<Page>
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 NOVEMBER 30, 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:
December 28, 2001: 1,407,225 Shares
Transitional Small Business Disclosure Format (check one): YES[ ] NO [XX]
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iEXALT, INC.
<Table>
<Caption>
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 19
and Results of Operations
Part II Other Information
Item 1 Legal 25
Item 2 Changes in Securities 26
Item 6 Exhibits and Reports on Form 8-K 26
31
Signatures
</Table>
2
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Part I - Item 1. Condensed Consolidated Financial Statements.
<Table>
<Caption>
iEXALT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
November 30, August 31,
2001 2001
(Unaudited)
-------------- --------------
CURRENT ASSETS
Cash and cash equivalents $ 24,801 $ 80,466
Accounts receivable, trade, net of allowance for doubtful accounts 665,097 762,201
Accounts receivable, other and notes receivable, net of allowance for
doubtful accounts 1,046,374 189,177
Accounts receivable, affiliate 27,051 22,874
Inventory, prepaid expenses and other current assets 290,120 394,620
-------------- --------------
TOTAL CURRENT ASSETS 2,053,443 1,449,338
PROPERTY AND EQUIPMENT, net 400,440 568,029
OTHER ASSETS
Goodwill and other intangible assets, net 2,626,443 4,271,540
Other assets, net 172,353 166,361
-------------- --------------
$ 5,252,679 $ 6,455,268
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 806,506 $ 758,744
Notes payable to shareholders 545,000 545,000
Current maturities of long-term debt 621,847 630,941
Current maturities of obligations under capital lease 6,248 7,969
Accounts payable, trade 1,890,953 1,399,047
Accounts payable, affiliate 68,314 54,429
Deferred revenue 334,751 489,742
Other accrued liabilities 551,920 689,881
--------------- --------------
TOTAL CURRENT LIABILITIES 4,825,539 4,575,753
-------------- --------------
LONG-TERM DEBT 7,546 60,953
OBLIGATIONS UNDER CAPITAL LEASE 1,411 1,411
--------------- --------------
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value, 20,000,000 shares authorized, no shares
issued and outstanding -- --
Common stock, $.05 par value, 2,000,000 shares authorized, 1,386,225 and
1,346,341 shares, issued and outstanding, respectively 69,311 67,317
Paid-in capital 19,556,940 19,424,686
Deferred Compensation (450,938) (524,062)
Retained deficit (18,757,130) (17,150,790)
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY 418,183 1,817,151
-------------- --------------
$ 5,252,679 $ 6,455,268
============== ==============
</Table>
See accompanying notes.
3
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iEXALT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<Table>
<Caption>
Three Months Ended November 30,
----------------------------------
2001 2000
------------ -----------
REVENUES $ 1,771,998 $ 2,446,989
COST OF SALES AND SERVICES 1,300,709 1,711,579
----------- -----------
GROSS PROFIT 471,289 735,410
SELLING, GENERAL, AND ADMINISTRATIVE 619,346 2,571,483
PAYROLL COSTS 589,806 633,554
DEPRECIATION AND AMORTIZATION 34,453 83,165
LOSS/(GAIN) ON DISPOSAL OF ASSETS -- 153,262
IMPAIRMENT OF LONG LIVED ASSETS 605,629 --
----------- -----------
LOSS FROM OPERATIONS (1,377,945) (2,706,054)
OTHER INCOME (EXPENSES)
Interest income 9,505 2,977
Interest expense (33,626) (37,566)
----------- -----------
LOSS BEFORE INCOME TAXES (1,402,066) (2,740,643)
INCOME TAXES -- --
----------- -----------
LOSS FROM CONTINUING OPERATIONS (1,402,066) (2,740,643)
LOSS FROM DISCONTINUED OPERATIONS (92,625) --
LOSS FROM DISPOSAL OF ASSETS OF DISCONTINUED OPERATIONS (111,649) --
----------- -----------
NET LOSS $(1,606,340) $(2,740,643)
----------- -----------
NET LOSS PER SHARE $ (1.18) $ (4.41)
----------- -----------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 1,362,108 621,430
----------- -----------
</Table>
See accompanying notes.
4
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iEXALT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
<Table>
<Caption>
Common
Stock Receivable Total
-------------------- Paid-In Deferred from Retained Shareholders
Shares Amount Capital Compensation Shareholder Deficit Equity
--------------------------------------------------------------------------------------------
BALANCE August 31, 2000 572,937 $ 28,647 $ 9,810,457 $ -- $ (9,239) $ (8,075,282) $ 1,754,583
Issuance of stock for
acquisitions 108,803 5,441 4,175,469 -- -- -- 4,180,910
Issuance of stock for
dispositions 5,500 275 188,912 -- -- -- 189,187
Issuance of stock for cash 54,008 2,700 732,299 -- -- -- 734,999
Issuance of stock for
services 162,759 8,137 1,528,709 (585,000) -- -- 951,846
Amortization of deferred
compensation -- -- -- 60,938 -- -- 60,938
Issuance of stock for
loans, settlements &
debenture conversions 430,334 21,517 1,807,390 -- 9,239 -- 1,838,146
Exercise of options 12,000 600 11,400 -- -- -- 12,000
Issue stock
options/warrants -- -- 1,170,050 -- -- -- 1,170,050
Net loss -- -- -- -- -- (9,075,508) (9,075,508)
----------------------------------------------------------------------------------------------
1,346,341 $ 67,317 $19,424,686 $ (524,062) $ -- $(17,150,790) $ 1,817,151
BALANCE August 31, 2001
Issuance of stock for
acquisitions 6,500 325 15,763 -- -- -- 16,088
Issuance of stock for
services 7,670 383 23,777 -- -- -- 24,160
Amortization of deferred
compensation -- -- -- 73,124 -- -- 73,124
Issuance of stock for
loans, settlements
& debenture conversions 25,714 1,286 88,714 -- -- -- 90,000
Issue stock
options/warrants -- -- 4,000 -- -- -- 4,000
Net loss -- -- -- -- -- (1,606,340) (1,606,340)
-----------------------------------------------------------------------------------------------
BALANCE November 30, 2001 1,386,225 $ 69,311 $19,556,940 $ (450,938) $ -- $(18,757,130) $ 418,183
-----------------------------------------------------------------------------------------------
</Table>
See accompanying notes.
5
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iEXALT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
Three Months Ended November 30,
------------------------------
2001 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,606,340) $ (2,740,643)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization 46,461 83,165
Loss on disposition of assets -- 153,262
Loss on disposition of assets from discontinued operations 111,649 --
Impairment of long lived assets 605,629 --
Non-cash expense of issuing stock options/warrants 4,000 1,300,898
Compensation and other expense for common shares issued for 97,284 344,356
services
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable 174,179 12,931
Inventory, prepaid expenses and other current assets 153,953 (103,284)
Other assets (5,992) (90,364)
Accounts payable 525,383 115,744
Deferred revenue (154,991) (80,138)
Other accrued expenses (96,002) (71,602)
------------ ------------
Net cash used in operating activities (144,787) (1,075,675)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash from acquisitions -- 123,775
Purchases of property and equipment (2,880) (29,282)
------------ ------------
Net cash (used)/provided by investing activities (2,880) 94,493
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock -- 560,000
Proceeds from exercise of options -- 12,000
Proceeds from borrowings from shareholders -- 55,000
Payment on borrowings from shareholders -- (12,000)
Proceeds from issuance of debt 183,646 564,609
Payments of capital lease obligations (1,721) (7,764)
Repayments of debt (89,923) (44,201)
------------ ------------
Net cash provided by financing activities 92,002 1,127,644
------------ ------------
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (55,665) 146,462
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 80,466 278,164
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 24,801 424,626
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 22,508 23,249
</Table>
See accompanying notes.
6
<Page>
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION - 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 markets filtered internet service,
publishes Christian electronic books and reference materials, a
Christian events magazine, a Christian business directory, and a
Christian newspaper, produces the Life Perspectives radio program five
nights per week and is affiliated with a youth-oriented Christian
radio program, operates a comprehensive contemporary Christian music
website, one of the largest speaker's bureaus dedicated to Christian
speakers, and an agency business for Christian artists. 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. Through November 30, 2001 iExalt provided
psychiatric counseling services for senior citizens earning healthcare
revenues from the implementation and management of geriatric
psychiatric programs for hospitals and other health facilities. This
business segment as more fully discussed in NOTE B has been sold.
