UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED October 31, 2005
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
Commission file number 0-30499
VISIONGATEWAY, INC.
(Exact name of Registrant as specified in its charter)
Nevada 90-0015691
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
12707 High Bluff Drive, Suite 200,
San Diego, California 92130
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (858) 794-1416
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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 [X] No [ ]
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
As of October 31, 2005 there were 42,268,218 shares of the registrant's
common stock outstanding.
Transitional Small Business Disclosure Format. Yes [ ]. No [X].
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
VISIONGATEWAY, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2005
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet at October 31, 2005
(unaudited) 3
Condensed Consolidated Statements of Operations
(unaudited) 4
Condensed Consolidated Statements of Cash Flows
(unaudited) 6
Notes to Condensed Consolidated Financial Statements
(unaudited) 7
Item 2. Management's Discussion and Analysis or Plan of Operations 10
Item 3. Controls and Procedures 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 22
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
visionGATEWAY, Inc.
Including the accounts of its wholly owned subsidiaries
[A Development Stage Company]
Condensed Consolidated Balance Sheet
October 31, 2005
Unaudited
ASSETS
Assets
Current Assets
Cash $ 6
---------
Total current assets 6
Equipment & Property (net) 14,127
Deposits 0
---------
Total Assets $ 14,133
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Current Liabilities:
Accounts payable $ 999,794
Bank Overdraft 0
Accrued liabilities 315,858
Related party payable 1,401,238
---------
Total Liabilities $2,716,890
Stockholders' Deficit:
Preferred Stock 10,000,000 shares authorized,
$.10 par value per share, Nil outstanding 0
Capital Stock 75,000,000 shares authorized having a
par value of $.004 per share; 42,268,218 shares issued
and outstanding 169,073
Additional paid-in capital 1,167,136
Deficit accumulated during the development stage (4,023,529)
Accumulated foreign currency translation adjustment (15,437)
---------
Total Stockholders' Deficit (2,702,757)
---------
Total Liabilities and Stockholders' Deficit $ 14,133
=========
3
visionGATEWAY, Inc.
Including the accounts of its wholly owned subsidiaries
[A Development Stage Company]
Condensed Consolidated Statements of Operations
For the Three Month Periods Ended October 31, 2005 & 2004
3 mths ended 3 mths ended
October 31 October 31
2005 2004
Unaudited Unaudited
Revenues $ 0 $ 0
Research & development 64,159 97,591
General & administrative expenses 163,183 383,338
--------- ---------
Operating loss (227,342) (480,929)
--------- ---------
Net Loss Before Income Taxes (227,342) (480,929)
Current Year Provision for Income Taxes 0 0
--------- ---------
Net Loss $(227,342) $(480,929)
========= =========
Other Comprehensive Income
Unrealized gain(loss) on
foreign Currency
translation (net of tax) 1,197 (8,314)
Total Comprehensive Income (Loss) (226,145) (489,243)
========= =========
Loss Per Share - basic and diluted $ (0.01) $ (0.01)
========= =========
Weighted Average Shares Outstanding 42,268,218 41,942,131
========== ==========
4
visionGATEWAY, Inc.
Including the accounts of its wholly owned subsidiaries
[A Development Stage Company]
Condensed Consolidated Statements of Operations
For the Six Month Periods Ended October 31, 2005 & 2004, and for the
Period from Reactivation [November 30, 2001] through October 31, 2005
6 mths ended 6 mths ended Reactivation
October 31 October 31 through
2005 2004 October 31, 2005
Unaudited Unaudited Unaudited
Revenues $ 0 $ 0 $ 53,406
Research & development 127,003 168,941 830,416
General & administrative
expenses 335,870 680,929 3,246,519
--------- --------- -----------
Operating loss (462,873) (849,870) (4,023,529)
--------- --------- -----------
Net Loss Before Income Taxes (462,873) (849,870) (4,023,529)
Current Year Provision for
Income Taxes 0 0 0
--------- --------- -----------
Net Loss $(462,873) $(849,870) $(4,023,529)
========= ========= ===========
Other Comprehensive Income
Unrealized gain(loss) on
foreign Currency
translation (net of tax) 1,462 (8,062) (15,437)
Total Comprehensive Income
(Loss) (461,411) (857,932) (4,038,966)
========= ========= ===========
Loss Per Share - basic and
diluted $ (0.01) $ (0.02) $ (0.11)
========= ========= ===========
Weighted Average Shares
Outstanding 42,268,218 40,905,446 35,246,485
========== ========== ==========
5
visionGATEWAY, Inc.
