U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES ACT OF 1934
For the quarterly period ended March 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
Commission File No. 000-29209
21st CENTURY TECHNOLOGIES, INC.
----------------------------------------
(Exact name of registrant as specified in its Charter)
NEVADA 48-1110566
----------------------------- ------------------------
(State or Other Jurisdiction of (I.R.S. Employer ID. No.)
incorporation or organization)
2513 East Loop 820 North
Ft. Worth, TX 76118
---------------------------------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number, including area code: (817) 284-0099
Facsimile Number: (817) 284-7528
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
1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet for the Three Months
Ended March 31, 2000 and 1999 (unaudited)
Consolidated Statements of Operations for the Three
Months Ended March 31, 2000 and 1999 (unaudited)
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2000 and 1999 (unaudited)
Consolidated Statements of Stockholder's Equity (unaudited)
for the Three Months Ended March 31, 2000
Notes to Consolidated Financial Statements for the
Three Months Ended March 31, 2000 (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Part I
FINANCIAL INFORMATION
This report includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Act of 1934, as amended. All statements other than statements of
historical fact included in this report are forward looking statements. Such
forward looking statements include, without limitation, statements as to
estimates, expectations, beliefs, plans, and objectives concerning the
Company's Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital Resources" regarding the Company's estimate
of sufficiency of existing capital resources and its ability to raise
additional capital to fund cash requirements for future operations and
acquisitions. The forward looking statements are subject to assumptions and
beliefs based on current information known to the Company and factors that are
subject to uncertainties, risk and other influences, which are outside the
Company's control, and could yield results differing materially from those
anticipated. The ability to achieve the Company's expectations is
2
<PAGE>
contingent upon a number of factors which include (i) availability of
sufficient capital and capital market conditions, (ii) the Company's ability
to produce and market its products as produced by its various subsidiaries
(including, but not limited to, the PT Night Sights, Sea Patch, Gripper,
Griffon 1911 Colt 45 replica sidearm, and tire sealant), (iii) effect of any
current or future competitive products, (iv) on going cost of research and
development activities, and (v) the retention of key personnel. "PT Night
Sights", "Sea Patch", "Gripper" and "Griffon" are our trade marks. This
report may contain trademarks and service marks of other companies.
___________________________________________________
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3
<PAGE>
21st Century Technologies, Inc. and Subsidiaries
Consolidated Balance Sheet
(Unaudited)
March 31, 2000 March 31, 1999
-------------- --------------
Assets
------
Current Assets:
Cash and cash equivalents $ 732,069 $ 23,990
Accounts Receivable 1,078,318 982,707
Inventories 435,194 159,416
Notes Receivable 28,465 35,000
-------------- --------------
Total Current Assets 2,274,046 1,201,113
Property, Plant, and Equipment, Net 344,332 188,060
Other Assets, Net 464,392 432,017
-------------- --------------
Total Assets $ 3,082,770 $ 1,821,190
============== ==============
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Accounts Payable-trade 210,069 124,964
Accounts Payable-other 66,079 1,029
-------------- --------------
Total Current Liabilities 276,148 125,993
Other Liabilities:
Working Capital Advances 1,446,958 -
Customer Deposits 4,304 1,435
Notes Payable 32,720 71,882
-------------- --------------
Total Other Liabilities 1,483,982 73,317
-------------- --------------
Total Liabilities: 1,760,130 199,310
Stockholders' Equity:
Common Stock, issued 51,667,753 and
outstanding shares at $.001 par value
at March 31, 2000 51,667 37,932
Paid-in Capital 4,498,917 3,629,103
