UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MAY 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ___________
COMMISSION FILE NUMBER: 000-09322
iEXALT, INC.
NEVADA 75-1667097
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12000 AEROSPACE AVENUE, SUITE 375
HOUSTON, TEXAS 77034 - 5576
(Address of principal executive offices)
281-464-8400
(Registrant's telephone number, including area code)
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
June 30, 2002: 2,220,509 shares
Transitional Small Business Disclosure Format (check one): YES[ ] NO [XX]
iEXALT, INC.
Table of Contents
Page
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Part I Financial Information
Item 1 Condensed Consolidated Financial Statements 3
Management's Discussion and Analysis of Financial
Item 2 Condition and Results of Operations 24
Part II Other Information
Item 2 Changes in Securities 32
Item 3 Defaults Upon Senior Securities 32
Item 6 Exhibits and Reports on Form 8-K 32
Signatures 36
2
Part I - Item 1. Condensed Consolidated Financial Statements.
iEXALT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
May 31, August 31,
2002 2001
(Unaudited)
------------- -------------
CURRENT ASSETS
Cash $ 115,873 $ 80,466
Accounts receivable, trade, net 324,745 762,201
Accounts receivable, other and notes receivable, net 45,328 189,177
Accounts receivable, affiliate 35,559 22,874
Inventory, prepaid expenses and other current assets 197,168 394,620
------------- -------------
TOTAL CURRENT ASSETS 718,673 1,449,338
PROPERTY AND EQUIPMENT, net 358,587 568,029
OTHER ASSETS
Goodwill and other intangible assets, net 2,364,010 4,271,540
Other assets, net 24,834 166,361
------------- -------------
$ 3,466,104 $ 6,455,268
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Short-term borrowings $ 818,735 $ 758,744
Notes payable to shareholders 606,258 545,000
Current maturities of long-term debt 567,864 630,941
Current maturities of obligations under capital lease 9,396 7,969
Accounts payable, trade 1,587,498 1,399,047
Accounts payable, affiliate 106,076 54,429
Deferred revenue 509,262 489,742
Other accrued liabilities 493,824 689,881
------------- -------------
TOTAL CURRENT LIABILITIES 4,698,913 4,575,753
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LONG-TERM DEBT 4,500 60,953
------------- -------------
OBLIGATIONS UNDER CAPITAL LEASE 2,052 1,411
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SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.001 par value, 20,000,000 shares
authorized, no shares issued and outstanding - -
Common stock, $.05 par value, 100,000,000 shares
authorized 2,185,509 and 1,346,341 shares, issued
and outstanding, respectively 109,275 67,317
Paid-in capital 20,457,563 19,424,686
Deferred Compensation (80,280) (524,062)
Retained deficit (21,725,919) (17,150,790)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (1,239,361) 1,817,151
------------- -------------
$ 3,466,104 $ 6,455,268
============= =============
See accompanying notes.
3
iEXALT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
May 31, May 31, May 31, May 31,
2002 2001 2002 2001
-------------------------- --------------------------
REVENUES $ 2,112,972 $ 1,993,595 $ 5,138,662 $ 5,141,950
COST OF SALES AND SERVICES 1,383,387 1,486,491 3,498,249 3,725,459
------------ ------------ ------------ ------------
GROSS PROFIT 729,585 507,104 1,640,413 1,416,491
SELLING, GENERAL, AND ADMINISTRATIVE 853,894 945,078 2,217,614 4,023,760
PAYROLL COSTS 646,394 722,313 1,828,126 1,685,787
DEPRECIATION AND AMORTIZATION 224,813 89,471 479,512 261,892
LOSS ON DISPOSAL OF ASSETS - (25,445) 93,438 127,817
IMPAIRMENT OF LONG LIVED ASSETS - - 605,629 -
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (995,516) (1,224,313) (3,583,906) (4,682,765)
OTHER INCOME (EXPENSES)
Contract Cancellation, Interest Income, Other (4,531) (10,062) (403,250) (6,750)
Interest Expense (196,378) (129,010) (275,340) (346,914)
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES (1,196,425) (1,363,385) (4,262,496) (5,036,429)
INCOME TAXES - - - -
