-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kb7QpHsXcVxMz9Fo5VN0HeTxmPlEvrQAICYlCusmN93fyy41GTv4Itrka5Dr3KS5 AOeIcU8bqZIXNLsXuu2aQg== 0001010549-03-000278.txt : 20030519 0001010549-03-000278.hdr.sgml : 20030519 20030519125626 ACCESSION NUMBER: 0001010549-03-000278 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20030519 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RTIN HOLDINGS INC CENTRAL INDEX KEY: 0000921066 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 752337102 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-13559 FILM NUMBER: 03710117 BUSINESS ADDRESS: STREET 1: 3218 PAGE ROAD CITY: LONGVIEW STATE: TX ZIP: 75605 BUSINESS PHONE: 903.758.28 MAIL ADDRESS: STREET 1: P O BOX 5310 CITY: LONGVIEW STATE: TX ZIP: 75608 FORMER COMPANY: FORMER CONFORMED NAME: RESTAURANT TEAMS INTERNATIONAL INC DATE OF NAME CHANGE: 19980911 FORMER COMPANY: FORMER CONFORMED NAME: FRESH N LITE INC DATE OF NAME CHANGE: 19971030 10QSB/A 1 rtin10qsba2063002.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB/A-2 (Mark One) [x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 ------------- [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------------- -------------- Commission file number 001-13559 --------- RTIN Holdings, Inc. (Name of small business issuer in its charter) Texas 75-2337102 (State of other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization 3218 Page Rd., Longview, Texas 75605 (Address of principal executive offices) (Zip Code) Issuer's telephone number (903) 295-6800 Number of shares outstanding of each of the issuer's classes of common stock, as of July 20th, 2002 was 4,848,533 shares of common stock, par value $.01. Transitional Small Business Disclosure Format (check one) [ ] Yes [X] No RTIN HOLDINGS, INC. Page No. -------- PART I FINANCIAL INFORMATION................................................ Item 1. Financial Statements.................................................3 Table of Contents to Financial Information...........................4 Condensed Balance Sheets as of December 31, 2001 and June 30, 2002........................................................5 Condensed Statements of Continuing Operations for Three Month Periods Ended June 30, 2001 and June 30, 2002 .............................7 Condensed Statements of Cash Flows for the Three Month Periods Ended June 30, 2001 and June 30, 2002........................8 Notes to Interim Condensed Financial Statements .....................9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................11 PART II OTHER INFORMATION...................................................13 Item 2. Changes in Securities...............................................13 Item 4. Submission of Matters to a Vote of Security Holders.................13 Item 6. Exhibits and Reports on Form 8-K....................................14 Signatures....................................................................15 Item 1. FINANCIAL STATEMENTS RTIN Holdings, Inc. Financial Statements As of June 30, 2002 RTIN Holdings, Inc. Financial Statements As of June 30, 2002 Contents Financial Statements Balance Sheet................................................................F-1 Statements of Operations.....................................................F-3 Statements of Cash Flow......................................................F-5 Notes........................................................................F-6 RTIN Holdings, Inc. Condensed Balance Sheets For The Year End December 31, 2001 and Six-Month Period Ended June 30, 2002 ASSETS Current Assets June 30, 2002 December 31, 2001 ----------------- ----------------- (unaudited) Cash $ 60,339 $ 8,355 Inventory 34,164 6,505 Accounts Receivable 3,505 0 Note Receivable 3,868,900 0 ----------------- ----------------- Total Current Assets $ 3,966,908 $ 14,860 Property & Equipment, at cost Fixtures & Equipment $ 233,270 $ 794,522 Vehicles 29,950 29,950 Buildings & Leasehold Improvements 10,297 2,425,651 Accumulated Depreciation (54,806) (876,358) ----------------- ----------------- Net Property & Equipment $ 218,711 $ 2,373,765 Other Assets Deposits $ 6,970 $ 0 Cost of Technology 820,803 358,753 Research & Development 157,237 0 ----------------- ----------------- Total Other Assets $ 985,010 $ 358,753 Total Assets $ 5,170,629 $ 2,747,378 F-1 RTIN Holdings, Inc. Condensed Balance Sheets For The Year End December 31, 2001 and Six-Month Period Ended June 30, 2002 Liabilities & Equity Current Liabilities June 30, 2002 December 31, 2001 ----------------- ----------------- (unaudited) Cash Overdrafts $ 0 $ 14,539 Accounts Payable 607,673 317,056 Accrued Expenses & Other Liabilities 440,449 1,139,170 Current Portion Notes Payable 243,220 2,159,641 ----------------- ----------------- Total Current Liabilities $ 1,291,341 $ 3,630,406 Long Term Liabilities $ 787,000 $ 0 Deferred Liabilities $ 0 $ 48,958 Convertible Debentures $ 0 $ 1,996,301 ----------------- ----------------- Total Liabilities $ 2,078,341 $ 5,675,665 Stockholder's Equity (Deficit) Common Stock $ 45,496 $ 10,291 Series A Preferred Stock 1,996,301 0 Additional Paid in Capital 15,606,325 14,532,483 Treasury Stock (868,002) (868,002) Retained Earnings - Prior (16,603,059) (16,603,059) Retained Earnings - Current 2,915,226 0 ----------------- ----------------- Total Shareholder's Equity $ 3,092,287 ($ 2,928,287) Total Liabilities & Stockholder's Equity $ 5,170,629 $ 2,747,378 F-2