Retained Earnings (Deficit) (3,193,316) (2,005,066)
Treasury Stock (31,628) (30,089)
Stock Subscriptions (3,000) (10,000)
-------------- --------------
Total Stockholders' Equity 1,322,640 1,621,880
-------------- --------------
Total Liabilities and Stockholders' Equity $ 3,082,770 $ 1,821,190
============== ==============
See Notes to Consolidated Financial Statements
<PAGE> 4
21st Century Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
3 Months Ended 3 Months Ended
Mar 31, 2000 Mar 31, 1999
-------------- --------------
Net Sales $ 274,393 $ 222,660
Cost of Sales 253,930 185,397
-------------- --------------
Gross Profit 20,463 37,263
General and administrative expenses 476,067 188,642
Depreciation and Amortization 32,997 30,901
-------------- --------------
Net Income (Loss) (488,601) (182,280)
Estimated Income Taxes - -
-------------- --------------
Net Income (Loss) $ (488,601) $ (182,280)
============== ==============
Earnings (Loss) Per Common Share:
Primary $ (0.0096) $ (0.0115)
Fully Diluted $ NA $ NA
See Notes to Consolidated Financial Statements
<PAGE> 5
21st Century Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended March 31, 2000
Mar 31, 2000 Mar 31, 1999
-------------- --------------
Cash Flows From Operating Activities:
Net Income (Loss) $ (488,848) $ (182,280)
Adjustments to reconcile net income to net cash
provided (used) by operating activities
Depreciation and Amortization 32,997 30,901
Change in operating assets and liabilities:
Accounts receivable (90,701) 13,956
Inventory (86,069) (440)
Other non-current assets and liabilities, net 16,246 (6,787)
Accounts payable 7,699 86,717
-------------- --------------
Net Cash Provided (Used) by
Operating Activities (608,676) (57,933)
Cash Flows From Investing Activities:
Purchase Equipment (315,467)
--------------
Net Cash Provided (Used) by
Investing Activities (315,467)
Cash Flows From Financing Activities:
Working Capital Advances 1,446,958 -
Increase/(Decrease) in long-term debt (40,162) (70,027)
Sale of stock and subscriptions received 137,602 140,829
-------------- --------------
Net Cash Provided (Used) by
Financing Activities 1,544,398 70,802
-------------- --------------
Net Increase (Decrease) in Cash and
Cash Equivalents 620,255 12,869
Cash and Cash Equivalents at Beginning of Period 111,814 11,121
-------------- --------------
Cash and Cash Equivalents at End of Period $ 732,069 $ 23,990
============== ==============
See Notes to Consolidated Financial Statements
<PAGE> 6
21st Century Technologies, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Three Months Ended March 31, 2000
<TABLE>
<CAPTION>
Common Paid-in Retained Treasury Stock Issued
Stock Capital (Deficit) Stock Subscribed Total Shares
--------- ------------ ------------ --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1999 $ 50,083 $ 4,420,260 $(2,704,715) $(31,628) $(79,700) $1,654,300 50,083,753
Sale of Stock 1,584 78,657 - - - 80,241 1,584,000
Subscriptions Received - - - - 76,700 76,700 -
Net Income (Loss) - - (488,601) - - (488,601) -
--------- ------------ ------------ --------- --------- ----------- ----------
Balance March 31, 2000 $ 51,667 $ 4,498,917 $(3,193,316) $(31,628) $ (3,000) $1,322,640 51,667,753
========= ============ ============ ========= ========= =========== ==========
Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 7
21st Century Technology, Inc.
Notes to Consolidated Financial Statements
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
Note 1: Summary of Significant Accounting Policies:
a. Organization and Business Activities
21st Century Technologies, Inc. was incorporated under the laws of the State
of Delaware on May 15, 1967 as Satcom Corporation. On November 6, 1991, the
Company changed its name to Hughes Pharmaceutical Corporation. Subsequent to
1991, the Company changed its name from Hughes Pharmaceutical Corporation to
First National Holding Corporation(FNHC Delaware). The Company became public
in 1985 through a merger with International Fluidics Control, Inc. (formerly
Sensory Systems, Inc., Training With The Pros, Inc., and/or M-H Studios,
Inc.). International Fluidics Control, Inc. successfully completed a public
offering of its securities in 1969 under Regulation A of the Securities Act of
1933.
