SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2001
Commission file number 000-25499
Flexxtech Corporation
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0390360
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State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization
5777 W. Century Boulevard, Suite 775,
Los Angeles, CA 90045
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(Address of principal executive offices) (Zip Code)
(310) 342-0794
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(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports) Yes [ ] No [X], and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of June 30, 2001, the issuer had outstanding 11,287,612 shares of its
Common Stock, $0.001 par value.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
(A) BALANCE SHEET
(B) STATEMENT OF OPERATIONS
(C) STATEMENT OF CASH FLOWS
(D) NOTES TO UNAUDITED FINANCIAL STATEMENT
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
BALANCE SHEET
JUNE 30, 2001
(Unaudited)
ASSETS
Current Asset:
Cash and cash equivalents $ 262,503
Accounts receivable 1,173,445
Inventory 654,358
Investments in stocks available for sale 46,000
Notes Receivable 0
Notes Receivable - related parties 929,404
Insurance Receivable 0
Deposits & other current assets 42,239
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Total Current Asset 3,107,949
------------
Property & equipment, net 1,557,836
Goodwill on acquisition, net 1,765,581
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TOTAL ASSETS $ 6,431,366
============
LIABILITIES STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,360,343
Accrued expenses 187,240
Loans payable - Current 1,936,566
Loans payable related parties 21,566
Deferred income tax 10,559
Customer deposits 5,704
------------
Total Current Liabilities 3,521,978
Long-term Liabilities:
Long-term Loans 729,624
STOCKHOLDERS' EQUITY
Common stock, authorized 100,000,000 shares at $.001 par
value, issued and outstanding 11,287,612 shares 11,288
Additional Paid in Capital 5,506,289
Shares to be issued 49,300
Accumulated deficit (2,757,613)
Accumulated other comprehensive income:
Unrealized gain on securities available for sale (629,500)
------------
Total Stockholders' Equity 2,179,764
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,431,366
============
The accompanying notes are an integral part of these financial statements.
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
------------ ------------- ------------ ------------
Sales $ 1,767,876 $ 108,496 $ 3,886,422 $ 108,496
Cost of sales 1,486,210 71,448 3,260,802 71,448
------------ ------------- ------------ ------------
Gross profit 281,666 37,048 625,620 37,048
General and Administrative expenses 848,740 87,166 1,381,118 87,166
------------ ------------- ------------ ------------
Loss from operations (567,074) (50,118) (755,498) (50,118)
Other income (expenses)
Realized loss on sale of
marketable securities - - (51,958) -
Other income 6,925 - 8,078 -
Interest income 861 - 861 -
Interest expense (51,009) - (112,945) -
------------ ------------- ------------ ------------
Total other income (expenses) (43,223) - (155,964) -
------------ ------------- ------------ ------------
Net loss before income tax (610,297) (50,118) (911,462) (50,118)
Provision of Income tax 1,600 800 4,000 800
------------ ------------- ------------ ------------
Net Loss $ (611,897) $ (50,918) $ (915,462) $ (50,918)
============ ============= ============ ============
Other comprehensive loss:
Unrealized loss on investments
available for sale (32,870) (154,000) (148,000) (154,000)
------------ ------------- ------------ ------------
Comprehensive Income (Loss) (644,767) (204,918) (1,063,462) (204,918)
============ ============= ============ ============
Basic and diluted loss per share $ (0.055) $ (0.023) $ (0.082) $ (0.026)
============ ============= ============ ============
Basic and diluted weighted average
shares outstanding *11,224,816 2,180,629 *11,136,129 1,980,915
============ ============= ============ ============
* The basic and diluted net loss per share has been restated to retroactively effect a
2:1 forward stock split in the ratio of one share for 13.09322865 shares on December
22, 1999, a 2:1 forward split on April 14, 2000, a 1:3 reverse split on April 29,
2000 and a 3:2 forward stock split at March 26, 2001.
The accompanying notes are an integral part of these financial statements.
