<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-QSB
QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT TO THE 1934
ACT REPORTING REQUIREMENTS
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
FOR THE FISCAL QUARTERLY PERIOD ENDED AUGUST 31, 2000
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO.0-22814
INSYNQ, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 74-2964608
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1101 BROADWAY PLAZA, TACOMA, WA 98402
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(253) 284-2000
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check whether the registrant (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 [X] No [_]
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1
<PAGE>
The total number of shares of the Registrant's Common Stock outstanding as of
October 20, 2000, was 21,204,346.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
--------------------------------------------------------------------------------
2
<PAGE>
INSYNQ, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 2000
Item PAGE
PART I
1 Financial Statements
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II
2 Changes in Securities
4 Submission of Matters to a Vote of Security Holders
5 Other Information
6 Exhibits and Reports on Form 8-K
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
3
<PAGE>
Insynq, Inc.
(formerly Xcel Management, Inc.)
(A Development Stage Company)
Balance Sheet
<TABLE>
<CAPTION>
August 31, 2000 May 31, 2000
--------------------- -------------------
(unaudited) (restated)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ -- $ 106,806
Restricted Cash 15,000
Accounts receivable, net of
allowance for doubtful accounts of
$9,920 and $1,469 at August 31,
2000, and May 31, 2000, respectively 65,113 63,405
Other receivables 48,712 16,912
Inventory 13,064 29,512
Prepaid expenses 32,481 29,186
--------------------- -------------------
174,370 245,821
PROPERTY & EQUIPMENT, NET 1,127,265 1,031,675
OTHER ASSETS:
Intellectual and other intangible 72,088 87,824
property, net
Deposits 167,414 165,584
--------------------- -------------------
$1,541,137 $1,530,904
===================== ===================
</TABLE>
F-1
<PAGE>
Insynq, Inc.
(formerly Xcel Management, Inc.)
(A Development Stage Company)
Balance Sheet
<TABLE>
<CAPTION>
August 31, 2000 May 31, 2000
------------------- -------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) (unaudited) (restated)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 859,343 $ 296,946
Accrued and other liabilities 171,832 183,565
Notes payable 252,245 39,470
Current portion of capital leae obligations 210,532 166,869
----------- -----------
Total current liabilities 1,493,952 686,850
ADVANCE FROM STOCKHOLDER -- 100,000
CONVERTIBLE DEBENTURES, NET OF DISCOUNT OF $325,000 325,000 --
CAPITAL LEASES OBLIGATIONS, NET OF CURRENT PORTION 421,917 442,087
COMMITMENTS AND CONTINGENCIES -- --
PUT OPTION OBLIGATION 1,071,785 1,071,785
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $0.001 par value, 10,000,000 shares
authorized, no shares issued or outstanding -- --
Common stock, $0.001 par value, 100,000,000 shares
authorized, 20,354,346 and 19,620,946 shares
and outstanding as of August 31 and May 31, 2000,
respectively 20,354 19,621
Additional paid-in capital 6,792,129 3,132,903
Unearned compensation and services (1,853,159) --
Accumulated development stage deficit (6,730,841) (3,922,342)
----------- -----------
Total stockholders' equity (deficit) (1,771,517) (769,818)
----------- -----------
$1,541,137 $1,530,904
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
Insynq, Inc.
(formerly Xcel Management, Inc.)
(A Development Stage Company)
Statements of Operation
<TABLE>
<CAPTION>
Cumulative results of
Three months ended August 31, operations since
-------------------------------------------- inception
2000 1999 (August 31, 1998)
----------------- ------------------------ --------------------------
(unaudited) (unaudited and restated) (unaudited)
<S> <C> <C> <C>
REVENUE $ 67,761 $ 23,462 $ 317,185
COSTS AND EXPENSES:
Direct cost of services 274,381 38,928 912,294
Network and infrastructure costs 37,414 5,950 138,755
Selling, general and administrative 2,132,658 53,804 5,098,123
Research and development 70,684 -- 176,436
Advertising 53,041 -- 150,786
Depreciation and amortization 72,357 10,364 277,614
----------------- ------------------- --------------------------
2,640,535 109,046 6,754,008
----------------- ------------------- --------------------------
Loss from operations (2,572,774) (85,584) (6,436,823)
OTHER INCOME (EXPENSES):
Interest expense (236,291) (18,625) (341,370)
Other income 566 41,239 47,352
----------------- ------------------- --------------------------
(235,725) 22,614 (294,018)
----------------- ------------------- --------------------------
NET LOSS $(2,808,499) $ (62,970) $(6,730,841)
================= =================== ==========================
NET LOSS PER SHARE $(0.14) $(0.01) $(0.49)
================= =================== ==========================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 19,972,841 11,321,046 13,763,070
================= =================== ==========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Insynq, Inc.
(formerly Xcel Management, Inc.)
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended
August 31, Cumulative cash flows
-------------------------------------- since inception
2000 1999 (September 16, 1998)
----------------- ---------------- --------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH:
Net loss $(2,808,499) $(62,970) $(6,730,841)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITES:
Depreciation and amortization expense 72,357 10,364 277,174
Issuance of common stock for services 169,270 -- 508,349
Issuance of warrants for services 358,024 -- 1,140,868
Issuance of options to employees under fair 120,506 -- 120,506
market value
Warrants issued with debt and capital leases 145,267 -- 168,867
Warrants and beneficial conversion feature of 325,000 -- 325,000
debentures
CHANGE IN ASSETS AND LIABILITIES:
Accounts receivable (1,708) (3,083) (65,113)
Other receivables 3,200 (634) (13,712)
Prepaid expenses (3,295) (2,613) (32,481)
Inventories 16,448 (26,843) (13,064)
Deposits and other assets (671) -- (164,882)
Accounts payable 562,397 9,999 859,343
Accrued liabilities (11,733) 39,625 171,575
----------------- ---------------- --------------------------
Net cash used by operating activities (1,053,437) 36,154 (3,448,411)
----------------- ---------------- --------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (135,608) (37,662) (548,082)
Acquisition of intellectual property -- -- (1,548)
Deposit on future acquisition (50,000) -- (50,000)
Cash received from Xcel acquisition -- -- 257
----------------- ---------------- --------------------------
Net cash used by investing activities (185,608) (37,662) (599,373)
----------------- ---------------- --------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on short-term notes payable -- --
Payments on capital leases (2,136) (9,463)
Borrowings on convertible debentures 550,000 550,000
Proceeds from short-term notes payable 310,000 310,000
Payments on short-term notes payable (5,625) (36,155)
Proceeds from issuance of common stock -- 265,001 3,133,402
Advance from stockholder 280,000 -- 100,000
----------------- ---------------- --------------------------
Net cash provided by financing activities 1,132,239 265,001 4,047,784
----------------- ---------------- --------------------------
NET INCREASE (DECREASE) IN CASH (106,806) 191,184 --
CASH AT BEGINNING OF PERIOD 106,806 501 --
----------------- ---------------- --------------------------
CASH AT END OF PERIOD $ -- $191,685 $ --
================= ================ ==========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Insynq, Inc.
