SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ____ to ____
Commission File Number: 000-26425
NextPath Technologies, Inc.
(Exact name of registrant as specified in its charter)
NEVADA 84-1402416
--------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5050 North 40th Street, Suite 340, Phoenix, Arizona 85016
---------------------------------------------------------
(Address of principal executive offices, Zip Code)
(602) 224-0685
----------------------------------------------------
(Registrant's telephone number, including area code)
15100 Central Avenue S.E., Albuquerque, New Mexico 87192
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
As of November 13, 2000, there were 45,294,800 shares of our common
stock outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
To the Board of Directors and Stockholders of
NextPath Technologies, Inc.
Phoenix, AZ
We have reviewed the accompanying condensed consolidated balance sheet of
NextPath Technologies, Inc. as of September 30, 2000 and the related condensed
consolidated statements of income and cash flows for the nine months then ended.
These financial statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
The accompanying statements of operations and cash flows for the period ended
September 30, 2000 were not audited or reviewed by us and, accordingly, we do
not express an opinion on them.
/s/ Chisholm & Associates
---------------------------
Chisholm & Associates
November 13, 2000
<PAGE>
NextPath Technologies, Inc.
Consolidated Balance Sheets
ASSETS
------
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(Unaudited)
Current Assets
<S> <C> <C>
Cash $ 3,072,495 $ 658,837
Accounts Receivable (Net of
Allowance of $15,720 and $41,480) 700,100 282,051
Inventory 717,275 138,057
Prepaid Expenses 423,126 42,674
Advances to Shareholders - 6,487
Advances & Notes Receivable (Net of
Allowance of $927,000 and $1,235,075) 3,636,416 3,260,161
---------- ----------
Total Current Assets 8,549,412 4,388,267
---------- ----------
Property & Equipment, Net 5,106,550 535,179
---------- ----------
Other Assets
Investments - Available for Sale 11,982,300 2,600,000
Goodwill, Net 17,269,165 17,883,754
Deposits 4,250 4,250
---------- ----------
Total Other Assets 29,255,715 20,488,004
---------- ----------
TOTAL ASSETS $42,911,677 $25,411,450
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts Payable $ 716,769 $ 384,148
Accrued Expenses 292,774 192,654
Deferred Taxes 14,882 14,882
Advances 253,997 -
Notes Payable - Related 6,205,942 3,455,869
Current Portion of Long Term Debt 220,492 -
---------- ----------
Total Current Liabilities 7,704,856 4,047,553
---------- ----------
Long Term Liabilities
Notes Payable 2,590,822 -
Less: Current Portion of Long Term Debt (220,492) -
---------- ----------
Total Long Term Debt 2,370,330 -
---------- ----------
Stockholders' Equity
Common Stock, $.001 par value; 100,000,000
shares authorized; 45,544,800 and
37,136,430 shares issued and
outstanding, respectively 45,545 37,136
Additional Paid-In Capital 77,837,961 58,623,056
Retained Earnings (45,047,015) (37,296,295)
---------- ----------
Total Stockholders' Equity 32,836,491 21,363,897
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $42,911,677 $25,411,450
========== ==========
</TABLE>
3
<PAGE>
NextPath Technologies, Inc.
