UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended February 28, 1998
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (no fee required) for the transition period from
____________________ to _____________________
Commission file number: 0-9476
FLEXWEIGHT CORPORATION
(Name of Small Business Issuer in Its Charter)
Kansas 48-0680109
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2133 East 9400 South, Suite 151, Sandy, Utah 84093
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(801) 944-0701
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 No XX
The number of shares outstanding of Registrant's common stock ($0.10 par value)
as of February 19, 1998 was 4,958,078.
Total of Sequentially Numbered Pages: 6
Exhibit Index on Page: 6
1
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TABLE OF CONTENTS
PART 1
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.............3
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................4
SIGNATURES............................................................5
INDEX TO EXHIBITS.....................................................6
<PAGE>
PART I
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ITEM 1. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Unless otherwise indicated, the term "Company" refers to Flexweight
Corporation and its former subsidiaries and predecessors. Unaudited interim
financial statements including a balance sheet for the Company as of the fiscal
quarter ended February 28, 1998 and statements of operations and statements of
cash flows for the interim period up to the date of such balance sheet and the
comparable period of the preceding fiscal year are attached hereto as Pages F-1
through F-8 and are incorporated herein by this reference.
This section intentionally left blank.
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Flexweight Corporation
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance sheet of Flexweight Corporation (a
development stage company) as of August 31, 1997 and the related statements of
operations, stockholders' equity (deficit), and cash flows for the years ended
August 31, 1997 and 1996 and from inception on November 26, 1962 through August
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly, in all
material respects, the financial position of Flexweight Corporation (a
development stage company) as of August 31, 1997 and the results of its
operations and its cash flows for the years ended August 31, 1997 and 1996 and
from its inception on November 26, 1962 through August 31, 1997 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is a development stage company and has no
operating capital which raises substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Jones, Jensen & Company
November 11, 1997
F-1
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FLEXWEIGHT CORPORATION
(A Development Stage Company)
UNAUDITED FINANCIAL STATEMENTS
February 28, 1998
C O N T E N T S
Unaudited Balance Sheet .....................................................F-3
Unaudited Statements of Operations ......................................... F-4
Unaudited Statements of Cash Flows ......................................... F-5
Notes to the Unaudited Financial Statements ................................ F-6
See notes to unaudited financial statements
F-2
<PAGE>
FLEXWEIGHT CORPORATION
(A Development Stage Company)
Unaudited Balance Sheet
ASSETS
February 28,
1998
CURRENT ASSETS
Cash $ - _
Total Current Assets -_
TOTAL ASSETS $ -
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 10,133
Taxes payable (Note 5) 12,500
Total Current Liabilities 22,633
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 5,000,000 shares authorized
of $0.10 par value, 4,958,078 shares issued
and outstanding 495,808
Additional paid-in capital 1,040,508
Deficit accumulated during the development stage (1,558,949)
Total Stockholders' Equity (Deficit) (22,633)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ -
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
FLEXWEIGHT CORPORATION
(A Development Stage Company)
Unaudited Statements of Operations
From
Inception on
November 26,
For the 6 Months Ended 1962 Through
February 28, February 28,
1997 1996 1998
REVENUES $ - $ - $ -
LOSS FROM DISCONTINUED
OPERATIONS (NOTE 3) - - (2,048,687)
GAIN FROM DISPOSITION OF
DISCONTINUED OPERATIONS (Note 3) 220,888 - 499,871
NET INCOME (LOSS) $ 220,888 $ - $ (1,548,816)
NET INCOME (LOSS) PER
SHARE OF COMMON STOCK $ 0.04 $ - $ -
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
FLEXWEIGHT CORPORATION
(A Development Stage Company)
Unaudited Statements of Cash Flows
From
Inception on
November 26,
For the 6 Months Ended 1962 Through
February 28, February 28,
1998 1997 1998
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) ........................................... $ 220,888 $ -- $ (1,769,704)
Adjustments to reconcile net loss to
net cash used by operating activities:
