UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2001
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number: 000-09322
iEXALT, INC.
NEVADA 75-1667097
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12000 Aerospace Avenue, Suite 375
Houston, Texas 77034 - 5576
(Address of principal executive offices)
281-464-8400
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES |XX| NO |_|
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
March 31, 2001: 40,596,577 Shares.
Transitional Small Business Disclosure Format (check one): YES |_| NO |XX|
iEXALT, INC.
TABLE OF CONTENTS
Page
----
Part I Financial Information
Item 1 Condensed Consolidated Financial Statements 3
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 21
Part II Other Information
Item 2 Changes in Securities 28
Item 6 Exhibits and Reports on Form 8-K 29
Signatures 31
2
Part I - Item 1. Condensed Consolidated Financial Statements.
iEXALT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
February 28, August 31,
2001 2000
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 450,012 $ 278,164
Accounts receivable, trade, net of allowance for doubtful
accounts 809,979 665,180
Accounts receivable, affiliate 68,980 86,384
Inventory, prepaid expenses and other current assets 555,409 265,758
------------ ------------
TOTAL CURRENT ASSETS 1,884,380 1,295,486
------------ ------------
PROPERTY AND EQUIPMENT, net 790,857 717,025
------------ ------------
OTHER ASSETS
Goodwill and other intangible assets, net 5,864,566 2,462,244
Other assets 727,915 272,853
------------ ------------
$ 9,267,718 $ 4,747,608
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 1,646,714 $ 241,678
Notes payable to shareholders 545,000 557,000
Current maturities of long-term debt 639,235 613,037
Current maturities of obligations under capital lease 103,491 8,235
Accounts payable, trade 998,621 622,007
Accounts payable, affiliate 18,521 20,633
Deferred revenue 698,288 323,035
Other accrued liabilities 636,025 509,326
------------ ------------
TOTAL CURRENT LIABILITIES 5,285,895 2,894,951
------------ ------------
LONG-TERM DEBT 82,199 90,050
OBLIGATIONS UNDER CAPITAL LEASE 12,542 8,024
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value, 20,000,000 shares
authorized, no shares issued and outstanding -- --
Common stock, $.001 par value, 100,000,000 shares authorized, 34,294,032
and 28,646,876 shares, issued and outstanding,
respectively 34,294 28,647
Paid-in capital 15,462,166 9,810,457
Receivable from shareholder (9,239) (9,239)
Retained deficit (11,600,139) (8,075,282)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 3,887,082 1,754,583
------------ ------------
$ 9,267,718 $ 4,747,608
============ ============
See accompanying notes.
3
iEXALT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
---------------------------- ----------------------------
February 28, February 29, February 28, February 29,
2001 2000 2001 2000
------------ ------------ ------------ ------------
REVENUES $ 2,456,154 $ 841,788 $ 4,903,143 $ 1,295,443
COST OF SALES AND SERVICES 1,585,222 494,128 3,296,801 838,353
------------ ------------ ------------ ------------
GROSS PROFIT 870,932 347,660 1,606,342 457,090
SELLING, GENERAL, AND ADMINISTRATIVE 672,614 579,557 3,244,097 901,270
PAYROLL COSTS 654,531 472,733 1,288,085 755,388
DEPRECIATION AND AMORTIZATION 141,824 43,206 224,989 55,316
LOSS ON DISPOSAL OF ASSETS -- -- 153,262 --
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (598,037) (747,836) (3,304,091) (1,254,884)
OTHER INCOME (EXPENSES)
INTEREST INCOME 935 363 3,912 5,252
INTEREST EXPENSE (187,112) (3,590) (224,678) (4,364)
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES (784,214) (751,063) (3,524,857) (1,253,996)
INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
NET LOSS $ (784,214) $ (751,063) $ (3,524,857) $ (1,253,996)
============ ============ ============ ============
NET LOSS PER SHARE $ (0.02) $ (0.03) $ (0.11) $ (0.05)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 34,023,380 24,460,007 32,539,289 22,927,759
============ ============ ============ ============
See accompanying notes.
4
iEXALT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
Common
Stock Receivable Total
--------------------------- Paid-In from Retained Shareholders
Shares Amount Capital Shareholder Deficit Equity
------------ ------------ ------------ ------------ ------------ ------------
BALANCE August 31, 2000 28,646,876 $ 28,647 $ 9,810,457 $ (9,239) $ (8,075,282) $ 1,754,583
Issuance of stock for acquisitions 2,975,500 2,976 3,279,763 -- -- 3,282,739
Issuance of stock for dispositions 275,000 275 188,912 -- -- 189,187
Issuance of stock for cash 879,906 880 559,120 -- -- 560,000
Issuance of stock for services 916,750 916 464,569 -- -- 465,485
Exercise of options 600,000 600 11,400 -- -- 12,000
Issue stock options/warrants -- -- 1,147,945 -- -- 1,147,945
Net loss -- -- -- -- (3,524,857) (3,524,857)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE February 28, 2001 34,294,032 $ 34,294 $ 15,462,166 $ (9,239) $(11,600,139) $ 3,887,082
============ ============ ============ ============ ============ ============
See accompanying notes.
5
iEXALT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
-----------------------------
Six Months Ended
February 28, February
2001 29, 2000
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,524,857) $ (1,253,996)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 224,989 55,316
Loss on disposition of assets 153,262 -
Non-cash expense of issuing stock options/warrants 910,251 -
Compensation and other expense for common shares
issued for services 465,485 71,250
Changes in assets and liabilities, net of effects of
acquisitions:
Accounts receivable (82,052) (8,546)
Inventory, prepaid expenses and other current assets (280,315) (31,901)
Other assets (238,443) (70,000)
Accounts payable 176,894 362,385
Deferred revenue 150,764 -
Other accrued expenses (49,210) (133,815)
-------------- -------------
Net cash used by operating activities (2,093,232) (1,009,307)
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash from acquisitions 124,291 64,087
Purchases of property and equipment (49,507) (312,109)
-------------- -------------
Net cash provided by investing activities 74,784 (248,022)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 560,000 782,497
Proceeds from exercise of options 12,000 -
Payments on borrowings from shareholders (12,000) -
Proceeds from issuance of debt 1,469,645 450,000
Proceeds from issuance of warrants 237,694 -
Payments of capital lease obligations (25,106) -
Repayments of debt (51,937) (32,213)
-------------- -------------
Net cash provided by financing activities 2,190,296 1,200,284
-------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 171,848 (57,045)
BEGINNING OF PERIOD 278,164 351,312
-------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 450,012 $ 294,267
============== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 50,771 $ 4,487
============== =============
See accompanying notes.
6
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, BUSINESS AND BASIS OF PRESENTATIONS - iExalt, Inc.,
("iExalt" or "Company"), was originally incorporated as Louisiana
Northern Gas, Inc. a Nevada corporation on April 23, 1979. The name
of the Company was changed to Sunbelt Exploration, Inc. on December
21, 1979. From 1989 until September 1, 1999, the Company had very
limited operations.
On September 1, 1999, the Company consummated a merger (hereinafter
referred to as the "Merger") with iExalt, Inc., a Texas corporation
incorporated on January 7, 1999, ("iExalt-Texas") whereby the
shareholders of iExalt-Texas acquired an approximate 89% ownership
interest in the Company. The Merger has been accounted for as a
reverse takeover with the Company being the surviving legal entity
and iExalt-Texas being the acquiror for accounting purposes.
Concurrent with the Merger, the Company changed its name from
Sunbelt Exploration, Inc. to iExalt, Inc.
iExalt blends the positive modern technologies available through the
Internet with traditional media to provide products, services, and
Internet solutions to Christian families, businesses, schools,
communities, and organizations. iExalt currently operates as a
nationwide filtered Internet Service Provider, publishes Christian
electronic books and reference materials, a Christian events
magazine, a Christian business directory, and a Christian newspaper,
produces a radio program in 52 markets five nights per week and is
affiliated with a youth oriented Christian radio program, operates a
comprehensive contemporary Christian music website and one of the
largest speaker's bureaus dedicated to Christian speakers. In
addition, iExalt sells tickets for Christian events, manages one of
the most popular Christian portal sites, provides access to on-line
web based sermon resources through its web site, and provides
through the Internet a cutting-edge, information-packed, online
monthly newsletter for local youth programs. iExalt provides
psychiatric counseling services for senior citizens earning
healthcare revenues from the implementation and management of
geriatric psychiatric programs for hospitals and other health
facilities. iExalt also operates a Christian inpatient mental health
management company.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany balances and transactions
have been eliminated.
INTERIM RESULTS - The accompanying unaudited condensed consolidated
financial statements of the Company and its subsidiaries reflect, in
the opinion of management, all adjustments necessary to present
fairly the Company's consolidated financial position at February 28,
2001 and the Company's consolidated results of operations and cash
flows for the three and six month periods ended February 28, 2001
and February 29, 2000. Interim period results are not necessarily
indicative of the results that may be expected for an entire year.
These consolidated financial statements and the notes thereto should
be read in conjunction with the Company's Annual Report on Form
10-KSB for the year ended August 31, 2000, including the financial
statements and notes thereto.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
debt instruments having maturities of three months or less at the
date of purchase to be cash equivalents.
7
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
PROPERTY AND EQUIPMENT - Property and equipment is carried at
original cost or adjusted net realizable value, as applicable.
Maintenance and repair costs are charged to expense as incurred.
When assets are sold or retired, the remaining costs and related
accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in income.