[A Development Stage Company]
Condensed Consolidated Statements of Cash Flows
For the six months Ended October 31, 2005 & 2004, and for the Period from
Reactivation
[November 30, 2001] through October 31, 2005
6 mths ended 6 mths ended Reactivation
October 31 October 31 through
2005 2004 October 31, 2005
Unaudited Unaudited Unaudited
Cash Flows from Operating Activities
Net Loss $(462,873) $(849,870) $ (4,023,529)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 5,339 9,950 44,508
Stock issued for services 0 (200,000) 371,000
Change in current assets 4,261 0 0
Increase in current liabilities 214,119 325,486 1,560,136
--------- --------- ------------
Net Cash Used for Operating
Activities (239,154) (714,434) (2,047,885)
Cash Flows from Investing Activities
Purchase of property 0 (15,729) (58,635)
Cash Flows from Financing Activities
Proceeds from borrowing 237,555 538,870 1,401,238
Additional paid in Capital 0 200,000 720,725
--------- --------- ------------
Net Cash Provided by Financing
Activities 237,555 738,870 2,121,963
Effect Of Exchange Rate on cash
and cash Equivalents 1,462 (8,062) (15,437)
Net Increase/(Decrease) in Cash (137) 645 6
Beginning Cash Balance 143 3,424 0
--------- --------- ------------
Ending Cash Balance $ 6 $ 4,069 $ 6
========= ========= ============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for
interest 6,964 5,627 20,616
Cash paid during the period for
income taxes 0 0 0
Supplemental Disclosure of Non-Cash Financing Activities:
Stock issued to relinquish debt 0 0 244,486
6
visionGATEWAY, Inc.
[A Development Stage Company]
Notes to Condensed Consolidated Financial Statements (unaudited)
October 31, 2005
NOTE 1 ORGANIZATION AND INTERIM FINANCIAL STATEMENTS
(a) Organization
visionGATEWAY, Inc. (the Company) was organized on September 13, 1999,
as Peninsula Web Pages, Inc., under the laws of the State of Nevada. It
essentially became dormant until November 30, 2001, when its name was
changed to visionGATEWAY, Inc. and it acquired two companies. The
Company is now a holding company for the software business now being
organized in these two wholly owned subsidiaries. Both subsidiaries are
Australian corporations; visionGATEWAY Pty Ltd, a distribution and
marketing company, and Software Innovisions Pty Ltd, a software
development company. The consolidated company is an Enterprise Software
Solutions company in the commercialization stage. It is currently
growing its planned principal operations, which is development,
distribution, and marketing of business software solutions for Internet
Resource Management. The accompanying financial statements include the
accounts of the Company as well as its wholly owned subsidiaries. All
intercompany transactions have been eliminated.
On March 4, 2004, the Company combined with Chiropractic 21
International, Inc., an inactive public Nevada corporation, for the
purpose of recapitalization. The combination is accounted for as a
reverse purchase.
The financial statements of the Company have been prepared in accordance
with U. S. generally accepted accounting principles. The following
summarizes the more significant of such policies:
(b) Interim financial statements
The accompanying condensed consolidated financial statements are
unaudited and have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by
accounting principles for complete financial statements generally
accepted in the United States of America. In the opinion of management,
the accompanying consolidated financial statements contain all
adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of our financial position as of October 31, 2005 and
2004. There has not been any change in the significant accounting
policies of visionGATEWAY, Inc. for the periods presented. The results
of operations for the six months ended October 31, 2005 are not
necessarily indicative of the results for a full-year period. It is
suggested that these unaudited condensed consolidated financial
statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's Annual Report
on Form 10-KSB for the fiscal year ended April 30, 2005 filed with the
Securities and Exchange Commission (the "SEC").
(c) Stock based compensation
SFAS No. 123, Accounting for Stock-Based Compensation allows companies
to choose whether to account for employee stock-based compensation on a
fair-value method, or to account for such compensation under the
intrinsic value method prescribed in Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees (APB 25). The Company
has chosen to account for stock-based compensation using APB 25. If the
compensation cost for the Company's compensation plan had been
determined consistent with SFAS No. 123 the Company's net income and net
income per common share would have changed to the pro forma amounts
indicated below:
7
6 mths ending 6 mths ending
October 31, 2005 October 31, 2004
Net loss, as reported $ (462,873) $ (849,870)
Compensation cost under fair value-based
accounting method, net of tax - -
------------ -----------
Net loss, pro forma (462,873) (849,870)
Net loss per share-basic and diluted:
As reported $ (0.01) $ (0.02)
Pro forma $ (0.01) $ (0.02)
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
assumptions: dividend yield of 0%; expected volatility of 0%; risk-free
interest rate of 3% and expected lives of 3,650 days.
(d) Research & Development Costs
Expensing of Research & Development Costs. Research and Development is
expensed as incurred.
NOTE 2 LIQUIDITY/GOING CONCERN
The Company has accumulated losses through October 31, 2005 amounting to
$4,023,529, has minimal assets, and has a net working capital deficiency
at October 31, 2005 raising substantial doubt about the company's
ability to continue as a going concern.
Management plans include continued development of its planned principal
operations and seeking capital either through a private placement or
public offering. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
A fund raising is underway through an affiliate, Aspen Fund Limited, of
the Company's major shareholder in Australia. Other fund raising
activities are underway with investment banking groups in the USA.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Plan
of Operations
Forward-Looking Statements
Statements made in this Form 10-QSB, particularly in this section, which are
not purely historical and statements preceded by, followed by or that include
the words "may," "could," "should," "expects," "projects," "anticipates,"
"believes," "estimates," "plans," "intends," "targets," or similar
expressions, are forward-looking statements with respect to the goals, plan
objectives, intentions, expectations, financial condition, results of
operations, future performance and business of the Company.