RTIN Holdings, Inc. Condensed Income Statements For The Three Month Periods Ended June 30, 2001 and June 30, 2002 (unaudited) Statement of Operations Revenue 3 Months Ended June 30, 2002 3 Months Ended June 30, 2001 Income - License Fees $ 779,000 $ 0 Revenue Write Down (1,500,000) 0 Income - Rental 0 60,978 Income - Pharmacy 107,550 0 Income - Restaurant 0 180,664 ----------- ----------- Total Revenue ($ 613,450) $ 241,642 Operating Costs & Expenses Cost of Sales 66,286 61,819 General & Administrative Expenses 465,647 251.562 Depreciation & Amortization 85,050 22,500 ----------- ----------- Total Operating Costs & Expenses $ 616,982 $ 335,881 Non Operating Income (Expense) Other Income (441,892) 0 Interest Expense (100,725) (39,408) Gain on Sale of Assets 345,655 0 Discontinued Operations (36,917) 0 Gain on Asset Impairment 4,500,000 0 ----------- ----------- Total Non Operating Income (Expense) $ 4,266,121 ($ 39,408) Income Before Income Taxes $ 3,035,689 ($ 126,623) Income Tax Benefit $ 0 $ 0 Net Gain (Loss) $ 3,035,689 ($ 126,623) Earnings Per Share (Fully Diluted) $ .35 ($ .16)
F-3
RTIN Holdings, Inc. Condensed Income Statements For The Six Month Periods Ended June 30, 2001 and June 30, 2002 (unaudited) Statement of Operations Revenue 6 Months ended June 30, 2002 6 Months Ended June 30, 2001 Income - License Fees $ 5,779,000 $ 0 Revenue Write Down (1,500,000) Income - Rental 48,228 121,951 Income - Pharmacy 107,550 0 Income - Restaurant 0 364,392 ----------- ----------- Total Revenue $ 4,434,778 $ 486,343 Operating Costs & Expenses Cost of Sales $ 66,286 $ 124,441 General & Administrative Expenses 913,136 530,974 Depreciation & Amortization 139,050 45,000 ----------- ----------- Total Operating Costs & Expenses $ 1,118,471 $ 700,415 Non Operating Income (Expense) Other Income (439,085) 0 Interest Expense (199,725) (92,952) Discontinued Operations (107,925) (216,007) Gain on sale of Assets 345,655 0 ----------- ----------- Total Non Operating Income (Expense) ($ 401,080) ($ 308,959) Income Before Income Taxes $ 2,915,226 ($ 523,031) Income Tax Benefit $ 0 $ 0 Net Gain $ 2,915,226 ($ 523,031) Earnings Per Share (Fully Diluted) $ .34 ($ .66)
F-4
RTIN HOLDINGS, INC. STATEMENTS OF CASH FLOW For The Six Month Periods Ended June 30, 2001 and June 30, 2002 Consolidated Statement of Cash Flows June 30, 2002 June 30, 2001 ------------- ------------- Cash Flows From Operating Activities Net Profit (Loss) $ 2,915,226 ($ 523,031) Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities Depreciation & Amortization $ 139,050 $ 45,000 Stock for Services $ 229,316 $ 0 Changes in Operating Assets and Liabilities Decrease (Increase) in Inventories ($ 27,659) ($ 1,133) Increase (decrease) in Accounts Receivable $ 3,505 $ 0 Decrease in Marketable Securities $ 0 $ 24,140 Decrease in Cash Overdrafts ($ 14,539) $ 0 Increase (Decrease) in Accounts Payable $ 220,499 ($ 104,080) (Decrease) in notes due related parties $ 0 ($ 47,500) Increase in Deposits $ 6,970 $ 0 (Increase) Decrease in Note Receivable ($3,658,980) $ 0 Increase in Research & Development $ 157,237 $ 0 Increase (Decrease) in Accrued Expenses & Other Liabilities ($ 504,459) ($ 194,307) Net Cash Used in Operating Activities $ 209,920 ($ 277,880) Cash Flows From Investing Activities Purchase of Property & Equipment ($ 66,878) $ 0 Purchase of Rights to Software ($ 462,050) $ 0 Proceeds from Sale of Property & Equipment $ 25,000 $ 0 Change in assets of discontinued operations $ 0 $ 84,607 Net Cash Used in Investing Activities ($ 503,928) $ 84,607 Cash Flows From Financing Activities Change in Convertible Debentures ($1,999,301) ($1,996,301) Change in Common Stock $ 1,109,047 $ 516,183 Change in Series A Preferred Stock $ 1,999,920 $ 1,999,920 Change in Series B Preferred Stock $ 0 $ 143,803 Proceeds from issuance of Notes Due Related Parties $ 187,000 $ 0 Net Cash Provided by Financing Activities $ 1,299,666 $ 663,605 NET INCREASE (DECREASE) IN CASH $ 51,984 ($ 52,699) CASH BEGINNING OF YEAR $ 8,355 $ 59,133 CASH AT END OF PERIOD $ 60,339 $ 6,434
F-5 RTIN Holdings, Inc. Notes to Interim Condensed Financial Statements For The Six Month Periods Ended June 30, 2001 and June 30, 2002 (unaudited) Note 1. Basis of Presentation The condensed financial statements of RTIN Holdings, Inc. (the "Company") as of June 30, 2001 and June 30, 2002 have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management; necessary to fairly state the operating results for the respective periods. However, these operating results are not necessarily indicative of the results expected for the full fiscal year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principals have been omitted pursuant to such rules and regulations. These condensed financial statements should be read in conjunction with the notes to the financial statements contained in the Form 10-KSB filed May 9, 2002. Company management believes that the disclosures are sufficient for interim financial reporting purposes. Note 2: Organization and description of business RTIN Holdings, Inc. ("the Company"), a Texas Corporation, was formerly known as Restaurant