For financial reporting purposes depreciation of property and
equipment is provided using the straight-line method based upon the
expected useful lives of each class of assets. Estimated lives of
assets are as follows: Furniture and fixtures - five to seven years;
computers and software - three to five years; automobiles - three to
five years; and leasehold improvements - over the estimated useful
life or the remaining life of the lease, whichever is shorter.
FINANCIAL INSTRUMENTS - FAIR VALUE - The carrying values of the
Company's financial instruments, which include cash and cash
equivalents, accounts receivable, accounts payable and accrued
liabilities, royalties and debt, approximate their respective fair
values because of short lives and the use of market interest rates.
CREDIT RISK - The Company maintains its cash and cash equivalents
with high credit quality institutions and limits the credit exposure
to any one institution. The Company's accounts receivable arise from
sales to customers and the Company periodically evaluates its credit
exposure with its customers. Included in accounts receivable is
$326,338 due from one customer of PremierCare, a subsidiary of the
Company. The Company has fully reserved this receivable since the
payment has been disputed for more than twelve months, however,
management is vigorously pursuing collection of this balance.
GOODWILL AND OTHER INTANGIBLES - Goodwill represents the cost in
excess of fair value of the assets of businesses acquired and is
being amortized using the straight-line method over 20 years. Other
intangible assets represent costs allocated to covenants not to
compete and other intangibles acquired in business acquisitions.
Other intangible assets are being amortized using the straight-line
method over their estimated useful lives, which range from two to
five years.
STOCK BASED COMPENSATION - Under SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company has elected the method that
requires disclosure of stock-based compensation. The Company
accounts for its employee stock-based compensation plan under
Accounting Principles Board ("APB") Opinion No. 25 and the related
interpretations. Accordingly, deferred compensation is recorded for
stock-based compensation grants to employees based on the excess of
the estimated fair value of the common stock on the measurement date
over the exercise price. The deferred compensation is amortized over
the vesting period of each unit of stock-based compensation. If the
exercise price of the stock-based compensation grant is equal to or
greater than the estimated fair value of the Company's stock on the
date of grant, no compensation expense is recorded. Additionally,
for stock-based compensation grants to consultants, the Company
recognizes as compensation expense the estimated fair value of such
grants as calculated pursuant to SFAS No. 123, recognized over the
related service period.
IMPAIRMENT OF LONG LIVED ASSETS - In September 2000, management made
the decision to dispose of two acquisitions and terminate a funding
arrangement with another potential acquisition. The carrying values
of goodwill and intangible assets of the related dispositions were
not recovered. Therefore, an impairment loss of $3,451,407 was
recognized during August 2000 on these assets. Management believes
there is no other impairment of goodwill and other intangibles.
8
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
REVENUE RECOGNITION - The Company generally recognizes revenue on
services as they are performed and on products when they are sold
net of sales returns. Speaker revenues are recognized when the
speech or event occurs. The Company grants refunds and returns on
electronic publishing products if the software and publications sold
are returned within thirty days. Revenue from ticket operations is
recognized as tickets are sold. Although iExalt collects ticket
receipts representing the full ticket price on behalf of its
clients, the Company only records as revenue the convenience charges
and handling fees included in the ticket price.
In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101"), which clarifies certain existing
accounting principles for the timing of revenue recognition and its
classification in the financial statements. The SEC delayed the
required implementation date of SAB 101 by issuing Staff Accounting
Bulletins No. 101A, "Amendment: Revenue Recognition in Financial
Statements" and 101B, "Second Amendment: Revenue Recognition in
Financial Statement" in March and June 2000, respectively. As a
result, the SAB 101 will become effective for the Company in the
fourth quarter of fiscal year end August 31, 2001. The Company
believes the adoption of SAB 101 will not be material to the
earnings and financial position of the Company.
MANAGEMENT'S 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 disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. While it is believed that such estimates are
reasonable, actual results could differ from those estimates.
CONDITIONS AFFECTING ONGOING OPERATIONS - The Company is currently
dependent upon external financing to continue its current level of
operations. The Company hopes to obtain additional debt and equity
financing from various sources in order to finance its operations
and to continue to grow through merger and acquisition
opportunities. In the event the Company is unable to obtain
additional debt and equity financing, the Company may not be able to
continue its current level of operations. If the Company is unable
to continue its current level of operations, the value of the
Company's assets could experience a significant decline in value
from the net book values reflected in the accompanying consolidated
balance sheet.
The Company's continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on
a timely basis, to comply with the terms of its financing
agreements, to obtain additional financing or refinancing as may be
required, and ultimately to attain profitability. Accordingly,
management believes that period-to-period comparisons of results of
operations should not be relied upon as an indication of future
results of operations.
NOTE B ACQUISITIONS AND DISPOSITIONS
During September 2000, the Company re-evaluated its business mix and
projected cash flows and made decisions to dispose of First Choice
and the Company's filtering software and related technology. First
Choice was sold to a company owned by a former member of the Board
of Directors in exchange for the assumption of future liabilities.
As a part of the transaction, the Company made a payment to First
Choice of $25,000 during October and issued 25,000 shares of the
Company's common stock to an employee for past services rendered.
The filtering software and related technology was sold to a former
employee of the Company. The Company issued 150,000 shares of the
Company's common stock with piggyback registration rights to the
former employee in exchange for a note receivable secured by a lien
on the assets so sold and a resulting $84,359, the total of existing
liabilities related to the filtering technology at the closing.
9
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE B ACQUISITIONS AND DISPOSITIONS (continued)
The note will be repaid upon sale of the stock or six months,
whichever occurs first. The Company retained the right to use and
market the filtering technology to the Christian market. The Company
had also made the decision to cancel its acquisition efforts related
to a start-up Internet Company. The Company had been funding the
start-up under a management and funding agreement since April, 2000.
Under the Termination Agreement, the Company issued 100,000 shares
of the Company's common stock with piggyback registration rights,
retained a 49% interest in the start-up and received a note
receivable for the total funds advanced of $368,112. An impairment
loss of the total of all funds advanced and the related acquisition
costs incurred was recorded due to the low probability of collecting
the note receivable or realizing future income from the equity
interest. Related impairment costs recorded during fiscal year 2000
totaled $3,451,407 and an additional $240,813 loss was recognized
from operations and losses on disposal of fixed assets on the
dispositions during the three months ended November 30, 2000 and six
months ended February 28, 2001.
On September 29, 2000 the Company acquired a seven percent indirect
interest in Sonora Behavioral Hospital, a 30-plus-bed psychiatric
hospital in Arizona. The Company exchanged 150,000 shares of its
common stock for the interest in Integral Behavioral Health
Services, Inc., the 100% owner and operator of Sonora. This
acquisition has been accounted for under the cost method.
On October 3, 2000, the Company acquired all the stock of
ListenFirst.com ("ListenFirst"), a Christian music news website for
60,000 shares of the Company's common stock. If certain revenue or
profit levels are reached over the next three years, a maximum of
50,000 additional shares will be issued for the acquisition. The
transaction was accounted for as a purchase and goodwill was
recorded in the amount of $60,084.
On October 18, 2000, the assets of Northwest Christian Journal
("NWCJ"), a monthly Christian newspaper in the Seattle area, were
acquired for 37,500 shares of the Company's common stock and cash
proceeds of $7,500. The transaction was accounted for as a purchase
and goodwill was recorded in the amount of $41,250. On October 29,
2000, the assets of the Christian Blue Pages, LLC ("Blue Pages")
that produces a directory of Christian businesses in four editions
in Southern California, were acquired in exchange for 60,000 shares
of the Company's common stock and a percentage of the first year's
advertising revenues. The transaction was accounted for as a
purchase and goodwill was recorded in the amount of $112,182. Both
of these acquisitions were added to the operations of Christian
Times, a subsidiary of the Company.
All the outstanding stock of Clean Web, Inc. ("Clean Web"), a
national filtered ISP with approximately 6,000 users, was acquired
on October 24, 2000 for 2,313,000 shares of the Company's common
stock. The transaction was accounted for as a purchase and goodwill
was recorded in the amount of $2,236,680.
Effective November 1, 2000, the Company acquired all the assets of
Rapha ("Rapha"), a Christian inpatient mental health management
company. Under the terms of the acquisition agreement, the Company
issued 200,000 shares of common stock at closing. When contracts
noted within the purchase agreement are certified by PsyCare that
such contracts have been assigned within 180 days of closing, then
final valuation will be increased by $200,000 per contract, not to
exceed $1,000,000 in total, and settled with additional shares of
common stock, if necessary, in October, 2002. The transaction was
accounted for as a purchase and originally goodwill was recorded in
the amount of $284,228. As of the period ended February 28, 2001 the
contracts had been certified and goodwill was recorded in the amount
of an additional $715,772 as an adjustment to the purchase price.
On November 21, 2000, in exchange for 30,000 shares of the Company's
common stock, the Company acquired all of the speaker contracts and
speaking engagements related to the Christian market from Alive
Communications ("Alive"). The transaction was accounted for as a
purchase and
10
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE B ACQUISITIONS AND DISPOSITIONS (continued)
goodwill was recorded in the amount of $10,969. Alive is a leading
provider of speakers to the Christian community and the business
will be combined with ChristianSpeakers.com.
On December 1, 2000, in exchange for 50,000 shares of the Company's
common stock, the Company acquired the assets of Gilmore Marketing
Company. The company provides marketing related products and
services such as multi media development, advertising art work and
content, publication brochures, printing designs, and logos. The
transaction was accounted for as a purchase and goodwill was
recorded in the amount of $12,206.
The following unaudited pro forma combined results of operations of
the Company for the six months ended February 2001 and 2000 assume
significant acquisitions had occurred as of the beginning of the
respective periods.
