AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 2004
REGISTRATION NO: ____________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
AMENDMENT # 3
SB-2 REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
PROTEC INDUSTRIES, INC.
Washington 1311 and 1400 98-037463
(State of jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number)Identification 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 FEE
Title of Each Class Amount to be Proposed Maximum
of Securities To Be Resistered Offering Price Per
Registered Share
Title of Each Class Proposed Maximum Proposed Maximum
of Securities To Be Amount To Be Offering Price Per
Registered Registered Share
- ----------------------- --------------------- -------------------- -
Common Stock$.001 par Minimum 50,000 $8.00
-------------------- -------------------
Maximum 3,125,000 $8.00
Proposed Manimun Amount
Aggredage Offering of
Price Registration Fee
$400,000
$25,000,000 $3,167.50
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
December 14, 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"), a wholly owned subsidiary of Tek Corp, 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.
================================================================================
Title of each Proposed Proposed
Class of Securities Amount to Offering Price Aggregate
to be Registered be Registered Per Share Offering Price
_______________________________________________________________________
Maximum:
Common Stock 3,125,000 $8.00 $25,000,000.
Minimum
50,000 $8.00 $400,000.
================================================================================
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.
Nine Months to Year Ended Year Ended
September 30, 2004 2003 2002
Statement of Operations
Income Statement data:
Revenues -0- -0- -0-
Expenses 134,781 35,939
Income (loss) from
operations ($1,105,464) ($134,781) ($35,939)
Net Loss Per Common Share $(.02) $(.02) $ (.05)
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 2 .
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 December 14, 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
15.
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
September 30, 2005, 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 9.
TABLE OF CONTENTS
Part I - Prospectus
Prospectus Summary ......................................................1-2
The Offering.............................................................3
Risk Factors.............................................................13-15
Use of Proceeds..........................................................15-16
Dilution.................................................................16-18
Determination of Offering Price..........................................18-19
Plan of Distribution.....................................................19-20.
Dividends................................................................20
Legal Proceedings........................................................20
Directors, Executive Officers, Promoters and Control Persons.............20-23
Executive Compensation...................................................23-24
Security Ownership of Officers, Directors and Certain Beneficial Owners..24-25
Description of Securities ...............................................25-27
Description of Business..................................................27-34
Management's Discussion and Analysis or Plan of Operation................34-38
Description of Property..................................................38-19
Certain Relationships and Related Transactions...........................39*
Market for Common Equity and Related Stockholder Matters.................40
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities.....................................................40
Available Information and Reports to Securities Holders..................41
Transfer Agent...........................................................41
Interest of Named Experts and Counsel....................................41
Investors May Only Rely Upon the Information in This Prospectus..........42
Financial Statements ....................................................43-58
Part II - Information Not Required in Prospectus
Indemnification of Directors and Officers................................59
Other Expenses of Issuance and Distribution..............................60
Recent Sales of Unregistered Securities..................................60-61
Exhibits.................................................................61
Undertakings.............................................................61-62
Signatures...............................................................S-1
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., a wholly owned subsidiary of Tek
Corp., 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"), a wholly owned
subsidiary of Tek Corp., 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 $1,276,184 from inception of September 2002 to
September 30, 2004 and losses of $134,781 from Inception to December 31, 2003,
the end of its previous fiscal year. 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. In February 2004, Protec became a wholly
owned subsidiary of Tek Corp., due to 74,500,000 shares of the Company being
acquired by Tek Corp.and Tek Corp principal, which represents 74.3088% of the
Company's ownership. Tek Corp. was issued 70,000,000 shares of common stock and
Tom Robbins was issued 4,500,000 shares of common stock.
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,
1
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 22
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.
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 September 30, 2005, 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 15. There are no commissions being charged to Protec in
connection with this offering.
As of December 14, 2004, there are 100,257,191 shares of common stock issued and
outstanding; no shares of preferred stock issued and outstanding, Protec has 968
shareholders of record.
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 12.
2
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.
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 $1,276,184 since inception to September 30, 2004
and losses of $134,781 from Inception to December 31, 2003, the end of its
previous fiscal year. 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. 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 8 that states: "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.
3
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.
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.
(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.
4
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
Protec's 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.
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
5
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.
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: (1) 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.
6
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.
(2) 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.
(3) 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.
(4) 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
7
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.
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
8
financing, Protec will not be able to establish their raw material processes to
be able to continue operations.
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
9
adverse effect on Protec's overall business.
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.
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
10
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 September 30, 2005. 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.
