-----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, UtW/yCvSUZt8ZQauz9OtzohwDLz5L+y5YTeCJ9ECDiuDNubnKnE5KMH7dRmA0qOX kdhgCuZG+bgAkSjOUUOiXQ== 0001092306-02-000182.txt : 20020520 0001092306-02-000182.hdr.sgml : 20020520 20020520164339 ACCESSION NUMBER: 0001092306-02-000182 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020520 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 SEC ACT: 1934 Act SEC FILE NUMBER: 000-29209 FILM NUMBER: 02657922 BUSINESS ADDRESS: STREET 1: 5050 EAST BELKNAP CITY: HALTOM CITY STATE: TX ZIP: 76117 BUSINESS PHONE: 8172840099 MAIL ADDRESS: STREET 1: 5050 EAST BELKNAP CITY: HALTOM CITY STATE: TX ZIP: 76117 10QSB 1 form10qsb.txt FORM 10-QSB PERIOD 3/31/02 ________________________________________________________________________________ SEC POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION 2334(6- CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM 00) DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER. ________________________________________________________________________________ __________________________ OMB APPROVAL OMB Number: 3235-0416 Expires: April 30, 2003 Estimated average burden hours per response: 32.00 __________________________ 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 March 31, 2002 [ ] 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 (IRS Employer Identification No.) of incorporation or organization) 5050 East Belknap, Haltom City, Texas, 76117 (Address of principal executive offices) (817) 838-8011 (Issuer's telephone number) ________________________________________________________________________________ (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: 165,313,545 as of April 10, 2002. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] 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, 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. Independent Accountants' Report Board of Directors and Stockholders 21st Century Technologies, Inc. and subsidiaries Fort Worth, Texas We have reviewed the accompanying consolidated balance sheet of 21st Century Technologies, Inc. and subsidiaries as of March 31, 2002 and the related consolidated statements of operations, stockholders' equity and cash flows for the three months then ended. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying March 31, 2002 consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. /s/ TURNER, STONE & Company, L.L.P. ____________________________________ Turner, Stone & Company, L.L.P. Certified Public Accountants Dallas, Texas May 20, 2002
21ST CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED) MARCH 31, 2002 MARCH 31, 2001 ______________ ______________ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 126,302 $ 63,805 Accounts Receivable, net 1,071,222 537,204 Inventories 820,704 640,945 Advances to Stockholders 207,878 151,693 ___________ ___________ Total Current Assets 2,226,106 1,393,647 Property, Plant, and Equipment, Net 1,722,458 1,777,416 Other Assets, Net 826,505 505,485 ___________ ___________ Total Assets $ 4,775,069 $ 3,676,548 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts Payable-trade $ 1,041,168 $ 402,966 Accounts Payable-other 698,663 183,050 ___________ ___________ Total Current Liabilities 1,739,831 586,016 OTHER LIABILITIES: Working Capital Advances 0 998,948 Notes Payable 346,698 12,705 Deferred Revenue - 225,000 Advances from Stockholders 193,829 90,631 ___________ ___________ Total Other Liabilities 540,527 1,327,284 ___________ ___________ TOTAL LIABILITIES: 2,280,358 1,913,300 ___________ ___________ MINORITY INTEREST-MMC 3,158 0 STOCKHOLDERS' EQUITY: Common Stock, 164,313,545 and 90,708,586 issued and outstanding shares at $.001 par value at March 31, 2002 and 2001, respectively 164,314 88,368 Paid-in Capital 13,471,415 8,012,829 Stock Earned, Not Issued 360,000 360,000 Retained Earnings (Deficit) (11,484,732) (6,661,571) Treasury Stock (16,444) (33,378) Stock Subscriptions (3,000) (3,000) ___________ ___________ Total Stockholders' Equity 2,491,553 1,763,248 Total Liabilities and Stockholders' Equity $ 4,775,069 $ 3,676,548 =========== =========== See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) 3 MONTHS ENDED 3 MONTHS ENDED MAR 31, 2002 MAR 31, 2001 ______________ ______________ Net Revenues $ 728,758 $ 250,081 Cost of Revenues 289,907 166,892 ___________ ___________ Gross Profit 438,851 83,189 Operating Expenses: Advertising & Selling 34,593 80,862 General and administrative expenses 154,963 389,905 Depreciation and Amortization 82,123 68,403 Compensation Costs 124,614 444,872 ___________ ___________ Total Operating Expenses 396,293 984,042 ___________ ___________ Net Income (Loss) 42,558 (900,853) Estimated Income Taxes 0 0 ___________ ___________ NET INCOME (LOSS) $ 42,558 $ (900,853) =========== =========== EARNINGS (LOSS) PER COMMON SHARE: Basic $ 0.00 $ (0.01) Fully Diluted $ 0.00 $ (0.01) See Notes to Consolidated Financial Statements
21ST CENTURY TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 2002 2001 _________ _________ Cash flows from operating activities: Net income (loss) 42,558 (900,853) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 45,987 53,079 Amortization 36,136 17,289 Common stock issued for services 37,500 112,635 Changes in operating assets and liabilities Accounts receivable, trade (685,317) 238,017 Inventories 42,300 (195,316) Prepaid expenses 25,093 120,539 Other assets (134,966) (100,571) Accounts payable, trade 164,707 137,424 Accrued expenses 533,107 133,050 64,547 516,146 Cash used in operations 107,105 (384,707) Cash flows from investing activities: Purchase of property and equipment (881,144) Advances to stockholders (3,316) Cash used in investing activities (3,316) (881,144) Cash flows from financing activities: Advances from officer 98,554 Repayment of notes payable (78,437) (58,479) Advances from stockholders 93,729 827,868 Issuance of common stock 373,369 Cash provided by financing activities 15,292 1,241,312 Net increase (decrease) in cash 119,081 (24,539) Cash at beginning of period 7,221 88,344 Cash at end of period 126,302 63,805 The accompanying notes are an integral part of the consolidated financial statements