Forward-looking statements involve inherent risks and uncertainties, and may
be dependent upon important factors (many of which are beyond the Company's
control) that could cause actual results to differ materially from those set
forth in the forward-looking statements, including the following: general
economic or industry conditions, either nationally, internationally or in the
communities in which the Company conducts its business, changes in the
interest rate environment, legislation or regulatory requirements, conditions
of the securities markets, the Company's ability to raise capital, changes in
accounting principles, policies or guidelines, financial or political
instability, acts of war or terrorism, other economic, governmental,
regulatory and technical factors affecting the Company's operations, products,
services and prices.
Accordingly, results actually received may differ materially from results
expected in these statements. Forward-looking statements speak only as of the
date they were made. The Company does not undertake, and specifically
disclaims, any obligation to update any forward-looking statements to reflect
events or circumstances occurring after the date such statements were made.
Overview
Description of Business
visionGATEWAY is an Enterprise Solutions Development and Distribution company
with a focus on Internet Resource Management and Security. It is accelerating
its growth in key markets USA, UK, Australia, Asia, and Europe.
visionGATEWAY is continuing the building of a Global Distribution Network
using its proprietary business model to grow sales through strategic
partnerships these include the Avnet Partner Solutions distributorships for
North America, UK and Australia/New Zealand, and iProof and NetIntelligence in
UK. The arrangements between visionGATEWAY and iProof & NetIntelligence are
the first of a series of worldwide distribution agreements being brokered by
Alan Boyd, former head of acquisitions at Microsoft and now a Director of the
Company.
The Company's first product, INTERScepter TM, is an Internet Resource
Management solution. This product is an enterprise business solution that
helps to improve Company earnings by assisting organizations in understanding,
managing and exploiting Internet usage and valuable resources, including
bandwidth, systems and employee productivity. The INTERScepter TM solution
empowers managers to effectively control, schedule and utilize costly Internet
resources, while placing responsibility on users to self manage and modify
their Internet usage behavior.
visionGATEWAY has continued with further product innovation for its
INTERScepter product with the release of the Linux platform version in late
2004 and now in late 2005 has released a version for the Home/SOHO markets, as
well as other technical and functional innovations. "INTERScepter@Home" will
be further facilitated by not only providing a single system solution, but
also providing a "solution on a chip" to be OEM'd with communications systems
manufacturers and communications bandwidth suppliers, particularly the ISP
market.
New synergistic products from 3rd parties are regularly being evaluated and
existing contracts have been established with the following for distribution
in our regional markets:
o iProof - a safe and secure email service available online and from
your desktop using software and encryption components
o NetIntelligence - Internet Security products that provide
comprehensive protection from the threats that the use of the
internet and email can bring for both the home and the enterprise.
9
visionGATEWAY has ensured that the implementation of its business strategy is
well prepared and ready for immediate growth.
The Internet is an ever growing global communications and commerce medium.
Traditional organizations (both government and corporate) continue to
demonstrate a significant growth in their need for integration of Internet
based technologies into their core business and marketing needs. As a result,
chief operating and financial officers and managers of business units are
faced with three very compelling issues:
1. Managing large amounts of information from the Internet while
meeting their corporate and government obligations.
2. Measuring and managing the growing non-productive use of the
Internet by staff at work, who use the Internet while at work for non-
productive, personal purposes.
3. Maintaining secure and private internet access for staff, while
reducing risk and liability relative to internet usage.
The Company recognized a market opportunity for the development of software
solutions to identify and redirect non-productive use of staff employees at
work to profitable uses of their time and Internet availability, while
maintaining security and privacy. Based on the Company's preliminary
investigations of market demand for this type of product, it believed that
moving forward with the INTERScepter TM project was more than justified.
The benefit of the Company's product to its customers is based upon
improving productivity and reducing costs through the use of its software
tools.
The three primary industry segments for INTERScepter TM at present are:
1. Education. INTERScepter TM was originally developed for the
education environment to meter and cost control Internet usage by students and
staff. It contains tailored functionality around the volume of Internet use,
the type of Internet usage and functionality for improved learning in lecture
and classroom activities. INTERScepter TM can reduce Internet cost and
bandwidth usage; it can allocate costs to cost centers and allow students to
be charged correctly according to their own personal use beyond base level
quotas. Through its access policy facilities, it allows teachers to "regain
control of the classroom" without having to revert to the IT department.
2. Government. INTERScepter TM allows government agencies to
record Internet traffic, the type of usage made and allows costs to be
allocated against the proper budget. In the Company's opinion, significant
benefits can be achieved through implementing Internet policy by use of the
INTERScepter TM software. It provides the means to self manage the use of
the Internet as well as reducing direct Internet and bandwidth costs.
3. Private Enterprise. Businesses have a need to maximize
productivity to achieve better performance to stakeholders through a
combination in top line performance or bottom line cost reduction. The product
allows for both outcomes and can be focused on a particular business objective
or a series of them as required. It benefits the business with a growth agenda
or one that is looking to streamline costs.