CONDITIONS AFFECTING ONGOING OPERATIONS - The Company is currently
dependent upon external debt and equity financing to continue
operations. The Company's internally generated cash flows from
operations have historically been and continue to be insufficient for
the Company's cash needs. New debt or equity capital, if available may
have provisions that could suppress future stock prices further, or
cause significant dilution to current shareholders and increase the
cost of doing business. In the event the Company is unable to obtain
additional debt and equity financing, the Company will not be able to
continue its operations. If the Company were unable to continue its
operations, the value of the Company's assets would experience a
significant decline from the net book values reflected in the
accompanying consolidated balance sheet. In this regard, assets that
generally suffer the greatest decline in value include; receivables as
customers recognizing the entity's problems consider not paying their
bills, inventories lose value as the entity no longer has the
capability to market and distribute its products to customers,
goodwill and other intangibles which represents amounts paid in excess
of the net book value of assets and companies purchased generally have
no value as operations cease, and property and equipment is often sold
for small percentages of net book value reflected on the accounting
records. Consequently, in the event the Company is unable to continue
as a going concern, its assets as currently reflected on the
accompanying balance sheet would provide little in the way of funds to
reduce the Company's significant debt load and liabilities. Based on
this assessment, nothing would remain for the Company's shareholders
and investors should the Company not remain in business.
Management believes that net proceeds of future sales of assets, if
any, anticipated securities offerings and revenues which are projected
to be realized from operations, should be sufficient to fund ongoing
operations in the near term. However, the asset sales may not occur,
the anticipated securities offerings may not be undertaken, and if
undertaken, may not be successful or the proceeds derived from such
offerings may not, in fact, be sufficient to fund operations and meet
the needs of the Company's business plans or the Company's revenues
may not be adequate or realized as projected. The Company's current
deficit working capital is not sufficient to cover cash requirements
for the balance of the current quarter or fiscal year or sufficient to
allow the Company to remain in business. Consequently, the Company may
not ever become profitable and could soon fail as a going concern.
Accordingly, management and its independent accountants believe that;
period-to-period comparisons of results of operations or anticipated
future events should not be relied upon as an indication of positive
future results of operations or future profitability, and continuance
as a going concern may not be achieved.
7
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iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Management continues to seek merger and acquisition opportunities for
possible growth and profitability within its business planning
activities and these possibilities along with other factors will
impact future operations. However, possible merger and acquisition
opportunities leading to enhanced cash flow and profitability cannot
be assured.
The Company's deficit working capital, its lack of access to the debt
and equity markets, and its small market cap among other things,
significantly limits the Company's ability to successfully attract
quality merger and acquisition candidates.
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 November 30, 2001 and
the Company's consolidated results of operations and cash flows for
the three month periods ended November 30, 2001 and November 30, 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, 2001, 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.
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 primarily arise
from sales to customers and generally do not require collateral. The
Company periodically evaluates its credit exposure with its customers.
Included in accounts receivable, other and other assets at November
30, 2001 are receivables in the amount of $288,000 and $360,000,
respectively due the Company from the purchaser of selected assets of
CleanWeb, one of the Company's subsidiaries. In September 2001, the
purchaser filed under the federal bankruptcy statutes to seek
protection as it reorganizes and the Company fully reserved all of the
note receivable.
8
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iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
GOODWILL AND OTHER INTANGIBLES - Goodwill represents the cost in
excess of fair value of the assets of businesses acquired. Other
intangible assets represent costs allocated to covenants not to
compete and other intangibles acquired in business acquisitions or
agreements. In July, 2001 the FASB issued statement of Financial
Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets. Statement No. 141 requires,
among other things, all business combinations initiated after June 30,
2001 be accounted for using the purchase method of accounting.
Statement No, 142 primarily addresses the accounting for goodwill and
intangible assets subsequent to their acquisition. Under Statement
142, goodwill will no longer be amortized over its estimated useful
life, but instead be tested for impairment at least annually.
Statement No. 142 will be effective for fiscal years beginning after
December 15, 2001 and must be adopted at the beginning of a fiscal
year. Goodwill and intangible assets acquired after June 30, 2001 will
immediately be subject to the provisions of Statement No. 142. The
Company adopted Statement No. 142 effective September 1, 2001. At
November 30, 2001, the Company had $1,844,417 in intangible goodwill
that will no longer be amortized under this statement. However, at
least annually the Company must test all intangible assets to
determine the amount of impairment, if any. Consequently, and due in
substantial part to; the Company's and its subsidiaries inability to
generate positive cash flow and working capital; lack of profitability
and equity capital, large adjustments to intangibles may result from
impairment testing.
IMPAIRMENT OF LONG LIVED ASSETS - When events or circumstances
indicate the carrying value of a long-lived asset may be impaired, the
Company uses an estimate of the future undiscounted cash flows to be
derived from the remaining useful life of the asset to assess whether
or not the asset is recoverable. If the future undiscounted cash flows
to be derived over the life of the asset do not exceed the asset's net
book value, the Company then considers the discounted net cash flows
to value the assets at estimated fair market value as opposed to the
net book value in determining any potential impairment.
In August 2001, management recognized an impairment loss in the
aggregate amount of $1,103,133 with respect to the discontinued
activities of Global Christian Network ($1,075,258) and Global
Solutions ($27,875), two subsidiaries of the Company. The Company
purchased Global Christian Network in March 2001 and Global Solutions
in November 1999.
In September 2001, iExalt was notified that 711.NET, Inc., the
purchaser of certain assets of CleanWeb, filed for protection from
creditors to reorganize under the federal bankruptcy statutes. Based
on the information available at that time management determined that
the Company should recognize at August 31, 2001 an impairment in the
amount of $1,340,312 to these assets including the promissory note,
common stock value of 711.NET, Inc. and some of the goodwill. Based
upon the results of the preliminary bankruptcy hearings in December
2001, management no longer anticipates the reclaiming of the CleanWeb
customer base and does not expect to collect any notes receivable owed
by 711.NET. As a result, management impaired the remaining goodwill of
$500,000 effective November 30, 2001.
Management has learned that the primary advertising provider of
ListenFirst.com, one of the Company's subsidiaries, unexpectedly
discontinued operations as of December 31, 2001. ListenFirst.com
provides an internet website for Christian music. Its advertising
providers are critical to ListenFirst.com achieving and maintaining
profitability. The Company is currently operating ListenFirst.com's
website; however management is not optimistic about obtaining other
advertising providers that will allow the subsidiary to achieve and
maintain profitable operations. Accordingly, management impaired
goodwill associated with ListenFirst.com of $105,629 at November 30,
2001. Although management believes that no additional impairment of
goodwill and other intangibles is required at this time, additional
impairment losses may be required in the near term.
9
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iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
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 substantially from those estimates.
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. Advertising revenue is recognized
as the service is contracted.
EARNINGS PER SHARE - The dilutive effects of stock options and
warrants have not been included in the calculation of earnings per
share as they are anti-dilutive; however, may become dilutive in the
future.
REVERSE STOCK SPLIT - In December 2001, the Company's Board of
Directors declared a 50 to one (50:1) reverse stock split of the
Company's common stock. Every 50 shares of iExalt, Inc. common stock,
$0.001 par value per share, is to be converted to one share of iExalt,
Inc. common stock, $0.05 par value, and each shareholder will be
entitled to receive a payment for any fractional shares that result
from the split. In addition, all holders of options or warrants to
purchase future shares of the Company's common stock were also reduced
on an equal basis of 50 to one. Accordingly, the Company has presented
all equity information as if the reverse stock split had occurred
effective September 1, 2000. The new stock symbol is IEXA and CUSIP
number is 451691 20 8. The Company for voting, distribution, or other
purposes will not recognize certificates representing the pre-split
shares. Old certificates must be replaced with new certificates.
NOTE B ACQUISITIONS AND DISPOSITIONS
On November 30, 2001 the Company purchased certain assets of Barnabus
Christian Counseling Network, LLC, an on-line counseling company, for
6,500 shares of the Company's common stock. The transaction was
accounted for as a purchase and goodwill was recorded in the amount of
$16,088.