------------ ------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS (1,196,425) (1,363,385) (4,262,496) (5,036,429)
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS (15,602) (7,226) (200,984) 140,961
LOSS FROM DISPOSAL OF ASSETS OF
DISCONTINUED OPERATIONS - - (111,649) -
------------ ------------ ------------ ------------
NET LOSS $(1,212,027) $(1,370,611) $(4,575,129) $(4,895,468)
============ ============ ============ ============
NET LOSS PER SHARE FROM CONTINUING
OPERATIONS $ (0.64) $ (1.67) $ (2.74) $ (7.12)
============ ============ ============ ============
NET LOSS PER SHARE $ (0.65) $ (1.68) $ (2.94) $ (6.92)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 1,873,177 818,083 1,556,453 707,053
============ ============ ============ ============
4
iEXALT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED MAY 31, 2002
(Unaudited)
Common
Stock Total
-------------------- Paid-In Deferred Retained Shareholders
Shares Amount Capital Compensation Deficit Equity (Deficit)
---------- -------- ----------- -------------- ------------- -----------------
BALANCE, August 31, 2001 67,317,077 $ 67,317 $19,424,686 $ (524,062) $(17,150,790) $ 1,817,151
(Prior to 50:1 reverse split effective
December 28,2001)
BALANCE August 31, 2001 1,346,341 $ 67,317 $19,424,686 $ (524,062) $(17,150,790) $ 1,817,151
(Restated for effect of 50:1 reverse split)
Issuance of stock for acquisitions 32,500 1,625 35,063 - - 36,688
Issuance of stock for services 658,689 32,934 349,686 - - 382,620
Deferred compensation, net - - - 443,782 - 443,782
Issuance of stock for loans,
settlements & debenture conversions 147,979 7,399 356,545 - - 363,944
Issue stock options/warrants - - 4,000 - - 4,000
Preferential conversion cost of debt - - 287,583 - - 287,583
Net loss - - - - (4,575,129) (4,575,129)
-----------------------------------------------------------------------------------
BALANCE May 31, 2002 2,185,509 $109,275 $20,457,563 $ (80,280) $(21,725,919) $ (1,239,361)
===================================================================================
See accompanying notes.
5
iEXALT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended May 31,
-----------------------------
2002 2001
------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,575,129) $ (4,895,468)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization 491,520 349,970
Amortization of deferred compensation 591,782 -
Loss on disposition of assets 124,824 127,817
Loss on disposal of assets from discontinued operations 111,649 -
Impairment of long lived assets 605,629 -
Non-cash expense primarily amortization of debt discounts 185,927 998,118
Compensation and other expense for common shares 410,287 739,546
Changes in assets and liabilities, net of acquisitions:
Accounts receivable 640,425 (42,043)
Inventory, prepaid expenses and other current assets 106,930 (309,342)
Other assets (1,470) (212,252)
Accounts payable 207,750 540,336
Deferred revenue (60,845) 169,820
Other accrued expenses (154,098) (210,641)
------------- ---------------
Net cash used by operating activities (1,314,819) (2,744,139)
------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash from acquisitions 17,122 157,869
Purchases of property and equipment (46,114) (56,229)
Disposition of Assets 938,449 -
------------- ---------------
Net cash provided by investing activities 909,457 101,640
------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 560,000
Proceeds from exercise of options - 12,000
Payment on borrowings from shareholders - (12,000)
Issuance of stock for loans and settlement (927) -
Proceeds from issuance of debt 946,999 2,027,859
Payments of capital lease obligations (10,663) (38,052)
Repayments of debt (494,640) (101,623)
------------- ---------------
Net cash provided by financing activities 440,769 2,448,184
------------- ---------------
NET INCREASE (DECREASE) IN CASH 35,407 (194,315)
CASH, BEGINNING OF PERIOD 80,466 278,164
------------- ---------------
CASH, END OF PERIOD $ 115,873 $ 83,849
============= ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 55,213 $ 85,723
See accompanying notes.