PRO FORMA
Six Months Ended
----------------------------
February February
28, 2001 29, 2000
------------ ------------
Revenues $ 5,114,114 $ 4,076,853
Loss from operations $ (3,479,645) $ (2,386,610)
Net loss $ (3,704,626) $ (2,451,326)
Net loss per share $ (0.11) $ (0.10)
Pro Forma Weighted Average Number of 33,229,355 25,409,606
Shares Outstanding
The pro forma information has been adjusted to reflect the
amortization of goodwill from the beginning of the respective
periods for each of the acquired companies that were significant.
The pro forma financial information is not necessarily indicative of
the combined results that would have occurred had the acquisitions
taken place at the beginning of the period, nor is it necessarily
indicative of results that may occur in the future.
In June 2000, the Company entered into a funding agreement with
Global Christian Network, Inc. under which iExalt advances funds and
directs the management of the company pending completion of the
definitive acquisition agreement. Funds advanced under this
agreement were $368,280 and were included in Other Assets at
February 28, 2001. The acquisition was completed and closed on March
1, 2001 and is further disclosed in Note K.
NOTE C PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at:
February 28, August 31,
2001 2000
--------- ---------
Computer equipment and software $ 493,973 $ 383,532
Furniture, fixtures and office
equipment 257,055 224,390
Automobiles 190,091 186,090
Leasehold improvements 55,815 34,360
--------- ---------
996,934 828,372
Less accumulated depreciation (206,077) (111,347)
--------- ---------
$ 790,857 $ 717,025
========= =========
11
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE D SHORT-TERM BORROWINGS
Short-term borrowings consisted of the following at:
February 28, August 31,
2001 2000
----------- -----------
Revolving line of credit with bank, interest $ 150,000 $ 150,000
at prime payable monthly, due December 18,
2000, guaranteed by shareholder
Convertible debentures, interest at prime
plus one half, due March 22, 2001 500,000 --
Bridge loan, non-interest bearing, due April
9, 2001 180,000 --
Convertible debentures, non-interest
bearing, due April 15, 2001 180,000 --
Convertible debentures, renegotiating terms 600,000 --
Convertible debentures, interest at 11%, due
August 28, 2001 200,000 --
Less: Discounts on debentures (237,694) --
Other unsecured revolving lines of credit in
the form of credit cards, interest ranging
from 11.9% to 22.9%, payable monthly 74,408 91,678
----------- -----------
$ 1,646,714 $ 241,678
=========== ===========
In August 1999, the Company negotiated a $50,000 revolving line of
credit with a bank. The credit line was increased to $150,000 in
December 1999. The line was guaranteed by a shareholder without the
Company's authority, and matured in late December 2000. The bank has
provided forbearance and the Company continues to service the debt
with monthly interest payments. The Company expects to repay the
line of credit by the end of June 2001. In October 2000, the
shareholder/guarantor of the line indicated that the guarantee would
not be renewed.
On September 20, 2000, the Company agreed to issue $500,000 in
convertible debentures. The debentures bear interest at prime plus
one half and were convertible into common stock at the lesser of
$0.17 per share or fifty percent of the current market price.
Principal and interest were due on October 20, 2000 but the due date
was extended to January 15, 2001 and as additional consideration,
the Company issued a five-year warrant to purchase one million
shares at $1.13 per share to the holders of the convertible
debentures. The debenture holders subsequently agreed to again
extend the due date to March 22, 2001, convert no more than to
4,950,000 shares, and provide a bridge loan of $180,000 in return
for the adjustment of the conversion price per share to $0.07 and
the adjustment of the exercise price of outstanding warrants to
$0.21. The Company is working with the debenture holder to determine
the form of repayment.
On February 16, 2001, the Company agreed to issue $180,000 in the
form of a convertible debenture. The debenture bears no interest,
provides for conversion of $90,000 of the principal for shares with
a conversion price of $0.18, and matures on April 15, 2001.
Additional consideration was issued in the form of warrants for the
purchase of up to 1,000,000 shares, the first 818,182 at an exercise
price of $0.11 and the balance of 181,818 shares at an exercise
price of $0.18.
12
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE D SHORT-TERM BORROWINGS (continued)
In November 2000, the Company agreed to terms for issuing
convertible debentures for $1,200,000 and the establishment of an
18-month equity line of $3,000,000. Subsequently on December 11,
2000 the terms were modified to issue $600,000 in convertible
debentures and a $3,400,000 equity line. The agreement was with
Thomson Kernaghan & Co. Limited and provided for two year debentures
carrying a 10% accumulating interest rate and convertible into
common shares. In addition, the Company had agreed to issue
five-year warrants to purchase 1,250,000 shares of its common stock
with an exercise price equal to 110% of the average closing bid
price for the three trading days preceding closing. The Company also
agreed to place 2,883,333 shares of its common stock as collateral.
Definitive agreements were signed and effective December 11, 2000.
The Company complied with all requirements for closing including the
placement of the shares as collateral but the transaction did not
close under the terms of the agreement and the equity line was not
established. Funds totaling $600,000 were ultimately received and
the Company has been negotiating with Thomson Kernaghan & Co.
Limited regarding repayment and expects to resolve the outstanding
issues in a mutually agreeable manner.
On February 23, 2001, the Company agreed to a $6,000,000 capital
investment by Woodcrest Capital II Limited Partnership. The initial
funding will be $1,000,000 paid in installments over nine months and
subsequent funding of $5,000,000 subject to certain covenants. The
Company received $200,000 at closing and is able to receive an
additional $100,000 each month thereafter. The loans are to be
repaid within six months of funding and bear interest at 11%. As
additional consideration, the Company issued warrants totaling
10,812,500 shares at an exercise price of $0.16 related to the first
$1,000,000 loaned. The warrants are vested and have a five-year
term. The Company has the option to repay the principal and interest
with cash or shares of common stock which shares will be valued at
the lesser of $0.20 per share or 75% of the average of the stock's
closing price in the previous 5 trading days. If the Company borrows
amounts over the initial loan of $1,000,000 the interest rate and
repayment terms are similar and additional warrants to purchase
shares of common stock would be granted of 5 shares for every $1.00
loaned.
NOTE E NOTES PAYABLE TO SHAREHOLDERS
Notes payable to shareholders consist of the following at:
February 28, August 31,
2001 2000
------------ ----------
Non-interest bearing note payable to shareholder, due
on demand secured by all assets of NetXpress $350,000 $350,000
Unsecured note payable to shareholder, 8%
interest, due on demand 195,000 195,000
Unsecured note payable to shareholder, 8%
interest, due on demand -- 12,000
-------- --------
$545,000 $557,000
======== ========
In connection with the acquisition of NetXpress, the Company assumed
a $350,000 note payable to a shareholder of the Company. Under the
terms of this note, the balance became payable on demand when net
assets exceeded $5,000,000. As of November 2000, the shareholder
made demand for payment through his attorney and the Company is
attempting to negotiate the payment terms while also offering
Christian mediation under the rules of the Institute for Christian
Conciliation.
13
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE E NOTES PAYABLE TO SHAREHOLDERS (continued)
During August 2000, two shareholders loaned the Company $195,000 and
$12,000 respectively under two separate demand notes each with an 8%
interest rate. The $12,000 demand note was repaid in November 2000.
Demand for payment of the $195,000 has been made through an attorney
and the company is currently attempting to negotiate payment terms
while also offering Christian Binding Arbitration.
During September 2000, a shareholder loaned the Company $55,000
under a promissory note with an 11.75% interest rate due on or
before March 16, 2001. The note was repaid in December 2000.
During November 2000, three shareholders loaned a total of 2,883,333
common shares in conjunction with its funding agreement with Thomson
Kernaghan & Co. Limited to the Company to be held as collateral by
Thomson Kernaghan. The Company agreed to repay the shareholders
within six months. The shareholders have agreed that the
collateralized shares may be repaid in restricted shares in the
event the shares loaned are not returned. As further consideration,
the shareholders also receive interest on the fair market value of
the shares loaned paid at 12%. Accrued interest for the six months
ended February 28, 2001 totaled $36,678.
NOTE F LONG-TERM DEBT
Long-term debt consisted of the following at:
February 28, August 31,
2001 2000
-------- --------
Note payable to bank, interest at prime
payable quarterly, due June 30, 2001,
unsecured, guaranteed by shareholder $550,000 $550,000
Vehicle notes payable, interest ranging
from 1.9% to 14.25%, maturing June 2001 to
June 2004, secured by vehicles 108,803 131,173
Notes payable on various insurance policies 54,456 19,414
Other unsecured note payables, due on demand 8,175 2,500
-------- --------
721,434 703,087
Less: current maturities 639,235 613,037
-------- --------
$ 82,199 $ 90,050
======== ========
NOTE G SHAREHOLDERS' EQUITY
First Choice was sold to a company owned by a former member of the
Board of Directors in exchange for the assumption of future
liabilities. As a part of the transaction, the Company made a
payment to First Choice of $25,000 during October and issued 25,000
shares of the Company's common stock to an employee for past
services rendered.
The filtering software and related technology was sold to a former
employee of the Company. The Company issued 150,000 shares of the
Company's common stock with piggyback registration rights to the
former employee in exchange for a note receivable of $84,359, the
total of existing liabilities related to the filtering technology at
the closing.
14
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE G SHAREHOLDERS' EQUITY (continued)
A funding agreement related to the acquisition of a start-up
Internet Company that the Company had signed in April, 2000 was
terminated. The Company issued 100,000 shares of the Company's
common stock with piggyback registration rights, retained a 49%
interest in the start-up, and received a note for the total funds
advanced of $368,112. These assets were fully impaired at August 31,
2000 due to the low probability of collecting the note receivable or
realizing future income from the equity interest.
