SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): JANUARY 15, 2002
THE X-CHANGE CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation)
0 41703 43-1594165
(Commission File Number) (IRS Employer Identification Number)
36 WEST 44TH STREET, SUITE 1209, NEW YORK, NY 10036
(Address of principal executive offices including zip code)
(646) 728-7023
(Registrant's telephone number including area code)
48 S.W. 16TH STREET, DANIA BEACH, FL 33004
(Former name or former address, if changed since last report)
ITEM 1. CHANGE IN CONTROL OF REGISTRANT.
TERMS OF ACQUISITION OF WEBIX INC.: On January 15, 2002, The X-Change
Corporation, a publicly-held Nevada corporation (the "Company" or "XCHC"),
closed under an Agreement and Plan of Merger which had been entered into on
December 14, 2001 (the "Plan of Merger"). The closing resulted in X-Change
Technologies Corp., a Delaware corporation ("XCHC Technologies") which is the
wholly-owned subsidiary of XCHC, acquiring the business and operations of WEBiX
Inc., a privately-held Florida corporation ("WEBiX") in exchange for the
issuance by XCHC of a controlling interest in its shares to the former
shareholders of WEBiX. XCHC Technologies had been formed solely for the purpose
of effecting the Plan of Merger and had no assets, liabilities or operations at
the time of the closing. Upon the closing of the merger transaction, the
shareholders of XCHC elected a new board of directors which, in turn, appointed
new executive officers for XCHC.
Under the Plan of Merger, the Company acquired the business and operations of
WEBiX by issuing (a) 24,000,000 shares of common stock (the "XCHC Common
Shares") to WEBiX common shareholders on a pro rata basis, and (b) 4,000,000
shares of Series A Preferred Stock (the "XCHC Preferred Shares") and 40,000,000
warrants (the "XCHC Warrants") to WEBiX preferred shareholders on a pro rata
basis. Immediately prior to closing, certain existing shareholders of XCHC
surrendered approximately 9,500,000 XCHC Common Shares to treasury, which
reduced the number of outstanding XCHC Common Shares immediately prior to
closing to 13,002,000. Following the closing, the Company has outstanding
37,002,000 XCHC Common Shares, 4,000,000 XCHC Preferred Shares and 40,000,000
XCHC Warrants.
The XCHC Preferred Share provisions are attached as an exhibit to this filing.
Reference is made to that exhibit for a more thorough understanding of the terms
and conditions of the XCHC Preferred Shares. In summary, the XCHC Preferred
Shares (a) are a series of up to 5,000,000 shares termed Series A Convertible
Preferred Stock, (b) have a liquidation preference of $1.00 per share, (c) are
convertible at the option of the holder on a 10 XCHC Common Shares for 1 XCHC
Preferred Shares basis (subject to adjustment), (d) will automatically convert
in the event of (i) a public offering of XCHC Common Shares yielding gross
proceeds of at least $7,500,000 at a minimum price of $3.00 per share, or (ii)
in the event that holders of at least 2/3rds of the outstanding XCHC Preferred
Shares elect to convert, (e) are entitled to ten votes on parity with the XCHC
Common Shares on all matters which may be submitted to a vote, (f) are not
redeemable, and (g) are not entitled to the declaration or receipt of dividends
other than on as converted basis in the event that any dividends are declared on
the XCHC Common Shares. The XCHC Preferred Shares are considered to be a common
stock equivalent for financial reporting purposes.
The form of agreement evidencing the XCHC Warrants is attached as an exhibit to
this filing. Reference is made to that exhibit for a more thorough understanding
of the terms and conditions of the XCHC Warrants. In summary, the XCHC Warrants
are exercisable to purchase one XCHC Common Share at an exercise price of $1.00
per share (subject to adjustment) for a one year period beginning on the
effective date of the registration of the warrants and the underlying shares
(the "XCHC Warrant Shares") with the Securities and Exchange Commission under
the Securities Act of 1933, as amended.
In connection with the closing, a Lock-Up agreement was entered into amongst
various XCHC shareholders and the Company. The form of Lock-Up agreement is
attached to this filing as an exhibit. Reference is made to that exhibit for a
more thorough understanding of its terms and conditions. In summary, the Lock-Up
agreement prevents the sale or other transfer of the subject shares by the
holders prior to April 15, 2003. The parties to the Lock-Up Agreement are the
holders of 8,000,000 of the 13,002,000 outstanding XCHC Common Shares at closing
and the holders of the 24,000,000 shares of XCHC Common Stock issued to the
former WEBiX common shareholders at closing.
Following the merger, the following persons have beneficial ownership of in
excess of 5% of the outstanding shares of Common Stock of the Corporation
(assuming conversion of the XCHC Preferred Shares): K. Richard B. Niehoff-
14,671,450; Donald E. Weeden- 20,803,676, and John D. Weeden living trust-
4,178,436.
2
DESCRIPTION OF THE BUSINESS OPERATIONS ACQUIRED THROUGH THE MERGER
WEBiX was formed in December 2000 for the purpose of establishing an internet
based trading market for securities that are currently quoted on the OTC
Bulletin Board (the "OTCBB"). At the time of the merger, WEBiX was in the
development phase, had not commenced the operation of its proposed market and
had no revenue producing activities. The following is a description of the
proposed business of the Company following its acquisition of WEBiX.
THE OTC SECURITIES INDUSTRY AND THE BACKGROUND OF RECENT SEC REGULATORY
INITIATIVES AIMED AT THE MICROCAP SECURITIES MARKETS:
Over-The-Counter (OTC) securities are composed of securities issued by publicly
traded companies which are registered with the Securities and Exchange
Commission (the "SEC") but which are not listed on a national securities
exchange, such as the New York or American Stock Exchanges or on the automated
quotation system maintained by the National Association of Securities Dealers,
Inc. ("NASDAQ"). These securities are sometimes also referred to as microcap
issues since the market capitalization of these companies is generally
relatively small.
Price quotations of OTC microcap securities are indicated on the OTC Bulletin
Board ("OTCBB"). The OTCBB principally differs from registered exchanges and
NASDAQ in that it functions solely as a quotation service which provides pricing
information to subscribing NASD broker-dealer members. Unlike registered
exchanges, a quotation service does not impose listing standards on the issuers
themselves. Further, the NASD has no authority over the issuers; instead, the
NASD merely requires OTCBB market makers to research the public filings on the
issuer and to sponsor the issuer for trading by that market maker by filing an
eligibility form with the NASD. The OTCBB also differs from registered exchanges
and NASDAQ in that it does not provide a means for automated order executions,
maintain listing standards and relationships with the quoted issuers or impose
obligations on market makers similar to those imposed by NASDAQ on
broker-dealers that make a market in securities that trade on the NASDAQ
National Market System or on the NASDAQ Small Cap Market System.
These differences have long been a source of concern and comment by industry
members, commentators, regulators and other interested parties, particularly in
light of concerns over the perceived increase in the incidence of fraud in OTC
securities. On March 5, 1999, the SEC proposed amendments to Rule 15c2-11 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") to attempt
to remedy these differences. (Exchange Act Release No. 34-41110, File No.