10
The Company has an international presence. Its core software research and
development team is based in Brisbane, Australia in conjunction with the
Australia/Asia office for marketing and distribution. The Company's
registered office is located in San Diego, California. The main U.S. Sales and
Distribution office is in Los Angeles, at Marina del Rey, California. Sales
and marketing activities have commenced in United Kingdom through the
Company's new distribution and channel partners these will begin to show
results in the first quarter of 2006. Currently, the Company is in the
relationship- building/partnership phase for marketing and sales activities
through product bundling for Western Europe and China, particularly in the
area of telecommunications. Major emphasis is concurrently being placed on
driving the major strategic partnerships and sales channels that have been put
in place in the USA, UK and Australia/New Zealand.
Sales and Marketing
INTERScepter TM is marketed and sold as a business tool, not as a
technical product, although it is, in the Company's opinion, technically
robust and innovative. The sales proposition is primarily commercial and is
targeted at senior management and not solely the IT department. The Company's
business model is to use outsourced sales channels and to offer meaningful
margins to its channel partners, which will encourage early and considerable
commitment. The value chain in the product also provides substantial recurring
service revenue opportunities to channel partners. The Company offers
significant product breadth to meet the holistic requirements in Internet
Resource Management.
The Company's strategic decisions, dependent on available capital, are
based on rapidly building on an international scale. Three key sales channels
will be utilized: strategic partnerships, large technology resellers and niche
technology firms. Additionally, the Company has set a price point and payment
model that we believe encourages product trial and sale. This product
distribution business model also facilitates further growth through the
introduction of complementary products in the future.
With the introduction of INTERScepter for the Home and SOHO (Small Office
Home Office) markets, there will be opportunities to OEM this product through
communications systems manufacturers as well as Telcos and ISP's.
The majority of the Company's revenues will come from product licenses. As
described above, the Company's first product is the INTERScepter TM software
tool. It is sold through a network of distribution channels consisting of
technology resellers and other distribution outlets, which the Company refers
to as its "channel partners." It provides measurable added value to resellers
with only marginal overheads.
In the U.S. and the UK, the Company has worked with a number of partners to
assist in the development of opportunities in all segments. They have also
assisted the Company to build a distribution and reseller network. In addition
the Company has completed major distribution arrangements. One of these
is with Avnet Partner Solutions, a division of the $4.35 billion Avnet
Technology Solutions operating group of Avnet, Inc. (NYSE: AVT). This
arrangement now covers North America, UK and Australia/New Zealand. With the
Company's expansion into Europe, Avnet's Reseller Partners are being solicited
in those areas to distribute a bundled solution. Avnet Partner Solutions has
incentivised its Business Development Managers to sign resellers as channel
partners and help them drive customer sales. As a result of this activity the
Company is currently negotiating with a number of new channel partners across
all regions.
As a result of these channel partner activities, the Company has end user
opportunities that are being pursued across the U.S. and UK with a number of
Universities, Educational institutions, Government Departments, and Corporate
enterprises. Within the corporate sector particular emphasis has been placed
on the Financial Services market segment which has business issues in relation
to compliance and security, which the visionGATEWAY products provide an ideal
solution. With the introduction of the latest version of INTERScepter, new
opportunities will be pursued in the SMB market in conjunction with partners
who specialize in that segment of the market.
11
In the USA and UK, INTERScepter is being marketed as a key solution to the
problems of internet usage by Universities and High Schools. The Company has
been enhancing its visibility in the market place over the last twelve months
by participating in selected major conferences for decision makers for the
Higher Education market. The key education sector professional associations
in the USA are NAEB (buyers - those with the purchasing power), NACUBO
(business officers, ie CFO - part of the decision team), ACUTA (Technology
Directors - run IT and part of decision team).
Pricing for INTERScepter TM is currently based around a three year
contract License Pack followed by an ongoing Update Pack. In the three year
license contract, pricing is based on the number of workstations accessing the
Internet rather than the number of users in an organization.
Standard Channel Partners are contracted to the Company through a Channel
Partner Agreement which sets out the terms and conditions of the arrangement,
including responsibilities of the parties, product pricing, volume discounts,
and channel partner commissions which vary according the value of product sold
in a calendar year.
INTERScepter - The Internet Resource Management (IRM) Solution
The Internet impacts every aspect of today's busy organization so it is no
surprise that an organization can benefit from deploying INTERScepter TM to
manage Internet resources.
Internet Resource Management "(IRM)" is the Company's approach to helping
organizations maximize their return on investment in Internet services. Unlike
simple content filtering solutions, IRM calls for a more holistic approach to
understanding and managing the constellation of Internet resources in any
organization.
Most organizations lack a comprehensive understanding of what Internet
resources are being used and how, making it all but impossible to ensure they
are being used productively, or to predict or plan for their growth. With IRM,
an organization can monitor and report usage, set and enforce policies, and
improve productivity.
Competition
The Company does not believe that it has any direct competition with
respect to its INTERScepter TM software program and it is not aware of any
competitor offering the same complete solution with the full elements of the
software for sale.
There is, however, substantial indirect competition from products which
address issues of immediate concern to clients such as Internet security and
violation of web resources. These products address "bad behavior" on network
usage. Policing activities tend, however, to intimidate users and bad behavior
goes underground and re-offending will generally occur. INTERScepter TM
assists staff to police their own behavior and guides them to do what is more
efficient for the Company.