On September 16, 2000, the Company issued 300,000 shares of its
common stock valued at $274,212 to SunState Equity Inc., for
consulting services related to corporate financing activities,
market acceptance of the Company's business and securities,
recommendations relating to specific business operations and
investments, advice relating to financial planning, and advice
regarding future finances involving securities of the Company.
On September 25, 2000, the Company granted a one-year option to
purchase 600,000 shares of the Company's common stock at an exercise
price of $0.02 per share to CSI for consulting services provided as
part of the Company's reorganization and restructuring. These
options were exercised on October 10, 2000 for $12,000. The Company
incurred non-cash expense of $681,773 for the fair value of the
options under SFAS No. 123.
On September 29, 2000, the Company acquired a seven percent indirect
interest in Sonora Behavioral Hospital, a 30-plus-bed psychiatric
hospital in Arizona. The Company exchanged 150,000 shares of its
common stock for the interest in Integral Behavioral Health
Services, Inc., to the 100% owner and operator of Sonora.
On October 3, 2000, the Company acquired all the stock of
ListenFirst.com ("ListenFirst"), a Christian music news website for
60,000 shares of the Company's common stock. If certain revenue or
profit levels are reached over the next three years, a maximum of
50,000 additional shares will be issued for the acquisition.
On October 17, 2000, the Company sold 879,906 shares of common stock
to an accredited investor for $560,000.
On October 18, 2000, the assets of Northwest Christian Journal
("NWCJ"), a monthly Christian newspaper in the Seattle area, were
acquired for 37,500 shares of the Company's common stock and cash
proceeds of $7,500. On October 29, 2000, the assets of the Christian
Blue Pages, LLC ("Blue Pages") that produces a directory of
Christian businesses in four editions in Southern California, were
acquired in exchange for 60,000 shares of the Company's common stock
and a percentage of the first year's advertising revenues.
All the outstanding stock of Clean Web, Inc. ("Clean Web"), a
national filtered ISP with approximately 6,000 users, was acquired
on October 24, 2000 for 2,313,000 shares of the Company's common
stock.
Effective November 1, 2000, the Company acquired all the assets of
Rapha ("Rapha"), a Christian inpatient mental health management
company. Under the terms of the acquisition agreement, the Company
issued 200,000 shares of common stock at closing. When contracts
noted within the purchase agreement are certified by Psycare that
such contracts have been assigned within 180 days of closing, then
the final valuation will be increased by $200,000 per contract, not
to exceed $1,000,000 in total, and settled with additional shares of
common stock, if necessary, in October, 2002. The transaction was
accounted for as a purchase and originally goodwill was recorded in
the amount of $284,228. As of the period ended February 28, 2001 the
contracts had been certified and goodwill was recorded in the amount
of an additional $715,772.
15
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE G SHAREHOLDERS' EQUITY (continued)
On November 21, 2000, in exchange for 30,000 shares of the Company's
common stock, the Company acquired all of the speaker contracts and
speaking engagements related to the Christian market from Alive
Communications ("Alive").
On November 21, 2000, in exchange for 75,000 shares of the Company's
common stock, the Company concluded a strategic relationship
agreement with Shepherd Productions, Inc. in which two websites were
purchased and commitments for future collaborative efforts were
formalized such as the development of radio and Internet related
programs.
On November 29, 2000, in exchange for 75,000 shares of the Company's
common stock, the Company concluded a strategic relationship
agreement with Dawson McAllister in which the Company's products and
services will be marketed through radio and Internet related
communications.
On November 2, 2000 a signing bonus of 50,000 shares of the
Company's common stock was provided per an agreement of employment
and non-competition with the Company's Vice President - Marketing.
On December 1, 2000, in exchange for 50,000 shares of the Company's
common stock, the Company acquired all of the assets of Gilmore
Marketing.
On December 11, 2000, in exchange for 20,000 shares of the Company's
common stock, the Company concluded a strategic relationship
agreement with Wes Holloman for services related to the
TheParentLink on-line site that offers an online monthly newsletter
for parents that youth ministers can download and customize for
their own use.
On December 15, 2000 the Board of Directors provided that 150,000
shares of common stock be issued to two individuals as compensation
for services provided to the Company and 100,000 shares of common
stock be issued to a director for services.
On February 9, 2001, in exchange for 100,000 shares of the Company's
common stock, the Company concluded a strategic relationship
agreement with TeamImpact, Inc. in which TeamImpact will promote the
Company's internet service provider product, and other related
products and services as well as naming iExalt as a key sponsor of
TeamImpact promotional events.
On February 15, 2001, the warrant issued to Robert Horn as
compensation for services performed related to the CleanWeb, Inc.
acquisition was exercised resulting in 10,000 shares of the
Company's stock being issued.
On February 23, 2001, the Company provided 93,750 shares of its
common stock to W. Michael Greene as compensation for services
related to the closing of the Woodcrest Capital investment.
16
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE H STOCK OPTIONS AND WARRANTS
The board of directors elected to issue stock options at an exercise
price of $0.20 per share to directors for a number of shares equal
to the number of dollars loaned or guaranteed personally by any such
director. Accordingly, options to purchase an aggregate 800,000
shares of common stock were granted within the quarter ended
February 28, 2001. A non-cash expense of $9,109 was recorded
related to the fair value of the options.
The board of directors elected to issue stock options at an exercise
price of $0.19 per share to directors for compensation for serving
on the executive committee. Accordingly, options to purchase an
aggregate 750,000 shares of common stock were granted within the
quarter ended February 28, 2001. A non-cash expense of $23,071 was
recorded related to the fair value of the options.
The board of directors elected to issue stock warrants at an
exercise price of $0.14 per share to Wes Christian for legal
services. Accordingly, warrants to purchase an aggregate 300,000
shares of common stock were granted within the quarter ended
February 28, 2001. A non-cash expense of $37,500 was recorded
related to the fair value of the warrants.
NOTE I INCOME TAXES
The Company has had losses since inception and, therefore, has not
been subject to federal income taxes. As of February 28, 2001 the
Company estimates an accumulated taxable net operating loss ("NOL")
carryforward for income tax purposes of approximately $10.8 million,
resulting in a deferred tax asset of $3.8 million. These
carryforwards begin to expire in 2019. Because U.S. tax laws limit
the time during which NOL and tax credit carryforwards may be
applied against future taxable income and tax liabilities, the
Company may not be able to take full advantage of its NOL and tax
credits for federal income tax purposes. A valuation allowance has
been established to fully offset the deferred tax assets.
NOTE J BUSINESS SEGMENTS
The Company's operations are grouped into three business segments
based on types of service and delivery media: Internet and
technology applications, print publications, and healthcare
services. Internet and technology applications consist of CleanWeb,
iExalt.com (portal), Electronic Publishing, ChristianSpeakers.com,
ListenFirst.com, iSermons, the ParentLink, and Life Perspectives.
Print publications consist of Christian Happenings, Christian Times,
and Christian Blue Pages. Healthcare services consist of the
counseling programs of PremierCare and Rapha.
17
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE J BUSINESS SEGMENTS (continued)
The Company's reportable segment information for the six months
ended February 28, 2001 and February 29, 2000 is as follows:
Six Months Ended Internet & Print Healthcare Corporate/ Reportable
February Technology Publications Services Other Segments
- ---------------- ----------- ------------ ----------- ----------- -----------
Revenues:
2001 $ 2,195,770 $ 952,585 $ 1,754,788 $ -- $ 4,903,143
2000 $ 850,234 $ 445,209 $ -- $ -- $ 1,295,443
Gross Profit:
2001 $ 614,625 $ 294,762 $ 696,955 $ -- $ 1,606,342
2000 $ 163,009 $ 294,081 $ -- $ -- $ 457,090
(Loss)/Income from
Operations:
2001 $ (789,401) $ (95,869) $ 154,255 $(2,573,076) $(3,304,091)
2000 $ (406,790) $ (10,845) $ -- $ (837,249) $(1,254,884)
Depreciation/Amort:
2001 $ 116,699 $ 44,354 $ 52,568 $ 11,368 $ 224,989
2000 $ 31,898 $ 8,300 $ -- $ 15,118 $ 55,316
Assets:
2001 $ 4,155,374 $ 1,488,472 $ 2,442,003 $ 1,181,869 $ 9,267,718
2000 $ 4,524,664 $ 314,127 $ -- $ 330,815 $ 5,169,606
The following table reconciles reportable segment gross profit to
the Company's consolidated loss before income taxes for the six
months ended February 28, 2001 and February 29, 2000:
February 28, February 29,
2001 2000
----------- -----------
Gross profit of reportable segments $ 1,606,342 $ 457,090
Other expenses 4,910,433 1,711,974
----------- -----------
Loss from operations (3,304,091) (1,254,884)
Other Income/(Expense)
Interest income 3,912 5,252
Interest expense (224,678) (4,364)
----------- -----------
Loss before income taxes $(3,524,857) $(1,253,996)
=========== ===========
18
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE J BUSINESS SEGMENTS (continued)
The Company's reportable segment information for the three months
ended February 28, 2001 and February 29, 2000 is as follows:
Three Months Ended Internet & Print Healthcare Corporate/ Reportable
February Technology Publications Services Other Segments
- ------------------ ----------- ------------ ----------- ----------- -----------
Revenues:
2001 $ 1,072,542 $ 480,029 $ 903,583 $ -- $ 2,456,154
2000 $ 523,403 $ 318,385 $ -- $ -- $ 841,788
Gross Profit:
2001 $ 358,320 $ 124,913 $ 387,699 $ -- $ 870,932
2000 $ 112,856 $ 234,804 $ -- $ -- $ 347,660
(Loss)/Income from
Operations:
2001 $ (396,101) $ (67,364) $ 104,639 $ (239,211) $ (598,037)
2000 $ (275,195) $ 982 $ -- $ (473,623) $ (747,836)
Depreciation/Amort:
2001 $ 82,771 $ 23,226 $ 30,143 $ 5,684 $ 141,824
2000 $ 24,298 $ 5,400 $ -- $ 13,508 $ 43,206
Assets:
2001 $ 4,155,374 $ 1,488,472 $ 2,442,003 $ 1,181,869 $ 9,267,718
2000 $ 4,524,664 $ 314,127 $ -- $ 330,815 $ 5,169,606
The following table reconciles reportable segment gross profit to
the Company's consolidated loss before income taxes for the six
months ended February 28, 2001 and February 29, 2000:
February 28, February 29,
2001 2000
----------- -----------
Gross profit of reportable segments $ 870,932 $ 347,660
Other expenses 1,468,969 1,095,496
----------- -----------
Loss from operations (598,037) (747,836)
Other Income/(Expense)
Interest income 935 363
Interest expense (187,112) (3,590)
----------- -----------
Loss before income taxes $ (784,214) $ (751,063)
=========== ===========
19
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE K SUBSEQUENT EVENTS
On March 1, 2001, the Company completed the acquisition of the
Global Christian Network, Inc. (GCN), a technology company and the
creators of an online Christian Community based in Reno, Nevada. GCN
will substantially increase the Company's online presence and add
significant technology improvements. As consideration for the
acquisition, the Company issued a total of 1,520,105 of its common
shares to certain GCN shareholders and $11,958 of cash to certain
GCN shareholders in exchange for all issued and outstanding stock of
GCN. The Company issued 500,000 of its common shares for full
payment of an outstanding promissory note owed by GCN to an
investor. The Company issued 207,000 of its common shares to four
employees of GCN for past services. The Company agreed to a
contingent payment of $26,033 of cash to selected employees for past
services based on the achievement of certain performance objectives.
