10QSB 1 texn3q01.txt UNITED STATES 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 September 30. 2001 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from _________________ to _________________ Commission file number: 000-29209 21st Century Technologies, Inc. (Exact name of small business issuer as specified in its charter) Nevada 48-1110566 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 5050 East Belknap, Haltom city, Texas, 76117 (Address of principal executive offices) (817) 838-8011 (Issuer's telephone number) N/A (Former name, former address and former fiscal year, if changed since last report) APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 115, 169,300 as of September 30, 2001. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X ] PART I - FINANCIAL INFORMATION This report includes "forward looking statements". 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, MMC gun 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 trademarks. This report may contain trademarks and service marks of other companies. Item 1. Financial Statements. Consolidated Balance Sheet (Unaudited) Sept 30, 2001 Sept 30, 2000 -------------- ------------- Assets Current Assets: Cash and cash equivalents $ 99,892 $ 280,601 Accounts Receivable, Net 692,621 457,390 Inventories 1,001,514 610,099 Notes Receivable 494,854 692,580 ------------ ------------ Total Current Assets 2,288,881 2,040,670 Property, Plant, and 2,081,214 461,081 Equipment, Net Other Assets, Net 891,336 535,410 ------------ ------------ Total Assets $5,261, $3,037,161 =========== ============ Liabilities and Stockholders' Equity Current Liabilities: Accounts Payable-trade $ 875,516 $ 59,844 Accounts Payable-other 360,595 90,356 Deferred Income 225,000 225,000 ----------- ------------ Total Current Liabilities 1,461,111 375,200 Other Liabilities: Working Capital Advances 1,562,314 1,765,458 Notes Payable 534,648 141,678 ----------- ------------ Total Other Liabilities 2,096,962 1,907,136 ----------- ------------ Total Liabilities: 3,558,073 2,282,336 Stockholders' Equity: Common Stock, issued 115,169,300 and 52,857,240 issued and outstanding shares at $.001 par value at Sept 30, 2001 and 2000 115,169 52,857 Paid-in Capital 9,072,821 4,730,298 Common Stock Earned, but not Issued 360,000 360,000 Retained Earnings (Deficit) (7,678,254) (4,351,602) Treasury Stock ( 163,378) ( 33,728) Stock Subsriptions ( 3,000) ( 3,000) ----------- ------------ Total Stockholders' Equity 1,703,358 754,825 Total Liabilities ----------- ------------ and Stockholders' Equity $5,261,431 $3,037,161 =========== ============
See Notes to Consolidated Financial Statements 21st Century Technologies, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) 3 Mos. Ended 3 Mos. Ended 9 mos. Ended 9 mos. ended Sept 30, 2001 Sept 30, 2000 Sept 30, 2001 Sept 30, 2000 ----------- ----------- ------------- ------------ Net Sales Innovative Weaponry $ 455,464 $ 163,080 $1,023,679 $611,425 Club 2826 164,081 0 208,562 0 Hallmark 125,130 0170,091 0 Trident 22,065 0 48,567 0 Total Net Sales 766,740 163,080 1,450,899 611,425 Cost of Sales 215,187 151,912 609,486 562,606 ----------- ----------- ------------ ----------- Gross Profit 551,553 12,084 841,413 48,819 General and administrative 425,910 266,762 1,161,074 1,235,896 expenses Advertising & Selling 45,365 316,247 Compensation Costs 323,870 1,151,338 Depreciation and Amortization 82,797 28,626 234,363 99,812 ----------- ----------- ------------ ----------- Net Income (Loss) (326,389) (283,304) $(2,021,609) $(1,286,889) Estimated Income Taxes 0 0 0 0 ----------- ----------- ------------ ----------- Net Income (Loss) $(326,389) $(283,304) (2,021,609) $(1,286,889) =========== =========== ============ =========== Earnings (Loss) Per Common Share: Basic & Diluted $ (0.00) $ (0.00) $(0.02) $(0.02)
See Notes to Consolidated Financial Statements 21st Century Technologies, Inc. and Consolidated Subsidiaries Notes to Consolidated Financial Statements For the Three Months Ended September 30, 2001 and 2000 (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 Delaware 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'S-NM's bankruptcy action. On February 1, 1995, the U. S. Bankruptcy Court of the District of New Mexico confirmed the IWI'S-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, 2000. Note 2: 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 3: 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 September 30, 2001, there are 115,169,300 shares of common stock issued and outstanding. 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 the second quarter of 2000. 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 4: 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 2000 and 1999. There were no common stock equivalents outstanding during the years 2000 and 1999. 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. For the Quarter Ended Sept 30, 2001 ------------------------------------- Income Shares Per-Share (Numerator) (Denominator) Amount --------- ------------ -------- Income ($326,389) Basic EPS Income available to Common (326,389) 115,169,300 $(0.00) Stockholders Effect of Dilutive Securities Common Stock Earned but not Issued 19,000,000 Diluted EPS Income available to common stockholders Plus assumed conversions ($326,389) 134,169,300 $(0.00) ========== =========== =========
