SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
-----------------------------
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 December 31, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
Commission File Number: 0-27059
----------------------------
FLEXEMESSAGING.COM, INC.
-----------------------------
(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
225 George Street
Sydney, Australia NSW 2000
--------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Issuer's telephone number: (011) 61 2 9250-8888
---------------
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. [ ] Yes [X] No
As of February 11, 2000 there were 10,400,000 shares of Common Stock, par value
$.001 per share, of the registrant outstanding.
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<PAGE>
TABLE OF CONTENTS
Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheet as of December 31, 1999
Unaudited Consolidated Statements of Operations for the three and six
months ended December 31, 1999 and 1998
Unaudited Consolidated Statements of Cash Flows for the six months
ended December 31, 1999 and 1998
Notes to the Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations
Part II - Other Information:
Item 6. Exhibits
Ex. 10.1 Transfer agreement between Trade Centre Systems Pte
Ltd and Jebsen and Jessen Communications Pte Ltd
Ex. 27 Financial Data Schedule
Signatures
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<PAGE>
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., the financial statements presented herein are the consolidated financial
statements of the Company for the six months ended December 31, 1999 and 1998,
and the consolidated statements of loss and comprehensive loss for the three
months ended December 31, 1999
The Company has two divisions: Voice and Data Division and FlexiFax Division
operating under the trade name of FlexiFax Global Services. Voice and Data
Systems 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. FlexiFax Global Services
operates an enhanced fax broadcast service over a global network. FlexiFax
specializes in quality fax broadcasts generated from customers' desktops for
delivery to any destination in the world.
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<PAGE>
<TABLE>
<CAPTION>
FLEXEMESSAGING.COM, INC
Consolidated Balance Sheets
NOTE UNAUDITED
31 DECEMBER
1999
- --------------------------------------------------------------------------------------
ASSETS $
<S> <C>
CURRENT
Cash 217,525
Receivables 2,767,835
Inventory - Raw materials 142,369
Inventory - Finished goods 163,251
-------------
Costs on projects not yet billed 278,445
-------------
-------------
3,749,425
-------------
CAPITAL ASSETS 438,225
GOODWILL 3,805
OTHER 25,745
-------------
467,775
-------------
4,037,200
- --------------------------------------------------------------------------------------
LIABILITIES AND SHaREHOLDERS' EQUITY
CURRENT
Trade Creditors 2,171,288
Sundry creditors and accruals 1,007,855
Customer deposits 272,188
Unearned maintenance revenue 213,407
Current portion of lease obligations 31,071
Loan payable on securitization of debt 106,089
-------------
3,801,898
-------------
NON CURRENT
Non current portion of lease obligations 21,561
Loans payable 2 757,695
Employee entitlements payable 138,098
-------------
917,354
-------------
TOTAL LIABILITIES 4,719,252
-------------
SHAREHOLDErS' EQUITY
Common Stock, $0.001 par value; 20,000,000 shares 10,400
Authorized; 10,400,000 shares issued
Preferred Stock, $0.001 par value; 5,000,000 shares -
Authorized; no shares issued
Additional paid-in capital 4,525,393
Comprehensive income - foreign currency translation 3 181,532
Accumulated deficit (5,399,377)
-------------
(682,052)
-------------
4,037,200
- --------------------------------------------------------------------------------------
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
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<PAGE>
Consolidated Statements of Loss and Comprehensive Loss
<TABLE>
<CAPTION>
NOTE UNAUDITED UNAUDITED UNAUDITED UNAUDITED
THREE MONTHS THREE MONTHS SIX MONTHS ENDED SIX MONTHS ENDED
ENDED ENDED 31 DECEMBER 31 DECEMBER
31 DECEMBER 31 DECEMBER 1999 1998
1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
$ $ $ $
<S> <C> <C> <C> <C>
SALES 3,950,865 1,815,329 6,028,155 4,296,269
LESS:
COST OF SALES 2,553,135 1,021,128 3,602,655 2,359,504
----------------------------------------------------------------------
GROSS PROFIT 1,397,730 794,201 2,425,500 1,936,765
OPERATING EXPENSES
NETWORK OPERATING COSTS 18,574 27,140 42,405 55,826
SELLING,GENERAL AND ADMINISTRATIVE 1,424,742 1,043,562 2,778,730 2,169,056
DEPRECIATION AND AMORTIZATION 134,707 120,689 244,600 227,806
RESTRUCTURING COSTS 725,735 - 725,735
----------------------------------------------------------------------
TOTAL OPERATING EXPENSES 2,303,758 1,191,391 3,791,470 2,452,688
----------------------------------------------------------------------
LOSS FROM OPERATIONS (906,028) (397,190) (1,365,970) (515,923)
Other income/(expense)
Interest paid
- loans - short term (14,698) (16,903) (25,712) (25,308)
Interest received 6,882 4,747 8,194 6,882
----------------------------------------------------------------------
LOSS FOR THE YEAR BEFORE INCOME TAX (913,844) (409,346) (1,383,488) (534,349)
Income tax expense - - - -
----------------------------------------------------------------------
NET LOSS (913,844) (409,346) (1,383,488) (534,349)
OTHER COMPREHENSIVE INCOME, NET OF TAX
Foreign currency translation adjustments 13,458 17,287 42,799 19,516