6
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION - iExalt blends the
positive modern technologies available through the Internet with
traditional media to provide products, services, and Internet
solutions to Christian families, businesses, schools, communities, and
organizations. iExalt currently publishes Christian electronic books
and reference materials, a Christian events magazine, a Christian
business directory, a Christian newspaper, and a Christian preaching
magazine; produces the Life Perspectives radio program five nights per
week and is affiliated with a youth-oriented Christian radio program;
and operates a comprehensive contemporary Christian music website, a
speaker's bureau dedicated to Christian speakers, and an agency
business for Christian artists. In addition, iExalt sells tickets for
Christian events, manages Christian portal sites, provides access to
on-line web based sermon resources through its website, and provides
through the Internet, an information-packed, on-line monthly
newsletter for local youth programs. Through November 30, 2001 iExalt
provided psychiatric counseling services for senior citizens earning
healthcare revenues from the implementation and management of
geriatric psychiatric programs for hospitals and other health
facilities. This business segment was sold as more fully discussed in
NOTE B.
CONDITIONS AFFECTING ONGOING OPERATIONS - The financial statements
have been prepared assuming the Company will continue to remain in
business as a going concern. The Company is currently dependent upon
external debt and equity financing to continue operations. The
Company's internally generated cash flows from operations have
historically been and continue to be insufficient for the Company's
cash needs. New debt or equity capital, if available, may have
provisions that could suppress future stock prices further, or cause
significant dilution to current shareholders and increase the cost of
doing business. In the event the Company is unable to obtain
additional debt and equity financing, the Company will not be able to
continue its operations. If the Company were unable to continue its
operations, the value of the Company's assets would experience a
significant decline from the net book values reflected in the
accompanying consolidated balance sheet. In this regard, assets that
generally suffer the greatest decline in value include; receivables as
customers recognizing the entity's problems consider not paying their
bills, inventories lose value as the entity no longer has the
capability to market and distribute its products to customers,
goodwill and other intangibles which represents amounts paid in excess
of the net book value of assets and companies purchased generally have
no value as operations cease, and property and equipment is often sold
for small percentages of net book value reflected on the accounting
records. Consequently, in the event the Company is unable to continue
as a going concern, its assets as currently reflected on the
accompanying balance sheet would provide little in the way of funds to
reduce the Company's significant debt load and liabilities. Based on
this assessment, little or nothing would remain for the Company's
creditors, shareholders and investors should the Company not remain in
business.
Management believes that net proceeds of anticipated securities
offerings, anticipated debt financing and revenues which are projected
to be realized from operations, should be sufficient to fund ongoing
operations in the near term. However, the anticipated securities
offerings and debt financing may not be undertaken, and if undertaken,
may not be successful or the proceeds derived from such offerings may
not be sufficient to fund operations and meet the needs of the
Company's business plans or the Company's revenues may not be adequate
or realized. The Company does not generate sufficient working capital
to cover cash requirements for the balance of the fiscal year or
sufficient to allow the Company to remain in business. Consequently,
the Company may not ever become profitable and could soon fail as a
going concern. Accordingly, management and its independent accountants
believe that; period-to-period comparisons of results of operations or
anticipated future events should not be relied upon as an indication
of positive future results of operations or future profitability, and
continuance as a going concern may not be achieved.
7
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Management continues to seek merger and acquisition opportunities for
possible growth and profitability within its business planning
activities, and these possibilities along with other factors will
impact future operations. However, possible merger and acquisition
opportunities leading to enhanced cash flow and profitability cannot
be assured. The Company's deficit working capital, its lack of access
to the debt and equity markets, and its small market cap among other
things, significantly limits the Company's ability to successfully
attract quality merger and acquisition candidates.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries.
All significant intercompany balances and transactions have been
eliminated.
INTERIM RESULTS - The accompanying unaudited condensed consolidated
financial statements of the Company and its subsidiaries reflect, in
the opinion of management, all adjustments necessary to present fairly
the Company's consolidated financial position at May 31, 2002 and the
Company's consolidated results of operations for the three month and
nine month periods and cash flows for the nine month periods ended May
31, 2002 and May 31, 2001. Interim period results are not necessarily
indicative of the results that may be expected for an entire year.
These consolidated financial statements and the notes thereto should
be read in conjunction with the Company's Annual Report on Form 10-KSB
for the year ended August 31, 2001, including the financial statements
and notes thereto.