As of December 31, 1985, the Company had liquidated all business operations
and began the search for a suitable merger or acquisition candidate. As a
result of this action, the Board of Directors approved a quasi-reorganization
for accounting purposes, effective January 1, 1986, whereby all accumulated
deficits in shareholders' equity were offset against additional paid-in
capital and common stock balance sheet accounts to the extent of reducing
these accounts to equal the par value of the issued and outstanding shares of
common stock.
During the third quarter of 1994, in conjunction with the execution of a
letter of intent to acquire Innovative Weaponry, Inc. (a New Mexico
corporation), the Company consummated a plan of merger between FNHC Nevada and
FNHC Delaware whereby the Nevada Corporation was the survivor (see below) and
changed its corporate name to Innovative Weaponry, Inc. to better reflect its
future actions and pending relationship with the acquisition target. On
September 15,1995, the Board of Directors approved a name change to 21st
Century Technologies, Inc.
Innovative Weaponry, Inc. - New Mexico was incorporated on June 22, 1988 under
the laws of the State of New Mexico. The Company was formed for the
development and sale of specialized firearms, firearm systems and related
equipment. On September 14, 1992, Innovative Weaponry, Inc. filed a petition
for relief under Chapter 11 of the Federal Bankruptcy Laws in the United
States Bankruptcy Court of the District of New Mexico. Under Chapter 11,
certain claims are stayed while the Debtor continues business operations as
Debtor-in-Possession. On August 19, 1994, IWI-NV (now 21st Century
Technologies, Inc.) and IWI-NM entered into a letter of intent whereby IWI-NV
would use its unregistered, restricted common stock and cash to satisfy
certain obligations of IWI-NM in settlement of IWI-NM's bankruptcy action.
On February 1, 1995, the U. S.
<PAGE> 8
Bankruptcy Court of the District of New Mexico confirmed IWI-NM's plan of
reorganization. The plan became effective 30 days after its confirmation.
IWI-NM became a wholly owned subsidiary of Innovative Weaponry, Inc. (IWI-NV)
(formerly First National Holding Corporation) (a Nevada Corporation) (now
known as 21st Century Technologies, Inc.), a publicly owned company.
b. Cash and Cash Equivalents:
For purposes of reporting cash flows, the Company considers all cash on hand
and in banks, certificates of deposit and other highly liquid debt instruments
with a maturity of three months or less at the date of purchase to be cash and
cash equivalents.
c. Revenue recognition and credit policies:
In the normal course of business, the Company primarily sells its goods on
either a "cash in advance" or "cash on delivery" basis but primarily extends
unsecured credit to its customers involved in the retail sale of the Company's
products. All customers are located throughout the United States and some
European Countries. Revenue is recognized when products are shipped to the
wholesale or retail purchaser. All products are shipped F.O.B. the Company's
facilities in Ft. Worth, Texas. The Company has, on occasion, engaged in
"bill and hold" transactions which are not material to the financial
statements. On these "bill and hold" transactions, the Company received a
purchase order, manufacturing was completed and the majority of the product
was shipped. All such transactions have been initiated by the customers and
ownership of the goods has passed to the buyer.
Management has provided an allowance for doubtful accounts, which reflects its
opinion of amounts, which will eventually become uncollectible. In the event
of complete non-performance by the Company's customers, the maximum exposure
to the Company is the outstanding trade accounts receivable balance at the
date of non-performance.
d. Inventory:
Inventory consists of raw materials used in the manufacture of firearm
products and finished goods and finished goods imported for resale. Inventory
is carried at the lower of cost or market value, using the first-in, first-out
method.
e. Property and equipment:
Property and equipment is recorded at its historical cost. Depreciation is
provided for in amounts sufficient to relate the asset cost to operations over
the estimated useful life (three to five years) using the straight-line method
for financial reporting purposes.
Gains and losses from disposition of property and equipment are recognized as
incurred and are included in operations.