Pursuant to the execution of a funding agreement between the
companies dated June 30, 2000, the Company had advanced cash
totaling $368,280 for pre-acquisition expenditures. The transaction
was accounted for as a purchase and goodwill of $1,100,000 was
recorded.
On March 1, 2001, the Company completed the acquisition of Capital
Artists Agency, Inc., a full service talent agency representing a
variety of names in contemporary Christian music headquartered in
Nashville, TN. The purchase will substantially increase the
Company's presence in the Christian entertainment service sector. In
conjunction with the acquisition, Capital Artist Agency changed its
name to ChristianArtists.com. The transaction in terms of reporting
does not qualify as a significant acquisition. The Company provided
187,500 shares of its common stock and additional shares may be
issued under certain contingencies to provide for a purchase price
of $150,000 at the final closing on March 1, 2002. The transaction
was accounted for as a purchase and goodwill of $47,250 was
recorded.
As further discussed in Note E, three shareholders loaned a total of
2,883,333 common shares in conjunction with its funding agreement
with Thomson Kernaghan & Co. Limited to the Company to be held as
collateral by Thomson Kernaghan. On March 28, 2001, the Company
provided 3,787,936 restricted shares of common stock to the three
shareholders in repayment for the collateralized shares. Thomson
Kernaghan & Co. Limited retained the collateralized shares and was
issued an additional 250,000 of restricted shares in repayment for
the $600,000 in convertible debentures reported at February 28,
2001.
20
Part I- Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion should be read together with our financial
statements, which are included earlier within this Form 10-QSB. The following
discussion contains certain forward-looking statements regarding our
expectations for our business and our capital resources. These expectations are
subject to various uncertainties and risks that may cause actual results to
differ significantly from these forward-looking statements.
General
iExalt, Inc., ("iExalt" or "Company"), was originally incorporated as
Louisiana Northern Gas, Inc. a Nevada corporation on April 23, 1979. The name of
the Company was changed to Sunbelt Exploration, Inc. on December 21, 1979. From
1989 until September 1, 1999, the Company had very limited operations.
On September 1, 1999, the Company consummated a merger (hereinafter
referred to as the "Merger") with iExalt, Inc., a Texas corporation incorporated
on January 7, 1999, ("iExalt-Texas") whereby the shareholders of iExalt-Texas
acquired an approximate 89% ownership interest in the Company. The Merger has
been accounted for as a reverse takeover with the Company being the surviving
legal entity and iExalt-Texas being the acquiror for accounting purposes.
Concurrent with the Merger, the Company changed its name from Sunbelt
Exploration, Inc. to iExalt, Inc.
iExalt blends the positive modern technologies available through the
Internet with traditional media to provide products, services, and Internet
solutions to Christian families, businesses, schools, communities, and
organizations. iExalt currently operates as a nationwide filtered Internet
Service Provider, publishes Christian electronic books and reference materials,
a Christian events magazine, a Christian business directory, a Christian
newspaper, produces a radio program in 52 markets five nights per week, is
affiliated with a youth oriented Christian radio program, operates a
comprehensive contemporary Christian music website and one of the largest
speakers bureaus dedicated to Christian speakers. In addition, iExalt sells
tickets for Christian events, manages one of the most popular Christian portal
sites, provides access to on-line web based sermon resources through its web
site, and provides, through the internet, a cutting-edge information-packed,
online monthly newsletter for local youth programs called the ParentLink. iExalt
provides psychiatric counseling services for senior citizens from the
implementation and management of geriatric psychiatric programs for hospitals
and other health facilities. iExalt also operates a Christian inpatient mental
health management company.
iExalt is a company formed to meet the needs of the Christian community.
Our vision is to reflect Jesus Christ by providing the highest quality Christian
products, services and Internet solutions. iExalt's primary goals are as
follows:
o Media: iExalt will acquire, develop and expand our influence
through print, radio, television, and the Internet
o Migration: iExalt will migrate each company in the iExalt family to
a Web related strategy
o Market: iExalt will enter fields where we can reasonably expect
to be the dominant entity
o Ministry: iExalt must ensure that each company within the family of
iExalt companies has a ministry focus, and shares our
commitment to the Christian faith
o Monetary: iExalt must create positive returns for our shareholders
the resignations of Chairman and Chief
On September 13, 2000, Donald W. Sapaugh, who had served as President of
iExalt from the Company's inception was elected to the office of Chairman of The
Board and Chief Executive Officer. This action was initiated subsequent to the
resignation of some of the Company officers and Board members. Both the Board of
Directors and the resigning directors and officers stated that the resignations
resulted from philosophical management differences and were unrelated to
operating performance or accounting issues.
Subsequent to those actions, we re-evaluated our business mix and
reviewed economic expectations from the various businesses. This analysis
allowed management to determine which lines of business would best enable iExalt
to achieve the company goals. Decisions were made that resulted in the
disposition of two businesses and the termination of an acquisition effort
related to a third business. We divested all of our interest in First Choice to
the management of that subsidiary for their assumption of future liabilities. We
divested ourselves of our filtering software and related technologies to the
management of that function for their assumption of future liabilities, while
retaining the rights to use the filtering software in our ISP business and to
market it to the Christian community.
21
Our management believed that the effort to take this technology to other markets
would have diverted too much capital and management attention away from the
goals of the company. We terminated the acquisition of a start-up Internet
company with which we had signed a funding agreement in April 2000, because of
our perception of delays in business prospects necessary for it to reach
positive cash flow. The value of the goodwill and intangible assets on our books
as of August 31, 2000, relating to First Choice and the prospective acquisition
were fully impaired and written down to zero within the year then ended. The
carrying value of the filtering and related software was reduced to the value of
future cost savings that we estimate will be realized by having our own
filtering technology rather than having to license it as is generally the case
with other filtered internet service providers. In addition to writing off the
associated assets and paying expenses through the time of disposition, we have
made a supplemental payment of $25,000 to First Choice and have issued 150,000
shares of our common stock to the filtering software acquirer and 100,000 shares
to the terminated acquisition target. We acquired a note receivable from the
filtering software acquirer of $84,359 and a note receivable from the terminated
acquisition target of $368,112 Also, as a result of the funding agreement, we
retained a 49% interest in the acquisition target as the note was not repaid by
the agreed upon date of January 1, 2001. These assets were fully impaired at
August 31, 2000 due to the low probability of collecting the note receivable or
realizing future income from the equity interest.
On September 16, 2000, the Company issued 300,000 shares of common stock
to a financial advisor for consulting services.
On September 29, 2000, we acquired an indirect seven percent interest in
Sonora Behavioral Health Hospital, LLC, a 30-plus-bed psychiatric hospital in
Arizona. Management believes this acquisition provides us with an opportunity to
expand our counseling activities. Our interest is held through Integral
Behavioral Health Service, Inc., in which we acquired a seven percent interest
in exchange for 150,000 shares of our common stock.
On October 3, 2000, we acquired all of the stock of ListenFirst.com, Inc.,
which operates a music news website, for 60,000 shares of our common stock. If
certain revenue and profit levels are reached over the next three years, a
maximum of 50,000 additional shares of common stock will be issued. This
acquisition provides us with another element to our mix of Internet websites
oriented to the Christian market. Management also believes it provides potential
synergies with radio programs and Christian events.
On October 17, 2000, the Company sold 879,906 shares of common stock to an
accredited investor for $560,000.
On October 18, 2000, we acquired substantially all of the assets of
Northwest Christian Journal for 37,500 shares of our common stock plus $7,500.