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2001 & 2000
(Unaudited)
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (915,462) $ (50,918)
Adjustments to reconcile net loss to cash used in
operating activities
Depreciation and amortization 205,437 2,060
Amortization of goodwill 62,839 -
Issuance of stocks for consulting services 154,413 -
Issuance of stocks for compensation 91,800 -
Loss on sale of marketable securities 51,958 -
(Increase)/decrease in current assets
Accounts receivable 79,110 (78,105)
Insurance receivable 247,490 -
Inventory (150,760) (75,740)
Deposits & other current assets (12,791) (7,550)
Increase /(decrease) in current liabilities
Accounts payable 50,115 102,689
Accrued expenses 109,649 9,580
Deferred Income Tax 7,161 10,559
Customers' deposit 5,704 7,374
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NET CASH USED IN OPERATING ACTIVITIES (13,337) (80,051)
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CASH FLOWS FROM INVESTING ACTIVITIES
Sale (Purchase) of marketable securities 98,443 -
Acquisition of property & equipment (78,566) (2,057)
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 19,877 (2,057)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sales of common stock 132,716 103,700
Proceeds from shares to be issued 49,300 -
Repayment of notes receivable 123,120 -
Proceeds from borrowings 705,363 141,950
Payments of loans (1,274,401) -
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (263,902) 245,650
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (257,362) 163,542
CASH AND CASH EQUIVALENTS -BEGINNING 519,865 2,869
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CASH AND CASH EQUIVALENTS -ENDING $ 262,503 $ 166,411
============= ============
The accompanying notes are an integral part of these financial statements.
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTE TO UNAUDITED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30,2001 AND 2000
1. Organization:
The Company was organized on March 24, 1998, under the laws of the State of
Nevada, as Color Strategies. On December 20, 1999, the Company changed its
name to Infinite Technology Corporation. The Company changed its name to
Flexxtech Corporation in April 2000.
Prior to March 31, 2000, the Company was in the development stage whereby all
the activities were devoted to obtaining financing for the acquisitions of
businesses. Since April 2000, the Company is in operation through its
subsidiaries.
Mardock, Inc. was established in 1986 and is a designer, manufacturer, and
distributor of apparel and promotional products to the corporate community.
Primavera Corporation ("PC") was incorporated in the state of Texas on April
26, 2000. Pursuant to an acquisition agreement, dated May 11, 2000, PC
acquired one hundred percent (100%) of the common shares outstanding of the
North Texas Circuit Board, Inc. (NTCB). NTCB was incorporated in 1978 in the
state of Texas. NTCB manufactures printed circuit boards. The products are
sold through its distribution center in Irving, Texas utilizing outside sales
people. Deliveries are made primarily throughout the United States.
OpiTV.com, a Nevada Corporation, was formed on October 12, 1999. OpiTV.com is
an I-Commerce technology company that is engaged in the business of marketing
and distributing a Set-Top-Box (STB) device on a rental or acquisition basis.
The STB is a convergence device, giving the consumer high-speed Internet
access and enhanced communications as well as full computing capabilities in
their home or office. Through June 30, 2001, OpiTV.com has not generated any
revenue.
Flexxtech Holdings, Inc., a Nevada Corporation, was formed on October 1, 1999.
Flexxtech Holdings, Inc. owns majority shares ownership of Mardock, Primavera
and OpiTV.com.
Flexx Capital Partners, a Nevada Corporation, was formed on December 1, 2000.
The purpose of organization is to engage in merchant banking advisory
activities for technology companies. Flexx Capital Partners did not have any
operations during 2000.
2. Principles of Consolidation:
The accompanying financial statements include the accounts of Flexxtech
Corporation (the "Parent"), and its 100% owned subsidiaries, Flexxtech
Holdings, Inc., Mardock Promotional Products, Inc, (an Oregon corporation),
Primavera Corporation and its wholly owned subsidiary North Texas Circuit
Board Co., Inc. (a Texas corporation) and 82% owned
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTE TO UNAUDITED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30,2001 AND 2000
Optv.com (a Nevada corporation). All significant intercompany accounts and
transactions have been eliminated in consolidation.
3. Basis of Preparation:
The accompanying unaudited condensed interim financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission for the presentation of interim financial information, but
do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. The audited
financial statements for the two years ended December 31, 2000 was filed on
May 14, 2001 with the Securities and Exchange Commission and is hereby
referenced. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for
the six-month period ended June 30, 2001 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2001.
4. Recent Pronouncements:
In January 2001, the Financial Accounting Standards Board Emerging Issues Task
Force issued EITF 00-27 effective for convertible debt instruments issued
after November 16, 2000. This pronouncement requires the use of the intrinsic
value method for recognition of the detachable and imbedded equity features
included with indebtedness, and requires amortization of the amount associated
with the convertibility feature over the life of the debt instrument rather
than the period for which the instrument first becomes convertible. Management
is in the process of evaluating the requirements of EITF 00-27, but does not
expect this pronouncement will materially impact the Company's financial
position or results of operations.