<PAGE> 9
f. Income Taxes:
The Company uses the asset and liability method as identified in SFAS 109,
Accounting for Income Taxes.
g. 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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
h. Asset Impairment:
The Company adopted the provisions of SFAS 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, in its
financial statements for the year ended December 31, 1995. There has been no
effect as of March 31, 2000 of adopting SFAS 121.
i. Stock-Based Compensation:
The Company will follow the fair value based method of accounting as
prescribed by SFAS No. 123, Accounting for Stock-Based Compensation, for its
stock-based compensation. The Company has not adopted a stock option plan.
j. Principles of Consolidation and Presentation --Wholly-Owned Subsidiaries:
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Intercompany transactions and accounts have been eliminated
in the consolidation.
k. License Agreement:
The License agreement is amortized over the life of the related patent
technology (generally 17 years) using the straight-line method.
l. Basis of Presentation:
Financial information presented as of any date other than December 31 has been
prepared from the books and records without audit. The accompanying financial
statements have been prepared in accordance with the instructions to Form
10QSB and do not include all of the information and the footnotes required by
generally accepted accounting principles for complete statements. In the
opinion of management, all adjustments, consisting only
<PAGE> 10
of normal recurring adjustments, necessary for a fair presentation of such
financial statements, have been included.
These financial statements should be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 1999.
Note 2: Other Assets
License Agreement: In June 1995, Trident entered into a license agreement
(Agreement) with Trade Partners International, Inc. (TPI) to acquire the
exclusive license to certain patent rights conveyed to TPI by The University
of California as operators of Los Alamos National Laboratory (patent holder)
related to the development, marketing and sales rights to certain specified
magnetic and/or magnet technology.
The agreed-upon and negotiated value of the Agreement at acquisition date was
$75,000. Subsequently, the transaction was re-negotiated and 21st Century
acquired all of the common stock of TPI in a Type B reorganization.
Trident, as sub-licensee, is obligated to pay a royalty fee of 8.0% on net
income (as defined in the Agreement) of products sold using the patented
technology. Further, Trident is to pay an annual maintenance fee, which was
$24,000 for the third and all subsequent years of the Agreement. All royalty
fees paid during a specific year are to be credited to that year's maintenance
fee and the maintenance fee requirement is considered met if the royalty
payments during an Agreement year are equal to or exceed the required
maintenance fee.
Trademark:
---------
The trademark "PT Night Sights" has been capitalized at cost and is being
amortized over its term.
Bankruptcy excess Re-Organization Cost:
-------------------------------------
Innovative Weaponry, Inc. (IWI) emerged from a bankruptcy filing under Chapter
11 of the US Bankruptcy Code, effective March 1, 1995. As a result of the
Plan of Reorganization, IWI became a wholly owned subsidiary of 21st Century
Technologies, Inc. and all prior IWI shareholders retained less that a 50%
interest in the combined reorganized entities.
In conjunction with IWI's emergence from protection under Chapter 11, IWI
recognized "fresh-start" accounting as a result of its acquisition by 21st
Century. "Fresh start" accounting allows for the restatement of all assets
and liabilities being set to the fair market value of each respective category
and the restatement of retained earnings to "0". The resulting amount was
debited to the account "Reorganization value in excess of amounts allocable to
identifiable assets". This balance is being amortized over ten (10)
<PAGE> 11
years using the straight-line method. The amortization period began on March
1, 1995, concurrent with the effective date of IWI's Plan of Reorganization.
The adjustment necessary to reflect the "fresh-start" accounting, as
prescribed by Statement of Position 90-7 "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" issued by the American Institute of
Certified Public Accountants reflected a Reorganization value in excess of
amounts allocable to identifiable assets.
Note 3: Stockholders' Equity
The total number of all classes of authorized capital stock is 200,000,000
shares, all of which are Common Stock, $0.001 par value per share. As of
March 31, 2000, there are 51,667,753 shares of Common Stock issued.