(formerly Xcel Management, Inc.)
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Unearned Development Total
------------------------------ Paid-in Compensation Stage Stockholders'
Shares Amount Capital and Services Deficit Equity (Deficit)
-------------- ------------ ------------- -------------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Balances at May 31, 2000
as restated 19,620,846 $19,621 $3,132,903 $ -- $(3,922,342) $ (769,818)
Issuance of common stock
for services valued at
$3.25 per share in June
2000, including
unearned services 250,000 250 812,250 (643,230) -- 169,270
Issuance of common stock
at $0.60 per share in
July 2000 200,000 200 119,800 -- -- 120,000
Issuance of common stock
at $0.60 per share in
August 2000 200,000 200 119,800 -- -- 120,000
Issuance of common stock
at $2.00 per share in
August 2000 80,000 80 39,920 -- -- 40,000
Issuance of common stock
for services valued at
$1.32 per share in
August 2000 and stock
granted to Director for
services 3,500 3 22,932 (13,755) -- 9,180
Unearned compensation
for stock options
granted to employees
with exercise prices
below fair market value
on date of grant -- -- 1,307,500 (1,307,500) -- --
Amortization of unearned
compensation -- -- -- 111,326 -- 111,326
Allocation of warrants
and conversion feature
on convertible debenture -- -- 650,000 -- -- 650,000
Issuance of common stock
warrants for services
rendered -- -- 358,024 -- -- 358,024
Allocation of common
stock warrants issued
with debt -- -- 229,000 -- -- 229,000
Net loss for the period
ended August 31, 2000 -- -- -- -- (2,808,499) (2,808,499)
-------------- ------------ ------------- -------------- ------------ ---------------
Balances at August 31,
2000 20,354,346 $20,354 $6,792,129 $(1,853,159) $(6,730,841) $(1,771,517)
============== ============ ============= ============== ============ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Insynq, Inc.
(formerly Xcel Management, Inc.
Notes To Financial Statements
Note 1 - Financial statements
------
The unaudited financial statements of the Company have been prepared by the
Company 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 (GAAP) have been condensed or omitted pursuant to such rules and
regulations. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the entire fiscal year ending May
31, 2001.
The Company, in preparing the Quarterly Financial Report Form 10QSB, discovered
material errors in the Company's Annual Report on Form 10-KSB for the year ended
May 31, 2000 (the "Original Filing"). There is a change in the reporting entity.
The restated financial statements present the financial position and results of
operations of Insnyq, Inc. for the period from inception (August 31, 1998) to
May 31, 2000. The financial statements included in the Original Filing were
those of Xcel Management, Inc. for the two years ended May 31, 2000, with the
results of operations of Insynq included from February 18, 2000 (date of merger)
to May 31, 2000. In addition material errors were discovered in reporting of
expenses related to stock and warrants issued for services in the amount of
$862,843 and the Company did not record an adjustment to equity of $1,071,785 to
account for Put Option Obligation on certain stock. In addition, there were
other adjustments decreasing Stockholders' equity as of May 31, 2000, and
increasing the loss from operations and net loss totaling approximately $85,000
for the year ended.
The following is a schedule of changes to the Original Filing as of May 31,
2000:
Original Filing As Restated
--------------- -----------
Total assets $ 1,607,577 $ 1,530,904
Liabilities $ 1,320,408 $ 1,228,937
Put Option Obligation -- $ 1,071,785
Stockholders equity $ 287,169 $ (769,818)
Loss from operations $ (2,830,427) $ (3,727,042)
Net Loss $ (2,830,427) $ (3,778,867)
Net Loss Per Common Share $(0.29) $(0.27)
The Company has taken steps to correct these errors and to implement procedures
to insure they do not recur.
The Company is preparing an Amended Annual Report on Form 10-K for the Period
ended May 31, 2000 (10KSB-A).
Note 2 - Basis of Presentation
------
Basis of Presentation: The Company does not have operations significant to
sustain it without raising additional funds either through added debt or
offerings of equity. Therefore, in accordance with Statement of Financial
Accounting Standards Board ("SFAS") No. 7, the Company is considered a
Development Stage Company.
F-6
<PAGE>
Insynq, Inc.
(formerly Xcel Management, Inc.)
Notes To Financial Statements
Note 3 - Loss Per Common Share
------
Basic loss per share is computed by dividing the net loss by the weighted
average number of common shares outstanding during the period. The weighted
average number of shares outstanding was 19,972,841 and 11,321,046 for the three
months ended August 31, 2000 and 1999, respectively, and 13,763,070 since
inception August 31, 1998 through August 31, 2000. Diluted loss per share for
all periods presented equaled basic loss per share due to antidilutive effect of
the potentially dilutive securities.