Protec management and affiliates beneficially own 86.28% 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.
11
Protec's directors and executive officers and other family members and/or
affiliates beneficially own 86.28% 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 andsubstantial 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 13-14.
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.
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, Protec has 100,257,191 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
12
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 33. 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.
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 on the OTC Bulletin
Board 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
13
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.
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
14
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
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
15
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.
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.
From inception of September 2002 to September 30, 2004, Protec had a net loss of
$1,276,184. As of December 31, 2003, Protec had a net loss of $134,781. 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
16
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:
- --------------------------------------------------------------------------------
(1) (2)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Prior to Sale After Sale of After Sale of
50,000 shares 781,250 shares
Number of Shares 100,257,191 100,307,191 101,038,441
Public offering price n/a $8.00 $8.00
per share $400,000.
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net tangible book -.00849 -.00849 -.00849
value per share of
common stock before
the offering
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net tangible and
Pro forma net tangible $ (-851,223) (-$451,223) $5,398,777.
book value (deficiency)
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Increase to net tangible
book value per share
attributable to purchase
of shares of common n/a (-$.0045) $0..053
stock by new investors
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Per Share
Dilution to new investors n/a -$8.00 -$7.95
(3) (4) (5)
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
17
After Sale of After Sale of After Sale of
1,562,500 shares 2,343,750 shares 3,125,000 shares
Number of Shares 101,819,691 102,600,941 103,382,191
Public offering price $8.00 $8.00 $8.00
per share
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net tangible book -.00849 -.00849 -.00849
value per share of
common stock before
the offering
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net tangible and
Pro forma net tangible $11,648,777 $17,898,777 $24,148,777
book value (deficiency)
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Increase to net tangible
book value per share
attributable to purchase
of shares of common $.0.1144 $0. 1745 $0..2336
stock by new investors
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Per Share
Dilution to new investors $7.89 - $7.823 -$7.77
- --------------------------------------------------------------------------------
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
18
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.
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
19
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
September 30, 2005 or before. The termination date will not be extended.
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:
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
20
Tolan Furusho (4) 35 Secretary/Treasury/Director
(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 December 13, 2002.
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.
Tolan S. Furusho, Attorney at Law, Secretary and Director of Protec is also a
director of Goldtech Mining Corporation. No other director 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.
21
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. 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
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.
22
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.
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
23
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.
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
SUMMARY COMPENSATION TABLE OF SHARES ISSUED FOR SERVICES
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
*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.
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 December 14, 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.
24
As of the date of this prospectus, there are 100,257,191 shares of common stock,
duly authorized and validly issued and outstanding among 968 shareholders of
record; there are no shares of preferred stock issued and outstanding.
________________________________________________________________________
Name Shares of Common Percentage of
Stock Owned Shares Owned
_______________________________________________________________________
TEK Corp 70,000,000 69.82 %*
Shareholder Only
5 Sonnblickstrasse
FL-Vaduz 9490,
Principality of Liechtenstein
Tom Robbins 4,500,000 4.488%*
C/o Tek Corp.
5 Sonnblickstrasse
FL-Valduz 9490
Principality of Liechtenstein
Arne Przybilla 4,000,000 3.99 %*
President and CEO
Mallorca, Spain
Edgar Luber 4,000,000 3.99%*
V. Pres./Director
St. Gallans, Switzerland
Wolfgang Benneckenstein 4,000,000 3.99%*
Second Vice Pres./Director
Vaduz, Liechtenstein
_______________________________________________________________________
ALL OFFICERS, DIRECTORS
AND CERTAIN BENEFICIAL
OWNERS AS A GROUP 86,500,000 86.28%*
*These figures are "rounded up" to the next
digit as some of the digits are significantly extended.
- -----------------------------------------------------------------------
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.
25
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 100,257,191 shares of common stock,
duly authorized and validly issued among 968 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 December 14, 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, 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
26
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 250,000,000 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.
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
27
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 due date, 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 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.
28
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.
29
(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.
(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.
(3) 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
30
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.
Competition
As stated previously under "RISK FACTORS", beginning on page 9, 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
31
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.
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 12.
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.
32
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,
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 and September 30, 2004, 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:
1 Phase 1 - Negotiate and acquire the marketing rights to the
target company.
2 Phase 2 - Identify areas of synergy within the expanded vertically integrated
partnership and pursue these avenues through marketing and administrative
support.
3 Phase 3 - Acquire the specific equipment to facilitate expanded sales through
the target company.
33
4 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.
