SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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FORM 10-QSB
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[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Quarter ended September 30, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
Commission File Number: 0-27059
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FLEXEMESSAGING.COM, INC.
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(Name of Small Business Issuer in its charter)
Idaho 82-0485978
----- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Level 27 Grosvenor Place NSW 2000
225 George Street --------
Sydney, Australia (Zip code)
------------------------------------
(Address of principal executive offices)
Issuer's telephone number: (011) 612 9250-8888
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Securities to be registered pursuant to Section 12(b) of the Act: none
Securities to be registered pursuant to Section 12(g) of the Act: Common Stock
Check 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 past 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. [X] Yes [ ] No
As of November 15, 2000 there were 10,200,000 shares of Common Stock, par value
$.001 per share, of the registrant outstanding.
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TABLE OF CONTENTS
Page
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PART I FINANCIAL INFORMATION................................................3
Item 1. Financial Statements.................................................3
Unaudited Consolidated Balance Sheet as of September 30, 2000........4
Unaudited Consolidated Statements of Operations for the three
months ended September 30, 2000 and 1999.............................6
Unaudited Consolidated Statements of Cash Flows for the nine
months ended September 30, 2000 and 1999.............................8
Notes to the Unaudited Consolidated Financial Statements............10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...............................................14
PART II OTHER INFORMATION...................................................20
Item 6. Exhibits and Reports on Form 8-K....................................20
SIGNATURES....................................................................21
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
For financial accounting purposes, as a result of the reverse acquisition by
Flexemessaging.com, Inc. (the "Company") of the business assets of Trade Wind
Communications Limited ("TWC"), consisting of the stock of Trade Wind Group Pty
Ltd. ("TWG"), the financial statements presented herein are the consolidated
financial statements of the Company for the nine months ended September 30, 2000
and 1999, and the consolidated statements of loss and comprehensive loss for the
three months ended September 30, 2000.
The Company operates through its wholly owned subsidiary, TWG, through two
divisions: the Voice and Data Division and the Flexemessaging Division (formerly
known as the Flexifax Division) operating under the trade name of
Flexemessaging. Voice and Data Division is a specialist supplier and integrator
of voice communication systems and decision support applications for dealing
rooms, emergency services and other organizations with mission-critical needs.
Flexemessaging Division operates an enhanced fax broadcast service over a global
network. Flexemessaging specializes in quality fax broadcasts generated from
customers ' desktops for delivery to any destination in the world.
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FLEXEMESSAGING.COM, INC
CONSOLIDATED BALANCE SHEETS
NOTE UNAUDITED
30 SEPTEMBER
2000
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ASSETS $
CURRENT
Cash 171,958
Receivables 1,344,811
Inventory 190,428
Deferred charges 145,462
------------
1,852,659
------------
CAPITAL ASSETS 274,970
OTHER 12,802
------------
287,772
------------
2,140,431
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Trade Creditors 591,115
Sundry creditors and accruals 548,426
Customer deposits 891,272
Deferred revenue 251,088
Current portion of lease obligations 18,028
Loan payable on securitization of debt 122,942
------------
2,422,871
------------
NON CURRENT
Loans payable 2 91,832
Notes payable to related parties 2 113,955
Employee entitlements payable 104,137
------------
309,924
------------
TOTAL LIABILITIES 2,732,795
------------
SHAREHOLDERS' EQUITY
Common Stock, $0.001 par value; 20,000,000 shares 10,200
Authorized; 10,200,000 shares issued
Preferred Stock, $0.001 par value; 5,000,000 shares -