S7-5-00). These amendments, as proposed, would require broker-dealers who
publish quotes on OTCBB securities to review and record the measures taken by
them to ensure that the issuers whose securities are being quoted and traded are
financially viable prior to publishing quotes. NASD member firms expressed their
concern that compliance with this proposal would place an enormous and
unbearable cost burden on them. One predicted effect of implementation of the
proposed amendments was the elimination of "Pink Sheet" trading altogether and a
commensurate dissipation in liquidity for microcap issues generally.
In response to these expressed concerns, the SEC reproposed the amendment and
called for the establishment of a centralized database which would enhance the
availability of, and foster access to, information about microcap issuers. This
reproposal called for the establishment of a centralized information repository
(IR) that would allow subscribing broker-dealers to comply with the rule as
amended without individually being required to research the issuers that they
make a market in. The NASD, however, advised the SEC in its first comment that
it was unable to undertake the responsibility of establishing or serving as an
IR. The SEC, therefore, has encouraged the development of one or more private
sector entities to act as an IR. Although proposed rulemaking has not yet been
finalized and adopted by the SEC, management believes that an opportunity to
establish an IR is available and it is considering the feasibility of pursuing
this business opportunity. Management believes that the pending SEC rulemaking
will also create an opportunity to create market infrastructure and systems
which will assure an orderly market in OTC securities. It is this potential
3
opportunity that is the focus of managements efforts at the present time and
which is discussed in the section below.
THE PROPOSED BUSINESS OF THE COMPANY AS A MARKETPLACE FOR OTCBB SECURITIES:
The Company is premised on the belief that effective markets thrive on
efficiency, investor confidence, transparency and the ready availability of
information to investors and market participants. Management does not believe
that the OTCBB currently functions as an effective marketplace. One sign of the
current market inefficiencies is the existence of substantially larger spreads
between the "bid" and "asked" price of the securities quoted on the OTCBB than
those on registered exchanges or on NASDAQ. This pricing inefficiency serves to
discourage trading of OTCBB issues and creates uncertainty among investors and
market participants. Management believes that the SEC will continue to take
steps to regulate the OTC securities industry, particularly if interest in OTC
traded securities continues to increase. Recent SEC proposed rulemaking
initiatives would increase the level of information concerning orders for the
purchase or sale of OTCBB securities which is viewed as likely to compress the
wide spread in these stocks. Management of the Company believes that the
increasing levels of public demand for microcap securities coupled with the
recent SEC regulatory initiatives presents a market opportunity for the
establishment and operation of a central exchange or marketplace for trading in
OTCBB securities that would be responsive to the concerns of the SEC, investors
and market participants alike.
The Company is currently considering two approaches in which it could function
as a central exchange or marketplace. The first would involve the attempt by the
Company to seek registration for exchange status in the same manner as the New
York or American Stock Exchanges are registered. This approach would be quite
expensive and time consuming and would delay the Company's ability to implement
its proposed marketplace. The second approach would require the Company (or an
affiliated company) to first become registered with the SEC as a broker-dealer
and to thereafter file with the SEC to be a registered operator of an
Alternative Trading System ("ATS"), which would enable the Company to provide an
order matching service to broker-dealer subscribers. The Company has chosen this
second approach and in August 2001, through its affiliated company, WEBiX
Brokerage Services, Inc., filed an application for licensure as a registered
broker-dealer with the SEC and for membership in the NASD. In January 2002,
WEBiX Brokerage Services, Inc. filed an application for licensure as a sponsor
of an Alternative Trading System. Although the regulatory licensing process is
complicated and there may be unanticipated delays, management is hopeful that
these licenses will be granted in March 2002. In the event that these licenses
are granted on a timely basis, the Company currently intends to launch its
Alternative Trading System in April 2002. Thereafter, the Company may pursue
partnership opportunities with an existing registered national securities
exchange which would enhance its exposure and credibility in the marketplace and
would potentially afford additional revenue producing opportunities in the form
of listing fees, membership fees, and market data fees.
Upon establishment of the Company's marketplace, the Company intends to offer
access to its web site on a subscription basis and further intends to charge
transaction fees for all transactions that are processed through its system.
THE COMPANY'S TECHNOLOGY ENCOMPASSES THE FEATURES AND FUNCTIONALITY THAT
MANAGEMENT BELIEVES WILL BE REQUIRED TO OPERATE A SUCCESSFUL MARKETPLACE:
The Company has licensed and has proceeded to customize and further develop a
proprietary internet-based software trading system which offers the ability to
route, display, and automatically execute orders in microcap securities in a
straight through processing (STP) environment. This user-friendly, web enabled
system requires no client-side software other than a standard web/internet
browser. The application uses extensive caching to minimize bandwidth
requirements and to thereby make the system broadly accessible.
The system is designed to handle standard brokerage order types and to report
all executions in real-time to broker-dealer subscribers. The system
incorporates order entry and routing features, automated, instantaneous
executions of orders, automated locked-in trades, best execution methodology, an
anonymous central limit order book, price and time priority, and the
preferencing of orders to counterparties for execution. The OTCBB currently
4
offers none of these features. The system provides a complete quote and sales
log audit trail. In essence, the Company intends to provide a systemic
infrastructure to the microcap market that has been previously available only to
primary markets and their participants.
Additionally, the Company is also seeking opportunities to relicense its
proprietary trading technologies for use in other non competitive exchange
related applications.
DIRECTORS AND EXECUTIVE OFFICERS:
K. RICHARD B. NIEHOFF (Chairman of the Board of Directors, President and CEO).
From September 2000 to January 2002, Mr. Niehoff was President and Chief
Executive Officer of WEBiX Inc. Prior to that, from September 1999 to August
2000, he was President of VSX Technologies, Inc. a wholly-owned subsidiary of
Unified Management Corp., where he also served as Managing Director of its
broker-dealer subsidiary. From August 1998 to September 1999, Mr. Niehoff was
Vice President of Wit Capital Corp. and President of the Digital Stock Market,
Inc., a wholly-owned subsidiary of Wit Capital Corp. From May 1997 to August
1998, Mr. Niehoff was Vice President and Director of Third Market Corporation, a
registered broker-dealer. From September 1996 to May 1997, Mr. Niehoff was the
Regional Sales Manager of Interactive Brokers, LLC.
In his long career in the securities brokerage and regulatory industries, Mr.
Niehoff has also served as a Managing Director of KPMG OTC Markets Project for
the Republic of Poland and as an Advisor to the Polish Ministry of
Privatization. Mr. Niehoff also established the Trading Services Division of the
NASDAQ Stock Market and was its first executive officer. Prior to joining
NASDAQ, he served as President and Chief Operating Officer of the Cincinnati
Stock Exchange, a position he held for fifteen years. He also was a member of
the Cincinnati and Philadelphia Exchanges, and an allied member of the New York
Stock Exchange. Mr. Niehoff has been substantially involved for most of his
career in the area of building on-line transaction processing equity trading
systems for U.S. and global exchanges and brokerages and could be regarded as a
pioneer and expert in this area. Mr. Niehoff was a founding member and Director
of the Consolidated Tape Association, Composite Quote Operating Committee, and
the Intermarket Trading System Committee. Additionally, he served on the
Exchange Executive Coordinating Committee. He maintains principal and general
licenses with the NASDR and maintains various state brokerage registrations.