Northwest Christian Journal is a monthly Christian newspaper with a circulation
of about 20,000 published in the Seattle area. The newspaper is being renamed
Northwest Christian Times and is now operated by our Christian Times subsidiary.
On October 24, 2000, we acquired all of the outstanding stock of CleanWeb,
Inc., another filtered ISP, for 2,313,000 shares. iExalt is combining the
operations of iExalt.net and CleanWeb and markets the product through CleanWeb,
Inc. With the addition of the CleanWeb subscribers our customer base exceeds
6,000.
On October 29, 2000, we acquired all of the assets of Christian Blue
Pages, LLC in exchange for 60,000 shares of our common stock and 25%-50% of the
first year's advertising revenues. Christian Blue Pages produces a "yellow
pages" of Christian businesses in four editions in southern California. Its
operations are now conducted through our Christian Times subsidiary.
Effective November 1, 2000, we acquired the assets of Rapha from PsyCare
America, LLC, expanding our counseling services to Christian inpatient mental
health management. Under the terms of the acquisition, we issued 200,000 shares
of common stock. If the contracts noted within the purchase agreement are
certified by PsyCare America, LLC that such contracts have been assigned within
180 days of closing then the final valuation will be increased by $200,000 per
contract, not to exceed $1,000,000 in total, and settled with additional shares
of common stock, if necessary, in October 2002. Our chairman, chief executive
officer, and president had been president of Rapha Treatment Centers from 1987
to 1996, prior to its sale to PsyCare America, LLC.
On November 2, 2000 a signing bonus of 50,000 shares of the Company's
common stock was provided per a non compete agreement.
22
On November 21, 2000, in exchange for 30,000 shares of our common stock,
we acquired from Alive Communications all of its speaker contracts and speaking
engagements relating to the Christian market. Alive is a leading provider of
speakers to the Christian community. Their business has been combined with
ChristianSpeakers.com.
On November 21, 2000, in exchange for 75,000 shares of the Company's
common stock, the Company concluded a strategic relationship agreement with
Shepherd Productions, Inc. in which two websites were purchased and commitments
for future collaborative efforts were formalized such as the development of
radio and internet related programs.
On November 29, 2000, in exchange for 75,000 shares of the Company's
common stock, the Company concluded a strategic relationship agreement with
Dawson McAllister in which the Company's products and services will be marketed
through radio and internet related communications.
On December 1, 2000, in exchange for 50,000 shares of the Company's common
stock, the Company acquired the assets of Gilmore Marketing Company. The company
provides marketing related products and services such as multi media
development, advertising art work and content, publication brochures, printing
designs, and logos.
On December 11, 2000, in exchange for 20,000 shares of the Company's
common stock, the Company concluded a strategic relationship agreement with Wes
Holloman for services related to the TheParentLink on-line site that offers an
online monthly newsletter for parents that youth ministers can download and
customize for their own use.
On February 9, 2001, in exchange for 100,000 shares of the Company's
common stock, the Company concluded a strategic relationship agreement with
TeamImpact, Inc. in which TeamImpact will promote the Company's internet service
provider product, and other related products and services as well as naming
iExalt as a key sponsor of Team Impact promotional events.
iExalt has a limited operating history upon which an evaluation of
business results can be based. The company is involved in a dynamic and rapidly
developing technology and is attempting to incorporate the tremendous power of
the internet to market its products and services while seeking to generate
revenues from its internet portal through advertising and sponsorship. The risk
and rewards associated with start-up ventures or early developmental companies
like iExalt are often volatile. iExalt has incurred net losses since its
inception and expects to continue to operate at a loss until its companies
generate sufficient revenues in excess of expenditures. As of February 28, 2001,
iExalt has experienced a cumulative non-cash/cash deficit of $11,600,139.
Management has determined that the Company will emphasize the monetary goal
during the second half of the fiscal year 2001, and to that end, will execute
plans that will increase revenues while simultaneously seeking acquisitions that
add immediate positive value to earnings.
Results of Operations
Our operating units are grouped into three business segments based on
types of service and delivery media: (1) Internet & Technology Applications, (2)
Print Publications, and (3) Healthcare Services. Internet & Technology
Applications consist of CleanWeb, iExalt.com (portal), Electronic Publishing,
ChristianSpeakers.com, ListenFirst.com, iSermons, the ParentLink, and Life
Perspectives radio. Print Publications consist of Christian Happenings,
Christian Times, and Christian Blue Pages. Healthcare Services consist of the
counseling programs of PremierCare and Rapha.
Net loss for the six months ended February 28, 2001 totaled $3,524,857
compared to a net loss of $1,253,996 for the same period ended February 29,
2000. However, this loss includes significant non-cash expenses totaling
$1,753,987 related to businesses that we disposed of during September 2000,
depreciation, amortization, common stock shares issued for services, and stock
options and warrants that were issued. Excluding these non-cash expenses, the
loss for the six months ended February 28, 2001 was $1,770,870. Net loss for the
quarter ended February 28, 2001 totaled $784,214 compared to a net loss of
$751,063 for the same quarter in year 2000.
23
Revenues
Internet & Technology Applications generate revenues from product sales,
speaker fees, subscriptions, user fees, and advertising. Revenues for Print
Publications consist of advertising and ticket service fees. Healthcare Services
revenues are earned from hospitals for providing services in accordance with our
contracts. Total revenues were $4,903,143 for the six months ended February 28,
2001 compared with $1,295,443 for the six months ended February 29, 2000.
Increases to revenue are primarily attributable to sales recognized from the
businesses and the business assets that have been purchased through the
company's aggressive acquisition program. Our revenues by segment for the two
periods are as follows.
Six Months Ended
--------------------------------------------------------------------
February 28, February 29,
2001 2000
------------------------------- -------------------------------
REVENUES Amount Percent Amount Percent
---------- ------- --------- -------
Internet and Technology Applications $2,195,770 45% $ 850,234 66%
Print Publications 952,585 19% 445,209 34%
Healthcare Services 1,754,788 36% -- -%
Total revenues were $2,456,154 for the quarter ended February 28, 2001
compared with $841,788 for the quarter ended February 29, 2000. Our revenues by
segment for the two periods are as follows.
Three Months Ended
--------------------------------------------------------------------
February 28, February 29,
2001 2000
------------------------------- -------------------------------
REVENUES Amount Percent Amount Percent
---------- ------- --------- -------
Internet and Technology Applications $1,072,542 44% $ 523,403 62%
Print Publications 480,029 19% 318,385 38%
Healthcare Services 903,583 37% -- --%
Cost of Sales and Services
Cost of Sales and Services for Internet & Technology Applications includes
royalties, direct labor, payments to speakers, Internet connectivity, and
communications costs. Cost of Sales and Services for Print Publications consists
of printing, shipping, delivery, credit card fees and direct labor. Healthcare
Services Cost of Sales and Services is primarily direct personnel costs.
Increases to costs are primarily attributable to expenditures incurred from the
businesses and the business assets that have been purchased through the
company's aggressive acquisition program. The Cost of Sales and Services was
$3,296,801 for the six months ended February 28, 2001 compared with $838,353 for
the six months ended February 29, 2000. Cost of Sales and Services by segment
for the two periods are shown below.
Six Months Ended
--------------------------------------------------------------------
February 28, February 29,
2001 2000
------------------------------- -------------------------------
COST OF SALES AND SERVICES Amount Percent Amount Percent
---------- ------- --------- -------
Internet and Technology Applications $1,581,145 48% $ 687,225 82%
Print Publications 657,823 20% 151,128 18%
Healthcare Services 1,057,833 32% -- --%
24
The Cost of Sales and Services was $1,585,222 for the quarter
ended February 28, 2001 compared with $494,128 for the quarter ended February
29, 2000. Cost of Sales and Services by segment for the two periods are shown
below.
Three Months Ended
--------------------------------------------------------------------
February 28, February 29,
2001 2000
------------------------------- -------------------------------
COST OF SALES AND SERVICES Amount Percent Amount Percent
---------- ------- --------- -------
Internet and Technology Applications $714,222 45% $410,547 83%
Print Publications 355,116 22% 83,581 17%
Healthcare Services 515,884 33% -- --%
Selling, General and Administrative
Selling, General and Administrative costs for Internet & Technology
Applications include primarily personnel and advertising costs. Selling, General
and Administrative costs for Print Publications consist of personnel and
communication services. Healthcare Selling, General and Administrative costs are
primarily personnel, travel and transportation. Corporate overhead costs are
primarily personnel, professional fees, and non-cash losses.
Selling, General and Administrative costs were $3,244,097 for the six
months ended February 28, 2001 compared with $901,270 for the six months ended
February 29, 2000. Included in the six months ended February 28, 2001 are
significant non-cash expenses totaling $1,375,736 related to stock options and
warrants that were issued and common stock shares issued for services provided.
Excluding these non-cash expenses, the total Selling, General and Administrative
costs were $1,868,361 for the six months ended February 28, 2001. Increases to
Selling, General and Administrative costs are primarily attributable to
expenditures incurred from the businesses and the business assets that have been
purchased through the company's aggressive acquisition program along with the
costs of implementing the company's growth strategy. Selling, General and
Administrative costs by segment for the two periods are shown below.
Six Months Ended
--------------------------------------------------------------------
February 28, February 29,
2001 2000
------------------------------- -------------------------------
SELLING, GENERAL, AND ADMINISTRATIVE Amount Percent Amount Percent
---------- ------- --------- -------
Internet and Technology Applications $ 744,986 22% $ 298,478 33%
Print Publications 160,551 5% 121,409 14%
Healthcare Services 165,521 5% -- --%
Corporate Overhead 2,173,039 68% 481,383 53%
Selling, General and Administrative costs were $672,614 for the quarter
ended February 28, 2001 compared with $579,557 for the quarter ended February
29, 2000. Selling, General and Administrative costs by segment for the two
periods are shown below.
