U.S. 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 29, 2000
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[ ] Transition Report under Section 13 or 15(d)of the Exchange Act For
the
Transition Period from ________ to ___________
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Commission File Number: 0-22814
XCEL MANAGEMENT, INC.
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(Exact name of small business issuer as specified in its charter)
Utah 87-0363613
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1101 Broadway Plaza
Tacoma, Washington 98402
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(Address of principal executive offices)
(253) 284-2000
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(Issuer's telephone number)
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months
(or 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 [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the Registrant filed all documents and reports required to
Be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
1
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The Registrant has 9,404,050 shares of Common Stock, $0.001 par value per
share, issued and outstanding as February 29, 2000. The Registrant has no
Preferred Stock issued nor outstanding as of February 29, 2000.
Traditional Small Business Disclosure Format (check one) Yes [ ] No [X]
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements................................. 4
CPA Review Letter..................................... 5
Balance Sheet (unaudited)............................ 6-7
Statements of Operations (unaudited)................. 8
Item 2. Management's Discussion and Analysis of Plan
of Operation........................................ 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 13
Item 2. Changes in Securities and Use of Proceeds............ 13
Item 3. Defaults upon Senior Securities...................... 13
Item 4. Submission of Matters to a Vote
of Security Holders.................................. 13
Item 5. Other Information..................................... 13
Item 6. Exhibits and Reports on Form 8-K...................... 13
Signatures...................................................... 14
3
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS
(a) The unaudited financial statements of registrant for the three
months ended February 29, 2000, follow. The financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented.
4
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G. BRAD BECKSTEAD
Certified Public Accountant
5836 S. Pecos Road
Las Vegas, NV 89120
702.528-1984
425.928.2877 efax
To the Board of Directors
Xcell Management, Inc.
Tacoma, Washington
I have reviewed the accompanying balance sheet of Xcell Management, Inc. as
of February 29, 2000, and the related income statement for the 3-month period
then ended, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of Xcell Management, Inc.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than
an audit in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, I do not express such an opinion.
Except as expressed below, based on my review, I am not aware of any material
modifications that should be made to the accompanying financial statements in
order for them to be in conformity with generally accepted accounting
principles.
My review was made for the purpose of expressing limited assurance that there
are not material modifications that should be made to the financial statements
in order for them to be in conformity with generally accepted accounting
principles. Management has elected to omit substantially all of the required
disclosures and the statements of cash flow and stockholders' equity for the
period ended February 29, 2000. Because the significance and pervasiveness
of the omitted disclosures make it difficult to assess their impact on
financial statements taken as a whole, users of these financials statements
should recognize that they might reach different conclusions about the
company's financial, results of operations, and cash flows if they had access
to revised financial statements prepared in conformity with generally
accepted accounting principles.
/s/ G. Brad Beckstead, CPA
- ----------------------------
May 3, 2000
5
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Insynq, Inc.
Balance Sheet
Balance as of: 02/29/2000
<TABLE>
<CAPTION>
BALANCE SHEET
Assets:
Currant Assets:
<S> <C>
Cash on Hand:
Petty Cash $ 100.00
Cash on Hand $ 100.00
Cash in Bank:
Cash in Bank, Checking $ 4,703.06
Cash in Bank-Wells Fargo $ Mkt Chkg 367,279.45
Wells Fargo Gen Cking 584.00
Wells Fargo-Purchasing 255.00
Cash in Bank 372,821.51
Accounts Receivable:
Accounts Receivable:
Accounts Receivable - Trade $ 43,384.00
Allowance for Doubtful Accounts -1,468.59
Employee Advances 10,209.01
Accounts Receivable $ 52,124.42
Accounts Receivable 52,124.42
Inventory 8,104.32
Work in Process - Labor 5,809.18
Work In Process - Materials 37,640.91
Prepaid Expenses:
Prepaid Expenses $ 21,538.52
Prepaid Expenses 21,538.52
Total Currant Assets $ 498,138.86
Fixed Assets:
Computer Hardware $ 124,291.70
Computer Software 92,087.37
Equipment 163,816.50
Furniture & Fixtures 71,741.31
Intellectual Property 130,000.00
Capitalized Leased Equipment 587,517.09
Leasehold Improvements 35,441.78
Accumulated Amortization -32,500.00
Accumulated Depreciation-Fixed Assets -65,182.00
Fixed Assets 1,107,213.75
Total Fixed Assets 1,107,213.75
Deferrred Tax Benefits 352,958.44
Total Fixed Assets 1,460,172.19
Other Assets:
Organization Expense $ 4,151.19
Trademarks 1,547.79
Accumulated Amortization-OrganizationExpense -345.93
Accum Amortization - Trademark -43.00
Escrow - Building Deposit 153,343.75
Deposits 5,000.00
Other Assets 163,653.80
Total Assets 2,121,964.85
============
</TABLE>
6
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Insynq, Inc.