Mr. Niehoff earned his dual B.A. in history and economics from the University of
Cincinnati. He also attended the Colleges of Business Administration and Law at
this university at the graduate level.
DONALD E. WEEDEN (Director): For the past 15 years, Mr. Weeden has been the
Chairman of Weeden Securities Corporation, the general partner of Weeden & Co.,
L.P., a New York Stock Exchange member firm and a member of the NASD. In the
1960s and 1970s Weeden & Co., a corporation controlled by Mr. Weeden, was
regarded as a pioneer and one of the leading firms in the "third market." Mr.
Weeden has served on several committees of the SEC involved in market structure
and the SEC's National Market Advisory Board.
Mr. Weeden has also been an active investor in high technology ventures and
companies related to the securities industry. In 1959, he was a founder of
National Semiconductor Corporation and has been a director since 1962.
Subsequent venture investments included Instinet Corp., Autex, Cadence Design
and Quantum Health. Mr. Weeden has a B.A. in economics from Stanford University.
MOLLY G. BAYLEY (Director and Executive Vice-President of the Company): From
March 2001 to January 2002, Ms. Bayley was Executive Vice President of WEBiX,
Inc. From December 2000 to March 2001, Ms. Bayley was Vice President, Regulation
of Market Systems, Inc. Prior to that, from May 2000 to November 2000, she was a
principal of Molly G. Bayley Consulting. From October 1998 to April 2000 Ms.
Bayley was Vice President, Exchange Relations of OptiMark Technologies Inc. From
5
November 1997 to October 1998 she was Senior Managing Director of DST Catalyst,
a company which built automated trading systems for stock exchanges.
In her career, Ms. Bayley has also served as a Vice President of NASDAQ
Operations for the NASDAQ Stock Mark and a Director of Market Surveillance for
NASDAQ. She also served as the Executive Director of the Commodity Futures
Trading Commission and as an International Regulatory Advisor for Emerging
Capital Markets at Arthur Andersen Consulting. Ms. Bayley has a B.A. in French
from Wellesley College.
JEFFREY M. SCHAEFER (Senior Vice-President): From February 2001 to January 2002,
Dr. Shaefer was Senior Vice President and Director of Research of WEBiX, Inc.
From July 2000 to February 2001 he was self-employed. From November 1997 to July
2000, Dr. Schaefer was a Consultant to the Securities Industry Association.
Prior to that, he was Senior Economic Advisor of Midwood Securities from March
1998 to December 1999. From June 1977 to November 1997, he was Senior Vice
President and Director of Research of the Securities Industry Association.
Before joining SIA, Dr. Schaefer worked as the Director of International
Financial Policy at the New York Stock Exchange. Mr. Schaefer has a B.A. in
Economics from City College of New York and an M.A. and a PhD in Economics from
Columbia University.
ERIC B. NISSAN (Director and Senior Vice-President): From March 2000 to January
2002, Mr. Nissan was a principal of WebIAm, Inc., a technology development and
consulting firm engaged in the development of exchange related applications.
From December 1997 to March 2000, he was a Programmer Analyst with Lazard Freres
and Co., LLC. Prior to that, from August 1996 to December 1997, he was an
Application Developer at Integrated Office Solutions.
Mr. Nissan's career has been focused on introducing and implementing technology
solutions for major financial institutions and brokerage firms. As a principal
and founder of WebIAm, Inc. he oversaw the day-to-day operations of the company,
as well as the development of various projects relating to the delivery of
real-time trading systems over the Internet. Mr. Nissan has a B.S. in Computer
Science from SUNY Stony Brook.
SUSAN LAPCZYNSKI (Vice President): From June 2001 to January 2002, Ms.
Lapczynski was Vice President, Market Technology and Support of WEBiX, Inc.
Prior to taking her position with WEBiX, Ms. Lapczynski was a Technology Group
Analyst with OptiMark Technolgies from May 1998 to June 2001. From September
1993 to May 1998, she was with Chase Securities Inc. (formerly Chemical Bank)
where she was a Research Analyst in the Global Investment Banking Group and a
Business Analyst in the Global Emerging Markets Group. Prior to that she was a
Senior Systems Analyst with Merrill Lynch & Co., Inc., in their Capital Markets
Information Systems divisions. Ms. Lapczynski has a B.A. in both French and
Business Administration from Rutgers College.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This filing contains certain forward-looking statements, as defined in the
Private Securities Litigation Reform Act of 1995, and information relating to us
that are based on the beliefs of our management, as well as assumptions made by
and information currently available to our management. When used in this filing,
the words estimate, project, believe, anticipate, intend, expect and similar
expressions are intended to identify forward-looking statements. These
forward-looking statements reflect our current views with respect to future
events and are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in these forward-looking
statements. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date on this filing. We
have no obligation to publicly release any revisions to these forward-looking
statements to reflect events or circumstances after the date of this prospectus
or to reflect the occurrence of unanticipated events.
6
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS: See Item 1, above.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS:
The required financial and unaudited proforma statements are included hereinin
immediately following the signature page.
EXHIBITS
(c) Exhibits
3.1 Preferred Stock Provisions (1)
4.1 Lock-Up Agreement (1)
10.1 Merger Agreement (1)
10.2 Form of Warrant Agreement (1)
99.1 Press Release (1)
(1) Incorporated by reference to Form 8K, filed January, 30, 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Dated: March 29, 2002 The X-Change Corporation
(Registrant)
By: /s/ K. Richard B. Niehoff
K. Richard B. Niehoff, Chief Executive Officer
7
The X-Change Corporation
(A Development Stage Company)
-:-
INDEPENDENT AUDITOR'S REPORT
DECEMBER 31, 2001 AND 2000
CONTENTS
Page
Independent Auditor's Report...........................................................F - 1
Balance Sheets
December 31, 2001 and 2000...........................................................F - 2
Statements of Operations
For the Years Ended December 31, 2001 and 2000.......................................F - 3
Statement of Stockholders' Equity for the
Period February 5, 1969 (inception) (unaudited)to December 31, 2001..................F - 4
Statements of Cash Flows
For the Years Ended December 31, 2001 and 2000.......................................F - 5
Notes to Financial Statements..........................................................F - 6
INDEPENDENT AUDITOR'S REPORT
The X-Change Corporation
(A Development Stage Company)
We have audited the accompanying balance sheets of The X-Change
Corporation (a development stage company) as of December 31, 2001 and 2000, and
the related statements of operations and cash flows for the two years then
ended, and the statement of stockholders' equity for the period February 5, 1969
(inception)(unaudited) to December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of The X-Change
Corporation (a development stage company) as of December 31, 2001 and 2000, and
the results of its operations and its cash flows for the two years ended
December 31, 2001 and 2000 in conformity with accounting principles generally
accepted in the United States of America.