Teams International, Inc. Prior to December of 2001, the Company had owned and operated full service restaurants, principally in the Dallas, Texas metropolitan area. The Company has since liquidated all of its restaurant related assets and is currently focusing exclusively on the pharmaceutical sector through the operation of its two wholly owned subsidiaries, Safe Med Systems, Inc. and Safescript Pharmacies, Inc., both Texas Corporations. The accompanying financial statements include the accounts of the Company and its wholly owned subsidiaries Safe Med Systems, Inc. and Safescript Pharmacies, Inc. All significant intercompany balances and transactions have been eliminated in the consolidation. Note 3: Basic summary of significant accounting procedures Revenue Recognition ------------------- Sales and related costs are recognized by the Company upon the sale of products at pharmacy locations as well as at the time of sale of any licensed territories to market partners of the Company's Safescript Pharmacy model. During the second quarter of 2002 the Company reduced the sale price of the territory sold to RxSystems, Inc. from $5,000,000 to $3,500,000 in exchange for the purchase being paid in cash instead of RxSystems, Inc. stock. The result of this reduction in price was a revenue write down of $1,500,000 in the second quarter. Due to the fact that the Company had already written off as impairment, the $4,500,000 in RxSystems, Inc. stock granted pursuant to the original license agreement purchase, the Company realized a net gain of $3,000,000 in connection with this transaction. F-6 Per Share Data -------------- Basic earnings (loss) per share (EPS) is computed by dividing income or loss available to common stockholders by the weighted average number of common shares outstanding. Diluted EPS includes potentially dilutive common shares outstanding during the period. On December 17, 2001 the Company initiated a 50:1 reverse split of its common stock and all per share data is reflective of this split. Included in the EPS data are 2,812,129 shares of Series C Preferred stock yet unconverted and 2,000,000 shares issuable to Stanley L. Swanson and Curtis A. Swanson upon their option. (See Note 8 Related Party Transactions) Stock-Based Compensation ------------------------ The Company measures stock-based employee compensation costs using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock-Based Compensation," and related interpretations. Accordingly, compensation cost for stock options and other stock-based employee awards is measured as the excess, if any, of the quoted market price of the Company's common stock at the date of grant over the amount the employee must pay to acquire the stock. Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period and disclosures of contingent assets and liabilities. Actual results could differ from those estimated. Concentrations of Credit Risk ----------------------------- The Company places its cash in what it believes to be credit-worthy financial institutions. Cash balances may exceed FDIC insured levels at times during the year. As of June 30, 2002, no balance exceeded the FDIC insured limits. Note 4: Acquisition Summary of Medex and Pegasus transaction ---------------------------------------- On December 5, 2001, RTIN, Medex, Pegasus, Laurence Solow and Ann E. Rau (Solow and Rau are referred to herein as the "Shareholders") entered into a Stock Purchase Agreement ("Agreement"). The Agreement provided that RTIN would issue 3,521,127 shares of its post split common stock to the Shareholders or their designees in exchange for all of the issued and outstanding stock of Medex and Pegasus. On December 18, 2001, the Company acquired Medex and Pegasus for 3,521,127 shares of the Company's common stock valued at $4 per share or $14,084,508. On March 8, 2002, the Company, Medex, Pegasus, the Shareholders, and others entered into a Settlement and Separation Agreement which called for the rescission of the transaction by the Company and the return of all shares issued by the Company in connection with the acquisition. Pursuant to the Settlement the Company was to receive a duplicate of the technology used by Medex and Pegasus in their business model along with an exclusive license to use all intellectual property of Medex and Pegasus in 153 CMSA's throughout the United States. As of July 2002 the Company contends that Medex, Pegasus, and the Shareholders have F-7
violated the terms of the Settlement and Separation Agreement by, among other things, withholding portions of the technology, which were supposed to have been made available to the Company. Additionally, the Company contends there were material misrepresentations relating to the initial stock acquisition. As such, the Company has initiated litigation against these parties for damages. Note 5: Accrued expenses and other liabilities Accrued expenses and other liabilities at December 31, 2001 June 30, 2002, consist of the following: December 31, 2001 June 30, 2002 ----------------- ----------------- (unaudited) Accrued Interest Payable $ 803,415 $ 93,363 Accrued Expenses 13,125 22,877 Property Taxes Payable 20,469 0 Accrued Payroll and Related Taxes 278,423 324,209 Deposits Received on Stock Sales 110,000 0 Sales Taxes