Balance Sheet
Balance as of: 02/29/2000
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current Liabilities:
<S> <C>
Accounts Payable:
Accounts Payable $ 193,111.89
Credit Cards Payable 650.00
Payable - IISC -215.77
Offering Refunds 15,000.00
Customer Deposits 15,418.60
Deferred Revenue 3,330.00
Accrued Bonuses 15,000.00
Accounts Payable $242,294.72
Payroll Taxes Payable:
Federal Payroll Taxes Payable:
Federal 941 Taxes Payable $ 9,534.72
Federal 940 Taxes Payable 1,099.64
Federal Payroll Taxes Payable $ 10,634.36
State Payroll Taxes Payable:
Labor & Industries Payable $ 621.97
Employment Security Payable 4,101.63
California Withholding 10,850.04
California Disability 568.71
State Payroll Taxes Payable 16,142.35
Total Payroll Taxes Payable 26,776.71
Sales Tax Payable 9,365.33
Employee Deductions Payable 1,675.46
Current Portion Long Term Debt 166,869.00
Total Current Liabilities $ 446,981.22
Long Term Liabilities:
Notes Payable:
Equipment Lease - HP $ 587,517.09
Current Portion - HP Lease -166,869.00
Eqmnt Lease-Capital Connection 25,844.23
Furn. Lease-Capital Connection 28,249.99
Notes Payable $ 474,742.31
Total Long Term Liabilities 474,742.31
Other Liabilities:
Deferred Tax Liability $ 50,966.00
Total Other Liabilities 50,966.00
Total Liabilities $ 972,689.53
Equity:
Stock:
Common Stock:
Common Stock $ 594,150.00
Private Offering 929,500.00
Private Offering 800,000.00
Common Stock 2,323,650.00
Stock 2,323,650.00
Paid in Capital 1,242.00
Retained Earnings -601,501.11
Current Net Income -574,115.57
Total Equity 1,149,275.32
Total Liabilities & Capital 2,121,964.85
============
</TABLE>
7
<PAGE>
Insynq, Inc.
