-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CSHmrF/9/Hvr/Df9VRMiF5ebcC3YeE5NU25/5hhoBDeNWPa2Yr2Qcg2BLVN2jP11 4dMK5jTBpOlAFj6lwrrVgQ== 0001023175-00-000328.txt : 20001225 0001023175-00-000328.hdr.sgml : 20001225 ACCESSION NUMBER: 0001023175-00-000328 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20001222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 21ST CENTURY TECHNOLOGIES INC CENTRAL INDEX KEY: 0001090870 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 481110566 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-29209 FILM NUMBER: 794376 BUSINESS ADDRESS: STREET 1: 2513 EAST LOOP STREET 2: 820 NORTH CITY: FT WORTH STATE: TX ZIP: 76118 BUSINESS PHONE: 8172840099 MAIL ADDRESS: STREET 1: 2513 EAST LOOP STREET 2: 820 NORTH CITY: FT WORTH STATE: TX ZIP: 76118 10QSB/A 1 0001.txt U. S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q/A Amendment No. 3 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934 For the quarterly period ended June 30, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 Commission File No. 000-29209 21st CENTURY TECHNOLOGIES, INC. ---------------------------------- (Exact name of registrant as specified in its Charter) NEVADA 48-1110566 --------------------------- -------------------------- (State or Other Jurisdiction of (I.R.S. Employer ID. No.) incorporation or organization) 2513 East Loop 820 North Ft. Worth, TX 76118 ------------------------------------------- (Address of Principal Executive Offices) Issuer's Telephone Number, including area code: (817) 284-0099 Facsimile Number: (817) 284-7528 Indicate by check mark 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 preceding 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 PART 1 FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet for the Three Months Ended June 30, 2000 Consolidated Statements of Operations for the Three Months Ended June 30, 2000 Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2000 Consolidated Statements of Stockholder's Equity for the Three Months Ended June 30, 2000 Notes to Consolidated Financial Statements for the Three Months Ended June 30, 2000 Item 2. Management's Discussion and Analysis of Financial Condition and Result of Operations. PART II OTHER INFORMATION Item 1. Legal Proceedings Item 6. Exhibits and Reports on Form 8-K Part I. FINANCIAL INFORMATION This report includes "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended. All statements other than statements of historical fact included in this report are forward looking statements. Such forward looking statements include, without limitation, statements as to estimates, expectations, beliefs, plans, and objectives concerning the Company's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources" regarding the Company's estimate of sufficiency of existing capital resources and its ability to raise additional capital to fund cash requirements for future operations and acquisitions. The forward looking statements are subject to assumptions and beliefs based on current information known to the Company and factors that are subject to uncertainties, risk and other influences, which are outside the Company's control, and could yield results differing materially from those anticipated. The ability to achieve the Company's expectations is contingent upon a number of factors which include (i) availability of sufficient capital and capital market conditions, (ii) the Company's ability to produce and market its products as produced by its various subsidiaries (including, but not limited to, the PT Night Sights, Sea Patch, Gripper, Griffon 1911 Colt 45 replica sidearm, and tire sealant), (iii) effect of any current or future competitive products, (iv) on going cost of research and development activities, and (v) the retention of key personnel. "PT Night Sights", "Sea Patch", "Gripper" and "Griffon" are our trade marks. This report may contain trademarks and service marks of other companies. ITEM 1. FINANCIAL STATEMENTS 21st Century Technologies, Inc. and Subsidiaries Consolidated Balance Sheet (Unaudited) June 30, 2000 June 30, 1999 -------------- -------------- Assets Current Assets: Cash and cash equivalents $ 374,389 $ 34,279 Accounts Receivable, Net 38,339 1,015,430 Inventories 509,146 172,605 Notes Receivable 826,245 35,873 -------------- -------------- Total Current Assets 1,748,119 1,258,187 Property, Plant, and Equipment, Net 454,607 194,137 Other Assets, Net 560,795 423,313 -------------- -------------- Total Assets $ 2,763,521 $ 1,875,637 ============== ============== Liabilities and Stockholders' Equity Current Liabilities: Accounts Payable-trade $ 65,230 $ 121,553 Accounts Payable-other 43,707 0 -------------- -------------- Total Current Liabilities 108,937 121,553 Other Liabilities: Working Capital Advances 1,765,458 0 Customer Deposits (4,243) 2,594 Notes Payable 12,685 55,989 -------------- -------------- Total Other Liabilities 1,773,900 58,583 -------------- -------------- Total Liabilities: 1,882,837 180,136 Stockholders' Equity: Common Stock, issued 52,657,240 and outstanding shares at .001 par value at June 30, 2000 52,657 38,160 Paid-in Capital 4,607,583 3,731,914 Common Stock Earned, but not Issued 360,000 360,000 Retained Earnings (Deficit) (4,104,928) (2,404,484) Treasury Stock (31,628) (30,089) Stock Subscriptions ( 3,000) 0 -------------- -------------- Total Stockholders' Equity 880,684 1,695,501 -------------- -------------- Total Liabilities and Stockholders' Equity $ 2,763,521 $ 1,875,637 ============== ============== See Notes to Consolidated Financial Statements 21st Century Technologies, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited)