Competition is also realized from filtering software. Filters eliminate
offending materials from the web but the INTERScepter TM approach is one of
self management rather than forced elimination.
Other products which provide reporting and presentation of gathered
statistics, analytics and performance measurement also offer competition for
the Company's product.
There are other competitors in the market as well, however, they mainly
supply the home market for parental control of the Internet. Some other
products are hardware based and cover the aspect of INTERScepter TM that
controls bandwidth usage. In the Company's opinion, no other product has the
same total coverage as INTERScepter TM.
It must, nevertheless, be considered that competition in the business
software industry is intense, with many companies making entries into the
market every day. Most of the competitors in the industry are very large
businesses with far greater resources than the Company in terms of capital,
size and number of employees. The Company's growth will depend on many
variables not in its control, including the ability to obtain additional
funding for its operations and development plus many other unforeseen economic
and competitive conditions.
12
The Company has been augmenting its positioning in the market by adding to
the INTERScepter IRM platform with other synergistic products that add further
depth of functionality particularly as it relates to security and compliance.
Sources and availability of raw materials and the names of principal suppliers
The Company is a producer and distributor of software solutions and is not
dependent on any one supplier for raw materials for its software products. The
underlying technologies are built on publicly available components that are
used in conjunction with other software products.
Dependence on one or a few customers
The Company has outsourced its sales channels and has established or is in
process of making alliances with distribution channels in numerous locations
and, consequently, most of its sales are generated from these various sources.
At this time there is no single reseller or group of resellers upon which the
Company is dependent. The Company has strategic partnerships with Avnet
Partner Solutions across three countries to distribute INTERScepter, pre-
installed on IBM hardware, through that company's reseller channels. When the
funding currently being sought is in place, these partnerships can be used to
rapidly drive core sales growth.
Patents, trademarks, licenses, franchises, concessions, royalty agreements or
labor contracts, including duration
The Company has registered product trade marks, trade names and logos in
Australia and is now in the process of registering these items in the U.S. The
Company is dependent on its trademark for INTERScepter TM to distinguish its
software from other products in the market and to create a market identity for
its product. Patents are under consideration for the next generation of
INTERScepter TM.
At the present time there are no patents in effect upon which the Company
is dependent. There are also no concession agreements, franchises, licenses,
royalty agreements or labor agreements in effect at this time.
Government approval
The Company is not subject to direct governmental regulation in the conduct
of its business.
Effect of existing or probable governmental regulations on the business
At the present time, based on the Company's business as now conducted,
direct governmental regulation of its business is not anticipated.
The Company is, however, subject to the Sarbanes-Oxley Act in the conduct
of its business as follows:
Sarbanes-Oxley Act
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of
2002. This Act imposes a wide variety of new regulatory requirements on
publicly-held companies and their insiders. Many of these requirements will
affect the Company.
13
The Sarbanes-Oxley Act has required the Company to review its current
procedures and policies to determine whether they comply with the Sarbanes-
Oxley Act and the new regulations promulgated thereunder. The Company will
continue to monitor its compliance with all future regulations that are
adopted under the Sarbanes-Oxley Act and it will take whatever actions are
necessary to ensure that it is in compliance.
This Act may also result in higher operating costs to comply as well as
higher professional fees.
The estimated amount of capital spent during each of the last two fiscal years
on research and development activities, and the extent to which the cost of
such activities are borne directly by its customers
The estimated amount spent on research and development in the last two
fiscal years was over $500,000. Research and Development expenditure is
currently running at an annual rate of just under $250,000 based on the
October quarter. All of these expenses have been borne by the Company.
Costs and effects of compliance with environmental laws (federal state and
local)
The Company has not had any significant cost or effect with respect to
compliance with environmental laws, either in the U.S. or in Australia.
Number of employees and number of full time employees
As of October 31, 2005, the total number of employees of the Company is
less than ten full-time employees as operations were scaled back until the
current funding being sought is in place. The Company also uses the services
of part-time employees or contract service employees in the areas of product
development, accounting and sales functions as required. Over the course of
fiscal 2006 the Company anticipates that it will be increasing its full-time
work force to 20 as needed to support its proposed growth, however this is
dependent on future sales prospects as well as the availability and timing of
new capital funding.
Reports to Security Holders
The Company will voluntarily deliver to all Security holders an annual
report which will contain audited financial statements.
The Company regularly files reports with the Securities and Exchange
Commission (the "Commission"). These reports include annual reports on Form
10-KSB, quarterly reports on Form 10-QSB and current reports on Form 8-K.
The public may read and copy any materials the Company files with the
Commission at the Commission's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You may obtain information about the Public
Reference Room of the Commission by calling the Commission at 1 800 SEC 0330.
The Commission also maintains an Internet site that contains reports, proxy
and information statements and other information regarding issuers that file
electronically that may be accessed at the Commission's web site address:
http://www.sec.gov.
Management's Discussion and Analysis of recent activity and Plan of Operation
The following discussion should be reviewed in conjunction with our
consolidated financial statements and the related notes and other financial
information appearing elsewhere in this report. In addition to historical
information, the following discussion and other parts of this document contain
forward-looking information that involves risks and uncertainties. Please
refer to the section entitled "Forward-Looking Statements" at the beginning of
Item 2 of this Form 10-QSB.