On July 20, 2001, the FASB issued SFAS No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." These statements make
significant changes to the accounting for business combinations, goodwill, and
intangible assets.
SFAS No. 141 establishes new standards for accounting and reporting
requirements for business combinations and will require that the purchase
method of accounting be used for all business combinations initiated after
June 30, 2001. Use of the pooling-of-interests method will be prohibited. This
statement is effective for business combinations completed after June 30,
2001.
SFAS No. 142 establishes new standards for goodwill acquired in a business
combination and eliminates amortization of goodwill and instead sets forth
methods to periodically evaluate goodwill for impairment. Intangible assets
with a determinable useful life will continue to be amortized over that
period. This statement becomes effective January 1, 2002.
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTE TO UNAUDITED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30,2001 AND 2000
Management is in the process of evaluating the requirements of SFAS No. 141
and 142, but does not expect these pronouncements will materially impact the
Company's financial position or results of operations.
5. Stockholder's Equity
Stock Split:
On December 22 1999, the Board of Directors of the Company declared a
13.09322865 to 1 forward stock split of the Company's common stock. The
stockholders approved an increase in the authorized number of shares of common
stock from 25 million to 100 million. On April 14, 2000, the Company affected
a 2-for-1 forward stock split of its common stock. On April 29, 2000, the
Company affected a reverse stock split of 1:3. On March 26, 2001, the Company
affected a 3 for 2 forward stock split of its common stock.
Common Stock:
Effective March 30, 2001, the Board of directors approved to cancel 750,000
shares of common stock issued to a related party, related through common share
holder, in exchange of various notes receivable. The notes were receivable
from a Corporation totaling $1,250,000. The notes, carried interest ranging
from 8% to 12% per year, were secured and due on demand. The company returned
the notes to the related party.
During six-month period ending June 30, 2001, the Company issued 135,907
shares of common stock for cash amounting $132,716, 82,078 shares for services
amounting $154,413 and 20,000 shares for compensation amounting $91,800.
6. Segment Information
In computing income from operations by industry segment, un-allocable general
and administrative expenses have been excluded from each segments' pre-tax
operating earnings before interest expense and have been included in general
corporate and other operations.
The Company reportable business segments are strategic business units that
offer distinctive products and services that are marketed through different
channels. They are managed separately because of their unique technology,
marketing, and distribution requirements. The Company is a holding company
that is comprised of two operating subsidiaries: North Texas Circuit Board,
Inc. (a 100% subsidiary of Primavera, Inc.) and Mardock, Inc. North Texas
Circuit Board, Inc. (NTCB) manufactures printed circuit boards. The products
are sold through its distribution center in Irving, Texas utilizing outside
sales people. Deliveries are
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTE TO UNAUDITED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30,2001 AND 2000
made primarily throughout the United States. Mardock is a designer,
manufacturer, and distributor of apparel and promotional products to the
corporate community.
Following is a summary of segmented information for the three months and six
months ended June 30, 2001:
NTCB Mardock
3 Months 6 Months 3 Months 6 Months
------------ ------------ ------------ -------------
Sales $ 1,634,000 $ 3,612,000 $ 134,000 $ 274,000
Operating gain/(loss) (189,023) (344,180) 689 (14,439)
Total Assets 3,433,315 3,433,315 247,428 247,428
Capital Expenditure 78,026 78,566 - -
Depreciation and
amortization 60,000 130,000 6,685 11,667
Substantially all of the Company's operations are domestic. The Company's
foreign operations are not material to the Company's results of operations.
7. Going Concern
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principle, which contemplate continuation of the
Company as a going concern. However, the Company has accumulated deficit of
$2,757,613 including net losses of $915,462 and $50,918 for the six-month
period ended June 30, 2001 and 2000, respectively. The continuing losses have
adversely affected the liquidity of the Company. The Company faces continuing
significant business risks, including but not limited to, its ability to
maintain vendor and supplier relationships by making timely payments when due.
In view of the matters described in the preceding paragraph, recoverability of
a major portion of the recorded asset amounts shown in the accompanying
balance sheet is dependent upon continued operations of the Company, which in
turn is dependent upon the Company's ability to raise additional capital,
obtain financing and to succeed in its future operations. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts and classification of
liabilities that might be necessary should the Company be unable to continue
as a going concern.
Management has taken the following steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue as a going concern. Management devoted considerable
effort during the period ended June 30, 2001, towards (i) obtaining additional
equity financing (ii) reduction of salaries and general and administrative
expenses (iii) management of accounts payable and (iv) evaluation of its
distribution and marketing methods.