Income Statement
For period beginning 01/01/2000 and ending 02/29/2000
<TABLE>
<CAPTION>
STATEMENT OF INCOME
Revenue:
<S> <C>
Sales Income:
Data Utility Services $ 19,040.25
Vertical Market Activity 750.00
Sales - Hardware 25,056.00
Sales - Software 9,150.00
Less: Discounts & Allowances -1,667.00
Sales Income 52,329.25
Cost of Sales:
Cost of Sales $ 43,257.87
Internet Services 26,250.23
Total Cost of Sales 69,508.10
Total Revenue -$17,178.85
Operating Expense:
Technical Operating Expenses:
Salaries & Benefits $ 77,340.86
Telephone Expense 1,284.36
Publications, Computer Manuals 21.93
Small Tools and Supplies 758.37
Staff Training 820.00
Travel & Entertainment 1,593.51
Other Technical Expense 407.90
Total Technical Operating Expenses $ 82,226.93
Sales & Marketing :
Salaries and Payroll Tax Expense $ 58,279.59
Advertising Expense 60,377.54
Dues and Subscriptions 124.65
Marketing Materials 25,522.04
Telephone Expense 498.11
Travel & Entertainment 6,299.15
Total Sales & Marketing 151,101.08
Total Operating Expense 233,328.01
General Expense:
Administrative Expenses:
Salaries & Payroll Tax 175,082.28
Interest Expense 382.76
Insurance Expense 10,466.00
Telephone Expense 10,435.38
Rent Expense 35,485.97
Professional Fees 35,079.47
Office Expenses 6,650.65
Travel 27,673.94
Other Administrative Expense 24,344.70
Total Administrative Expenses 325,601.15
Total General Expense 325,601.15
Other Income:
Other Income:
Interest Income $1,992.44
Other Income $1,992.44
Total Other Income 1,992.44
Net Profit or (Loss) (574,115.57)
</TABLE>
8
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS
Xcel Management, Inc., the ("Company") or the ("Registrant"), is a provider
of computer hardware, software, computer/internet related telephonic
requirements and services, access to web services of all kinds, access to
internet marketing assistance and related equipment and services. The
Company offers these services as an integrated whole; in other words, the
Company is an on-line provider of hardware and software, together with
related support services, on a rental, fee or sales basis, with its best
margins arising from fee services.
The Company faces risks which include, but are not limited to, an
evolving and unpredictable business model, dependence on the growth
in use of services such as the Company provides, the acceptance of
the Company's services and products, the ability to obtain information
about competitive activities, rapid technological change and
the management of growth. There can be no assurance that the
Company will be successful in addressing such risks, and the failure
to do so could have a material adverse effect on the Company's
business, prospects, financial condition and results of operations.
(1) Products, Services, and Targeted Customers
Xcel Management Inc., targets small businesses and high-end home offices
for the sale of hardware and software and access to related services. It
provides these not in a retail setting, but by attempting to convince
customers and subscribers to adopt a cost effective on-line solution to
building and to maintain an information technology system through the
adoption of a "server-based" computing as an alternative to both local
area networks (LAN's), and traditional client/server implementations.
The Company plans to concentrate on the small business and high-end home
office user ("SOHO"), and markets itself as an "internet utility company"
that can provide cost-effectively all of the computer software, hardware,
telecommunication and internet needs for the SOHO markets.
The Company's offices and headquarters, consisting of approximately
18,000 square feet, are located at 1101 Broadway Plaza, Tacoma, Washington
98402. The Company has approximately 30 employees, consisting of the
Company's management, clerical, approximately 10 to 12 technical people,
and an additional 10 marketing and sales personnel.
Going Concern - The Company experienced operating losses for the
period ended February 29, 2000. The financial statements have been
prepared assuming the Company will continue to operate as a going
concern which contemplates the realization of assets and the
settlement of liabilities in the normal course of business. No
adjustment has been made to the recorded amount of assets or the
recorded amount or classification of liabilities which would be
required if the Company were unable to continue its operations. As
discussed in Note 3, of the notes to the financial statements.
Unclassified Balance Sheet - In accordance with the provisions of
SFAS No. 53, the Company has elected to present an unclassified
balance sheet.
9
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Loss Per Share - The Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share"
that established standards for the computation, presentation and
disclosure of earnings per share ("EPS"), replacing the presentation
of Primary EPS with a presentation of Basic EPS. It also requires
dual presentation of Basic EPS and Diluted EPS on the face of the
income statement for entities with complex capital structures. The
Company did not present Diluted EPS since it has a simple capital
structure.
(2) Results of Operations
For third Quarter ending February 29, 2000, the Company generated
sales of $52,329. For the operating period ended February 29, 2000,
the Company incurred a net loss of $574,115 for technical, selling,
marketing, general and administrative expenses related to start-up
operations. Of this amount, Technical Operating expenses were
$82,226; Sales and Marketing expenses were $151,101.
