<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
-------------------------------
For the quarterly period ended December 31, 1995
Commission File Number: 0-20376
XXSYS TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
California 33-0161808
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4619 Viewridge Avenue
San Diego, California 92123
(Address of principal executive offices)
(619) 974-8200
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 X No
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: Common Stock, no par value
- -- 6,149,057 shares outstanding on February 13, 1996.
Transitional Small Business Disclosure Format (check one): Yes X No
<PAGE> 2
XXSYS TECHNOLOGIES, INC.
INDEX
PART I -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-8
</TABLE>
2
<PAGE> 3
XXSYS TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
ASSETS 1995 1995
------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 884,542 $ 148,562
Accounts receivable 176,743 46,623
Stock subscription receivable -- 380,000
Inventory -- --
Prepaid expenses and other 79,089 53,600
------------ ------------
Total current assets 1,140,374 628,785
Machinery, equipment and furniture, net of
accumulated depreciation of $365,434 and $ 207,211 571,648 439,047
Long-term note receivable 446,928 446,928
Deferred costs (Note 2) 192,500 1,102,181
Patents, net of amortization of $94,776 and $86,298 71,857 59,796
------------ ------------
$ 2,423,307 $ 2,676,737
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 502,552 $ 695,552
Accounts payable 434,587 521,699
Accrued liabilities 307,360 98,622
Related party accrued expenses 193,905 192,426
------------ ------------
Total current liabilities 1,438,404 1,508,299
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $100
Shares authorized -- 2,000,000;
Issued and outstanding -- 4,500
(liquidation preference -- $450,000) 450,000 450,000
Common stock, no par value
Shares authorized -- 20,000,000;
Issued and outstanding -- 6,142,822 / 6,067,082 12,216,228 12,068,535
Accumulated deficit (11,230,286) (10,910,399)
Note receivable for preferred stock (275,039) (263,698)
Note receivable for common stock (176,000) (176,000)
Deferred compensation -- --
------------ ------------
Total stockholders' equity 984,903 1,168,438
------------ ------------
$ 2,423,307 $ 2,676,737
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
XXSYS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
1995 1994
----------- -----------
<S> <C> <C>
Revenues:
Sales $ -- $ --
Contract revenues 188,000 118,713
----------- -----------
Total revenues 188,000 118,713
Operating expenses:
Cost of equipment -- --
Cost of services 124,302 1,632
Selling, general and administrative 513,100 206,765
Research and development -- 14,193
----------- -----------
Total operating expenses 637,402 222,590
Operating loss (449,402) (103,877)
Interest income 27,253 12,239
Other income (6) 122,820 --
Interest expense (20,558) (18,679)
----------- -----------
Net loss $ (319,887) $ (110,317)
=========== ===========
Net loss per share $ (.05) $ (.03)
=========== ===========
Weighted average number of shares
outstanding 6,077,784 4,267,898
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
XXSYS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
1995 1994
----------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (319,887) $(110,317)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 33,902 28,293
Non-cash compensation -- 10,000
Accrued interest income (11,341) (11,343)
Changes in assets and liabilities:
Investments -- --
Accounts receivable (130,120) 3,896
Inventories -- --
Prepaid expenses and other (25,489) 672
Accounts payable (87,112) (56,523)
Accrued liabilities 58,738 56,999
Related party accrued expenses 1,479 5,992
----------- ---------
Net cash used in operating activities (479,830) (72,331)
Cash flows from investing activities:
Purchase of machinery and equipment (158,685) (66,610)
Deferred acquisition costs 1,102,181 (1,991)
Other assets (19,879) (74,101)
----------- ---------
Net cash used in investing activities 923,617 (142,702)
Cash flows from financing activities:
Sale of common stock 380,000 --
Warrant redemption costs (42,500) --
Exercise of warrants 147,693 --
Issuance of convertible notes -- 800,000
Issuance of other notes payable -- --
Repayment of notes payable (193,000) --
Payments of related party debt --
----------- ---------
Net cash from financing activities 292,193 800,000
Net increase (decrease) in cash 735,980 584,967
Cash and cash equivalents -- beginning of period 148,562 8,722
----------- ---------
Cash and cash equivalents at end of period $ 884,542 $ 593,689
=========== =========
</TABLE>
See accompanying notes.