Authorized; no shares issued
Additional paid-in capital 5,400,376
Comprehensive income - foreign currency translation 3 337,052
Accumulated deficit (6,339,992)
------------
(592,364)
------------
2,140,431
--------------------------------------------------------------------------------
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
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CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
NOTE UNAUDITED UNAUDITED
THREE MONTHS THREE MONTHS
ENDED ENDED
30 SEPTEMBER 30 SEPTEMBER
2000 1999
--------------------------------------------------------------------------------
$ $
REVENUES 1,441,838 2,077,290
LESS:
COST OF SALES 570,622 1,049,520
------------------------------
GROSS PROFIT 871,215 1,027,770
Operating Expenses
Network operating costs - 23,831
Selling, general and administrative 1,065,670 1,353,988
Depreciation and amortization 35,147 109,893
Total operating expenses 1,100,816 1,487,712
------------------------------
LOSS FROM OPERATIONS (229,602) (459,942)
Other income/(expense)
Interest paid
- loans - short term (12,970) (11,014)
Interest received 5,817 1,312
------------------------------
LOSS FOR THE YEAR BEFORE INCOME TAX (236,755) (469,644)
Income tax expense - -
------------------------------
LOSS (236,755) (469,644)
OTHER COMPREHENSIVE INCOME, NET OF TAX
Foreign currency translation adjustments 120,028 (29,341)
------------------------------
COMPREHENSIVE LOSS (116,727) (498,985)
NET PROFIT/LOSS PER SHARE (0.02) (0.05)
WEIGHTED AVERAGE NUMBER OF SHARES 10,200,000 9,800,000
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
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CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOWS
UNAUDITED UNAUDITED
NINE MONTHS ENDED NINE MONTHS ENDED
30 SEPTEMBER 30 SEPTEMBER
2000 1999
--------------------------------------------------------------------------------
CASH PROVIDED/(USED) BY: $ $
OPERATING ACTIVITIES
Operations
Net loss for the period (236,755) (469,644)
Items not involving cash:
Amortization 35,147 109,893
Increase/(decrease) from changes in:
Accounts receivable 204,004 (402,511)
Inventory 10,632 (79,896)
Deferred charges (47,820) 115,223
Accounts payable and other (1,737,257) 213,057
accruals
Income taxes - (111)
Employee entitlement payable (35,890) 2,168
(1,807,939) (511,821)
INVESTING ACTIVITIES
Disposal/(Investments) in:
Capital assets - net - (41,823)
- (41,823)
FINANCING ACTIVITIES
Loans (repaid)/raised - 724,363
Loan payable on securitization of debt 136,838 1,842
Lease payments (1,858) (3,405)
Proceeds on issue of stock
Contribution of capital (39,888) (47,643)
44,947 675,157
(DECREASE)/INCREASE IN CASH (1,672,959) 121,513
Cash at beginning of period 1,844,917 118,912
CASH AT END OF PERIOD 171,958 240,425
SUPPLEMENTAL NON-CASH INVESTING
AND FINANCING ACTIVITIES
Capital lease obligations - -
Interest 12,970 11,014
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
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NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. INTERIM FINANCIAL STATEMENTS
The Consolidated interim financial statements included herein are stated in
US dollars and have been prepared by the Company, without audit, in
accordance with accounting principles generally accepted in the United
States and pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal recurring
adjustments, which, in the opinion of management, are necessary for fair
presentation of the information contained therein. It is suggested that
these Consolidated interim financial statements be read in conjunction with
the financial statements of Flexemessaging.com Inc for the year ended June
30, 2000 and notes thereto included in the Company's registration on Form
10-SB, as amended. The Company follows the same accounting principles in
preparation of interim reports.
Results of operations for the interim periods are not indicative of annual
results.
b. ORGANIZATION
Trade Wind Communications Limited, a Bermudan corporation , listed on the
Canadian Venture Exchange (VSE: TWC) ("TWC") entered into a business
combination agreement ("Merger Agreement") on February 5, 1999 with
Flexemessaging.com, Inc. (previously Siler Ventures Inc., "SVI") and
Atlantic International Capital Holdings Ltd. ("AICH") to complete a reverse
acquisition of Flexemessaging.com, Inc. (the "Company") and a financing
arrangement of $3,660,000 through the sale of the Company's common stock
pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended. TWC owned all of the stock in Trade
Wind Group Pty Limited ("TWG") that controlled all the business assets.