In its most recent operating period ended February 29, 2000, the
Company incurred a net loss of approximately $574,115. This loss is
in line with company expectations. Sales from Operations for the same
period were $52,329, with cost of goods sold at $69,508, resulting in
negative revenues of ($17,178). Total Operating Expenses for the same
period were $325,601.
(3) Plan of Operation
From November 1992 until approximately the end of 1995, the Company (which
had changed its name to "Palace Casinos, Inc."), was engaged, through
its then wholly-owned subsidiary, Maritime Group, Ltd. (the "Subsidiary"), in
the development of a dockside gaming facility in Biloxi, Mississippi. In
April, 1994, the Subsidiary completed the development of the Biloxi gaming
facility, "Palace Casino," and commenced operations. On December 1, 1994, the
Company and the Subsidiary separately filed voluntary petitions for relief
under Chapter 11 of the federal bankruptcy laws. Although the Company's
original bankruptcy petition was filed in the United States Bankruptcy Court
for the District of Utah, Central Division, the supervision of the Company's
Chapter 11 proceedings was transferred to the United States Bankruptcy Court
for the Southern District of Mississippi (the "Bankruptcy Court"). On
September 22, 1995, the Company, which had been operating as
debtor-in-possession in connection with the bankruptcy proceeding, entered
into an Asset Purchase Agreement under the terms of which it agreed, subject
to the approval of the Bankruptcy Court, to sell substantially all of the
Subsidiary's operating assets. This transaction was approved by the
Bankruptcy Court, and completed in the end of 1995, with all of the net
proceeds of the transaction being distributed to creditors. Following the
completion of the sale of the Subsidiary's Assets, the Company had essentially
no assets and liabilities and the Company's business operations essentially
ceased, except for efforts to complete a plan of reorganization, described
below.
In February, 1999, Steve Rippon and Edward D. Bagley, the Company's
former management, submitted to the Bankruptcy Court, as plan proponents, a
plan of reorganization (the "Plan"), which was confirmed by the Bankruptcy
Court on June 16, 1999. Under the terms of the Plan: (a) all of the
Company's priority creditors were paid a total of $5,000; (b) unsecured
creditors, holding between $300,000 and $500,000 in claims, were issued pro
rata a total of 90,000 shares of post-bankruptcy common stock in full
satisfaction of such obligations; and (c) all of the equity holders of
the Company's common stock, were issued, pro rata, a total of approximately
90,000 shares of common stock in lieu of a total of 8,794,329 shares of
preferAcquisition or Disposition of Assets"), pursuant to
Item 6, ("Resignations of Registrant's Director's"), pursuant to Item 7,
("Financial Statements and Exhibits"). These changes have been reflected
in this Form 10QSB filing. The Company also filed a Current Report, dated
April 3, 2000, on Form 8-K containing information pursuant to Item 4,
("Changes in Registrant's Certifying Account").
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
XCEL MANAGEMENT, INC.
(Registrant)
Dated: May 3, 2000
/s/ John P. Gorst
- --------------------------------------
John P. Gorst, Chairman of the Board
and Chief Executive Officer
Dated: May 3, 2000
/s/ M. Carroll Benton
- --------------------------------------
M. Carroll Benton, Secretary/Treasurer
14
<PAGE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET, THE STATEMENT OF OPERATIONS, AND THE STATEMENT OF CASH
FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> FEB-29-2000
<CASH> 372,821
<SECURITIES> 0
<RECEIVABLES> 52,124
<ALLOWANCES> 65,089
<INVENTORY> 8,104
<CURRENT-ASSETS> 498,138
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,121,964
<CURRENT-LIABILITIES> 446,981
<BONDS> 0
0
0
<COMMON> 594,150
<OTHER-SE> 1,285,520
<TOTAL-LIABILITY-AND-EQUITY> 2,121,964
<SALES> 52,329
<TOTAL-REVENUES> (17,178)
<CGS> 69,508
<TOTAL-COSTS> 325,601
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,992
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (574,115)
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