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 and the first two quarters of 2005, 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 31 of this prospectus. Protec Industries, Inc. has generated no revenues to
date.
34
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.
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 volatility, interest rates
fluctuations, inflation, especially on equipment purchases, and other market
conditions.
35
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.
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 borrowing 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
volatility, 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
36
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 volatile nature of
the extraction, sale and distribution of raw materials, will affect the
quarter-to-quarter income and cash flow of the Company. This volatile aspect of
the Company's business may have a material effect on the financial condition or
results of the Company's business operations.
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
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 $134,781 from inception to
December 31, 2003 and $1,276,184 from inception to the nine months ending
September 30, 2004. 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
37
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.
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
38
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.
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.
The parent company to the Company is Tek Corp. and Tek Corp owns 70,000,000
shares of common stock or 69.82% of the Company. Tek Corp.'s controlling
shareholder, Tom Robbins owns 4,500,000 shares of common stock or 4.48% of the
Company. There are no other control persons or entities other than as described
in this prospectus.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of the date of this prospectus, there are 100,257,191 shares of common stock,
duly authorized and validly issued, to 968 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 5,248,853 shares of common stock that are free-trading and the balance
of 95,008,338 shares are restricted and are not subject to be sold into the
public marketplace.
39
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.
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.
40
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.
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 and unaudited financial statements of September
30, 2004, in connection with this offering. Mr. Rex Andersen, CPA, does not own
any shares of common stock of the Company.
41
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.
42
FINANCIAL STATEMENTS
Report of Independent Certified Public Accountant 44-45
Audited Financial Statements of June 30, 2004
Balance Sheets as at June 30, 2004 46
Statement of Operations - For the six months ended 47
une 30, 2004 and the Years
Ended December 31,
2003 and December 31, 2002
Statement of Changes in Stockholders Equity 48
For the Period September 9, 2002 (Date of Inception)
to June 30, 2004
Statement of Cash Flows for the six months ended 49
June 30, 2004 and the year
ended December 31, 2003 and the
years ended December 31, 2002
Notes to Financial Statements 50-55
Unaudited Financial Statements of September 30, 2004
Balance Sheets as at September 30, 2004 56
Statement of Operations - For the nine months ended 57
September 30, 2004 and the
Years Ended December 31,
2003 and December 31, 2002
Statement of Changes in Stockholders Equity -
For the Period September 9, 2002 (Date of Inception)
to September 30, 2004
Statement of Cash Flows for the nine months ended -
September 30, 2004 and the
year ended December 31, 2003 and the
years ended December 31, 2002
Notes to Financial Statements 58
43
;MADSEN & ASSOCIATES, CPA's INC. 684 East Vine St, # 3
------------------------------- Murray, Utah 84107
Certified Public Accountants and Business Consultants Telephone 801-268-2632
Fax 801-262-3978
Board of Directors
Protec Industries, Inc.
Bellevue, Washington
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying balance sheet of Protec Industries, Inc.
(exploration stage company) at September 30, 2004 and December 31, 2003 and the
related statement of operations, stockholders' equity, and cash flows for the
nine months ended June 30, 2004 and the year ended December 31, 2003 and and the
period September 9, 2002 (date of inception) to December 31, 2002 and the period
September 9, 2002 to September 30, 2004. 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 audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall
balance sheet presentation. We believe that our audit provides 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
September 30, 2004 and December 31, 2003 and the results of operations, and cash
flows for the nine months ended September 30, 2004 and the year ended December
31, 2003 and the period September 9, 2002 to December 31, 2002 and the period
September 9, 2002 to September 30, 2004, 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,
November 8, 2004
MADSEN & ASSOCIATES, CPA's INC. 684 East Vine St, # 3
- ------------------------------- Murray, Utah 84107
Certified Public Accountants and Business Consultants Telephone 801-268-2632
Fax 801-262-3978
Board of Directors
Tek Corp and Subsidiary
Murray, Utah
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying consolidated balance sheets of Tek Corp and
Subsidiary (exploration stage company) at September 30, 2004 and December 31,
2003 and the related consolidated statement of operations, stockholders' equity,
and cash flows for the nine months ended September 30, 2004 and the years ended
December 31, 2003 and 2002 and the period July 15, 2002 (date of inception) to
September 30, 2004. 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 audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall
balance sheet presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Tek Corp and
Subsidiary at September 30, 2004 and December 31, 2003 and the related statement
of operations, and cash flows for the nine months ended September 30, 2004 and
the years ended December 31, 2003 and 2002 and the period July 15, 2002 (date of
inception) to September 30, 2004, 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,
November 8, 2004
45
PROTEC INDUSTRIES, INC.