On February 5, 1999, SVI entered into an acquisition agreement with TWC to
purchase all of its business assets, consisting of the stock of TWG, a
wholly owned subsidiary of TWC, incorporated on September 6, 1988. SVI was
a non-operating public shell with no tangible assets and 500,000 shares of
common stock outstanding. This merger of TWG and SVI (a non-operating
public shell with a tangible asset value of nil) resulted in TWG having
actual or effective operating control of the combined Company after the
transaction. As a result, this transaction has been treated as a capital
transaction in substance, rather than a business combination and has been
accounted for as a reverse acquisition. Any references to past
accomplishments of the Company and its financial information, prior to the
acquisition, relate solely to TWG, as combined, since SVI (now known as
Flexemessaging.com, Inc.) has been inactive for several years. SVI acquired
the assets of TWG in exchange for the issuance of 8.8 million shares of
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common stock. This valuation was based on arms length negotiation driven by
ultimate ownership principles. A forward valuation (a valuation arrived at
by applying a revenue multiple to the Company's future revenue stream)
based on future revenues was determined and from this capitalization model,
the total outstanding common stock was calculated. Thereafter, the
respective equity ownership positions were negotiated. SVI continued the
operations of TWG as a wholly owned operating subsidiary.
Pursuant to the Merger Agreement, the Company entered into an agreement
with AICH, a Bermudan corporation, with the objective of performing two
tasks. First, AICH was to identify an acquisition candidate and secondly,
AICH was to arrange for funding for the Company. Pursuant to that
agreement, AICH identified SVI as an acquisition vehicle and assisted the
Company in structuring and concluding the reverse acquisition. In return,
the shareholders of SVI were allocated 500,000 of the Company's common
stock after it had been recapitilized. The fair value of the assets and
liabilities assumed in the reverse acquisition were nil. AICH has also
assisted the Company in seeking financing of $3,660,000 through the sale of
the Company's common stock utilizing private placements. AICH made an
interim placement on March 16, 1999 of 300,000 shares of common stock of
the Company for $750,000.
Per the Merger Agreement, AICH was expected to place the balance of the
$3,660,000 financing through the sale of the Company's common stock
pursuant to future private placements. As a condition of the Merger
Agreement with AICH, 600,000 shares of the Company's common stock were
issued to AICH as performance shares for arranging future financing. These
performance shares were subject to a lockup agreement signed by AICH
whereby shares were to be released from the lockup agreement in proportion
to the funds raised by AICH, subject to a minimum of $1 million.
On May 10, 2000, the Company entered into a Deed of Release with AICH,
whereby AICH was formally relinquished from its previous commitment of
raising funds. At the date of the Deed of Release, AICH had only raised
$750,000 and thus fell short of the $1 million minimum funding level to
qualify for all the performance shares. Per the Deed of Release, AICH could
convert outstanding debt evidenced by a promissory note issued to AICH in
July 1999 to equity in order to satisfy the minimum-funding threshold. As a
result of the conversion, AICH was issued 100,000 shares at $2.50 per
share. Subject to the conditions governing the amount of performance shares
to be released from the restrictions set forth in the lock up agreement,
AICH qualified for the release of 205,090 performance shares from its
capital raising efforts, leaving 394,910 shares out of the 600,000 to be
canceled. However, AICH was in possession of only 300,000 shares for
cancellation. Under the terms of the Deed of Release, AICH agreed to pay
the Company an amount equal to the number of shares not available for
cancellation (94,910 shares) multiplied by $2.50 per share. This amount of
$237,275 has been set off against the promissory note issued to AICH in
July 1999 with the outstanding balance of such note being $12,225 as of
June 30, 2000. The Company has subsequently canceled the 300,000
performance shares returned by AICH.
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Flexemessaging.com, Inc is incorporated under the laws of Idaho. Its stock
was traded on the Over the Counter Bulletin Board market until April 2000
and is now traded in the pink sheets.
TWC is a holding company that did not carry on any operations. Its only
expenditures were in relation to investor relations and stock exchange
compliance, relating to its capital stock as listed on the Canadian Venture
Exchange. As a result, all costs of doing business (i.e. officer and
employee salaries, rent, depreciation, advertising, accounting, legal,
interest expense) have been reflected in the financial statements of TWG.
