<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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
[x] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition Period From ________ to ________
Commission file number 0-27928
NICOLLET PROCESS ENGINEERING, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Minnesota 41-1528120
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2665 S. Bayshore Dr., PH 2B
Miami, Florida 33133
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(305) 913-3300
- --------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. YES [X] NO [ ]
The number of shares of common stock, no par value, outstanding as of April 17,
2000 was 27,296,706
Transitional Small Business Disclosure Format (Check One): YES [ ] NO [X]
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
XBOX TECHNOLOGIES, INC.
F/k/a Nicollet Process Engineering, Inc.
Balance Sheets
February 29, 2000 (Unaudited) and August 31, 1999
<TABLE>
<CAPTION>
February 29, August 31,
2000 1999
------------ ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current Assets:
Cash ...................................................................... $ 330,379 $ 200,048
Net receivables ........................................................... 193,981 88,923
Notes receivable - related party .......................................... 3,305,898 651,709
Inventories ............................................................... 49,921 93,674
Prepaid expenses and other assets ......................................... 24,710 19,354
------------ ------------
Total current assets ................................................. 3,904,889 1,053,708
------------ ------------
Property and equipment:
Computer equipment ........................................................ 826,339 620,528
Furnishings and equipment ................................................. 310,150 172,856
Leasehold improvements .................................................... 80,825 70,211
------------ ------------
1,217,314 863,595
Less: accumulated depreciation ........................................... (731,799) (626,681)
------------ ------------
Total property and equipment ......................................... 485,515 236,914
------------ ------------
Other assets:
Software development costs - net of amortization .......................... 28,276 19,096
Other assets ........................................................... 159,513 9,798
------------ ------------
Total other assets ................................................... 187,789 28,894
------------ ------------
Total assets ................................................................. $ 4,578,193 $ 1,319,516
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable .......................................................... $ 212,477 $ 288,217
Accounts payable - related party .......................................... 7,717 59,450
Accrued payroll liabilities ............................................... 137,272 272,086
Other current liabilities ................................................. 65,445 69,857
Customer deposits ......................................................... 16,666 12,615
Current portion of capitalized lease obligation ........................... 15,471 6,204
Accrued consulting fees - related party ................................... 425,000 550,000
Accrued interest .......................................................... 426,210 266,721
------------ ------------
Total current liabilities .................................................... 1,306,258 1,525,150
Notes payable ................................................................ 6,895,400 1,559,900
Capital lease obligation ..................................................... 31,785 11,821
Total liabilities ............................................................ 8,233,443 3,096,871
------------ ------------
Stockholders' deficit:
Common stock, no par value:
Authorized shares -- 50,000,000; issued and outstanding shares
27,296,706 at November 30, 1999 and 26,412,861 at August 31, 1999 .... 12,544,061 12,102,883
Accumulated deficit ....................................................... (16,199,311) (13,880,238)
------------ ------------
Total stockholders' deficit .................................................. (3,655,250) (1,777,355)
------------ ------------
Total liabilities and stockholders' deficit .................................. $ 4,578,193 $ 1,319,516
============ ============
</TABLE>
Note: The balance sheet as of August 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles.
See accompanying notes to financial statements.
2
<PAGE> 3
XBOX TECHNOLOGIES, INC.
F/k/a Nicollet Process Engineering, Inc.
Statements of Operations
For the Three Months and Six Months Ended
February 29, 2000 and February 28, 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------- --------------------------------
Feb. 29, 2000 Feb. 28, 1999 Feb. 29, 2000 Feb. 28, 1999
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales ........................... $ 131,974 $ 262,434 $ 351,559 $ 777,238
Cost of sales ....................... 20,328 262,116 155,825 660,188
------------ ------------ ------------ ------------
Gross margin ........................ 111,646 318 195,734 117,050
Operating expenses:
Selling expenses .............. 394,842 299,960 781,544 563,695
Research and development
expenses ..................... 35,374 97,924 123,036 217,795
General and administrative
expenses ..................... 871,419 260,316 1,534,849 563,551
------------ ------------ ------------ ------------
Total operating expenses .... 1,301,635 658,200 2,439,429 1,345,041
------------ ------------ ------------ ------------
Operating loss ...................... (1,189,989) (657,882) (2,243,695) (1,227,991)
Other income/(expenses)
Interest expense .............. (65,809) (55,116) (78,414) (99,865)
Interest income ............... 2,225 3,036
------------ ------------
Total other
income/(expenses) .......... (63,584) (55,116) (75,378) (99,865)
------------ ------------ ------------ ------------
Net loss ............................ $ (1,253,573) $ (712,998) $ (2,319,073) $ (1,327,856)
------------ ------------ ------------ ------------
Net loss per share .................. $ (0.05) $ (0.11) $ (0.08) $ (0.21)
------------ ------------ ------------ ------------
Weighted average number of
shares outstanding ............ 27,296,706 6,237,384 27,296,706 6,237,384
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
XBOX TECHNOLOGIES, INC.