Note 4 - Management Plans
------
The Company is devoting its present efforts into establishing a new business in
the Application Service Provider ("ASP") industry and is currently in the
process of establishing alliances with Independent Software Vendors ("ISV") to
provide applications for its customers and building channels for marketing
products to its customers. We are further developing products from our
technology. Accordingly, our operating revenue has been minimal. The Company's
operations to date have consumed substantial and increasing amounts of cash. The
Company's negative cash flow from operations is expected to continue and may
accelerate in the future. The Company has been testing various marketing ideas
and is near completion of its national marketing plan. The Company will need to
raise substantial additional capital to fund its operations and planned
expansion of its sales efforts through public and private equity or debt
financing. There can be no assurance that such additional funding will be
available on acceptable terms, if at all. The Company's continued existence as a
going concern is ultimately dependent upon its ability to secure additional
funding for completing and marketing its technology and services.
Note 5 - Stock Split
------
On August 3, 2000, the Company held a special meeting of the shareholders and
unanimously voted to adopt the following:
In connection with the re-incorporation of the Company in the State of Delaware,
the shareholders adopted a plan of re-capitalization (the "Re-capitalization")
pursuant to which the issued and outstanding shares of the Company's common
stock were forward split, two-for-one, so that holders of common stock received
two shares of the Company's $0.001 par value common stock (the "Split Common
Stock") for each share previously held.
In addition, the 9,915,424 shares of common stock outstanding immediately prior
to the reorganization were converted to approximately 19,830,848 shares of
common stock, and outstanding options and warrants to purchase shares were
converted into options and warrants entitling the holders to purchase twice as
many shares upon exercise of such options and warrants. The financial statements
have been restated to reflect the forward split.
Note 6 - Stockholder Loans
------
On July 17, 2000, the Company entered into a private financing transaction with
two shareholders, International Fluid Dynamics ("IFD") and Garnier Holdings,
Inc. ("Garnier"), under the terms of which IFD and Garnier each loaned the
Company the sum of $127,500, or a total of $255,000, (the "loans"), and were
granted warrants to purchase a total of 325,000 shares of common stock at a
price of $2.00 per share at any time before July 17, 2005. The Loans are payable
on or before March 1, 2001, with interest compounded annually at the Chase
Manhattan Bank, NA rate quoted as its prime. The Company recorded a discount on
the loans totaling $229,000 for the fair value of warrants granted.
Note 7 - Convertible Debentures
------
Prior to June 1, 2000 the Company received a $100,000 shareholder advance on a
loan pursuant to an agreement with Travin Partners, LLLP ("TPL"), and TCA
Investments, Inc. ("TII"). On June 16, 2000, the Company entered into a private
financing transaction with TPL and TII, under the terms of which TPL and TII
each loaned us the sum of $325,000 (the "loans"), in the form of convertible
debentures, convertible at $0.71, with attached warrants entitling each of them
to purchase a total of 457,746 shares of the Company's common stock at a price
of $1.00 per share. Accrued interest under each debenture is payable only in
shares of the Company's common stock, at a price of $0.71 per share at the
current Bank of America prime rate, plus 1/2%.
The Company recorded a discount on the convertible debentures totaling $650,000
for the fair value of the warrants and conversion feature. The Company has
recognized $325,000 of interest expense on the discount for the period ended
August 31, 2000.
Note 8 - Stockholders' Equity
------
Issuance of Common Stock and Warrants for Cash:
On August 2, 2000 the Company completed a private placement of common equity
with five foreign investors for $100,000 at $0.50 per share, a total of 200,000
shares of restricted shares of common stock. The Company issued these securities
under an exception provided by Rule 903 of Regulation S under the Act.
On August 4, 2000 the Company completed a private placement of common equity
with a private equity investor for $120,000 at $0.60 per share, a total of
200,000 shares of restricted shares of common stock and warrants to purchase
200,000 shares of common stock at an exercise price of $2.00 per share were
issued.
F-7
<PAGE>
Insynq, Inc.
(formerly Xcel Management, Inc.)
Notes To Financial Statements
Note 9 - Contingencies
------
On August 14, 2000, Kathleen McHenry ("McHenry"), the widow of a former
principal and shareholder of Insynq, filed a lawsuit in the Superior Court of
Washington against the Company, Insynq, M. Carroll Benton, the Company's Chief
Administrative Officer, Secretary, and Treasurer, and Mr. John Gorst, the
Company's President, Chief Executive Officer, and Chairman of the Board,
alleging that the defendants attempted to defraud her out of the shares issued
to her deceased husband during his tenure with Insynq. In May 1999, Mr. Gorst
and Ms. McHenry entered into an agreement whereby Ms. McHenry sold to Mr. Gorst
3,526,400 shares of Insynq left to her after her husband's death. The lawsuit
alleges that neither Mr. Gorst nor Insynq performed under the terms of the
agreement and seeks a rescission of that agreement, a declaration from the court
that the agreement is unenforceable, and damages in an unspecified amount.
Management does not consider the contingency to be probable or quantifiable, and
therefore has not accrued an amount on the Company's financial statements.
Note 10 - Stock Options
-------
In connection with the restructuring, the Company granted 535,000 options to
existing employees and 85,000 options to employees who were terminated. All
options were issued at an exercise price of $1.63 per share.
The Company also issued options to employees with an exercise price under fair
market value. In accordance with APB Opinion 25, the Company recorded unearned
compensation of $1,307,500 and recognized expense of $111,326 for the period
ended August 31, 2000.
Note 11 - Subsequent Events
-------
Long Term Incentive Plan
Effective September 1, 2000, the Company amended its Long-Term Incentive Plan to
provide that stock options may be issued at less than the fair market value of
the Company's common stock to consultants as of the date granted.
In connection with the restructuring, the Company granted 535,000 options to
existing employees and 85,000 options to employees who were terminated. All
options were issued at an exercise price of $1.63 per share.
The Company also issued options to employees with an exercise price under fair
market value. In accordance with APB Opinion 25, the Company recorded unearned
compensation of $1,307,500 and recognized expense of $111,326 for the period
ended August 31, 2000.
