offering a minimum of 50,000 shares and
amaximum of 3,125,000 shares of common stock at $8.00 per share. Even if
Protec received the maximum proceeds from the sale of the 3,125,000 shares
of common stock, the Company may need to raise additional capital, which
may result in the issuance of additional shares of common stock, or debt
instruments. Shares of common stock may be issued under an available
exemption, a latter registration statement, or both. When, as and if
additional shares of common stock are issued, this will cause dilution in
the value of shares purchased in this offering and may cause the price of
the Company's shares of common stock to drop. These factors could also
make it more difficult to raise funds through future offerings of the
Protec's shares of common stock or shares of preferred stock.
The remaining shares of common stock, which are not being registered
hereby, are "restricted securities" as defined under Rule 144 or 144(k), a
substantial amount of which are available for sale in the public market,
subject to the provisions of Rule 144 or 144(k) under the Securities Act.
See "MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS, page 45.
Sales of substantial amounts of shares of common stock in the public
market, or the perception that such sales will occur, could have a material
negative effect on the potential market price of the Company's shares of
common stock. This potential problem would be exacerbated if the Company
further issues restricted shares of common stock in exchange for equipment
and services or for any other reason, which would cause further dilution.
The issuance of restricted shares of common stock is determined solely by
Protec's Board of Directors and does not need shareholder approval. The
potential issuance of additional shares of common stock could adversely
affect the price of the Company's shares of common stock and cause further
dilution of the investor's stock position.
PROTEC'S DIRECTORS HAVE LIMITED LIABILITY AND THEREFORE CANNOT BE HELD
- ----------------------------------------------------------------------
LIABLE FOR MONETARY DAMAGES WHICH WOULD HAVE A MATERIAL ADVERSE AFFECT ON
- -------------------------------------------------------------------------
THE COMPANY AND ITS SHAREHOLDERS.
- ---------------------------------
Under the laws of the state of Washington and Protec's Bylaws, the
directors cannot be held liable to the Company or to the stockholders for
monetary damages for breach of fiduciary duties except under certain
circumstances. These circumstances would include any unlawful acts under
the laws of the state of Washington or unlawful or fraudulent acts
conducted in the normal course of business. In the event that the officers
and directors have committed any unlawful securities violations then the
officers and directors are subject to civil and/or criminal enforcement.
However, the potential breach of fiduciary responsibility to the Company is
sometime difficult to determine or to act upon which would have a material
adverse affect on the Company and its shareholders.
19
PROTEC MAY NOT BE ABLE TO LIST OR MAINTAIN A TRADING MARKET FOR ITS SHARES
- --------------------------------------------------------------------------
OF COMMON STOCK WHICH COULD MATERIALLY ADVERSELY AFFECT THE SHAREHOLDERS IN
- ---------------------------------------------------------------------------
THE SELLING OF THEIR SHARES.
- ----------------------------
The trading in the Protec's shares of common stock is dependent upon
the sponsorship of a license National Association of Securities Dealers
("NASD") broker/dealer and submission and acceptance by the NASD and a
listing on the OTC Bulletin Board, operated by the NASD. Said trading is
dependent upon Protec continuing to be able to comply with Rule 6530 of the
NASD, which requires us to file reports as set forth in the Securities
Exchange Act of 1933 and 1934 in the event that the Company files to become
subject to the rules and regulations of the Securities Exchange Act of
1934. Because the Company may not be able to obtain or maintain a listing
on the OTC Bulletin Board, the Company's shares of common stock may be
difficult or impossible to sell.
PROTEC SHARES OF COMMON STOCK COULD BE TREATED AS A "PENNY STOCK," IF THE
- -------------------------------------------------------------------------
PRICE OF THE SHARES GOES BELOW $5.00 PER SHARE OR IF PROTEC DOES NOT
- --------------------------------------------------------------------
ACHIEVE THE NET CAPITAL THRESHOLD OF $2,000,000 IN NET OPERATION CAPITAL
- ------------------------------------------------------------------------
AND COMPLIANCE WITH REQUIREMENTS FOR DEALING IN "PENNY STOCKS" MAY MAKE IT
- --------------------------------------------------------------------------
DIFFICULT FOR HOLDERS OF THE COMPANY'S SHARES OF COMMON STOCK TO RESELL
- -----------------------------------------------------------------------
THEIR SHARES OF COMMON STOCK.
- -----------------------------
Currently there is a limited public market for the Company's shares of
common stock as the shares of common stock have only been traded on the
National Quotations Board's Pink Sheets market. If the shares of common
stock are listed in the public market in what is known as the over-the-
counter market and at least for the foreseeable future, the Company's
shares of common stock if traded at a price below $5.00 per share, will be
deemed to be a "penny stock" as that term is defined in Rule 3a51-1 under
the Securities Exchange Act of 1934. Rule 15g-2 under the Exchange Act
requires broker/dealers dealing in penny stocks to provide potential
investors with a document disclosing the risks of penny stocks and to
obtain from these inventors a manually signed and dated written
acknowledgement of receipt of the document before effecting a transaction
in a penny stock for the investor's account. Compliance with these
requirements may make it more difficult for holders of the Company's shares
of common stock to resell their shares to third parties or otherwise, which
could have a material adverse effect on the liquidity and market price of
the Company's shares of common stock.
"Penny stocks" are stocks with a price of less than $5.00 per share
unless traded on NASDAQ or a national securities exchange;
Penny stocks are also stocks that are issued by companies with: net
tangible assets of less than $2 million (if the issuer has been in
continuous operation for at least three years); or $5.0 million (if in
continuous operation for less than three years); or average revenue of less
than $6.0 million for the last three years.
20
PROTEC'S SHAREHOLDERS MAY FIND IT MORE DIFFICULT TO SELL THEIR SHARES OF
- ------------------------------------------------------------------------
COMMON STOCK BECAUSE THE COMPANY IS NOT, AND MAY NEVER BE, ELIGIBLE FOR
- -----------------------------------------------------------------------
NASDAQ OR ANY NATIONAL STOCK EXCHANGE.
- --------------------------------------
Protec is not presently, and it is likely that for the foreseeable
future the Company will not be, eligible for inclusion in NASDAQ or for
listing on any United States national stock exchange. To be eligible to be
included in NASDAQ, a company is required to have not less than $4,000,000
in net tangible assets, a public float with a market value of not less than
$5,000,000, and a minimum bid of price of $4.00 per share. At the present
time, management of the Company is unable to state when, if ever, the
Company will meet the NASDAQ application standards. Unless the Company is
able to increase its net worth and market valuation substantially, either
through the accumulation of surplus out of earned income or successful
capital raising financing activities, the Company will never be able to
meet the eligibility requirements of NASDAQ. As a result, it will be more
difficult for holders of the Company's shares of common stock to resell
their shares to third parties or otherwise, which could have a material
adverse effect on the liquidity and market price of the Company's shares of
common stock
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS, WHICH INVOLVE RISKS
AND UNCERTAINTIES. SUCH FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS
REGARDING FUTURE EVENTS AND THE COMPANY'S PLANS AND EXPECTATIONS. PROTEC'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE
SET FORTH IN THE ABOVE RISK FACTORS AND ELSEWHERE IN THIS PROSPECTUS. IN
ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS.
USE OF PROCEEDS
The net proceeds to Protec from the sale of the 3,125,000 shares of
common stock at the offering price of $8.00 per share is $25,000,000, less
the cost of the offering which is estimated to be $35,000, or $24,965,000.
As Mr. Arne Przybilla, Protec's President and Board Chairman and Edgar
Luber, Protec's Vice President and Director are the only persons allowed to
sell this offering, there is no commission being charged to Protec in
connection with this offering.
Net proceeds - if 100% of the shares of common stock (3,125,000 @$8.00) are
sold by the Company: $25,000,000
$ 5,000,000 Talc Mine Exercise of Option to purchase (convert
option to purchase contract)
$ 500,000 Epic Energy, Inc. Exercise/Purchase of Option for 49%
of common Shares
$ 10,125,000 Machinery and Equipment
$ 390,000 Marketing Costs
$ 8,950,000 Working Capital
$ 65,000 Offering Expense
Total Use of Proceeds: $25,000,000
21
Net proceeds - if 75% of the shares of common stock (2,343,750 @$8.00) are
sold by the Company: $18,750,000
$ 5,000,000 Payment to Convert Talc Mine Option to Purchase
Contract with payment terms
$ 500,000 Epic Energy, Inc. Exercise/Purchase of Option for 49%
of common shares
$ 3,250,000 Machinery and Equipment
$ 315,000 Marketing Costs
$ 9,650,000 Working Capital
$ 35,000 Offering Expense
Total Use of Proceeds: $18,750,000
Net proceeds - if 50% of the shares of common stock (1,562,500 @$8.00) are
sold by the Company: $12,500,000
$ 5,000,000 Payment to Convert Talc Mine Option to Purchase
Contract with payment terms
$ 500,000 Epic Energy, Inc. Exercise/Purchase of Option for 49%
of common shares
$ 3,650,000 Machinery and Equipment
$ 315,000 Marketing Costs
$ 3,000,000 Working Capital
$ 35,000 Offering Expense
Total Use of Proceeds: $12,500,000
Net proceeds - if 25% of the shares of common stock (781,250 @$8.00) are
sold by the Company: $6,250,000
$ 5,000,000 Payment to convert Talc Mine Option to a Purchase
Contract with payment terms
$ 500,000 Epic Energy, Inc. Exercise of Option to purchase 49% of
common shares
$ 135,000 Machinery and Equipment
$ 380,000 Working Capital
$ 200,000 Marketing Costs
$ 35,000 Offering Expense
Total Use of Proceeds: $6,250,000
In the event that 25%of the shares of common stock are sold by the
Company, the Company intends to pay salaries to the president, vice-
president and minimal secretarial services. The salary for the president
will be $100,000 per year and the salary for the vice-president will be
$60,000 per year. There will be no salaries paid until 25% of the proceeds
derived from this offering are received and accepted by the Company,
enabling the Company to commence meaningful operations.
Net proceeds if the minimum amount of shares of common stock (781,250
@$8.00), are sold by the Company: $400,000.
The $35,000 will be used for the offering expense, the listing of the
Company's shares of common stock on the OTC Bulletin Board, through a
registered broker/dealer, and the balance for general corporate purposes.
22
DILUTION
Protec is authorized to issue a substantial number of shares of common
stock, in addition to the shares of common stock comprising the shares of
common stock in this offering, up to the authorized share capital of
250,000,000 shares of common stock and 10,000,000 shares of preferred
stock. The shares of preferred stock can be issued in such series and with
such designated rights and preferences, as may be determined by the Board
of Directors, at its sole discretion. In the event that Protec does not
achieve the maximum proceeds by way of this offering, Protec will require
significant additional financing to implement its business plan in a
meaningful way, and such funding could entail the issuance of a substantial
number of additional shares of common stock which could cause material
dilution to the investors in this offering.
As of December 31, 2003, Protec had a net loss of $(158,362). The
following table sets forth the dilution to persons purchasing shares of
common stock in this offering, without considering any changes in Protec's
net tangible book value, except for the sale of the shares of common stock
in this offering at a price of $8.00 per share. The net tangible book
value per share is determined by subtracting the total liabilities from the
tangible assets, divided by the total number of shares of common stock
outstanding. The following table reflects the dilution if (1) the minimum
amount of the shares of common stock (50,000 shares of common stock) are
sold in this offering; (2) if 25% of the shares of common stock (718,250);
(3) 50% of the shares of common stock (1,562,500 shares of common stock)
are sold in this offering; (4) 75% of the shares of common stock (2,343,750
shares of common stock) are sold in this offering; (5) 100% or the maximum
amount of 3,125,000 shares of common stock are sold in this offering.