F/k/a Nicollet Process Engineering, Inc.
Statements of Cash Flows
For the Six Months Ended February 29, 2000 and February 28, 1999
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------
Feb. 29, 2000 Feb. 28, 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss .................................................................. (2,319,073) (1,327,856)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation/amortization ........................................... 87,854 150,443
Accounts receivable ............................................... (89,592) (89,734)
Inventories ......................................................... 44,668 110,994
Prepaid expenses .................................................. 12,730 (96,774)
Accounts payable .................................................... (156,348) (111,982)
Other current liabilitie..s ......................................... (22,578) 1,111,206
Accrued liabilities ............................................... (106,769) 109,419
----------- -----------
Net cash used in operating activities ..................................... (2,549,108) (144,284)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures ...................................................... (67,609) (38,750)
Other assets .............................................................. (2,875) 0
Loans to related party .................................................... (2,654,189) 0
Cash acquired from acquisitions ........................................... 15,383 0
Capital-in-process ........................................................ 0 (42,102)
----------- -----------
Net cash used in investing activities ..................................... (2,709,290) (80,852)
CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES
Proceeds from:
Common stock ........................................................... 60,832 16,625
Notes payable .......................................................... 5,335,500 11,167
Deferred lease obligation .............................................. 0 (425)
Capitalized lease obligation ........................................... (7,603) 0
----------- -----------
Net cash (used in)/from financing activities .............................. 5,388,729 27,367
Net increase in cash ...................................................... 130,331 $ (197,769)
Cash at beginning of period ............................................... 200,048 257,909
Cash at end of period ..................................................... $ 330,379 $ 60,140
=========== ===========
SUPPLEMENTARY DISCLOSURE OF INTEREST AND TAXES PAID
Interest paid ............................................................. $ 0
Taxes paid ................................................................ $ 0
SUPPLEMENTARY DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Asset acquired through noncash acquisition ................................ $ 149,020
</TABLE>
See accompanying notes.
4
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XBOX TECHNOLOGIES, INC.
F/k/a Nicollet Process Engineering, Inc.
Form 10-QSB
February 29, 2000
Notes to Financial Statements
1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements
include the financial statements of XBOX Technologies, Inc. f/k/a
Nicollet Process Engineering, Inc. and its wholly owned subsidiaries,
FullMetrics, Inc. and Knowledgeware Solutions, Inc. All significant
intercompany transactions and accounts have been eliminated. These
financial statements have been prepared by the Company in accordance
with generally accepted accounting principles, pursuant to the rules
and regulations of the Securities and Exchange Commission. Accordingly,
certain information and footnote disclosures normally included in
financial statements have been omitted or condensed pursuant to such
rules and regulations. The information furnished reflects, in the
opinion of the management of the Company, all adjustments (of only a
normally recurring nature) necessary to present a fair statement of the
results for the interim periods presented. Operating results for the
six month period ended February 29, 2000 is not necessarily indicative
of the results that may be expected for the year ended August 31, 2000.
The accompanying unaudited interim financial statements should be read
in conjunction with the financial statements and related notes included
in the Company's Annual Report on Form 10-KSB dated August 31, 1999.
2. NET LOSS PER SHARE
Basic earnings per share is based on the weighted average shares
outstanding and excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share for the Company are
the same as basic earnings per share because the effect of options and
warrants is anti-dilutive.
3. ACQUISITIONS
On November 12, 1999, the Company completed a merger with Knowledgeware
Solutions, Inc. through the exchange of 704,345 shares of common stock
of the Company in exchange for all of the outstanding shares of
Knowledgeware Solutions, Inc. The merger was accounted for using the
purchase method of accounting and, accordingly, the purchase price was
allocated to the acquired assets based on their respective values.
4. SUBSEQUENT EVENTS
The Company anticipates the purchase of 100% of the outstanding stock
of Amyyon Company. The Company has signed a letter of intent with
TechInspirations, Inc. (Cayman), a Cayman Island corporation ("TECH
Cayman"). TECH Cayman is the largest shareholder of the Company and
beneficially owns approximately 77.2% of the Company's common stock.