On November 30, 2001 the Company sold certain assets of PremierCare
including the assets related to the Rapha and Barnabus Christian
Counseling Network business to UMC Ten Broeck, Inc. ("Buyer").
Excluded from the asset sale is PremierCare's cash, accounts
receivable, and receivable from related parties. The Buyer did not
assume any liabilities except those liabilities outlined in the
agreement. The purchase price was $1,000,000 cash at closing plus
deferred payments equal to one third of any EBITDA generated by the
business in excess of $500,000 annually for a period of two years
following closing. Total payment in deferred purchase price shall not
exceed $750,000 on an annual basis. Excluding shared services, EBITDA
generated by Premier Care/Rapha for fiscal year ending August 31, 2001
exceeded the targeted EBITDA, however, it is not possible at this time
to determine whether future earnings from the PremierCare assets will
be sufficient to exceed the EBITDA threshold, consequently it is not
possible to determine whether the Company will receive any future
payments from this arrangement. As part of the sale, the Company
entered into a shared services agreement, whereby management of the
Company will provide consulting services to the Buyer during the
two-year period. In addition, the Company will provide advertising and
marketing
10
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iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
services to the Buyer to promote the growth strategy of PremierCare
for a term of not less than three years. Based on the facts and
circumstances existing at the conclusion of the Company's fiscal year
end August 31, 2001 and currently existing, management of the Company
is of the opinion that the service contract has an estimated value of
approximately $750,000. Consequently, some of the goodwill, which
represented a portion of the excess cost paid by the Company over the
net book value of PremierCare's assets at the date purchased by the
Company will be retained on the Company's books, treated as an
intangible asset and amortized over a one-year period, commencing
December 31, 2001, on a straight-line basis. This estimate is subject
to significant near term impairment should future operating results of
the sold operating assets of PremierCare not be sufficient to generate
an adequate amount of earnings.
Had the $750,000 in goodwill, which is now being retained on the
Company's financial statements as an intangible asset been written off
at the time the Company sold PremierCare's assets, the Company would
have recognized an additional $750,000 loss from disposal of assets
from discontinued operations. If the additional losses had been
recognized at August 31, 2001 or November 30, 2001, depending
primarily upon when the asset sale was recognized, net losses would
have amounted to $9,825,508 or $2,356,340, respectively. Net loss per
share at August 31, 2001 or November 30, 2001 would have amounted to $
12.59 or $1.73, respectively. Due to the nature of the intangible
asset, it is not possible to ascertain whether this asset has any
future value or will contribute to the Company's earnings. This
estimate is subject to significant near term impact if future
operating results are not indicative of management's estimates.
Additionally, the Company's obligation to settle with PsyCare (seller
of Rapha to iExalt) in October 2002 for possible additional shares of
the Company's common stock remains with the Company.
The following unaudited pro forma combined results of operations of
the Company for the three months ended November 2001 and 2000 assume
significant acquisitions and dispositions had occurred as of the
beginning of the respective periods.
<Table>
<Caption>
PRO FORMA
THREE MONTHS ENDED NOVEMBER 30,
------------------------------
2001 2000
-------------- --------------
Revenues $ 1,771,998 $ 1,478,995
Loss from operations $ (1,377,945) $ (2,736,333)
Net loss $ (1,402,066) $ (2,765,852)
Net loss per share $ (1.03) $ (4.27)
Pro Forma Weighted Average Number of
Shares Outstanding 1,362,108 648,373
</Table>
The pro forma financial information is not necessarily indicative of
the combined results that would have occurred had the significant
acquisitions and dispositions taken place at the beginning of the
period, nor is it necessarily indicative of results that may occur in
the future.
11
<Page>
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
<Table>
<Caption>
NOTE C PROPERTY AND EQUIPMENT
November 30, August 31,
2001 2001
-------------- ------------
Computer equipment and software $ 348,439 $ 347,582
Furniture, fixtures and office equipment 199,174 211,061
Automobiles 12,000 190,091
Leasehold improvements 42,036 42,036
------------- -----------
601,649 790,770
Less accumulated depreciation (201,209) (222,741)
------------- -----------
$ 400,440 $ 568,029
============= ===========
</Table>
NOTE D SHORT-TERM BORROWINGS
<Table>
<Caption>
November 30, August 31,
2001 2001
----------- ---------
Revolving line of credit with bank, interest at prime payable
monthly, due December 18, 2000, guaranteed by
shareholder (1) $150,000 * $ 150,000
Bridge loan, non-interest bearing, due March 22, 2001 (2) 90,000 * 180,000
Convertible debenture, due July 15, 2002, interest at
14%, payable monthly (3) 122,750 165,936
Promissory note, due December 31, 2001, interest at
21% (4) 75,000 75,000
Convertible debenture, interest at 11%, payable after
six months of advance on December 29, 2001 (5) 131,000 100,000
Promissory note, due November 10, 2002, interest at
14%, net of discount ($4,000) (6) 46,000 --
Promissory note, due December 12, 2001, interest at
14% (7) 100,000 --
Other unsecured revolving lines of credit in the form
of credit cards with interest ranging from 11.9% to
22.9%, payable monthly 91,756 87,808
--------- ---------
$ 806,506 $ 758,744
========= =========
</Table>
(*) Debt is in default at November 30, 2001 due to lack of payment.
(1) 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 and guaranteed by a shareholder without the Company's
authority. To date the bank has provided forbearance and the Company
continues to make interest payments and is working with the bank to
develop a mutually agreeable plan to repay the debt. This note is
subject to the litigation with Jack Tompkins as more fully discussed
in NOTE K.
12
<Page>
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(2) 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 $8.50 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 20,000 shares of the Company's common
stock at $56.50 per share to the holders of the convertible
debentures. The debenture holders subsequently agreed to again extend
the due date to March 22, 2001, provide a bridge loan of $180,000,
convert no more than 99,000 shares if the bridge loan was fully paid,
adjust the conversion price per share to $3.50 or fifty percent of the
market price at the exercise date, and adjust the exercise price of
outstanding warrants to $10.50. In August 2001, the Company issued
181,388 restricted shares of its common stock to the debenture holders
in repayment of the $500,000 debentures and in October 2001, the
Company issued 25,714 restricted shares of its common stock in payment
of $90,000 of the bridge loan. In December 2001, the Company resolved
the outstanding balance of the bridge loan by issuing 5,000 restricted
shares of its common stock to the debenture holder.
(3) On February 16, 2001, the Company agreed to issue $180,000 in the
form of a non interest bearing convertible debenture. The debenture
agreement provides for conversion of $90,000 of the principal for
shares with a conversion price of $9.00 per share, is secured by
existing and future accounts receivable of PremierCare along with a
guarantee from a shareholder, and matured on April 15, 2001.
Additional consideration was issued in the form of warrants for the
purchase of up to 20,000 of the Company's common shares as follows;
16,363 at an exercise price of $5.50 and 3,636 shares at an exercise
price of $9.00. The debenture holder subsequently agreed to extend the
due date to July 15, 2002. The Company has agreed to make twelve
monthly payments of $16,164.39 with the first installment due August
15, 2001 including 14% interest per annum, change the debenture
conversion provision to $5.50 per share, and change the exercise price
related to the warrants for the purchase of up to 20,000 shares to
$5.50 per share. In December 2001, the Company repaid the loan in
full.
(4) On June 5, 2001, the Company agreed to issue $100,000 in the form
of a convertible debenture. The debenture bears interest payable
monthly of 450 of the Company's restricted common shares, provides for
conversion of $25,000 of the principal for common shares with a
conversion price of $4.00 per share, allows for a placement fee of
2,000 of the Company's restricted common shares if funds are delivered
prior to June 30, 2001, and matures on December 31, 2001. The
conversion was exercised related to the $25,000 and a total of 6,410
of the Company's restricted common shares were issued to the debenture
holder along with 5,150 common shares related to the placement fee and
interest. In December 2001, the Company repaid the loan.
(5) On August 14, 2001, the Company entered into a $140,000 loan
agreement with Cresson Productions, Inc. Any borrowings are to be
repaid within six months of funding and bear interest at 11%. As
additional consideration, the Company issued warrants for 8,400 shares
of the Company's common stock at an exercise price of $3.50 related to
transaction placement fees. 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 the Company's common stock which
shares will be valued at the lesser of $10.00 per share or 75% of the
average of the stock's closing price in the previous 5 trading days.