DILUTION TABLE
<Table>
<Caption>
(1) (2) (3) (4)
- -------------------------------------------------------------------------------------
After After After After After
Sale of Sale of Sale of Sale of Sale of
Prior to 50,000 781,250 1,562,500 2,343,750 3,125,000
Sale shares shares Shares Shares Shares
- -------------------------------------------------------------------------------------
Number
of
Shares 99,939,080 99,989,030 100,720,330 101,501,580 102,282,830 103,064,080
Public
offering
price
Per
share n/a 400,000 60,000,000 12,500,000 18,750,000 25,000,000
- -------------------------------------------------------------------------------------
Net
tangible
book n/a (.0016) (.0016) (.0016) (.0016) (.0016)
value
per share
of common
stock
before
the
offering
- -------------------------------------------------------------------------------------
23
Net
tangible
and
Pro forma
net
tangible
book
value
(deficiency) $(158,362) $41,638 $6,091,638 $12,341,638 $18,591,638 $24,841,638
- -------------------------------------------------------------------------------------
Increase
to net
tangible
book value
per share
attributable
to purchase $(.0016) $(.0024) $.060 $.1216 $.1818 $.241
of shares
of common
stock by
new
investors
- -------------------------------------------------------------------------------------
Dilution
to new
investors n/a 8.20 7.94 7.88 7.82 7.76
- -------------------------------------------------------------------------------------
</Table>
This offering itself involves immediate and substantial dilution to
investors. Any shares of common stock issued or shares of preferred stock
issued in the future, including issuances to management, could reduce the
proportionate ownership, economic interests and voting rights of any
holders of shares of common stock purchased in this offering.
DETERMINATION OF OFFERING PRICE
Protec arbitrarily determined the price of the shares of common stock
in this offering. The offering price is not an indication of and is not
based upon the actual value of the Company. The offering price bears no
relationship to the book value, assets or earnings of the Company or any
other recognized criteria of value. Management determined the amount of
funds that were needed to fully implement the Company's business plan and
the dilution factor that management believed would be acceptable to the
Company's current and prospective shareholders. The offering price should
not be regarded as an indicator of the future market price of the
securities.
24
PLAN OF DISTRIBUTION
Protec intends to sell a minimum of 50,000 shares of common stock and
a maximum of 3,125,000 shares of common stock to the public on a self-
underwriting, not underwritten by a registered broker/dealer, "best
efforts" basis. This offering may only be sold by Mr. Arne Przybilla, the
Company's President and Board Chairman, and Edgar Luber, the Company's
Vice-President and Director. Mr. Arne Przybilla and Edgar Luber are
eligible to sell this offering under Rule 3(a)4-1 of the Securities Act of
1933 which states, in part, that: (a) An associated person of an issuer of
securities shall not be deemed to be a broker solely by reason of his
participation in the sale of the securities if 1. the person or persons are
not subject to statutory disqualification; 2. is not compensated in
connection with his participation by the payment of commissions or other
remuneration based either directly or indirectly on transactions in
securities; 3. is not at the time of the participation an associated person
of a broker or dealer; and 4. meets the conditions of any one of paragraph
(a)4(i)(ii) or (iii) of this section. Mr. Pryzbillia and Mr. Luber both
meet the requirements in (a)4(ii) which states that the associated person
meets all of the following conditions: A. The associated person primarily
performs, or is intended primarily to perform at the end of the offering,
substantial duties for or on behalf of the issuer otherwise than in
connection with transactions in securities; and B. The associated person
was not a broker or dealer, or an associated person of a broker or dealer,
within the preceding 12 months; and C. The associated person does not
participate in the selling of an offering of securities for any issuer more
than once every 12 months.
There is no commission being charged to the Company, either directly
or indirectly by the Company's officers and directors or any persons or
firm in connection with solicitation of sales of the shares of common
stock. A limited public market currently exists for the shares of common
stock of the Company, however the Company intends to have a registered
broker/dealer apply to the National Association of Securities Dealers to
have its shares of common stock listed under the companies current symbol
"PTCS" on the OTC Bulletin Board or a regional stock exchange if the
Company meets the listing criteria. There is no assurance that the Company
will receive the current symbol "PTCS".
If all of the shares of common stock are sold in this offering, the
Company will receive a gross proceeds of $25,000,000 less the $35,000 in
offering costs, netting the Company $24,965,000. If only the minimum
amount of shares of common stock are sold by the Company, then the Company
will receive $6,250,000, less the offering expense of $35,000, netting the
Company $6,215,000 which will be used for general corporate expense and to
have a registered broker/dealer apply for a listing on the OTC Bulletin
Board, operated by the National Association of Securities Dealers.
All of the funds received and accepted by the Company for the sale of
its shares of common stock will be deposited in a segregated, non-interest
bearing corporate account known as "Protec Industries, Inc. Special
Account." This account does not have any escrow or trust provisions
associated with the deposit of funds to achieve the minimum amount of this
offering. The signatories on this account are the same officers and
directors as those officers and directors who will be selling the shares of
common stock in this offering. These officers and directors are Mr. Arne
Przybilla, President and Board Chairman and Edgar Luber, Vice-President and
Director. In the event that the minimum amount of the offering is not
achieved, then all funds will be returned to the investors, without
interest or deduction, within 10 days of the termination date of December
31, 2004 or before. The termination date will not be extended.
25
In the event that the minimum amount of proceeds are received and
accepted by the Company, then all subsequent funds will be deposited into
the segregated account or "special account" and held in that account until
the appropriate amount of shares of common stock are issued by the
Company's transfer agent to the investor. At that time, the funds will be
transferred to the Company's general corporate account for use according to
the "Use of Proceeds."
DIVIDENDS
Protec has no operating revenues, no profits and no dividends accrued
for shareholders. At the present time, management does not believe that
Protec will be able to issue a dividend to its shareholders in the
foreseeable future or at all. Should have any retained earnings, the
Company will use these retained earning to further and fully develop its
business plan.
LEGAL PROCEEDINGS
Protec is not currently nor has ever been a party to any legal
proceedings. Further, the officers and directors know of no legal
proceedings threatened or anticipated against the Company or its property
by any entity or individual or any legal proceedings contemplated by any
governmental authority.
DIRECTORS, OFFICERS, PROMOTERS, SIGNIFICANT EMPLOYEES AND CONTROL PERSONS
Protec's employees are the Company's President and Board Chairman,
Arne Przybilla, Vice-President and Director, Edgar Luber, Second Vice-
President and Director Wolfgang Benneckenstein, and Secretary/Treasurer and
Director, Tolan Furusho. As of the date of this prospectus, Protec does
not have any promoters working for the Company.
Directors and Executive Officers:
- ---------------------------------
Protec's officers and directors and control persons are listed below
with information about their respective backgrounds:
<Table>
<Caption>
- ---------------------------------------------------------------------------
NAME AGE POSITION
- ---------------------------------------------------------------------------
Arne Przybillia (1) 58 CEO/Chairman/President
- ---------------------------------------------------------------------------
Edgar Luber (2) 56 Vice President/Director
- ---------------------------------------------------------------------------
Wolfgang Benneckenstein (3) 53 Second Vice President/Director
- ---------------------------------------------------------------------------
Tolan Furusho (4) 34 Secretary/Treasury/Director
- ---------------------------------------------------------------------------
</Table>
(1) Mr. Arne Przybilla was appointed as Protec's President and Board
Chairman a member on April 10, 2004.
(2) Edgar Luber was appointed as Vice-President a member of the Company's
Board of Directors on April10, 2004.
(3) Wolfgang Benneckenstein, was appointed as Second Vice-President and a
member of the Company's Board of Directors on April10, 2004.
(4) Tolan Furusho has served on the Protec's Board and as Secretary
/Treasurer since the December 13, 2002.
26
All current directors were duly appointed and will hold office until
the next annual stockholders' meeting and until their successors have been
elected or qualified or until their death, resignation, retirement,
removal, or disqualification. Vacancies on the board will be filled by a
majority vote of the remaining directors. Officers of the Company serve at
the discretion of the Board of Directors.
None of the directors holds other directorships in other reporting
companies.
The Company's officers, directors and significant employees comprises:
Resumes follow:
Mr. Arne Przybilla, President, CEO and Board Chairman
- -----------------------------------------------------
Mr. Przybilla, a German citizen, graduated from College studying
marketing and design and a study of economics in 1978 with a degree in
major of business.
From 1978 to 1987 Mr. Przybilla was employed as a director of a
subsidiary of a German heavy equipment manufacturing company.
From 1979 to 1981 he graduated an additional study let become him to a
specialist in large hydraulic and pneumatic equipment.
Since 1987 Mr. Przybilla works as a self-employed financial and
property consultant. His particularly attentiveness be effective in
providing financial supports to various private and public companies
throughout Europe.
Since 2002 he also works for an Austrian company as an authorized
signatory in the sphere of raw material regarding his substantial knowledge
in economic and technical is asked.
In April 2004, Mr. Przybilla became President and CEO of Protec
Industries, Inc.
Summary of business experience within the last five years:
- ----------------------------------------------------------
- - April 2004 to present President and CEO Protec Industries, Inc.
- - 2002 to present authorized signatory in the sphere of raw material
- - 1987 to present self-employed financial consultant
- - 1978 to 1987 director in German hydraulic and pneumatic manufacturing
Edgar Luber, Vice President / Director
- --------------------------------------
Mr. Luber, a German citizen, graduated School of Economics in
Peissenberg, Germany.
In 1981 he majored in economics and subsequently went to work in the
family's company, specializing in production of textiles.
From 1982 to 1998 Mr. Luber was living in London, England working as
an independent
precious metal trader.
In 1999 he moved from England to Switzerland. He is currently working
as an independent management consultant.
In April 2004, Mr. Luber became Vice-President and Director of Protec
Industries, Inc.
27
Summary of business experience within the last five years:
- ----------------------------------------------------------
- - April 2004 to present Vice-President and Director Protec Industries,
Inc.
- - 1999 to present self-employed management consultant
- - 1982 to 1998 precious metal trader
Wolfgang Benneckenstein, Second Vice President / Director:
- ----------------------------------------------------------
After having spent three years in the German merchant marine, where he
qualified as an engineering machinist, Mr. Benneckenstein became one of the
pioneering entrepreneurs in the area on fast food restaurants in Germany.
By 1988 he was part of senior management of FAST FOOD SYSTEMS in Germany
and was responsible for establishing and managing all the franchised
SOUTHERN FRIED CHICKEN outlets in Germany.
Mr. Benneckenstein left FAST FOOD SYSTEMS to run his own restaurants
in Germany and Spain and in 1991 he moved to Switzerland to set-up and co-
manage a financial consulting business. Through various entities
Benneckenstein advised clients in the former Czechoslovakia, Romania and
Hungary in privatization and on obtaining funding and equity from financial
institutions in the U.S., the U.K., and Switzerland. One entity of which he
was co-manager structured and marketed tax-driven investments in Germany,
where the proceeds were used to provide funding for projects in the above-
mentioned Eastern European countries.
In 1998 Mr. Benneckenstein joined DIE WACHE, a long-established 'security
house' in Liechtenstein, as part of senior management. His area of
responsibility included acquiring funds for deposit and overseeing the
administration and management of those funds. In this capacity, Mr.