14
The October quarter was one of consolidation in anticipation of new funding
later this year and early 2006. This resulted in a cut back in expenditures
compared to previous quarters. The Company focused on growing our
partnerships in the USA and UK with the focus on leveraging from the new
distribution arrangements with Avnet as outlined above as well as promoting
the company and product in key market segments, particularly higher education,
Financial Services and SMB's. A key focus from a development perspective
has been the completion of the first phase of INTERScepter Version 3. This
has seen the release on the INTERScepter Home/SOHO version which is being
presented to distributors and communications systems manufacturers for OEM
opportunities. The quarter also saw the introduction of new products through
third party partnerships, focused on internet security and compliance.
Plan of Operation
Funding
The visionGATEWAY business over the last two years has focused on product
development and building its market positioning, presence and global
distribution channels. In the last twelve months, the key aspects of
expenditure have been:
* Building reseller networks and client opportunities through its US
base and through the key distribution arrangements such as with
Avnet;
* Restructuring the channels in Australia, New Zealand and Asia;
* Opening new channels in the UK through Avnet and our new board
member, Alan Boyd;
* Finding and evaluating synergistic 3rd party products to bring to
the distribution mix;
* Development of INTERScepter version 2 with significant
enhancements in functionality and a new underlying platform in
Linux for the iGateway component of the product; and
* Development of INTERScepter version 3 to address the Home and SOHO
markets.
Since early 2005, the Company has focused on arranging major funding that will
enable it to take full advantage of the platform that has been built through
its product development and global distribution channels. This funding will be
used to drive sales in global markets with a key focus on the U.S. and UK. It
also enables the Company to focus on some new product initiatives that are
aligned to market needs and sales potential.
In the twelve months ended October 2005, visionGATEWAY has been able to
acquire investment and loan funds for working capital of approximately
US$800,000 from existing and new investors. This has enabled us to pay key
operational expenses in Australia and USA, as well as travel and marketing
expenses related to the development of sales and investor efforts in U.S., UK
and Australia/New Zealand.
The Company continues to seek working capital to meet the key short term
requirements of activating the distribution channels and related outsourced
sales force in the U.S., ramping up the U.S. operational presence, commencing
New Zealand and UK distribution, and providing additional working capital for
specific revenue related development projects. This first tranche of funding
is to be linked to a main round of funding that is anticipated to close within
the next six to nine months in two further tranches, to provide additional
working capital for next stage growth in global markets and potential
acquisition of synergistic companies. Any delay in obtaining the larger
amounts of funding outlined above does not effect existing day-to-day
operations that are funded by existing investors. Any delay in the receipt of
these larger funding tranches would have the effect of delaying the next stage
growth strategies that have been planned. These fund raising activities are
currently underway in conjunction with US based investment banking firms and
Australian investor groups.
The Company anticipates that sales revenue will commence in the first
quarter of calendar 2006 in the U.S., Australia/New Zealand and UK markets,
once key strategic distribution arrangements, such as those with Avnet Partner
Solutions, become fully operational and initial funding is in place.
15
Research & Development
Over the last eighteen months, the R&D division was revamped and specific
R&D plans incorporated. This was enhanced with the opening of the Company's
new R&D Center in Brisbane during February 2004. The first component of this
has been version 2.0 ("V2") of INTERScepter TM. V2 is now used by all
clients and resellers in Australia, USA and UK. V2 provides enhanced sales
potential in the Company's growing market place.
Apart from the change to a Linux operating environment for the INTERScepter
TM iGateway system component, there are a number of other improvements in
functionality as listed below.
* Port Management
* Simplified and More Flexible Directory Structure
* Intranet Based Management
* Refreshed Intranet Interfaces
* Client Notifications System
* Web based user identification
As a result of global exposure to the Company's Business Model through
investor forums and reseller networks, there is significant interest from
other businesses for the Company to consider adding on synergistic product
modules and expand the product offering.
The INTERScepter TM product provides the underlying Internet Resource
Management platform on which other modules can be added. These will include
modules provided by the Company as well as specialist modules from third
parties such as:
* Whole of network traffic monitoring and analysis tools;
* Facilities to monitor, control and charge Internet traffic over
wi-fi networks as well as mobile telephony (including PDA's with
phones);
* Facilities to monitor, control and charge VOIP traffic;
* Specialist content review modules as "plug-ins"; and
* Process improvement tools e.g. video conferencing - a strategic
cooperative marketing alliance with a Texas based company is
currently being finalized.
The second key component of Development is INTERScepter version 3. This
version will not only address the Home and SOHO markets, but also provide
database independence and significant technological advantages. We have now
formally announced our new INTERScepter Home product that provides full
internet control and management to the home/small business user. This has
resulted in real interest from communications manufacturers. We have the
solution loaded on a chip inside a Cable/DSL Router. We have begun to
arrange appointments to introduce this solution around telecommunication
manufacturers as well as Telcos and ISP's on 3 continents.
As a result of global exposure to the visionGATEWAY Business Model through
investor forums and reseller networks, there is significant interest from
other businesses for the Company to consider adding on synergistic product
modules and expand the product offering.