3 Mos. Ended 3 Mos. Ended 6 mos. ended 6 mos. ended June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 -------------- ------------- -------------- ------------- Net Sales $ 213,953 $ 270,795 $ 448,346 $ 493,455 Cost of Sales 235,681 132,401 489,611 317,798 -------------- ------------- -------------- ------------- Gross Profit (21,728) 138,394 (41,265) 175,732 General and administrative expenses 448,472 146,986 924,539 335,628 Depreciation and Amortization 41,411 30,901 74,408 61,802 -------------- ------------- -------------- ------------- Net Income (Loss) (551,611) ( 39,493) $ (1,040,212) $ (231,698) Estimated Income Taxes 0 0 0 0 -------------- ------------- -------------- ------------- Net Income (Loss) $ (551,611) $ ( 39,493) $ (1,040,212) $ (231,698) ============== ============= ============== ============= Earnings (Loss) Per Common Share: Basic & Diluted $ (0.01) $ (0.00) $ (0.02) $ (0.01) See Notes to Consolidated Financial Statements
21st Century Technologies, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, 2000 2000 1999 ------------- ------------- Cash Flows From Operating Activities: Net Income (Loss) $ (1,040,212) $ ( 221,698) Adjustments to reconcile net income to net cash provided (used) by operating activities Depreciation and Amortization 74,408 61,802 Change in operating assets and liabilities: Accounts receivable 55,229 (18,767) Sale of Receivable 99,409 Inventory (108,234) (13,629) Other non-current assets and liabilities, net ( 229,993) 1,917 Accounts payable (155,194) 82,277 ------------- ------------- Net Cash Provided (Used) by Operating Activities (1,304,587) (108,098) Cash Flows From Investing Activities: Purchase Equipment (327,168) (6,823) ------------- ------------- Net Cash Provided (Used) by Investing Activities (327,168) (6,823) Cash Flows From Financing Activities: Working Capital Advances 1,765,458 Increase/(Decrease) in long-term debt (61,025) (85,919) Sale of stock and subscriptions received 189,897 223,998 ------------- ------------- Net Cash Provided (Used) by Financing Activities 1,894,330 138,079 ------------- ------------- Net Increase (Decrease) in Cash and Cash Equivalents 262,575 23,158 Cash and Cash Equivalents at Beginning of Period 111,814 11,121 ------------- ------------- Cash and Cash Equivalents at End of Period $ 374,389 $ 34,279 ============= ============= Non Cash: Sale of Continental Weapons Receivable $ 800,591 See Notes to Consolidated Financial Statements 21st Century Technologies, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity For the Six Months Ended June 30, 2000
Common Paid-in Retained Treasury Stock Issued Stock Capital (Deficit) Stock Subscribed Total Shares --------- ------------ ------------ --------- --------- ----------- ---------- Stock Earned, but not issued $360,000 $ 360,000 Balance December 31, 1999 $ 50,083 $ 4,420,260 $(3,064,715) $(31,628) $(79,700) $1,294,300 50,083,753 Sale of Stock 2,574 187,222 - - - 189,896 1,631,000 Subscriptions Received - - - - 76,700 76,700 - Net Income (Loss) - - (1,001,387) - - (1,040,212) - --------- ------------ ------------ --------- --------- ----------- ---------- Balance June 30, 2000 $ 52,657 $ 4,607,583 $(4,104,928) $(31,628) $ 357,000 $ 880,684 51,714,753 ========= ============ ============ ========= ========= =========== ==========
See notes to Consolidated Financial Statements 21st Century Technologies, Inc. and Consolidated Subsidiaries Notes to Consolidated Financial Statements For the Three Months Ended June 30, 2000 and 1999 (Unaudited) Note 1: Summary of Significant Accounting Policies: a. Organization and Business Activities 21st Century Technologies, Inc. was incorporated under the laws of the State of Delaware on May 15, 1967 as Satcom Corporation. On November 6, 1991, the Company changed its name to Hughes Pharmaceutical Corporation. Subsequent to 1991, the Company changed its name from Hughes Pharmaceutical Corporation to First National Holding Corporation(FNHC) Delaware. The Company became public in 1985 through a merger with International Fluidics Control, Inc. (formerly Sensory Systems, Inc., Training With The Pros, Inc., and/or M-H Studios, Inc.). International Fluidics Control, Inc. successfully completed a public offering of its securities in 1969 under Regulation A of the Securities Act of 1933. As of December 31, 1985, the Company had liquidated all business operations and began the search for a suitable merger or acquisition candidate. As a result of this action, the Board of Directors approved a quasi-reorganization for accounting purposes, effective January 1, 1986, whereby all accumulated deficits in shareholders' equity were offset against additional paid-in capital and common stock balance sheet accounts to the extent of reducing these accounts to equal the par value of the issued and outstanding shares of common stock. During the third quarter of 1994, in conjunction with the execution of a letter of intent to acquire Innovative Weaponry, Inc. (a New Mexico corporation), the Company consummated a plan of merger between FNHC Nevada and FNHC Deleware whereby the Nevada Corporation was the survivor (see below) and changed its corporate name to Innovative Weaponry, Inc. to better reflect its future actions and pending relationship with the acquisition target. On September 15, 1997, the Board of Directors approved a name change to 21st Century Technologies, Inc. Innovative Weaponry, Inc. - New Mexico was incorporated on June 22, 1988 under the laws of the State of New Mexico. The Company was formed for the development and sale of specialized firearms, firearm systems and related equipment. On September 14, 1992, Innovative Weaponry, Inc. filed a petition for relief under Chapter 11 of the Federal Bankruptcy Laws in the United States Bankruptcy Court of the District