Payable 6,463 0 ----------------- ----------------- $ 1,231,895 $ 440,449 ================= ================= Note 6: Notes payable Notes Payable at December 31, 2001 and June 30, 2002, consists of the following: 12-31-01 6-30-02 ---------- ---------- (unaudited) Note payable to an investment company, interest at 9%, remaining unpaid principal and accrued interest past due as of June 27, 2000, secured by pledge of 8,070 shares of treasury stock and 2,400 shares of the Company's common stock which is owned by a major shareholder $ 122,900 $ 122,900 Note payable to the FDIC, interest at 8% for 24 months (Unsecured) -- 100,000 Note payable to a stockholder, interest at 10%, due May 9,2002, Secured by assignment of investment in McConnell's Fine Ice Cream 50,000 -- Note payable to a corporation, interest at 8% 500,000 500,000 Note payable to a corporation, due March 1, 2002, by delivery of 100,000 shares of the Company's common stock 170,000 -- Note payable to a corporation, due March 1, 2002, by delivery of 50,000 shares of the Company's common stock 100,000 -- Two notes payable to bank, interest at 9.5%, monthly principal and Interest payments totaling $14,620, remaining unpaid principal and interest due April 9, 2001, collateralized by certain real property. Loans are in default for failure to make scheduled Payments 1,366,421 -- Note payable to a bank, interest 9.5%, monthly principal and interest payments of $2,935, remaining unpaid principal And interest due October 30, 2001, unsecured 110,003 110,003 F-8 Note payable to related party due December 31, 2002 bearing 8% interest -- 187,000 (Unsecured) Note payable, interest at 11.65%, monthly principal and interest payments of $425, remaining unpaid principal and accrued interest due April 9, 2003, collateralized by an automobile 10,317 10,317 ---------- ---------- Total Notes Payable $2,429,641 $1,030,220 ========== ==========
During the second quarter the Company disposed of its entire restaurant related assets eliminating $1,793,932 in current liabilities inclusive of its debt to the FDIC. The result of the transaction was a reduction in current liabilities of $1,793,932, a reduction of overall debt of $1,266,421, a reduction in fixed assets of $1,995,311, and a charge to earnings of $301,379. The Company still owes $100,000 to the FDIC as indicated above. Note 7: Convertible Debentures On May 29, 1998, the Company entered into an agreement to issue two tranches of convertible debentures ("1998 Debentures") to accredited investors with a total face amount of $3,000,000. The 1998 Debentures bear interest at 6% and are convertible into shares of common stock of the Company based on a formula stated in the 1998 Debenture agreement. The 1998 Debenture holders converted $675,000 and $1,018,699 of the face amount of the 1998 Debentures into 408,388 and 9,858,932 shares of the company's common stock in 1998 and 2000, respectively. The remaining outstanding 1998 Debentures ($1,306,301) were converted into 1,309,920 shares of the Company's newly created Series A Preferred stock in 2002. On February 29 2000, the Company entered into an agreement to issue convertible debentures ("2000 Debentures") to accredited investors with a total face amount of $690,000. These 2000 Debentures bear interest at 8% and are convertible into shares of common stock of the Company. Because of the discount in the conversion feature of the 2000 Debentures, a Beneficial Conversion Feature was calculated by the Company in the amount of $174,000, which has been charged to interest expense in 2000. The 2000 Debentures were converted into 690,000 shares of the Company's newly created Series A Preferred stock in 2002. In connection with the issuance of the Convertible Debentures, the Company issued to the investor and the placement agent warrants to purchase up to an aggregate of 150,000 and 50,000 shares, respectively, of the Company's stock with an exercise price equal to 110% of the average closing bid price for the five trading days immediately preceding the agreement date of $4.40 per share. These warrants are exercisable at any time through May 2003. These warrants were valued on the date of issuance at $2.00 per warrant which resulted in a decrease in the carrying value of the Convertible Debentures and a corresponding increase in stockholder's equity of $40,000. This discount is being accreted into interest expense over the life of the debentures, as adjusted for conversions to common stock. F-9 Note 8: Related party transactions On December 6, 2001, the Company entered into executive employment agreements with Stan Swanson (the Company's Chief Executive Officer) and Curtis Swanson (the Company's Chief Operating Officer). The employment agreements provide for initial terms of four years with automatic extensions of one year periods unless notice of non extension is given by either party 30 days before expiration. The agreements provide for total base salaries of $385,000 in 2002, $440,000 in 2003, $490,000 in 2004, and $570,000 in 2005 plus incentive compensation of one and one half percent (1.5%) each of the adjusted net profits of the Company, as defined, plus automobile allowances and life and health insurance coverage. In the event of termination without cause, the executives