The Company is primarily engaged in two major business division through its
subsidiary TWG: Voice and Data and electronic messaging. The Company's
Voice and Data Division is a value add distributor of communication systems
and data applications for financial traders and emergency services
operations. The Company's Flexemessaging Division (electronic messaging)
provides customers with a global enhanced fax and email broadcast services
originating from the customers' desktop personal computer ("PC") or the
internet.
These financial statements are stated in US dollars and have been prepared
in accordance with generally accepted accounting principles in United
States.
These unaudited financial statements present figures for the Company for
the three months ended September 30, 2000, and 1999.
c. GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business.
The Company has incurred cumulative losses to date of $6,339,992 which
includes a net loss for the current period of $236,755. The Company
believes that the current cash needs for operations will be funded by the
sale of the accounts receivables of the Flexemessaging Division under a
working capital based factoring facility established with Scottish Pacific
Business Finance Pty Ltd. and cash profits generated from the Voice & Data
and Flexemessaging Divisions. Acquisitions that the Company may decide to
pursue will be funded by the issue of shares or by cash raised by the
investment community.
d. LOSS PER SHARE
Basic earnings per share is computed by dividing the net loss by the
weighted average number of stock of common stock outstanding each year.
Diluted earnings per share is computed in a manner consistent with that of
basic earnings per share while giving effect to all potentially dilutive
common stock equivalents that were outstanding during the period. For the
years ended June 30, 2000 and 1999 there were no common stock equivalents,
therefore both basic and dilutive earnings per share were the same amounts
for both periods. Net loss per share is calculated assuming
recapitalization occurred at the beginning of the earliest period shown. As
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the 600,000 shares directly or indirectly beneficially owned by AICH were
performance based, they were excluded from the weighted average number of
shares until May 10, 2000, when the minimum funding requirement was met and
the contract terminated.
NOTE 2: LOANS PAYABLE
AICH, as Agent, has advanced bridge financing in the sum of $499,500 to the
Company in return for an unsecured promissory note of the Company. The loan
bears interest at a rate announced from time to time by Nationsbank N.A. as its
prime rate, plus 200 basis points per annum. Interest is calculated on the basis
of a 360-day year, but only to the extent that the unpaid principal remains
outstanding. Interest accrues and is payable from the day that the Company
receives net proceeds of not less than $1,500,000 from the offering. The
promissory note is to be repaid on the later of commencement of trading of the
Company's securities on the American Stock Exchange, NASDAQ or another national
exchange acceptable to the Company, or December 31, 2000. The note may be
prepaid at any time without penalty or premium. As the Company has not listed on
any exchange, the Company is not in default on the repayment of the loan. As per
the Deed of Release signed on May 10, 2000, AICH converted some of the
promissory note into equity in the amount of $487,275. The amount owing to AICH
by the Company at September 30, 2000 under the promissory note is $12,225. The
Company also borrowed an additional $54,695 from AICH. This amount is unsecured
with no fixed terms of repayment and does not attract interest.
Notes payable to related parties represents loans payable to Martin McCarthy of
$60,000 and to Frank Favretto in the amount of $53,955. These loans are
unsecured with no fixed terms of repayment and do not attract interest.
NOTE 3: COMPREHENSIVE INCOME - FOREIGN CURRENCY TRANSLATION
In accordance with SFAS 130, the accumulated comprehensive income comprises the
following:
Accumulated comprehensive income
Balance at beginning of period 217,024
Foreign currency translation adjustments 120,028
----------
Balance at end of period 337,052
NOTE 4: SEGMENTED FINANCIAL INFORMATION
The Company operates two business divisions, Voice and Data and Flexemessaging.