On September 11, 2000, we entered into a private financing transaction with two
investors, Travin Partners, L.L.L.P. ("TPL") and TCA Investments, Inc. ("TII"),
under the terms of which TPL and TII each loaned us the sum of $125,000 (the
"loans"), and we issued the convertible debentures and granted warrants,
described below. The loans are payable pursuant to the terms of identical
convertible debentures (each, a "Debenture"), providing for full payment on or
before October 11, 2000 (the "Due Date"), with interest at the current Bank of
America prime rate, plus 1/2%. All principal and accrued interest under each
Debenture is convertible into shares of our common stock at a conversion price
of (a) $1.00 per share or (b) sixty percent (60%) of the average of the bid
price, whichever is less on the date of conversion. The Debentures are
convertible in increments of no less than $10,000, at any time after September
11, 2000 and before repayment of such amounts. In addition to the Debentures,
TPL and TII were granted warrants entitling each of them to purchase a total of
125,000 shares of our common stock at a price of $1.00 per share, at any time
after October 31, 2000 and before September 11, 2005. These warrants have a
"cashless" exercise provision allowing TPL and/or TII to exercise the warrants
for a reduced number of shares pursuant to a formula set forth in the warrants.
We agreed to file, on or before October 31, 2000, a registration statement
which includes the shares issuable under conversion of the Debentures and upon
exercise of the warrants held by TPL and TII (the "Underlying Shares"), at TPL's
and TII's request, and to cause such registration statement to become effective
as soon as practicable. In addition, we agreed to include the Underlying Shares,
on TPL's and TII's request, in any registration we file (exclusive of a
registration relating to sales in employee benefit plans, a Rule 145
transaction, or the sale of debt or convertible debt instruments, or a
registration statement which does not contain substantially similar
information), subject to the holder's agreement to enter into appropriate
underwriting agreement(s), and other requirements. We issued these securities
under an exemption provided by Rule 506 of Regulation D under the Act. Each of
TPL and TII represented that it was an "accredited investor" as defined in Rule
501 of Regulation D, was acquiring the securities as an investment and not with
a view to distribution, and would not resell the securities unless they became
registered or another exemption from registration was available. The securities
we issued were properly legended to reflect these restrictions.
The maturity dates of the promissory notes dated July 17, 2000, between the
company and each of Garnier Holdings, Lt., and International Fluid Dynamics,
Inc., have been extended to March 1, 2001.
F-8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" and other similar expressions or variations of
such words are intended to identify these forward-looking statements.
Additionally, statements concerning future matters such as the development of
new products, enhancements, or technologies, possible changes in legislation and
other statements regarding matters that are not historical fact are forward-
looking statements. Forward-looking statements involve risks and uncertainties.
Actual results could differ materially from those projected in the forward-
looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, availability of financial resources adequate
for short-, medium- and long-term needs, demand for our products and services
and market acceptance, as well as those factors discussed in this "Item 2.
Management's Discussion and Analysis of Financial Condition and Operating
Results" and elsewhere in this Report.
Overview
Insynq-WA was incorporated August 31, 1998, and is a development stage company
that provides Internet Appliances, managed and hosted software services, Web
hosting services, Web-based local and wide area networks, and access to Internet
marketing assistance and related equipment and services.
In late 1999, Insynq-WA decided to target a combination with a public company
and on February 18, 2000, Xcel and Insynq-WA closed an asset purchase
transaction in which Xcel acquired substantially all of the assets of Insynq-WA.
with Insynq as the surviving entity. We continued the business of Insynq-WA and
on August 3, 2000, at a special meeting of its shareholders, Xcel completed a
re-incorporation merger with its wholly owned subsidiary, Insynq Inc., a
Delaware corporation. Today, we continue to deliver the application hosting and
managed software services we founded incorporating Internet Appliances developed
as part of our IQ Delivery System.
Results of Operations
We had limited active operations during the fiscal quarter ended August 31, 1999
("First Quarter 2000"), and therefore, we believe that a comparison of the
results of operations of First Quarter 2000 to the fiscal quarter ended August
31, 2000 ("First Quarter 2001"), has limited value for evaluating trends and as
a basis for predicting future results.
We incurred a net loss of $2,808,499 for the First Quarter 2001, as compared to
a net loss of $62,970 for the First Quarter 2000. The First Quarter 2001 and
First Quarter 2000 losses resulted primarily from: (1) providing discounted or
free services as we test-marketed our products and services, (2) initial
network, infrastructure, and research and
________________________________________________________________________________
1
<PAGE>
development costs associated with start-up operations, and (3) increases in
salaries and related benefits, reflecting headcount increases in our technical,
development, sales, marketing, finance, accounting, and administrative staff.
Total revenue for First Quarter 2001 was $67,761, an increase of $44,299 as
compared to the First Quarter 2000. The primary sources of First Quarter 2001
revenue, which essentially did not occur in First Quarter 2000, includes: seat
subscription revenue of $42,012, managed software service revenue of $21,008,
and hardware and software sales revenue of $4,741. We expect future revenue from
all sources to trend away from our practice of providing discounts and free
offerings experienced in First Quarter 2000 as we continue develop our sales and
implement our sales and marketing strategies, and prove our business model.
Our continued growth is significantly dependent upon our ability to generate
sales relating to our subscription and managed software services. Our main
priorities relating to revenue are: (1) increase market awareness of our
products and services through our strategic marketing plan, (2) growth in the
number of customers and seats per customer, (3) continue to accomplish
technological economies of scale, and (4) continue to streamline and maximize
efficiencies in our system implementation model.
Costs and Expenses
During First Quarter 2001, we recorded direct costs of services of $274,381, an
increase of $235,453 over the limited operations experienced in First Quarter
2000. Network and infrastructure costs were $37,414 for First Quarter 2001,
which is an increase of $31,464 from First Quarter 2000.
Selling, general, and administrative costs increased to $2,132,658 in the First
Quarter 2001, an increase of $2,078,854 over the First Quarter 2000, as we built
out our infrastructure, including hiring management and support staff, and
started to develop our sales and delivery systems.
Depreciation and amortization expense increased to $72,357 in First Quarter
2001, an increase of $61,993 over First Quarter 2000, as we purchased fixed
assets, including computer equipment needed for infrastructure to support active
business operations.