are entitled to two hundred percent (200%) of the executives' base salary in effect on the date of termination plus two hundred percent (200%) of the executives' incentive compensation for the fiscal year in which employment was terminated. The executives are also entitled to options to acquire a total of 125,000 shares each of RTIN's common stock at $4.00 per share. The options are exercisable as follows: 40,000 shares each on December 5, 2002, 40,000 shares each on December 5, 2003 and 45,000 each on December 5, 2004 if still employed by the Company's exercise dates. On May 6, 2002 the Company issued a right to Stanley L. Swanson to convert his accrued salary through March 31, 2002 in the amount of $177,177 into 1,107,356 shares of common stock of the Company at any time prior to April 30, 2003 and issued a right to Curtis A. Swanson to convert his accrued salary through March 31, 2002 in the amount of $134,000 into 892,644 shares of common stock of the Company at any time prior to April 30, 2003. If converted the $311,177 in accrued salary, which is reflected as a current liability on the Company's balance sheet at March 31, 2002, would be eliminated and the number of outstanding shares of common stock would be increased by 2,000,000. This transaction has been entered into in lieu of the issuance of Series B preferred stock, which had been issued to the Stanley L. Swanson and Curtis A. Swanson but then rescinded on May 3, 2002. Note 9: Stockholders' equity (deficit) Common Stock ------------ On December 17, 2001, the Company effected a 50 to 1 reverse stock split through an amendment to its Articles of Incorporation and an immediate increase in the authorized shares to 25,000,000. As a result of such reverse split, the number of authorized and outstanding shares of common stock of the Company was decreased from 50,000,000 and 43,954,100 to 1,000,000 and 879,082, respectively. The Company then issued 3,521,127 shares of common stock in the acquisition of Medex and Pegasus. The shares issued in connection with the Medex and Pegasus acquisitions where later cancelled pursuant to the rescission of the transaction and the Settlement and Separation Agreement of March 8, 2002. Preferred Stock --------------- The Company has 10,000,000 shares of preferred stock authorized. The preferred stock may be issued with rights or preferences as determined by the board of directors. The Company and the debentures holders agreed to convert the debentures and accrued interest into 500,000 shares of common stock of the company and 1,999,920 shares of the Company's Convertible Exchangeable Series A Preferred Stock (Series A Stock). The Series A Stock has a par value of $.10 per share, bears interest at 10% per annum on the face value of $1,999,920, provides for a preferred liquidation preference of $1.00 per share plus any unpaid accumulated dividends in the event of dissolution, liquidation or winding up of the Company and has no voting rights. The holders of the Series A Stock may at their option convert the Series A Stock to common stock of the Company at any time as follows: (a) at one dollar ($1) per share for each share of common stock during the first twelve months or, F-10 (b) after the first twelve (12) months, based on 80% of the market value of the common stock at the time of conversion. The Company has the right to redeem the Series A Stock upon cash payment of the greater of the market price of the Company's common stock prior to redemption or 110% of the face value plus accrued but unpaid dividends. The Company also has outstanding 2,812,129 shares of Series C Convertible Preferred stock, which remain as of June 30, 2002. These shares are included in the earnings per share (EPS) as they are convertible one to one (1:1) into the common stock of the Company and the Company anticipates that all such conversions will take place prior to October 28, 2002. The Series C Preferred stock carries no other preferences and has no voting rights. Note 10: Commitments and Contingencies Settlement with Debentures Holders ---------------------------------- In 1998, the Company filed a lawsuit against three investment funds and their principals ("the Debenture Holders"), alleging fraud and violations of federal and state securities laws in connection with their $3 million investment in the Company's convertible debentures. Certain defendants to the Company's lawsuit have counterclaimed seeking damages in excess of $3 million. On December 28, 1999, the Company and Debenture Holders reached an agreement to settle their litigation. As part of the settlement, the Company agreed to issue the Debenture Holders an additional 5% of the outstanding principal value of the debentures, payable in Company common stock (approximately 258,000 shares at December 31, 1999). The approximate value of the shares was recorded as an expense of $116,250 in 1999. The Company has now retained the firm of O'Quinn & Laminack as well as Christian, Wukoson, Smith, & Jewell of Houston, Texas to represent it in renewed litigation against the prior debenture holders who are now holders of Series A Preferred shares of the Company. This litigation is pending in the Southern District of New York. (See Litigation) Loan Default Litigation ----------------------- As