The INTERScepter TM product provides the underlying Internet Resource
Management platform on which other modules can be added. These will include
modules provided by visionGATEWAY as well as specialist modules from third
parties such as:
* Whole of network traffic monitoring and analysis tools;
* Facilities to monitor, control and charge Internet traffic over
mobile telephony (including PDA's with phones);
* Facilities to monitor, control and charge VOIP traffic (an
INTERScepter TM Plus module to be available in 2006);
* Specialist content review modules as "plug-ins"; and
* Process improvement tools e.g. video conferencing
16
INTERScepter can also be integrated into Bundled Solutions
* iNTERNET TRACKER - INTERScepter plus Billing Solution for Higher
Education market
* Teleport Vision - Internet based security camera control solution
In line with this strategy we have just established new joint distributor
arrangements with iProof and NetIntelligence of UK for their suite of Internet
Security products.
The technology of INTERScepter enables visionGATEWAY to build and leverage a
number of strategic technology alliances. These can be categorized as
follows:
o Core components
* Linux operating system
* Database systems - MS, IBM, Oracle, etc
* Client workstations MS, Linux/Novell, Apple
* Terminal Services MS, Citrix
* User Authentication MS, Novell, etc
o Hardware/Networking
* Servers IBM, Intel, HP
* Wi-Fi various technology and solution providers
o Specialist devices
* IP based video conferencing
* IP based Security cameras
* Voice Over IP (VOIP)
o Specialist software plug-ins
* Filters
* Whole of network bandwidth management
* Spam management
* E-mail content checking
* IM content checking
o Telcos and ISP's differentiate data lines with management tool
Business Strategy
The strategy to be adopted for the development of a strong, sustainable
market for these products across key global markets incorporates a number of
elements including:
* The continuing development or acquisition of innovative technology
products providing business solutions to the market;
* The strengthening of a global market presence, a clear corporate
and product identity, branding, and wide promotion of the
brand(s); and
* The growth of distribution channels through resellers and OEM's
with strong dedicated sales teams to directly market the products
to their own existing and potential clients.
17
These proposals and initiatives are integral components of a co-coordinated
marketing strategy designed to exploit the identified key market segments and
distribution channels to maximize the potential for the successful and
profitable distribution of the products globally.
The "visionGATEWAY Global Distribution Network" (VGDN) is a key component of
our corporate strategy. We will be able to utilize our US market listing to
facilitate the funding that will be necessary to grow the VGDN to the extent
and potential we believe is appropriate. As part of the evaluation as to how
we implement this strategy, we have been determining the most appropriate
corporate structures that will easily complement the strategy.
Alan Boyd, a VGWA Director, has a long experience in product acquisition,
which he headed at Microsoft for many years, and he envisions that a Global
Distribution Network can be built to feed off products that we can jointly
source. Similarly, products from other geographic regions including those
developed by visionGATEWAY can also be fed into the network.
From his perspective, visionGATEWAY can be an integral part of this network
since VGWA is keen to have its own developed products introduced into many
markets, and we are equally keen to populate our own distribution channels
with licensed or sourced products. We believe that if we were to continue the
development of the VGDN in conjunction with Alan Boyd, leveraging his
reputation to head the product sourcing then we believe a number of things
would happen including :
* enhanced interest from other distributors to join the network;
* product developers have a proven distribution channel;
* investors have an attractive and diverse investment opportunity.
visionGATEWAY is ideally placed to become the central company in the network
'franchise' with its existing distribution into three major markets, an OTCBB
listing and currently in fundraising mode.
Our external advisors believe our sector is poised for substantial growth.
They further say that it's a good time to be an emerging provider that
secures, controls and optimizes internal business networks. There is a
recognized and growing demand for non-obtrusive, wire-speed solutions for
compliance, internal network protection, and application optimization. They
say that our solution tool appears to be particularly suited to highly
regulated, compliance-driven industries that have high bars for end-user
control, security and policy-based solutions.
Distribution and Marketing
Current Sites - INTERScepter TM is has been installed in 35 sites
covering over 5,000 workstations and 50,000 users in Australia, New Zealand,
U.S.A., UK and Malaysia.
Significant New Distribution and Business Development initiatives are
underway in U.S., UK and Australia/New Zealand, in conjunction with our
strategic partnerships and as new investor funding begins to flow. In
conjunction with this funding the Company would commence a recruitment
campaign for new Business Development and Pre-Sales Technical staff across the
regions to support the strategic partnerships that have been and are being
completed.
The Company has also been promoting itself in the marketplace, initially
with a focus on Higher Education, to leverage from its origins and also from
its partnerships. More recently this has been augmented by a focus on the
financial services sector, telecommunications (particularly ISP's) and SMB's
in conjunction with the enhanced suite of products we have brought in to meet
immediate business needs. The latest version of INTERScepter for the
Home/SOHO markets will enable us to further utilize and build strategic
partnerships to tackle these markets.
18
The Company now has established a number of channel partners in the U.S. and
UK, however they are not yet very active, as we await funding to staff up to
drive sales from these partnerships. They provide a good spread over
Education, Government and Corporate markets.