Respectfully submitted
/S/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
March 13, 2002
F - 1
THE X-CHANGE CORPORATION
(A Development Stage Company)
BALANCE SHEETS
December 31,
-------------------------------
2001 2000
-------------- ---------------
Assets - Cash $ - $ 417
============== ===============
Current Liabilities:
Accounts payable $ 1,218 $ 5,779
Loans payable - shareholders 19,821 9,900
-------------- ---------------
Total Current Liabilities 21,039 15,679
-------------- ---------------
Stockholders' Equity (Deficit):
Preferred Stock, Par value $.001
Authorized 10,000,000 shares
Issued - None - -
Common Stock, Par value $.001
Authorized 100,000,000 shares,
Issued 22,540,000 shares at December 31,
2001 and December 31, 2000 22,540 22,540
Paid-In Capital 543,243 543,243
Retained Deficit (536,688) (536,688)
Deficit Accumulated During the
Development Stage (50,134) (44,357)
-------------- ---------------
Total Stockholders' Equity (Deficit) (21,039) (15,262)
-------------- ---------------
Total Liabilities and
Stockholders' Equity $ - $ 417
============== ===============
The accompanying notes are an integral part of these financial statements.
F - 2
THE X-CHANGE CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
since
October 4,
2000
Inception
For the Year Ended of
December 31, Development
------------------------------
2001 2000 Stage
-------------- -------------- ---------------
Revenues: $ - $ - $ -
General and Administrative
Expenses: 5,777 180,262 50,134
-------------- -------------- ---------------
Net Loss $ (5,777) $ (180,262) $ (50,134)
============== ============== ===============
Basic & Diluted loss per share $ - $ (0.02)
============== ==============
The accompanying notes are an integral part of these financial statements.
F - 3
THE X-CHANGE CORPORATION
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM FEBRUARY 5, 1969 (INCEPTION) TO DECEMBER 31, 2001
Deficit
Accumulated
Since
October 4,
2000
Inception of
Common Stock Paid-In Retained Development
Shares Par Value Capital Deficit Stage
------------ ----------- ---------- ------------ -------------
Balance at February 5, 1969
(inception) - $ - $ - $ - $ -
June 11, 1969 Issuance of Stock for
cash 928 1 102,154 - -
Issuance of stock for services 50 - 6,137 - -
Net Loss 1969 to 1993 - - - (171,352) -
------------ ----------- ---------- ------------ -------------
Balance at December 31, 1993 978 1 108,291 (171,352) -
(unaudited)
Net Loss - - - (40,337) -
------------ ----------- ---------- ------------ -------------
Balance at December 31, 1994 978 1 108,291 (211,689) -
Issuance of stock for services 48,200 48 3,676 - -
Net Income - - - 99,673 -
------------ ----------- ---------- ------------ -------------
Balance at December 31, 1995
and 1996 49,178 49 111,967 (112,016) -
Issuance of stock for services 157,143 157 36,473 - -
Net Loss - - - (36,630) -
------------ ----------- ---------- ------------ -------------
Balance at December 31, 1997 206,321 206 148,440 (148,646) -
Issuance of stock for services 119,636 120 27,767 - -
Net Loss - - - (27,887) -
------------ ----------- ---------- ------------ -------------
Balance at December 31, 1998 325,957 326 176,207 (176,533) -
------------ ----------- ---------- ------------ -------------
F - 4
THE X-CHANGE CORPORATION
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM FEBRUARY 5, 1969 (INCEPTION) TO DECEMBER 31, 2001
(Continued)
Deficit
Accumulated
Since
October 4,
2000
Inception of
Common Stock Paid-In Retained Development
Shares Par Value Capital Deficit Stage
------------- ----------- ---------- ------------ -------------
Balance at December 31, 1998 325,957 326 176,207 (176,533) -
Return of shares to treasury (85,957) (86) 86 - -
Issuance of stock for services 2,760,000 2,760 221,490 - -
Net Loss - - - (224,250) -
------------- ----------- ---------- ------------ -------------
Balance at December 31, 1999 3,000,000 3,000 397,783 (400,783) -
as originally reported
50:1 reverse stock split (2,940,000) (2,940) 2,940 - -
4:1 forward stock split 180,000 180 (180) - -
------------- ----------- ---------- ------------ -------------
Restated balance at December 31,
1999 240,000 240 400,543 (400,783) -
Issuance of stock for cash 14,300,000 14,300 60,700 - -
Issuance of stock for services 8,000,000 8,000 82,000 - -
Net Loss - - - (135,905) (44,357)
------------- ----------- ---------- ------------ -------------
Balance at December 31, 2000 22,540,000 22,540 543,243 (536,688) (44,357)
Net Loss - - - - (5,777)
------------- ----------- ---------- ------------ -------------
Balance at December 31, 2001 22,540,000 $ 22,540 $ 543,243 $ (536,688) $ (50,134)
============= =========== ========== ============ =============
The accompanying notes are an integral part of these financial statements.
F - 5
THE X-CHANGE CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Cumulative
Since
October 4,
2000
For the Years Ended Inception of
December 31, Development
-----------------------------
2001 2000 Stage
-------------- -------------- ---------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (5,777)$ (180,262)$ (50,134)
Increase (decrease) in accounts payable (4,561) 5,779 30,313
-------------- -------------- ---------------
Net Cash Used in operating activities (10,338) (174,483) (19,821)
-------------- -------------- ---------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net cash provided by
investing activities - - -
-------------- -------------- ---------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Shareholder loans 9,921 9,900 19,821
Issuance of common stock - 165,000 -
-------------- -------------- ---------------
Net Cash Provided by
Financing Activities 9,921 174,900 19,821
-------------- -------------- ---------------
Net (Decrease) Increase in
Cash and Cash Equivalents (417) 417 -
Cash and Cash Equivalents
at Beginning of Period 417 - -
-------------- -------------- ---------------
Cash and Cash Equivalents
at End of Period $ - $ 417 $ -
============== ============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ - $ -
Franchise and income taxes $ - $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES: None
The accompanying notes are an integral part of these financial
statements.
F - 6
THE X-CHANGE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for The X-Change Corporation (a
development stage company) is presented to assist in understanding the Company's
financial statements. The accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation of
the financial statements.