Benneckenstein established good working relationships with many of the
offices of global financial institutions in Liechtenstein and Zurich, most
notably U.B.S. and Warburg Dillon Reed.
In 2003, Mr. Benneckenstein became a director and shareholder of TEK
Corporation and the TEK Foundation. The TEK group of companies is a major
owner of real-estate in the U.S. and has real-estate assets of
approximately 1 billion U.S. dollars. Wolfgang Benneckenstein is the
director overseeing TEK's European operations and his activities include
structuring transactions which fund new projects, utilizing TEK's assets as
security for the required funding.
His experience in the financial services sector during the past 13
years puts Wolfgang Benneckenstein in an ideal position to be part of the
PROTEC management team.
In April 2004, Mr. Benneckenstein became Vice-President and Director
of Protec Industries, Inc.
Summary of business experience within the last five years:
- ----------------------------------------------------------
- - April 2004 to present Vice-President and Director Protec Industries,
Inc.
- - 2003 to present Director TEK Foundation
- - 1998 to 2003 Fund-Manager for security house "Die Wache"
- - 1991 to 1998 Manager financial consulting
- - 1988 to 1991 Franchise-Manager Southern Fried Chicken
28
Tolan Furusho, Secretary / Treasurer / Director
- -----------------------------------------------
Tolan Shigeo Furusho attended Loyola Marymount University from 1988
through 1992. He graduated with two Bachelor of Arts degrees, one in
English and the other in Psychology.
In 1992 Tolan began his law education at Seattle University School of
Law in Washington State. Tolan graduated in 1995 with his Juris Doctorate.
Immediately after passing the Washington State Bar Exam in October
1995, Tolan opened his law office as a sole practitioner. In the
beginning, Tolan practiced in a variety of areas including Criminal
Defense, Family Law and Corporate Planning. By the third year of
practicing law, Tolan's practice focused on Criminal Defense, including
Federal Investigations in Texas, Florida and Washington. At about this
time, Tolan Furusho began focusing his practice on securities issues and
defended several clients in an investigation spearheaded by the SEC with
ancillary investigations by the FBI. Despite the double exposure, Tolan
Furusho successfully settled the matter with both the SEC and the FBI
favorably for all of his clients, the government and the Commission.
In the last quarter of 1997, Tolan Furusho was retained to appeal a
decision of the SEC to the Ninth Circuit Court of Appeals. The case at
hand stemmed from charges by the National Association of Securities Dealers
that his client had engaged in the Parking of Securities and for violating
the NASD's Rule 2110, Rules of Fair Practice and Equitable Principles of
Trade.
The matter was heard by the Ninth Circuit Court of Appeals on May 7,
1999. The decision was entered on August 20, 1999 and the Court of Appeals
ruled in favor of Tolan Furusho and his client and reversed the findings of
the SEC. This decision set the precedence for securities parking
violations. On this particular issue of parking of securities and violating
Rule 2110, this was the first successful challenge in the entire nation.
In his opinion, Judge Beezer incorporated portions of Tolan Furusho's brief
to elucidate the law of parking of securities violations.
Since the decision of August 20, 1999, Tolan Furusho has focused his
practice on Securities law both in litigation and transactional work.
Tolan has assisted several companies in going public and has successfully
defended both large and small brokerage firms against investigation by the
NASD and the SEC.
Away from the office, Tolan participates in Powerlifting, having won
the 1999 Washington State title for both the bench press and the deadlift
in the 165lb. weight class. In 2002 Tolan set two State bench press
records in the 181lb. weight class. In 2003, Tolan is preparing to set the
World Record in the bench press for the 181lb. weight class by pressing
523.50lbs. Tolan is also a Fourth Degree Black Belt in the study of
Shotokan Karate.
Summary of business experience within the last five years:
- ----------------------------------------------------------
- - 1995 to present private law practice, Bellevue, Washington
EXECUTIVE COMPENSATION
Currently, the officers and directors receive no cash compensation and
provide services to the Company on an ad hoc basis.
29
If Protec is successful in the sale of at least twenty five percent
(25%) of the shares of common stock by way of this offering, the Company
plans on compensating Mr. Arne Przybillia, President, CEO and Board
Chairman, a yearly salary of $100,000; and Edgar Luber, Vice-President and
Director, a yearly salary of $60,000. There will be no salaries paid until
25% of the proceeds derived from this offering are received and accepted by
the Company (see notes to the financial statements- Note #2 "Salaries"),
enabling the Company to commence meaningful operations. There are no
employment agreements with either Mr. Arnie Przybillia or Edgar Luber.
When, as, and if Protec becomes profitable and produces commensurate cash
flow from operations, then the Protec's Board of Directors will decide the
level of reasonable salary for Protec's executives and other employees,
commensurate with their time and services. At such time as the Company
receives and accepts 25% of the funds through the sale of shares of common
stock in this offering, the Company plans to purchase a "key man" insurance
policy in the amount of a minimum of $1,000,000 for Mr. Arne Przybillia and
for Mr. Edgar Luber.
Protec has issued shares of common stock to compensate the officers
and directors as a bonus, for their services on the following basis. There
are no provisions or plans for the issuance of shares of common stock for
officers' and directors' in the future.
<Table>
<Caption>
- --------------------------------------------------------------=------------
Mr. Arne Przybillia President & Board Chairman 4,000,000 shares
- ---------------------------------------------------------------------------
Edgar Luber Vice-President & Director 4,000,000 shares
- ---------------------------------------------------------------------------
Wolfgang Benneckenstein Second Vice-President & Director 4,000,000 shares
- ---------------------------------------------------------------------------
</Table>
SUMMARY COMPENSATION TABLE OF SHARES ISSUED FOR SERVICES
- --------------------------------------------------------
<Table>
<Caption>
Name & Other
Principal Annual
Position Year Salary Bonus Expenses
- -----------------------------------------------------------------
Arne Przybilla 2002 None None $4,000.00*
President/Chairman
Edgar Luber 2002 None None $4,000.00*
V. Pres/Director
Wolfgang Benneckenstein 2002 None None $4,000.00*
Second VP/Director
</Table>
*This amount represents the amount of shares of common stock issued to
each of the above, valued at the par value of $.001 for accounting
purposes.
Protec currently has no employee stock option, annuity, or pension
plans in place although the Company does intend to provide all or a portion
of these benefits at some future date if the Company can establish sales
and positive cash flow.
30
SECURITY OWNERSHIP OF OFFICERS, DIRECTORS, AND CERTAIN BENEFICIAL OWNERS
The Company's officers and directors have been issued a total of
12,000,000 shares of common stock in exchange for their services.
The following table sets forth, as of May 6, 2004, Protec's shares of
common stock issued and outstanding owned of record or beneficially owned
by each executive officer and director and by each person who owned of
record, or was known by the Company to own beneficially, more than 5% of
its shares of common stock, and the share holdings of all executive
officers, directors and significant employees as a group. Each person has
sole voting power with respect to the shares of common stock shown.
As of the date of this prospectus, there are 99,939,080 shares of
common stock, duly authorized and validly issued and outstanding among 936
shareholders of record; there are no shares of preferred stock issued and
outstanding.
<Table>
<Caption>
Shares Percentage
of Common of Shares
Name Stock Owned Owned
- ---------------------------------------------------------------------------
TEK Corp 70,000,000 70.0 %
Shareholder Only
(Not an Executive Officer or BOD)
5 Sonnblickstrasse
FL-Vaduz 9490, Principality of Liechtenstein
Arne Przybilla 4,000,000 4.0 %*
President and CEO
Mallorca, Spain
Edgar Luber 4,000,000 4.0 %*
V. Pres./Director
St. Gallans, Switzerland
Wolfgang Benneckenstein 4,000,000 4.0%*
Second Vice Pres./Director
Vaduz, Liechtenstein
- ---------------------------------------------------------------------------
ALL OFFICERS, DIRECTORS
AND CERTAIN BENEFICIAL
OWNERS AS A GROUP 12,000,000 12.0 %*
*These figures are "rounded up" to the next digit as some of the digits are
significantly extended.
- ---------------------------------------------------------------------------
</Table>
DESCRIPTION OF SECURITIES
The following is a summary description of the Company's capital stock
and certain provisions of the Company's Articles of Incorporation and By-
laws, copies of which have been incorporated by reference as exhibits to
the registration statement of which this prospectus forms a part.
31
GENERAL
The following description of the Company's capital stock is a summary of
the material terms of its capital stock. This summary is subject to and
qualified in its entirety by the Company's Articles of Incorporation and
Bylaws, which are included as exhibits to the registration statement of
which this prospectus forms a part.
As of the date of this prospectus, there are 99,939,080 shares of common
stock, duly authorized and validly issued among 936 shareholders of record.
There are no warrants or options issued as of this date. There are no
stock option plans in effect for officers, directors and significant
employees.
Common Stock
- ------------
Protec's authorized capital common stock consists of 250,000,000 shares of
common stock, with a par value $.001 per share of common stock.
The holders of the shares of common stock are entitled to one vote for each
share held of record on all matters submitted to a vote of stockholders.
Protec 's Articles of Incorporation and By-laws do not provide for
cumulative voting rights in the election of directors. Accordingly, holders
of a majority of the shares of common stock entitled to vote in any
election of directors may elect all of the directors standing for election.
Holders of common stock are entitled to receive ratably such dividends as
may be declared by the Board out of funds legally available. In the event
of the Company's liquidation or dissolution, holders of common stock are
entitled to share ratably in the assets remaining after payment of
liabilities. Holders of common stock have no preemptive, conversion or
redemption rights. All of the outstanding shares of common stock are fully
paid and non-assessable.
Preferred Stock
- ---------------
Protec's authorized capital preferred stock consists of 10,000,000 shares
of preferred stock, with a par value of $0.001 per share of preferred
stock. No shares were issued and outstanding as of May 6, 2004 and the
Company has no current plans to issue shares of preferred stock. Each share
of preferred stock is entitled to dividends when, and if, declared by the
Board of Directors. There are currently no voting, conversion and
liquidation rights, nor redemption or sinking fund provisions for the
preferred stock.
Liquidation or Dissolution of the Corporation
- ---------------------------------------------
The Company's shareholders are entitled to receive, ratably, the net assets
of the Company available to shareholders after payment to all creditors.
Article IV of the Company's Articles of Incorporation states that: "The
holders of the preferred shares and common shares are entitled to receive
the net assets of the Company upon dissolution. Article V of the Company's
Articles of Incorporation states that "Any such change of the Bylaws must
be agreed to by the majority of the shareholders. The Board of Directors
shall not make or alter any Bylaws fixing their qualifications,
32
classifications, terms of office or extraordinary powers without first
securing the approval of the majority (50% or more) of the shareholders.
Such majority approval may be obtained by the Board of Directors, without
the necessity of a special or extraordinary general meeting of the
corporation's shareholders, subject to the rules and regulations of the
Securities Exchange Act of 1933 and revisions thereto. Such majority
shareholder approval may be obtained by written proxy statement or a
polling of the shareholders by telephone or telefax". Article II of the
Company's Bylaws provides for an annual stockholders meeting to be held on
or before June 30th or each year at 11:00 AM, at which time the
shareholders shall elect a Board of Directors (every two years or otherwise
appropriate) and transact any other appropriate business. The shareholders
have the right to effect a change of control at the annual meeting.