Note 5: Income Taxes At December 31, 2000, 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 6: 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 have been tested and approved by the American Bureau of Shipping and are being used by Louisiana Emergency Response Training facilities in Holden, LA.; Texas A&M Emergency Services Training Institute in College Station, TX; and Transportation Technology Center Emergency Response Training facility in Pueblo, CO. 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. These products have been marketed outside the United States. In future marketing, the Company may be subject 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 7: 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, 2000 and 1999 represent fair value. Note 8: 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. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Description of Subsidiaries. The Company had nine wholly owned subsidiaries at the end of the third quarter of 2001: 1. Innovative Weaponry Inc. Innovative Weaponry is a manufacturer of tritium products available in night sights and other "night seeing" sights in the weapons industry. Both military and private gun owners currently purchase tritium based night sights with additional applications currently under research and development. The Innovative Weaponry products feature multi-color tritium sights with the front sight brighter than the rear sight thereby enhancing low light sighting. Innovative Weaponry products have been sold to original equipment manufacturers, certain members of the United States military (including two Navy Seal Teams, United States Customs, Drug Enforcement, Fish and Game, and state and local police departments nationwide. Innovative Weaponry sells under the federal trademark protected name "PT Night Sights"TM a multi-color 3-dot night sight using the radioactive isotope "tritium" in encapsulated form to provide light in low light and no light situations. Innovative Weaponry has also designed and manufactured some prototype sights using fiber optic material. Fiber optics utilizes ultra-violet rays and transmits these rays through a tube giving the shooter a phenomenal daytime sight picture. 2. Trident Technologies Inc. Trident Technologies Corporation ("Trident"), is a manufacturer of the Gripper (a magnetic climbing device worn on the hand and feet), the Sea Patch formerly called the Underwater Seal and the Pro Mag. The Sea Patch is a magnetic "cam-on/cam-off" device used to seal leaks in the metal hulls of ships with both disaster and environmental markets. The magnetic technology utilized by Trident in its products is licensed from the Los Alamos National Laboratory ("Los Alamos National Lab") in Los Alamos, New Mexico. The Grippers are "worn" on hands and feet to enable the user to climb or traverse any steel surface. It is a lightweight magnetic device (each Gripper weighs only 1.5 pounds) that attaches to any ferromagnetic material- iron, steel, or their alloys. It fastens smoothly to a surface and can be attached or detached with only one hand or foot. Using a set of Grippers (i.e. two devices on the hands and two on the feet) the user can climb a vertical surface, releasing and repositioning the Grippers as he ascends. Wearing Grippers, a person can move up, down, or sideways with relative ease. The Pro Mag is designed to stop leaks on rail cars, tankers and pipelines. The Pro Mag can be applied to rounded surfaces and corners, and used in other applications. 3. Griffon USA, Inc. Griffon USA, Inc. ("Griffon"), imports a .45 caliber semi-automatic pistol from continental Weapons (Pty) located in South Africa. Griffon is regulated by the U.S. Bureau of Alcohol, Tobacco and Firearms. Due to fewer sales than anticipated, the Company is in the process of liquidating the assets of Griffon. 4. Net Construction, Inc. On June 19, 2001, the name of company subsidiary CQB Armor, Inc. was changed to Net Construction, Inc. CQB Armor had been an inactive subsidiary since its formation due to the failure of a planned acquisition to close. The name was changed on order to effect the acquisition of Net Construction, a telecommunications and networking company originally founded in 1999. It was the company's intent to offer through Net Construction a variety of telecommunications services. Due to higher than anticipated overhead expense, the Company has decided to cease operations of Net Construction. 5. Trade Partners International, Inc. Trade Partners International, Inc. ("Trade Partners") is in negotiations to conclude its acquistion of a privately held California partnership which manufactures and distributes bicycle tire sealant. 