of New Mexico. Under Chapter 11, certain claims are stayed while the Debtor continues business operations as Debtor-in-Possession. On August 19, 1994, IWI-NV (now 21st Century Technologies, Inc.) and IWI-NM entered into a letter of intent whereby IWI-NV would use its unregistered, restricted common stock and cash to satisfy certain obligations of IWI-NM in settlement of IWI-NM's bankruptcy action. On February 1, 1995, the U. S. Bankruptcy Court of the District of New Mexico confirmed the IWI- NM's plan of reorganization. The plan became effective 30 days after its confirmation. IWI-NM became a wholly owned subsidiary of Innovative Weaponry, Inc. (IWI-NV) (formerly First National Holding Corporation) (FNHC Nevada) (now known as 21st Century Technologies, Inc.), a publicly owned company. b. Cash and Cash Equivalents: For purposes of reporting cash flows, the Company considers all cash on hand and in banks, certificates of deposit and other highly liquid debt instruments with a maturity of three months or less at the date of purchase to be cash and cash equivalents. c. Revenue recognition and credit policies: In the normal course of business, the Company sells its goods on "cash in advance" or "cash on delivery", but primarily extends unsecured credit to its customers involved in the retail and wholesale sale of the Company's products. Revenue is recognized when products are shipped to the wholesale or retail purchaser. All products are shipped F.O.B. the Company's facilities. Management has provided an allowance for doubtful accounts, which reflects its opinion of amounts, which will eventually become uncollectible. In the event of complete non-performance by the Company's customers, the maximum exposure to the Company is the outstanding trade accounts receivable balance at the date of non-performance. d. Inventory: Inventory consists of raw materials used in the manufacture of firearm products and finished goods imported for resale. Inventory is carried at the lower of cost or market value, using the first-in, first-out method (FIFO). e. Property and equipment: Property and equipment is recorded at its historical cost. Depreciation is provided in amounts sufficient to relate the asset cost to operations over the estimated useful life (three to seven years) using the straight-line method for financial reporting purposes. Gains and losses from disposition of property and equipment are recognized as incurred and are included in operations. f. Income Taxes: The Company uses the asset and liability method as identified in SFAS 109, Accounting for Income Taxes. g. Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. h. Asset Impairment: The Company adopted the provisions of SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, in its financial statements for the year ended December 31, 1995. The Company prepares an undiscounted estimate of future cash flows for each long-lived asset (excluding production equipment) on an annual basis. If the carrying value of the asset exceeds undiscounted future cash flows expected to be produced by the asset, the Company recognizes an impairment loss. The Company measures the amount of the impairment loss as the amount by which the carrying value of the asset exceeds its fair value. The Subsidiary Bankruptcy Excess Reorganization Value is evaluated annually for events or conditions which would indicate impairment. Management estimates cash flows which can be expected for continuing to use the asset and then compares these estimated cash flows to the asset's carrying amount. If the estimated cash flows resulting from continuing to use the asset exceed the carrying amount of the asset, an impairment adjustment is not necessary. There has been no effect as of December 31, 1999 of adopting SFAS 121. i. Stock-Based Compensation: The Company will follow the fair value based method of accounting as prescribed by SFAS No. 123, Accounting for Stock-Based Compensation, for its stock-based compensation. The Company currently does not have a stock option plan. j. Principles of Consolidation and Presentation --Wholly-Owned Subsidiaries: The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany transactions and accounts have been eliminated in the consolidation. k. License Agreement: The License agreement is amortized over the life of the related patent technology (generally 17 years) using the straight-line method. l. Research and Development Costs: The Company expenses any research and development costs in the period which they are incurred. There are no research and development costs incurred in the periods presented. m. Treasury Stock: The Company utilizes the cost method to account for the acquisition of Treasury Stock. n. Basis of Presentation: Financial information presented as of any date other than December 31 has been prepared from the books and records without audit. The accompanying financial statements have been prepared in accordance with the instructions to Form 10QSB and do not include all of the information and the footnotes required by generally accepted accounting principles for complete statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of such financial statements, have been included. These financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 1999. Note 2: Accounts Receivable On November 6, 1998, Innovative Weaponry received a purchase order from Continental Weapons Ltd for 32,103 Night Sights. Continental was invoiced and a quantity of sights were shipped to South Africa. The balance of the order ( approximately 1,000 sights) has been manufactured and is being held at the Company's manufacturing facility to be installed on the Griffon replica of the Colt 45 as they are received by the Company. The Company is receiving the first 1000 pistols sightless and are invoiced for a pistol without sights. The receivable is decreased by the number of sights used when they are installed on the pistols and income is credited for the sights installed. Due to Continental's inability to ship the entire 1000 pistol order, the receivable was not decreased materially during 1999. The Continental Weapons invoice remained unpaid as of December 31, 1999; however, the Company negotiated an agreement to sell the receivable for the full invoice value. The sale was consumated April 1, 2000 to Great Mughal Trade Associates, Ltd.