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Delaware on
February 5, 1969 as Diversified Technologies Group, Inc., the Company
reincorporated and changed its domicile to the State of Nevada on October 4,
2000. The Company on December 1, 1999, entered into an agreement (Reorganization
Agreement) to acquire all of the outstanding capital stock of S&J (Chatteris)
Holdings Limited, a United Kingdom corporation (S&J Holdings). Pursuant to the
Reorganization Agreement, the Company agreed to acquire all of the outstanding
capital stock of S&J in exchange for shares of Common Stock. The Reorganization
Agreement required S&J Holdings to perform certain conditions, including the
delivery of audited financial statements. These conditions had not been
fulfilled by February 14, 2000; therefore, the agreement was rescinded and
deemed to have been void and of no effect from the beginning as if the
acquisition had not occurred. All shares issued in the acquisition were returned
to treasury. The Company also attempted two acquisitions in 2000, neither of
which were able to deliver the required financial statements. The first was
rescinded and the second was not consummated. In June 2001, the Company entered
into a reorganization agreement which was later rescinded for failure to provide
adequate compliance with the representations, warranties and covenants of the
agreement. In July 2001, the Company changed its name to The X-Change
Corporation. Since October 4, 2000, the Company is in the development stage, and
has not commenced planned principal operations.
On January 15, 2002, the Company merged with WEBiX, Inc. This merger
resulted in the Company acquiring the business and operations of WEBiX in
exchange for the issuance by the Company of a controlling interest in its shares
to the former shareholders of WEBiX.
Nature of Business
The Company has no products or services as of December 31, 2001.
Subsequent to year end, the Company merged with WEBiX Inc (See subsequent event
footnote number 7).
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
F - 7
THE X-CHANGE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Loss per Share
The reconciliations of the numerators and denominators of the basic loss
per share computations are as follows:
Per-Share
Income Shares Amount
------ ------ ------
(Numerator) (Denominator)
For the Year Ended December 31, 2001
Basic Loss per Share
Loss to common shareholders $ (5,777) 22,540,000 $ -
=============== =============== ==============
For the Year Ended December 31, 2000
Basic Loss per Share
Loss to common shareholders $ (180,262) 9,385,000 $ (0.02)
=============== =============== ==============
The effect of outstanding common stock equivalents would be
anti-dilutive for December 31, 2001 and 2000 and are thus not considered.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements.
Stock Compensation for Non-Employees
The Company accounts for the fair value of its stock compensation grants
for non-employees in accordance with FASB Statement 123. The fair value of each
grant is equal to the market price of the Company's stock on the date of grant
if an active market exists or at a value determined in an arms length
negotiation between the Company and the non-employee.
F - 8
THE X-CHANGE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(Continued)
NOTE 2 - INCOME TAXES
As of December 31, 2001, the Company had a net operating loss
carryforward for income tax reporting purposes of approximately $587,000 that
may be offset against future taxable income through 2021. Current tax laws limit
the amount of loss available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount available to
offset future taxable income may be limited. No tax benefit has been reported in
the financial statements, because the Company believes there is a 50% or greater
chance the carryforwards will expire unused. Accordingly, the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of the
same amount.
NOTE 3 - DEVELOPMENT STAGE COMPANY/ GOING CONCERN
The Company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage. Continuation of the Company as a going concern is dependent
upon obtaining the additional working capital necessary to be successful in its
planned activity, and the management of the Company has developed a strategy,
which it believes will accomplish this objective through additional equity
funding and long term financing, which will enable the Company to operate for
the coming year.
NOTE 4 - COMMITMENTS
As of December 31, 2001 all activities of the Company have been
conducted by corporate officers from either their homes or business offices.
Currently, there are no outstanding debts owed by the company for the use of
these facilities and there are no commitments for future use of the facilities.
NOTE 5 - STOCK SPLIT
On June 6, 2000 the Board of Directors authorized 50 to 1 reverse stock
split, changed the authorized number of shares to 110,000,000 shares and the par
value to $.001 for the Company's stock with 100,000,000 of such shares to be
denominated common shares and 10,000,000 of such number to be denominated
preferred shares. As a result of the split, 2,940,000 shares were canceled. On
October 17, 2000 the Board of Directors authorized a 4 to 1 forward stock split.
As a result of the split, 180,000 shares were issued. All references in the
accompanying financial statements to the number of common shares and per-share
amounts for 2000 have been restated to reflect the stock split.
NOTE 6 - COMMON STOCK TRANSACTIONS
From July to September 2000, the Company issued 8,000,000 (post split)
restricted common shares to various consultants for services at the market value
on the date of issuance and 14,300,000 (post split) restricted common shares to
individuals for cash at $.005245 per share.
F - 9
THE X-CHANGE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(Continued)
NOTE 7 - SUBSEQUENT EVENTS
On January 15, 2002, the Company and its newly created wholly owned
subsidiary X- Change Technologies Corp, merged with WEBiX, Inc. (a Florida
Corporation). As a result, the Company acquired the business and operations of
WEBiX, in exchange for the issuance of a controlling interest in The X-Change
Corporations' shares to the former shareholders of WEBiX. Under the Plan of
Merger, 24,000,000 shares of Common Stock, 4,000,000 shares of Series A
Convertible Preferred Stock (convertible into 40,000,000 shares of Common Stock)
and 40,000,000 warrants were issued. In addition, certain existing shareholders
of the Company surrendered approximately 9,500,000 shares of Common Stock to
treasury.
F - 10
X-Change Technologies Corp
(Formerly WEBiX Inc.)
(A Development Stage Company)
-:-
INDEPENDENT AUDITOR'S REPORT
DECEMBER 31, 2001 AND 2000
CONTENTS
Page
Independent Auditor's Report...........................................................F - 1
Balance Sheets
December 31, 2001 and 2000...........................................................F - 2
Statements of Operations for the
Year Ending December 31, 2001 and
the Period From November 17, 2000 (Inception) to December 31, 2000..................F - 3
Statement of Stockholders' Equity for the
Period November 17, 2000 (Inception) to December 31, 2001............................F - 4
Statements of Cash Flows for the
Year Ending December 31, 2001 and
the Period From November 17, 2000 (Inception) to December 31, 2000..................F - 6
Notes to Financial Statements..........................................................F - 8
INDEPENDENT AUDITOR'S REPORT
X-Change Technologies Corp (Formerly WEBiX Inc.)
(A Development Stage Company)
We have audited the accompanying balance sheets of X-Change Technologies
Corp (Formerly WEBiX Inc.) (a development stage company) as of December 31, 2001
and 2000, and the related statements of operations and cash flows for the year
ending December 31, 2001 and the period from November 17, 2000 (Inception) to
December 31, 2000 and the statement of stockholders' equity for the period
November 17, 2000 (Inception) to December 31, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of X-Change
Technologies Corp (Formerly WEBiX Inc.) (a development stage company) as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for the year ending December 31, 2001 and the period from November 17, 2000
(Inception) to December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America.
Respectfully submitted
/S/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
March 23, 2002
F - 1
X-CHANGE TECHNOLOGIES CORP
(Formerly WEBiX Inc.)