----------------------------------------------------------------------
COMPREHENSIVE LOSS (900,386) (392,059) (1,340,689) (514,833)
NET LOSS PER SHARE (0.09) (0.05) (0.13) (0.06)
WEIGHTED AVERAGE NUMBER OF SHARES 10,400,000 8,800,000 10,400,000 8,800,000
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
</TABLE>
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<PAGE>
Notes on the Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Cash Flows
UNAUDITED UNAUDITED
SIX MONTHS ENDED SIX MONTHS ENDED
31 DECEMBER 31 DECEMBER
1999 1998
CASH PROVIDED/(USED) BY: $ $
<S> <C> <C>
OPERATING ACTIVITIES
Operations
Net loss for the year (1,383,488) (534,349)
Items not involving cash:
Amortization 244,600 227,806
Write down of network equipment 419,418
Changes in operating assets and liabilities:
Accounts receivable (868,121) 387,727
Inventory 750 (57,232)
Costs on projects not yet billed 178,339 343,677
Accounts payable and other 893,783 (1,464,691)
accruals
Income taxes (111) 1
Employee entitlement payable 6,247 7,705
----- -----
(508,583) (1089,356)
INVESTING ACTIVITIES
Investments in:
Capital assets - net (41,951) (119,083)
-------- ---------
(41,951) (119,083)
FINANCING ACTIVITIES
Loans raised 757,695 -
Loan payable on securitization of debt 31,654 (1,761)
Lease payments (6,527) (7,275)
Contribution of capital - 681,635
Distributions (133,675) -
--------- -
649,147 672,599
(DECREASE)/INCREASE IN CASH 98,613 (535,840)
Cash at beginning of year 118,912 589,877
CASH AT END OF YEAR 217,525 54,037
SUPPLEMENTAL NON-CASH INVESTiNG AND FINANCING ACTIVITIES
Capital lease obligations - -
Interest 25,712 25,308
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
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<PAGE>
Notes on the Financial Statements
- --------------------------------------------------------------------------------
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, 1999 and notes thereto included in the
Company's registration on Form 10-SB. 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 (VSE: TWC) ("TWC") entered into a
business combination agreement ("Merger Agreement") on February 5, 1999
with Flexemessaging.com Inc. (previously Siler Ventures Inc.) and
Atlantic International Capital Holdings Ltd. ("Atlantic") to complete a
reverse acquisition of Flexemessaging.com Inc and a financing
arrangement of US$3,660,000 through the sale of Flexemessaging.com,
Inc. 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 Ltd (TWG) which controlled all the
business assets.
In summary, Flexemessaging.com, Inc acquired the business assets of
TWC, consisting of the stock of TWG, in exchange for 8,800,000 shares
of common stock of Flexemessaging.com, Inc. and Atlantic has made an
interim placement of 300,000 shares of common stock of
Flexemessaging.com Inc. for $750,000. Per the Merger Agreement,
Atlantic is expected to place the balance of the $3,660,000 financing
through the sale of Flexemessaging.com Inc.'s common stock pursuant to
a private placement.
Flexemessaging.com Inc is incorporated under the laws of Idaho. Its
stock is traded on the Over the Counter Bulletin Board market..
Included in the issued stock are 600,000 shares of common stock
beneficially owned by Atlantic. These shares are held in escrow and
will be subject to performance by Atlantic under the terms of the
Merger Agreement. The performance terms have not been met and the
contract is currently under review by management.
Trade Wind Group Pty Ltd was incorporated in Australia on December 6,
1988. Its principal activity comprises the manufacture and sale of
telecommunication equipment and the provision of communication
services. The majority of sales to date have concentrated in Australia
and South East Asia, however with the expansion of communication
services to Europe and North America, the Company is developing a
global profile.
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 and six months ended December 31, 1999, and 1998.
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<PAGE>
Notes on the Financial Statements
- --------------------------------------------------------------------------------
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 $5,399,377 which
includes a net loss (after extraordinary items) for the current period
of $1,383,488. The Company anticipates raising additional capital to
meet its planned operational and expansion requirements over the
remaining part of the financial year ending June 30, 2000. Should the
appropriate level of funding not become available, then the Company
will have to reduce its costs employed in various areas including its
global expansion activities, network expansion, new channel marketing
initiatives, R&D, sales and general marketing activities to a cost
level to meet the anticipated cash needs for working capital and
capital expenditure requirements. Thereafter if the Company's operation
does not begin to deliver positive cashflows in amounts enough to
satisfy the Company's requirements then it will be necessary for the
Company to raise additional funds through bank debt, equity funding,
partnering with others to share overheads, undertake appropriate
divestment strategies of certain technologies for equity or cash, or
through other sources of capital. Additional funding may not be
available, or may not be available on terms and timing acceptable to
the Company, which could have a material adverse effect on the
Company's financial position, its overall business and the result of
the Company's operations.