Special meetings of the shareholders may be called by the Board of
Directors or such additional persons as may be deemed authorized by the
Board of Directors provided in the Articles and Bylaws and amendments.
DESCRIPTION OF BUSINESS
Protec is in the natural resources development, exploration, recovery,
processing, business, specifically in the bulk sale of certain raw
materials of oil, gas, and talc as well as, the real estate development
business. Protec is a Washington corporation formed originally on September
9, 2002 under the laws of the state of Arizona, and under the name of "ANF
Telecast, Inc." with authorized common stock of 100,000,000 shares at $.001
par value. On December 13, 2002, the Company changed its name to Protec
Industries, Inc. On March 2, 2004, the domicile was changed to the state of
Washington. The Company is in the development stage and as not started any
significant operations.
Protec intends to acquire interests in various business opportunities
which, in the opinion of management, will provide a profit to the Company,
however, there is insufficient working capital for any future planned
activity, and to service its debts, which raises substantial concern about
its need to finance its operations and ability to continue as a profitable
concern. Continuation of the Company, as a going concern is dependent upon
obtaining sufficient working capital.
Epic Energy, Inc (Oil and Gas Reserves)
- ---------------------------------------
The management of Protec has developed a strategy, which it believes will
accomplish this objective through advances from officers, additional equity
funding, and long term debt, which will enable the Company to conduct
operations for the coming year, and until it can start its oil recovery
operations via Epic Energy, Inc., in the Ukraine. The talc extractions are
projected to start within 8 months of sufficient working capital. Epic
Energy, Inc. holds licensing rights to approximately 7 million acres of the
Crimean Peninsula of the Ukraine, for oil and gas production. The wells
will be reopened, after being closed for tax negotiations, that have
resulted in lower taxes. Epic Energy, Inc., also controls the licensing
rights to the Black Sea and the Azov Sea, (Ukranian territories) for oil
and gas exploration, recovery, etc. Protec holds an option to purchase 49%
of the common shares of Epic Energy, Inc., for $15,000,000 USD.
33
Rozmine s.r.o. (Talc Mine)
- -------------------------
During January 2004, the Company acquired an option to purchase 49% of the
Rozmine Talc mining property, known as Rozmine, s.r.o., located in
Slovakia. The terms of the option provides for a purchase price of EUR
26,000,000 with an advance payment of $500,000 EURO ($627,000 USD), which
was paid on January 21, 2004 and contributed to the Company by TEK Corp.
Upon receipt of the advance payment the company was granted an irrevocable
right to purchase the 49% interest. If the option is exercised before the
advance payment made will be applied to the purchase price. As part of the
advance payment made, the Company received an incentive bonus of 3,000,000
common shares of EuroGas, Inc. which represents 1.5% of the total
outstanding stock of EuroGas, Inc., with an approximate fair market value
of $.03 per share.
Rozmine s.r.o. is owned 57% by EuroGas, Inc. and 43% by Euro Gas Austria
GmbH, a wholly owned subsidiary of EuroGas, Inc.
Protec and EuroGas, Inc., have recently entered into a contract that allows
Protec to convert the Option to a Purchase Contract with a payment of
$5,000,000 USD. The Purchase Contract will credit Protec with the $5
million USD payment towards the purchase price of $26,000,000, with the
balance to be paid over time on terms. The benefit of this is that Protec
will be able to benefit immediately from the sale of Talc to processors.
Protec is currently negotiating a sales contract with a major processor in
Europe, convenient to the location of the mine. Protec is quite certain
that they will be able to sign the contract soon, since there is a shortage
of Talc in Europe, especially with the high grade of Talc that Rozmine
possesses, and in such a close location to the buyer's processing plant.
Talc is used in the production of paint, paper, and other various products.
Protec's management believes that the high grade of talc material in this
mine, which provides for low cost processing for use in finished products
such as paint and paper.
La Guadalupe Ranch
- ------------------
During February 2004, the Company issued 74,500,000 shares of its common
capital stock, and 20,190,227 shares for services, in connection with the
acquisition of the development and income rights to 3,300 acres, known as
La Guadalupe Ranch, located at Km 120 carretera federal Cancun Tulum,
Municipio de Cozumel, Estado de Quintana Roo, Mexico (near Cancun, Mexico)
on the Mexican Caribbean Sea, consisting of an area of approximately 1,498
hectares.
There can be no assurance that the company will be able to raise the
necessary capital to proceed with the La Guadalupe Ranch project. The fair
value of the stock issued, or to the development rights, are unknown and
have been recorded showing no value for accounting purposes.
OVERVIEW OF THE MARKET
Protec plans to achieve its goals by targeting its current projects and
developing the associated resources. The Talc business is a high margin
market due to the shortage of talc in Europe. Recently, China passed a law
prohibiting the export of talc from inside China. This has created a
shortage of quality talc in Europe and therefore, has opened up the
possibilities of tremendous profits from the talc mining operations.
34
With regards to the oil and gas licenses and existing oil wells, etc., of
Epic Energy, Inc., Protec's management believes that there is the potential
for profits and significant net margins. Currently, the price of oil has
risen to $30.00 USD per barrel. This is approximately $5.00 USD higher
than the target price set by OPEC. Recently, OPEC has decided not to
increase production this year, which is already creating pricing pressures
upward on oil sales. This makes our start-up projects an excellent time
for entry into the market while net margins are lucrative. The high net
margins resulting from the higher than normal oil prices, could result in
profitable operations and lead to exploration and recovery plans for the
development of other wells. The current market is also favorable to gas
suppliers, which could provide opportunities in the Black Sea and Azov Sea
for new wells to recover reserves that are available.
Protec with its real estate holding, the La Guadalupe Ranch beach resort
property near Cancun, Mexico, has the ability to enter into joint venture
partnerships to develop that property. Unstable conditions in the world
have severely damaged the hospitality industry. However, Mexico has not
been the scene of recent violence and therefore, tourism has continued to
develop. Most of the consumers come from the United States and the La
Guadalupe Ranch is very close to the United States with established air
travel. Property values are stable and development should increase the
value of the property. Feasibility studies indicate that new facilities
would be welcome to replace the older resorts in the area and that hence
the potential of profit should Protec be able to enter into an agreement
with a suitably financed joint venture partner.
Overall, the oil, gas, and talc resources should provide revenue to the
Company, resulting in potentially profitable daily operations that can be
recorded and managed efficiently providing that the Company is properly
financed, however there are no assurances that the Company will be able to
operate on a profitable basis or that the Company will managed effectively.
These business opportunities that can be created relate to the amount of
the shares that are sold in this offering. In the event that the minimum
amount of 50,000 of the shares of common stock are sold to provide the
Company with $400,000 less the $35,000 cost of the Offering, the Company
will utilize those funds for general business purposes and the seeking of
alternative financing to allow the Company to continue in business.
In the event that the Company is successful in the selling of at least 25%
of its shares of common stock through this Offering, then the business will
implement its business plan on the following basis:
(1) If 25% of the shares of common stock are sold:
(a) the Company will convert its options to purchase
agreements and continue to pay from profits generated in the
projects on a daily basis.
(b) the Company will operate at a slower pace in order for
smaller profits to be reinvested in the projects to expand
the operations until targets are achieved.
(2) If 50% of the shares of common stock are sold, the Company will
conduct business in all of the above categories listed in "if
only 25% of the shares of common stock are sold", in addition to:
(c) the Company will be able to convert its options to
purchase contracts and completely exercise its option on the
talc and lease a site for processing.
(d) the Company will purchase equipment to process some of
its extracted raw materials, and increase the growth rate
and potential recovery of raw materials to a higher level
realizing higher levels of efficiency and economies of scale
in exploration, extraction, recovery, processing, etc.
35
(3) If 75% of the shares of common stock are sold the Company will
conduct all of the above categories listed in "if only 25% of the
shares of common stock are sold" and "if only 50% of the shares
of common stock are sold", in addition to:
(e) the Company intends to purchase exploration, recovery
and extraction, equipment, that will provide for full
capacity objectives to be met.
(f) the Company will also complete the purchase of the Epic
Energy, Inc. Option to purchase 49% of the common shares.
(4) If 100% of the shares of common stock are sold the Company will
conduct all of the above categories listed in "if only 25% of the
shares of common stock are sold" and "if only 50% of the shares
of common stock are sold", and "if only 75% of the shares of
common stock are sold", in addition to:
(e) the Company will purchase additional exploration,
recovery and extraction, equipment, that will provide for
full capacity objectives to be met.
(f) the Company will also provide capital to the La
Guadalupe Ranch property in Cancun to start site preparation
and planning activities.
MARKETING PLANS AND STRATEGY
Management of Protec, specifically Arne Przybilla and Edgar Lubar acquired
the business research and contact base of OMV, Austria's second largest
industrial company, and of RWE, another large public contractor.
Management of Protec plans to use these contacts and knowledge of their
contacts, i.e., foreign (export) distributors, institutional distributors,
distributors, processors and manufacturers, etc. to market Protec's raw
products.
It is planned that the initial marketing of the Protec products will take
place in Europe, USA, and Canada where the market is better known to
management, taking advantage of the lower Canadian dollar value to the US
dollar value to sell to export distributors. The intent is to work with
and through business associates to use their professional skill on a joint
venture basis to eliminate the need for salaried employees.
Protec anticipates that it will initially derive revenues from the direct
sales to local processors, foreign (export) distributors, institutional
distributors, for its primary raw products. As part of the normal course
of business, discounting to distributors is a function of the marketplace
and is dependent on factors such as risk and timing in the transaction.
Discounting, if contemplated, would reflect issues such as credit
worthiness of the customer, method of payment, timing of payment, quality
of the product being considered for sale, size of the order contemplated
for sale and the seasonal timing of the order. Discounting, if necessary,
is a regular process in the negotiating and finalizing or an order. Due to
the fact that products are generally non-perishable and bulky to transport,
Protec intends to reply on third party carriers to transport its products.
The Company is not dependent on a few major customers once it commences
meaningful operations. The potential market for the Company's product is
both domestic and international.
36
COMPETITION
As stated previously under "RISK FACTORS", beginning on page 7, the market
for all natural resources products is highly competitive, rapidly evolving,
resulting in a dynamic competitive environment, with several dominant
national and multi-national leaders. Protec will have to compete with
companies that have substantially greater financial, marketing, technical
and human resources capabilities. In addition, new companies may enter the
market with new products and services that may be competitive with products
and services offered or to be offered by Protec. Because there are
potential entrants to the natural resources fields, it is extremely
difficult to assess which companies are likely to offer competitive
products and services in the future, and in some cases it is difficult to
discern whether an existing product is competitive with Protec's products.
Competitive factors in the natural resources industry include product
quality, marketing and distribution resources, customer service and support
and price of product. Protec expects competition to persist and intensify
in the future.
Some of Protec's competitors are much larger companies than Protec and are
very well capitalized and can utilize their strong market share for further
growth that may impede the Company's ability to generate enough sales to
cover the costs of marketing the product. Several of the Company's
competitors have operating histories for many decades, greater name
recognition, larger client bases and significantly greater financial,
technical and marketing resources than Protec. Such competitors may be able
to undertake more extensive marketing campaigns, adopt more aggressive
pricing policies and make more attractive offers to potential clients. In
addition, many of Protec's current or potential competitors, such as Shell,
Texaco, Amoco, Exxon, have broad distribution channels that may be used to
distribute competing products directly to end-users or purchasers. It is
possible that Protec will not be able to compete effectively with current
or future competitors resulting in a loss of business or entire business
failure. However, Epic Energy, Inc., has entered into contracts with OMV,
Austria's second largest industrial company, and also with RWE, another
large entity, to joint venture in the exploration, recovery, and processing
of oil, gas, and talc.