6. Hallmark Human Resources, Inc. Hallmark commenced business effective January 1, 2001. Hallmark was established to operate as a Professional Employer Organization ("PEO"), more commonly known as an employee leasing company. PEO's hire the employees of existing businesses and then lease the employees back to the company. This relieves the company of much of the "red tape" associated with maintaining permanent employees, and provides reduced administrative expense, workers' compensation premiums and similar costs due to the benefits of an economy of scale. Similarly, employees are afforded reduced costs for medical coverage, childcare and other benefits. Prior to Hallmark's creation, the Company and its subsidiaries had used the services of another PEO at a cost of approximately $4000.00 a month. Hallmark has now assumed this role. Hallmark received its license to operate as a staff licensing service from the Texas Department of Licensing and Regulation, effective August 30, 2001. Hallmark is currently marketing its services to potential clients. On June 27, 2001, it finalized a marketing agreement with Great Southwest Insurance Brokerage, an agency with over four thousand agents throughout Texas. On October 11, 2001, a similar agreement was finalized with Hildebrand Insurance Services, with affiliates in West Virginia, Virginia, Kentucky and North Carolina. 7. Unertl Optical Company, Inc. In the fourth quarter of 2000, the Company purchased the assets of the former John Unertl Optical Company, Inc. of Mars, Pennsylvania, a long time manufacturer of high quality rifle scopes and optical equipment and formed Unertl Optical Company, Inc. ("Unertl") as a wholly owned subsidiary to carry on the business. During the first quarter of 2001, the machinery, equipment and work in process inventory was relocated to the Company's Ft. Worth, Texas manufacturing facility. The Company has initiated production of the two inch target scopes, and intends to commence production of the Unertl "10X " scope by the end of the year. 8. 2826 Elm Street, Inc. In order to evaluate the potential for involvement in areas unrelated to present operations, the Company in January 2001 acquired the stock of 2826 Elm Street, Inc., the operator of a nightclub in the historic Deep Ellum entertainment district of Dallas, Texas. Within the past fifteen years the Deep Ellum area has evolved from a rundown warehouse district into an entertainment district of national prominence containing live music venues, restaurants, condominium projects and art galleries. This acquisition was made in order to evaluate the potential for future investments in this industry with a minimal investment by the Company. The company has now determined to consolidate its interests in its more traditional lines of business and has determined to sell this property if it receives a satisfactory offer. 9. Miniature Machine Corporation, Inc. In March 2001 the Company acquired the stock of Miniature Machine Corporation, Inc. ("MMC"). Like Innovative Weaponry, MMC manufactures and distributes gun sights. The primary difference between the products of the two subsidiaries is that Innovative Weaponry manufactures and markets fixed sights, while MMC's sights are adjustable. The Company believes that MMC will integrate smoothly into its business plan and will ultimately provide some economy of scale, which could not be achieved if two such operations were operated separately. Results of Operations. The Company completed the third quarter of 2001 with total assets of $5,261,431, compared with $2,960,903 at the end of fiscal year 2000, and $3,037,161 at the end of the third quarter of 2000. The company's fixed assets, consisting of property, plant and equipment, were valued at $2,081,214 at the end of the third quarter of 2001, compared with $949,351 at the end of fiscal year 2000 and $461,081 at the end of the third quarter of 2000. This continued increase since the end of the third quarter of 2000 was due to several factors, including the Company's acquisition of a new manufacturing and office facility in Haltom City, Texas, new computer equipment, and the acquisition of the assets of Miniature Machines Corporation, all of which took place during the first quarter of 2001, and the earlier purchase of the assets of the Unertl Optical Company in the fourth quarter of 2000. The Company had net revenues for the third quarter of 2001 of $766,740, compared to second quarter, 2001 net revenues of $548,804, and third quarter, 2000 net revenues of $163,080. Total net revenues for the first three quarters of 2001 were $1,450,899. This was more than twice the amount of net revenues in the comparable period of 2000 (net revenues for first three quarters of 2000 of $611,425). Gross profit on sales for the third quarter of 2001 was $551,553 and was $841,413 for the first three quarters of 2001, compared with a gross profit of $12,084 for the third quarter of 2000 and $48,819 for the first three quarters of 2000. Advertising and selling expenses for the third quarter of 2001 were $45,365, and were $316,247 for the first three quarters of 2001. General and administrative expenses were $425,910 for the third quarter of 2001 and $1,161,074 for the first three quarters of 2001, compared with $266,762 for the third quarter of 2000 and $1,235,896 for the first three quarters of 2000, representing a slight decrease over the comparable three quarter period in 2000. Compensation costs for the third quarter of 