The market for fax and messaging is very competitive and the Voice and
Data business, with its large contracts is very influenced by the
economic conditions pertaining in Australia at the time. The Company
does not expect this to change and in fact expects it to require even
greater effort to overcome in the future. The Company will therefore
continue to have the need for additional funding until it reaches
significant levels of revenue and margin to become cashflow positive.
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.
For the six months ended December 31, 1999 and 1998 there were no
common stock equivalents. Net loss per share is calculated assuming
recapitalization occurred at the beginning of the earliest period
shown.
NOTE 2: LOANS PAYABLE
Atlantic International Capital Holdings Limited, as Agent, has advanced
bridge financing in the sum of $499,500, in return for an unsecured
promissory note over Flexemessaging.com Inc. The loan bears interest at
the 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 described in Note 5. The Note is to be repaid on the
later of commencement of trading of securities of the Company on the
American Stock Exchange, NASDAQ or another exchange acceptable to the
Company, or December 21, 1999. The note may be prepaid at any time
without penalty or premium.
The balance of the loan funds are unsecured with no fixed terms of
repayment and do not attract interest.
-8-
<PAGE>
Notes on the Financial Statements
- --------------------------------------------------------------------------------
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 138,733
Foreign currency translation adjustments 42,799
------------
Balance at end of period 181,532
NOTE 4: SEGMENTED FINANCIAL INFORMATION
The Company operates two business divisions, Voice and Data Systems and FlexiFax
Global Services. Voice and Data Systems is a specialist supplier and integrator
of voice communications systems and decision support applications for dealing
rooms, emergency services dispatch and similar operations. FlexiFax Global
Services operates an enhanced fax broadcast system. It is not considered
necessary to show geographic segmented financial information as on a materiality
basis, all revenue has been generated from Australia. 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:
FOR THE THREE MONTHS EnDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
VOICE AND DATA FLEXIFAX HEAD OFFICE CONSOLIDATED
<S> <C> <C> <C> <C>
Revenue 3,103,854 847,011 - 3,950,865
---------------------------------------------------------------
Amortization 31,331 96,636 6,740 134,707
---------------------------------------------------------------
Segment operating profit/(loss) 225,268 (1,020,145) (111,151) (906,028)
---------------------------------------------------------------
Identifiable assets 3,151,820 651,169 234,211 4,037,200
---------------------------------------------------------------
FOR THE THREE MONTHS ENDED DECEMBER 31,
1998
Revenue 1,071,167 744,162 - 1,815,329
---------------------------------------------------------------
Amortization 26,287 91,853 2,549 120,689
---------------------------------------------------------------
Segment operating profit/(loss) (128,233) (249,013) (19,944) (397,190)
---------------------------------------------------------------
Identifiable assets 1,839,389 1,205,656 259,360 3,304,405
---------------------------------------------------------------
</TABLE>
-9-
<PAGE>
Notes on the Financial Statements
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENdED DECEMBER 31, 1999
<TABLE>
<CAPTION>
VOICE AND DATA FLEXIFAX HEAD OFFICE CONSOLIDATED
<S> <C> <C> <C> <C>
Revenue 4,229,231 1,798,924 - 6,028,155
-----------------------------------------------------------------
Amortization 62,720 168,380 13,500 244,600
-----------------------------------------------------------------
Segment operating profit/(loss) 97,188 (1,299,449) (163,709) (1,365,970)
-----------------------------------------------------------------
Identifiable assets 3,151,820 651,169 234,211 4,037,200
-----------------------------------------------------------------
FOR THE SIX MONTHS ENdED DECEMBER 31, 1998
Revenue 2,705,828 1,590,441 - 4,296,269
-----------------------------------------------------------------
Amortization 57,806 164,765 5,235 227,806
-----------------------------------------------------------------
Segment operating profit/(loss) (72,175) (403,443) (40,305) (515,923)
-----------------------------------------------------------------
Identifiable assets 1,839,389 1,205,656 259,360 3,304,405
-----------------------------------------------------------------
</TABLE>
NOTE 5: EVENTS SUBSEQUENT TO BALANCE SHEET DATE
On August 30, 1999, the Company made an offering of 500,000 common shares at
$3.75 per share for the raising of net proceeds of $1,725,000 by way of private
placement. This offering is being made pursuant to the limited and private
offering exemption set forth in Rule 506 of Regulation D under the US Securities
Act of 1933, as amended and comparable exemptions from registration under
applicable state securities laws. Accordingly, the Shares offered hereby will be
sold only to investors who are accredited investors (as that term is defined in
Regulation D of the Securities Act). The Offering will have no aggregate minimum
purchase requirement. This offering closes after 180 days from the offering date
or until all shares are sold whichever is the earlier. To date no shares have
been subscribed for under the offering. Management has agreed to extend the
closing date of the offering to June 30, 2000.