PRODUCT SOURCE
The current source of the Company's product is Rozmine Talc, Inc., of
Slovokia, Epic Energy, Inc. of Canada, and Eurogas, Inc. of Canada.
EMPLOYEES
The Company currently has no employees. In the event that 25% of the
Company's shares of common stock are sold by way of this offering, then Mr.
Arne Przybilla, the Company's President and Board Chairman and Edgar Luber,
the Company's Vice-President and Director will be full time employees of
the Company. Mr. Arne Przybilla will receive a salary of $100,000 per year
and Edgar Luber will receive a salary of $60,000 per year. The Company is
recording contributed capital for salaries for the president and vice-
president of $13,333 per month. These are monthly recurring costs.
Protec intends to engage a sales force once management of Protec deems that
the volume of activity warrants additional personnel. Initially, Protec
will receive sales and management support of generating sales as part of
the agreement with its Executive Officers, to provide sales support and
bookkeeping services for the Company, and especially the Company's
President and Board Chairman, Mr. Arne Przybilla and Vice President and
Director, Edgar Luber.
37
DISTRIBUTORS
The management of Protec has currently made informal arrangements or
agreements with distributors or processors. Until the Company can commence
meaningful operations, there is no basis to engage or negotiate
distribution opportunities further. In the event that the Company has
received and accepted the proceeds from the sale of 25% of the shares of
common stock, the Company will negotiate formal distribution agreements. A
number of established and suitable processors and distributors are known to
the management of Protec. Additional distributors can be sourced at product
trade shows, trade journals and direct solicitation with institutional
buyers or processors.
RAW MATERIALS BUSINESS
As Protec progresses with sales, management will enter the raw materials
business. The Company's need for processing equipment is dependent on the
funds derived from this offering, the strategy and timing for its
operations. In the event that the Company is not able to raise sufficient
capital to operate its own processing plant, the Company intends that the
strategy is to joint venture some of the operations and thereby "outsource"
the need for capital and trained employees. This outsourcing can be
achieved by negotiating with existing facilities on a contracted basis. At
the present time, there are no contracts or agreement with any existing
entity or facility. In addition, Protec intends to achieve "value added"
products and processes whereby capital and trained employees would be
required in order to achieve the objectives of the business in larger
capacity. This would be achieved through the sale of 100% of the
Company's shares of common stock offered in this prospectus. See "USE OF
PROCEEDS", page 21.
GOVERNMENT REGULATION
Protec will not be subject to any government regulation while acting as an
extractor, natural resources developer, processor, and distributor of oil,
gas, talc, etc., except as it relates to corporate licensing requirements,
pollution and other environmental laws, production quotas, etc. Protec
would be subject to government regulation if Protec receives and accepts
funds from the sale of a minimum of 50% of the shares of common stock
offered in this prospectus and commences extraction, processing, production
and distribution of the raw material products. In that event, Protec would
lease a site for primary and secondary processing, and production as
previous described and the functional space would need to be certified by
Occupational Safety Hazards Act regulators (OSHA), Canadian regulators, and
per regulations for products sold in the United States.
INDUSTRY INFORMATION SOURCES
Protec has relied upon the following sources in compiling their business
plan. These sources are readily available through print media,
publications and Internet resources. Some of these resources are the US
Department of Agriculture, CIA Fact Book, OECD Statistics, World Bank
Economic Statistics, Agriculture Canada, Canadian Marketing Association,
38
THE COMPANY'S OPERATIONS TO DATE
Since new management was installed to the board of directors of Protec in
April 2004, the Company has been developing and implementing its business
plan and has entered into two agreements:
(1) Option to Purchase a 49% interest in the Rozmine s.r.o. which
consists of high grade talc, a product use in the manufacture of
paint and paper.
(2) Option to Purchase 49% of the common shares of Epic Energy, Inc.
This gives Protec Industries, Inc. licensing rights to 7 million
acres in the Crimean Peninsula of the Ukraine, as well as, all
Ukrainian territories of the Black Sea and the Azov Sea.
(3) Purchase of La Guadalupe Ranch, an undeveloped beach resort
property in the Cancun, Mexico area.
SOURCES OF REVENUE
Through December 31, 2003, Protec, as a development stage company, has
received no revenues from operations nor has it sold any of its products.
As of the date of this registration statement, there have been no revenues
for the Company. If Protec Industries, Inc. can realize its goals as set
forth above and commence meaningful business operations, revenue could
potentially come from sales of the products, oil, gas, talc, etc. The
Company is solely dependent of this offering to commence meaningful
business operations.
POTENTIAL STRATEGIC ALLIANCES AND/OR JOINT VENTURE PARTNERSHIPS
Protec Industries, Inc.'s management has developed a strategy of
identifying business combination opportunities within the strategic
alliance mandate. Protec Industries, Inc's approach is to work in stages
to develop the relationship with the target companies by providing
management and marketing support for the product. Management believes that
this strategy will facilitate efficiencies and growth potential of the
target company. The potential stages of this activity are as follows:
Phase 1 Negotiate and acquire the marketing rights to the target
company.
Phase 2 Identify areas of synergy within the expanded vertically
integrated partnership and pursue these avenues through marketing and
administrative support.
Phase 3 Acquire the specific equipment to facilitate expanded sales
through the target company.
Phase 4 Provide an acquisition, joint venture partnership or other
business combination option for the target company.
As additional products are sourced and processed, then Protec
Industries, Inc. will pursue other sales and joint venture opportunities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following is the Company's plan of operation for the following 12
months, and should be read in conjunction with the Company's financial
statements and notes thereto appearing in this prospectus.
39
PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS IS AS FOLLOWS:
Protec Industries, Inc. intends to use the proceeds from this offering
to establish its inventory, sales and marketing business for raw material
sales primarily in the Northern Hemisphere market. Protec Industries,
Inc.'s philosophy has been to search for various targets of opportunity and
specialty markets that would provide revenues to the Company. The plan of
operation is dependent on the amount of proceeds realized from the sale of
common stock in this offering.
Net proceeds - if 100% of the shares of common stock (3,125,000 @$8.00) are
sold by the Company: $25,000,000
$5,000,000 Talc Mine Exercise of Option to purchase (convert
option to purchase contract)
$500,000 Epic Energy, Inc. Exercise/Purchase of Option for 49%
of common Shares
$10,125,000 Machinery and Equipment
350,000 Marketing Costs
$8,950,000 Working Capital
75,000 Offering Expense
Total Use of Proceeds: $25,000,000
In order for Protec Industries, Inc. to further implement its initial
business plan and to commence meaningful business operations through the
end of December 31, 2004, the Company must raise at least 25% of the
proceeds offered by the sale of common stock in this offering or
$6,250,000. The Company anticipates that it will obtain orders for its
product that are able to be financed through traditional methods such as
purchase order financing, account receivable financing, or letters of
acceptance and letters of credit. There is no assurance that the Company
will be able to achieve meaningful sales volume or any sales at all.
Protec Industries, Inc. is a development stage company that is in the
recovery of natural resources business, specifically in the wholesale bulk
purchase of certain oil and gas and talc The product and services that
the Company intends to offer are described in the "Description of Business"
section beginning on page 33 of this prospectus. Protec Industries, Inc.
has generated no revenues to date.
In the event that only the minimum amount of proceeds of 781,250
shares of common stock at a purchase price of $8.00 or $6,250,000 is
received and accepted by the Company, then the Company must seek other
means of financing the Company as $6,250,000 is not sufficient to achieve
the Companies objectives for its business operations. In the event that
25% of the proceeds of 781,250 shares of common stock at a purchase price
of $8.00 is received and accepted by the Company, that $6,250,000 will be
sufficient to operate the Company for a minimum of one year. In the event
that 50% of the proceeds of 1,562,500 shares of common stock at a purchase
price of $8.00 is received and accepted by the Company, that $12,500,000
will be sufficient to operate the Company for a minimum of two years. In
the event that 75% of the proceed of 2,343,750 shares of common stock at a
purchase price of $8.00 is received and accepted by the Company, that
$18,750,000 will be sufficient to operate the Company for a minimum of 30
months. In the event that 100% of the proceeds of 3,125,000 shares of
common stock at a purchase price of $8.00 is received and accepted by the
Company, that $25,000,000 will be sufficient to operate the Company for a
minimum of 36 months, and net cashflows generated will be sufficient to
finance ongoing operations and current and future projects on a permanent
basis, internally.
40
GENERAL
Protec Industries, Inc. has developed a business plan that can be
further implemented upon financing. Protec Industries, Inc. can commence
meaningful business operations upon receiving and accepting funds from the
sale of a minimum of 25% of the shares of common stock offered in this
prospectus.
The net proceeds to Protec Industries, Inc. from the sale of the
3,125,000 shares of common stock at the offering price of $8.00 per share
is $25,000,000, less the cost of the offering which is estimated to be
$75,000, or $24,925,000. The following plan will be followed, as a
result:
Net proceeds - if 100% of the shares of common stock (3,125,000 @$8.00) are
sold by the Company: $25,000,000
$5,000,000 Talc Mine Exercise of Option to purchase (convert
option to purchase contract)
$500,000 Epic Energy, Inc. Exercise/Purchase of Option for 49%
of common Shares
$10,125,000 Machinery and Equipment
350,000 Marketing Costs
$8,950,000 Working Capital
75,000 Offering Expense
Total Use of Proceeds: $25,000,000
OTHER FACTORS
Some of the phases of Protec Industries, Inc.'s operations are subject
to influences outside of the control of the Company. Any one, or a
combination, of these factors could materially affect the results of the
Company's operations. These factors include the weather and other
conditions of nature and its results on the quantity and quality of the
extracted raw materials, i.e., oil, gas, talc., etc., competitive
pressures, market price volitility, interest rates fluctuations, inflation,
especially on equipment purchases, and other market conditions.
The Company has no knowledge of any material event or any uncertainty
in the mainstream and/or segmented berry market that would adversely affect
the Company's operations or have any effect on the Company's financial
statement. It is not anticipated that labor costs will escalate over the
normal "cost of living" increases or that the cost of equipment or
materials be increased in the Company's day-to-day operations. The Company
is not aware of any information or market condition that would adversely
impact the Company's current business plan or future operation results.
FORWARD LOOKING STATEMENTS
Forward-looking statements are made by or on behalf of the Company
based on knowledge of its business and the environment in which it
operates, but because of the factors listed above, as well as other
commercial, environmental and business factors over which the Company has
no control, actual results may differ from those in the forward-looking
statement. Consequently, all of the forward-looking statements made are
qualified in their entirety by these cautionary statements and there can be
no assurance that the actual results or developments anticipated by the
Company will be realized or, even if substantially realized, that they will
have the expected effect on the business and/or operations of the Company.
41
LIQUIDITY AND CAPITAL RESOURCES
Protec Industries, Inc., and its affiliates, Epic Energy, Inc. and
Rozmine Talc, Inc., are in the development stage and since inception have
not received significant revenue from operations. Protec Industries,
Inc.will need additional capital to carry out its business plan. The
Company's only source of financing and having the ability to commence
meaningful operation is to sell shares of common stock in this offering, or
borrow funds. In the event that the Company is successful in the sale of
its shares of common stock, the Company will be able to extract product for
sale and distribution. The Company will depend upon these sales and the
potential profit of these sales to continue as a business operation.