Loss on discontinued operations ............................. -- -- 303,243
Gain on disposal of assets .................................. -- -- (278,983)
Stock issued for services ................................... -- -- 105,612
Increase (decrease) in accounts and taxes payable ........... (220,888) -- 233,388
Net Cash Used by Operating Activities .................... -- -- (1,406,444)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment ....................................... -- -- (124,208)
Net Cash Used by Investing Activities .................... -- -- (124,208)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable ................................. -- -- 350,000
Issuance of common stock for cash ........................... -- -- 1,180,652
Net Cash Provided by Financing Activities ................ -- -- 1,530,652
NET INCREASE (DECREASE) IN CASH ............................... -- -- --
CASH AT BEGINNING OF PERIOD ................................... -- -- --
CASH AT END OF PERIOD ......................................... $ -- $ -- $ --
CASH PAID FOR:
Interest .................................................... $ -- $ -- $ --
Income taxes ................................................ $ -- $ -- $ --
NON CASH FINANCING ACTIVITIES
Common stock issued for services ............................ $ -- $ -- $ 105,612
The accompanying notes are an integral part of these financial statements
</TABLE>
F-5
<PAGE>
FLEXWEIGHT CORPORATION
(A Development Stage Company)
Notes to the Unaudited Financial Statements
February 28, 1998
NOTE 1 - ORGANIZATION AND HISTORY
The Company was incorporated under the laws of the State of
Kansas on November 26, 1962 under the name of 'Flexweight
Drillpipe Company, Inc.' The purpose of the Company was to engage
in manufacturing and marketing of double-wall drill pipe. It
changed its name to 'Flexweight Corporation' on September 11,
1967.
The Company filed for Chapter 11 bankruptcy protection on June
25, 1987. In September 1995, the Company's only asset, a
building, was foreclosed upon.
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected an August 31 year
end.
b. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments
with maturities of three months or less at the time of
acquisition.
c. Loss Per Share
The computations of loss per share of common stock are based on
the weighted average number of shares outstanding at the date of
the financial statements.
d. Provision for Taxes
At February 28, 1998, the Company had net operating loss
carryforwards of approximately $1,500,000 that may be offset
against future taxable income through 2012. No tax benefit has
been reported in the financial statements, because the Company
believes there is a 50% or greater chance the carryforwards will
expire unused. Accordingly, the potential tax benefits of the
loss carryforwards are offset by a valuation account of the same
amount.
e. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
FLEXWEIGHT CORPORATION
(A Development Stage Company)
Notes to the Unaudited Financial Statements
February 28, 1998
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern
which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. However, the
Company does not have significant cash or other material assets,
nor does it have an established source of revenues sufficient to
cover its operating costs and to allow it to continue as a going
concern. It is the intent of the Company to seek a merger with an
existing, operating company. Until that time, shareholders of the
Company have committed to meeting its minimal operating needs.
NOTE 3 - DISCONTINUED OPERATIONS
The Company has been inactive since August 1995. All activity
subsequent to August 1995 is relating to the discontinued
operations. The following is a summary of income (loss) from
operations of the Company.
Revenue $ 729,587
Expenses (2,778,274)
Loss from Discontinued Operations $ (2,048,687)
Write-off of assets $ (295,373)
Gain on write off of debt $ 795,244
Gain on Disposal of
Discontinued Operations $ 499,871
NOTE 4 - STOCK TRANSACTIONS
On August 8, 1996, the Board of Directors approved to issue
878,504 and 97,612 shares of common stock to A-Z Professional
Consultants and Park Street Investments, Inc. for consulting fees
valued at $87,850 and $9,761, respectively.
In June 1997, the Company issued a total of 80,000 shares of its
common stock to its officers for services they rendered valued at
$8,000.
NOTE 5 - TAXES PAYABLE
The taxes payable pertain to personal property taxes payable on
equipment and machinery which the Company no longer owns. On
March 8, 1998, The Company settled personal property taxes owed
to Barton County Kansas of $223,255 by paying $12,500.
NOTE 6 - SUBSEQUENT EVENTS
On April 8, 1998, the Shareholders approved, among other matters,
a 1 for 100 Reverse Split of the Company's Common Stock, par
value $0.10, and to amend the Articles of Incorporation to
increase the number of authorized shares from 5,000,000 to
25,000,000.