FLEXXTECH CORPORATION
FORMERLY INFINITE TECHNOLOGY CORPORATION AND
COLOR STRATEGIES
NOTE TO UNAUDITED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30,2001 AND 2000
8. Contingency
In April 2001, a suit was brought against the Company and certain of its
officers and directors for alleged breach of contract. The Company has denied
all the claims and believes it is a frivolous suit. The management of the
Company plans to rigorously defend the Company. Management does not believe
implication of this litigation will have any material impact on the Company's
financial statements.
9. Subsequent Events
Subsequent to June 30, 2001, the Company disposed off two of its subsidiaries,
Mardock, Inc. in exchange for 200,000 shares of its common stock and OpiTV.com
for 50,000 shares of its common stock.
Subsequent to June 30, 2001, The Company exchanged a promissory note
receivable amounting $900,000 for 450,000 shares of its common stock, which
was owned by purchaser of the note.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Report on Form 10-QSB contains forward-looking statements, including
(without limitation) statements concerning possible or assumed future results
of operations and those preceded by, followed by or that include the words
"believes," "could," "expects," "anticipates," or similar expressions. For
those statements, we assert the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. You should understand that various events could cause
those results to differ materially from those expressed in such
forward-looking statements: materially adverse changes in economic conditions
in the markets that we and our subsidiaries serve; competition from others in
the markets and industry segments occupied by us and our subsidiaries; the
ability to enter, the timing of entry and the profitability of entering new
markets; greater than expected costs or difficulties related to the
integration of the businesses acquired by our subsidiaries; and other risks
and uncertainties as may be detailed from time to time in our public
announcements and SEC filings.
The discussion and financial statements contained herein are for the
quarters ended June 30, 2001 and June 30, 2000. The following discussion
regarding the financial statements of the Company should be read in
conjunction with the financial statements of the Company included herewith.
Overview:
The Company, through its wholly owned subsidiary, Flexxtech Holdings,
Inc., is engaged in the business of acquiring, developing, operating, and
investing in growth companies in technology. The Company's objective is to
build long-term capital appreciation for its shareholders primarily through
the acquisition of technology companies. The primary focus in technology will
include the acquisition, investment, and internal development in the following
categories: Data Storage, Internet Infrastructure, Wireless Technologies,
Computer Software, Telecommunications Networks equipment and services,
Semiconductor Equipment and Electronic Manufacturers and Services. The
Company's focus of investment and acquisition is also guided by the economic
conditions within a particular segment of technology. The major thrust of the
Company currently is its acquisition of circuit board and electronic component
companies servicing the government sector.
Plan of Operation:
The Company is a holding company through its wholly owned subsidiary,
Flexxtech Holdings, Inc., of a variety of investments in the technology arena
that include 100% in Primavera Corporation, the parent company of North Texas
Circuit Board Co. and the primary asset of the Company. The Company's main
thrust is the acquisition or "roll-up" of companies within the circuit board
and government contracting business which have history of profitability and
business synergies. In its endeavor the Company also seeks out acquisitions
that are in a turnaround situation and that can be exploited. The turnaround
candidates, for the most part, have been historically profitable and would
represent significant future value to the Company.
ROLL-UP STRATEGY
------------------
In addition to the circuit board roll-up plan the Company will seek out
additional industries where efficiencies through consolidation will greatly
benefit the Company. The thrust will be to:
. Acquire "islands of excellence" in attractive, complementary markets.
. Efficiently acquire and integrate new companies while preserving
their entrepreneurial spirit.
. Use the greater purchasing power to obtain improved vendor deals.
. Keep and integrate only those superior managers.
MERGER & ACQUISITION TENETS
----------------------------
. Build on the Company's organizational skill in performing
acquisitions; develop systems for managing the process from lead
evaluation, negotiation, contracting, and post-closing integration.
. Pay reasonable multiples with extra incentives to ensure seller
commitment.
. Exercise complete due diligence to ensure smooth integration of
personnel and operations.
. Achieve rapid returns on investment by implementing the Company's
best practices in the acquired operation.
. Reduce overhead by vacating unneeded premises.
. Centralize any duplicated support functions into the Headquarter
location.
In April 2000 the Company changed the direction and business plan of the
Company to its current model. Before April 2000 the Company virtually had no
meaningful business. New Officers and Directors were approved and appointed by
the shareholders to guide the Company and its new business plan.