There are currently no other capital obligations or agreements with
any distributors, processors, or manufacturers, other than those which are
stated in this offering . The Company will not enter into any other
agreements with distributors or manufacturers, processors, etc., until the
Company receives and accepts funds from borrowering or the sale of a
minimum of 25% of the shares of common stock from this offering and can
establish meaningful business operations. There should not be any
significant elements of income or loss that does not arise from the
Company's continuing operations.
There are currently no commitments to purchase or lease any equipment
or to purchase or lease any facilities.
SEASONAL AND WEATHER CONSIDERATIONS
There are seasonal considerations and other considerations affected by
market volitility, weather and other natural elements which have been
discussed more thoroughly in the RISK FACTORS,
"PROTEC INDUSTRIES, INC. MAY INCUR PROBLEMS IN THE EXTRACTION AND RECOVERY
- --------------------------------------------------------------------------
AS WELL AS ACQUISITION AND REDISTRIBUTION BUSINESS WHICH COULD RESULT IN
- ------------------------------------------------------------------------
LACK OF PRODUCT SALES, BUSINESS DELAYS AND THE FUTURE ECONOMIC VIABILITY
- ------------------------------------------------------------------------
OF THE COMPANY., PAGE 8; AND "PROTEC INDUSTRIES, INC. EXPECTS TO HAVE
- ---------------------------------------------------------------------
QUARTER TO QUARTER FLUCTUATIONS IN REVENUES, EXPENSES, LOSS AND CASH FLOW,
- --------------------------------------------------------------------------
SOME OF WHICH COULD ADVERSELY MATERIALLY AFFECT THE BUSINESS AND FUTURE
- -----------------------------------------------------------------------
OPERATIONS.", PAGE 10 AND 11.
- -----------------------------
Protec Industries, Inc., is dependent upon the quantity and quality of the
raw materials that are extracted only in favorable conditions in the
Northern Hemisphere. The quantity and quality of all raw materials are
determined by weather, processing and recovery conditions, and other
natural factors beyond the control of the Company. The volitile nature of
the extraction, sale and distribution of raw materials, will affect the
quarter-to-quarter income and cash flow of the Company. This volitile
aspect of the Company's business may have a material effect on the
financial condition or results of the Company's business operations.
42
SHARES OF COMMON STOCK ISSUED FOR SERVICES
On January 10, 2004, the Company issued the following shares of common
stock for officers and directors services. These issuances were as
follows:
4,000,000 shares of common stock
- ----------------------------------
Arne Przybilla, President and Board Chairman, is responsible for the
overall activity, Company contracts and client procurement for the overall
sales of the Company on a day to day basis. In the event that a minimum of
25% of the proceeds are received and accepted by the Company, Mr. Arne
Przybilla will be working full time for the Company, earning a salary of
$100,000 per year in addition to the 250,000 shares of common stock. Mr.
Pryzbillia' experience as a former Executive brings business and accounting
experience to the Company.
4,000,000 shares of common stock
- ----------------------------------
Edgar Luber, Vice-President and Director, is responsible for a portion of
the Company's sales and other business activities to be determined by the
amount of proceeds derived from the offering. In the event that a minimum
of 25% of the proceeds are received and accepted by the Company, Edgar
Luber will be working full time for the Company, earning a salary of
$60,000 per year in addition to the 100,000 shares of common stock. Edgar
Luber's experience as a business professional and business professor
provides the Company with seasoned business acumen and performance.
4,000,000 shares of common stock
- ----------------------------------
Wolfgang Benneckenstein, Second Vice President and Director is a former
officer and director of the Company with an extensive background in finance
and management.
The 12,000,000 shares of common stock issued to officers and directors
of the Company were issued for services and reflected on the Company's
financial statements at a rate of $.001 per share of common stock. The
amount of $.001 was determined to be the 'fair value" of the shares of
common stock.
OPERATING RESULTS TO DATE
During the 12 months ended December 31, 2003, the Company spent
$130,731 in operational expenses.
The Company has had no revenues since its inception in September 2002,
due to the fact that the Company is in the development stage mode. New
officers and directors of the Company were installed on April 10, 2004.
Protec Industries, Inc. incurred operating losses of $158,362 from
inception to December 31, 2003. Protec Industries, Inc. expects its
accumulated deficit to grow for the foreseeable future as total costs and
expenses increase due principally to increased marketing expense associated
with its plans to undertake trials of its product and services. There can
be no assurances that Protec Industries, Inc. will be successful in the
further implementation of its business plan or to successfully generate
sales of the product to have sufficient revenues to allow the Company to
operate profitably.
43
Protec Industries, Inc. does not expect to generate a positive
internal cash flow for at least the next year due to expected increase in
spending for salaries and the expected costs of marketing and sales
activities.
Protec Industries, Inc. currently has limited internal and external
sources of liquidity.
At this time Protec Industries, Inc. has two material commitments for
capital expenditures (Talc Mine Option: $26,000,000.00 USD and Epic Energy,
Inc. Option: $15,000,000.00 USD). Protec Industries, Inc., however; is
able to convert the Options to Purchase contracts with a smaller portion of
funds if provided before the Option Date.
MARKET OUTLOOK
There are no known trends, events or uncertainties that are expected
to have a material impact on the net sales and income from operations of
the Company. The industry and the needs of the market are well established.
The Company believes that it will serve an established natural resources
materials market and specialty raw materials market with its product and
services that has yet to be served adequately. The Company's overall
business is not particularly or completely subject to seasonal aspects.
Even as the market is growing, technologies allow these products to be
processed and stored on a multi-yearly basis and not subject to a seasonal
cycle.
DESCRIPTION OF PROPERTY
Protec Industries, Inc. owns a purchase option to a 28 million ton
deposit of Rozmine Talc in Slovockia. Protec Industries, Inc. also owns an
option to purchase 49% of Epic Energy, Inc.'s common stock. Epic Energy,
Inc. owns 60% of the oil and gas license rights on the Crimean Peninsula (7
million acres) and also the development rights to the oil and gas in the
Black Sea and Azov Seas found in Ukranian territories under a Joint Venture
with a Ukranian Government owned corporation. Protec Industries, Inc. also
owns 2.5 million common shares of Epic Energy, Inc., as well as 3 million
common shares of Eurogas, Inc., a company that owns oil and gas rights in
Northern British Columbia. Protec Industries, Inc. also owns development
and income rights to La Guadalupe Ranch, a beach front resort property
located in the Cancun area of Mexico.
Protec Industries, Inc.'s operational office is located at 5
Sonnblickstrasse, FL-9490 Vaduz, Principality of Liechtenstein., which is
located within the offices of the Company's Second Vice President and
Director, Wolfgang Benneckenstein. The Company is paying a rental fee of
$3000 per month for an office space of approximately 1800 square feet
general office space. The Company is recording contributed capital for rent
for the Company's office of $3000 per month. These are monthly recurring
costs. The total contributed capital for rent to the annual period will be
recorded in the Quarterly Statements ended March 31, 2004. In the event
that 25% of the shares of common stock are sold by the Company from the
offering, the Company will commence paying rent in cash as of that date.
The rent is on a month-to-month basis with the rental being charged and
accrued in the financial statements on a $3000 per month gross basis with
no other charges. In the event that Protec is successful in selling 50% of
the shares of common stock by way of this offering, Protec will relocate to
a permanent facility in due course.
44
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Arne Przybilla, Edgar Luber, and Wolfgang Benneckenstein have
negotiated all of the Company's contracts to date. All of the contracts
were researched as to fair market value. The Purchase and Sale Agreement
with Eurogas, Inc. (Rozmine Talc) was negotiated for the direct costs to be
incurred by Eurogas, Inc., in opening the recovery and extraction phase of
the mine. The agreement with Epic Energy, Inc. for the option to purchase
49% of the common shares of stock was negotiated at the latest available
market prices.
The Company's secretarial services are pursuant to the day-to-day
operations of the Company and the corporate secretarial services pertain to
the record keeping of the corporation including the voting on corporate
policies and the recording of the monthly Board of Directors meeting.
Neither Mr. Pryzbillia nor any other officer, director or possible
nominee for election as a director of the Company, is the owner of five
percent or more of the Company's outstanding shares of common stock, nor
has any member of their immediate families entered into or proposed any
transaction, other than that as described in this prospectus, in which the
amount involved exceeds $1,000. There are no stock options offered to any
officer, director or significant employee or any other remuneration
contracts except as otherwise described in this prospectus.
There are no parent companies to the Company and no other control
persons or entities other than as described in the prospectus.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of the date of this prospectus, there are 99,939,080 shares of
common stock, duly authorized and validly issued, to 936 shareholders of
record. Protec's shares of common stock have a limited market trading on
the National Quotation Board's Pink Sheets. The Company has no shares of
common stock equity subject to outstanding purchase options or warrants.
The Company has no securities convertible into its common stock equity.
There are 4,050,000 shares of common stock that are free-trading and
the balance of 95,889,080 shares are restricted and are not subject to be
sold into the public marketplace.
There are no shares of common stock of the Company that are subject to
registration rights. There are no other shares of common stock agreements
that are subject to registration rights.
There are no shares of common stock subject to any stock option
contract or any other contract. There are no stock option contracts for
any officer, director of significant employees and none contemplated.
To date, the Company has not paid any dividends on its shares of
common stock and does not expect to declare or pay any dividends on its
shares of common stock in the foreseeable future. The payment of any
dividends will depend upon the Company's future earnings, if any, its
financial condition, and other factors as deemed relevant by the Company's
Board of Directors.
45
The Company's shares of common stock may be considered a "penny stock"
if it is traded at a price at under $5.00 or other factors. Investors
should be aware that, according to the Securities and Exchange Commission
Release No. 34-29093, the market for "penny stocks" has suffered in recent
years from patterns of fraud and abuse. Such patterns include:
(1) Control of the market for the security by one or a few
broker/dealers that are often related to the promoter or to the Company;
(2) Manipulation of prices through prearranged matching of purchases
and sales and false and misleading press releases;
(3) "Boiler room" practices involving high-pressure sales tactics and
unrealistic price projections by inexperienced sales persons;
(4) Excessive and undisclosed bid-ask differentials and markups by
selling broker/dealers; and
(5) The wholesale dumping of the same securities by promoters and
broker/dealers after prices have been manipulated to a desired level, along
with the inevitable collapse of those prices with consequent investor
losses.
One or more of the above could cause the investor to lose all or part
of the investment.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
The Company's Articles of Incorporation provides that no director of
the Company shall be personally liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director except as
limited by Washington law. The Company's Bylaws provide that the Company
shall indemnify to the full extent authorized by law each of its directors
and officers against expenses incurred in connection with any proceeding
arising by reason of the fact that such person is or was an agent of the
corporation.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
AVAILABLE REPORTS TO SECURITIES HOLDERS
Upon effectiveness of this registration statement the Company will
commence filing reports, proxy statements and other information with the
Securities and Exchange Commission. An investor may read and copy any
report, proxy statement or other information the Company files with the
Commission at their website at http://www.sec.gov that contains reports,
proxy statements and other information filed with the Commission. The
public may read and copy any materials the Company filed with the SEC at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C., 20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at (800)-SEC-0330.