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales $ 1,127,388 $ - $ 3,565,763 $ -
Cost Of Goods Sold 485,420 - 2,208,303 -
---------- ---------- ---------- ----------
Gross Profit 641,968 - 1,357,460 -
---------- ---------- ---------- ----------
Operating Expenses
General &
Administrative 2,558,306 224,162 6,818,064 447,365
Consulting 239,739 617,846 5,274,699 701,054
Sales 175,283 - 740,414 -
---------- ---------- ---------- ----------
Total Operating 2,973,328 842,008 12,833,177 1,148,419
Net Income (Loss)
From Operations (2,331,360) (842,008) (11,475,717) (1,148,419)
---------- ---------- ---------- ----------
OTHER INCOME(EXPENSE)
Interest Expense (45,199) (21,693) (67,037) (82,047)
Dividend Income 30,000 - 90,000 -
Other Income (20,180) - 4,469 -
Depreciation & (1,260,370) - (3,957,620) -
Gain (Loss) on
Sales of Assets 7,722,086 - 7,722,086 -
Loss on Investment (142,200) (142,200) -
Interest Income 63,309 - 75,299 -
---------- ---------- ---------- ----------
Total Other
Income(Expense) 6,347,446 (21,693) 3,724,997 (82,047)
---------- ---------- ---------- ----------
NET INCOME(LOSS) $ 4,016,086 $ (863,701) $(7,750,720) $(1,230,466)
========== ========== ========== ==========
NET INCOME
(LOSS PER SHARE) $ 0.090 $ (0.054) $ (0.183) $ (0.091)
========== ========== ========== ==========
WEIGHTED AVERAGE
SHARES OUTSTANDING 44,560,125 16,070,906 42,325,835 13,555,107
========== ========== ========== ==========
</TABLE>
4
<PAGE>
NextPath Technologies, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
September 30
------------ ------------
2000 1999
------------ ------------
Cash Flows From Operating Activities
<S> <C> <C>
Net Income(Loss) $(7,750,720) $(1,230,466)
Adjustments to Reconcile Net Income(Loss) to
Net Cash Provided(Used) in Operating Activities:
Gain on Disposal of Assets (7,722,086) -
Loss on Investment 142,200 -
Depreciation & Amortization 3,957,620 -
Stock Issued for Services 4,024,471 617,846
Change in Assets and Liabilities
(Net of Effects of Acquisition
of Essentia)
(Increase) Decrease in:
Accounts Receivable (377,796) -
Inventory (500,471) -
Prepaid Expenses (346,042) (44,100)
Notes Receivable (376,255) -
Advance to Shareholders 6,487 -
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 305,884 (38,054)
---------- ----------
Net Cash Provided(Used) by Operating Activities (8,636,708) (694,774)
---------- ----------
Cash Flows from Investing Activities
Cash Paid for Fixed Assets (4,808,628) (3,682)
Cash Paid for Goodwill (486,824) -
Cash Paid for Investments (8,425,000) (1,168,890)
Cash Received on Sale of Assets 14,240,965 -
Cash Acquired in Acquisition 55,412 -
---------- ----------
Net Cash Provided(Used) by Investing Activities 575,925 (1,172,572)
---------- ----------
Cash Flows from Financing Activities
Cash Received from Debt Financing 5,840,895 3,158,705
Cash Paid on Debt Financing (500,000) -
Proceeds from Advances 253,997 -
Stock Issued for Cash 4,879,549 527,348
---------- ----------
Net Cash Provided(Used) by Financing Activities 10,474,441 3,686,053
---------- ----------
Increase in Cash 2,413,658 1,818,707
Cash and Cash Equivalents at Beginning of Period 658,837 -
---------- ----------
Cash and Cash Equivalents at End of Period $ 3,072,495 $ 1,818,707
========== ==========
</TABLE>
5
<PAGE>
NextPath Technologies, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
September 30
------------ ------------
2000 1999
------------ ------------
Supplemental Disclosures of Cash Flow Information:
Cash Paid for:
<S> <C> <C>
Interest $ 67,037 $ 82,047
---------- ----------
Income Taxes $ - $ -
========== ==========
Non Cash Investing Activities:
Common Shares Issued for Investments $10,319,294 $ -
---------- ----------
Non Cash Financing Activities:
Common Shares Issued for Services $ 5,190,271 $ 617,846
---------- ----------
Common Shares Cancelled for Services $(1,166,000) $ -
========== ==========
</TABLE>
NextPath Technologies, Inc.
Notes to Financial Statements
September 30, 2000
NOTES TO FINANCIAL STATEMENTS
NextPath Technologies, Inc. (the "Company") has elected to omit
substantially all footnotes to the financial statements for the nine
months ended September 30, 2000, since there have been no material
changes (other than indicated in other footnotes) to the information
previously reported by the Company in their Annual Report filed on Form
10-KSB for the Fiscal year ended December 31, 1999.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and records of
the Company without audit. However, such information reflects all
adjustments which are, in the opinion of management, necessary to
properly reflect the results of the period presented. The information
presented is not necessarily indicative of the results from operations
expected for the full fiscal year.