(Exploration Stage Company)
BALANCE SHEETS
September 30, 2004 and December 31, 2003
Sept 30, Dec 31,
2004 2003
ASSETS
CURRENT ASSETS
Cash $ 37,894 $ -
------- -----------
Total Current Assets 37,894 -
------- ------------
OTHER ASSETS
Available-for-sale securities 439,245 173,245
------- -------
$ 477,139 $ 173,245
======= =======
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ - $ -
--------- ---------
Total Current Liabilities - -
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock
10,000,000 shares authorized, at $.001 par value;
none issued on Sept 30, 2004 -
Common stock
250,000,000 shares authorized,
at $.001 par value;
100,257,191 shares issued and
outstanding on Sept 30, 2004 100,257 5,867
Capital in excess of par value 1,653,066 338,098
Deficit accumulated during the
exploration stage (1,276,184) (170,720)
Total Stockholders' Equity 477,139 173,245
The accompanying notes are an integral part of
these financial statements.
46
PROTEC INDUSTRIES, INC.
(Exploration Stage Company)
STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2004 and 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 September 30, 2004
Setp 9,
Sept 30 Dec 31 Dec 31 2002 to
2004 2003 2002 Sept 30
2004
REVENUES $ - $ - $ $ -
EXPENSES
Development expenses
Mexico project 30,000 - - 30,000
Exploration & options
oil and gas properties 133,507 -- 133,507
Exploration & options
talc properties 586,003 - - 586,003
Consultants 67,139 28,919 31,439 127,497
Professional 36,741 40,065 4,500 81,306
Administrative 75,438 65,797 -
-------- --------- --------- ----
141,235
NET LOSS - before
other costs (928,828) (134,781) (35,939) (1,099,548)
FINANCING COSTS (176,636) - - (176,636)
NET LOSS $(1,105,464) $ (134,781) $(35,939) $(1,276,184)
NET LOSS PER COMMON SHARE
Basic and diluted $ (.02) $ (.02) $ (.05)
AVERAGE OUTSTANDING SHARES
Basic (stated in 1,000's) 68,130 5,472 774
The accompanying notes are an integral part of
these financial statements.
47
PROTEC INDUSTRIES, INC.
(Exploration Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period September 9, 2002 (Date of Inception)
to September 30, 2004
Common Stock
Shares Amount
Balance September 9, 2002 - $ -
Issuance of common stock for services
at $.02 - Sept through Dec 2002 1,571,929 1,572
Issuance of common stock for cash
at $.10 - September 2002 45,040 45
Net operating loss for the period
September 9, 2002 to December 31, 2002 - -
Balance December 31, 2002 1,616,969 1,617
Issuance of common stock for a license -
no value recognized - January 2003 199,995 200
Issuance of common stock for cash
at $.001- February 8, 2003 4,050,000 4,050
Contributions to capital - available-for-
sale securities - -
Contributions to capital - expenses - -
Net operating loss for the year ended
ended December 31, 2003 - -
Balance December 31, 2003 5,866,964 5,867
Issuance of common stock for
development rights - Mexico - no
value recognized - March 2004 74,500,000 74,500
Issuance of common stock for services
at $.001 - March 2004 18,890,227 18,890
Issuance of common stock for 40% of
stock of Pumilia AG - August 2004 1,000,000 1,000
Contributions to capital - advances by TEK - -
Net operating loss for the nine months
ended September 30, 2004 - -
Balance September 30, 2004 100,257,191 $ 100,257
Capital in
Excess of Accumulated
Par Value Deficit
Balance September 9, 2002 $ - $ -
Issuance of common stock for services
at $.02 - Sept through Dec 2002 29,867 -
Issuance of common stock for cash
at $.10 - September 2002 4,455 -
Net operating loss for the period
September 9, 2002 to December 31, 2002 - (35,939)
Balance December 31, 2002 34,322 (35,939)
Issuance of common stock for a license -
no value recognized - January 2003 (200) -
Issuance of common stock for cash
at $.001- February 8, 2003 - -
Contributions to capital - available-for-
sale securities 173,245 -
Contributions to capital - expenses 130,731 -
Net operating loss for the year ended
ended December 31, 2003 - (134,781)
Balance December 31, 2003 338,098 (170,720)
Issuance of common stock for
development rights - Mexico - no
value recognized - March 2004 (74,500) -
Issuance of common stock for services
at $.001 - March 2004 - -
Issuance of common stock for 40% of
stock of Pumilia AG - August 2004 145,000 -
Contributions to capital - advances by TEK 1,244,468 -
Net operating loss for the nine months
ended September 30, 2004 - (1,105,464)
Balance September 30, 2004 $ 1,653,066 $(1,276,184)
The accompanying notes are an integral part of these financial statements.