2001 were $323,870, marking a decrease of approximately $60,000 from those same costs in the second quarter of 2001 of $397,482. Compensation costs were $1,151,338 for the first three quarters of 2001. A comparison of net revenues and expenses for the first three quarters of 2001 evidences a trend of increasing revenues coupled with decreasing expenses. First quarter 2001 net revenues were $250,081; second quarter 2001 net revenues were $548,804; third quarter 2001 net revenues were $766,740. Total advertising costs, general and administrative expenses and compensation costs for the same periods were $915,639, $977,003 and $795,145 respectively. Factors Affecting Liquidity and Capital Resources. The Company is dependent upon cash on hand, revenues from the sales of its products, and its ability to raise cash through the sale of its shares and the leveraging of its assets for debt. At present, the Company needs cash for monthly operating expenses in excess of its historic sales revenues. The Company will continue to require additional capital funding until sales of current products increase and sales of products under the Trident and Unertl lines are fully established. The Company may finance further growth through both public and private financing, including equity offerings, which may further dilute current shareholders' interests. If the Company is unable to raise sufficient funds to satisfy either short term or long term needs, there would be substantial doubt as to whether the Company could continue as a going concern on either a consolidated basis or through continued operation of any subsidiary, and it might be required to significantly curtail its operations, significantly alter its business strategy or forego market opportunities. Part II - OTHER INFORMATION Item 1. Legal Proceedings. On September 5, 2001, Patricia Wilson a former officer and director of the Company, filed suit against the Company and directors Ken Wilson, Jim Mydlach and Dave Gregor. The suit is pending in the 153rd District Court of Tarrant County, Texas in Cause Number 153-189311-01. The suit arises out of Ms. Wilson's termination as an officer and director of the company on August 31, 2001. The causes of action asserted against the Defendants include breach of fiduciary duty, breach of contract, defamation and negligent investigation. The Petition seeks actual damages of $500,000.00, exemplary damages of $10,000,000, and 9,000,000 shares of Company stock. A further discussion of the litigation is included in the Company's Form 8- K filed as of September 26, 2001. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Number Description Location ------- ------------- ------- 1 Articles of Incorporation of First National Holding Corporation dated January 28, 1994 * 2 Certificate of Amendment to Articles of Incorporation filed September 19, 1994 * 3 Certificate of Amendment to Articles of Incorporation filed September 29, 1995 * 1995 4 Articles of Merger filed May 19, 1995 * 5 Bylaws * 6 Lease Agreement between 21st Century * Technologies, Inc. and Landlord 7 Los Alamos Exclusive Patent License * Agreement dated May 23, 1995 between The Regents of the University of California and Trade Partners International Incorporated 8 Trident Technologies Sub-License Agreement * dated July 31, 1996 9 Limited Exclusive Patent License * Agreement between The Regents of the University of California and Trident Technologies Corporation 10 Application and Permit for Firearms * Importation dated November 20, 1998 11 License of Dept. of Treasury, Bureau * Of Alcohol, Tobacco and Firearms 12 Representation Agreement dated * May 3, 1999 13 Registry of Radioactive Sealed Sources * and Devices dated February 20, 1996 14 U.S. Nuclear Regulatory Commission * Materials License dated October 18, 1996 15 NRC Registration Amendment * dated August 22, 1997 16 Request to Rescind Confirmatory Order * dated September 14, 1998 17 Distribution and Agency Agreement * dated October 15, 1999 18 Radioactive Materials License dated * October 09, 1999 19 U.S. Bankruptcy Court Order Confirming ** Plan of Reorganization dated February 1, 1995 20 Asset Purchase Agreement dated September ** 7, 2000 regarding purchase of assets of John Unertl Optical Company, Inc. 21 Purchase Agreement between 21st Century ** Technologies, Inc. and Retired Persons Pharmacy of Texas dated September 25, 2000. 22 Agreement dated April 1, 2000 between ** Great Mughal Trade Associates, Ltd. and 21st Century Technologies, Inc. 23 Purchase Order dated April 3, 2000 ** 24 Subsidiaries of the Registrant ** * Incorporated by reference to the Form 10-SB filed with the SEC on January 27, 2000. ** Incorporated by reference to the Form 10-KSB filed with the SEC on April 12, 2001. (b) Reports on Form 8-K The Company filed one Form 8-K during the third quarter of 2001. The 8-K filed as of September 26, 2001 reported the commencement of the litigation described in Part II, Item I above. The company filed no other Form 8-K's during the third quarter of 2001. 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. 21st Century Technologies, Inc. (Registrant) Date November 12, 2001 /s/ Ken Wilson, President (Signature)*