46
The Company has filed a registration statement on Form SB-2 with the
Commission to register shares of the Company's common stock for sale in a
public offering. This prospectus is part of that registration statement
and, as permitted by the Commission's rules, does not contain all of the
information set forth in the registration statement. For further
information with respect to the Company, or the Company's shares of common
stock, an investor may refer to the registration statement and to the
exhibits and schedules filed as part of the registration statement. An
investor can review a copy of the registration statement and its exhibits
and schedules at the Commission's web site, as described above. It should
be noted that statements contained in this prospectus that refer to the
contents of any contract or other document are not necessarily complete.
Such statements are qualified by reference to the copy of such contract or
other document filed as an exhibit to the registration statement.
TRANSFER AGENT
Protec Industries, Inc.'s transfer agent is First American Stock
Transfer, Inc., 1717 East Bell Road, Suite 2, Phoenix, Arizona 85022,
telephone (602) 485-1346, fax (602) 788-0423.
INTEREST OF NAMED EXPERTS AND COUNSEL
These experts have been retained in connection with the registration
of this offering of the Company's shares of common stock. Mr. Tolan
Furusho, Attorney at Law, 2200-112th Ave., NE, Suite 200, Bellevue,
Washington 98004 was retained to provide the legal opinion regarding the
corporation in connection with this offering. Mr. Furusho is also Protec's
Secretary/Treasurer and Director and does not own any shares of common
stock of the Company. Mr. Rex Andersen, CPA of Madsen & Associates, CPA's
Inc. located at 684 East Vine St. # 3, Murray, Utah 84107, has been engaged
to provide the audited financial statements of the Company as of December
31, 2003, in connection with this offering. Mr. Rex Andersen, CPA, does
not own any shares of common stock of the Company.
INVESTORS MAY ONLY RELY UPON THE INFORMATION IN THIS PROSPECTUS
Investors should rely only on the information contained in this
document. The Company has not authorized anyone to provide investors with
information that is different. This prospectus is not an offer to sell
shares of common stock in any state where the offer or sale is not
permitted.
FINANCIAL STATEMENTS
- ---------------------
Report of Independent Certified Public Accountant 48
Balance Sheets as at December 31, 2003 49
Statement of Cash Flows for the year ended December 31, 2003
and the year's ended December 31, 2002 50
Statement Of Changes In Stockholders' Equity for the Period
September 9, 2002 (Date of Inception)to December 31, 2003 51
Notes to Financial Statements 52
MADSEN & ASSOCIATES, CPA's INC. 684 East Vine St, # 3
Certified Public Accountants and Business Consultants Murray, Utah 84107
Telephone 801-268-2632
Fax 801-262-3978
Board of Directors
Protec Industries, Inc.
Bellevue, Washington
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying balance sheet of Protec Industries,
Inc. (development stage company) at December 31, 2003 and the related
statement of operations, stockholders' equity, and cash flows for the year
ended December 31, 2003 and the period September 9, 2002 (date of
inception) to December 31, 2002 and the period September 9, 2002 to
December 31, 2003. 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 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
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 balance sheet presentation. We believe that
our audits 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 Protec Industries ,
Inc. at December 31, 2003 and the results of operations, and cash flows
for the year ended December 31, 2003 and the period September 9, 2002 to
December 31, 2002 and the period September 9, 2002 (date of inception) to
December 31, 2003, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company will need
additional working capital for its planned activity and to service its
debt, which raises substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are described
in the notes to the financial statements . These financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
s\ Madsen & Associates, CPA's Inc.
Salt Lake City, Utah,
March 11, 2004
PROTEC INDUSTRIES, INC.
( Development Stage Company)
BALANCE SHEET
December 31, 2003
<Table>
<Caption>
===========================================================================
ASSETS
CURRENT ASSETS
Cash $ -
----------
Total Current Assets -
----------
OTHER ASSETS
Available-for-sale securities - at cost $ 173,245
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ -
----------
Total Current Liabilities -
----------
STOCKHOLDERS' EQUITY
Common stock
100,000,000 shares authorized, at $0.001 par value;
5,248,853 shares issued and outstanding 5,249
Capital in excess of par value 326,358
Deficit accumulated during the development stage (158,362)
----------
Total Stockholders' Equity $ 173,245
==========
</Table>
The accompanying notes are an integral part of these financial statements.
49
PROTEC INDUSTRIES, INC.
( Development Stage Company)
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2003 and the Period
September 9, 2002 to December 31, 2002 and the Period
September 9, 2002 (Date of Inception) to December 31, 2003
===========================================================================
<Table>
<Caption>
Dec 31, Dec 31, Sept 9, 2002 to
2003 2002 Dec 31, 2003
------------ ------------ ------------
REVENUES $ - $ - $ -
EXPENSES
Administrative 134,701 23,661 158,362
------------ ------------ ------------
NET LOSS $ (134,701) $ (23,661) $ (158,362)
============ ============ ============
NET LOSS PER COMMON SHARE
Basic and diluted $ (.03) $ (.09)
------------ ------------
AVERAGE OUTSTANDING SHARES
Basic (stated in 1,000's) 4,894 250
------------ ------------
</Table>
The accompanying notes are an integral part of these financial statements.
50
PROTEC INDUSTRIES, INC.
( Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period September 9, 2002 (Date of Inception)
to December 31, 2003
<Table>
<Caption>
=====================================================================================
Common Stock Capital in
------------------------ Excess of Accumulated
Shares Amount Par Value Deficit
-------------------------------------------------
BALANCE SEPTEMBER 9, 2002 - $ - $ - $ -
Issuance of common stock for
services at $.02 -
September 2002 4,018 4 76 -
Issuance of common stock for
services at $.02 -
November 14, 2002 199,168 199 3,801 -
Issuance of common stock
for cash at $.10 -
September 2002 45,040 45 4,455 -
Issuance of common stock
for services at $.02 -
December 6, 2002 750,632 751 14,250 -
Net operating loss for
the period September 9,
2002 to December 31, 2002 - - - (23,661)
-------------------------------------------------
Balance December 31, 2002 998,858 999 22,582 (23,661)
Issuance of common stock
for a license -
January 28, 2003 199,995 200 (200) -
Issuance of common stock for
cash at $.001-
February 8, 2003 4,050,000 4,050 - -
Contributions to capital -
available for sale securities - - 173,245 -
Contributions to capital -
expenses - - 130,731 -
Net operating loss for the year
ended December 31, 2003 - - - (134,701)
-------------------------------------------------
Balance December 31, 2003 5,248,853 $5,249 $ 326,358 $ (158,362)
=================================================
</Table>
The accompanying notes are an integral part of these financial statements.
51
PROTEC INDUSTRIES, INC.
(Development Stage Company)
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2003 and the Period
September 9, 2002 to December 31, 2002 and the Period
September 9, 2002 (Date of Inception) to December 31, 2003
<Table>
<Caption>
=====================================================================================
Dec 31, Dec 31, Sept 9, 2002 to
2003 2002 Dec 31, 2003
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (134,701) $ (23,661) $ (158,362)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Changes in accounts payable (80) 80 -
Issuance common capital stock
for services - 19,081 19,081
Contribution to capital - expenses 130,731 - 130,731
------------ ------------ ------------
Net Change From Operations (4,050) (4,500) (8,550)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES - - -
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 4,050 4,500 8,550
------------ ------------ ------------
Net Change in Cash - - -
------------ ------------ ------------
Cash at Beginning of Period - - -
------------ ------------ ------------
Cash at End of Period $ - $ - $ -
============ ============ ============
NON CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES
Issuance of 953,818 common shares for services $ 19,081
Issuance of 199,995 common shares for a license -
Contributions to capital - expenses 130,731
Contributions to capital - available-for-sale securities 173,245
</Table>
The accompanying notes are an integral part of these financial statements.
52
PROTEC INDUSTRIES, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
===========================================================================
1. ORGANIZATION
The Company was incorporated under the laws of the state of Arizona on
September 9, 2002 under the name " ANF Telecast, Inc." with authorized
common stock of 100,000,000 shares at $.001 par value. On December 13,
2002 the name was changed to "Protec Industries, Inc." and on March 2,
2004 the domicile was changed to the state of Washington.
The Company is in the development stage and has not started any significant
operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
- ------------------
The Company recognizes income and expenses based on the accrual method of
accounting.
Dividend Policy
- ---------------
The Company has not yet adopted a policy regarding payment of dividends.
Income Taxes
- ------------
The Company utilizes the liability method of accounting for income taxes.
Under the liability method deferred tax assets and liabilities are
determined based on the differences between financial reporting and the tax
bases of the assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect, when the differences are expected to
reverse. An allowance against deferred tax assets is recorded, when it is
more likely than not, that such tax benefits will not be realized.
On December 31, 2003, the Company had a net operating loss available for
carry forward of $134,701. The tax benefit of approximately $40,000
from the loss carry forward has been fully offset by a valuation reserve
because the use of the future tax benefit is doubtful since the Company has
no operations. The net operating loss will expire in 2024.
Basic and Diluted Net Income (Loss) Per Share
- ---------------------------------------------
Basic net income (loss) per share amounts are computed based on the
weighted average number of shares actually outstanding. Diluted net income
(loss) per share amounts are computed using the weighted average number of
common shares and common equivalent shares outstanding as if shares had
been issued on the exercise of common share rights unless the exercise
becomes antidilutive and then only the basic per share amounts are shown in
the report.
53
PROTEC INDUSTRIES, INC.
( Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2003
===========================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Statement of Cash Flows
- -----------------------
For the purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less to be
cash equivalents.
Financial and Concentrations Risk
- ---------------------------------
The Company does not have any concentration or related financial credit
risk.
Revenue Recognition
- -------------------
Revenue will be recognized on the sale and delivery of a product or the
completion of a service provided.
Advertising and Market Development
- ----------------------------------
The company will expense advertising and market development costs as
incurred.
Foreign Currency Translation
- ----------------------------
Part of the transactions of the Company were completed in CHF and EUR
dollars and have been translated to US dollars as incurred, at the exchange
rate in effect at the time, and therefore, no gain or loss from the
translations is recognized. US dollars are considered to be the functional
currency.
Estimates and Assumptions
- -------------------------
Management uses estimates and assumptions in preparing financial statements
in accordance with accounting principles generally accepted in the United
States of America. Those estimates and assumptions affect the reported
amounts of the assets and liabilities, the disclosure of contingent assets
and liabilities, and the reported revenues and expenses. Actual results
could vary from the estimates that were assumed in preparing these
financial statements.
Financial Instruments
- ---------------------
The carrying amounts of financial instruments are considered by management
to be their estimated fair values.
54
PROTEC INDUSTRIES, INC.
( Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2003
===========================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Recent Accounting Pronouncements
- --------------------------------
The Company does not expect that the adoption of other recent accounting
pronouncements will have a material impact on its financial statements.
3. AVAILABLE-FOR-SALE SECURITIES
During November 2003 the Company received 2,500,000 common shares of Epic
Energy from Clarex Finance Establishment, controlled by a shareholder of
the reporting Company, as a contribution to capital. The predecessor
purchased the shares for $173,245 immediately prior to the transfer to the
Company.
The fair market value of the shares on the report date was $175,000. The
shares represent approximately 4% of the outstanding shares of Epic Energy.
The officers of the Company plan to hold the shares as an investment.
4. CAPITAL STOCK
During January 2003 the Company issued 199,995 net shares for a license,
which was later mutually rescinded, as outlined in note 5, and during
February 2003 the Company issued 4,050,000 shares for $4,050. During
February 2004 (subsequent to the balance sheet date) the Company issued
94,690,227 shares as shown in note 8 resulting in outstanding shares of
99,939,080.