As of November 30, 2001 the Company had received $131,000 in cash
advances from Cresson Productions. In December 2001, the Company paid
the outstanding balance by issuing 5,000 restricted shares of its
common stock to the debenture holder.
13
<Page>
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(6) On November 8, 2001, the Company entered into a $50,000 promissory
note agreement with a holder of warrants to purchase shares of the
Company's common stock. The loan bears interest at 14% and is payable
in twelve monthly installments or in full upon the closing of the
PremierCare asset sale. In December 2001, the Company repaid the loan
in full.
(7) On November 12, 2001, the Company entered into a $100,000
promissory note agreement. The loan bears interest at 14% and is
payable in full within one month or upon the closing of the
PremierCare asset sale. In December 2001, the Company repaid the loan
in full.
NOTE E NOTES PAYABLE TO SHAREHOLDERS
<Table>
<Caption>
November 30, 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
------------- --------------
$ 545,000 $ 545,000
------------- --------------
</Table>
In connection with the acquisition of NetXpress, iExalt, Inc. (Texas)
assumed a $350,000 note payable to a shareholder of the Company
(iExalt, Inc. Nevada). Under the terms of this note, the balance
becomes payable on demand when net assets of iExalt, Inc. (Texas)
exceed $5,000,000. Demand for payment has been made, however, as of
November 30, 2001, the net assets of iExalt, Inc. (Texas) had not
exceeded $5,000,000; therefore, management does not believe there has
been cause for demand of payment.
During August 2000, U.S. Sporting Interests, LLC loaned the Company
$195,000 under a demand note with an 8% interest rate. Demand for
payment of the $195,000 has been made.
NOTE F LONG-TERM DEBT
<Table>
<Caption>
November 30, August 31,
2001 2001
------------ ----------
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 -- 90,785
Notes payable on various insurance policies 69,894 44,256
Other unsecured notes payable, due on demand 9,499 6,853
------------ ----------
629,393 691,894
Less: current maturities 621,847 630,941
------------ ----------
$ 7,546 $ 60,953
============ ==========
</Table>
(*) Debt is currently in default at November 30, 2001 due to lack of payment.
14
<Page>
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The note payable to the bank matured on June 30, 2001; however, the
bank has provided forbearance and the Company continues to make
interest payments. The Company is working with the bank to develop a
mutually agreeable plan to repay the debt. This note is subject to the
litigation with Jack Tompkins as more fully discussed in NOTE K.
NOTE G SHAREHOLDERS' EQUITY
On October 15, 2001, the Company issued 25,714 shares of the Company's
common stock for repayment of a $90,000 bridge loan that was due in
March 2001.
On October 29, 2001, the Company issued 7,670 shares of the Company's
common stock for incentive compensation to various employees of the
Company and selected speakers who contract to perform at events
arranged by the Company's subsidiary, ChristianSpeakers.
On November 30, 2001 the Company purchased certain assets of Barnabus
Christian Counseling Network, LLC, an on-line counseling company, for
6,500 shares of the Company's common stock.
NOTE H STOCK OPTIONS AND WARRANTS
On November 8, 2001, the warrant agreement between the Company and I.
Leonards was amended to add an additional 10,000 shares of the
Company's common stock and the warrant exercise price was reduced to
$2.50 per share. A loan of $50,000 was advanced to the Company at an
interest rate of 14% that was fully repaid in December 2001.
NOTE I INCOME TAXES
The Company has had losses since inception and, therefore, has not
been subject to federal income taxes. As of November 30, 2001 the
Company estimates an accumulated taxable net operating loss ("NOL")
carry forward for income tax purposes of approximately $14.6 million,
resulting in a deferred tax asset of $5.1 million. These carry
forwards begin to expire in 2019 through 2020. Because U.S. tax laws
limit the time during which NOL and tax credit carry forwards 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, Global
Christian Network, ChristianArtists.com, Gilmore Marketing, 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,
Rapha and Barnabus, which were sold on November 30, 2001.
15
<Page>
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The Company's reportable segment information for the three months
ended November 30, 2001 and 2000 are as follows:
<Table>
<Caption>
Three Months Internet & Print Health Corporate/ Reporting
Ended Technology Publications Services Other Segments
November 30,
------------ ---------- ------------ --------- ---------- ---------------
Revenues:
2001 $ 1,272,637 $ 499,361 $ -- $ -- $ 1,771,998
2000 $ 1,123,228 $ 472,556 $ 851,205 $ -- $ 2,446,989
Gross Profit:
2001 $ 344,552 $ 126,737 $ -- $ -- $ 471,289
2000 $ 256,305 $ 169,849 $ 309,256 $ -- $ 735,410
(Loss)/Income -- Operations:
2001 $ (781,099) $ (133,781) $ -- $ (463,065) $ (1,377,945)
2000 $ (393,300) $ (28,505) $ 49,616 $ (2,333,865) $ (2,706,054)
Depreciation /
Amortization:
2001 $ 13,587 $ 10,575 $ -- $ 10,291 $ 34,453
2000 $ 33,928 $ 21,128 $ 22,425 $ 5,684 $ 83,165
Assets:
2001 $ 1,480,804 $ 1,272,038 $ -- $ 2,499,837 $ 5,252,679
2000 $ 4,158,204 $ 1,416,747 $ 1,725,490 $ 901,491 $ 8,201,932
</Table>
The following table reconciles reportable segment gross profit to the
Company's consolidated loss before income taxes as follows:
<Table>
<Caption>
Three Months Ended November 30,
-------------------------------------
2001 2000
--------------- ------------
Gross profit of reportable segments $ 471,289 $ 735,410
Other expenses 1,849,234 3,441,464
--------------- ------------
Loss from operations (1,377,945) (2,706,054)
Other Income/(Expense)
Interest income/other 9,505 2,977
Interest expense (33,626) (37,566)
--------------- ------------
Net Loss $ (1,402,066) $ (2,740,643)
--------------- ------------
</Table>
Revenues totaled $1,771,998 for the three months ended November 30,
2001, which is a 28% decrease compared to revenues from the three
months ended November 30, 2000. Decreases to revenue are attributable
to the sale of the assets within the healthcare segment. Revenues from
the healthcare segment for the three months ended November 30, 2001
totaled $872,502 and expenses totaled $965,127, which are shown net as
results from discontinued operations. Gross profit for the three
months ended November 30, 2001 totaled $471,289 compared to $735,410
for the three months ended November 30, 2000, which is a decrease of
36% due primarily to reflecting the gross profit from the healthcare
segment as a part of the loss from discontinued operations. Assets
related to the Health Services segment were sold in the quarter ended
November 30, 2001 resulting in a loss on
16
<Page>
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
disposal of assets of $111,649 which is reflected as loss from
discontinued operations on the accompanying condensed consolidated
statement of operations.
NOTE K CONTINGENCIES
As more fully discussed in NOTE A, the Company received notice that
711.NET, Inc., the purchaser of certain assets of CleanWeb, had filed
a petition in bankruptcy and that the case is pending pursuant to
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy
Court for the Western District of North Carolina. Even though
definitive action may not be realized for some time and much
uncertainty exists related to the outcome of the bankruptcy, the
Company recognized impairment charges at August 31, 2001 and an
additional amount at November 30, 2001. Any future payments received
from 711.NET, if any will be considered income when received. Also
included within the period ended November 30, 2001 is a $105,629
impairment loss related to ListenFirst.com, a subsidiary of the
Company. Management has learned that the primary advertising provider
of ListenFirst.com unexpectedly discontinued operations as of December
31, 2001. Although the Company continues to operate ListenFirst.com,
other significant advertising providers may not be obtained and the
Company may be forced to discontinue these operations in the near
future. Management believes that no additional impairment of goodwill
and other intangibles is required at this time.
In November 2001 the Company received notice of a lawsuit from Atrium
Associates Limited Partnership for failure to make lease payments in
accordance with the lease term for office space in Houston, Texas.
Management and counsel are evaluating the claim. The Company has not
accrued a contingency toward a settlement resulting from resolution of
future negotiations.