of December 31, 1999, the Company was in default of a promissory note agreement that matured August 26, 1999. In February 2000, the holder of the promissory note filed a lawsuit seeking damages of unpaid principal and accrued interest totaling approximately $444,000, plus attorney's fees. A court awarded the holder of the note a judgment in the amount of $522,900. The judgment was acquired by W/F Investment Corp. ("W/F"). As part of the settlement W/F converted $400,000 of the judgment into 10,680,908 shares of the Company's common stock. The remaining $122,900 is carried as a note payable. Note 11: Sale of territories Over the course of the first six months of the year the Company has entered into license agreements with RxSystems, Inc., RxConcepts, Inc., Safescript Pharmacies of Arizona, Inc., and Safescript Pharmacies of Kentucky, Inc. These license agreements resulted in revenue of $4,279,000 (net of $1,500,000 revenue write down) for the period. The ongoing revenue, which will be realized by the Company in association with these license agreements, is a one time fee of $20,000 per pharmacy and 4% of gross revenue. F-11 The license revenue received from RxSystems, Inc. consisted of a $500,000 promissory note and $4,500,000 in the unregistered equity securities by RxSystems, Inc. The Company recognized an impairment to earnings of $4,500,000 relating to the unregistered securities as not immediately marketable. The Company restructured its transaction with RxSystems, Inc. reducing the overall purchase price of its territory from $5,000,000 to $3,500,000, increasing the promissory not to $3,500,000 and eliminating the issuance of unregistered securities. The Company has granted RxSystems, Inc. the option to sell its Southern California territory to Safescript Pharmacies, Inc. of Arizona for $1,500,000 cash provided that 100% of the proceeds from this sale are to be paid to the Company and applied against the note payable due from RxSystems, Inc. The result of this transaction was an increase in notes receivable of $3,000,000 and revenue write down of $1,500,000. RxConcepts, Inc. and Safescript Pharmacies of Arizona, Inc. have begun the process of opening their initial locations. RxConcepts, Inc. will be opening its first Safescript Pharmacy location in Denver, Colorado on August 5, 2002 and Safescript Pharmacies of Arizona, Inc. have targeted September 3, 2002 as the opening date for their first pharmacy. Neither RxSystems, Inc. nor Safescript Pharmacies of Kentucky have scheduled openings of their initial locations as of the date of this report. On May 14, 2002 the Company entered into an agreement to sell the Huntington, West Virginia, Owensboro, Kentucky, Clarksville, Jacksonville, and Chattanooga, Tennessee, Safescript Pharmacy license to Safescript Pharmacies of Kentucky, Inc. for $198,000. The purchase price is being paid as follows: $25,000 paid prior to the execution of the agreement and the balance is payable in weekly installments of $5,000 per week until paid. In addition the agreement calls for the payment of $20,000 for each Safescript Pharmacy opened and 4% of gross sales on an ongoing basis. This transaction will be recorded as license fee revenue of $198,000 in the second quarter of 2002 and has resulted in an increase in the Company's notes receivable of $173,000. On May 17, 2002 the Company entered into an agreement to sell the Denver, Colorado Safescript Pharmacy license to RxConcepts, Inc. for $330,000. The purchase price is being paid as follows: $48,000 was paid prior to the execution of the agreement and the balance of $282,000 is payable with one payment of $30,000.00 on October 1, 2002 and five subsequent monthly payments of $51,125.40 through March 1, 2003. In addition the agreement calls for the payment of $20,000 for each Safescript Pharmacy opened and 4% of gross sales on an ongoing basis. This transaction will be recorded as license fee revenue of $330,000 in the second quarter of 2002 and has resulted in an increase in the Company's notes receivable of $282,000. On May 20, 2002 the Company entered into an agreement to sell the Tucson, Yuma, and Flagstaff, Arizona, Provo, Utah, and Pocatello and Boise, Idaho, Safescript Pharmacy license to Safescript Pharmacies of Arizona, Inc. for $300,000. The purchase price is being paid $65,000 in cash prior to the execution of the agreement and $235,000 in monthly installments of $23,500.00. In addition the agreement calls for the payment of $20,000 for each Safescript Pharmacy opened and 4% of gross sales on an ongoing basis. This transaction will be recorded as license fee revenue of $300,000 in the second quarter of 2002 and has resulted in an increase in the Company's notes receivable of $235,000. Note 12: Subsequent events On July 28, 2002 the Company entered into an agreement with Mid-States Pharmacies, Inc. to sell the licensing rights to Arkansas, Oklahoma, Illinois, Iowa, Nebraska, Kansas, and Missouri for $774,000 in cash payable on or before August 8, 2002. In addition to the up front licensing fee the Company will also receive $20,000 for each pharmacy opened in these territories by Mid-States Pharmacies, Inc. as well as 4% of gross revenue from each pharmacy location. Subsequent to August 8, 2002, the Company granted