ACQUISITION OF ESSENTIA WATER, INC.
On January 21, 2000, the Company acquired Essentia Water, Inc., a
Woodinville, Washington based bottled water marketing company. The
Company issued 585,760 shares for all the outstanding stock of Essentia.
The purchase was recorded at a value of $7,654,294. Essentia had assets
of $543,974 and liabilities of $526,857 at December 31, 1999. Goodwill
of $7,676,487 was recorded in the acquisition. The operating history of
Essentia is included in the consolidated numbers of the Company
effective January 1, 2000. The acquisition was recorded using the
purchase method of a business combination.
6
<PAGE>
SALE OF ASSETS OF WILLOW SYSTEMS, INC.
On June 22, 2000, the Company sold the assets of its wholly owned
subsidiary, Willow Systems, Inc. (Willow), to Corning, Inc. for
$15,000,000. The Company had determined that since all of Willow's
income producing assets and technologies have been sold, the remaining
goodwill associated with this acquisition should be $0. As of September
30, 2000, the remaining goodwill of $6,238,939 was written off. The gain
on the sale of the assets was $7,722,086.
PURCHASE OF ASSETS FROM LEWIS MECHANICAL AND METALWORKS, INC.
On August 1, 2000, the Company's wholly owned subsidiary, NextPath
Environmental Services, Inc.(NESI), entered into an agreement to acquire
the assets of the Industrial Division of Lewis Mechanical and
Metalworks, Inc. (Lewis). The purchase price of the assets as of the
closing date is $4,084,104, which consists of a cash payment of
$1,675,000 and assumption of $2,409,104 in liabilities. Goodwill of
$1,526,824 has been recognized in relation to the acquisition of assets.
NESI also assumed operating leases of Lewis in the original principal
amount of $2,530,526. The unpaid principal is approximately $2,100,000.
In addition to the cash payment and assumption of liabilities, the
Company has transferred 2,439,025 shares of its common stock into escrow
per a Stock Earn-Out Agreement. This agreement stipulates that Lewis
Mechanical will receive a minimum of 1,000,000 shares and a maximum of
2,439,025 shares based on meeting certain performance criteria.
INVESTMENT IN US CERTIFIED LETTERS, LLC
On July 27, 2000, the Company entered into an agreement to purchase 20%
of US Certified Letters, LLC(USCL) for $10,375,000. The purchase price
consists of $8,750,000 in cash and 1,000,000 shares of the Company's
common stock valued at $1,625,000.
As of September 30, 2000, USCL had a net operating loss of $711,000. The
Company uses the equity method for this investment and has recognized a
loss of $142,200.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward Looking Statements
This 10-Q contains forward looking statements that plan for or
anticipate the future. Forward-looking statements include statements about
future business plans and strategies and most other statements that are not
historical in nature. In this 10-Q, forward-looking statements are generally
identified by the words "anticipate," "plan," "believe," "estimate," and the
like. Because forward-looking statements involve future risks and uncertainties,
there are factors that could cause actual results to differ materially from
those expressed or implied, including, but not limited to, our ability to obtain
infusion of equity capital or financing on terms reasonably satisfactory to us,
competition, changes in consumer trends, and competitors' marketing strategies.
These forward-looking statements are based on our current expectations or those
of the preparer of the statement. Please do not place undue reliance on the
forward-looking statements. All written and oral forward-looking statements
attributable to us or persons acting on our behalf are qualified in their
entirety by those cautionary statements.
The terms "NextPath," the "Company," "we," "our" and "us" refer to
NextPath Technologies, Inc. and its subsidiaries and affiliates unless the
context suggests otherwise.