On June 26, 2000 the Company commenced a private placement offering
pursuant to Regulation D, Rule 506, as amended and Regulation S, as amended.
Through June 30, 2001, the Company had 11,287,612 shares of common stock
outstanding.
While there is no assurance the Company will be successful in raising
additional capital, the Company is actively seeking public and private equity
financing to assure that it will be capable of financing the continuation of
business.
Any additional capital raised above and beyond what the Company needs as
its monthly expenditure would be used in increasing marketing and sales
efforts and future investments and acquisitions. Should the Company fail to
raise additional funding, it will be forced to curtail its growth, both
through internal development and through investments and acquisitions. As only
a holding company to date, the company does not generate its own revenues, but
relies on additional financing to pay its operation expenses. The Company is
currently developing a plan to provide a variety of consulting services to
emerging technology companies to include business and marketing plan
development, merchant and investment banking services and general business
consulting. The Company hopes to attract clients for these new services in the
fourth quarter of this year, therefore not relying on additional financing to
support its role as a holding company.
(a) Results of Operations
The Company has generated consolidated revenues of $1,767,876 for the
quarter ended June 30, 2001 as compared to $108,496 for the quarter ended June
30, 2000. A majority of the revenues are attributed from the Company's
subsidiary, North Texas Circuit Board Company (NTCB). NTCB for the quarter
ended June 30, 2001 has invested heavily in its future by making capital
improvement of $374,566 to the facility, equipment and processes that have had
a dramatic impact on the performance of the business. The operating costs have
been reduced by approximately 33 percent. Approximately one year ago, at the
acquisition of NTCB, NTCB needed to sell more than $900,000 per month in
products and services to break-even. The current break-even level is
approximately $600,000 per month. The dramatic drop in operating cost coupled
with internal yields and quality at a historic high level for the business,
positions NTCB to return to profitability anticipated in the fourth quarter of
this year. While making the investment and improvements to the facility,
equipment and processes, NTCB has been turning away business. The Company
anticipates an increase in generating revenues in the future. Currently, the
Company's cash needs include, but are at no means limited to, rent, salaries
and wages, cash raising expenses and to fund operation of its subsidiaries,
and for future acquisitions. On December 15, 2000, the Company sold 225,000
shares of Accesspoint Corporation to a shareholder. Subsequent to June 30,
2001, the Company exchanged the Note for the 450,000 shares of the Company's
common stock. Subsequent to June 30, 2001, the Company sold 100,000 shares of
Easyriders, Inc. to a shareholder for 25,000 shares common stock of Flexxtech.
The Company plans on growing its revenues through the acquisition of various
technology companies in various markets and increasing its products and
services in part through acquisition of existing technology businesses. The
Company will continue to seek capital for acquisitions and in the internal
development of those companies acquired. The Company will seek capital
through private investors and anticipates attracting institutional investors
in the near future. In the event the Company does not attract such capital and
is unable to generate revenues sufficient to support its expenses, then the
Company will be required to curtail its operations, sell existing investments,
and slow down its plan for expansion.
The Company, however, is taking all necessary action to limit its overhead and
cut expenses at its operating subsidiaries. Because of the current slow down
in the economy, the Company's acquisition plans and expansion plans have
slowed. Further, the slow down in financing and the lack of capital have also
slowed the acquisition plans of the Company. The Company feels that the
current economic conditions benefit the Company in it choice of acquisitions.
For the Quarter and Six Months Ended June 30, 2001 as Compared to the Quarter
and Six Months Ended June 30, 2000
Revenues.
We had revenues of $1,767,876 and $3,886,422 for the three months and six
months ended June 30, 2001 as compared to $108,496 and $108,496 for the three
months and six months ended June 30, 2000. The increase in revenues was the
result of the acquisition of Mardock, Inc. on April 26, 2000, and the
acquisition of Primavera Corporation, the parent company of North Texas
Circuit Board Company (NTCB) on August 15, 2000. NTCB had sales of $3,612,000
for the six months ended June 30, 2001 and Mardock had $455,000 for the six
months ended June 30, 2001.
Cost of Sales.
We incurred Cost of Sales of $1,486,210 and $3,260,802 for the three
months and six months ended June 30, 2001 as compared to $71,448 and $71,448
for the three months and six months ended June 30, 2000. The increase in Cost
of Sales is the result of consolidated Cost of Sales from the Company's
subsidiaries, Mardock, Inc., Primavera Corporation and its wholly owned
subsidiary, North Texas Circuit Board Co. The Cost of Sales increase was the
result of NTCB making capital improvements of $374,566 to the facility,
equipment and processes that have a dramatic impact on the performance of the
business. The operating cost has been reduced by approximately 33 percent at
NTCB.