an extension until September 15, 2002 for Mid-America Pharmacies, Inc. to fulfill its' obligations pursuant to the licensing agreement. F-12 Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This Quarterly Report on Form 10-QSB includes "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which can be identified by the use of forward-looking terminology such as, "may", "believe", "expect", "intend", "anticipate", "estimate" or "continue" or the negative thereof or other variations thereon or comparable terminology. All statements other than statements of historical fact included in this Form 10-QSB, are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors with respect to any such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ materially from the Company's expectations ("Cautionary Statements") are disclosed in this Form 10-QSB, and include, but are not limited to, the newness of the Company, the need for additional capital and additional financing, the Company's limited pharmacy base, lack of geographic diversification, the risks associated with expansion, a lack of marketing experience and activities, risks of licensing, development and construction delays, need for additional personnel, increases in operating and drug costs and availability of supplies, significant industry competition, government regulation, insurance claims and the ability of the Company to meet its stated business goals. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. The following discussion of the results of operations and financial condition should be read in conjunction with the Financial Statements and related Notes thereto included herein and in conjunction with the Company's Annual Report on Form 10-KSB for the year ended December 31, 2001. Overview RTIN Holdings, Inc. is a Texas Corporation. The Company currently owns two subsidiary divisions, Safe Med Systems, Inc. (a Texas corporation) and Safescript Pharmacies, Inc. (a Texas corporation). Under the Safescript Pharmacies division the Company has one pharmacy open in Longview Texas, a second pharmacy opening in Tyler, Texas and a third pharmacy location opening in Texarkana, Texas on August 5, 2002. The Company also has five market partners who are opening Safescript Pharmacies in various locations throughout the United States. Results of Operations Comparison of Six Months Ended June 30, 2001 and June 30, 2002 Revenues. For the six months ended June 30, 2002, the Company generated revenues of $4,434,778 compared to revenues of continued locations in the same period of 2001 of $486,343. The increase in revenue is due to the sale of the license rights to the Safescript Pharmacy model to various market partners throughout the United States. These sales include all but three territories remaining for sale in the United States and thus the revenue generated from territory sales is anticipated to decline in the future. However, management believes that the revenue which will be generated through the license fees charged on a per store basis and the revenue from the 4% of gross sales, which is charged to each licensee for support, will eventually offset if not exceed the license fee revenue. Costs and Expenses. Costs and expenses for the six months ended June 30, 2002 increased by $418,056 or 45% to $1,118,471 as compared to $700,415 for the corresponding period of 2001. This increase was due to the increase in research and development cost and other general and administrative expense associated with the development of the Safe Med Systems and Safescript Pharmacy models. Net Profit and Loss. The Company had a net profit for the six months ended June 30, 2002 of $2,915,226 compared to net loss of $523,031 for the corresponding six months of 2001. Comparison of Three Months Ended June 30, 2001 and June 30, 2002 Revenues. For the three months ended June 30, 2002, the Company generated revenues of $886,550 less a $1,500,000 write down for the reduction in price of the RxSystems, Inc. territory for a net of ($613,450) compared to revenues in the same period of 2001 of $241,642. Costs and Expenses. Costs and expenses for the three months ended June 30, 2002 increased by $281,101 or 46% to $616,982 as compared to $335,881 for the corresponding period of 2001. Net Profit and Loss. The Company had a net profit for the three months ended June 30, 2002 of $3,035,689 compared to net loss of $126,623 for the corresponding three months of 2001. During 2001 the Company was not engaged in the pharmaceutical sector but rather in the restaurant industry. As such, the results of operations from 2001 are based on the Company's prior business model in the restaurant industry. The Company entered a new business segment beginning December 5, 2001 which is expected to significantly affect the Company's results of operations. Liquidity and Capital Resources Cash flow from operations is not sufficient to fund the Company's business plan and the Company will require additional capital for research and development of the Safe Med Systems technology and the construction of additional Safescript Pharmacies. The Company intends to obtain the necessary funds for operation by collection of the receivables associated with the sale of the Safescript territories to its market partners, obtaining