5
<PAGE> 6
XXSYS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
and reflect, in the opinion of management, all adjustments necessary for a fair
presentation of the information contained therein. The condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes for the year ended September 30, 1995, contained
in the Company's Form 10-K. The results of operations for the three-month period
ended December 31, 1995, are not necessarily indicative of results for the
entire year.
2. DEFERRED COSTS
Costs incurred in the first quarter ended December 31, 1995, are in
connection with a planned redemption of warrants and have been deferred. If the
warrant redemption is completed, these costs will be accounted for as part of
the cost of the redemption. Otherwise, they will be charged to expense in the
period the warrant redemption activity is terminated.
Costs incurred for the period ended September 30, 1995, were in
connection with a proposed acquisition, which was terminated subsequent to
September 30, 1995. The Company received a cash settlement when it released
certain parties to a lawsuit filed by the Company in October 1995 related to
this matter. (See Note 6, Other Income.)
3. NOTES PAYABLE
Notes payable borrowed from four individuals in May 1994 totaling
$100,000 and having an interest rate of 10% per year were paid off on October 4,
1995, including $13,940 in interest. Another note payable of $93,000 borrowed
from an individual over the August-September 1995 time-frame having an interest
rate of 10% per year was repaid on December 4,1995, including $4,904 in
interest.
Notes payable at December 31, 1995 totaling $502,552 represent
extensions and additions to loans that were in existence from two parties prior
to October 1, 1995. The interest rate on loans outstanding at December 31, 1995,
is at 10% per year. These notes payable are due on October 11, 1996, or upon the
Company receiving no less than $2 million from any equity offering, whichever
occurs sooner. Based on management's current plans for repayment, these new
notes are recorded as short term liabilities.
4. COMMITMENTS
At December 31, 1995, the Company had a commitment to purchase a column
wrapping machine at a cost of approximately $312,000, of which $210,413 had been
paid.
5. STOCKHOLDERS' EQUITY
Common Stock:
On December 27, 1995, the Company received $147,693 upon the exercise
of a warrant to purchase 75,740 restricted shares of common stock at $1.95 per
share.
On October 3, 1995, the Company received cash in the amount of $380,000
as part of a subscription receivable related to a private placement of
$1,056,000, in exchange for 211,200 shares of common stock sold to an uncle of
the Company's chairman at a price of $5.00 per share under a purchase agreement
dated September 1, 1995. Cash in the amount of $500,000 had already been
received by September 30, 1995. Of the total purchase commitment, $176,000
remains as a two-year note payable to the Company at an interest rate of 10% per
year, due September 29, 1997.
6
<PAGE> 7
6. OTHER INCOME
Other income of $122,820 represents the net effect of the Company's
settlement of a lawsuit in which it claimed breach of contract and breach of
fiduciary relationship against third parties who interfered with Company's
efforts to acquire a composite materials company (the "target company"). As
part of the settlement, the Company received a cash payment of $1,300,000, which
has been offset against the Company's cost of acquisition, including legal fees,
appraisal, environmental studies and other due diligence costs and estimated
charges for future costs totaling $1,177,180.
In November 1995 a claim for fees in connection with the Company's
attempted acquisition of the target company was placed against the Company by
its previous investment banker, H. J. Meyers & Co., Inc. ("HJM") (formerly
Thomas James Associates, Inc.). HJM claims that the Company's aforementioned
settlement with the purchaser of the target company qualifies as a "Transaction"
under the terms of the Company's earlier investment banking agreement with HJM,
and that HJM is entitled to an investment banking fee. HJM is seeking $400,000
as its share of the Company's settlement and is willing to waive its right of
first refusal to be the Underwriter of a warrant redemption as a part of that
settlement amount. The Company denies the settlement with purchaser represents a
Transaction and is disputing HJM's claim. Further, the Company plans to go
forward with the warrant redemption as planned, but without an Underwriter (See
Liquidity and Capital Resources).
RESULTS OF OPERATIONS
First Quarter of 1996 Compared to First Quarter of 1995
Revenues of $188,000 were recorded in the quarter ended December 31,
1995, the first quarter of the Company's 1995 fiscal year, representing an
increase of $69,287, or 58%, over the first quarter of fiscal 1994. The increase
in revenues was due principally to billings under government contracts which
fund the validation and resting of the Robo-Wrapper(TM) technology.