(A Development Stage Company)
BALANCE SHEETS
December 31,
-------------------------------
2001 2000
--------------- --------------
ASSETS:
Current Assets:
Cash $ 4,055 $ -
--------------- --------------
Total Current Assets 4,055 -
--------------- --------------
Fixed Assets:
Office Equipment 11,349 2,297
Accumulated Depreciation (1,527) (115)
--------------- --------------
Net Fixed Assets 9,822 2,182
--------------- --------------
Intangibles and Other Assets:
Licensing and Distribution Rights - WebIAm 483,758 -
Accumulated Amortization (67,189) -
--------------- --------------
Net Intangible and Other Assets 416,569 -
--------------- --------------
Total Assets $ 430,446 $ 2,182
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY:
- -------------------------------------
Current Liabilities:
Accounts payable $ 78,010 $ -
Accrued Salaries - 30,833
Loans payable - shareholders 44,418 1,863
--------------- --------------
Total Current Liabilities 122,428 32,696
--------------- --------------
Stockholders' Equity (Deficit):
Preferred Stock, Par Value $.01, Authorized
2,500,000 shares, Issued 914,500 and 0
at December 31, 2001 and 2000 9,145 -
Common Stock, Par value $.01, Authorized
7,500,000 Shares, Issued 1,100,000 and 600,000
at December 31, 2001 and 2000 11,000 6,000
Paid-In Capital 1,129,355 4,000
Deficit Accumulated During the Development Stage (841,482) (40,514)
--------------- --------------
Total Stockholders' Equity (Deficit) 308,018 (30,514)
--------------- --------------
Total Liabilities and Stockholders' Equity 430,446 $ 2,182
=============== ==============
The accompanying notes are an integral part of these financial statements.
F - 2
X-CHANGE TECHNOLOGIES CORP
(Formerly WEBiX Inc.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
since
November 17,
2000
For the Year For the Period Inception
Ending Ending of
December 31, December 31, Development
2001 2000 Stage
-------------- -------------- ---------------
Revenues: $ - $ - $ -
-------------- -------------- ---------------
Expenses:
General & Administrative 796,569 40,484 837,053
-------------- -------------- ---------------
Operating Loss (796,569) (40,484) (837,053)
Other Income (Expense):
Interest (4,399) (30) (4,429)
-------------- -------------- ---------------
Loss Before Income Taxes (800,968) (40,514) (841,482)
Income Taxes - - -
-------------- -------------- ---------------
Net Loss $ (800,968) $ (40,514) $ (841,482)
============== ============== ===============
Basic & Diluted loss per share $ (0.59) $ (0.07)
============== ==============
The accompanying notes are an integral part of these financial statements.
F - 3
X-CHANGE TECHNOLOGIES CORP
(Formerly WEBiX Inc.)
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM NOVEMBER 17, 2000 (INCEPTION) TO DECEMBER 31, 2001
Deficit
Accumulated
Since
November 17,
2000
Inception of
Preferred Stock Common Stock Paid-In Development
Shares Par Value Shares Par Value Capital Stage
---------- ---------- ---------- ------------ ----------- ---------------
Balance at November 17, 2000
(Inception) - $ - - $ - $ - $ -
November 17, 2000 Shares
Issued for Cash - - 10 10 9,990 -
Net Loss - - - - - (40,514)
---------- ---------- ---------- ------------ ----------- ---------------
Balance at December 31, 2000
As Originally Reported - - 10 10 9,990 (40,514)
Retroactive adjustment for
60,000 to 1 stock split
July 16, 2001 - - 599,990 5,990 (5,990) -
---------- ---------- ---------- ------------ ----------- ---------------
Restated Balance January 1, 2001 - - 600,000 6,000 4,000 (40,514)
February 28, 2001, Shares Issued
For Cash - - 350,000 3,500 71,500 -
June 30, 2001 Shares Issued For
Acquisition of Licensing - - 150,000 1,500 148,500 -
Cash 590,000 5,900 - - 584,100 -
Expenses 6,800 68 - - 6,732 -
July 30, 2001, Shares Issued
For Cash 125,000 1,250 - - 123,750 -
August 31, 2001, Shares Issued
For Cash 105,000 1,050 - - 103,950 -
F - 4
X-CHANGE TECHNOLOGIES CORP
(Formerly WEBiX Inc.)
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM NOVEMBER 17, 2000 (INCEPTION) TO DECEMBER 31, 2001
Deficit
Accumulated
Since
November 17,
2000
Inception of
Preferred Stock Common Stock Paid-In Development
Shares Par Value Shares Par Value Capital Stage
---------- ---------- ---------- ------------ ----------- ---------------
November 2, 2001, Shares Issued
For Cash 25,000 $ 250 - $ $ - 24,750 $ -
December 7, 2001, Shares Issued
For Cash 50,000 500 - - 49,500 -
For Expenses 12,700 127 - - 12,573 -
Net Loss - - - - - (800,968)
---------- ---------- ---------- ------------ ----------- ---------------
Balance at December 31, 2001 914,500 $ 9,145 1,100,000 $ 11,000 1,129,355 $ (841,482)
========== ========== ========== ============ =========== ===============
The accompanying notes are an integral part of these financial statements.
F - 5
X-CHANGE TECHNOLOGIES CORP
(Formerly WEBiX Inc.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Cumulative
Since
November 17,
For the Year For the Period 2000
Ending Ending Inception of
December 31, December 31, Development
2001 2000 Stage
-------------- -------------- ---------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (800,968)$ (40,514)$ (841,482)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operating Activities:
Depreciation and Amortization 68,601 115 68,716
Issuance of Preferred Stock for Expenses 19,500 - 19,500
Issuance of Common Stock for
Licensing Rights 150,000 - 150,000
Increase (Decrease) in Accounts Payable 78,010 - 78,010
Increase (Decrease) in Accrued Salaries (30,833) 30,833 -
-------------- -------------- ---------------
Net Cash Used in Operating Activities (515,690) (9,566) (525,256)
-------------- -------------- ---------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase and Development of Licensing
Rights (483,758) - (483,758)
Purchase of Office Equipment (9,051) (2,297) (11,348)
-------------- -------------- ---------------
Net Cash Provided by Investing Activities (492,809) (2,297) (495,106)
-------------- -------------- ---------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase Shareholder Loans 42,555 1,863 44,418
Issuance of Preferred Stock for Cash 895,000 - 895,000
Issuance of Common Stock for Cash 75,000 10,000 85,000
-------------- -------------- ---------------
Net Cash Provided by Financing Activities 1,012,555 11,863 1,024,418
-------------- -------------- ---------------
F - 6
X-CHANGE TECHNOLOGIES CORP
(Formerly WEBiX Inc.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Continued)
Cumulative
Since
November 17,
For the Year For the Period 2000
Ending Ending Inception of
December 31, December 31, Development
2001 2000 Stage
-------------- -------------- ---------------
Net (Decrease) Increase in
Cash and Cash Equivalents 4,056 - 4,056
Cash and Cash Equivalents
at Beginning of Period - - -
-------------- -------------- ---------------
Cash and Cash Equivalents
at End of Period $ 4,056 $ - $ 4,056
============== ============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 2,891 $ - $ 2,891
Franchise and income taxes $ - $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
On June 30, 2001, the Company obtained licensing and distribution rights for
WebIAm software in exchange for $100,000 and 150,000 common shares valued at a
$1 per share along with assuming $68,111 in WebIAm's accounts payable.
The accompanying notes are an integral part of these financial statements.