extended payment terms from its suppliers, incurrence of additional indebtedness, or sale of equity interests in the Company. There is no assurance that sufficient funds will be available from such sources and the lack of sufficient funds may adversely impact the realization of the Company's business goals. Subsequent Events On July 28, 2002 the Company entered into an agreement with Mid-America Pharmacies, Inc. to sell the licensing rights to Arkansas, Oklahoma, Illinois, Iowa, Nebraska, Kansas, and Missouri for $774,000 in cash payable on or before August 8, 2002. In addition to the up front licensing fee the Company will also receive $20,000 for each pharmacy opened in these territories by Mid-States Pharmacies, Inc. as well as 4% of gross revenue from each pharmacy location. Subsequent to August 8, 2002, the Company granted an extension until September 15, 2002 for Mid-America Pharmacies, Inc. to fulfill its' obligations pursuant to the licensing agreement. PART II - OTHER INFORMATION Item 2. CHANGES IN SECURITIES During the first six months of 2002 the Company converted 2,687,871 shares of its Series C Preferred stock to Common Stock of the Company. These shares are reflected in the total shares outstanding as of June 30, 2002. There are 2,812,129 shares of Series C Preferred stock still outstanding, which are convertible into 2,812,129 shares of Common Stock through October 28, 2002. Item 3.DEFAULTS UPON SENIOR SECURITIES. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Hereafter set forth as an exhibit to the Form 10-QSB of RTIN Holdings, Inc. is the following exhibit: Exhibit No. Description 2.1 Agreement of Merger, dated September 28, 1995, between Fresh'n Lite, Inc, a Delaware corporation, and F'NL, Inc., a Texas corporation (incorporated by reference to the Amendment 1 Form 10-SB filed with the Securities and Exchange Commission on June 25, 1998.) 2.2 Stock Purchase Agreement dated December 6, 2001 between Restaurant Teams International, Inc., MedEx Systems, Inc., Pegasus Pharmacy, Inc., Laurence Solow and Ann E. Rau. (incorporated by reference to the Form 8-K filed with the Securities and Exchange Commission on December 13, 2001.) 2.3 Settlement and Separation Agreement dated March 8, 2001, between RTIN Holdings, Inc., MedEx Systems, Inc., Pegasus Pharmacy, Inc., Laurence Solow, Ann E. Rau, Curtis Swanson, Stanley Swanson, ITIS, Inc., and Hunter Carr (incorporated by reference to the Form 8-K filed with the Securities and Exchange Commission on March 12, 2002.) 3.1 First Amended and Restated Articles of Incorporation (incorporated by reference to Form 10-KSB filed with the Securities and Exchange Commission on May 9, 2002. 3.2 Certificate of Correction to the First Amended and Restated Articles of Incorporation (incorporated by reference to Form 10-KSB filed with the Securities and Exchange Commission on May 9, 2002) 3.3 Bylaws of RTIN Holdings, Inc. (incorporated by reference to the Form 10-SB filed with the Securities and Exchange Commission on November 10, 1997.) 4.1 Description of the Common Stock, $.01 par value (incorporated by reference to the Form 10-SB filed with the Securities and Exchange Commission on November 10, 1997.) 4.2 Warrant Agreement (incorporated by reference to the Form 10-KSB filed with the Securities and Exchange Commission on February 28, 1997.) 10.1 1997 Incentive Stock Option Plan (incorporated by reference to the Amendment 1 Form 10-SB filed with the Securities and Exchange Commission on June 25, 1998.) 10.2 Employment contract between RTIN Holdings, Inc. and Stanley L. Swanson (incorporated by reference to Form 10-KSB filed with the Securities and Exchange Commission on May 9, 2002) 10.3 Employment contract between RTIN Holdings, Inc. and Curtis A. Swanson (incorporated by reference to Form 10-KSB filed with the Securities and Exchange Commission on May 9, 2002) 10.4 Market Share Beta Test Agreement with Letco Medical Inc., dated April 9, 2002 (incorporated by reference to Form 10-QSB filed with the Securities and Exchange Commission on May 20, 2002) 10.5 License of Safescript Technology to Safescript Pharmacies of Kentucky, Inc., dated May 14, 2002 (incorporated by reference to Form 10-QSB filed with the Securities and Exchange Commission on May 20, 2002) 10.6 License of Safescript Technology to RxConcepts, Inc., dated May 17, 2002 (incorporated by reference to Form 10-QSB filed with the Securities and Exchange Commission on May 20, 2002) 10.7 License of Safescript Technology to Safescript Pharmacies of Arizona, Inc. dated May 20, 2002 (incorporated by reference to Form 10-QSB filed with the Securities and Exchange Commission on May 20, 2002) (b) Current Reports on Form 8-K: The Company filed the following reports on Form 8-K during the quarter ended June 30, 2002. None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RTIN Holdings, Inc. (Registrant) Date: August 30, 2002 By: /s/ Stanley L. Swanson --------------------------------------------- Stanley L. Swanson, Chief Executive Officer (Duly Authorized Signatory) Date: August 30, 2002 By: /s/ Curtis A. Swanson --------------------------------------------- Curtis A. Swanson, President, Chief Operating Officer and Senior Accounting Officer (Duly Authorized Signatory) -----END PRIVACY-ENHANCED MESSAGE-----