Total operating expenses of $637,402 in the first quarter 1996
increased by $414,812, or 186%, over the first quarter of fiscal 1995. The cost
of services of $124,302 represented 66% of contract revenues in the first
quarter 1996. Research and development efforts for the first quarter 1996 were
all part of billable government contracts and therefore were reported as cost of
services. Selling, general and administrative expenses increased by $ 306,335,
or 148%, to $513,100, as the result of higher staffing levels and travel
activity.
Interest income during the first quarter increased to $27,253, compared
to $12,239 in the prior year's first quarter, as a result of a higher level of
cash available for investment and accrued interest on the long term note
receivable. Other income was the result of a settlement of a lawsuit (see Note
6, Other Income).
The net loss for the first quarter of fiscal 1996 of $319,887
represents an increase of $209,570, or 190%, over the net loss of $110,317 in
the first quarter of 1995. On a per share basis, the net loss was $0.05 in the
first quarter 1996, compared to $0.03 in the first quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES--PLANNED WARRANT REDEMPTION
On January 16, 1996, the Company announced that it plans to call for
redemption of its publicly-traded common stock warrants ("Warrants"). The
Company has a right to redeem the Warrants at $0.05 per Warrant. There are
1,600,000 Warrants issued and outstanding, each of which entitles the holder to
purchase one share of common stock of the Company. The initial exercise price of
the Warrants was $6.00 per share, however, the exercise price at the time of the
call for redemption is expected to be closer to $4.00 per share after giving
effect to certain adjustments pursuant to the anti-dilution provisions of the
Warrants.
The anti-dilution provision also affects the number of shares to be
purchased at the lower price, such that each Warrant is expected to entitle the
holder to purchase 1.50 shares of common stock (at $4.00 per share). The Company
expects to formally call the Warrants for redemption in the early Spring of
1996, subject to the effectiveness of a registration statement to be filed with
the Securities and Exchange Commission for purposes of registering the shares of
common stock issuable upon exercise of the Warrants.
7
<PAGE> 8
The redemption of the Warrants, and the sale of any shares of common
stock issued upon the exercise of the Warrants, shall be made only by means of a
prospectus made part of the registration statement to be filed with the
Securities and Exchange Commission.
IMPACT OF INFLATION
Inflation has not had any significant effect on the Company's operating
costs.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is currently subject to certain claims and legal actions
arising in the ordinary course of its business. In the opinion of management,
all such matters are adequately covered by insurance or will not have a material
adverse effect on the Company's financial position.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
None
(b) Reports on Form 8-K:
On October 10, 1995, the Company filed a Form 8-K relating to the
settlement of a lawsuit that it filed against third parties in which the Company
claimed breach of contract and fiduciary duty with regard to its efforts to
acquire a carbon composites manufacturer.
8
<PAGE> 9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
XXSYS TECHNOLOGIES, INC.
July 9, 1996
By: /s/ Gregory P. Hanson
Gregory P. Hanson
Chief Financial Officer (Principal
Financial and Accounting Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-QSB/A FOR THE PERIOD ENDED DECEMBER 31, 1995
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 884,542
<SECURITIES> 0
<RECEIVABLES> 623,671<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,140,374
<PP&E> 937,082
<DEPRECIATION> 365,434
<TOTAL-ASSETS> 2,423,307
<CURRENT-LIABILITIES> 1,438,404
<BONDS> 0
0
450,000
<COMMON> 12,216,226
<OTHER-SE> (451,039)<F2>
<TOTAL-LIABILITY-AND-EQUITY> 2,423,307
<SALES> 188,000
<TOTAL-REVENUES> 188,000
<CGS> 124,302
<TOTAL-COSTS> 124,302
<OTHER-EXPENSES> 513,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,558
<INCOME-PRETAX> (319,887)
<INCOME-TAX> 0
<INCOME-CONTINUING> (319,887)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (319,887)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES LONG TERM NOTE RECEIVABLE OF $446,928 AND TRADE RECEIVABLE OF $176,743
<F2>INCLUDES NOTE RECEIVABLE FOR COMMON STOCK OF $176,000 AND NOTE RECEIVABLE FOR
PREFERRED STOCK OF $275,039 WHICH ARE CONTRA-EQUITY ACCOUNT
</FN>
</TABLE>