On January 22, 2003 the Company completed a reverse stock split of one
share for 100 outstanding shares.
This report has been prepared showing post split shares from inception.
5. ACQUISITION OF LICENSE AGREEMENT
The Company acquired a license to market a business and management system
by the issuance of 20,000,000 common shares of the Company which were
recorded with no value. The license was mutually rescinded and 19,800,005
of the shares were returned and cancelled.
6. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
During February 2004 (subsequent to the balance sheet date) a stockholder
of the Company and his controlled corporation, acquired 74,500,000 common
shares of the Company. Contributions to capital have been made by a related
party, as shown in the statement of stockholders' equity.
After the above stock issues in February 2004, officer-directors and TEK
Corp (the controlling corporation) had acquired 85% of the outstanding
capital stock of the Company.
55
PROTEC INDUSTRIES, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2003
===========================================================================
7. GOING CONCERN
The Company intends to acquire interests in various business opportunities
which, in the opinion of management, will provide a profit to the Company,
however there is insufficient working capital for any future planned
activity, and to service its debt, which raises substantial doubt about its
ability to continue as a going concern. Continuation of the Company as a
going concern is dependent upon obtaining additional working capital and
the management of the Company has developed a strategy, which it believes
will accomplish this objective through advances from officers, additional
equity funding, and long term debt which will enable the Company to conduct
operations for the coming year.
8. SUBSEQUENT EVENTS
La Guadalupe Ranch
- ------------------
During February, 2004 the Company issued 74,500,000 shares of its common
capital stock, and 20,190,227 shares for services, in connection with the
acquisition of the development and income rights to 3,300 acres, known
as La Guadalupe Ranch, located at Km 120 carretera federal Cancun Tulum,
Municipio de Cozumel, Estado de Quintana Roo, Mexico (near Cancun, Mexico)
on the Mexican Caribbean Sea, consisting of an area of approximately 1,498
hectares.
Future development plans for the property includes hotels, a marina, nature
trails, including an un-excavated pyramid archeology site, individual
residences, museums, and other supporting facilities. The necessary capital
to start and complete the development has not been obtained at the report
date. There can be no assurance that the Company will be able to raise the
necessary capital. The fair value of the stock issued, or to the
development rights, are unknown and have been recorded showing no value.
The rights were purchased from TEK Corp., who holds 70 % of the
Company's outstanding stock, after the above transaction.
56
PROTEC INDUSTRIES, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2003
===========================================================================
8. SUBSEQUENT EVENTS - continuted
Talc Mining Property
- --------------------
During January 2004 the Company acquired an option to purchase 49% of a
talc mining property, known as Rozmin s.r.o., located in Slovakia. The
terms of the option provides for a purchase price of EUR26,000,000 with an
advance payment of $627,000 (EUR 500,000), which was paid on January 21,
2004 and contributed to the Company by TEK Corp. Upon the receipt of the
advance payment the Company was granted an irrevocable right to purchase
the 49% interest. If the option is exercised before April 1, 2004 the
advance payment made will be applied to the purchase price. As part of the
advance payment made, the Company received an incentive bonus of 3,000,000
common shares of EuroGas Inc. which represents 1.5% of the total
outstanding stock of EuroGas Inc., with an approximate fair market value of
$.03 per share.
Rozmin s.r.o. is owned 57% by EuroGas Inc. and 43% by Euro Gas Austria
GmbH , a wholly owned subsidiary of EuroGas Inc.
9. COMBINED PRO-FORMA FINANCIAL STATEMENTS
During February, 2004 a stockholder of the Company and his controlled
Corporation TEK Corp, acquired 75% of the outstanding common capital
stock of the Company. Included in the following are the summarized,
combined, unaudited, pro-forma financial statements of the Company and TEK
Corp (parent) The financial statements have been prepared assuming the
acquisition had been completed on January 1, 2004.
All intercompany transactions have been eliminated. Minority interests
have not been shown.
57
TEK CORP & PROTEC INDUSTRIES, INC (subsidiary)
PROFORMA COMBINED BALANCE SHEETS
January 1, 2004
<Table>
<Caption>
=====================================================================================
Protec
Industries
TEC Corp Inc. Elimination Total
------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 941 $ - $ 941
Accounts receivable 6,041 - 6,041
------------ ------------ ------------
Total Current Assets 6,982 - 6,982
------------ ------------ ------------
OTHER ASSETS
Available-for-sale securities - 173,245 173,245
------------ ------------ ------------
$ 6,982 $ 173,245 $ 180,227
============ ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 365,548 $ - $ 365,548
------------ ------------ ------------
Total Current Liabilities 365,548 - 365,548
------------ ------------ ------------
STOCKHOLDERS' (DEFICIENCY) (358,566) 173,245 (185,321)
------------ ------------ ------------
$ 6,982 $ 173,245 $ 180,227
============ ============ ============
</Table>
58
TEK CORP & PROTEC INDUSTRIES, INC (subsidiary)
PROFORMA COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 2003
<Table>
<Caption>
=====================================================================================
Protec
Industries
TEC Corp Inc. Elimination Total
------------ ------------ ------------ ------------
REVENUES $ - $ - $ -
EXPENSES
Administrative 132,323 134,701 267,024
------------ ------------ ------------
NET LOSS $ (132,323) $ (134,701) $ (267,024)
============ ============ ============
</Table>
TEK CORP & PROTEC INDUSTRIES, INC (subsidiary)
PROFORMA COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 2002
<Table>
<Caption>
=====================================================================================
Protec
Industries
TEC Corp Inc. Elimination Total
------------ ------------ ------------ ------------
REVENUES $ - $ - $ -
EXPENSES
Administrative 235,211 23,661 258,872
------------ ------------ ------------
NET LOSS $ (235,211) $ (23,661) $ (258,872)
============ ============ ============
</Table>
59
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors, Officers, Employees and Agents.
The Registrant's certificate of incorporation limits the liability of
the Registrant's directors to the maximum extent permitted by Washington
law. Washington law provides that a director of a corporation will not be
personally liable for monetary damages for breach of that individual's
fiduciary duties as a director except for liability for (1) a breach of the
director's duty of loyalty to the corporation or its stockholders, (2) any
act or omission not in good faith or that involves intentional misconduct
or a knowing violation of the law, (3) unlawful payments of dividends or
unlawful stock repurchases or redemptions, or (4) any transaction from
which the director derived an improper personal benefit.
This limitation of liability does not apply to liabilities arising under
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
The Washington corporation law provides that a corporation may indemnify
directors and officers, as well as other employees and individuals, against
attorneys' fees and other expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection
with any threatened, pending or completed actions, suits or proceedings in
which such person was or is a party or is threatened to be made a party by
reason of such person being or having been a director, officer, employee or
agent of the corporation. The Washington General Corporation Law provides
that this is not exclusive of other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
The Registrant's certificate of incorporation and bylaws provide that
the Registrant is required to indemnify its directors and officers to the
maximum extent permitted by law. The Registrant's bylaws also require the
Registrant to advance expenses incurred by an officer or director in
connection with the defense of any action or proceeding arising out of that
party's status or service as a director or officer of the Registrant or as
a director, officer, employee benefit plan or other enterprise, if serving
as such at the Registrant's request. The Registrant's bylaws also permit
the Registrant to secure insurance on behalf of any director or officer for
any liability arising out of his or her actions in a representative
capacity. The Registrant intends to enter into indemnification agreements
with its directors and some of its officers containing provisions that (1)
indemnify, to the maximum extent permitted by Washington law, those
directors and officers against liabilities that may arise by reason of
their status or service as directors or officers except liabilities arising
from willful misconduct of a culpable nature, (2) to advance their expenses
incurred as a result of any proceeding against them as to which they could
be indemnified, and (3) to obtain directors' and officers' liability
insurance if maintained for other directors or officers.
60
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with the
issuance and distribution of the securities being registered hereby. All
such expenses will be borne by the registrant; none shall be borne by any
selling stockholders.
Securities and Exchange
Commission registration fee $ 3,167.50
Print expenses 8,000.00
Legal fees and expenses 10,000.00
Accounting fees and expenses 8,000.00
Transfer agent's fee and expenses 1,000.00
Filing Fee and Miscellaneous (Estimate) 4,832.50
Total $35,000
Item 26. Recent Sales of Unregistered Securities.
January 10, 2004
------------------
The Company issued 12,000,000 shares of common stock to the Company's
officers and directors for their officers' and directors' services to
December 31, 2003 to the following persons:
- Arne Przybilla 4,000,000 shares of common stock
- Edgar Luber 4,000,000 shares of common stock
- Wolfgang Benneckenstein 4,000,000 shares of common stock
February 10, 2004 --
---------------------
(subsequent to the balance sheet date) a stockholder of the Company
and his controlled corporation, i.e., TEK Corp, acquired 74,500,000 common
shares of the Company. Contributions to capital have been made by a
related party, as shown in the statement of stockholder's equity. See note
8 of the Audited Financial Statement ended December 31, 2003.
These shares of common stock were issued at a price of $.001
commensurate with the services to be performed by the officers and
directors.
For all of the above issuances, Protec Industries, Inc. relied upon
Section 4(2) of the Act. In each instance, such reliance was based upon the
fact that (i) the issuance of the shares did not involve a public offering;
(ii) the offers and sales were made in compliance with Rules 501 and 502;
(iii) the securities were subject to Rule 144 limitation on resale; (iv)
the limited number of offerees; (v) the manner in which it was issued; (vi)
the relationship of the shareholder to the Issuer; (vii) the amount of
shares issued; and (viii) each of the parties is a sophisticated purchaser
and had full access to the information on Protec Industries, Inc. necessary
to make an informed investment decision by virtue of the due diligence
conducted by the purchaser or available to the purchaser prior to the
transaction.
Protec Industries, Inc. sold or distributed their shares to various
shareholders, all of whom reside outside of the United States.
61
Item 27. Exhibits.
(a) Exhibits:
The following exhibits are filed as part of this registration statement:
Exhibit Description
- ------- -----------
2.1 Articles of Merger & Plan or Reorganization and Change of Domicile
3.1 Articles of Incorporation of Protec Industries, Inc.
3.2 By-laws of Protec Industries, Inc.
4.1 Option to Purchase 49% of Rozmin, S.R.O.
4.2 Stock Subscription Agreement
4.3 Optiont to Purchase Oil & Gas Epic Energy, Inc.
5.1 Opinion of Legal Counsel - Tolan Furusho
5.2 Opinion of Legal Counsel - Widdison Cox & Associates
23.1 Consent of Auditor
UNDERTAKINGS
The Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
notwithstanding the forgoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospects filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in the volume and price
represent no more that a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the
securities offered, and the Offering of the securities of the securities at
that time to be the initial bona fide Offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the Offering.
(4) For determining any liability under the Securities Act, treat
the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act as part of this
registration statement as of the time the Commission declared it
effective.
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(5) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of prospectus
as a new registration statement for the securities offered in the
registration statement, and the offering of the securities at that
time as the initial bona fide Offering of those securities.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
- --------------------------- ----- ----
/s/ Mr. Arne Przybilla President/Board Chairman May 6, 2004
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/s/ Edgar Luber Vice President/Director May 6, 2004
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/s/ Wolfgang Benneckenstein Second Vice President May 6, 2004
- --------------------------- / Director
/s/ Tolan S. Furusho Secretary/Treasurer/Director May 6, 2004
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