F-7
<PAGE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
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The Company was originally incorporated under the name Flexweight
Drillpipe Company in 1958. From 1958 to late 1961, the Company acted as a
distributor of oil field equipment, representing several manufacturers. In 1961,
the Company commenced the manufacture of a double-wall flexible weight pipe used
in oil field drilling, and couplings, devices which join lengths of pipe in a
pipeline system. The Company also provided tool joint welding services, machine
shop and custom repair work including rebuilding drilling rigs and their
components principally in the State of Kansas.
Beginning in 1982, the Company experienced significant losses from
operations largely as a result of contraction of the oil field supply industry.
On March 11, 1985, the Company filed for protection in the U.S. Bankruptcy Court
for the District of Kansas. The Company's secured creditors demanded complete
liquidation, sales of inventory, machines, tools and office furniture. The sale
was held on June 12, 1986. The secured creditors agreed to cancel all debt not
satisfied by the proceeds distribution of the liquidation sale resulting in a
$1,721,483 reduction of secured indebtedness. Certain officers and directors of
the Company purchased machines, tools and inventory in the liquidation sale with
plans to lease such assets to the Company and then later exchange the assets for
stock once a plan of reorganization was approved. Following the approval of a
plan of reorganization and discharge from bankruptcy, the Company continued to
operate on a limited basis and attempted to expand into other business
industries. The Company ultimately discontinued operations and liquidated
remaining assets on or about April 8, 1994.
The Company has not had revenues from operations in either of the last
two fiscal years. The Company does not currently produce any products or provide
any services. The Company has no employees, full or part time, aside from its
officers and directors. The Company is actively seeking to recover from its
significant decline in operations and subsequent period of dormancy. The
Company's plan of operations for 1998 centers around its quest to find a
suitable merger or acquisition target with which it can combine or which it can
acquire. Although the Company is seeking to effect a merger or acquisition,
there can be no assurances that it will be able to do so, or if a combination is
achieved, that it will be profitable, worthwhile or sustainable.
On September 1, 1997, the Company executed a Consulting Agreement with
Park Street Investments, Inc. Pursuant to the agreement, Park Street was
retained to assist the Company in locating a suitable target for merger of
acquisition, and to provide financial consulting services, marketing and public
relations services. As consideration for these services, the Company is
obligated to issue a quantity of the Company's common stock sufficient to give
Park Street up to 15% of the Company's total outstanding Common Stock upon Park
Street successfully locating a merger or acquisition candidate and facilitating
the Company's planned merger or acquisition. Park Street may be deemed to be a
control person of the Company by virtue of this contract or by virtue of the
fact that Tammy Gehring, the Company's president and a director is an employee
of Park Street.
4
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The Company is substantially dependent on Park Street Investments.
Presently, the Company is unable to satisfy its cash requirements without the
services provided by Park Street, which has made limited cash advances to the
Company to assist the Company in meeting its short-term cash needs. Park Street
has also agreed to provide the Company with services necessary to sustain the
day to day operations of the Company. The Company can provide no assurances that
Park Street will continue to provide the services or make the advancements
necessary to sustain the Company. The Company will need to raise additional
financing in the next 12 months and the Company intends to raise such funds
through a private or public offering of its common stock once it has
successfully completed a merger or acquisition. However, given the Company's
absence of cash flow and history of losses, there is a substantial risk that the
Company will not be able to raise the capital necessary to make a subsequent
merger or acquisition successful.
In an attempt to prepare the Company for a successful merger or acquisition
with another business entity, the Company agreed to settle its debt obligation
to Barton County, Kansas. The original amount of debt claimed by Barton County
against the Company was $223,255. This debt was incurred by the Company during
1985 and 1986 and wass related to personal property tax liabilities. On November
26, 1997, the Company executed a Settlement Agreement with Barton County, Kansas
pursuant to which the Company was obligated to pay $12,500 to Barton County
within 90 days of the date of the Agreement. According to the agreement, upon
Barton County's receipt of such payment from the Company, the County would
release any and all liens held against the Company. On March 9, 1998 Barton
County received the $12,500 payment and issued the Company a paid in full tax
receipt.