7
<PAGE>
Overview
We are a development stage holding company that identifies, acquires and
manages what we believe to be state-of-the-art technology companies that
together form a community of shared resources. We are organized into four
operating groups as follows: Precision Technologies Group, Internet and
E-Commerce Group, Environmental Technologies Group and Health Products Group.
Our efforts are directed toward developing the business of our
subsidiaries and in bringing their technologies to the market place. In so
doing, we will continue to pursue opportunities that will accelerate this
objective and provide the necessary operating capital. All of the Company's
revenues are generated within its wholly owned subsidiaries. Our operating
expenses are comprised of our general and administrative overhead and the
expenses of our subsidiaries.
We intend to provide our subsidiaries with sufficient funds so that they
can grow their businesses nationally and internationally by effectively
developing, marketing and expanding their products, services and market base.
However, absent an infusion of equity capital or financing on terms acceptable
to us, we may not have the liquidity and capital resources necessary to operate
our business and those of our subsidiaries beyond the next four months. We are
actively engaged in negotiations with debt and equity sources and we will
continue to pursue all such options on an aggressive basis.
Third Quarter Transactions
We closed the following transactions during the third quarter of 2000:
o On July 21, 2000, we sold the assets related to the servo controls and
opto-electronic operations of Willow Systems, Inc. to Corning
Incorporated for $15,000,000.
o On July 27, 2000, we acquired twenty percent (20%) of US Certified
Letters, LLC ("USCL"), which has licensed, on an exclusive basis, the
right to proprietary technology for transmitting any instruments by
certified mail via the Internet or other medium (the "C-mail
Technology") within the continential United States, Alaska and Hawaii
(the "USCL Transaction").
o On July 27, 2000, our wholly owned subsidiary, Global Certified Mail,
Inc. ("GCM"), signed a License Agreement by which it licensed, on an
exclusive basis, the C-mail Technology for use outside of the
continential United States, Alaska and Hawaii in exchange for which GCM
transferred twenty percent (20%) of its stock to the Licensor (the "GCM
Transaction").
o On August 4, 2000, our wholly owned subsidiary, NextPath Environmental
Services, Inc. ("NESI") acquired the assets of the Industrial Division
of Lewis Mechanical and Metalworks, Inc. ("Lewis") and a license for oil
water separation technology from Tetra Separation Solutions. On October
2, 2000, NESI acquired a license for waste to energy systems from
Thermogenics, Inc. On October 26, 2000, the Company transferred a
license with Needful Provision, Inc. ("NPI") to NESI and NESI expanded
and revised the agreement with NPI. All of the activities of the Company
related to environmental services and energy have been consolidated into
NESI.
Results of Operations
In General
----------
Operational Summary - Third Quarter
-----------------------------------
Sales for the three month period ended September 30, 2000 (the "current
year third quarter") increased to $1,127,388 from no sales for the three month
period ended September 30, 1999 (the "prior year third quarter"). The increase
in sales for the current year third quarter reflects the acquisitions of Laser
Wireless, Inc. ("Laser Wireless"), Sagebrush Technology, Inc. ("Sagebrush"),
Essentia Water, Inc. ("Essentia") and the restructuring of NextPath
Environmental Services ("NESI").
8
<PAGE>
Cost of goods sold increased to $485,420 in the current year third
quarter from no cost of goods sold in the prior year third quarter due to the
acquisitions of LaserWireless, Sagebrush and Essentia and the restructuring of
NESI. Gross profit increased to $641,968 in the current year third quarter from
no gross profit during the prior year third quarter. The increase in gross
profit for the current year third quarter reflects increased sales by our
subsidiaries.
Operating Expenses for the current year third quarter increased to
$2,973,328 from $842,008 in the prior year third quarter. The increase in
operating expenses was due to increased general and administrative expenses
($224,162 to $2,558,306) and decreased consulting expenses ($617,846 to
$239,739) and increased sales and marketing ($0 to $175,283). The increase in
operating expenses is mostly from consulting services, legal fees and other
professional services.
Other income (expense) for the current third quarter increased from
$(21,693) to $6,347,446. Other income relates primarily to the gain on the sale
of Willow Systems, Inc. Other expenses are primarily depreciation of fixed
assets and amortization of goodwill.