In December 2001 the Company received notice of a lawsuit from Jack
Tompkins requesting the Court to declare the Settlement and Mutual
Release Agreement dated on or about October 5, 2001 to be enforceable
in all of its terms. Specifically that the Company deliver collateral
consisting of the receivables of PremierCare to J. P. Morgan Chase
("Chase") for the proposed restructured indebtedness related to the
$550,000 bank loan. The Company proposed alternative collateral;
however, Chase has not accepted. Management and counsel are evaluating
the lawsuit. The Company has not accrued any contingent liability
toward a settlement.
In the future we may be party to litigation arising from the ordinary
course of our business. Our insurance coverage may not be adequate to
cover all liabilities arising out of any such claims that may be
initiated in the future. A lack of sufficient insurance coverage may
have an adverse effect on our business, financial condition, and
operating results.
NOTE L SUBSEQUENT EVENTS
In December 2001, the Company issued 1,000 shares of its common stock
and $5,000 to acquire the assets related to the "Youth Conference"
including but not limited to the trade names and goodwill of the Youth
Conference, all software, or other electronic information and all
physical copies of all data bases to support the bookings and author
relationships including URL's, work in progress, proformas, and
contracts.
In December 2001, the Company issued 5,000 shares of its common stock
for payment in full of any obligation related to the remaining $90,000
bridge loan and the convertible debenture of $131,000 related to
Cresson Productions, Inc.
17
<Page>
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
In December 2001, the Company issued 10,000 shares of its common stock
for payment in full of any obligation related to the consulting
agreement between the Company and Consulting and Strategy.
In December 2001, the Company issued 5,000 shares of its common stock
for settlement with the former owners of PremierCare LLC in regards to
the earn out provisions of the purchase and sale agreement.
As more fully discussed in NOTE A, the Company's Board of Directors
declared a 50 to one (50:1) reverse stock split of the Company's
common stock as of December 28, 2001 record date.
18
<Page>
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 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 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 markets filtered internet service, publishes
Christian electronic books and reference materials, a Christian events magazine,
a Christian business directory, a Christian newspaper, produces a radio program
five nights per week, is affiliated with a youth oriented Christian radio
program, operates a comprehensive contemporary Christian music website, one of
the largest speakers bureaus dedicated to Christian speakers, and an agency that
provides Christian artists. 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 Parent Link. iExalt provided
psychiatric counseling services for senior citizens from the implementation and
management of geriatric psychiatric programs for hospitals and other health
facilities through November 30, 2001 at which time this business segment was
sold.
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 technology solutions. iExalt's primary goals are as
follows:
-- Media: iExalt will acquire, develop and expand our
influence through print, radio, television
and the Internet
-- Migration: iExalt will migrate each company in the
iExalt family to a Web related strategy
-- Market: iExalt will enter fields where we can
reasonably expect to be the dominant entity
-- 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
-- Monetary: iExalt must create positive returns for our
shareholders
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. The
Company consummated a merger (hereinafter referred to as the "Merger") on
September 1, 1999 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.
On September 19, 2001 the Company received notice that 711.NET, Inc., the
purchaser of certain assets of CleanWeb, had filed a petition in bankruptcy and
that the case is pending pursuant to Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the Western District of North Carolina. Even
though definitive action may not be realized for some time and much uncertainty
exists related to the outcome of the bankruptcy, the Company recognized
impairment charges both at August 31, 2001 and an additional amount at November
30, 2001. Any future payments received from 711.NET, if any will be considered
income when received. Also included within the period ended November 30, 2001 is
a $105,629 impairment loss related to ListenFirst.com, a subsidiary of the
Company. Although the Company continues to operate ListenFirst.com, other
advertising providers may not be obtained and the Company may be forced to
discontinue these operations in the near future. Management believes no
additional impairment of goodwill and other intangibles is required at this
time.
On November 30, 2001 the Company purchased certain assets of Barnabus
Christian Counseling Network, LLC, an on-line counseling company, for 6,500
shares of the Company's common stock. These assets were consolidated with
PremierCare operations and sold.
19
<Page>
On November 30, 2001 the Company sold certain assets of PremierCare
including the assets related to the Rapha and Barnabus Christian Counseling
Network business to UMC Ten Broeck, Inc. ("Buyer"). Excluded from the asset sale
is PremierCare's cash, accounts receivable, and receivable from related parties.
The Buyer did not assume any liabilities except those liabilities outlined in
the agreement. The purchase price was $1,000,000 cash at closing plus deferred
payments equal to one third of any EBITDA generated by the business in excess of
$500,000 annually for a period of two years following closing. Total payment in
deferred purchase price shall not exceed $750,000 on an annual basis. Excluding
shared services, EBITDA generated by Premier Care/Rapha for fiscal year ending
August 31, 2001 exceeded the targeted EBITDA, however, it is not possible at
this time to determine whether future earnings from the PremierCare assets will
be sufficient to exceed the EBITDA threshold, consequently it is not possible to
determine whether the Company will receive any future payments from this
arrangement. . As part of the sale, the Company entered into a shared services
agreement, whereby management of the Company will provide consulting services to
the Buyer during the two-year period. In addition, the Company will provide
advertising and marketing services to the Buyer to promote the growth strategy
of PremierCare for a term of not less than three years. Based on the facts and
circumstances existing at the conclusion of the Company's fiscal year end August
31, 2001 and currently existing, management of the Company is of the opinion
that the service contract has an estimated value of approximately $750,000.
Consequently, some of the goodwill, which represented a portion of the excess
cost paid by the Company over the net book value of PremierCare's assets at the
date purchased by the Company will be retained on the Company's books, treated
as an intangible asset and amortized over a one-year period, commencing December
31, 2001, on a straight-line basis. This estimate is subject to significant near
term impairment should future operating results of the sold operating assets of
PremierCare not be sufficient to generate an adequate amount of earnings.
Had the $750,000 in goodwill, which is now being retained on the Company's
financial statements as an intangible asset been written off at the time the
Company sold PremierCare's assets, the Company would have recognized an
additional $750,000 loss from disposal of assets from discontinued operations.
If the additional losses had been recognized at August 31, 2001 or November 30,
2001, depending primarily upon when the asset sale was recognized, net losses
would have amounted to $9,825,508 or $2,356,340, respectively. Net loss per
share at August 31, 2001 or November 30, 2001 would have amounted to $ 12.59 or
$1.73, respectively. Due to the nature of the intangible asset, it is not
possible to ascertain whether this asset has any future value or will contribute
to the Company's earnings. This estimate is subject to significant near term
impact if future operating results are not indicative of management's estimates.
Additionally, the Company's obligation to settle with PsyCare (seller of Rapha
to iExalt) in October 2002 for possible additional shares of the Company's
common stock remains with the Company.
In December 2001, the Company issued 1,000 shares of its common stock and
$5,000 to acquire the assets related to the "Youth Conference" including but not
limited to the trade names and goodwill of the Youth Conference, all software,
or other electronic information and all physical copies of all data bases to
support the bookings and author relationships including URL's, work in progress,
proformas, and contracts.
In December 2001, the Company's Board of Directors declared a 50 to one
(50:1) reverse stock split of the Company's common stock. Every 50 shares of
iExalt, Inc. common stock, $0.001 par value per share, was converted to one
share of iExalt, Inc. common stock, $0.05 par value, and each shareholder was
entitled to receive a payment for any fractional shares that result from the
split. In addition, all holders of options or warrants to purchase future shares
of the Company's common stock were also reduced on an equal basis of 50 to one.
Accordingly, the Company has presented all equity information as if the reverse
stock split had occurred effective September 1, 2000. The new stock symbol is
IEXA and CUSIP number is 451691 20 8. The Company for voting, distribution, or
other purposes will not recognize certificates representing the pre-split
shares. Old certificates must be replaced with new certificates.
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. Partnered
with its technology efforts, iExalt is also providing products and services
through various channels. The risk and rewards associated with start-up ventures
or early developmental companies like iExalt are often volatile. iExalt has
incurred significant net losses since its inception and expects to continue to
operate at a loss unless its companies can generate revenues in excess of
expenditures at a
20
<Page>
future date. As of November 30, 2001, iExalt has experienced a cumulative
deficit of $18,757,130 comprised of both cash and non-cash components.