(GMTA). GMTA purchased the receivable and the rights to 31,103 Night Sights for $900,000.00 paying $50,000.00 down and a note for $850,000.00 payable $85,000.00 per month for 10 months. 6/30/00 3/31/00 12/31/99 12/31/98 ---------- --------- ---------- ---------- Outstanding Invoice-Continental $ 23,422 $ 923,422 $ 923,422 $ 930,987 Note 3: Other Assets License Agreement: In June 1995, Trident, a wholly owned subsidiary of the Company, entered into a license agreement (Agreement) with Trade Partners International, Inc. (TPI) to acquire the exclusive license to certain patent rights conveyed to TPI by The University of California as operators of Los Alamos National Laboratory (patent holder) related to the development, marketing and sales rights to certain specified magnetic and/or magnet technology. The agreed-upon and negotiated value of the Agreement at acquisition date was $75,000. Subsequently, the transaction was re-negotiated and 21st Century acquired all of the common stock of TPI in a Type B reorganization. Trident, as sub-licensee, is obligated to pay a royalty fee of 8.0% on net income (as defined in the Agreement) of products sold using the patented technology. Further, Trident is to pay an annual maintenance fee, which was $24,000 for the third and all subsequent years of the Agreement. All royalty fees paid during a specific year are to be credited to that year's maintenance fee and the maintenance fee requirement is considered met if the royalty payments during an Agreement year are equal to or exceed the required maintenance fee. Trademark: The trademark "PT Night Sights" has been capitalized at cost and is being amortized over 17 years. Bankruptcy excess Re-Organization Cost: Innovative Weaponry, Inc. (IWI) emerged from a bankruptcy filing under Chapter 11 of the US Bankruptcy Code, effective March 1, 1995. As a result of the Plan of Reorganization, IWI became a wholly owned subsidiary of 21st Century Technologies, Inc. and all prior IWI shareholders retained less that a 50% interest in the combined reorganized entities. In conjunction with IWI's emergence from protection under Chapter 11, IWI adopted "fresh-start" accounting as a result of its acquisition by 21st Century. "Fresh start" accounting allows for the restatement of all assets and liabilities being set to the fair market value of each respective category and the restatement of retained earnings to "0". The resulting amount was debited to the account "Reorganization value in excess of amounts allocable to identifiable assets". This balance is being amortized over ten (10) years using the straight-line method. The amortization period began on March 1, 1995, concurrent with the effective date of IWI's Plan of Reorganization. The adjustment necessary to reflect the "fresh-start" accounting, as prescribed by Statement of Position 90-7 "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" issued by the American Institute of Certified Public Accountants reflected a Reorganization value in excess of amounts allocable to identifiable assets. Note 4: Stockholders' Equity The total number of all classes of authorized capital stock is 200,000,000 shares, all of which are Common Stock, $0.001 par value per share. As of June 30, 2000, there are 52,657,240 shares of common stock issued. An additional 19,000,000 shares of common stock has been earned under a previous consulting agreement with the Chairman. These shares were not issued to Mr. Wilson because the Company needed the shares to raise equity capital. Additionally, it was discovered that the authorized shares had not been properly filed with the State of Nevada. The Company retroactively corrected this issue during this quarter. Mr. Wilson's shares are represented in the Equity section of the balance sheet as common stock earned but not issued. An adjustment to the 1997 ending retained earnings was recorded to record the compensation expense incurred by the Company Note 5: Earnings (Loss) Per Common Share Earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the years 1999 and 1998. There were no common stock equivalents outstanding during the years 1999 and 1998. SFAS No. 128, Earnings per Share applies to entities with publicly held common stock and establishes standards for computing and presenting earnings per share (EPS). Basic EPS excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Note 6: Income Taxes At December 31, 1999, the Company has available net operating loss carryforwards of approximately $2,704,715 for federal income tax purposes that begin to expire in 2008. The federal carryforwards resulted from losses generated in prior years and have created a deferred tax asset o $919,603. It is believed to be "more likely than not" that taxable income in the periods prior to the expiration of the deferred tax assets will not be sufficient for the deferred tax assets to be recognized; therefore, a valuation allowance of $919,603 has been recognized to offset the deferred tax assets. There are no deferred tax liabilities. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Note 7: Risks and Uncertainties The Company operates in highly specialized industries. There are only four companies worldwide who manufacture and sell night sights using tritium. The Company ranks number three out of four. The gun sight industry is highly dependent on major firearms manufacturers as well as consumer and governmental demand for weapons. World conditions and economies can affect the future sales of this product. The Company's magnetic and hydraulic-magnetic technologies are largely un-proven and may require additional extensive testing before marketing these products can continue. Demand for these products from governmental and industrial sources is largely estimated and while the Company has studied various markets, no assurance can be given that these products can be successfully marketed. In the future, these products will be marketed outside the United States, which will subject the Company to foreign currency fluctuation risks. The Company's firearm replica and tire sealant import division has not been tested in the U. S. market and the estimated demand for these products may not reach the Company's expectations. Note 8: Fair Values of Financial Instruments The following methods and assumptions were used to estimate the fair value of financial instruments: Cash and Cash Equivalents. The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. Accounts Receivable and Accounts Payable. The carrying amount of accounts receivable and accounts payable in the balance sheet approximates fair value. Short-Term and Long-Term Debt. The carrying amount of the debts recorded in the balance sheet approximates fair value. The carrying amounts of the Company's financial instruments at December 31, 1999 and 1998 represent fair value. Note 9: Comprehensive Income SFAS No. 130, Reporting Comprehensive Income establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. It requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. SFAS No. 130 requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid in capital in the equity section of a statement of financial position. The Company's comprehensive income does not differ from its reported net income. Note 10: Business Segments The Company has five business segments: (a) Manufacture of night sights for handguns, (b) Manufacture of "the Gripper", a patented device used for climbing steel surfaces, (c) Manufacture of an Emergency Magnetic-Hydraulic Sea Patch System (d) Importation and resale of firearms and (e) Importation and Distribution of a Tire Sealant product. The majority of the Company's sales are derived from sales of night sights. The other segments sales are not material to these financial statements. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS The Company's current revenue is derived from sales of product by its four operating subsidiaries as follows: 1. Innovative Weaponry Incorporated. We introduced our new line of lower profile PT Night Sights at the SHOT show in Las Vegas, NV during the 1Q00. We featured the low profile design we made for the Glock handgun. Subsequently, in the 2Q00 we added additional low profile designs including those for the Sig Sauer, Colt, H&K, Styer, Smith & Wesson, Novak style and our own Griffon. Our master gunsmiths created the low profile sights to lessen the possibility for "snags" on protective gear and clothing. A low profile is also easier to holster since it moves more smoothly throughout all ranges of motion. Since field conditions range from benign to hostile, we believe that the low profile offers an added measure of safety particularly for persons with small hand size and grip strength. However, the low profile will not replace the traditional design configurations which we have sold during the past four years. Both traditional and low profile compliment one another giving our customers a fuller range of design choices based upon personal preference. During the 2Q00, we implemented a number of engineering and manufacturing changes to the design and fabrication of our night sights. A number of these changes were prompted by feed back from our customers. None of these changes altered, however, the fact that we continue to "machine" not "cast" our night sights. Our customers may not know the difference between the two processes when comparing our night sights against competitors. "Casting" is the process of taking steel (while in a molten state) and pouring it into a mold of a specific shape. In order for the molten steel to pour, additives such as sulfur and other impurities must be utilized. These impurities impart certain negative qualities. As a result, a cast night sight must be sandblasted after it comes out of the mold followed by an oxidation processing called "bluing". Essentially bluing is a controlled oxidation process performed in a super heated bath (i.e. approximately 285 degrees Fahrenheit) containing sodium hydroxide and sodium nitrate. During bluing, the steel imparts a "black rust" surface instead of the normal "red rust" surface. Also, a cast sight after bluing turns a "plum color" which is the result of the impurities. However, our machined sights turn a "deep black" color after bluing which is considered by armorers to be more desirable. Further, a cast sight appears "rough" after bluing while our machined sights are "smooth". Despite the superiority of machined sights, our competitors continue to cast their sights based on a lower production unit cost. During casting, thousands of piece goods can be mass molded in a much shorter period of time then it takes us to machine the same number of sights by hand. While this mass production results in a lower price per each sight, the high cost of molds (which might cost $15,000 to $25,000) means that any change in design will require