As a result of the factors discussed above, we incurred a gain of
$4,016,086 during the current year third quarter ($0.09 per share) compared to a
net loss of $(863,71) ($(0.054 per share) during the prior year third quarter.
Operational Summary - YTD
-------------------------
Sales for the nine months ended September 30, 2000 (current year)
increased from no sales for the nine months ended September 30, 1999 (prior
year) to $3,565,763 for the current year. The increase in sales reflects the
activities of Laser Wireless, Sagebrush, Essentia and NESI. All of these
subsidiaries are in the developmental state. Some products are in the late
development state and are beginning marketing and distribution. Other products
are nearing commercialization. Other products are still in the developmental
stage. Significant increases in sales will not occur until full marketing
efforts can be accomplished. The ability to realize the full sales potential
will depend on the ability to raise additional capital.
Cost of goods sold for the nine months ended September 30, 1999 (current
year) increased from zero in the prior year to $2,208,303 in the current year.
Gross profit increased from zero to $1,357,460. Operating expenses increased
from $1,148,419 in the prior year to $12,833,177 in the current year. The large
increase in operational expenses relates mostly to large consulting, legal and
other professional fees. A large portion of the consulting fees are related to
stock transactions, whereby the consultants received stock in exchange for the
services. The Company questions the value of these services and has begun filing
lawsuits and taking other actions to correct these transactions. The consulting
fees have been recorded at the value of the stock on the date issued until
settlements are reached or legal action is concluded. Much of the increase in
legal fees relates to the costs of dealing with these past transactions. The
Company will need to continue to fund the legal costs to correct these
transactions. The success of this effort will depend on the ability to raise
additional capital.
Other income (expense) increased from $(82,047) in the prior year to
$3,724,997 in the current year. The increase in other income is mostly the
result of the gain on the sale of Willow. The increase in other expenses is
mostly the result of depreciation of fixed assets and amortization of goodwill.
As a result of the above factors, we incurred a loss of $(7,750,720) for
the current year or $(0.18) per share compared to a net loss of $(1,230,466) for
the prior year or $(0.091) per share.
The overall ability of the Company to increase sales and profitability
depends on the ability of the operational subsidiaries to implement their
business plans. Implementation of the business plans of our subsidiaries will
require additional funding. Resolution of the legal actions taken by the Company
will also influence the future operations of the Company and its subsidiaries
9
<PAGE>
Laser Wireless, Inc.
--------------------
Operational Summary - Third Quarter. There were no sales for the Third
Quarter 2000. Laser Wireless is in an advanced research and development stage
and in the process of transitioning to manufacturing production. The company's
manufacturing production conversion costs increased third quarter operating
costs 18% over the previous quarter. Infrastructure development caused General
and Administrative expenses to increase by 6.5% and Sales and Marketing by
18.8%. Accelerated efforts to complete product development increased these costs
38.6% over the previous quarter. The Company continues to expense rather than
capitalize all development costs. The net loss for the quarter increased 18%
over the previous quarter.
Operational Summary - YTD 2000. The net loss for the nine months ending
September 30, 2000 totaled $932,109. The company's LaserBridge(TM) product is in
the beta testing stage and undergoing product certification. The Company is in
the process of developing manufacturing and marketing strategies in anticipation
of final certification. Some marketing efforts are in process.
Sagebrush Technology, Inc.
--------------------------
Operational Summary - Third Quarter. Third quarter 2000 sales of
$333,406 were down 18% from last year's third quarter sales of $406,678,
principally as a result of a decline in standard product sales. Standard product
sales fell from 44% of total sales to only 25%. In contrast, engineering sales
increased 25% over last year's comparable quarter. OEM equipment sales remained
substantially level, but were lower than projected for this time period. Lower
OEM sales combined with long lead times for parts orders contributed to an
increase in inventory over the previous quarter. Gross profit at 44% from the
current quarter, expressed as a percentage of sales, remained steady from second
quarter results, and represented a substantial improvement over last year's
losses.