Note 4: Earnings (Loss) Per Common Share
Earnings per common share are computed by dividing net income by the weighted
average number of common shares outstanding during the 3 months ended March
31. 2000. SFAS No. 128, Earnings per Share applies to entities with publicly
held common stock and establishes standards for computing and presenting
earnings per share (EPS). Basic EPS excludes dilution and is computed by
dividing income available to common shareholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
Note 5: Income Taxes
At December 31, 1999, the Company had available net operating loss
carryforwards of approximately $2,704,715 for federal income tax purposes that
begin to expire in 2008. The federal carryforwards resulted in losses
generated in prior years. For financial purposes, a valuation allowance has
been recognized to offset the deferred tax assets. There are no deferred tax
liabilities. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Note 6: Risks and Uncertainties
The Company operates in highly specialized industries. There are only four
companies worldwide who manufacture and sell night sights using tritium. The
Company ranks number three out of four. The gun sight industry is highly
dependent on major firearms manufacturers as well as consumer and governmental
demand for weapons. World conditions and economies can affect the future
sales of this product.
<PAGE> 12
The Company's magnetic and hydraulic-magnetic technologies are largely
un-proven and may require additional extensive testing before marketing these
products can continue. Demand for these products from governmental and
industrial sources is largely estimated and while the Company has studied
various markets, no assurance can be given that these products can be
successfully marketed.
In the future, these products will be marketed outside the United States,
which will subject the Company to foreign currency fluctuation risks.
The Company's firearm replica import division has not been tested in the U. S.
market and the estimated demand may not reach the Company's expectations.
Note 7: Fair Values of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
financial instruments:
Cash and Cash Equivalents. The carrying amount reported in the balance sheet
for cash and cash equivalents approximates its fair value.
Accounts Receivable and Accounts Payable. The carrying amount of accounts
receivable and accounts payable in the balance sheet approximates fair value.
Short-Term and Long-Term Debt. The carrying amount of the debts recorded in
the balance sheet approximates fair value.
The carrying amounts of the Company's financial instruments at December 31,
1997 and 1996 represent fair value.
Note 8: Comprehensive Income
SFAS No. 130, Reporting Comprehensive Income establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. It requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements. SFAS No. 130 requires that an enterprise (a) classify
items of other comprehensive income by their nature in a financial statement
and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid in capital in the equity
section of a statement of financial position. The Company's comprehensive
income does not differ from its reported net income.
<PAGE> 13
Note 9: Business Segments
The Company has five business segments: (a) Manufacture of night sights for
handguns, (b) Manufacture of "the Gripper", a patented device used for
climbing steel surfaces, (c) Manufacture of an Emergency Magnetic-Hydraulic
Sea Patch System, (d)Importation and sale of handguns, and (e) Importation and
distribution of a tire sealant product. The majority of the Company's sales
are derived from sales of night sights. The other segments sales are not
material to these financial statements.
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
The Company's current revenue is derived from sales of product by its four
operating subsidiaries as follows:
1. Innovative Weaponry Incorporated.
We kicked-off our marketing efforts for Innovative Weaponry in January 2000 at
the Shot Show in Las Vegas, NV. The Shot Show is the largest gun show in the
country. We have attended this event for the past three years. Increasing
our booth size from 400 square feet to 800 square feet over the previous year,
we displayed a new and improved line of PT Night Sights and our sister
company's Griffon 1911 Colt 45 replica. We believe that this new and improved
line will be ready for production in 2Q00.
In past years we rented our booth, but we decided this year to build our own
customized booth and display towers for a more professional presentation. The
booth and towers were made locally in Las Vegas, NV with a cost equal to one
time rental. At future shows we will be able to re-use the booth and towers.
We believe that this will add to the continuity of our image from show to
show.