Interest expense was $236,291 during First Quarter 2001 versus $18,625 in First
Quarter 2000 as a result of an increase in capital lease obligations incurred on
purchases of computer equipment needed for infrastructure to support active
business operations and as a result of interest recognized on discounts on
short-term notes and convertible debentures. Other income, decreased to $566 in
the First Quarter 2001, versus $41,239, primarily due to trademark revenue
recorded in First Quarter 2000.
We recorded a $469,050 non-recurring extraordinary gain on extinguishment of
debt for First Quarter 2000 in connection with the Xcel Asset Purchase
Agreement.
________________________________________________________________________________
2
<PAGE>
Liquidity and Capital Resources
We had cash and cash equivalents of $0.00 at August 31, 2000, and $106,806 at
May 31, 2000, and working capital deficits of $(1,319,582) and $(441,029) at the
same dates, respectively.
Our continuation as a going concern is dependent on our ability to obtain
additional financing and generate sufficient cash flow from operations to meet,
and in certain cases restructure, our obligations on a timely basis.
From September 1, 2000, through October 17, 2000, we raised additional
financings of $464,000 through non-employee exercise of options and short-term
loans.
As of October 20, 2000, we are in default on certain obligations including
financing arrangements, in the amount of approximately $450,000. If the Company
is not able to correct such defaults, it could adversely impact our financial
condition and ability to raise funding in the future. We have initiated
discussions to restructure substanitally all of these obligations.
A shareholder has repurchase rights which allows for a "put" of its 285,714
shares of common stock back to the Company at $2.50 per share if a registration
statement is not filed on or before October 13, 2000 registering such shares,
and additional shares subject to warrnats it holds. Three other shareholders
have similar "put" rights for a total of 125,000 shares at $2.86 per share if
the Company does not register such shares by October 31, 2000. And additional
warrants they hold. The Company is currently in discussions with these
shareholders regarding an extension of the registration of these shares.
We currently have no arrangements or commitments for accounts or accounts
receivable financing. We believe our need for additional capital going forward
will be met from public and private debt and equity offerings, and,
increasingly, from revenues from operations as we continue to implement our
strategic plan; however, future operations will be dependent upon our ability to
secure sufficient sources of financing and adequate vendor credit.
We are currently developing and refining our acquisition and expansion strategy.
If we expand more rapidly than currently anticipated, if our working capital
needs exceed our current expectations, or if we consummate acquisitions, we will
need to raise additional capital from public and private equity and debt
sources. We cannot be sure that we will be able to obtain the additional
financings to satisfy our cash requirements or to implement our growth strategy
on acceptable terms or at all. If we cannot obtain such financings on terms
acceptable to us, our ability to fund our planned business expansion and to fund
our on-going operations will be materially adversely affected. We are presently
pursuing a variety of sources of debt and equity financings. If we incur debt,
the risks associated with our business and with owning our common stock could
increase. If we raise capital through the sale of equity securities, the
percentage ownership of our stockholders will be diluted. In addition, any new
equity securities may have rights, preferences, or privileges senior to those of
our common stock.
________________________________________________________________________________
3
<PAGE>
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
The Due Dates on the Convertible Debentures dated September 11, 2000,
between the Company and each of TCA Investments, Inc. and Travin Partners,
L.L.L.P. have been extended to November 11, 2000.
The maturity dates of the promissory notes dated July 17, 2000, between the
Company and each of Garnier Holdings, Lt., and International Fluid Dynamics,
Inc., have been extended to March 1, 2001.
On October 20, 2000, the Company borrowed $125,000 from each of Travin
Partners, LLLP and International Fluid Dynamics, Inc. in exchange for the
Company's promissory note to each lender. The notes bear interest at ten percent
per annum and are due November 3, 2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 3, 2000, the Company held a special meeting of shareholders at which
11,578,232 shares were present in person or by proxy. The following actions were
approved:
a) RE-INCORPORATION IN DELAWARE
Changing the state of incorporation from Utah to Delaware.
In order to accomplish the re-incorporation in accordance with the laws of the
states of Utah and Delaware, Xcel merged with and into a wholly owned
subsidiary, Insynq, Inc., formed under the laws of the state of Delaware
(hereinafter "Insynq"), pursuant to the terms of a Plan of Merger. Under the
terms of the merger, Insynq is the surviving corporation. The Certificate of
Incorporation and Bylaws of Insynq are the governing instruments of the
surviving corporation.
Through the merger, and in connection with the re-capitalization described under
"RECAPITALIZATION" below, each Xcel shareholder received two shares of Insynq
common stock, par value $0.001 per share, in exchange for each share of Xcel
common stock, par value $0.001 per share, held immediately prior to the merger.
The Certificate of Incorporation of Insynq increased the authorized number of
shares of common stock (the "Common Stock") to 100,000,000 shares, par value
$0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per
share. In addition, the
________________________________________________________________________________
4
<PAGE>
Certificate of Incorporation of Insynq also authorizes a total of 10,000,000
shares of Class A Common Stock (the "Class A Common Stock"), par value $0.001
per share.
Change of Our Name
In connection with the re-incorporation, we changed our name from Xcel
Management, Inc., to "Insynq, Inc." We believe that changing our name to
"Insynq, Inc." is more reflective of our activities.
Forward Stock Split
In connection with our re-incorporation in the state of Delaware, each
shareholder received 2 shares of Insynq for each share held prior to the merger.
As such, our outstanding stock increased to approximately 19,830,848 shares of
common stock. The reincorporation in Delaware was unanimously approved.
b) RE-CAPITALIZATION
Pursuant to the merger the shareholders unanimously voted for the adoption of a
plan of re-capitalization (the "Re-capitalization"), under which holders of Xcel
common stock received two shares of the Insynq $0.001 par value common stock for
each share held prior to the merger.
The rights of existing shareholders were not altered in connection with the Re-
capitalization, and no shareholders were eliminated as a result of the Re-
capitalization. The authorized number of shares of our common stock did not
change, and the par value of our common stock remained at $0.001. The Re-
capitalization had the effect of increasing our stated capital by approximately
$9,915 (which is the number of additional shares as a result of the Re-
capitalization multiplied by the par value for such shares).