Three Months Ended
--------------------------------------------------------------------
February 28, February 29,
2001 2000
------------------------------- -------------------------------
SELLING, GENERAL, AND ADMINISTRATIVE Amount Percent Amount Percent
---------- ------- --------- -------
Internet and Technology Applications $383,052 57% $197,741 34%
Print Publications 73,070 11% 82,492 14%
Healthcare Services 81,002 12% -- --%
Corporate Overhead 135,490 20% 299,324 52%
25
Payroll costs were $1,288,085 for the six months ended February 28, 2001
compared with $755,388 for the six months ended February 29, 2000. Increases to
costs related to payroll are primarily attributable to the additional personnel
added to provide for effective human resources to manage, operate, and
administer the efforts of a rapidly growing and dynamic business. Payroll costs
were $654,531 for the three months ended February 28, 2001 compared with
$472,733 for the three months ended February 29, 2000.
Liquidity and Capital Resources
As of February 28, 2001, iExalt had $1,884,380 in current assets,
$5,285,895 in current liabilities and a retained deficit of $11,600,139. We had
a net loss of $3,524,857 for the six months ended February 28, 2001. Net cash
used by operating activities for the period was $2,093,232.
In August 1999, the Company negotiated a $50,000 revolving line of credit
with a bank. The credit line was increased to $150,000 in December 1999. The
line is guaranteed by a shareholder, and matured in late December 2000. The bank
has provided forbearance and the Company continues to service the debt with
monthly interest payments. The Company expects to repay the line of credit by
the end of June 2001. In October 2000, the shareholder/guarantor of the line
indicated that the guarantee would not be renewed.
In July 2000, iExalt borrowed $550,000 from a bank under a term loan that
is due on June 30, 2001. A shareholder guaranteed the term loan. The guarantor
of our term loan has indicated that he will not renew the guarantee. The Company
is considering alternatives to secure, replace, or repay the term loan.
During August 2000, two shareholders loaned the Company $195,000 and
$12,000 respectively under two separate demand notes each with an 8% interest
rate. The $12,000 demand note was repaid in November 2000. Demand for payment of
the $195,000 has been made through an attorney and the company is currently
attempting to negotiate payment terms.
During September 2000, a shareholder loaned the Company $55,000 under a
promissory note with an 11.75% interest rate due on or before March 16, 2001.
The note was repaid in December 2000.
In connection with the acquisition of NetXpress, the Company assumed a
$350,000 note payable to a shareholder of the Company. Under the terms of this
note, the balance became payable on demand when the Company's net assets
exceeded $5,000,000. As of November 2000, the shareholder made demand for
payment through his attorney and the Company is attempting to negotiate the
payment terms while also offering Christian mediation under the rules of the
Institute for Christian Conciliation.
On September 20, 2000, the Company agreed to issue $500,000 in convertible
debentures to Travin Partners LLLP and TCA Investments, Inc. The debentures bear
interest at prime plus one half percent and were convertible into common stock
at the lesser of $0.17 per share or fifty percent of the current market price.
Principal and interest were due on October 20, 2000 but the due date was
extended to January 15, 2001 and as additional consideration, the Company issued
a five-year warrant to purchase one million shares at $1.13 per share to the
holders of the convertible debentures. The debenture holders subsequently agreed
to again extend the due date, convert no more than to 4,950,000 shares, and
provide a bridge loan of $180,000 in return for the adjustment of the conversion
price from $0.17 per share to $0.07 per share and the adjustment of the exercise
price of outstanding warrants to $0.21.
On September 25, 2000, we granted options to the principals of Consulting
and Strategy International Inc. to purchase 600,000 shares at an option price of
$0.02 as compensation for services since August 2000. The underlying shares were
registered on our Form S-8 filed with the Commission on October 6, 2000, and we
received $12,000 to exercise the options on October 10, 2000.
On October 17, 2000, we sold 879,906 unregistered shares of common stock
to an accredited investor for $560,000.
In November 2000, the Company agreed to terms for issuing convertible
debentures for $1,200,000 and the establishment of an 18-month equity line of
$3,000,000. Subsequently, the terms were modified to issue $600,000 in
convertible debentures and a $3,400,000 equity line. The agreement was with
Thomson Kernaghan & Co.
26
Limited and provided for two year debentures carrying a 10% accumulating
interest rate and convertible into common shares. In addition, the Company had
agreed to issue five-year warrants to purchase 1,250,000 shares of its common
stock with an exercise price equal to 110% of the average closing bid price for
the three trading days preceding closing at December 11, 2000. The Company also
agreed to place 2,883,333 shares of its common stock as collateral. Definitive
agreements were signed and effective December 11, 2000. The Company complied
with all requirements for closing including the placement of the shares as
collateral but the transaction did not close under the terms of the agreement
and the equity line was not established. Funds totaling $600,000 were ultimately
received and the Company has been negotiating with Thomson Kernaghan & Co.
Limited regarding repayment and expects to resolve the outstanding issues in a
mutually agreeable manner.
During November 2000, three shareholders loaned a total of 2,883,333
common shares to the Company. The Company agreed to repay the shareholders
within six months. The shareholders have agreed that the collateralized shares
may be repaid in restricted shares along with an interest value to be paid at
12%. The Company used the shares as collateral with Thomson Kernaghan & Co.
Limited to close the convertible debenture and equity line financing arrangement
that was never ultimately consummated.
On February 16, 2001, the Company agreed to issue $180,000 in the form of
a convertible debenture to Ignatius Leonards. The debenture bears no interest,
provides for conversion of $90,000 of the principal for shares with a conversion
price of $0.18, and matures on April 15, 2001. Additional consideration was
issued in the form of warrants for the purchase of up to 1,000,000 shares, the
first 818,182 at an exercise price of $0.11 and the balance of 181,818 shares at
an exercise price of $0.18.
On February 23, 2001, the Company agreed to a $6,000,000 capital
investment by Woodcrest Capital. The initial funding will be $1,000,000 paid in
installments over nine months and subsequent funding of $5,000,000 subject to
certain covenants. The Company received $200,000 at closing and is able to
receive an additional $100,000 each month thereafter. The loans are to be repaid
within six months of funding and bear interest at 11%. As additional
consideration, the Company issued warrants totaling 10,812,500 shares at an
exercise price of $0.16 related to the first $1,000,000 loaned. The warrants are
vested and have a five-year term. The Company has the option to repay the
principal and interest with cash or shares of common stock which shares will be
valued at the lesser of $0.20 per share or 75% of the average of the stock's
closing price in the previous 5 trading days. If the Company borrows amounts
over the initial loan of $1,000,000 the interest rate and repayment terms are
similar and additional warrants to purchase shares of common stock would be
granted of 5 shares for every $1.00 loaned.
Our working capital requirements and cash flow provided by operating
activities can vary from quarter to quarter, depending on revenues, operating
expenses, capital expenditures and other factors. Working capital is critical to
our on-going business and from inception has been provided primarily through
external investment instead of cash flow from the various businesses. Since
inception, we have experienced negative cash flow from operations and expect to
experience negative cash flow until at least the end of this fiscal year ending
August 31, 2001. With the investment from Woodcrest Capital and expected
improvements with regard to revenue generation, the Company is anticipating that
reliance on other sources for working capital should be diminished. Nonetheless,
it is not expected that the internal source of liquidity will improve until
operating activities provide significant net cash, and until such time, we will
need to rely upon external sources for liquidity.
We have not entered into any arrangements with any other financial
institutions or third parties to provide additional financing, other than as
described above. If we are unable to maintain adequate working capital in the
amounts desired and on acceptable terms, we may be required to reduce the scope
of our presently anticipated activities and we may not be able to assure
continuation as a going concern.
Our financial statements are prepared using principles applicable to a
going concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. We may in the future experience
significant fluctuations in our results of operations. Such fluctuations may
result in volatility in the price and/or value of our common stock. Shortfalls
in revenues may adversely and disproportionately affect our results of
operations because a high percentage of our operating expenses are relatively
fixed. Accordingly, we believe that period-to-period comparisons of results of
operations should not be relied upon as an indication of future results of
operations.
27
FORWARD LOOKING INFORMATION
This report on Form 10-QSB includes "forward-looking statements" within
the meaning of SECTION 27A of the Securities Act of 1933 and SECTION 21E of the
Securities Exchange Act of 1934. These forward-looking statements may relate to
such matters as anticipated financial performance, future revenues or earnings,
business prospects, projected ventures, new products and services, anticipated
market performance and similar matters. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for forward-looking statements. To comply
with the terms of the safe harbor, we caution readers that a variety of factors
could cause our actual results to differ materially from the anticipated results
or other matters expressed in our forward-looking statements. These risks and
uncertainties, many of which are beyond our control, include (i) the sufficiency
of our existing capital resources and our ability to raise additional capital to
fund cash requirements for future operations, (ii) uncertainties involved in the
rate of growth and acceptance of the Internet, (iii) adoption by the Christian
community of electronic technology for gathering information, facilitating
e-commerce transactions, and providing new products, websites, and services,
(iv) volatility of the stock market, particularly within the technology sector,
and the ability to use our capital stock as a currency for acquisitions, and (v)
general economic conditions. Although we believe that the expectations reflected
in these forward-looking statements are reasonable, the expectations reflected
in these forward-looking statements may prove to be incorrect.