48
PROTEC INDUSTRIES, INC.
(Exploration Stage Company)
STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2004 and 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
September 30, 2004
Sept 30, Dec 31,
2004 2003
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(1,105,464) $ (134,781)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Issuance common capital stock
for services 18,890 -
Contribution to capital - expenses - 130,731
Net Change From Operations (1,086,574) (4,050)
------------ -------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase securities (120,000) -
--------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Advances contributed to capital-TEK 1,244,468 -
Proceeds from issuance of common stock - 4,050
---------- ------
Net Change in Cash 37,894 -
Cash at Beginning of Period - -
----------- --------
Cash at End of Period $ 37,894 $ -
======= ========
NON CASH FLOWS FROM OPERATING ACTIVITIES
Issuance of 20,462,156 common
shares for services $ 50,329
-------
Contributions to capital - expenses 130,731
-------
Sept 9
2002 to
Dec 31, Sept 30
2002 2004
Net loss $ (35,939) $ (1,276,184)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Issuance common capital stock
for services 31,439 50,329
Contribution to capital - expenses - 130,731
Net Change From Operations (4,500) (1,095,124
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase securities - (120,000)
CASH FLOWS FROM FINANCING
ACTIVITIES
Advances contributed to capital-TEK - 1,244,468
Proceeds from issuance of common stock 4,500 8,550
Net Change in Cash - 37,894
Cash at Beginning of Period - -
Cash at End of Period $ - $ 37,894
NON CASH FLOWS FROM OPERATING ACTIVITIES
Issuance of 20,462,156 common shares for services
Contributions to capital - expenses
The accompanying notes are an integral part of these financial statements.
49
PROTEC INDUSTRIES, INC.
(Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2004
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 in connection with an increase in the authorized capital
stock to 250,000,000 common shares and 10,000,000 preferred shares with a par
value of $.001. No terms have been established for the preferred shares..
The Company is in the exploration 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 September 30, 2004, the Company had a net operating loss available for carry
forward of $1,276,184. The tax benefit of approximately $383,000 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 any common or preferred share rights unless the exercise becomes
antidilutive and then only the basic per share amounts are shown in the report.
50
PROTEC INDUSTRIES, INC.
(Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2004
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Exploration Costs
Costs of acquisition, exploration, carrying, and retaining unproven mining
properties are expensed as incurred. Costs incurred in proving and developing a
property ready for production are capitalized and amortized over the life of the
mineral deposit or over a shorter period if the property is shown to have an
impairment in value.
Environmental Requirements
At the report date environmental requirements related to the mining claims
acquired are unknown and therefore an estimate of the any future cost cannot be
made.
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 gains or losses are recognized from the
translations. 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.
51
PROTEC INDUSTRIES, INC.
(Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2004
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Financial Instruments
The carrying amounts of financial instruments are considered by management to be
their estimated fair values due to their short term maturities.
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 at
$.0693 per share for $173,245 immediately prior to the transfer to the Company.
The stock has had a temporary trading suspension, due to late filing of reports,
with the last trading at $.09 per share. For this report the fair value is
considered to be the original cost. The shares represent approximately 4% of the
outstanding shares of Epic Energy.
During February 2004 the Company purchased 3,000,000 shares of EuroGas, Inc. at
$.04 per share, representing 1.8% of the outstanding shares of EuroGas, Inc. The
fair market value on the report date was $.04 per share.
During August 2004 the Company issued 1,000,000 common shares of the Company in
exchange for 40% of the outstanding stock of Pumilia AG. Pumilia AG is a 20 year
old engineering and construction company registered and operating in Switzerland
and is privately owned. The value of the Pumilia AG shares have been recorded at
$146,000, the book value as shown in the reports of Pumilia, which is considered
to their fair value. The 1,000,000 shares of the Company are being held by
Pumilia's bank which will be released by March 1, 2004 as free trading. If the
shares cannot be registered for free trading by March 1, 2005, an officer of the
Company has agreed the substitute his free trading shares in exchange.
The management of the Company intends to hold the above shares as an investment,
however they may be subject to creditor claims. (Note 8)
52
PROTEC INDUSTRIES, INC.
(Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2004
4. PURCHASE OF DEVELOPMENT RIGHTS TO CANCUN MEXICO PROPERTY
During February, 2004 the Company issued 70,000,000 shares of its common capital
stock, with no value recognized, for 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. The rights expire twelve years and one month
from August 9, 2002.
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 to proceed with the plans.
The rights were purchased from TEK Corp., (parent of the Company) who holds 70 %
of the Company's outstanding stock, after the above transaction.
5. PURCHASE OF AN OPTION TO PURCHASE INTEREST IN TALC MINING PROPERTY
During January 2004 the Company acquired an option to purchase 49% of a talc
mining property from EuroGas Inc., 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 expensed. Upon the receipt of the advance payment the Company was granted an
irrevocable right to purchase the 49% interest.
Rozmin s.r.o. is owned 57% by EuroGas Inc. and 43% by Euro Gas Austria GmbH , a
wholly owned subsidiary of EuroGas Inc. Exploration of the property has been
started.
6. CAPITAL STOCK
During January 2003 the Company issued 199,995 net shares for a license, with no
value recognized, and during February 2003 the Company issued 4,050,000 shares
for $4,050 in a private offering. During February 2004 the Company issued
70,000,000 common shares to TEK Corp, and 4,500,000 to an officer of the
company, for the development rights in Cancun Mexico, with no value recognized,
as outlined in note 4 above. During August 2004 the Company issued 1,000,000
common shares in exchange for 40% of the outstanding stock of Pumilia AG as
outlined in note 3.
On January 22, 2003 the Company completed a reverse common stock split of one
share for 100 outstanding shares. This report has been prepared showing post
split shares from inception.
53
PROTEC INDUSTRIES, INC.
(Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2004
7. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
Officer- director's have acquired 15% of the outstanding common stock of the
Company.
During February 2004 TEK Corp, a corporation controlled by an officer of the
Company, acquired 70 % of the outstanding common stock of the Company. TEK Corp
has made advances to the Company of $1,244,468, which have been contributed to
capital. Other shareholders of the Company have made contributions to capital of
$303,976.
8. GOING CONCERN
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.
TEK Corp, parent of the Company , received net of $2,462,202 in loans from
investors with the agreement that TEK Corp invest the proceeds and pay 20%
return per month to the note holders, (later revised to the terms outlined
below). TEK Corp contracted with ITrust (a state of Utah Trust) to manage the
investments and guarantee the loans, with the knowledge of the note holders, and
TEK Corp received back, a no interest, demand loan of $445,995 from ITrust, and
therefore, TEK Corp has a contingent liability under the terms of the notes
payable if ITrust defaults. The terms of the notes, as revised, provide for
payments of $ 2,462,202 due during December 2004 (extended for 60 days) and
$4,451,620 due during March 2005. The proceeds of the loans, along with other
loans received by TEK Corp from other sources of $1,502,047, which are due
within the coming year, except for $250,000 which is due in three years, have
been used by the Company, TEK Corp, and ITrust in payments toward development
costs on the Mexico project (note 4 ), exploration costs and the purchase of an
option to purchase the Talc Mining Property (note 5), exploration costs in the
oil and gas properties, and real estate and other investments, resulting in a
substantial deficiency in the remaining current marketable assets available to
service the loans.
If there is a default in the payments on the loans due by Itrust, the note
holders can also make claims on the assets of TEK Corp., which consists
primarily, of the Company stock held by TEK Corp. The only assets the Company
has are the securities shown in the balance sheet, which would be substantially
deficient as payment on the debt should a demand be made against the Company,
which raises substantial doubt about the Company's ability to continue as a
going concern.
The management of the Company, TEK Corp, and ITrust, believe they can overcome
the deficiency needed to service the debt of TEK Corp and ITrust, by the
extension of the due dates on the notes beyond the coming year, or by conversion
of the debt to stock equity, by receiving additional equity funding, by loans
from officers through their sale of personal assets, or by obtaining new loans
from the profits in the operations of companies Protect Industries, Inc. owns an
interest in, which will enable the Company to continue operations for the coming
year.
54
PROTEC INDUSTRIES, INC.
(Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2004
9. CONSOLIDATING FINANCIAL STATEMENTS OF THE COMPANY AND TEC CORP.
During February, 2004 TEK Corp, (parent) acquired 70% of the outstanding common
capital stock of the Company. Included in the following are the consolidating,
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. The consolidated statements of operations include the
historical operating information of TEK Corp and the Company beginning on
January 1, 2004. The acquisition is reported as a purchase in which no good will
was recognized.