As a result of the Re-capitalization, the 9,915,424 shares of common stock
outstanding immediately prior to the reorganization were converted to
approximately 19,830,848 shares of common stock, and outstanding options and
warrants to purchase shares were converted into options and warrants entitling
the holders to purchase twice as many shares upon exercise of such options and
warrants.
c) ADOPTION OF INCENTIVE PLANS
By a vote of 11,525,336 to 52,896, the shareholders voted to adopt our 2000 Long
Term Incentive Plan (the "Employee Plan") and our 2000 Executive Long Term
Incentive Plan (the "Executive Plan") collectively, the ("Incentive Plans"). The
essential terms of the Incentive Plans are substantially identical, except for
two differences:
1) The Employee Plan is for our executives, managers, and key employees. The
Executive Plan is for our executive officers.
________________________________________________________________________________
5
<PAGE>
2) We reserved a total of 16,675,300 shares of common stock for issuance under
the Employee Plan, and we reserved a total of 5,400,000 shares of Class A Common
Stock for issuance under the Executive Plan. The Class A Common Stock carries
preferred voting rights, entitling the holder to three (3) voting shares for
each share of common stock held by a holder of Class A Common Stock.
d) RATIFICATION OF ACCOUNTANT
The shareholders unanimously ratified the selection of G. Brad Beckstead as our
independent auditor for the 2000 fiscal year.
ITEM 5. OTHER INFORMATION
On September 22, 2000, we executed a Release Agreement (the "Release Agreement")
with M. Carroll Benton, our chief administrative officer, secretary and
treasurer, John Gorst, our chief executive officer, Charles Benton, the husband
of Ms. Benton, Interactive Information Systems, an entity owned by Ms. Benton,
and entities controlled by Mr. Benton, which, with certain exceptions, releases
the parties from any and all claims, if any, arising from the parties' prior
relationships and dealings prior to the Release date. Among the consideration
given for the Release Agreement, the Company granted Mr. Benton registration
rights to register his shares of common stock of the Company. In addition, Mr.
Gorst, Mr. Benton and Ms. Benton executed a Release Agreement (the "Gorst
Release") to fully and finally release Mr. Gorst personally of any obligations
arising under the $65,000 promissory note he owed to Mr. Benton secured by
shares of our stock he originally purchased from Mr. Benton, as well as a
general release of Mr. Gorst, with certain exceptions, by Mr. and Mrs. Benton
and certain entities affiliated with them. In consideration of the Gorst
Release, Mr. Gorst agreed to transfer 150,000 shares of our common stock held by
him to Mr. Benton, and Ms. Benton transferred approximately 98,000 shares of
common stock held by her to Mr. Benton.
In connection with the reorganization of employees the company granted 535,000
options to employees who were not terminated and 85,000 options to employees who
were terminated. All options were issued at an exercise price of $1.63 per
share.
On October 20, 2000 the Company gave its thirty-day prior written notice to
Gerard Klauer Mattison & Co., Inc. to terminate its exclusive financial advisory
relationship regarding certain strategic transactions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
EXHIBIT
NUMBER DESCRIPTION
-------------------------------------------------------------------------------------------------------
<S> <C>
4.2* Form of Warrant Agreement issued to Consulting & Strategy International, LLC on
February 24, 2000, as amended by Amendment No.1 dated June 9, 2000, Amendment No. 2
dated July 31, 2000, Amendment No. 3 dated August 31, 2000 and Amendment No. 4 dated
October 1, 2000.
-------------------------------------------------------------------------------------------------------
</TABLE>
_______________________________________________________________________________
6
<PAGE>
<TABLE>
<S> <C>
-------------------------------------------------------------------------------------------------------
4.7* Form of Warrant Agreement issued to TCA Investments, Inc. on June 16, 2000, as amended
by Amendment No. 1 dated August 31, 2000, Extension No. 1 dated September 5, 2000,
Amendment No. 2 dated September 14, 2000 and Amendment No. 3 dated October 1, 2000.
-------------------------------------------------------------------------------------------------------
4.8* Form of Convertible Debenture issued to TCA Investments, Inc. on June 16, 2000, as
amended by Amendment No. 1 dated August 31, 2000, Extension No. 1 dated September 5, 2000,
Amendment No. 2 dated September 14, 2000 and Amendment No. 3 dated October 1, 2000.
-------------------------------------------------------------------------------------------------------
4.9* Form of Warrant Agreement issued to Garnier Holdings, Ltd. on July 17, 2000, as amended
by Amendment No.1 dated September 22, 2000, Amendment No. 2 dated October 1, 2000 and
Amendment No. 3 dated October 19, 2000.
-------------------------------------------------------------------------------------------------------
4.10* Form of Promissory Note issued to Garnier Holdings, Ltd. on July 17, 2000, as amended
by Extension No. 1 dated September 11, 2000 and Extension No. 2 dated October 1, 2000.
-------------------------------------------------------------------------------------------------------
4.17* Form of Subscription Agreement between TCA Investments, Inc. and Insynq, Inc. dated
June 16, 2000, as amended by Amendment No. 1 dated October 6, 2000.
-------------------------------------------------------------------------------------------------------
4.18* Form of Subscription Agreement between TCA Investments, Inc. and Insynq, Inc. dated
September 11, 2000.
-------------------------------------------------------------------------------------------------------
4.19* Form of Warrant Agreement issued to TCA Investments, Inc. dated September 11, 2000.
-------------------------------------------------------------------------------------------------------
4.20* Form of Convertible Debenture issued to TCA Investments, Inc. dated September 11, 2000,
as amended by Amendment No.1 dated September October 6, 2000 and Amendment No. 2 dated
October 19, 2000
-------------------------------------------------------------------------------------------------------
4.21* Form of Consent of Plazacorp, Ltd. to Extension of the filing of the Registration Statement
on Form SB-2 dated September 22, 2000.
-------------------------------------------------------------------------------------------------------
4.22* Form of Consent of Plazacorp, Ltd. to Extension of the filing of the Registration Statement
on Form SB-2 dated October 2, 2000.