At the Shot Show, we displayed our new line of lower profile PT Night Sights
featuring the design for the Glock handgun. Additional, low profile designs
will be added by 2Q00 including those for the Sig, Colt, H&K, Styer, Smith &
Wesson and our own Griffon. We believe that low profile sights create less
possibility for "snags" on protective gear and clothing. A low profile is
also easier to holster since it moves more smoothly throughout all ranges of
motion.
We also debuted our fixed PT Night Sight for revolvers and a new adjustable
"ghost ring" for shot guns. We believe that our line of 20 configurations and
multi-color format represented the broadest choices of any manufacturer at the
Shot Show. We anticipate making patent applications for a number of our
design changes still in research and development in 2Q00.
We believe that increased media coverage of our product line will help us
increase sales. We have planned on a media campaign commencing in 2Q00 in
major circulation gun magazines.
2. Trident Technologies Incorporated.
Our wholly owned subsidiary Trident has undergone a change in management
during 1999 with the hiring of Douglas N. Spring as President of Trident and
Buren Palmer as Chief Technology Officer. Mr. Spring is experienced in
hazardous materials or "HAZMAT" prevention and clean-up and Mr. Palmer is
experienced in maritime repair and maintenance as a former U.S. Navy SEAL
diver. In October 1999, Messrs. Spring and Palmer established an office in
Denham Springs, LA which is in close proximity to Baton Rouge, LA and the Gulf
Coast shipping and oil storage industries.
<PAGE> 15
Under the leadership of Messrs. Douglas and Palmer, we began implementing a
research and development project to fundamentally re-design the Sea Patch and
to market the Gripper. As originally designed at the Los Alamos National
Laboratory in Los Alamos, New Mexico, the Sea Patch consisted of a series of
magnetic pods attached to a circular plate with a flexible sealing gasket on
its inner surface. Using cam-on/cam-off technology, the Sea Patch could be
affixed to ferrous metal surfaces like a ship's hull or a storage container.
Once the Sea Patch was screwed down using cam-on mechanics, its surface plate
and flexible seals stopped leaks by exerting a powerful pressure gradient over
the damaged surface area thereby off-setting the backward pressure of the
leak. Although effective in its original design, our design modifications
were driven by the need for a dramatic reduction in weight and the ability to
adapt the size of the Sea Patch to "tears, punctures and rips" that came in
all sizes. In addition, we began testing a number of Sea Patch designs for
application in non-ferrous metal HAZMAT applications such as for highway
accidents involving overturned aluminum skinned tanker trucks.
Our design changes resulted in a series of hand built Sea Patch models which
was then followed by field testing using our own demonstration hull plate and
pressure gradient measurement devices. We also sought input from our
potential customer base which is composed of HAZMAT personnel, storage
facilities, rail car, inland barges and ocean tankers as to what they
currently used in emergency and/or repair situations. Using this "anecdotal"
and "roll-up" your sleeves methodology, we were able to re-design the Sea
Patch into a component kit consisting of a series of strong back bars,
locking-pins, and modular magnetic pods. The design innovations when
completed will provide us with an expanded product line consisting of
pre-built Sea Patches in 6 inch (circular), 12 inch (circular), 36 inch x 4
inch configurations and in a variety of component kit forms.
With our expanded product line, we were next able to analyze pricing models
for the Sea Patch on both a sale and lease basis. This allows buyers to take
into consideration their own budgetary needs selecting anywhere from entry
level to a complete inventory of Sea Patch designs. Our objective has been to
make the Sea Patch something everyone can initially afford with re-sales
coming from old customers expanding design capability through the purchase of
kit components. Also, we have integrated the Gripper as one of the kit
components. The Gripper whose magnets are worn on the hands and feet gives
the under water diver or surface repair crew the added ability to safely reach
the point of an accident on the hull of a ship (which is slippery and subject
to jarring wave movement).