General, Administrative and Selling Expenses.
We incurred costs of $848,740 and $$1,381,118 for the three months and
six months ended June 30, 2001 as compared to $87,166 and $87,166 for the
three months and six months ended June 30, 2000. The increase of operating
expenses is the result of the Mardock and North Texas Circuit Board
acquisitions and their consolidated operating expenses and an increase in
rent, salaries, and wages. Much of the increase in the three-month period was
due to the increase in improvements to the facility and the processes that
will allow us to return to profitable operations in the fourth quarter of
2001.
Net loss before income taxes.
We had a loss before taxes of $610,297 and $911,462 for the three months
and six months ended June 30, 2001 as compared to a loss of $50,918 and
$50,118 for the three months and six months ended June 30, 2000. The loss of
$611,897 for the three months was a result of the Company expensing capital
improvements and processes of $374,566 and from the issuance of common stock
for services and compensation for $246,213. By capitalizing the improvements
and the stock issuance we would show a $10,482 net profit before income tax.
Net loss.
We had a net loss of $611,897 and $915,462 for the three months and six
months ended June 30, 2001 as compared to a net loss of $50,918 and $50,918
for the three months and six months ended June 30, 2000. The net loss was
mostly due to the acquisition and inclusion of operations of North Texas
Circuit Board Co. and Mardock, Inc. and the increase in general and
administrative expenses of the Company. 100 percent of the loss for the three
months ended June 30, 2001 was the result of expensing capital improvements
and processes and from the issuance of common stock for services and
compensation.
Unrealized Loss on Investments.
We had an unrealized loss on marketable investments available for sale of
$32,870 and $148,000 for the three months and six months ended June 30, 2001as
compared to a loss of $154,000 for the three months and $154,000 for the six
months ended June 30, 2000. The unrealized loss is contributed to the
fluctuating market value of the securities the Company's subsidiary, Flexxtech
Holdings, Inc. owns, at the end of the quarter. The securities owned are
marked to market on the last day of the trading month for the period ended.
Subsequent to the period ended June 30, 2001, the Accesspoint Corporation
investment and Easyrider, Inc. investment were sold in an exchanged for shares
of the Company's common stock with a shareholder.
Comprehensive Loss.
We had a Comprehensive Loss of $644,767 and $1,063,462 for the three
months and six months ended June 30, 2001 as compared to a Comprehensive Loss
of $204,918 and $204,919 for the three months and six months ended June 30,
2000. The Comprehensive Loss includes the unrealized loss on marketable
investments available for sale of $32,870 and the net loss after taxes of
$611,897.
Liquidity and Capital Resources
The Company's business plan was restructured in April 2000 to its now
current plan. The Company must continue to raise capital to fulfill its plan
of acquiring technology companies and assisting in the development of those
companies internally. If the Company is unable to raise any additional capital
its operations will be curtailed and it may have to liquidate its current
investments for operating capital. As of June 30, 2001, the Company had total
Current Assets of $3,107,949 and Current Liabilities of $3,521,978. Cash and
cash equivalents were $262,503. Stockholders' Equity was $2,179,764. In its
acquisition of North Texas Circuit Board, Management feels that it has made
necessary cost cutting efforts to reduce the debt and increase productivity of
the Company. In its turn-around effort, management feels additional capital
will be needed to complete a full turnaround, but that the Company has made
significant strides toward a successful turnaround. Management feels that
other operations of the Company are financially sound at this time and that no
outside forces, including inflation has had a significant impact on its
operations. The Company will continue to raise capital for acquisitions and
the internal development of its subsidiaries.
Subsidiaries
Flexxtech Holdings, Inc. is a wholly owned subsidiary of Company. On
April 26, 2000, Flexxtech Holdings acquired 100% of the outstanding common
stock of Mardock, Inc., an Oregon Corporation. Subsequent to June 30, 2001,
Flexxtech Holdings sold Mardock, Inc. to Mardock.com in exchange for 200,000
shares of the Company's common stock. Mardock was sold so the Company could
focus its resources on North Texas Circuit Board Co. and other acquisitions
that would add greater value to the Company.