The Voice and Data Division is a specialist supplier and integrator of voice
communications systems and decision support applications for dealing rooms,
emergency services dispatch and similar operations. The Flexemessaging Division
operates an enhanced fax broadcast system. It is not considered necessary to
show geographic segmented financial information as revenues generated from
countries other than Australia are not considered significant and represent less
than 10% of total revenue. The accounting principles used to report the segment
amounts is the same as that used to report the financial statements. Segmented
financial information for these two divisions follows:
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FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
VOICE AND FLEXEMESSAGING HEAD OFFICE CONSOLIDATED
DATA
<S> <C> <C> <C> <C>
Revenue 738,733 703,105 - 1,441,838
------------------------------------------------------------------
Amortization 25,740 6,006 3,401 35,147
------------------------------------------------------------------
Segment operating profit/(loss) (109,051) 8,372 (128,923) (229,602)
------------------------------------------------------------------
Identifiable assets 1,300,240 543,790 296,401 2,140,431
------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999
Revenue 1,125,377 951,913 - 2,077,290
------------------------------------------------------------------
Amortization 31,389 71,744 6,760 109,893
------------------------------------------------------------------
Segment operating profit/(loss) (128,080) (279,304) (52,558) (459,942)
------------------------------------------------------------------
Identifiable assets 2,975,630 1,183,218 208,181 4,367,029
------------------------------------------------------------------
</TABLE>
NOTE 5: REORGANISATION COSTS
One of the core management objectives has been to re-position the Company more
towards a broad based messaging service and away from the heavy reliance on fax
running on a proprietary fax network. This plan would involve the closure of the
existing proprietary fax network and the cessation of use of the related network
equipment and resources. This is considered to be a closure of the existing
proprietary fax delivery network and the cessation of use of the related network
equipment and resources. This is considered to be a closure of part of a line of
business. Currently only customer bases in the UK, Canada, USA, Switzerland and
Singapore are affected by this closure. Revenues from this service comprise less
than 9% of Flexemessaging's total revenues.
In connection with this plan the Company signed an exclusive agreement on
December 2, 1999, with Premiere Information Systems Pty Ltd ("Premiere"), a
subsidiary of Premiere Technologies Inc., a communications company based in
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Atlanta, Georgia whereby the Company has outsourced the delivery of its fax
traffic to the Premiere network. This agreement provides for Premiere to
transmit all fax broadcast traffic for the Company for a period of 12 to 24
months subject to certain service and pricing criteria. The customer bases in
the UK, Canada, the USA, Switzerland and Singapore (representing the
discontinued and/or outsourced service) will now be serviced by Premiere with
the Company receiving a commission on revenues generated over the next 24 months
following the execution of the agreement.
Flexemessaging will still provide enhanced fax and email broadcast services to
their existing customers, namely Australia and New Zealand, which comprise 92%
of the segment's revenue. The Company is still billing the remaining customers
that have not been affected and the manner in which they transact with the
Company is unaltered.
As a result, with effect from December 1, 1999, all expenses in respect of
network operations (leased network backbone circuit expenses, facilities
management, software and hardware expenses and maintenance, network staff
resources) will not be continued.
The costs and liabilities of this plan includes:
<TABLE>
<CAPTION>
------------------------------------ --------------- ------------------- ------------ --------------
Expensed Applied against Payments Balance
related asset
September
30, 2000
------------------------------------ --------------- ------------------- ------------ --------------
<S> <C> <C> <C> <C>
Assumed obligations on closed 181,415 (78,196) 103,219
network operations
------------------------------------ --------------- ------------------- ------------ --------------
Severance and other employee 113,040 (113,040) -
costs(3 employees)
------------------------------------ --------------- ------------------- ------------ --------------
Impairment loss on network 357,080 (357,080) - -
equipment
------------------------------------ --------------- ------------------- ------------ --------------
651,535 (357,080) (191,236) 103,219
------------------------------------ --------------- ------------------- ------------ --------------
</TABLE>
Accrued liabilities for network operations in the amount of $103,219 as of
September 30, 2000 relate to termination costs of contracts and other
contractual agreements with third parties. There were not any further expenses
incurred that would have the effect of adjusting the restructuring liabilities.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
The Company cautions readers regarding certain forward looking statements in the
following discussion and elsewhere in this document or any other statement made
by, or on the behalf of the Company, whether or not in future filings with the
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Securities and Exchange Commission. Forward-looking statements are not based on
historical information but relate to future operations, strategies, financial
results or other developments. Forward looking statements are necessarily based
upon estimates and assumptions that are inherently subject to significant
business, economic and competitive uncertainties and contingencies, many of
which are beyond the Company's control and many of which, with respect to future
business decisions, are subject to change. These uncertainties and contingencies
can affect actual results and could cause actual results to differ materially
from those expressed in any forward looking statements made by, or on behalf of,
the Company. The Company disclaims any obligation to update forward-looking
statements.