21ST CENTURY TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2002 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-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 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, SeaPatch and ProMag products, work in process, 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 that 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, 2000 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, 2001. 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 March 31, 2002, there are 164,313,545 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. Mr. Wilson's shares are represented in the Equity section of the balance sheet as common stock earned but not issued. 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 2002 and 2001. There were no common stock equivalents outstanding during the years 2002 and 2001. 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 MARCH 31, 2002 INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ___________ _____________ _________ Income $42,558 BASIC EPS Income available to Common Stockholders $42,558 164,063,550 $ 0.00 EFFECT OF DILUTIVE SECURITIES Common Stock earned but not Issued 19,000,000 DILUTED EPS Income available to common stockholders plus assumed conversions $42,558 183,063,550 $ 0.00 ======= ======
NOTE 5: INCOME TAXES At December 31, 2001, the Company has available net operating loss carry forwards of approximately $11,000,000 for federal income tax purposes that begin to expire in 2008. The federal carry forwards resulted from losses generated in prior years and have created a deferred tax asset of $3,781,915. 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 $3,781,915 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. 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, 2001 and 2000 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. NOTE 9: BUSINESS SEGMENTS The Company has eight business segments: (a) Manufacture of night sights for handguns and other firearms (b) Manufacture of "the Gripper", a patented device used for climbing steel surfaces, and manufacture of an Emergency Magnetic-Hydraulic Sea Patch System (c) Importation and resale of firearms and (d) Manufacture and Distribution of a Tire Sealant product (inactive) (e) Professional Employer Organization (f) Manufacture of telescopic sights (g) Internet Services (formerly CQB Armor, Inc) (h) 2826 Elm Street, a night club. The majority of the Company's sales are derived from sales of night sights. Segments sales are not material to these financial statements. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. DESCRIPTION OF SUBSIDIARIES. The Company had nine wholly owned subsidiaries at the end of the first quarter of 2002. The seven subsidiaries with active operations include: 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 SeaPatch formerly called the Underwater Seal and the ProMag. 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 ProMag is designed to stop leaks on rail cars, tankers and pipeline. The ProMag can be applied to rounded surfaces and corners, as well as 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. 4. 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 intends to aggressively market its services to other employers in the current fiscal year. 5. Unertl Optical Company, Inc. In fiscal year 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 fourth quarter of 2000, we acquired the assets of the former John Unertl Optical Company. During the first quarter of 2001, the machinery, equipment and work in process inventory was relocated to our Ft. Worth, Texas manufacturing facility. We will retain the machinery and equipment necessary to commence production of the scopes. 6. 2826 Elm Street, Inc. In January 2001, the Company 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. 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. 7. 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 markets fixed sights, while MMC's sights are adjustable. The Company believes that MMC will integrate smoothly into its business plan and provides some economy of scale. ... RESULTS OF OPERATIONS. INCOME STATEMENT 21st Century Technologies, Inc. ended the first quarter of 2002 with a net profit of $42,558. The first quarter of 2002 is the first quarterly profit for the company since 1999. The driving factor behind the first quarter profit is attention to detail both direct and general and administrative labor costs. 21st Century Technologies, Inc. consolidated reported sales of $728,758, an increase of 291% from sales in the comparative period of first quarter 2001 of $250,081. The increase in sales is a reflection of continuing to capture additional market share with Innovative Weaponry, Inc. and Miniature Machine Corp. The company also accelerated the sales efforts with Griffon U.S.A. and Trident Technologies, Inc. Gross profit increased to $438,851 from $83,189. Increased gross profit is a function of increased sales and an increase in gross profit margin to 60% from 33%. The increase in gross profit margin was largely due to a significant reduction of direct labor charges and improved manufacturing techniques. The improved techniques are shown by the ability of the company to continue their ability to deliver at comparable or increased sales volumes, compared with prior quarters, while dramatically reducing staffing expenditures. Operating expenses have seen dramatic reductions in all categories. The most significant occurring in general and administrative compensation costs decreasing to 17% of sales from 177%. Total operating expenses decreased from $984,042 to $396,293 with the only increase shown in depreciation. Advertising and selling expenses for the first quarter declined substantially from $80,862 to $34,593 with the majority dedicated to Trident Technologies, Inc. with trade shows and sales travel expense. The first quarter of each year will have expenses from the SHOT Show, which is the largest hunting, shooting and outdoor trade show that 21st Century Technologies, Inc. attends. In 2002, 21st Century scaled back costs dramatically associated with this show. The reduction in General and Administrative Expenses, decreasing from $389,905 to $154,963 from first quarter 2001 to first quarter 2002, respectively, is largely due to the reduction in overhead costs associated with outside sales offices for various companies including Trident and TPI but also general cost reductions at the corporate headquarters. Compensation costs, decreasing from $444,872 to $124,614, from 2001 to 2002, respectively, are representative of personnel reorganization efforts at the Company in virtually all areas of the business. BALANCE SHEET 21st Century Technologies, Inc. ended the first quarter of 2002 with total assets of $4,775,069 compared with the first quarter 2001 balance of $3,676,548. Improvement in the liquidity ratio was of vital priority for management. Liquidity as a current ratio decreased from the comparative period one year ago but improved substantially when compared with year-end 2001 reporting. Current assets for the end of the first quarter 2002 were $2,226,106 compared with current liabilities of $1,739,831. Stockholder equity increased to $2,491,553 in the first quarter of 2002 from $1,763,248 in the comparative first quarter period. The leverage position of the Company also improved from 1.08X in the first quarter of 2001 to .92X in the first quarter of 2002. 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. 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 will finance further growth through both public and private financing, including equity offerings, which will 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. 1) Patricia Wilson Litigation-Suit by former officer, director and shareholder against the company and individual directors for breach of employment contract, wrongful termination, negligent investigation, breach of fiduciary duty and defamation. This suit is pending in the 153rd District court of Tarrant County, Texas in Cause No. 153-189311-01. It appears at this time that Plaintiff cannot legally prevail on many of her claims because they do not belong to her individually. As to the breach of contract claim, we believe that Plaintiff will be unable to establish a legally enforceable contract 2) Industrial Magnetics, Inc. - This is a trade claim pending in the 33rd Circuit court of Charlevoix County, Michigan, Cause No. 01-1138-19-GC, in the face amount of $742,500.00 for specially fabricated magnets, which were ordered by Trident. Trident, however, only accepted a portion of the order and has been sued for the balanced due under the contract. We believe that Trident has a valid counter claim because the magnets that were delivered were defective and unsuitable for their intended purpose. 3) Bike Doctor - In the year 2000 21st Century agreed to purchase the assets of Bike Doctor, a manufacturer of bicycle tire sealant, for $150,000. 21st Century made an initial payment of $5000.00 but failed to pay the balance and has now indicated that it does not intend to go through with the deal. Suit was subsequently filed in March 2002 in U.S. District Court for the State of California, Central Division, Cause No. CV-0201927 for the balance of the contract amount ($145,000.00) and punitive damages. This suit has recently been filed and is in the discovery phase. 4) U. S. Optics Suit was filed in 2001 against U.S. Optics and its principal John Williams in cause number 01CC02407 in Superior Court for the State of California, Orange County Division for conversion, trademark infringement, false advertising and breach of contract, among other caused of action arising from Defendants' interference 21st Century's purchase of Unertl Optical. The Defendants counterclaimed against 21st Century, its subsidiaries and individual present and former officers and directors of those entities, alleging breach of contract, fraud, conspiracy and other counts related to 21st Century's purchase of Unertl and its dealings with U.S. Optics and Williams. During the current quarter the litigation was successfully resolve in favor of 21st Century and the counterclaim was dismissed in all respects. ITEM 2. 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 * 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 ** 99.1 Complaint filed by 21st Century Technologies, *** Inc. and Trident Technologies, Inc. against Doug Spring and Buren Palmer, II, on April 27, 2001; 99.2 Order Partially Granting Application for *** Temporary Restraining Order and Scheduling Preliminary Injunction Hearing signed by Judge Terry Means on April 30, 2001; and 99.3 21st Century Technologies, Inc. press release *** dated April 27, 2001. * 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. *** Incorporated by reference to the Form 8-K filed with the SEC on May 11, 2001 (b) Reports on Form 8-K The company filed one form 8-K during the first quarter of 2001. The 8-K filed on May 11, 2001 reported the commencement of the litigation described in Item I above and the entry of an order in that litigation prohibiting the defendants from attempting to transfer the Company's proprietary information during the course of that litigation. The company filed no other Form 8-K's during the second quarter of 2001. However, on July 13, 2001, subsequent to the close of the second quarter, a Form 8-K was filed in connection with the settlement of the litigation described in Item 1 above. 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. SCOTT SHEPPARD ________________ (Registrant) By: /s/ SCOTT SHEPPARD, CHIEF OPERATING OFFICER ___________________________________________ (Signature and Title)* Date: May 20, 2002 -----END PRIVACY-ENHANCED MESSAGE-----