-------------------------------------------------------------------------------------------------------
4.23* Form of Consent of TCA Investments, Inc. to Extension of the filing of the Registration
Statement on Form SB-2 dated September 22, 2000.
-------------------------------------------------------------------------------------------------------
4.24* Form of Consent of TCA Investments, Inc. to Extension of the filing of the Registration
Statement on Form SB-2 dated October 2, 2000.
-------------------------------------------------------------------------------------------------------
4.25* Form of Consent of International Fluid Dynamics, Inc. to Extension of the filing of the
Registration Statement on Form SB-2 dated September 22, 2000.
-------------------------------------------------------------------------------------------------------
4.26* Form of Consent of International Fluid Dynamics, Inc. to Extension of the filing of the
Registration Statement on Form SB-2 dated October 2, 2000.
-------------------------------------------------------------------------------------------------------
4.27* Registration Rights Agreement dated September 22, 2000 between Charles Benton and Insynq,
Inc.
-------------------------------------------------------------------------------------------------------
4.28* Form of Promissory Note issued to International Fluid Dynamics, Inc. on October 20, 2000.
-------------------------------------------------------------------------------------------------------
10.2* Insynq, Inc. 2000 Long Term Incentive Plan, as amended by Amendment No. 1 dated
September 22, 2000.
-------------------------------------------------------------------------------------------------------
10.3* Business Services Contract with Consulting & Strategy International, L.L.C. dated
November 18, 1999, as amended by Amendment No. 1 dated August 31, 2000, Amendment No. 2
dated September 14, 2000 and Amendment No. 3 dated October 1, 2000.
-------------------------------------------------------------------------------------------------------
10.4* Independent Marketing Consultant Agreement with Vijay Alimchandani dated February 20,
2000, as amended by Amendment No. 1 dated June 30, 2000.
-------------------------------------------------------------------------------------------------------
</TABLE>
________________________________________________________________________________
7
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------
<S> <C>
10.14* Employment Agreement, dated as of February 20, 2000, between Jim Zachman and Xcel
Management, Inc., as amended by Amendment No. 1 dated September 16, 2000.
-------------------------------------------------------------------------------------------------------
10.37* Application Hosting and Delivery Agreement dated August 18, 2000 between Donor
Management, Inc. and Insynq, Inc.
-------------------------------------------------------------------------------------------------------
10.38* Application Service Provider Agreement dated August 21, 2000 between Corel Corporation
and Insynq, Inc.
-------------------------------------------------------------------------------------------------------
10.39* Application Services Agreement dated September 6, 2000 between Microsoft and Insynq,
Inc.
-------------------------------------------------------------------------------------------------------
10.40* Consulting Agreement dated September 20, 2000 between David D. Selmon and Insynq, Inc.
-------------------------------------------------------------------------------------------------------
10.41* Release Agreement with Charles Benton dated September 22, 2000.
-------------------------------------------------------------------------------------------------------
10.42* Release Agreement with Charles Benton dated September 22, 2000.
-------------------------------------------------------------------------------------------------------
10.43* Employment Agreement dated September 18, 2000 between Stephen C. Smith and Insynq, Inc.
-------------------------------------------------------------------------------------------------------
10.44* Non-Exclusive Financial Advisory Agreement dated June 16, 2000 between Sunstate Equity
Trading, Inc. and Xcel Management, Inc.
-------------------------------------------------------------------------------------------------------
10.45* Independent Consulting Agreement dated September 16, 2000, between Steven Tebo and
Insynq, Inc.
-------------------------------------------------------------------------------------------------------
10.46* Independent Consulting Agreement dated September 16, 2000, between Franklin C. Fisher
and Insynq, Inc.
-------------------------------------------------------------------------------------------------------
27.1* Financial Data Schedule
-------------------------------------------------------------------------------------------------------
</TABLE>
* Filed Herewith
(b) Reports of Form 8-K
The Company filed two Reports on 8-K during the three months ended August 31,
2000:
In its Form 8-K filed June 29, 2000, the Company reported that on June 15, 2000,
Don Manzano resigned his position as President and Chief Operations Officer of
the Company, and Mr. John P. Gorst will be acting as interim President and Chief
Operations Officer.
In its Form 8-K filed August 17, 2000, the Company reported that On August 3,
2000, Xcel Management, Inc., a Utah corporation (the "Xcel"), completed a re-
incorporation merger with its wholly-owned subsidiary, Insynq, Inc. ("Insynq"),
a Delaware corporation, pursuant to a Plan of Merger (the "Merger Agreement")
dated June 30, 2000. Pursuant to the Merger Agreement, each shareholder received
two (2) shares of Insynq common stock for each share held on the date of the
merger.
On September 27, 2000, we filed a Current Report on Form 8-K reporting our
reorganization of our operations both in sales and marketing; reduction of
salaries and benefits for most members of executive management and certain other
employees; our promotion of James R. Leigh, III to the position of President;
the resignation of DJ Johnson as our Chief Financial Officer; hiring of Stephen
C. Smith as the interim Chief Financial Officer; the termination of an agreement
with Tricorp Financial, Inc. and Rosenblum Partners, LLC; and, the retention of
Cardinal Capital of Atlanta, Georgia, to assist us in obtaining funding for
marketing and for additional working capital.
________________________________________________________________________________
8
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form 10-QSB and has duly caused this Quarterly
Report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Tacoma, State of Washington, on October 23, 2000.
INSYNQ, INC.
By: /s/ JOHN P. GORST
--------------------
John P. Gorst,
Chief Executive Officer
By: /s/ STEPHEN C. SMITH
--------------------
Stephen C. Smith,
Interim Chief Financial Officer
________________________________________________________________________________
9
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
EXHIBIT
NUMBER DESCRIPTION
-------------------------------------------------------------------------------------------------------
<S> <C>
4.2* Form of Warrant Agreement issued to Consulting & Strategy International, LLC on
February 24, 2000, as amended by Amendment No.1 dated June 9, 2000, Amendment No. 2
dated July 31, 2000, Amendment No. 3 dated August 31, 2000 and Amendment No. 4 dated
October 1, 2000.