new molds. For example, to change elevation impact (as we did in our new low profile sights) requires numerous new molds with various combinations of higher or lower front and/or rear sights. Thus, by introducing new low profile sights, we believe that we have achieved an additional competitive advantage based upon the high cost of market entry for our competitors who would have to re-mold their production lines. We have also improved the fit of our "dovetails" which hold the sights onto the particular weapon being equipped. In fact, our dovetails are machine cut at our manufacturing facility to tolerances that allow custom fitting by our gunsmiths for that bench made fit and feel. To aid our gunsmiths, we have designed special tools to better fit the "slides" and sights together. Because some 6 G's of force act upon the slide during recoil of a firearm, we use a special tool we call the "Slammer". This device uses air pressure and simulates recoil velocity such as encountered with a semi-automatic pistol. We can test adhesion of the sights more rapidly and with greater precision with the Slammer. Also during the 2Q00, our research and development resulted in seven (7) patent applications being filed with the U.S. Patent and Trade Mark Office in Washington, D.C. as follows: Application No. Description Filing Date Allowance Date 29/ 119,941 Replacement 2/28/00 6/29/00 Blade Rear Sight Handgun 29/ 119,487 Front Sight 2/28/00 6/29/00 Handgun 29/ 119,382 Fixed Rear 2/28/00 6/29/00 Handgun 29/ 119,493 Adjustable 2/28/00 6/29/00 Rear Shotgun Ghost Ring 29/ 119,492 Two Piece 2/28/00 6/29/00 Rear Sight Handgun 29/ 119,383 Front Sight 2/28/00 6/29/00 Shotgun 29/ 119,489 Front Sight 2/28/00 6/29/00 Shotgun We believe that additional design innovations will result in patent filings in the 3Q00. We believe that our line of 20 configurations and multi-color formats represents the broadest choices of any manufacturer. Our fixed PT Night Sight for revolvers and a new adjustable "ghost ring" for shot guns were added to our product inventory in 2Q00. We believe that increased media coverage of our product line will help increase sales. We have ads in three major publications: Guns & Ammo (588,000 readers per month); Shot Business (circulation directed to firearms dealers and storeowners); and Handguns (157,000 readers per month) a publication directed to personal defense and handgun enthusiasts. However, sales have remained steady and without the increase we believed would be generated by added media coverage. Over past years, we have relied upon trade shows like the SHOT show (Shooting, Hunting and Outdoor Trade, IACP show (International Association of Chief's of Police), COPEX (military and law enforcement) and TREXPO and our regional representatives for increasing sales. We now believe that the summer months will continue to be "soft". Since many of our customers don't traditionally place their orders until mid-August or September, we believe that sales will increase in the 3Q00. A number of industry sources believe that handgun sales will continue to be soft until after the Presidential elections which could adversely impact sales of night sights on new handguns, but not on those already purchased by our customers or in the marketplace. 2. Trident Technologies Incorporated. During the 2Q00, Douglas N. Spring, President of Trident and Buren Palmer, Chief Technology Officer, made numerous field demonstrations of the Sea Patch to members of the maritime industry and hazardous materials ("HAZMAT") prevention and clean-up industries. Assisting Messrs. Spring and Palmer in these demonstrations was Donald Alford of Baton Rouge, LA. Mr. Alford currently acts as an unpaid consultant to Trident with contract negotiations being pursued by the parties. Mr. Alford is experienced in oil industry sales and recently sold his Houston, TX based business. The demonstrations were made to a broad representation of Gulf Coast shipping, oil storage and HAZMAT related entities. At the demonstrations, Mr. Palmer (who is experienced in maritime repair and maintenance as a former U.S. Navy SEAL diver) is available to answer questions. During the 2Q00, we have continued to refine the re-design of the Sea Patch. As originally designed at the Los Alamos National Laboratory in Los Alamos, New Mexico, the Sea Patch consisted of a series of magnetic pods attached to a circular plate with a flexible sealing gasket on its inner surface. Using cam-on/cam-off technology, the Sea Patch could be affixed to ferrous metal surfaces like a ship's hull or a storage container. Once the Sea Patch was screwed down using cam-on mechanics, its surface plate and flexible seals stopped leaks by exerting a powerful pressure gradient over the damaged surface area thereby off-setting the backward pressure of the leak. Although effective in its original design, our design modifications were driven by the need for a dramatic reduction in weight and the ability to adapt the size of the Sea Patch to "tears, punctures and rips" that came in all sizes. In addition, we began testing a number of Sea Patch designs for application in non-ferrous metal HAZMAT applications such as for highway accidents involving overturned aluminum skinned tanker trucks. Our design changes resulted in a series of hand built Sea Patch models which was then followed by field testing using our own demonstration hull plate and pressure gradient measurement devices. We also sought input from our potential customer base which is composed of HAZMAT personnel, storage facilities, rail car, inland barges and ocean tankers as to what they currently used in emergency and/or repair situations. Using this "anecdotal" and "roll-up" your sleeves methodology, we