Although management's plans may not be successful, it has been determined
that the Company will emphasize the monetary goal, and to that end, will
execute plans that may increase revenues while simultaneously seeking
acquisitions that add immediate positive value to earnings. The Company's
deficit working capital, its lack of access to the debt and equity markets,
and its small market cap among other things, significantly limits the
Company's ability to successfully attract quality merger and acquisition
candidates.
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, Global Christian Network,
ChristianArtists.com, Gilmore Marketing, 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, Rapha and Barnabus which were sold on
November 30, 2001.
Net loss for the three months ended November 30, 2001 totaled $1,606,340
compared to a net loss of $2,740,643 for the three months ended November 30,
2000, which represents an improvement of 41%. The loss as of November 30, 2001
includes significant non-cash expenses totaling $865,023 related to impairment
of CleanWeb and ListenFirst.com assets, depreciation, amortization, common stock
shares issued for services, stock options or warrants that were issued and loss
on disposition of assets. Excluding these non-cash expenses, the loss for the
three months ended November 30, 2001 was $741,317.
Revenues
Internet & Technology Applications generate revenues from product sales,
speaker fees, artists fees, subscriptions, user fees, and advertising. Revenues
for Print Publications consist of advertising and ticket service fees.
Healthcare Services revenues were earned from hospitals for providing services
in accordance with our contracts. Total revenues from continuing operations were
$1,771,998 for the three months ended November 30, 2001 compared with $2,446,989
for the three months ended November 30, 2000. Decreases to revenue are
attributable to the sale of the assets within the healthcare segment. Revenues
from the healthcare segment for the three months ended November 30, 2001 totaled
$872,502, which are shown net as loss from discontinued operations in the
financial statements. Revenues for continuing operations by segment for the two
periods are as follows:
<Table>
<Caption>
Three Months Ended November 30,
-------------------------------------
2001 2000
---- ----
REVENUES AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
Internet and Technology Applications $ 1,272,637 72% $ 1,123,228 46%
Print Publications 499,361 28% 472,556 19%
Healthcare Services -- --% 851,205 35%
Cost of Sales and Services
</Table>
Cost of Sales and Services for Internet & Technology Applications includes
royalties, direct labor, payments to speakers and artists, 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 was primarily
direct personnel costs. Decreases to total costs are attributable to the sale of
the assets within the healthcare segment. Cost of sales and services from the
healthcare segment for the three months ended November 30, 2001 totaled
$651,216, which are shown net as loss from discontinued operations in the
21
<Page>
financial statements. The Cost of Sales and Services was $1,300,709 for the
three months ended November 30, 2001 compared with $1,711,579 for the three
months ended November 30, 2000. Cost of Sales and Services by segment for the
two periods is shown below:
<Table>
<Caption>
Three Months Ended November 30,
-------------------------------------
2001 2000
---- ----
COST OF SALES AND SERVICES AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
Internet and Technology Applications $ 928,085 71% $ 866,923 51%
Print Publications 372,624 29% 302,707 18%
Healthcare Services - -% 541,949 31%
</Table>
Selling, General and Administrative
Selling, General and Administrative costs for Internet & Technology
Applications primarily include 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 professional fees, costs of issuing stock options and warrants and
costs of issuing shares for services.
Selling, General and Administrative costs were $619,346 for the three
months ended November 30, 2001 compared with $2,571,483 for the three months
ended November 30, 2000. The reduction is primarily related to the significant
one time cost of issuing options and warrants that were accounted for during the
three months ended November 2000. Additionally, $59,782 in SG&A expense for
PremierCare and Rapha for the three months ended November 30, 2001 was included
in loss from discontinued operations, which is shown net in the financial
statements.
Selling, General and Administrative costs by segment for the two periods
are shown below:
<Table>
<Caption>
Three Months Ended November 30,
-------------------------------------
2001 2000
---- ----
SELLING, GENERAL, AND ADMINISTRATIVE AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
Internet and Technology Applications $ 221,911 36% $ 208,672 8%
Print Publications 93,237 15% 87,481 3%
Healthcare Services - -% 84,519 3%
Corporate Overhead 304,198 49% 2,190,811 86%
</Table>
Payroll costs were $589,806 for the three months ended November 30, 2001
compared with $633,554 for the three months ended November 30, 2000. Reduction
in payroll costs improved 7% compared to the three months ended November 30,
2000. Additionally, $239,489 in payroll costs for PremierCare and Rapha for the
three months ended November 30, 2001 was included in loss from discontinued
operations, which is shown net in the financial statements.
Liquidity and Capital Resources
As of November 30, 2001, iExalt had $2,053,443 in current assets,
$4,825,539 in current liabilities and a retained deficit of $18,757,130. We had
a net loss of $1,606,340 for the three months ended November 30, 2001. Net cash
used by operating activities for the period was $144,787.
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 and
guaranteed by a shareholder without the Company's authority. To date the bank
has provided forbearance and the Company continues to make interest payments and
is working with the bank to develop a mutually agreeable plan to repay the debt.
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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 bank has
provided forbearance and the Company continues to service the debt with interest
payments. The Company is working with the bank to develop a mutually agreeable
plan to repay the debt.
In connection with the acquisition of NetXpress, iExalt, Inc. (Texas)
assumed a $350,000 note payable to a shareholder of the Company (iExalt, Inc
Nevada). Under the terms of this note, the balance becomes payable on demand
when net assets of iExalt, Inc. (Texas) exceed $5,000,000. Demand for payment
has been made, however, as of November 30, 2001, the net assets of iExalt, Inc.
(Texas) had not exceeded $5,000,000; therefore, management does not believe
there has been cause for demand of payment. Management is in discussion with the
shareholder to resolve this issue.
During August 2000, U.S. Sporting Interests, LLC loaned the Company
$195,000 under a demand note with an 8% interest rate. Demand for payment of the
$195,000 has been made. The Company is attempting to resolve this demand for
payment in conjunction with the $350,000 NetXpress note.
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 $8.50 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 20,000 shares
of the Company's common stock at $56.50 per share to the holders of the
convertible debentures. The debenture holders subsequently agreed to again
extend the due date to March 22, 2001, provide a bridge loan of $180,000,
convert no more than 99,000 shares if the bridge loan was fully paid, adjust the
conversion price per share to $3.50 or fifty percent of the market price at the
exercise date, and adjust the exercise price of outstanding warrants to $10.50.
In August 2001, the Company issued 181,388 restricted shares of its common stock
to the debenture holders in repayment of the $500,000 debentures and in October
2001, the Company issued 25,714 restricted shares of its common stock in payment
of $90,000 of the bridge loan. In December 2001, the Company resolved the
outstanding balance of the bridge loan by issuing 5,000 restricted shares of its
common stock to the debenture holder.
On February 16, 2001, the Company agreed to issue $180,000 in the form
of a non interest bearing convertible debenture. The debenture agreement
provides for conversion of $90,000 of the principal for shares with a conversion
price of $9.00 per share, is secured by existing and future accounts receivable
of PremierCare along with a guarantee from a shareholder, and matured on April
15, 2001. Additional consideration was issued in the form of warrants for the
purchase of up to 20,000 of the Company's common shares as follows; 16,363 at an
exercise price of $5.50 and 3,636 shares at an exercise price of $9.00. The
debenture holder subsequently agreed to extend the due date to July 15, 2002.
The Company has agreed to make twelve monthly payments of $16,164.39 with the
first installment due August 15, 2001 including 14% interest per annum, change
the debenture conversion provision to $5.50 per share, and change the exercise
price related to the warrants for the purchase of up to 20,000 shares to $5.50
per share. In December 2001, the Company repaid the loan in full.
On June 5, 2001, the Company agreed to issue $100,000 in the form of a
convertible debenture. The debenture bears interest payable monthly of 450 of
the Company's restricted common shares, provides for conversion of $25,000 of
the principal for common shares with a conversion price of $4.00 per share,
allows for a placement fee of 2,000 of the Company's restricted common shares if
funds are delivered prior to June 30, 2001, and matures on December 31, 2001.
The conversion was exercised related to the $25,000 and a total of 6,410 of the
Company's restricted common shares were paid to the debenture holder along with
5,150 common shares related to the placement fee and interest. In December 2001,
the Company repaid the loan.