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
THIS FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. FOR THIS
PURPOSE, ANY STATEMENTS CONTAINED IN THIS FORM 10-QSB THAT ARE NOT STATEMENTS OF
HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING
THE FOREGOING, WORDS SUCH AS "MAY," "WILL," "EXPECT," "BELIEVE," "ANTICIPATE,"
"ESTIMATE" OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR
COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES,
AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF FACTORS,
INCLUDING THOSE DESCRIBED UNDER THE CAPTION "IMPORTANT FACTORS TO CONSIDER"
CONTAINED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, AS AMENDED, FOR THE
FISCAL YEAR ENDED AUGUST 31, 1999.
RESULTS OF OPERATIONS
GENERAL
The structure of the Company has materially changed since the
completion of its fiscal year on August 31, 1999 due to the consummation of two
separate transactions, formation of FullMetrics, Inc. and the acquisition of
Knowledgeware Solutions, Inc. and the contemplation of a third, the acquisition
of Amyyon Company. Management expects the accounting for the acquisition of
Ammyon Company to result in an increase of approximately $2,800,000 to each of
"Total Assets" and "Stockholders' Equity." Results of operations and cash flows
will be accounted for effective as of September 1, 1999.
The following discussions with respect to analysis of the specific
items of the Company's results of operations for the six months ended February
29, 2000 is limited the operations of the parent Company ( XBOX Technologies,
Inc. f/k/a Nicollet Process Engineering) and its two wholly owned subsidiaries
Fullmetrics, Inc. and Knowledgeware Solutions, Inc. No analysis is included for
the potential effects of the expected "Amyyon" acquisition because Amyyon is a
new entrant to the market and its expected results are still uncertain.
REVENUES
Net revenues decreased 55% to approximately $351,559 the six months
ended February 29, 2000 compared to approximately $777,238 the six months ended
February 28, 1999. This decrease is primarily the result of change in sales
model and product mix.
GROSS MARGINS
The gross margin was 56% of revenues in the six months ended February
29, 2000 compared to approximately 15% of revenues the six months ended February
28, 1999. This increase in gross margin as percent of sales is attributable
primarily to an overall reduction in fixed costs of sales. However, gross margin
as an absolute dollar value for the six months ended February 29, 2000 increased
67% to approximately $195,700 compared to approximately $117,000 for the prior
year. Its increase as an absolute dollar value is due to the addition of a
favorable gross profit from Knowledgeware Solutions and an improved FullMetrics
gross profit as compared to the prior year.
6
<PAGE> 7
SALES AND MARKETING EXPENSE
Sales and marketing expenses increased 39% to approximately $781,544
for the six months ended February 29, 2000 from approximately $563,695 the six
months ended February 28, 1999. The increase is primarily the result of an
increase in sales headcount and its related increase in traveling and marketing
expenses.
RESEARCH AND DEVELOPMENT
Research and development expenses decreased 44% from approximately
$123,000 in the six months ended February 29, 2000 to $217,995 for the six
months ended February 28, 1999. The overall decrease as an absolute dollar value
is due to lower research and development payroll costs resulting from staff
reductions and reduced research and development contract services.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased 172% to approximately
$1,535,000 in the six months ended February 29, 2000 compared to approximately
$564,000 for the six months ended February 28, 1999. The substantial increase in
general and administrative expense is partially due to the Company's overall
strategy to become a technology holding company, which resulted in both
Fullmetrics' and Knowledgeware incurring a $25,000 consulting fee each month for
various administrative services.
INTEREST EXPENSE
Interest expense decreased to approximately $78,000 for the six months
ended February 29, 2000 compared to approximately $100,000 for the six months
ended February 28, 1999. This decrease in interest expense is primarily due to
the conversion of Full Metrics' note payable to Techinspirations from debt to
equity on 8/31/99.
NET LOSS
The net loss was approximately $2.32 million or $(.08) per share for
the six months ended February 29, 2000 compared to a loss of approximately $1.33
million and $(.21) per share for the six months ended February 28, 1999.
LIQUIDITY AND CAPITAL RESOURCES
During 1998, the Company entered into a letter of intent with TECH to
provide up to $3,000,000 of additional working capital to the company. The terms
of the letter of intent provided that indebtedness of the Company to TECH would
be converted into equity securities of the Company. On July 29, 1999, the
Company entered into a Stock Purchase Agreement with TECH Cayman to convert the
debt to equity. The Company converted $3,000,000 of debt into 20,000,000 shares
of common stock at a conversion price of $.15 per share. In addition, the
Company converted $100 of debt into the common stock warrant to purchase
4,750,000 shares of the Company's common stock at the exercise price of $.15.
The Company also maintained a revolving operating line of credit up to
$4,000,000 with TECH Cayman bearing interest at the rate of 1% in excess of the
prime rate. The revolving line of credit is secured by a security interest in
the Company's assets. The outstanding balance and interest is due in full in
November 2001. The outstanding balance and accrued interest as of August 31,
1999 was $1,559,900 and $266,721, respectively.