All intercompany transactions have been eliminated.
55
TEK CORP & PROTEC INDUSTRIES, INC (subsidiary)
(Exploration Stage Company)
CONSOLIDATING BALANCE SHEETS
September 30, 2004
TEC Corp Protec
Industries Inc.
CURRENT ASSETS
Cash $ 62,751$ 37,894
Account receivable 5,000 -
------- -----------
Total Current Assets 67,751 37,894
------===========--------
OTHER ASSETS
Available-for-sale securities - 439,245
$ 67,751 $ 477,139
LIABILITIES AND STOCKHOLDERS'
DEFICIENCY
CURRENT LIABILITIES
Notes payable $ 1,252,047 $ -
Note payable - related party 250,000 -
Accrued interest payable 90,933 -
Advances - ITrust 445,995 -
Total Current Liabilities 2,038,975 -
CONTINGENT LIABILITIES - note 8 - -
--------------------------
MINORITY INTEREST - deficiency
STOCKHOLDERS' DEFICIENCY
Preferred stock - 100,000,000 authorized
at no par value - 25,000,000 outstanding -
no value recognized - -
Common stock -1,000,000 authorized
at $.001 par value - 1,000,000 out 1,000 100,257
Capital in excess of par value (1,244,468) 1,653,066
Deficit accumulated during
exploration stage (727,756) (1,276,184)
Total Stockholders' Deficiency (1,971,224) 477,139
$ 67,751 $ 477,139
============= ========
Elimination Total
ASSETS
CURRENT ASSETS
Cash $ $ 100,645
Account receivable - 5,000
--------------------------
Total Current Assets - 105,645
--------------------------
OTHER ASSETS
Available-for-sale securities - 439,245
- $ 544,890
LIABILITIES AND STOCKHOLDERS'
DEFICIENCY
CURRENT LIABILITIES
Notes payable - $ 1,252,047
Note payable - related party - 250,000
Accrued interest payable - 90,933
Advances - ITrust - 445,995
Total Current Liabilities - 2,038,975
CONTINGENT LIABILITIES - note 8 - -
--------------------------
MINORITY INTEREST - deficiency (170,465) (170,465)
STOCKHOLDERS' DEFICIENCY
Preferred stock - 100,000,000 authorized
at no par value - 25,000,000 outstanding -
no value recognized - -
Common stock -1,000,000 authorized
at $.001 par value - 1,000,000 out (100,257) 1,000
Capital in excess of par value 7,908 416,506
Deficit accumulated during
exploration stage 262,814 (1,741,126)
Total Stockholders' Deficiency - (1,323,620)
- $ 544,890
============= ========
The accompanying notes are an integral part of these financial statements.
56
TEK CORP & PROTEC INDUSTRIES, INC. (subsidiary)
(Exploration Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2004 and the Years
Ended December 31, 2003 and 2002 and the Period
November 15, 1999 (Date of Inception) to September 30, 2004
Consolidated TEK Corp
Sept 30 Dec 31
2004 2003
REVENUES $ 24,486 $ -
------ ---------
EXPENSES
Development expenses - Mexico project 30,000 -
Development expenses - California project - -
Development expenses - Ben Cay project - -
Exploration & options - oil & gas properties 133,507 -
Exploration & options - talc properties 586,002 -
Consultants 79,904 64,100
Professional 50,742 -
Management fees 31,167 -
Administrative 131,397 29,207
--------- --------
1,042,719 93,307
------- ---------
NET LOSS - before other expenses (1,018,233) (93,307)
--------- ---------
OTHER EXPENSES
Financing costs (176,636) -
Interest (90,933) -
--------------------------
(267,569) -
--------------------------
NET PROFIT (LOSS) (1,285,802) (93,307)
LESS MINORITY INTEREST 331,639 -
NET PROFIT (LOSS) net minority interest $ (954,163) $ (93,307)
==================== =============
NET LOSS PER COMMON SHARE
Basic and diluted $ (954.) $ (93.)