On August 14, 2001, the Company entered into $140,000 loan agreement with
Cresson Productions, Inc. Any borrowings are to be repaid within six months of
funding and bear interest at 11%. As additional consideration, the Company
issued warrants for 8,400 shares of the Company's common stock at an exercise
price of $3.50 related to transaction placement fees. 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 the Company's common stock which shares will be
valued at the lesser of $10.00 per share or 75% of the average of the stock's
closing price in the previous 5 trading days. As of
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<Page>
November 30, 2001 the Company had received $131,000 in cash advances from
Cresson Productions. In December 2001, the Company paid the outstanding
balance by issuing 5,000 restricted shares of its common stock to the
debenture holder.
On November 8, 2001, the Company entered into a $50,000 promissory note
agreement. The loan bears interest at 14% and is payable in twelve monthly
installments or in full upon the closing of the PremierCare asset sale. In
December 2001, the Company repaid the loan in full.
On November 12, 2001, the Company entered into a $100,000 promissory
note agreement. The loan bears interest at 14% and is payable in full within one
month or upon the closing of the PremierCare asset sale. In December 2001, the
Company repaid the loan in full.
In December 2001, the Company received $1,000,000 in cash from the sale of
the PremierCare subsidiary assets. The cash will be used to finance operations,
repay certain debt and accounts payable and continue to grow through merger and
acquisition opportunities. The Company's deficit working capital, its lack of
access to the debt and equity markets, and its small market cap among other
things, significantly limits the Company's ability to successfully attract
quality merger and acquisition candidates.
Our working capital requirements 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 through external investment instead of cash flow from the various
businesses. Since inception, we have experienced negative cash flow from
operations and expect this to continue unless significant increases to revenue
from operations or additional profitable acquisitions along with further cost
reductions are realized. The Company is currently dependent upon financing from
external sources to remain in business and is anticipated to remain dependent at
least through the end of fiscal 2002. Consequently, it is not expected that the
internal source of liquidity will improve unless 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. 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.
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
24
<Page>
capital stock as a currency for acquisitions, (v) general economic
conditions, (vi) acts or threats of war, terrorism and the effects of such
acts of or threats on the Company, (vii) the success or failure of
management's efforts to implement the business strategy, (viii) the ability
to develop profitable operations, (ix) the ability to attract and retain
quality employees, and (x) other risks, which may be described in future
filings with the SEC. 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 1. Legal
The Company is in settlement negotiations with General Mills over iExalt
proprietary information included in the LightDog CD that was distributed by
General Mills in over 18 million boxes of various cereals. iExalt has incurred
at least $54,000 in damages to mitigate and cease distribution of this CD.
iExalt has not accrued any award or settlement resulting from resolution of
future negotiations with General Mills.
As reported within the Form 10-KSB for fiscal 2000, the Company received
written demand from three shareholders who had purchased shares of common stock
and claimed the right to additional shares based on claimed anti-dilution
provisions associated with their investment. The Company has held several
discussions with the shareholders and expects to resolve the differences in a
mutually beneficial manner. Though not formally resolved as of the date of this
report, management has estimated that a contingent liability exists and accrued
$200,000 as a potential liability for this demand.
In October 2001, the Company received notice of a lawsuit from an
individual suggesting the Company is obligated to pay the remaining balance of
$25,500 related to a purchase and sale agreement whereby the Company purchased
filtered software rights and the seller agreed to non-compete terms. The Company
subsequently sold the filtered software rights in September 2000 to a buyer that
assumed the obligation and remitted payments to the individual until June 2001.
The Company has no obligation based on the assignment and as such has reflected
no related contingent liability.
The Company received notice of a lawsuit from an individual claiming he is
due $45,000 pursuant to an employment agreement. Management asserts that no
amount is due as he was terminated for cause. No amount has been accrued, as
management believes the probability of any judgment against the Company is
remote.
In November 2001 the Company received notice of a lawsuit from Atrium
Associates Limited Partnership for failure to make lease payments in accordance
with the lease term for office space in Houston, Texas. Management and counsel
are evaluating the claim. The Company has not accrued any expense toward a
settlement resulting from resolution of future negotiations.
In November 2001 the Company received notice of a lawsuit from Pyramid
Plaza Operating Association, LC for failure to make lease payments in accordance
with the lease term for office space in Lubbock, Texas. Management and counsel
are evaluating the claim. The Company has not accrued any expense toward a
settlement resulting from resolution of future negotiations.
In December 2001 the Company received notice of a lawsuit from Jack
Tompkins requesting the Court to declare the Settlement Agreement and Mutual
Release to be enforceable in all of its terms. Specifically that the Company
deliver collateral consisting of the receivables of PremierCare to J. P. Morgan
Chase ("Chase") for the proposed restructured indebtedness related to the
$550,000 bank loan. The Company proposed alternative collateral; however, Chase
has not accepted. Management and counsel are evaluating the lawsuit. The Company
has not accrued any expense toward a settlement resulting from resolution of
future negotiations.
In the future we may be party to litigation arising from the ordinary
course of our business. Our insurance coverage may not be adequate to cover all
liabilities arising out of any such claims that may be initiated in the
25
<Page>
future. A lack of sufficient insurance coverage may have an adverse effect on
our business, financial condition, and operating results.
Part II - Item 2. Changes in Securities
The following transactions involving unregistered securities occurred
during the three months ended November 30, 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 October 15, 2001, the Company issued 25,714 shares of the Company's
common stock for repayment of a $90,000 bridge loan that was due in March
2001.
On October 29, 2001, the Company issued 7,670 shares of the Company's
common stock for incentive compensation to various employees of the
Company and selected speakers who contract to perform at events arranged
by the Company's subsidiary, ChristianSpeakers.
On November 30, 2001 the Company purchased certain assets of Barnabus
Christian Counseling Network, LLC, an on-line counseling company, for
6,500 shares of the Company's common stock.
During the three months ended November 30, 2001, we granted options and
warrants as described below for which shares have not been registered:
On November 8, 2001, the warrant agreement between the Company and I.
Leonards was amended to add an additional 10,000 shares of the Company's
common stock and the warrant exercise price was reduced to $2.50 per
share. A loan of $50,000 was advanced to the Company at an interest rate
of 14% that was fully repaid in December 2001.
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 Registration Rights Agreement dated June 28, 2000 (filed as Exhibit
4.1 to the Company's Current Report on Form 8-K, as filed with the
Commission on July 26, 2000, is incorporated herein by reference).
4.2 First Addendum to Registration Rights Agreement, dated June 30, 2000
(filed as Exhibit 4.1 to the Company's Current Report on Form 8-K,
as filed with the Commission on July 27, 2000, is incorporated
herein by reference).
4.3 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).
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<Page>
4.4 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).
4.5 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).
4.6 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).
4.7 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).
4.8 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).
4.9 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).
4.10 Convertible Debenture issued to Thomson Kernaghan & Co., Ltd.
on December 11, 2000 (filed as Exhibit 4.8 to the Company's
Quarterly Report on Form 10-QSB for the quarter ended February
28, 2001, is incorporated herein by reference).
4.11 Registration Rights Agreement dated December 11, 2000 between
iExalt, Inc. and Thomson Kernaghan & Co., Ltd. (filed as
Exhibit 4.9 to the Company's Quarterly Report on Form 10-QSB
for the quarter ended February 28, 2001, is incorporated
herein by reference).
4.12 Warrant issued to Thomson Kernaghan & Co., Ltd. on December
11, 2000. (filed as Exhibit 4.10 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended February 28, 2001,
is incorporated herein by reference).
4.13 Convertible Debenture issued to Ignatius Leonards on February 15,
2001. (filed as Exhibit 4.11 to the Company's Quarterly Report on
Form 10-QSB for the quarter ended February 28, 2001, is incorporated
herein by reference).
4.14 Warrant issued to Woodcrest Capital II Limited Partnership on
February 23, 2001. (filed as Exhibit 4.13 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended February 28, 2001, is
incorporated herein by reference).
4.15 Warrant issued to Woodcrest Capital, L.L.C. on February 23,
2001. (filed as Exhibit 4.14 to the Company's Quarterly Report
on Form 10-QSB for the quarter ended February 28, 2001, is
incorporated herein by reference).