were able to re-design the Sea Patch into a component kit consisting of a series of strong back bars, locking-pins, and modular magnetic pods. The design innovations have now been completed with an expanded product line consisting of pre-built Sea Patches in 6 inch (circular), 12 inch (circular), 36 inch x 4 inch configurations and in a variety of component kit forms. We now have named the new design the ProMag 6, ProMag 4 and the ProMag 3 reflecting size and the number of magnet pods. We have established pricing models for the Sea Patch on both a sale and lease basis. This allows buyers to take into consideration their own budgetary needs selecting anywhere from entry level to a complete inventory of Sea Patch designs. Our objective has been to make the Sea Patch something everyone can initially afford with re-sales coming from old customers expanding design capability through the purchase of kit components. Also, we have integrated the Gripper as one of the kit components. The Gripper whose magnets are worn on the hands and feet gives the under water diver or surface repair crew the added ability to safely reach the point of an accident on the hull of a ship (which is slippery and subject to jarring wave movement). We will submit the new design to the American Bureau of Shipping ("ABS")for certification. Although on February 4, 2000, we obtained "certification" of the Sea Patch from the ABS, it does not cover the new design. The ABS is a non-for-profit and non-governmental organization which acts as a self-regulatory agency for the international marine industry. We will continue to test further generations of design modifications with the ABS and other maritime testing bodies worldwide to determine structural and technical fitness. We received our first order for the Sea Patch from an Indian Ocean customer based in the Seychelles who saw the early design at the offshore conference in Houston, TX. The order was for 500 units with the first 100 Units to be delivered in July 2000. The units were priced at our cost plus 20% with a revenue sharing arrangement following recovery of manufacturing costs. We received partial payment of approximately $150,000 towards the units which we used to purchase an inventory of magnets for the cam-on/cam-off pods. The magnets represent the most costly component of the units. We now have sufficient magnets to deliver the 100 units. Final delivery of the units will take place after we have completed filing for patent protection on the ProMag design modifications. Fabrication of the ProMag will be out sourced to select sub-contractors in a production schedule which we believe is 4 to 6 weeks in duration. We believe that patent filings will be completed in the 3Q00. The ProMag will make its international debut at the Stavanger, Norway maritime show scheduled for August 21-25, 2000. At the Stavanger show, consumer response will help determine the best mix between the ProMag 6, 4 and 3 design for the Indian Ocean. It is too early to make any projections on revenues and profitability since we are sourcing materials and determining marketing costs. Although the Indian Ocean represents a major maritime market in close proximity to both Africa, Southeast Asia, and Australia, future sales of the Sea Patch and ProMag will depend upon a number of factors the most important of which is acceptance of the technology by the maritime and HAZMAT industries. 3. Griffon USA, Inc. Griffon USA, Inc. ("Griffon"), is an importer and licensee of Continental Weapons (Pty), Inc., a South African manufacturer of a replica 1911 Colt 45 sidearm, rifles and other guns. A feature article about the Griffon appeared in the June 2000 edition of Combat Guns. The article was favorable and underscores a number of features concerning the Griffon. 4. TRADE PARTNERS INTERNATIONAL, INC. During 2Q00, Trade Partners International, Inc. ("Trade Partners") continued to work with William Baylor, formerly a principal of Vee Tubes USA, a bicycle inner tube company, based in Olney, IL. Mr. Baylor is a 25 year veteran in the bike industry. Due to a management decision of Vee Tubes parent, the plan to insert a our sealant was interrupted when USA activities were closed down. The sealant is used to prevent punctures in tube and tubeless tires. During this period, we decided to "test" our tire sealant in both the laboratory and field. The laboratory testing will consist of determining the "sealing tolerances" of our tire sealant versus others in the industry. The field testing will consist of collection of historical data based on a mountain bike event we will sponsor. The findings will be used to determine whether our product is competitive based on objective criteria. The findings will help us in determining whether reformulation is necessary. We hope the results will be available for the up coming bike show in Las Vegas, NV in late September 2000. REVENUES Our primary source of revenue during the three months ended June 30, 2000 continued to be from the sales of PT Night Sights. During the three months ended March 31, 2000, we increased sales of PT Night Sights over the previous period, but sales during the summer months are typically soft. We believe that sales will increase after Labor Day, but the political issues surrounding handgun registration and ownership may contribute to a continuing softening of sales. In addition, the U.S. Presidential election outcome may dramatically effect sales in the future either positively or negatively depending on which candidate wins. COST OF SALES Cost of sales for PT Night Sights consists primarily of material and labor costs. Because of the competitive nature of our business individual unit cost is confidential, but our cost of goods