As with any new product, we determined that the Sea Patch had to be
independently tested. On February 4, 2000, we obtained "certification" of the
Sea Patch from the American Bureau of Shipping (the "ABS"). The ABS is a
non-for-profit and non-governmental organization which acts as a
self-regulatory agency for the international marine industry. We will
continue to test each of our design modifications with the ABS and other
maritime testing bodies worldwide to determine structural and technical
fitness. In addition, we have believe that industry wide "education" of
HAZMAT and maritime industry personnel in how to properly use the Sea Patch is
as important as selling the product.
<PAGE> 16
We believe that the Sea Patch will be accepted by the HAZMAT and maritime
industry following ABS certification and field demonstrations.
3. Griffon USA, Inc.
Griffon USA, Inc. ("Griffon"), is an importer and licensee of Continental
Weapons (Pty), Inc., a South African manufacturer of a replica 1911 Colt 45
sidearm, rifles and other guns. We continue to market the Griffon at the Shot
Show in Las Vegas, NV which was held in conjunction with our Innovative
Weaponry subsidiary. Although the Griffon is pre-manufactured for us in South
Africa, we have implemented a number of refinements for a "bench made" feel
and fit. We believe that this extra level of customizing will add to the
appeal and value of the Griffon. We believe further media exposure of the
Griffon in leading gun magazines and publications should help increase sales.
A media plan is being implemented for 2Q00.
4. TRADE PARTNERS INTERNATIONAL, INC.
Trade Partners International, Inc. ("Trade Partners") established a
manufacturing alliance with William Baylor, principal of Vee Tubes USA, a
bicycle inner tube company, based in Olney, IL. Mr. Baylor is a 25 year
veteran in the bike industry. The alliance planned to insert a mono-ethylene
glycol and water based product licensed by Trade Partners. The sealant is
used to prevent punctures in tube and tubeless tires. Mr. Baylor planned on
using tubes manufactured by his parent company and other Southeast Asia
manufacturers in Taiwan, Thailand and China. Trade Partners planned on
selling the "sealant protected" tubes to vendors in its licensed territory
consisting of the U.S., Canada, Caribbean, India and Mexico.
The first shipment of sealant was scheduled for January 2000, but was delayed
until the end of March 2000 or the first part of April 2000. The sealant is
shipped in bulk containers consisting of 220 liters per container. The delay
in shipment demonstrated to management the need to manufacture the sealant
itself and not rely upon international shipments from South Africa.
We have commenced negotiations between Trade Partners and Mr. Baylor to
establish a manufacturing facility in Olney, IL consisting of approximately
5,000 square feet with three to five employees for the 2Q00. In addition, we
have commenced negotiations with Mr. Baylor to join Trade Partners on a full
time basis. The Olney, IL location has been chosen as it is known as the
"Bike Town USA" home to Brunswick Bicycle (complete); Marwi USA (pedals, hubs
and spokes); Weinman Sports (rims); KHS (European bicycle parts); Sigman
Sports (bicycle computers); Magura (hydraulic brakes and forks); Provelo
(parts distributor); MLD (oriental bicycle parts); and VP Sports (complete).
In addition, Olney, IL is located in a designated Enterprise Zone Community
with Foreign Trade Zone #146 status.
We believe that overall savings will be achieved by integrating the
manufacture of the sealant and insertion into tubes in one facility. High
grade bicycle tubes are a "commodity" available from any number of
manufacturing sources at prices equal to or lower than those originally
<PAGE> 17
quoted by Vee Tubes USA. These savings in cost of goods sold will allow us to
be more competitive in our pricing to vendors.
REVENUES
Our primary source of revenue originated from the sale of PT Night Sights.
During the three months ended March 31, 2000, we increased sales of PT Night
Sights over the previous periods. However, the sale of PT Night Sights
remains subject to variation due to budgetary restraints of our customers who
must get pre-approval for purchases from their respective governmental or
finance departments. We believe that the bunching of purchase orders is the
norm rather than the exception in our line of business and competitors as
well. We believe that revenues will improve following the January 2000 Show
in Las Vegas, NV since many customers have been awaiting our new design
introductions.