-------------------------------------------------------------------------------------------------------
4.7* Form of Warrant Agreement issued to TCA Investments, Inc. on June 16, 2000, as amended
by Amendment No. 1 dated August 31, 2000, Amendment No. 2 dated September 14, 2000 and
Amendment No. 3 dated October 1, 2000.
-------------------------------------------------------------------------------------------------------
4.8* Form of Convertible Debenture issued to TCA Investments, Inc. on June 16, 2000, as
amended by Amendment No. 1 dated August 31, 2000, Amendment No. 2 dated September 14,
2000 and Amendment No. 3 dated October 1, 2000.
-------------------------------------------------------------------------------------------------------
4.9* Form of Warrant Agreement issued to Garnier Holdings, Ltd. on July 17, 2000, as amended
by Amendment No.1 dated September 22, 2000, Amendment No. 2 dated October 1, 2000 and
Amendment No. 3 dated October 19, 2000.
-------------------------------------------------------------------------------------------------------
4.10* Form of Promissory Note issued to Garnier Holdings, Ltd. on July 17, 2000, as amended
by Extension No. 1 dated September 11, 2000 and Extension No. 2 dated October 1, 2000.
-------------------------------------------------------------------------------------------------------
4.17* Form of Subscription Agreement between TCA Investments, Inc. and Insynq, Inc. dated
June 16, 2000, as amended by Amendment No. 1 dated October 6, 2000.
-------------------------------------------------------------------------------------------------------
4.18* Form of Subscription Agreement between TCA Investments, Inc. and Insynq, Inc. dated
September 11, 2000.
-------------------------------------------------------------------------------------------------------
4.19* Form of Warrant Agreement issued to TCA Investments, Inc. dated September 11, 2000.
-------------------------------------------------------------------------------------------------------
4.20* Form of Convertible Debenture issued to TCA Investments, Inc. dated September 11, 2000,
as amended by Amendment No.1 dated September October 6, 2000 and Amendment No. 2 dated
October 19, 2000
-------------------------------------------------------------------------------------------------------
4.21* Form of Consent of Plazacorp, Ltd. to Extension of the filing of the Registration Statement
on Form SB-2 dated September 22, 2000.
-------------------------------------------------------------------------------------------------------
4.22* Form of Consent of Plazacorp, Ltd. to Extension of the filing of the Registration Statement
on Form SB-2 dated October 2, 2000.
-------------------------------------------------------------------------------------------------------
4.23* Form of Consent of TCA Investments, Inc. to Extension of the filing of the Registration
Statement on Form SB-2 dated September 22, 2000.
-------------------------------------------------------------------------------------------------------
4.24* Form of Consent of TCA Investments, Inc. to Extension of the filing of the Registration
Statement on Form SB-2 dated October 2, 2000.
-------------------------------------------------------------------------------------------------------
4.25* Form of Consent of International Fluid Dynamics, Inc. to Extension of the filing of the
Registration Statement on Form SB-2 dated September 22, 2000.
-------------------------------------------------------------------------------------------------------
4.26* Form of Consent of International Fluid Dynamics, Inc. to Extension of the filing of the
Registration Statement on Form SB-2 dated October 2, 2000.
-------------------------------------------------------------------------------------------------------
4.27* Registration Rights Agreement dated September 22, 2000 between Charles Benton and Insynq,
Inc.
-------------------------------------------------------------------------------------------------------
4.28* Form of Promissory Note issued to International Fluid Dynamics, Inc. on October 20, 2000.
-------------------------------------------------------------------------------------------------------
10.2* Insynq, Inc. 2000 Long Term Incentive Plan, as amended by Amendment No. 1 dated
September 1, 2000.
-------------------------------------------------------------------------------------------------------
10.3* Business Services Contract with Consulting & Strategy International, L.L.C. dated
November 18, 1999, as amended by Amendment No. 1 dated August 31, 2000, Amendment No. 2
dated September 14, 2000 and Amendment No. 3 dated October 1, 2000.
-------------------------------------------------------------------------------------------------------
10.4* Independent Marketing Consultant Agreement with Vijay Alimchandani dated February 20,
2000, as amended by Amendment No. 1 dated June 30, 2000.
-------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------
<S> <C>
10.14* Employment Agreement, dated as of February 20, 2000, between Jim Zachman and Xcel
Management, Inc., as amended by Amendment No. 1 dated September 16, 2000.
-------------------------------------------------------------------------------------------------------
10.37* Application Hosting and Delivery Agreement dated August 18, 2000 between Donor
Management, Inc. and Insynq, Inc.
-------------------------------------------------------------------------------------------------------
10.38* Application Service Provider Agreement dated August 21, 2000 between Corel Corporation
and Insynq, Inc.
-------------------------------------------------------------------------------------------------------
10.39* Application Services Agreement dated September 6, 2000 between Microsoft and Insynq,
Inc.
-------------------------------------------------------------------------------------------------------
10.40* Consulting Agreement dated September 20, 2000 between David D. Selmon and Insynq, Inc.
-------------------------------------------------------------------------------------------------------
10.41* Release Agreement with Charles Benton dated September 22, 2000.
-------------------------------------------------------------------------------------------------------
10.42* Release Agreement with Charles Benton dated September 22, 2000.
-------------------------------------------------------------------------------------------------------
10.43* Employment Agreement dated September 18, 2000 between Stephen C. Smith and Insynq, Inc.
-------------------------------------------------------------------------------------------------------
10.44* Non-Exclusive Financial Advisory Agreement dated June 16, 2000 between Sunstate Equity
Trading, Inc. and Xcel Management, Inc.
-------------------------------------------------------------------------------------------------------
10.45* Independent Consulting Agreement dated September 16, 2000, between Steven Tebo and
Insynq, Inc.
-------------------------------------------------------------------------------------------------------
10.46* Independent Consulting Agreement dated September 16, 2000, between Franklin C. Fisher
and Insynq, Inc.
-------------------------------------------------------------------------------------------------------
27.1* Financial Data Schedule
-------------------------------------------------------------------------------------------------------
</TABLE>
* Filed Herewith