NOTE 6: RESTRUCTURING 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 relaince 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.
In connection with this plan the Company signed an agreement on December 2,
1999, with Premiere Information Systems Pty Ltd ("Premiere"), a subsidiary of
Premiere Technologies Inc., a communications company based in Atlanta, Georgia
whereby the Company would outsource the delivery of its fax traffic to the
Premiere network. In addition the customer bases in the UK, Canada, USA,
Switzerland and Singapore will now be serviced by Premiere Technologies Inc.
with the company receiving commission on revenues generated for the next 24
months.
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<PAGE>
Notes on the Financial Statements
- --------------------------------------------------------------------------------
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 include:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Expensed Applied against Payments Balance
related asset Dec 31, 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assumed obligations on closed network 188,723 (50,116) 138,607
operations
- --------------------------------------------------------------------------------------------------------------------
Severance and other employee costs(3 117,594 (19,500) 98,094
employees)
- --------------------------------------------------------------------------------------------------------------------
Impairment loss on network equipment 419,418 (419,418) - -
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Total 725,735 (419,418) (69,616) (236,701)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Accrued liabilities for network operations in the amount of $138,607 as of
December 31, 1999 relate to termination costs of contracts and other contractual
agreements with third parties.
Estimated severance and other employee costs in the amount of $98,094 as of
December 31, 1999 relate to estimated severance for terminated employees.
Employee groups affected include management and network support personnel. As of
December 31, 1999 the accrual related to one senior employee.
The impairment loss on network equipment relates to network equipment that is to
be abandoned or otherwise disposed of. These assets are no longer being used in
the continued operations of the Company.
On December 16, 1999 Trade Centre Systems Holdings Pte Ltd ("TCSH"), an
indirectly wholly owned subsidiary of the Company, operating in Singapore
entered into an agreement with Jebsen and Jessen Communications Pte Ltd ("J&J").
Under the agreement TCSH has transferred its Voice & Data business in return for
revenue based commissions on sales and maintenance through to October 31, 2000.
This agreement relates to the transfer/disposal of a geographical portion of a
segment and does not constitute a discontinued operation. This transfer will not
have a material impact on the performance of the Company.
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<PAGE>
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
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, FlexiFax 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
FlexiFax 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.
As a result of the reverse acquisition of TWG by the Company in February 1999,
the financial information and financial statements presented herein are those of
TWG, the accounting acquirer. Thus, the financial position and results of
operation of the Company were recorded in Australian dollars, the functional
currency, and have been converted to US dollars.
On August 30, 1999, the Company made an offering of 500,000 common shares at
$3.75 per share for the raising of net proceeds of $1,725,000 by way of private
placement. This offering is being made pursuant to the limited and private
offering exemption set forth in Rule 506 of Regulation D under the US Securities
Act of 1933, as amended and comparable exemptions from registration under
applicable state securities laws. Accordingly, the Shares offered hereby will be
sold only to investors who are accredited investors (as that term is defined in
Regulation D of the Securities Act). The Offering will have no aggregate minimum
purchase requirement. This offering closes after 180 days from the offering date
or until all shares are sold whichever is the earlier. To date no shares have
been subscribed for under the offering. Management has agreed to extend the
closing date of the offering to June 30, 2000.
-12-
<PAGE>
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 relaince 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.
In connection with this plan the Company signed an agreement on December 2,
1999, with Premiere Information Systems Pty Ltd ("Premiere"), a subsidiary of
Premiere Technologies Inc., a communications company based in Atlanta, Georgia
whereby the Company would outsource the delivery of its fax traffic to the
Premiere network. In addition the customer bases in the UK, Canada, USA,
Switzerland and Singapore will now be serviced by Premiere Technologies Inc.
with the company receiving commission on revenues generated for the next 24
months.
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.
On December 16, 1999 Trade Centre Systems Holdings Pte Ltd ("TCSH"), an
indirectly wholly owned subsidiary of the Company, operating in Singapore
entered into an agreement with Jebsen and Jessen Communications Pte Ltd ("J&J").
Under the agreement TCSH has transferred its Voice & Data business in return for
revenue based commissions on sales and maintenance through to October 31, 2000.
This agreement relates to the transfer/disposal of a geographical portion of a
segment and does not constitute a discontinued operation. This transfer will not
have a material impact on the performance of the Company.