On August 15, 2000 the Company, through its wholly owned subsidiary
Flexxtech Holdings, Inc. acquired Primavera Corporation, the parent company of
North Texas Circuit Board Company. All terms of the Primavera acquisition have
been satisfied. On June 17, 2001 the Company acquired the remaining 20% of
Primavera Corporation for 100,000 options to purchase common stock, issued to
the four shareholders representing 20% of Primavera Corp. The options are
excersizable $2.50 per share and expire on June 17, 2004.
NTCB has invested heavily in its future in the three months ended June
30, 2001. NTCB has made capital improvements of $374,566 to the facility,
equipment, and processes that have had a dramatic impact on the performance of
the business. The operating costs have been reduced by one-third while the
internal yields and quality are now at a historic high level for the business.
While making the improvements in facility, equipment and processes that would
allow the Company to have profitable operations anticipated in the fourth
quarter of 2001, NTCB has been turning away business.
Primavera Corporation was formed in Texas on April 26, 2000. The Company
is a holding company, which operates primarily through its wholly owned
subsidiary, North Texas Circuit Board Company ("NTCB"), which was formed in
1978 in the state of Texas. NTCB manufacturers printed circuit boards on a
quick-turn basis and has recently invested heavily in its future toward
production levels. On May 11, 2000, Primavera acquired 100% of the common
stock of NTCB.
On September 15, 2000 the Company, through its wholly owned subsidiary
Flexxtech Holdings, Inc., acquired 80% of OpiTv.com in exchange for 100,000
shares of newly issued common stock of the Company at $6.25 per share.
Subsequent to June 30, 2001we sold Opitv.com to Mardock.com, a shareholder of
the Company, in exchange for 50,000 shares of the Company's common stock. The
Opitv.com plan was not implemented due to the passing of Howard Frantom, the
Chairman and CEO in December 2000 and due to the lack of capital required to
implement the plan. 40,000 shares of common stock issued to John Alkire were
retired to Flexxtech treasury upon his resignation.
OpiTV has no revenues to date and no operating expenses for the three
months ended June 30, 2001.
Following is a summary of segmented information for the three months and six
months ended June 30, 2001:
NTCB Mardock
3 Months 6 Months 3 Months 6 Months
----------- ----------- ----------- ------------
Sales $ 1,634,000 $ 3,612,000 $ 134,000 $ 274,000
Operating gain/(loss) (189,023) (344,180) 689 (14,439)
Total Assets 3,433,315 3,433,315 247,428 247,428
Capital Expenditure 78,026 78,566 - -
Depreciation and amortization 60,000 130,000 6,685 11,667
Substantially all of the Company's operations are domestic. The Company's
foreign operations are not material to the Company's results of
operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On April 26, 2001 a suit was brought against the Company and certain
officers and directors by Robert Eubanks, Larry Donizetti and Luminary
Venture, Inc. The complaint is for breach of contract among other actions. The
Company has denied all claims and is considering filing a counter suit for
breach of contract and for filing a frivolous suit among other claims.
Management will rigorously defend itself. Management also believes that a
settlement will be reached. Management also feels that this action is not
material to the business of the Company.
Robert Eubanks, President of Luminary Venture, Inc., was retained by the
Company to provide public relations and promotional services. Robert Eubanks,
under the agreement, was to act as Company spokesman. The agreement called for
Luminary to receive stock and options in the company and a monthly cash
retainer.
The Company is not aware of any material legal action or pending legal
action at this time.
Item 2. Changes in Securities
On June 26, 2000 we commenced a private placement offering ("Offering")
pursuant to Regulation D, Rule 506, as amended and Regulation S, as amended
for the sale of up to 3,000,000 shares of our common stock at a price of $2.50
per share. On September 8, 2000 we amended the Offering price to $5.00 per
share and commenced a new Offering. On May 1, 2001 we began a new offering
with an offering price of $1.00 per share. In the three months ended June 30,
2001, pursuant to Regulation D, we sold 4,333 shares at $3.00 per share for
proceeds of $13,000, and 79,500 shares at 1.00 per share for proceeds of
$79,500. We also issued 1,738 promotional shares for par value $.001 which
resulted in no proceeds. 20,000 promotional shares were issued at par value
$.001 to two (2) officers of NTCB, and 19,000 promotional shares valued at
$50,000 for consulting services. In the three months ended June
30, 2001, pursuant to Regulation S, we sold 6,000 shares at $3.00 per share
for proceeds of $18,000 and 3,000 shares at 1.75 for proceeds of $5,250.