We cannot guarantee any future results, levels of activity, performance or
achievements. Except as required by law, we undertake no obligation to update
any of the forward-looking statements in this Form 10-QSB after the date of this
report.
Part II - Item 2. Changes in Securities.
The following transactions involving unregistered securities occurred
during the three months ended February 28, 2001, in transactions in which the
Company relied on the exemption from registration available under SECTION 4(2)
of the Securities Act of 1933, as amended.
On December 1, 2000, in exchange for 50,000 shares of the Company's common
stock, the Company acquired all of the assets of Gilmore Marketing.
On December 11, 2000, in exchange for 20,000 shares of the Company's
common stock, the Company concluded a strategic relationship agreement with Wes
Holloman for services related to the TheParentLink on-line site that offers an
online monthly newsletter for parents that ministers can download and customize
for their own use.
On December 15, 2000 the Board of Directors provided that 150,000 shares
of common stock be issued to two individuals as compensation for services
provided to the Company and 100,000 shares of common stock be issued to a
director for services.
On February 9, 2001, in exchange for 100,000 shares of the Company's
common stock, the Company concluded a strategic relationship agreement with
TeamImpact, Inc. in which the Company's products and services will be marketed.
On February 15, 2001, the warrant issued to Robert Horn as compensation
for services performed related to the CleanWeb, Inc. acquisition was exercised
resulting in 10,000 shares of the Company's stock being issued.
On February 23, 2001, the Company provided 93,750 shares of its common
stock to W. Michael Greene as compensation for services related to the closing
of the Woodcrest Capital investment.
28
Part II - Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
3.1 Restated Articles of Incorporation of the Company (filed
as Exhibit 3.1 to the Company's Quarterly Report on Form
10-QSB for the quarter ending February 29, 2000, as
filed with the Commission on April 14, 2000, is
incorporated herein by reference).
3.2 Amended Bylaws of the Company as adopted on April 24,
1979 (filed as Exhibit 3.2 to the Company's Quarterly
Report on Form 10-QSB for the quarter ending February
29, 2000, as filed with the Commission on April 14,
2000, is incorporated herein by reference).
4.1 Investor's Rights Agreement, dated October 24, 2000 by
and among iExalt, Inc., certain shareholders of iExalt,
and Ted L. Parker (filed as Exhibit 4.1 to the Company's
Current Report on Form 8-K, as filed with the Commission
on November 8, 2000, is incorporated herein by
reference).
4.2 Convertible Debenture issued to TCA Investments, Inc. on
September 20, 2000 (filed as Exhibit 4.4 to the
Company's Annual Report on Form 10-KSB for the year
ended August 31, 2000, is incorporated herein by
reference).
4.3 Convertible Debenture issued to Travin Partners LLLP on
September 20, 2000 (filed as Exhibit 4.5 to the
Company's Annual Report on Form 10-KSB for the year
ended August 31, 2000, is incorporated herein by
reference).
4.4 Warrants issued to TCA Investments, Inc. on September
20, 2000 (filed as Exhibit 4.6 to the Company's Annual
Report on Form 10-KSB for the year ended August 31,
2000, is incorporated herein by reference).
4.5 Warrants issued to Travin Partners LLLP September 20,
2000 (filed as Exhibit 4.7 to the Company's Annual
Report on Form 10-KSB for the year ended August 31,
2000, is incorporated herein by reference).
4.6 Letter Agreement between iExalt, Inc. and Consulting &
Strategy International LLC dated September 25, 2000
(filed as Exhibit 4.1 to the Company's Form S-8 as filed
with the Commission on October 6, 2000, is incorporated
herein by reference).
4.7 Registration Rights Agreement dated November 1, 2000
between iExalt, Inc. and PsyCare America LLC. (filed as
Exhibit 4.1 to the Company's Current Report on Form 8-K,
as filed with the Commission on February 23, 2001, is
incorporated herein by reference).
*4.8 Convertible Debenture issued to Thomson Kernaghan & Co.,
Ltd. on December 11, 2000.
*4.9 Registration Rights Agreement dated December 11,
2000 between iExalt, Inc. and Thomson Kernaghan & Co.,
Ltd.
*4.10 Warrant issued to Thomson Kernaghan & Co., Ltd. on
December 11, 2000.
*4.11 Convertible Debenture issued to Ignatius Leonards
on February 15, 2001.
*4.12 Warrant issued to Ignatius Leonards on February 15,
2001.
*4.13 Warrant issued to Woodcrest Capital II Limited
Partnership on February 23, 2001.
*4.14 Warrant issued to Woodcrest Capital, L.L.C. on
February 23, 2001.
29
*4.15 Registration Rights Agreement dated February 23,
2001 between iExalt, Inc. and Woodcrest Capital II
Limited Partnership and Woodcrest Capital, L.L.C.
10.1 Exchange Agreement among the Company, iExalt,
Inc.-Texas, and the Shareholders of iExalt, Inc.-Texas
dated August 12, 1999 (filed as Exhibit 1.1 to the
Company's Current Report on Form 8-K, as filed with the
Commission on September 14, 1999, is incorporated herein
by reference).
10.2 Stock Purchase Agreement, dated September 27, 2000,
between iExalt, Inc. and iExalt Financial Services, Inc.
(filed as Exhibit 2.1 to the Company's Current Report on
Form 8-K, as filed with the Commission on October 12,
2000, is incorporated herein by reference).
10.3 Stock Exchange Agreement, dated October 24, 2000,
between iExalt, Inc. and Ted L. Parker, the sole
shareholder of Cleanweb, Inc. (filed as Exhibit 2.1 to
the Company's Current Report on Form 8-K, as filed with
the Commission on November 8, 2000, is incorporated
herein by reference).
*10.4 Employment Agreement dated November 27, 2000 between
iExalt, Inc. and Chris L. Sisk.
10.5 Amended and Restated Asset Purchase Agreement, dated
February 12, 2001, between iExalt, Inc. and PsyCare
America LLC. (filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K, as filed with the Commission
on February 23, 2001, is incorporated herein by
reference).
10.6 Agreement and Plan of Reorganization, dated November 30,
2000, between iExalt, Inc., GCN Combination Corp. and
Global Christian Network, Inc. and its Principal
Shareholders. (filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K, as filed with the Commission
on March 13, 2001, is incorporated herein by reference).
10.7 Plan of Merger, dated November 30, 2000, between iExalt,
Inc., GCN Combination Corp. and Global Christian
Network, Inc. (filed as Exhibit 2.2 to the Company's
Current Report on Form 8-K, as filed with the Commission
on March 13, 2001, is incorporated herein by reference).
10.8 Plan Asset Purchase Agreement, dated December 12, 2000,
between iExalt, Inc. and Barry Wineroth trustee for the
Showcase Financial Services, Inc. Profit Sharing Plan.
(filed as Exhibit 2.3 to the Company's Current Report on
Form 8-K, as filed with the Commission on March 13,
2001, is incorporated herein by reference).
10.9 Written Consent of Contingent Closing of Global
Christian Network, Inc., iExalt, Inc., David Fritsche,
GCN Combination Corp. & Princ. Shareholders. (filed as
Exhibit 2.4 to the Company's Current Report on Form 8-K,
as filed with the Commission on March 13, 2001, is
incorporated herein by reference).
*10.10 Demand Note dated November 22, 2000 issued to Hunter
M.A. Carr.
*10.11 Demand Note dated November 22, 2000 issued to Morris
Chapman.
*10.12 Demand Note dated November 22, 2000 issued to Donald
Sapaugh.
*10.13 Demand Note dated November 22, 2000 issued to Donald
Sapaugh.
*10.14 Loan Agreement dated February 23, 2001 between iExalt,
Inc. and Woodcrest Capital II Limited Partnership.
*10.15 Warrant issued to James W. Christian on March 21, 2001.
30
99.1 Press Release, dated February 26, 2001, related to the
announcement of $6,000,000 of funding from Woodcrest
Capital II LP. (filed as Exhibit 99.1 to the Company's
Current Report on Form 8-K, as filed with the Commission
on March 7, 2001, is incorporated herein by reference).
*99.2 Press Release, dated March 12, 2001, related to the
acquisition of Capital Artist Agency, Inc.
99.3 Press release issued by iExalt relating to the
acquisition of Global Christian Network, Inc. (filed as
Exhibit 99.1 to the Company's Current Report on Form
8-K, as filed with the Commission on March 13, 2001, is
incorporated herein by reference).
-------------
* Filed herewith
(b) Reports on Form 8-K and Form 8-K/A filed during the three months
ended February 28, 2001:
Form 8-K/A filed on December 11, 2000, reporting (i) the disposition
by iExalt of iExalt Financial Services, Inc. and nXp Technologies,
Inc. along with the termination of a Funding Agreement with an
e-commerce company and (ii) the pro forma financial information
related to the disposition of iExalt Financial Services, Inc.
Form 8-K/A filed on January 8, 2001, reporting (i) the acquisition
by iExalt of CleanWeb, Inc. (ii) the financial statements and pro
forma financial information of the acquired company related to the
acquisition.
Form 8-K filed on February 23, 2001, reporting the purchase of the
Rapha related assets from PsyCare America LLC.
SIGNATURES
In accordance with the requirements Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
iExalt, Inc.
April 6, 2001 /s/ Donald W. Sapaugh
-----------------------------
Donald W. Sapaugh, C.E.O. / Chairman /
President (Principal Executive Officer)
/s/ Russell Ivy
-----------------------------
Russel Ivy, Executive Vice President/
Chief Operating Officer
/s/ Chris L. Sisk
-----------------------------
Chris L. Sisk, Executive Vice President/CFO
(Primary Financial Officer)
31