The core elements of the Company's business are messaging and communications,
represented by the Company's two operating divisions, Flexemessaging and Voice &
Data. The Company offers a range of quality products and solutions in both of
these markets. The expansion of digital messaging is particularly strong and the
Flexemessaging Division is rapidly broadening its offerings to meet customer
demand. Similarly, in the systems market, the convergence of computer technology
with telecommunications infrastructures has created a demand for ever-increasing
functionality. The Voice & Data Division markets a range of products designed to
take advantage of some of these opportunities within its targeted niches of
financial trading, command/control centers and call centers.
Results of operations and financial position for the three months ended
September 30, 2000 and 1999
Management's discussion and analysis of operations for the period ended
September 30, 2000 and 1999 are on the converted US dollar figures. References
have been made to certain figures before taking into account the effect of the
foreign currency translation adjustment where necessary.
Consolidated Results of Operations
Consolidated revenues decreased by 31% to $1,441,838 for the three months ended
September 30, 2000, as compared to $2,077,290 for the three months ended
September 30, 1999. As a result of decreased sales volumes, cost of sales
decreased to $570,622 from $1,049,520 in the prior period. Cost of sales as a
percentage of revenue decreased to 40%, down from 51% in the corresponding
period. Total operating expenses decreased 26% to $1,100,816 from $1,487,712 in
the prior period. The net loss for the three months ended September 30, 2000 was
$236,755, which was down from the net loss reported for the three months ended
September 30, 1999 of $469,644.
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A detailed explanation of the results by operating division follows.
Flexemessaging Division
Revenues. Revenue decreased 26% to $703,105 for the three months ended September
30, 2000 from $951,913 for the three months ended September 30, 1999. This is a
direct result of the continued weakness of the Australian dollar relative to the
United Stated dollar, as well as fewer business days in the third quarter of
2000 compared to the third quarter of 1999. In addition, lower revenues were
reported from those countries where the Division has transferred the customer
base to Premiere. As a result of the outsourcing of our network, the Company
will only report a percentage of the revenue generated by the customer base, now
serviced by Premiere. Revenues generated from the customer base now serviced by
Premiere amounted to $20,020 for the three months ended September 30, 2000 as
compared to $160,672 for the three months ended September 30, 1999.
Cost of sales. Cost of sales comprises domestic, long distance and international
termination charges. These are variable costs based on actual volumes. Cost of
sales amounted to $305,738 for the three months ended September 30, 2000
compared to $544,605 for the prior period. Cost of sales as a percentage of
revenue decreased to 43% for the three months ended September 30, 2000, compared
to 57% for the corresponding period, directly as a result of the outsourcing of
the delivery network to Premiere, which has resulted in lower overall total
delivery costs.
Total operating expenses. Total operating expenses consist of expenses
associated with staff, premises, communications, travel, group management fees,
depreciation, and other expenses incurred in running the operation. Total
operating expenses for the three months ended September 30, 2000 amounted to
$388,995 resulting in a decrease of 41% as compared to $660,932 in the
corresponding period. This reduction was a result of achieving a lower operating
cost structure following the outsourcing of the delivery network to Premiere and
tight management control over expenses.
Voice and Data Division
Revenues. Revenues consist of sales from systems integration solutions for
voice, call center, electronic display, paging, call recording and data
applications. Revenues decreased 34% to $738,733 for the three months ended
September 30, 2000, from $1,125,377 for the three months ended September 30,
1999. The decrease is mainly attributable to the continued weakness of the
Australian dollar relative to the United Stated dollar and the fact that a large
electronic display project was completed in the three months ended September 30,
1999. In addition, client delays hampered completion of certain voice and call
center systems integration solutions for the quarter.