An increase in new product development costs substantially contributed
to the current year's third quarter loss of $232,269. The net loss increased 16%
over last year's third quarter loss of $200,195.
Operational Summary - YTD 2000. Sales of $1,755,463 for year-to-date
2000 were up 39% from last year's nine-month sales of $1,263,079, primarily as a
result of increased engineering sales. Year-to-date engineering sales nearly
doubled over the first nine months of last year and accounted for 41% of current
year-to-date sales. Engineering sales amounted to 30% of total sales for the
first nine months of last year. Gross profit for the current nine months,
expressed as a percentage of sales, at 44%, improved nine percentage points over
year-to date 1999 results due to improved project management and product control
practices.
Despite a 9% increase in gross profit, the current year-to-date period
loss of $242,963 increased by 38% over last year's nine month loss of $175,234
due principally to an increase in new product development costs targeted for
airborne and ground applications of precision motion control devices, as well as
communications equipment. General and administrative costs increased 16% over
year-to-date costs last year, primarily as a result of moving corporate offices
to more efficient space within Albuquerque, New Mexico, close to the production
facility.
Willow Systems, Inc.
--------------------
Operational Summary. On July 21, 2000, we closed the sale of the
majority of the assets of Willow to Corning Incorporated. The sale price was
$15,000,000. Willow's remaining operations have been merged into the operations
of Sagebrush.
Essentia Water, Inc.
--------------------
Operational Summary - Third Quarter. Third quarter 2000 sales of
$251,000 were essentially unchanged from last year's third quarter sales of
$250,600, principally as a result of a leveling in brand label sales attributed
to an unseasonably cool summer in the East, as well as a softening in private
label sales. While third quarter brand label sales increased a modest 7% over
last year's comparable quarter, sales of private label products, which accounted
for 32% of the current quarter sales, decreased 18%. Private label sales
amounted to 39% of last year's second quarter sales. The downturn in private
label sales for the current quarter is attributed to the large inventory
buildups by customers that occurred during the previous quarter. Current year
third quarter sales for the comparable West, Southwest and Midwest regions were
up 10% over those of the previous year. Gross profits for the current quarter,
expressed as a percentage of sales, at 27%, was off ten percentage points from
last year's third quarter rate of 37% principally as a result of higher product
costs associated with brand label sales.
10
<PAGE>
The current year's third quarter loss of $324,100 increased nearly 95%
over last year's loss of $166,500 for the comparable quarter due principally to
a 48% increase in sales, marketing and research and development costs associated
with expanding and supporting nationwide distribution of products and the
introduction and test marketing of new products. Additionally, general
administrative costs increased 92% primarily as a result of moving and
transitioning the corporate office from Woodinville, Washington to Phoenix,
Arizona.
Operational Summary - YTD 2000. Sales of $1,111,900 for year-to-date
2000 were up 111% from last year's nine-month sales of $526,200, partly as a
result of increased private label sales. Year-to-date sales of private label
products nearly tripled over the first nine months of last year and accounted
for 44% of current year-to-date sales. Private label sales amounted to 34% of
sales for the first nine months of last year. Year-to-date gross sales of the
Company's flagship Essentia brand grew 76%, principally due to having nationwide
distribution of branded products for the year-to-date period as compared with
distribution limited to the West, Southwest and Midwest regions during the
previous year. Year-to-date 2000 sales for the comparable regions were up 45%
over those of the previous year. Gross profits for the current nine months,
expressed as a percentage of sales, at 30%, was off five percentage points from
year-to-date 1999 as a result of higher margin brand sales diluted by the
proportionately larger increase in lower margin private label sales.
Despite a 81% increase in gross profit, the current year-to-date period
loss of $716,800 increased by 51% over last year's nine month loss of $475,400
due principally to a 66% increase in sales, marketing, research and development
costs associated with expanding and supporting nationwide distribution of
products and the introduction and test marketing of new products. Additionally,
general and administrative costs increased 66%, essentially as a result of audit
and consulting fees, increased staffing, as well as the moving and transition of
the corporate office from Woodinville, Washington to Phoenix, Arizona.