RESULTS OF OPERATIONS AND FINANCIAL POSITION FOR tHE THREE MONTHS ENDED DECEMBER
31, 1999 AND 1998
Management's discussion and analysis of operations for the period ended December
31, 1999 and 1998 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 increased by 118% to $3,950,865 for the three months ended
December 31, 1999, as compared to $1,815,329 for the three months ended December
31, 1998. As a result of increased sales volumes, cost of sales increased to
$2,553,135 from $1,021,128 in the prior period. Cost of sales as a percentage of
revenue increased to 65%, up from 56% in the corresponding period. Total
operating expenses before restructuring costs increased 32% to $1,578,023 from
$1,191,391 in the prior period. Total operating expenses after restructuring
costs increased 93% to $2,303,758 from $1,191,391 in the prior period. The net
loss before restructuring costs for the three months ended December 31, 1999 was
$188,109, which was down from the net loss reported for the three months ended
December 31, 1998 of $409,346. As a result of the restructuring costs, the net
loss for the three months ended December 31, 1999 was $913,844, which was up
from the net loss reported for the three months ended December 31, 1998 of
$409,346.
A detailed explanation of the results by operating division follows.
FlexiFax Global Services Division
Revenues. Revenue increased 14% to $847,011 for the three months ended December
31, 1999 from $744,162 for the three months ended December 31, 1998. Revenues
generated in countries outside of the US increased by 14%, which is lower than
the previous quarter increase as a result of the deal with Premiere. As a result
of this deal the Company will only report a percentage of the revenue generated
by the customer base, now serviced by Premiere Technologies Inc.
-13-
<PAGE>
Cost of sales. Cost of sales comprises local access charges, leased network
backbone circuit expenses, line rental, distributors' commission, software
maintenance and support, and domestic, long distance and international
termination charges. These are variable costs based on actual volumes. Cost of
sales amounted to $462,797 for the three months ended December 31, 1999 compared
to $505,482 for the prior period. Cost of sales as a percentage of revenue
decreased to 55% for the three months ended December 31, 1999, compared to 68%
for the corresponding period, mainly as a result of lower termination pricing
being negotiated with carriers. Note that from December 1999, cost of sales will
only include distributors' commission, software maintenance and support, and
domestic, long distance and international termination charges.
Total operating expenses. Total operating expenses consist of expenses
associated with staff, premises, communications, travel, group management fees,
depreciation, restructuring costs and other expenses incurred in running the
operation. Total operating expenses before restructuring costs for the three
months ended December 31, 1999 amounted to $705,911 compared to $589,264 in the
corresponding period. Significant expenses were incurred in connection with the
establishment of a direct office in London, which amounted to $94,050 for the
three months ended December 31, 1999. The balance of the increase in expenditure
resulted mainly from increased staff costs, largely as a result of the
establishment of the Flexemedia division, for the dissemination of news
releases. Depreciation decreased to $96,636 for the three months ended December
31, 1999, compared to $91,853 in the prior period. Restructuring costs have been
incurred as a result of the private network been made redundant due to the deal
signed with Premiere, whereby the end delivery of transmissions will be
performed by Premiere. Restructuring costs amounted to $725,735 in the three
months ended December 31, 1999. Total operating expenses after restructuring
costs for the three months ended December 31, 1999 amounted to $1,431,646
compared to $589,264 in the corresponding period.
Voice and Data Systems Division
Revenues. Revenues consist of sales from systems integration solutions for
voice, call centre, electronic display, paging, call recording and data
applications. Revenues increased 190% to $3,103,854 for the three months ended
December 31, 1999, from $1,071,167 for the three months ended December 31, 1998.
The increase is mainly attributable to turret system sales of $2,161,380 being
concluded as a result of the division being awarded the Australian
distributorship for IPC products as compared to $261,460 being generated in the
comparative period. The successful conclusion of the Australian distributorship
with IPC is expected to generate further positive results in this fiscal year,
with turret systems sales forecasted to be significantly higher than for fiscal
year 2000.
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 December 31, 1999 amounted to $2,090,338 compared to $515,646
for the comparative quarter as a result of increased sales volumes. Cost of
sales as a percentage of revenue increased to 67% for the current financial
period down from 48% for the three months ended December 31, 1998. The increased
percentage is a result of supplying larger project system sales as opposed to
providing a larger proportion of relocation and ancillary support and
maintenance services to the V Band voice customer base, 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 December 31, 1999 amounted to
$760,961 compared to $582,183 in the corresponding period. Depreciation was
$31,331 for the three months ended December 31, 1999, compared to $26,287 in the
prior period,
RESULTS OF OPERATIONS AND FINANCIAL POSITION FOR THE SIX MONTHS ENDED DECEMBER
31, 1999 AND 1998
Management's discussion and analysis of operations for the period ended December
31, 1999 and 1998 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.
-14-
<PAGE>
CONSOLIDATED RESUlTS OF OPERATIONS
Consolidated revenues increased by 40% to $6,028,155 for the six months ended
December 31, 1999, compared to $4,296,269 for the six months ended December 31,
1998. As a result of increased sales volumes Cost of sales increased to
$3,602,655, from $2,359,504 in the prior period. Cost of sales as a percentage
of revenue increased to 60%, up from 55% in the corresponding period. Total
operating expenses before restructuring costs increased 25% to $3,065,735 from
$2,452,688 in the prior period. Total operating expenses after restructuring
costs increased 55% to $3,791,470 from $2,452,688 in the prior period.The net
loss before restructuring costs for the six months ended December 31, 1999 was
$657,753, which was up from the amount reported for the six months ended
December 31, 1998 of $534,349. Anet loss after restructuring costs for the six
months ended December 31, 1999 of $1,383,488 was reported, which was up from the
net loss reported for the six months ended December 31, 1998 of $534,349.