F - 7
X-CHANGE TECHNOLOGIES CORP
(Formerly WEBiX Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for X-Change Technologies Corp
(Formerly WEBiX Inc.) (a development stage company) is presented to assist in
understanding the Company's financial statements. The accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Florida on
November 17, 2000. Since November 17, 2000, the Company is in the development
stage, and has not commenced planned principal operations.
On January 15, 2002, the Company merged with X-Change Technologies Corp
(a wholly owned subsidiary of The X-Change Corporation). This merger resulted in
the Company's business and operations being acquired in exchange for a
controlling interest in the acquiring Company's shares.
Nature of Business
The Company is in the process of developing, marketing and hosting an
internet accessible trading market for securities that are currently quoted on
the OTC Bulletin Board. Upon establishment of the Company's trading market, the
Company intends to offer access to its web site on a subscription basis and
intends to charge transaction fees for all transactions that are processed
through the system.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F - 8
X-CHANGE TECHNOLOGIES CORP
(Formerly WEBiX Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for
in amounts sufficient to relate the cost of depreciable assets to operations
over their estimated service lives, principally on a straight-line basis from 3
to 5 years.
Upon sale or other disposition of property and equipment, the cost and
related accumulated depreciation or amortization are removed from the accounts
and any gain or loss is included in the determination of income or loss.
Expenditures for maintenance and repairs are charged to expense as
incurred. Major overhauls and betterments are capitalized and depreciated over
their useful lives.
The Company identifies and records impairment losses on long-lived
assets such as property and equipment when events and circumstances indicate
that such assets might be impaired. The Company considers factors such as
significant changes in the regulatory or business climate and projected future
cash flows from the respective asset. Impairment losses are measured as the
amount by which the carrying amount of intangible asset exceeds its fair value.
Intangible Assets
Intangible assets are valued at cost and are being amortized on the
straight-line basis over a period of three years in accordance with FAS-86. The
amortization period is management's estimate of useful economic life of the
asset. The initial valuation of licensing and distribution rights for the
software products were derived from what Management believes to be arms length
negotiation.
The Company identifies and records impairment losses on intangible
assets when events and circumstances indicate that such assets might be
impaired. The Company considers factors such as significant changes in the
regulatory or business climate and projected future cash flows from the
respective asset. Impairment losses are measured as the amount by which the
carrying amount of intangible asset exceeds its fair value.
F - 9
X-CHANGE TECHNOLOGIES CORP
(Formerly WEBiX Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loss per Share
The reconciliations of the numerators and denominators of the basic loss
per share computations are as follows:
Per-Share
Income Shares Amount
------ ------ ------
(Numerator) (Denominator)
For the Year Ended December 31, 2001
Basic Loss per Share
Loss to common shareholders $ (800,968) 1,362,939 $ (0.59)
=============== =============== ==============
For the Period Ended December 31, 2000
Basic Loss per Share
Loss to common shareholders $ (40,514) 600,000 $ (0.07)
=============== =============== ==============
The effect of outstanding common stock equivalents would be
anti-dilutive for December 31, 2001 and 2000 and are thus not considered.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements.
Stock Compensation for Non-Employees
The Company accounts for the fair value of its stock compensation grants
for non-employees in accordance with FASB Statement 123. The fair value of each
grant is equal to the market price of the Company's stock on the date of grant
if an active market exists or at a value determined in an arms length
negotiation between the Company and the non-employee.
F - 10
X-CHANGE TECHNOLOGIES CORP
(Formerly WEBiX Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(Continued)
NOTE 2 - INCOME TAXES
As of December 31, 2001, the Company had a net operating loss
carryforward for income tax reporting purposes of approximately $1,129,000 that
may be offset against future taxable income through 2021. Current tax laws limit
the amount of loss available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount available to
offset future taxable income may be limited. No tax benefit has been reported in
the financial statements, because the Company believes there is a 50% or greater
chance the carryforwards will expire unused. Accordingly, the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of the
same amount.
NOTE 3 - DEVELOPMENT STAGE COMPANY/ GOING CONCERN
The Company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage. Continuation of the Company as a going concern is dependent
upon obtaining the additional working capital necessary to be successful in its
planned activity, and the management of the Company has developed a strategy,
which it believes will accomplish this objective through additional equity
funding and long term financing, which will enable the Company to operate for
the coming year.
NOTE 4 - COMMITMENTS
On June 25, 2001, the Company entered into a three year lease agreement
for its office facilities. The rental charges are approximately $54,000 to
$57,000 per year.
The minimum future lease payments under these leases for the next five
years is:
Twelve Months
Ended June 30:
- --------------------
2001 $ 54,000
2003 55,620
2004 57,289
2005 -
2006 -
--------------
Total minimum future lease payments $ 166,909
==============
In conjunction with the acquisition of WebIAm software rights the
company has a commitment to pay $5,700 per month for web hosting and $700 per
month for hardware.
F - 11
X-CHANGE TECHNOLOGIES CORP
(Formerly WEBiX Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(Continued)
NOTE 5 - LOANS FROM SHAREHOLDERS AND OTHER RELATED PARTY
TRANSACTIONS
As of December 31, 2001 and 2000, shareholder payables include
approximately $44,418 and $1,863 owing to a major shareholder at an interest
rate of 10%.
NOTE 6 - PREFERRED STOCK
On July 16, 2001, the Company created convertible Series A 7%
Convertible Preferred Stock, authorizing the issuance of 2,500,000 shares of
convertible preferred stock to be sold, with a par value of $.01. The preferred
stock are convertible at a ratio of 1 share of common stock per preferred share
converted.
The Corporation is under no obligation to pay dividends. The holders of
the Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors, and in any event upon liquidation, dissolution, or
winding-up of the Corporation, out of funds legally available therefore,
dividends at the annual rate of $.07 per share of Series A Preferred Stock
(adjusted for any stock dividend, stock split, etc.), payable in preference and
priority to any payment of any dividend o the Common Stock.
In the event of any liquidation, dissolution or winding-up of the
Corporation, the holders of outstanding shares of Series A Preferred shall be
entitled to be paid out of the assets of the Corporation available for
distribution to shareholders, before any payment shall be made to or set aside
for holders of the Common Stock, an amount of $1 per share of Series A Preferred
plus all accrued but unpaid dividends.
NOTE 7 - STOCK SPLIT
On July 16, 2001 the Board of Directors authorized a 60,000 to 1 stock
split. As a result of the split, 599,990 shares were issued. Also on July 16,
2001, the number of authorized shares was increased from 100 to 7,500,000 Common
and 1,500,000 shares of Preferred along with the par value was changed from $1
to $.01. All references in the accompanying financial statements to the number
of common shares and per-share amounts for 2001 and 2000 have been restated to
reflect the stock split.
F - 12
X-CHANGE TECHNOLOGIES CORP
(Formerly WEBiX Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(Continued)
NOTE 8 - COMMON STOCK TRANSACTIONS
On November 17, 2000, the Company issued 600,000 (post split) common
shares to the President in exchange for $10,000 cash.