------ ------
AVERAGE OUTSTANDING SHARES
Basic (stated in 1,000's) 1,000 1,000
----- -----
TEK Corp
Dec 31 Nov 15, 1999 to
2002 Sept 30, 2004
REVENUES $ - $ 24,486
------ --------- -----------
EXPENSES
Development expenses - Mexico project - 30,000
Development expenses - California project 141,976 141,976
Development expenses - Ben Cay project 20,000 20,000
Exploration & options - oil & gas properties - 133,507
Exploration & options - talc properties - 586,002
Consultants 258,437 402,441
Professional 7,161 57,903
Management fees - 31,167
Administrative 25,623 186,227
-------- ----------
453,197 1,589,223
-------------------
NET LOSS - before other expenses (453,197) (1,564,737)
--------- ---------
OTHER EXPENSES
Financing costs - (176,636)
Interest - (90,933)
----------------------------
- (267,569)
----------------------------
NET PROFIT (LOSS) (453,197) (1,832,306)
LESS MINORITY INTEREST - 331,639
NET PROFIT (LOSS) net minority interest $ (453,197) $(1,500,667)
============================
NET LOSS PER COMMON SHARE
Basic and diluted $ (453.)
------
AVERAGE OUTSTANDING SHARES
Basic (stated in 1,000's) 1,000 1,000
The accompanying notes are an integral part of these financial statements.
57
TEK CORP
(Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2004
1. ORGANIZATION
The Company was incorporated under the laws of the state of Utah on November 15,
1999 with authorized common stock of 1,000,000 shares at $.001 par value and
100,000,000 preferred shares with no par value.
The preferred shares have no voting rights and the terms provide for a dividend
to be given the holders of the stock at the year end, which is due by the end of
the first following quarter, with the amount of the dividend to be determined by
the board of director's.
2. NOTES PAYABLE
The Company has six notes payable totaling $1,252,047 due February through April
2005 with interest from 12% to 14%. The accrued interest payable on the notes at
September 30, 2004 was $90,933.
3. NOTE PAYABLE - RELATED PARTY
On September 25, 2004 the Company received a loan of $250,000 from an officer of
the Company. The loan is due September 22, 2007 including 10% accrued annual
interest.
4. ACQUSITION OF DEVELOPMENT RIGHTS TO CANCUN MEXICO PROPERTY
On August 9, 2002 the Company issued 5,000,000 preferred shares for 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. The rights
expire twelve years and one month from August 9, 2002. No value was recognized
on the exchange.
During February 2004 the Company transferred the rights to its subsidiary. (
note 4 - Protec Industries, Inc.)
5. ACQUISITION OF STOCK OF UNIVERSAL ROCKWELL CORPORATION
During January 2003 the Company acquired 15,000,000 common shares of Universal
Rockwell Corporation, a Nevada corporation, which is 10% of its outstanding
stock, in exchange for 20,000,000 preferred shares of the Company. Included in
the exchange was an agreement that no additional stock may be issued by either
party without the approval of both parties. Universal Rockwell Corporation is in
the business of real estate development, however, on the date of the exchange
Universal had no assets or liabilities. No value was recognized on the exchange.
58
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.
59
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
Legal fees and expenses 10,000
Accounting fees and expenses 8,000
Transfer agent's fee and expenses 1,000
Filing Fees and Miscellaneous (Estimate) 4,832.50
------------
Total $35,000.00
- ------------------------------
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 Tom Robbins, a stockholder of the Company and his controlled
corporation, TEK Corp, acquired 74,500,000 common shares of the Company.
70,000,000 shares of common stock were issued to Tek Corp. and 4,500,000 shares
were issued to Tom Robbins. Contributions to capital have been made by a related
party, as shown in the statement of stockholder's equity. See Note 4 of the
Audited Financial Statement ended December 31, 2003 and September 30, 2004.
August 19, 2004 - 1,000,000 shares of common restricted stock was issued to
Andreas Pumilia in exchange for 40% of the issued and outstanding shares of
Pumilia, AG.
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.
60
Protec Industries, Inc. sold or distributed their shares to various
shareholders, all of whom reside outside of the United States.
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 Filed on 5/19/2004
3.1 Articles of Incorporation of Protec Industries, Inc.
Filed on 5/19/2004
3.2 By-laws of Protec Industries, Inc. Filed on 5/19/2004
3.3 Amendment to the Articles of Incorporation
4.2 Stock Subscription Agreement
5.1 Opinion of Legal Counsel Filed on 5/19/2004
23.1 Consent of Auditor Filed on 5/19/2004
(other exhibits are the Company's agreements
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.
61
(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.
(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.
62
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 December 14, 2004
- ---------------------------
/s/ Edgar Luber Vice President/Director December 14 2004
- ---------------------------
/s/ Wolfgang Benneckenstein Second Vice President/Director December 14, 2004
- ---------------------------
/s/ Tolan S. Furusho Secretary/Treasurer/Director December 14 2004
S-1