A detailed explanation of the results by operating division follows.
FlexiFax Global Services Division
Revenues. FlexiFax revenues increased 13% to $1,798,924 for the six months ended
December 31, 1999 from $1,590,441 for the six months ended December 31, 1998.
Revenues generated in countries outside of the US increased by 13%. As a result
of this deal the Company will only report a percentage of the revenue generated
by the customer base, now serviced by Premiere Technologies Inc.
Cost of sales. Cost of sales comprises local access charges, leased network
backbone circuit expenses, line rental, distributors' commission, software
maintenance and support, and domestic, long distance and international
termination charges. (From December 1999, cost of sales will only include
distributors' commission, software maintenance and support, and domestic, long
distance and international termination charges.) These are variable costs based
on actual volumes. Cost of sales amounted to $1,009,448 for the six months ended
December 31, 1999 compared to $1,034,597 for the prior period. Cost of sales as
a percentage of revenue decreased to 56% for the six months ended December 31,
1999, compared to 65% for the corresponding period, mainly as a result of lower
termination pricing being negotiated with carriers.
Total operating expenses. Total operating expenses consist of expenses
associated with staff, premises, communications, travel, group management fees,
depreciation, restructuring costs and other expenses incurred in running the
operations. Total operating expenses before restructuring costs for the six
months ended December 31, 1999 amounted to $1,366,843 as compared to $959,288 in
the corresponding period. Significant expenses were incurred in connection with
the establishment of an office in London amounting to $178,743 for the six
months ended December 31, 1999. The balance of the increase in expenditure
resulted mainly from increased staff costs, largely as a result of the
establishment of the Flexemedia division, for the dissemination of news
releases. Depreciation decreased to $148,380 for the six months ended December
31, 1999, compared to $164,765 in the prior period. Total operating expenses
after restructuring costs for the six months ended December 31, 1999 amounted to
$2,092,578 as compared to $959,288 in the corresponding period.
Voice and Data Systems Division
Revenues. Revenues consist of sales from systems integration solutions for
voice, call centre, electronic display, paging, call recording and data
applications. Revenues increased 56% to $4,229,231 for the six months ended
December 31, 1999, from $2,705,828 for the six months ended December 31, 1998.
The increase is mainly attributable to turret system sales of $2,264,338 being
concluded as a result of the division being awarded the Australian
distributorship for IPC products as compared to $1,408,994 being generated in
the comparative period. The successful conclusion of the Australian
distributorship with IPC is expected to generate further positive results in
this fiscal year, with significantly higher turret systems sales forecasted.
-15-
<PAGE>
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
six months ended December 31, 1999 amounted to $2,593,207 as compared to
$1,324,907 for the comparative quarter as a result of increased sales volumes.
Cost of sales as a percentage of revenue increased to 62% for the current
financial period down from 49% for the six months ended December 31, 1998. The
increased percentage is a result of supplying larger project system sales as
opposed to providing a larger proportion of relocation and ancillary support and
maintenance services to the V Band voice customer base, 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 operations. Total
operating expenses for the six months ended December 31, 1999 amounted to
$1,535,183 as compared to $1,453,095 in the corresponding period. Depreciation
was $62,720 for the six months ended December 31, 1999, as compared to $57,806
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.
The Company anticipates raising additional capital to meet its planned
operational and expansion requirements over the remaining part of the fiscal
year ending June 30, 2000. Should the appropriate level of funding not become
available, then the Company will have to reduce its costs employed in various
areas including its global expansion activities, network expansion, new channel
marketing initiatives, R&D, sales and general marketing activities to a cost
level to meet the anticipated cash needs for working capital and capital
expenditure requirements. Thereafter, if the Company's operations do not begin
to deliver positive cashflows in amounts sufficient to satisfy the Company's
requirements then it will be necessary for the Company to raise additional funds
through bank debt, equity funding, partnering with others to share overheads,
undertake appropriate divestment strategies of certain technologies for equity
or cash, or through other sources of capital. Additional funding may not be
available, or may not be available on terms and timing acceptable to the
Company, which could have a material adverse effect on the Company's financial
position, its overall business and the result of the Company's operations.
The market for fax and messaging is very competitive and the Voice and Data
business, with its large contracts, is heavily influenced by the economic
conditions pertaining in Australia at the time. The Company does not expect this
to change. In fact, the Company expects that it will be required to use even
greater effort to remain competitive in the future. The Company will therefore
continue to have the need for additional funding until it reaches significant
levels of revenue and margin to become cashflow positive.