Essentia made a strategic move during 2000 to develop a National Brand
as part of a long-term strategic business plan. As a result of this strategy,
sales increased, margins decreased and administrative costs increased. We
believe this business strategy will result in better business opportunities for
the future.
NextPath Environmental Services, Inc. ("NESI")
----------------------------------------------
Operational Summary - Third Quarter and YTD. Third quarter sales were
$492,456, which represents sales of fabrication services from August 4, 2000,
the date of acquisition of the Industrial Division of Lewis Mechanical and
Metalworks, Inc. Gross profit was 56%. NESI incurred a loss of $76,222, mostly
related to the costs of reorganizing the Environmental Technologies Group and
development costs of preparing the technologies within NESI for market.
NESI has acquired a license for waste to energy technology which is in
the advanced research and development stage. NESI has just begun actively
pursuing sales of waste to energy projects.
NESI has also acquired a license for oil water separation technology
which is in the advanced research and development stage. Two systems were sold
in the third quarter and additional sales are pending. NESI is actively pursuing
marketing of these systems.
The technologies licensed from Needful Provision, Inc. ("NPI") are
mostly in the early developmental stages. NPI is focusing its efforts on
developing the biodiesel technology and is nearing completion of a test facility
outside of Tulsa, Oklahoma to perform the testing. The testing and certification
of the biodiesel technology is expected to occur in 2001 and will require
additional developmental costs.
11
<PAGE>
Liquidity and Capital Resources
-------------------------------
We believe that our existing working capital, the anticipated revenues
of our subsidiaries, and the anticipated revenues from our other investments
will be sufficient to fund our cash requirements and capital needs for the next
four months. Additional funding will be necessary to carry out the business
plans of the Company. Failure to raise adequate capital will increase the time
required to develop the technologies and will hinder the Company's ability to
market those products that are in the late developmental stage.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NextPath and its former President, James R. Ladd, are two of the named
defendants in the case of Tim McMurray vs. James R. Ladd, Robert Wehle et al.,
District Court of Dallas County, Texas (No. 00-00170) filed January 10, 2000.
The action alleges tortious interference with existing and/or potential business
relations, civil conspiracy, and negligence and also seeks injunctive relief. We
believe that this action is wholly without merit and intend to vigorously defend
it.
On January 11, 2000, NextPath Technologies, Inc. received a copy of the
SEC's December 20, 1999 Order Directing Private Investigation In the Matter of
NextPath Technologies, Inc. (the "Order"). The Order is a confidential document
directing a non-public investigation. While the Order is not available to the
public, it appears to focus on the increase in the trading price of our common
stock during the last six months of 1999. During the course of its
investigation, the SEC has issued subpoenas to the Company and other persons and
has taken a number of depositions. We believe that we have fully cooperated with
the SEC in its investigation and we will continue to fully cooperate.
NextPath is a named defendant in the case of Blueigloo, Inc. and Smart
Mart, Inc. vs. NextPath Technologies, Inc., James Ladd et al., Case No.
99-6940-D in the District Court, 95th Judicial District, Dallas County, Texas.
The action alleges tortious interference with business. We believe this action
is wholly without merit and we intend to vigorously defend it.
NextPath is the plaintiff in the case of NextPath Technologies, Inc.
vs. Benjamin A. Dunn, Case No. CIV-00-0905-W in the United States District
Court, Western District of Oklahoma. This action is for breach of contract.
NextPath was the defendant in the case of GroupNow, Inc. against
NextPath Technologies, Inc., Index No. 00CIV 5752 in the United States District
Court Southern District of New York, filed August 3, 2000. The action alleged
breach of contract. The action was settled and dismissed with prejudice on
October 23, 2000.
NextPath is the plaintiff in the case of NextPath Technologies, Inc. v.
Steven W. Martin, d/b/a W.O.W. Consulting Group, Case No. CJ-2000-7898 in the
District Court of Oklahoma County, State of Oklahoma, filed October 27, 2000.