4.16 Registration Rights Agreement dated February 23, 2001 between
iExalt, Inc. and Woodcrest Capital II Limited Partnership and
Woodcrest Capital, L.L.C. (filed as Exhibit 4.15 to the
Company's Quarterly Report on Form 10-QSB for the quarter ended
February 28, 2001, is incorporated herein by reference).
4.17 Convertible Debenture issued to Don Ballard on June 5, 2001. (filed
as Exhibit 4.16 to the Company's Quarterly Report on Form 10-QSB for
the quarter ended May 31, 2001, is incorporated herein by
reference).
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4.18 Convertible Debenture issued to Randy James on June 5, 2001. (filed
as Exhibit 4.17 to the Company's Quarterly Report on Form 10-QSB for
the quarter ended May 31, 2001, is incorporated herein by
reference).
4.19 Warrant issued to Cresson Productions, Inc. on August 14,
2001. (filed as Exhibit 4.19 to the Company's Annual Report on
Form 10-KSB for the fiscal year ended August 31, 2001, is
incorporated herein by reference).
*4.20 Letter agreement to amend the convertible debenture, warrant, and
registration rights agreement issued to Ignatius Leonards dated
November 8, 2001.
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 Company's Directors' Stock Option Plan (filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K, as filed with the Commission
on September 14, 1999, is incorporated herein by reference).
10.3 Company 1998 Stock Option Plan (filed as Exhibit 2.2 to the
Company's Current Report on 8-K, as filed with the Commission on
September 14, 1999, is incorporated herein by reference).
10.4 Contract for Sale and Purchase of Wordcross Enterprises, Inc.
between the Company and Wordcross Enterprises, Inc. d/b/a
Christian Happenings dated October 1, 1999 (filed as Exhibit
1.1 to the Company's Current Report on Form 8-K, as filed with
the Commission on October 15, 1999, is incorporated herein by
reference).
10.5 Services Agreement between Consulting & Strategy International, Inc.
and the Company (filed as Exhibit 10.4 to the Company's Annual
Report on Form 10-KSB for the period ending August 31, 1999, as
filed with the Commission on November 29, 1999, is incorporated
herein by reference).
10.6 Stock Purchase Agreement between the Company and Christian Speakers,
Inc. dated December 1, 1999 (filed as Exhibit 1.1 to the Company's
Current Report on Form 8-K, as filed with the Commission on December
16, 1999, is incorporated herein by reference).
10.7 Stock Purchase Agreement between the Company and First Choice
Marketing, Inc. dated December 31, 1999 (filed as Exhibit 1.1 to the
Company's Current Report on Form 8-K, as filed with the Commission
on January 28, 2000, is incorporated herein by reference).
10.8 Agreement and Plan of Reorganization, dated June 28, 2000, among
iExalt, Inc. and its Merger Subsidiaries and PremierCare, LLC and
its Direct and Indirect Members (filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K, as filed with the Commission
on July 26, 2000, is incorporated herein by reference).
10.9 Agreement and Plan of Merger, dated June 28, 2000, among
iExalt, Inc., PCII Combination Corp., and PremierCare
Investors, Inc. (filed as Exhibit 2.2 to the Company's Current
Report on Form 8-K, as filed with the Commission on July 26,
2000, is incorporated herein by reference).
10.10 Agreement and Plan of Merger, dated June 28, 2000, among
iExalt, Inc., PBH Combination Corp., and Premier Behavioral
Healthcare, Inc. (filed as Exhibit 2.3 to the Company's
Current Report on Form 8-K, as filed with the Commission on
July 26, 2000, is incorporated herein by reference).
10.11 Agreement and Plan of Reorganization, dated June 30, 2000, among
iExalt, Inc., KCG Combination Corp., and Keener Communications Group
and its Shareholders (filed as Exhibit 2.1 to the Company's Current
Report on Form 8-K, as filed with the Commission on July 27, 2000,
is incorporated herein by reference).
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10.12 Agreement of Merger, dated June 30, 2000, among iExalt, Inc., KCG
Combination Corp., and Keener Communications Group (filed as Exhibit
2.2 to the Company's Current Report on Form 8-K, as filed with the
Commission on July 27, 2000, is incorporated herein by reference).
10.13 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).
10.14 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).
10.15 Employment Agreement dated November 27, 2000 between iExalt,
Inc. and Chris L. Sisk. (filed as Exhibit 10.4 to the
Company's Quarterly Report on Form 10-QSB for the quarter ended
February 28, 2001, is incorporated herein by reference).
10.16 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).
10.17 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).
10.18 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).
10.19 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).
10.20 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).
10.21 Demand Note dated November 22, 2000 issued to Hunter M.A.
Carr. (filed as Exhibit 10.10 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended February 28, 2001,
is incorporated herein by reference).
10.22 Demand Note dated November 22, 2000 issued to Morris Chapman. (filed
as Exhibit 10.11 to the Company's Quarterly Report on Form 10-QSB
for the quarter ended February 28, 2001, is incorporated herein by
reference).
10.23 Demand Note dated November 22, 2000 issued to Donald Sapaugh. (filed
as Exhibit 10.12 to the Company's Quarterly Report on Form 10-QSB
for the quarter ended February 28, 2001, is incorporated herein by
reference).
10.24 Demand Note dated November 22, 2000 issued to Donald Sapaugh. (filed
as Exhibit 10.13 to the Company's Quarterly Report on Form 10-QSB
for the quarter ended February 28, 2001, is incorporated herein by
reference).
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10.25 Loan Agreement dated February 23, 2001 between iExalt, Inc.
and Woodcrest Capital II Limited Partnership. (filed as
Exhibit 10.14 to the Company's Quarterly Report on Form 10-QSB
for the quarter ended February 28, 2001, is incorporated
herein by reference).
10.26 Warrant issued to James W. Christian on March 21, 2001. (filed as
Exhibit 10.15 to the Company's Quarterly Report on Form 10-QSB for
the quarter ended February 28, 2001, is incorporated herein by
reference).
10.27 Stock Purchase Agreement issued to Don Ballard on July 3, 2001.
(filed as Exhibit 10.16 to the Company's Quarterly Report on Form
10-QSB for the quarter ended May 31, 2001, is incorporated herein by
reference).
10.28 Stock Purchase Agreement issued to Randy James on July 16, 2001.
(filed as Exhibit 10.17 to the Company's Quarterly Report on Form
10-QSB for the quarter ended May 31, 2001, is incorporated herein by
reference).
10.29 Employment Agreement dated February 28, 2001 between iExalt,
Inc. and Russell Ivy. (filed as Exhibit 10.29 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended August
31, 2001, is incorporated herein by reference).
10.30 Loan Agreement dated August 14, 2001 between iExalt, Inc. and
Cresson Productions, Inc. (filed as Exhibit 10.30 to the
Company's Annual Report on Form 10-KSB for the fiscal year
ended August 31, 2001, is incorporated herein by reference).
10.31 Purchase and Sale Agreement dated May 31, 2001 between iExalt, Inc.
and 711.NET, Inc. (filed as Exhibit 2.4 to the Company's Current
Report on Form 8-K, as filed with the Commission on June 8, 2001, is
incorporated herein by reference).
10.32 Purchase and Sale Agreement dated November 28, 2001 between iExalt,
Inc. and UMC Ten Broeck. (filed as Exhibit 10.32 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended August 31,
2001, is incorporated herein by reference).
*10.33 Promissory Note dated November 8, 2001 between iExalt, Inc.
and I. Leonards.
*10.34 Promissory Note dated November 12, 2001 between iExalt, Inc.
and JAK Unlimited Ltd.
-----------------
*Filed herewith.
(b)Reports on Form 8-K and Form 8-K/A filed during the three months ended
November 30, 2001:
None.
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<Page>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
iEXALT, INC.
January 11, 2002 /s/ Donald W. Sapaugh
----------------------------------------
Donald W. Sapaugh, C.E.O. / Chairman /
President (Principal Executive Officer)
January 11, 2002 /s/ Russell Ivy
--------------------------------------
Russell Ivy, Executive Vice President/
Chief Operating Officer
January 11, 2002 /s/ Chris L. Sisk
--------------------------------------
Chris L. Sisk, Executive Vice
President/CFO
(Primary Financial Officer)
31