On June 30, 2001, the Company issued 150,000 common shares valued at $1
per share for partial payment of licensing rights for WebIAm Software.
Throughout 2001, 350,000 shares of common stock were purchased at $.21
per share and 895,000 shares of preferred stock were purchased at $1 per share.
Also 19,500 preferred shares were issued in exchange for services.
NOTE 7 - SUBSEQUENT EVENTS
On January 15, 2002, the Company merged with X-Change Technologies Corp
(a wholly owned subsidiary of The X-Change Corporation) (a Nevada Corporation).
As a result, the Company's business and operations were acquired in exchange for
the issuance of a controlling interest in The X-Change Corporations' shares.
Under the Plan of Merger, the shareholders of The X-Change Corporation
surrendered 9,540,000 shares of Common Stock and 24,000,000 shares of Common
Stock, par value $.001 were issued to the Common Stock shareholders of WEBiX Inc
and 4,000,000 shares of Series A Preferred Stock, par value $.001 (Convertible
into 40,000,000 shares of Common Stock) and 40,000,000 warrants were issued to
the Preferred Stock shareholders of WEBiX Inc.
F - 13
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On January 15, 2002, The X-Change Corporation and its wholly owned
subsidiary X-Change Technologies Corp acquired the business and operations of
WEBiX Inc. See "The Merger". The following unaudited pro forma condensed
combined financial statements are based on the December 31, 2001 historical
financial statements of The X-Change Corporation and WEBiX Inc contained
elsewhere herein, giving effect to the transaction under the purchase method of
accounting, with WEBiX Inc treated as the acquiring entity for financial
reporting purposes.
The unaudited pro forma condensed combined balance sheet presenting the
financial position of the Surviving Corporation assumes the purchase occurred as
of December 31, 2001. The unaudited pro forma condensed combined statement of
operations for the year ended December 31, 2001 presents the results of
operations of the Surviving Corporation, assuming the merger was completed on
January 1, 2001.
The unaudited pro forma condensed combined financial statements have
been prepared by management of The X-Change Corporation and WEBiX Inc based on
the financial statements included elsewhere herein. The pro forma adjustments
include certain assumptions and preliminary estimates as discussed in the
accompanying notes and are subject to change. These pro forma statements may not
be indicative of the results that actually would have occurred if the
combination had been in effect on the dates indicated or which may be obtained
in the future. These pro forma financial statements should be read in
conjunction with the accompanying notes and the historical financial information
of The X-Change Corporation and WEBiX Inc (including the notes thereto) included
in this Form. See "FINANCIAL STATEMENTS."
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 2001
Pro Forma
The X-Change Pro Forma Combined
Corporation WEBiX, Inc Adjustments Balance
--------------- -------------- -------------- --------------
ASSETS
Current Assets $ - $ 4,055 $ - $ 4,055
Fixed Assets (net) - 9,822 - 9,822
Other Assets - 416,569 - 416,569
--------------- -------------- -------------- --------------
Total Assets $ - $ 430,446 $ - $ 430,446
=============== ============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable & Accrued Expenses $ 1,218 $ 78,010 $ - $ 79,228
Liabilities 19,821 44,418 (19,821) A 44,418
--------------- -------------- -------------- --------------
Total Liabilities 21,039 122,428 (19,821) 123,646
--------------- -------------- -------------- --------------
Stockholders' Equity:
Preferred Stock - 9,145 (5,145) A 4,000
Common Stock 22,540 11,000 3,462 A 37,002
Additional Paid in Capital 543,243 1,129,355 (565,318) A 1,107,280
Retained Earnings (Deficit) (536,688) - 536,688 A -
Deficit Accumulated During the
Development Stage (50,134) (841,482) 50,134 A (841,482)
--------------- -------------- -------------- --------------
Total Stockholders' Equity (Deficit) (21,039) 308,018 19,821 306,800
--------------- -------------- -------------- --------------
Total Liabilities and Stockholders' Equity $ - $ 430,446 $ - $ 430,446
=============== ============== ============== ==============
See accompanying notes to unaudited pro forma condensed combined financial
statements.
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
Pro Forma
The X-Change Pro Forma Combined
Corporation WEBiX, Inc Adjustments Balance
--------------- -------------- -------------- --------------
Revenues $ - $ - $ - $ -
Expenses:
Sales & Marketing - - - -
General & Administrative 5,777 796,569 - 802,346
--------------- -------------- -------------- --------------
Total Operating Expenses 5,777 796,569 - 802,346
--------------- -------------- -------------- --------------
Net Operating Income (Loss) (5,777) (796,569) - (802,346)
Other Income (Expense) - (4,399) - (4,399)
Taxes - - - -
--------------- -------------- -------------- --------------
Net Income (Loss) $ (5,777) $ (800,968) $ - (806,745)
=============== ============== ============== ==============
Loss per share $ - $ (0.59) $ - $ (0.01)
=============== ============== ============== ==============
Weighted average shares outstanding 22,540,000 1,362,939 77,002,000
=============== ============== ==============
See accompanying notes to unaudited pro forma condensed combined financial
statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
(1) General
In the merger involving The X-Change Corporation and WEBiX Inc, WEBiX was merged
with and into X-Change Technologies Corp, a wholly owned subsidiary of The
X-Change Corporation. Under the Plan of Merger, WEBiX's Common Stock
shareholders received 24,000,000 shares of The X-Change Corporations' Common
Stock, and the Preferred Stock shareholders received 4,000,000 shares of The
X-Change Corporations' Series A Preferred Stock (Convertible into 40,000,000
shares of Common Stock) along with 40,000,000 warrants, or approximately 65% of
the New Common Stock outstanding and 100% of the New Preferred Stock outstanding
subsequent to the Merger. WEBiX has not yet performed a detailed evaluation and
appraisal of the fair market value of the net assets sold in order to allocate
the purchase price among the assets sold. For purposes of preparing these pro
forma financial statements, certain assumptions as set forth in the notes to the
pro forma adjustments have been made in allocating the sales price to the net
assets sold. As such, the pro forma adjustments discussed below are subject to
change based on final appraisals and determination of the fair market value of
the assets and liabilities of WEBiX.
(2) Fiscal Year Ends
The unaudited pro forma condensed combined statements of operations for
the year ended December 31, 2001, include The X-Change Corporation's and WEBiX's
operations on a common fiscal year.
(3) Pro Forma Adjustments
The adjustments to the accompanying unaudited pro forma condensed
combined balance sheet as of December 31, 2001, are described below:
(A) Record acquisition of WEBiX by surrendering 9,540,000 shares of
Common Stock from the shareholders of The X-Change Corporation and by issuing
24,000,000 shares of Common Stock, par value $.001 and 4,000,000 shares of
Series A Preferred Stock, par value $.001 to the shareholders of WEBiX and to
eliminate shareholders loans from The X-Change Corporation
The adjustments to the accompanying unaudited pro forma condensed
combined statements of operations are described below:
There are no anticipated adjustments to the statements of operations as
a result of the merger.