COST OF SALES
Cost of sales for PT Night Sights consists primarily of material and labor
costs. Because of the competitive nature of our business individual unit cost
is confidential, but our cost of goods sold increased during the quarter
because of new design innovations such as the low profile configuration for
the Glock and other gun manufacturers. In addition, customizing the Griffon
added additional expenses. However, these should be non-recurring expenses in
subsequent quarters.
MARKETING AND SALES EXPENSE
Marketing and sales expense consists primarily of marketing and sales
expenditures, including promotional expenses. Our primary expense during the
period was our booth at the Shot Show in Las Vegas, NV. Our entire Shot Show
expenses were approximately $50,000.00. In addition, we anticipate spending
approximately $50,000.00 on print media in the 2Q00 to keep our product
circulating among gun enthusiasts.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense is comprised primarily of compensation and
related expenditures for administrative and executive personnel, professional
fees associated with legal, consulting, accounting services, and general
corporate overhead.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense consists primarily of personnel costs
including salaries, benefits and consultant costs related to the research and
preliminary development efforts in design modifications to our PT Night
Sights, Sea Patch and Griffon (attributable to our Innovative Weaponry,
Trident Technologies and Griffon subsidiaries).
Through the period ended March 31, 2000, we have incurred operating losses
since our inception. To date, our consolidated operations have not been
profitable and there is no assurance that they will become profitable in the
future. We believe that the steady growth of sales of PT Night Sights at our
Innovative Weaponry subsidiary will continue
<PAGE> 18
based upon customer satisfaction and inquiry. In addition, we believe that
sales of the Sea Patch should be realized as early as the 2Q00.
Significant changes in product design in our Innovative Weaponry, Trident
Technologies, and Trade Partners subsidiaries in 1999 (which are being
implemented in the first three months of 2000) distort the comparability
between periods and as to future revenues. We believe these design changes
make our products more appealing to our customers and therefore have warranted
the time and expense of research and development.
LIQUIDITY AND CAPITAL RESOURCES.
Our cash position, less known commitments and contingencies, plus outside
financing received through March 31, 2000, plus cash generated from operations
for the balance of fiscal year 2000 should be adequate to fund our on-going
operations and to fund the further development of the Sea Patent, including
any patent applications. Although we should have improved operating results,
we will still require substantial additional capital during fiscal 2000 to go
into manufacture and marketing the Sea Patch following design modification and
testing.
Our capital requirements will depend on many factors, including, cash flow
from operations, additional working capital requirements, additional product
development expenses and capital expenditures. To the extent existing
resources are insufficient to fund our operations in the short- or long-term,
we will need to raise additional funds through public or private financings.
We may not be able to raise additional financing on terms favorable to us or
to our stockholders without substantial dilution of their ownership and
rights. If we are unable to raise sufficient funds to satisfy either short-
or long-term there would be substantial doubt as to our ability to continue as
a going concern on either a consolidated basis or through continued operation
of any subsidiary, and we may be required to significantly curtail our
operations, significantly alter our business strategy, forego market
opportunities, or obtain funds through arrangements with strategic partners or
others that may require us to relinquish material rights to certain of our
technologies or potential markets.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings to which we are a party or which any
of our property is the subject other than ordinary, routine claims incidental
to our business.
ITEM 5. OTHER INFORMATION
During the three month period ended March 31, 2000, we accepted the
resignations of Lee Pitts and Maura Brantley as officers and directors of the
Company. Douglas N. Spring, President of Trident Technologies was elected to
serve a Director and David Gregor employed as Master Gunsmith with Innovative
Weaponry and Griffon was also elected to serve as a Director of the Company.
Each will serve a Director's term of two years.
<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 - Financial Data Schedule
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 thereto duly authorized.
21ST Century Technologies, Inc.
_______________________________
Registrant
7/17/00 /s/ Kenneth E. Wilson
_________________________ _______________________________
Date Kenneth E. Wilson
Chairman of the Board
Chief Executive Officer