It is likely that if the Company locates a merger or acquisition
candidate, the Company will be required to issue a substantial number of shares
of its Common Stock to facilitate the planned merger or acquisition. It is
expected that such an issuance of shares would likely dilute the ownership
interest of the Company's current shareholders to a substantial degree.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- --------------------------------------------------------------------------------
On April 8, 1998 at 10:15 a.m. there was a special meeting of the
shareholders held at 10100 Petunia Way, Sandy, Utah 84093. Proxies had been
solicited and the following matters were addressed:
Proposal 1 To reelect of Tammy Gehring, Cliff Halling and BonnieJean C.
Tippetts to the Company's board of directors.
Proposal 2 To amend the Company's Articles of Incorporation to increase
the number of authorized shares of the Company's common stock,
par value $0.10 ("Common Stock"), from 5,000,000 to
25,000,000.
Proposal 3 To approve a 1-for-100 reverse stock split of the Company's
Common Stock which shall affect the Common Stock currently
issued and outstanding but not the Common Stock authorized for
issuance.
Proposal 4 To ratify the selection of Jones, Jensen & Company as the
Company's independent auditors for the fiscal year to end
August 31, 1998.
The Board recommended in the Proxy Statement that shareholders vote FOR
each of the proposals to be presented at the special meeting. No solicitation in
opposition to the management's nominees was received prior to, nor presented at
the special meeting.
All of the above proposals were passed by the margins displayed in the
table below.
5
<PAGE>
VOTING RESULTS
Proposal FOR AGAINST ABSTAIN NON-VOTE
-------- --- ------- ------- --------
Election of Tammy Gehring 2,794,093 11,333 5,200 0
Election of BonnieJean Tippets 2,760,093 45,333 5,200 0
Election of Cliff Halling 2,800,093 5,333 5,200 0
Proposal 2 2,512,277 14,900 3,983 278,956
Proposal 3 2,737,643 52,700 20,283 0
Proposal 4 2,799,793 7,500 3,333 0
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a) Index to Exhibits. Exhibits required to be attached by Item 601 of
Regulation S-B are listed in the Index to Exhibits beginning on page
6 of this Form 10-QSB. The Index to Exhibits is incorporated herein
by this reference.
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K during
the quarter ended February 28, 1998.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized this 14TH day of April 1998.
Flexweight Corporation
/s/ Tammy Gehring
Tammy Gehring, President
6
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE DESCRIPTION
NO. NO.
3(i) * Articles of Incorporation, filed in Kansas on
November 26, 1962 under the name of Flexweight
Drillpipe Company, Inc., incorporated herein by
reference from the Company's report on Form 10-K
for the fiscal year ended August 31, 1989.
3(ii) * By-Laws of the Company as filed in Kansas on
November 26, 1962, incorporated herein by reference
from the Company's report on Form 10-K for the
fiscal year ended August 31, 1989.
MATERIAL CONTRACTS
10(i)(a) * Consulting Agreement by and between Flexweight
Corporation and A&Z Professional Consultants, Inc.
dated March 1, 1996, incorporated herein by
reference from the Company's report on Form 10-K
for the fiscal year ended August 31, 1997.
10(i)(b) * Consulting Agreement between the Company and Park
Street Investments, dated July 1, 1997,
incorporated herein by reference from the Company's
report on Form 10-K for the fiscal year ended
August 31, 1997.
10(i)(c) * Mutual Agreement to Terminate dated April 1, 1997
between the Company and A-Z Professional
Consultants, incorporated herein by reference from
the Company's report on Form 10-K for the fiscal
year ended August 31, 1997.
10(i)(d) * Settlement Agreement between the Company and Barton
County, Kansas, incorporated herein by reference
from the Company's report on Form 10-K for the
fiscal year ended August 31, 1997.
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINES SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED AUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S
February 28, 1998 QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000316128
<NAME> FLEXWIGHT CORPORATION
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> FEB-28-1998
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 22,633
<BONDS> 0
0
0
<COMMON> 495,808
<OTHER-SE> (518,441)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 210,755
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 210,755
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