The Company has financed its cash requirements for operations and investments in
capital assets mainly through loan financing.
As a result of operating losses, cash used in operating activities amounted to
$479,047 for the six months ended December 31, 1999, as compared to $1,091,117
for the six months ended December 31, 1998. Accounts receivable increased to
$2,767,835 from $1,899,714 for the six months ended December 31, 1998 mainly as
a result of increased sales volumes in the second quarter. Accounts payable and
other accruals increased by $925,437 as compared to a decrease of $1,466,452 in
the prior comparative period, mainly as a result of increased sales activity in
the second quarter as well as some of the funding received going towards
reducing the payables to an acceptable level in the prior period.
Cash used in investing activities, consisting primarily of the purchase of
capital assets, amounted to $39,833 for the six months ended December 31, 1999,
and $119,083 in the corresponding period in 1998.
Cash generated from financing activities, amounted to $617,493 as compared to
$674,360 in the prior period primarily as a result of unsecured loans in the
amount of $757,695. In the prior period, Trade Wind Communications Limited
contributed capital in the amount of $681,635.
-16-
<PAGE>
UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
entity, including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
The Company has formulated a Y2K compliance program to test and has successfully
tested the Company's products and services for compliance. All the Company's
principals who supply products have been asked for a compliance statement.
However in the telecommunications environment, individual products may be
compliant but their operation as a whole also depends on third parties over
which the Company has no control or in some cases even input.
The cost to the Company of the Y2K compliance program has not be separated but
been written off into general operating expenses and leasing costs (for
equipment upgrade). As of February 16, 2000 the Company has not experienced any
material effect or delay as a result of the Y2K issue.
Flexifax Division. As a result of the Premiere transaction (whereby Flexifax
outsources final delivery of their fax traffic to the Premiere network) the Y2K
risk lies primarily with the Premiere network readiness. Flexifax has asked (and
has received) from Premiere a Y2K compliance status and fall back plan. To date,
the Company has not experienced any difficulties with delay or material adverse
effects from the services provided by Premiere as a result of Y2K.
Voice and Data Division. Any software designed by the Company over the last year
has been Y2K compliant. The equipment distributed from the Company's principals
have also undergone test simulations for Y2K of the generic product. Similar
tests were not done at client's sites but the Company believes most clients are
conducting their own compliance programs. To date, the Company has not
experienced any difficulties with delay or material adverse effects as a result
Y2K.
The Y2K compliance position of following products (excluding any PCs owned or
supplied by the customer) sold to, or used in customer premises, by the Voice
and Data over the 12 months are as listed below:
V Band products - Not date dependent - compliant
IPC Products - Complient by purchasing upgrade.
CSK Systems - Supplier certificated
Dictaphone - Supplier certificated (with one minor exception currently being
addressed)
Multitone - Supplier certificated
Rockwell (ACD and Transcend) - Supplier certificated
Voicetek - Supplier certificated
Witness Systems - Supplier certificated
Webline - Supplier certificated
NxOrc - Supplier certificated
Company designed products:
Clarity - Compliant
ASX software interface has been tested for compliance.
Other designs and interfaces - Not date dependent.
The Flexifax billing system has been tested for compliance by simulated date
change.
-17-
<PAGE>
Internal Company Systems
To date, none of the Company's internal systems have experienced any problems or
delays as a result of Y2K. PCs purchased over at least a year ago by the Company
have been compliant and PC's used in the Company's accounting area are Y2K
compliant.
Part II Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.1 Transfer agreement between Trade Centre Systems Pte Ltd
and Jebsen and Jessen Communications Pte Ltd
27.1 Financial Data Schedule - December 31, 1999
(b) Reports on Form 8-K
None.
-18-
<PAGE>
Notes on the Financial Statements
- --------------------------------------------------------------------------------
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: February 21, 2000
/s/ Nicholas Bird
------------------------------
Nicholas Bird, President
TRANSFER AGREEMENT
BETWEEN
TRADE CENTRE SYSTEMS ("TCSH")
AND
JEBSEN AND JESSEN COMMUNICATIONS (S) PTE LTD ("J&J")
BACKGROUND
A. IPC Information Systems, Inc. ("IPC") following its acquisition of V Band
Corporation has confirmed J&J as its distributor in Singapore and regions.
B. TCSH agrees to transfer or assign to J&J any rights to obtain business from
V Band clients in Singapore in consideration for the following:
1. SALES/ PROJECTS/ BUILD-UPS (SYSTEM EXPANSIONS) MOVES, ADDS AND CHANGES
1.1 J&J will pay TCSH 20% of the margin of any IPC systems sold to the
clients nominated in Schedule A prior to October 31, 2000. This is
intended to cover all TCSH's V Band clients.
1.2 J&J will pay TCSH 60% of the gross profit on build-up (system
expansion) and MAC's orders from TCSH's existing V BAND customer base,
or from sales to existing customers of TCSH products or services,
received prior to October 31, 2000.