Activities in the Australasia region have been enhanced with the completion of
the distribution agreement for that region with VAD of New Zealand.
There is also special interest in a special "Lite" version of INTERScepter
that will provide "Location Access Control" in schools to facilitate classroom
control of internet usage by teachers. A number of schools have already
requested the special system for installation in January.
The key component of the Avnet arrangement is to take INTERScepter TM on
board in an "appliance" model variation where INTERScepter TM will be linked
to IBM brand servers and taken to Avnet's resellers' major clients. Through
this link with IBM there are opportunities to leverage that company's
resources and client base. There has also been an arrangement established
with IBM to provide our R&D Center with equipment to facilitate the porting of
the INTERScepter solution to the IBM OpenPower series of servers. This will
commence in the last quarter of 2005.
Item 3. Controls and Procedures
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of our disclosure controls and procedures, as such
term is defined under Rule 13a-15(e) promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Based on this evaluation, our
principal executive officer and our principal financial officer concluded that
our disclosure controls and procedures were effective as of the end of the
period covered by this quarterly report.
19
Part II OTHER INFORMATION
Item 1. Legal Proceedings
At October 31, 2005 there were no material legal proceedings pending against
the Company and to the knowledge of management, no federal, state or local
governmental agency is presently contemplating any such proceedings against
the Company or any of its affiliates.
No director, executive officer or affiliates of the Company or any owner of
five percent (5%) or more of the Company's common stock is an adverse party to
any action against the Company or its affiliates or otherwise has a material
interest adverse to the Company or any of its affiliates.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
20
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1(1) Agreement and Plan of Reorganization, dated February 27,
2004, by and among Chiropractic, Vision Nv, and the
stockholders of Vision Nv.
2.2(1) Addendum to the Agreement and Plan of Reorganization, dated
February 27, 2004.
3.1(2) Articles of Incorporation
3.2(2) Bylaws of Chiropractic 21 International, Inc.
3.3(2) Certificate of Amendment to Articles of Incorporation dated
September 23, 1970.
3.4(2) Certificate of Amendment to Articles of Incorporation dated
October 29, 1970.
3.5(2) Certificate of Amendment to Articles of Incorporation dated
October 6, 1972.
3.6(2) Certificate of Amendment to Articles of Incorporation dated
November 4, 1980.
3.7(2) Certificate of Amendment to Articles of Incorporation dated
July 15, 1983.
3.8(2) Certificate of Amendment to Articles of Incorporation dated
December 29, 1999.
10.1(3) Lease, dated February 15, 2004 by and between vision Gateway
Pty Ltd and Masinello Holdings Pty Ltd.
10.2(3) Lease Agreement, dated October 25, 2001, by and between
visionGATEWAY and Executive Centre 133.
10.3(3) HQ Global Workplaces Virtual Office Program Service
Agreement, dated December 1, 2003 by and between the
visionGATEWAY, Inc. and HQ Global Workplaces, Inc.
10.4(3) Sublease, dated March 1, 2004, by and between Guidance
Solutions, Inc. and visionGATEWAY, Inc.
10.5(3) Buy/Sell Agreement, dated May 14, 2004, by and between
visionGATEWAY, Inc. and AVNET, INC.
10.6(3) Letter Agreement regarding Management Services by and
between visionGATEWAY, Inc. and Aspen Capital Partners Pty Ltd.
10.7(3) Letter Agreement regarding Agent and Consulting Arrangements
by and between visionGATEWAY, Inc. and Aspen Capital Partners
Pty Ltd.
10.8(3) Letter Agreement regarding Employment of Michael Emerson by
and between visionGATEWAY, Inc., Michael Emerson and MICEL Pty
Ltd.
10.9(3) Letter Agreement regarding Agent and Consulting Arrangements
by and between visionGATEWAY, Inc. and MICEL Pty Ltd.
24.1 Power of Attorney (see signature page)
31.1 Certification by Michael Emerson, required by Rule 13a-14(a) or
Rule 15d-14(a) of the Exchange Act, promulgated pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification by Martin G. Wotton, required by Rule 13a-14(a)
or Rule 15d-14(a) of the Exchange Act, promulgated pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification by Michael Emerson, required by Rule 13a-14(b) or
Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter
63 of Title 18 of the United States Code, promulgated pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification by Martin G. Wotton, required by Rule 13a-14(b)
or Rule 15d-14(b) of the Exchange Act and Section 1350 of
Chapter 63 of Title 18 of the United States Code, promulgated
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
- -----------------
(1) Incorporated by reference to 8-K12G3 filed with the Securities and
Exchange Commission on April 7, 2004.
(2) Incorporated by reference to 10-SB filed with the Securities and Exchange
Commission on April 28, 2000.
(3) Incorporated by reference to 10-KSB filed with the Securities and Exchange
Commission on August 19, 2004.
(b) Reports on Form 8-K
21
We have furnished to the SEC one report on Form 8-K during the quarter ended
October 31, 2005.
October 21, 2005 Entry into Material Definitive Agreements (2).
22
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VISIONGATEWAY, INC.
By:/s/Michael F. Emerson
Michael F. Emerson
Chief Executive Officer
Date: December 13, 2005
23