Cost of sales. Cost of sales consists of the purchase of third party product,
necessary to complete the systems integration solution. Cost of sales for the
three months ended September 30, 2000 amounted to $264,884 compared to $504,915
for the comparative quarter as a result of reduced sales volumes and product
mix. Cost of sales as a percentage of revenue decreased to 36% for the current
fiscal period from 45% for the three months ended September 30, 1999. The
reduced percentage is a result of providing a larger proportion of relocation
and ancillary support and maintenance services to the call center customer base,
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as opposed to supplying larger project system sales, as well as a change in the
overall revenue mix, where different product groups attract different gross
margins.
Total operating expenses. Total operating expenses consist of expenses
associated with staff, premises, communications, travel, group management fees,
depreciation and other expenses incurred in running the operation. Total
operating expenses for the three months ended September 30, 2000 amounted to
$582,898 a decrease of 25% compared to $774,222 in the corresponding period.
Depreciation was $25,740 for the three months ended September 30, 2000, compared
to $31,389 in the prior period.
Liquidity and Capital Resources
The Company's consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement
of liabilities in the normal course of business. In connection with their report
on our consolidated financial statements for the years ended June 30, 2000 and
1999, BDO Nelson Parkhill, our independent auditors, expressed substantial doubt
about our ability to continue as a going concern because of recurring net losses
and negative cash flows from operations.
Management believes that current cash resources are adequate to satisfy the
management objectives outlined above as well as to provide working capital and
sustain our operations for the next fiscal year. We expect that these resources
will be provided from the following sources:
o Sales of the accounts receivable of the Flexemessaging Division under
a working capital based factoring facility established with Scottish
Pacific Business Finance Pty Ltd
o Cash profits generated from the Voice & Data and Flexemessaging
Divisions
In September 1997, the Company arranged an unlimited working capital-based
facility with Scottish Pacific Business Finance Limited ("Scottish Pacific"), in
respect of the Australian domiciled customers of Flexemessaging. In accordance
with Scottish Pacific lending criteria, this facility has been secured by a lien
over the assets of Trade Wind Marketing Pty Ltd (a wholly owned subsidiary of
TWG) as well as a guarantee by TWG and its subsidiaries. Interest is charged at
the highest of the prevailing rates of either Westpac Banking Corporation,
Australia and New Zealand Banking Group Limited or National Australia Bank
Limited plus a margin of 2%. The prevailing interest rate at September 30, 2000
was 10.39% (1999: 10.93%). Funds under the facility are advanced based on sales
invoices with repayment of such advanced funds being made from payments received
relating to the invoices and other working capital and external sources. The
outstanding balance owing to Scottish Pacific as at September 30, 2000 was
$122,942. The original term of this agreement was for a 12-month period with
automatic renewal. This agreement may be terminated by Scottish Pacific by
giving one month's notice or by the Company giving three month's notice. If the
Company terminated this facility, paying off the outstanding balance would
result in the Company having direct access to all the receipts on the
outstanding invoices for working capital purposes.
Cash used by operating activities was $1,807,939 for the three months ended
September 30, 2000, compared to $511,821 for the three months ended September
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30, 1999. Accounts receivable decreased $204,004 to $1,344,811 from $1,548,815
for the three months ended September 30, 2000 as a result of better credit
management and more focus being placed on collections and receipt of outstanding
receivables. Accounts payable and other accruals decreased by $1,737,257
compared to an increase of $213,057 in the prior comparative year, mainly as a
result of a large trade payable incurred in the previous quarter being paid in
this quarter.
Cash generated from investing activities, consisting primarily of the disposal
of capital assets, amounted to $90,033 for the year three months September 30,
2000, compared to $41,823 being invested in the corresponding period in 1999.
Cash generated from financing activities, amounted to $134,980 as compared to
$675,157 in the prior year primarily as a result of obtaining loans in the three
months ended September 30, 1999.
Cash and equivalents decreased to $171,958 for the three months ended September
30, 2000, compared to an increase of $121,513 in the previous year, as a result
of cash used by operations and loan finance.
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PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K
None
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
FLEXEMESSAGING.COM, INC.
(Registrant)
Date: November 15, 2000
/s/ Nicholas Bird
---------------------------------------
Nicholas Bird, President
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