1.3 TCSH will provide J&J with client site configuration detail.
1.4 J&J agrees to offer employment to Lim Cheng Hock and Chua Kim Wee
(Richard) on terms no less favourable than their current salary
packages, such employment to commence as soon as practicable with a
target date for commencement as January 1, 2000. TCSH will use
reasonable endeavours to facilitate the transfer of these employees to
J&J.
2. MAINTENANCE
2.1 TCSH will novate all its Maintenance contracts to J&J by 31 December
1999. After novation J&J will assume all responsibility for the V Band
sites.
2.2 The main intention of this arrangement is to give J&J immediate access
to TCSH's V Band clients. TCSH will not unreasonably delay or hinder
the novation of the contracts and will use best endeavours to arrange
that the novations take place as soon as practicable.
2.3 TCSH will supply all staff and materials required for maintenance in
each case until the contract is novated. Arrangements will be made for
reimbursement where J&J for any reason incur service obligations prior
to novation.
2.4 TCP Sydney will supply level 2 support on V Band products 24 hours
a day, 7 days a week until October 31, 2000 at no charge.
2.5 J&J will split 40/60 the net revenue with TCSH from all novated
maintenance contracts and maintenance contracts arising from clients
nominated in Schedule A after deduction of additional material costs
and 3rd party support charges, until October 31, 2000. J&J will supply
all staff required.
<PAGE>
3 DOCUMENTATION
3.1 TCSH will provide by December, 31 1999 to J&J on signing of this
agreement:
o a list of existing customers and site documentation
o details and copies of existing maintenance contracts.
o Invoicing details for each client
3.2 TCSH will assign approvals and other relevant documents for the V Band
product range.
4 FUTURE CO-OPERATION
4.1 TCP will make its products available to J&J on reasonable terms where
there is no conflict with existing local distributors.
5. NON-COMPETITION
TCSH agrees not to compete with J&J by selling any other turret product
for a period of twelve months following the date of the Agreement.
6. STOCK AND SPARES
TCSH will provide J&J with the stock of equipment and spares required
to maintain the systems nominated in Schedule A. This is not to include
items as part of work in progress to meet current orders. TCSH and J&J
will negotiate in good faith to determine spares level, and TCSH agrees
not to deal otherwise in that stock. TCSH will not charge a fee for the
stock and equipment used for maintenance purposes. Stock and equipment
utilised for customer expansion will be shared 60/40 on a revenue basis
from client invoice.
7. PAYMENT TERMS
Payment will be made by J&J to TCSH in arrears on the 15th of the
calendar month and will be based on the monthly billed and received
amounts. Accounts will be reconciled to include monies already received
by TCSH for pre-paid maintenance contracts.
8. TCSH PREMISES WALLICH STREET
Should J&J wish to utilise the premises at Wallich Street from the
period when they are vacated by TCSH until the conclusion of the lease
period (31 May 2000), J&J will contribute S$1,000.00 for part lease
costs. TCSH intend to give notice to the landlord in February that the
lease will not be extended unless otherwise notified by J&J.
9. ASSOCIATED COMPANIES
Where the context permits, this Agreement is agreed to bind the
associated companies of J&J and TCSH and their respective subsidiaries)
-2-
<PAGE>
Signed for and on behalf of TCSH Signed for and on behalf of J&J
By /s/ Illegible By /s/ Illegible
------------------------------------ ----------------------------------
(SIGNATURE)
ILLEGIBLE ILLEGIBLE
- -------------------------------------- ------------------------------------
(PRINT NAME AND TITLE)
Date 12/16/99 Date 12/16/99
----------------- ------------------
<PAGE>
SCHEDULE A (NOMINATED CLIENT SITES)
0 UBS AG
0 Christiana Bank
0 Westpac Banking Corporation
0 Capital International
0 Tokai Bank
0 Spectron Energy
0 Philips Singapore
0 San Paolo IMI Bank
0 HSBC Investment
0 Neptune Orient Line
0 NATSTEEL
0 NM Rothschild
0 Tokai Bank
0 Prebon Ltd.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10QSB FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 217,525
<SECURITIES> 0
<RECEIVABLES> 2,767,835
<ALLOWANCES> 0
<INVENTORY> 305,620
<CURRENT-ASSETS> 6,028,155
<PP&E> 438,225
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,037,200
<CURRENT-LIABILITIES> 3,801,898
<BONDS> 0
0
0
<COMMON> 10,400
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,037,200
<SALES> 6,028,155
<TOTAL-REVENUES> 2,425,600
<CGS> 3,602,655
<TOTAL-COSTS> 3,602,655
<OTHER-EXPENSES> 3,791,470
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (25,712)
<INCOME-PRETAX> 0
<INCOME-TAX> (1,383,488)
<INCOME-CONTINUING> 0
<DISCONTINUED> (1,383,488)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,340,689)
<EPS-BASIC> (0.13)
<EPS-DILUTED> (0.00)
</TABLE>