In the three months ended June 30, 2001, we sold a total of 83,833 shares
pursuant to the exemptions afforded by Regulation D resulting in gross
proceeds of $92,500. In the three months ended June 30, 2001, we sold a total
of 10,250 shares pursuant to the provisions of Regulation S resulting in gross
proceeds of $28,250. $25,735 received where shares have not been issued. We
utilized the services of finders in placing the Offering. We did not utilize
the services of brokers or underwriters. The Offering was self-underwritten.
The Offering expenses were approximately 15% of the gross Offering proceeds.
The balance of the Offering expenses were related to general sales expenses,
including, but not limited to, due diligence, accounting and legal expenses.
The Shares are being offered to persons who are "accredited investors,"
as defined under Rule 506 of Regulation D of the Securities Act of 1933 as
amended (the "Act"). An additional thirty-five (35) non-accredited investors
may participate in the Offering. Accredited investors must have a net worth or
joint net worth with their spouse of $1,000,000.00 or more, or have individual
income in excess of $200,000.00 (or $300,000.00 joint income with a spouse) in
each of the two most recent years and who reasonably expects an income of
$200,000.00 (or $300,000.00 joint income with a spouse) in the current year.
We are conducting the Offering as a self-underwriting. Shares in the
Offering are available only through us. The Offering is being conducted over a
three-month period commencing on May 1, 2001. We have the option
to extend the Offering up to an additional three months. We are making the
Offering on a best efforts basis. This means that we have not established any
minimum amount of proceeds that must be generated in the Offering.
Accordingly, investors who subscribe for Shares in the earlier stages of the
Offering will assume a substantially greater risk than investors who subscribe
for Shares later in the Offering.
Even if we sell all of the Shares covered by the Offering and raise
maximum proceeds, such proceeds may be insufficient to implement our business
investment plan. There is no guarantee that the funds generated by the
Offering will be sufficient to cover the financial requirements for our
growth.
We have arbitrarily set the price of the Shares in the Offering. The
price of the Shares is based upon the amount of capital that we desire to
raise and the percentage of our outstanding capital stock that we are willing
to sell at this point in our development. We have established the price of the
Shares and the value of our company without an independent appraisal. The
price has no relationship to book value per share, current earnings or other
generally accepted measurements of value. The Offering may involve immediate
and substantial dilution.
On June 27, 2001 a resolution was adopted by the Directors of Flexxtech
Holdings, Inc. to focus on its circuit board roll-up, and in particular focus
on the North Texas Circuit Board turnaround and divest itself from all other
business and issues that do not synergistically fit with the circuit board
operations and roll-up. Subsequent to the June 30, 2001 period, the following
transactions occured. Flexxtech Holdings disposed of its interest in
OpiTV.com to Mardock, Inc. for 50,000 shares of common stock of the Company.
Mardock Inc. was disposed to Mardock.com for 200,000 shares of common stock of
the Company. The value of the transaction is $600,000. Pursuant to the
Promissory Note for $900,000 from VLK Capital, the Company agreed to exchange
the note for 450,000 shares of common stock of the Company. Flexx Capital
Partners, Inc., a wholly owned subsidiary, was sold to a shareholder for
$1.00. Flexx Capital had no revenue or income to date. 100,000 shares of
Easyriders held in the name of Flexxtech Holdings, was exchanged for 25,000
shares of common stock of the Company with a shareholder of the Company.
Item 3. Subsequent Events
Certain shareholders and non-shareholders loaned the Company a total of
$217,500 in the 3 months ended June 30, 2001. The notes bear interest at 10%
and are due on demand. From June 29 through July 3, Greg Mardock, President
of the Company loaned to the Company $45,452 at 10% interest due July 5, 2002.
Subsequent to June 30, 2001, the Company's subsidiaries Mardock, Inc.
and Opitv.com were sold in share exchanges. Mardock was disposed of in
exchange for 200,000 shares of the Company's common stock and Opitv.com was
disposed for 50,000 shares of common stock of the Company.
Subsequent to June 30, 2001, the Company exchanged a promissory note
receivable amounting $900,000 for 450,000 shares of its common stock, which
was owned by the purchaser of the note.
Item 4. Defaults Upon Senior Securities
Not Applicable.
Item 5. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 6. Other Information.
Not Applicable.
Item 7. Exhibits and Reports on Form 8-K.
(a) Exhibits filed with this Report
Not Applicable.
(b) Reports on Form 8-K
Not Applicable
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FLEXXTECH CORPORATION
(Registrant)
Date: August 20, 2001
By: /s/ Greg Mardock
____________________________
Greg Mardock
President