This is an action for declaratory judgment brought by NextPath for the purpose
of determining the duties and obligations of NextPath with regard to a
Consulting Agreement NextPath entered into with the defendant, for breach of
contract, and for rescission and cancellation of promissory notes of NextPath
held by the defendant. NextPath alleges that without authorization of NextPath's
Board of Directors, the defendant has been wrongfully issued 9,300,000 shares of
the unregistered and restricted common stock of NextPath having a market value
at the date of issue of $84,293,750.00, as a retainer, for work alleged to have
been performed and to be performed on behalf of NextPath under the Consulting
Agreement. NextPath also alleges that if the defendant did any work on behalf of
NextPath, which NextPath denies, it was not worth the value of the stock issued
to the defendant. NextPath also alleges that any and all promissory notes of
NextPath held by the defendant are null and void and unenforceable and should be
rescinded and cancelled.
NextPath is the plaintiff in the case of NextPath Technologies, Inc. v.
James R. Ladd and Douglas A. McClain, Sr., Case No. CJ-2000-7917 in the District
Court of Oklahoma County, State of Oklahoma, filed October 30, 2000. This is an
action for breach of fiduciary duty and seeks actual and punitive damages.
NextPath alleges that from January, 1998 to March, 2000, while Mr. Ladd was
NextPath's Chairman of the Board and Chief Executive Officer, he engaged in a
regular course of conduct in direct derogation of his fiduciary duties owed to
NextPath. NextPath also alleges that from November, 1999 to March, 2000, while
Mr. McClain was a director of NextPath, he engaged in a regular course of
conduct in direct derogation of his fiduciary duties owed to NextPath.
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ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
On July 24, 2000, we filed a Form 8-K which reported our July 21, 2000
sale of certain assets, including equipment, personnel and technology, related
to the servo controls and opto-electronic operations of Willow Systems, Inc. to
Corning, Inc.
On August 10, 2000, we filed a Form 8-K which reported our July 27, 2000
purchase of a twenty percent (20%) interest in USCertifiedLetters, L.L.C. and
our July 27, 2000 exchange of a twenty percent (20%) interest in Global
Certified Mail, Inc. ("GCM"), a wholly owned subsidiary, for an exclusive,
royalty-free technology license, which GCM believes will enable GCM to provide
certified mail processing, utilizing the Internet, for delivery outside of the
United States, Alaska and Hawaii.
On August 10, 2000, we also filed a Form 8-K which reported the August
4, 2000 purchase by our wholly owned subsidiary, NextPath Environmental
Services, Inc., of the assets of the Industrial Division of Lewis Mechanical and
Metalworks, Inc.
On August 11, 2000, we filed a Form 8-K which reported the August 4,
2000 change in our certifying accountant from Crouch, Bierwolf & Chisholm to
Chisholm & Associates, CPA.
On September 27, 2000, we filed a Form 8-K which reported (a) the August
23, 2000 appointment of Richard Lewis as President of NextPath Environmental
Services, Inc., (b) the August 23, 2000 election of Richard Lewis and Kenneth
Uptain to the NextPath Board of Directors, (c) the September 8, 2000 appointment
of James D. Wilson as President, Chief Executive Officer and a Director of
NextPath, (d) the September 19, 2000 election of Kenneth Uptain as Chairman of
NextPath's Board of Directors, (e) the September 8, 2000 relocation of
NextPath's executive offices from Tulsa, Oklahoma to Albuquerque, New Mexico,
and (f) that the Annual Shareholders Meeting would be held December 1, 2000,
which date was subsequently changed to December 5, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEXTPATH TECHNOLOGIES, INC.
/s/ Kenneth Uptain November 14, 2000
--------------------------------------------
Kenneth Uptain
President, Chief Executive Officer
(principal executive officer)
NEXTPATH TECHNOLOGIES, INC.
/s/ Kary Lewis November 14, 2000
--------------------------------------------
Kary Lewis
Chief Financial Officer
(principal financial and accounting officer)
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