sold increased during the quarter because of new design innovations such as the low profile configuration for the Glock and other gun manufacturers. In addition, customizing the Griffon added additional expenses. However, these should be non-recurring expenses in subsequent quarters. MARKETING AND SALES EXPENSE During the 2Q00, we spent approximately $50,000.00 on print media to keep our product circulating among gun enthusiasts. This is about the same amount we spent in the previous period. GENERAL AND ADMINISTRATIVE EXPENSE General and administrative expense is comprised primarily of compensation and related expenditures for administrative and executive personnel, professional fees associated with legal, consulting, accounting services, and general corporate overhead. LIQUIDITY AND CAPITAL RESOURCES. Our cash position, less known commitments and contingencies, plus outside financing received through June 30, 2000, plus cash generated from operations for the balance of fiscal year 2000 should be adequate to fund our on-going operations and to fund the further development of the Sea Patch and MagPro, including any patent applications. Although we should have improved operating results, we will still require substantial additional capital during fiscal 2000 to go into manufacture and marketing the Sea Patch following design modification and testing. Our capital requirements will depend on many factors, including, cash flow from operations, additional working capital requirements, additional product development expenses and capital expenditures. To the extent existing resources are insufficient to fund our operations in the short- or long-term, we will need to raise additional funds through public or private financings. We may not be able to raise additional financing on terms favorable to us or to our stockholders without substantial dilution of their ownership and rights. If we are unable to raise sufficient funds to satisfy either short- or long-term there would be substantial doubt as to our ability to continue as a going concern on either a consolidated basis or through continued operation of any subsidiary, and we may be required to significantly curtail our operations, significantly alter our business strategy, forego market opportunities, or obtain funds through arrangements with strategic partners or others that may require us to relinquish material rights to certain of our technologies or potential markets. PART II. OTHER INFORMATION ITEM 1.LEGAL PROCEEDINGS There are no material legal proceedings to which we are a party or which any of our property is the subject other than ordinary, routine claims incidental to our business. ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K Exhibit 2.6 Certificate of Amendment to Articles of Incorporation Filed June 12, 2000 SIGNATURES Pursuant to 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 thereto duly authorized. 21ST Century Technologies, Inc. _______________________________________ Registrant 12-21-00 /s/ Kenneth E. Wilson _________ ________________________________________ Date Kenneth E. Wilson EX-2.6 2 0002.txt FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA C-1472-94 JUN 12 2000 /s/ Dean Heller DEAN HELLER SECRETARY OF STATE Certificate of Amendment to Articles of Incorporation for Nevada Profit Corporation (Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock) -Remit in Duplication- 1. Name of corporation 21ST CENTURY TECHNOLOGIES, INC. 2. The articles have been amended as follows (provide article numbers, if available): Articles Fourth provides in haec verba, as follows: "The total number of shares of stock which the Corporation is authorized to issue is Fifty Million (50,000,000)shares of common stock all of which have a par value of .001." Article Fourth is hereby amended as follows: See Attached Page 2 of 2 which is incorporated herein by reference its entirety. 3. The vote by which the shareholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation, have voted in favor of the amendment is: 3,700,000. 4. Signatures (Required): /s/ Ken Wilson /s/ David Gregor ---------------------------- and ---------------------------- President or Vice President Secretary or Asst Secretary * If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless of limitations or restrictions on the voting power thereof. IMPORTANT: Failure to include any of the above information an remit the proper fees may cause this filing to be rejected. FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA JUNE 12 2000 NO. C-1472-94 /s/ Dean Heller DEAN HELLER, SECRETARY OF STATE Certificate of Amendment to the Articles of Incorporation For Nevada Profit Corporation (Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock) 21st Century Technologies, Inc. Addendum to Certificate of Amendment Re: Paragraph 2 (continued from previous page) Articles Fourth: The total number of shares of stock which the Corporation is authorized to issue is Two Hundred Million (200,000,000) shares of Common Stock all of which shall have a par value of .001. Further, any and all persons who have been granted an option by the Corporation to purchase or otherwise acquire any series of shares, both common and preferred, or to whom the Corporation has become financially obligated through the issuance of a bond, debenture, and/or other financial instrument shall be entitled to voting rights in the same manner as if they were shareholders in the Corporation as may be specified in a resolution of the Board of Directors in accordance with Nevada Revised Statutes 78.197 and 78.200, respectively. ______________________________________________ [This page has been intentionally left blank.] Page 2 of 2 -----END PRIVACY-ENHANCED MESSAGE-----