7
<PAGE> 8
In August 1995, the Company acquired its existing Windows(TM) based die
casting software from a third party. The total purchase price for the software
was $300,000 payable in varying monthly installments through May 1999. Because
the agreement was non-interest-bearing, the Company estimated a discount on the
debt of approximately $40,000, which was amortized to interest expense ratably
over the period of the agreement.
Net cash used in operating activities was approximately $2.55 million
for the six months ended February 29, 2000. The cash was used primarily to fund
the Company's operating losses. The Company also used cash of approximately $2.7
million relating to investing activities for the six month period ended February
29, 2000. The net cash used in investing activities during the current period
was primarily for loans to related parties. Net cash provided by financing
activities for the period ended February 29, 2000 was approximately $5.39
million. The net cash provided by financing activities for the period ended
February 29, 2000 was primarily the result of the Company utilizing its credit
facilities.
The Company requires substantial additional financing to cover the cash
needs for fiscal 2000 as a result of the Company's new business strategy and
related ramp up or restructuring periods of its subsidiaries. To date, TECH
Cayman has made advances to the Company in excess of $9.5 million (including
advances that have been converted into shares of the Company's common stock) to
cover Company operating losses. Management is currently finalizing its fiscal
2000 business strategies at the individual subsidiary levels, including the
intended Amyyon acquisition, in order to determine and subsequently pursue
options to finance cash needs. TECH Cayman has no obligation to continue making
advances to the Company, and there can be no assurance that TECH Cayman will
continue to do so. Further, there can be no assurance that the Company will be
able to raise additional debt or equity capital.
The report of the Company's auditors contains an explanatory paragraph
to the effect that the Company's recurring losses and negative cash flows from
operations raise substantial doubts about its ability to continue as a going
concern. If the Company's operations do not provide sufficient cash or the
Company is unable to raise additional capital through debt or equity financing
case sufficient for the Company to continue operations, the Company may be
forced to cease operations.
IMPACT OF YEAR 2000
YEAR 2000 SYSTEMS COSTS
The Company utilizes software and related technologies
throughout its business that will be affected by the date change in the
year 2000. Anticipated costs for system modifications will be expensed
as incurred and are not expected to have a material impact on the
Company's results of operations. However, the Company cannot measure
the impact that the Year 2000 issue will have on its vendors,
suppliers, customers and other parties with whom it conducts business.
8
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material pending legal, governmental, administrative or
other proceedings to which the Company is a party or of which any of its
property is the subject.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The Company is currently in default of the minimum book net worth
covenant under the Credit Facilities and has borrowed funds in excess of the
borrowing base limitations imposed by the Credit Facilities. The Company is
continuously working with TECHINSPIRATIONS to resolve these defaults.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27.1 Financial Data Schedule.
(b) A Form 8-K was filed during the fiscal quarter ended
November 30, 1999.
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SIGNATURES
In accordance with the requirements 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.
XBOX TECHNOLGIES, INC.
F/K/A NICOLLET PROCESS ENGINEERING, INC.
Dated: April 19, 2000 By: /s/ Evros Psiloyenis
-----------------------------------------
Evros Psiloyenis
President
(principal executive officer)
By: /s/ Frank Van Luttikhuizen
-----------------------------------------
Frank Van Luttikhuizen
Chief Financial Officer
(principal accounting officer)
10
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XBOX TECHNOLOGIES, INC. f/k/a NICOLLET PROCESS ENGINEERING, INC.
QUARTERLY REPORT ON FORM 10-QSB
FISCAL QUARTER ENDED November 30, 1999
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Location
----------- ----------- --------
<S> <C> <C>
27.1 Financial Data Schedule............................................ Filed herewith
electronically
</TABLE>
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF OPERATIONS AND BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 330,379
<SECURITIES> 0
<RECEIVABLES> 193,981
<ALLOWANCES> 0
<INVENTORY> 49,921
<CURRENT-ASSETS> 3,904,889
<PP&E> 1,217,314
<DEPRECIATION> 731,799
<TOTAL-ASSETS> 4,578,193
<CURRENT-LIABILITIES> 1,306,258
<BONDS> 0
0
0
<COMMON> 12,544,061
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,578,193
<SALES> 351,559
<TOTAL-REVENUES> 351,559
<CGS> 155,824
<TOTAL-COSTS> 2,439,429
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,378
<INCOME-PRETAX> (2,319,073)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,319,073)
<EPS-BASIC> (.08)
<EPS-DILUTED> (.08)
</TABLE>