PROPERTY AND EQUIPMENT - Property and equipment is carried at original
cost or adjusted net realizable value, as applicable. Maintenance and
repair costs are charged to expense as incurred. When assets are sold
or retired, the remaining costs and related accumulated depreciation
are removed from the accounts and any resulting gain or loss is
included in income.
For financial reporting purposes depreciation of property and
equipment is provided using the straight-line method based upon the
expected useful lives of each class of assets. Estimated lives of
assets are as follows: Furniture and fixtures - five to seven years;
computers and software - three to five years; automobiles - three to
five years; and leasehold improvements - over the estimated useful
life or the remaining life of the lease, whichever is shorter.
FINANCIAL INSTRUMENTS - FAIR VALUE - The carrying values of the
Company's financial instruments, which include cash, accounts
receivable, accounts payable and accrued liabilities, royalties and
debt, approximate their respective fair values because of short lives.
CREDIT RISK - The Company maintains its cash and with high credit
quality financial institutions and limits the credit exposure to any
one institution. The Company's accounts receivable primarily arise
from sales to customers and generally do not require collateral. The
Company periodically evaluates its credit exposure with its customers.
GOODWILL AND OTHER INTANGIBLES - Goodwill represents the cost in
excess of fair value of the assets of businesses acquired. Other
intangible assets represent costs allocated to covenants not to
compete and other intangibles acquired in business acquisitions or
agreements. In July 2001 the FASB issued statement of Financial
Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets. Statement No. 141 requires,
among other things, all business combinations initiated after June 30,
2001 be accounted for using the purchase method of accounting.
Statement No. 142 primarily addresses the accounting for goodwill and
intangible assets
8
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
subsequent to their acquisition. Under Statement 142, goodwill will no
longer be amortized over its estimated useful life, but instead will
be tested for impairment at least annually. Statement No. 142 will be
effective for fiscal years beginning after December 15, 2001 and must
be adopted at the beginning of a fiscal year. Goodwill and intangible
assets acquired after June 30, 2001 will immediately be subject to the
provisions of Statement No. 142. The Company adopted Statement No. 142
effective September 1, 2001. At May 31, 2002, the Company had
$1,946,785 in intangible goodwill that will no longer be amortized
under this statement. Had the Company adopted SFAS 142 effective for
the three month and nine month periods ending May 31, 2001,
amortization expense would have been reduced $91,736 and $197,180,
respectively.
In place of amortization of intangible assets, at least annually, the
Company must test all intangible assets to determine the amount of
impairment to those assets, if any. Consequently, and due in
substantial part to; the Company's and its subsidiaries inability to
generate positive cash flow and working capital; lack of profitability
and equity capital, large adjustments to goodwill and intangibles may
result from impairment testing in the future.
IMPAIRMENT OF LONG LIVED ASSETS - When events or circumstances
indicate the carrying value of a long-lived asset may be impaired, the
Company uses an estimate of fair value using present value techniques
to be derived from the remaining useful life of the asset to assess
whether or not the asset is recoverable.
In August 2001, management recognized an impairment loss in the
aggregate amount of $1,103,133 with respect to the discontinued
activities of Global Christian Network $1,075,258, and Global
Solutions $27,875, two subsidiaries of the Company. The Company
purchased Global Christian Network in March 2001 and Global Solutions
in November 1999.
In September 2001, iExalt was notified that 711.NET, Inc., the
purchaser of certain assets of CleanWeb, filed for protection from
creditors to reorganize under the federal bankruptcy statutes. Based
on the information available at that time management determined that
the Company should recognize at August 31, 2001 an impairment loss in
the amount of $1,340,312 to these assets including the promissory
note, common stock value of 711.NET, Inc. and some of the goodwill.
Based upon the results of the preliminary bankruptcy hearings in
December 2001, management no longer anticipated reclaiming the
CleanWeb customer base and does not expect to collect any notes
receivable owed by 711.NET. As a result, management impaired the
remaining goodwill of $500,000 effective November 30, 2001. Notice was
given on March 15, 2002, that the 711.NET Trustee had initiated a
proposed sale and liquidation of the 711.NET assets, which
subsequently did occur.
Management learned that the primary advertising provider of
ListenFirst.com, one of the Company's subsidiaries, unexpectedly
discontinued operations as of December 31, 2001. ListenFirst.com
provides an Internet website for Christian music. Its advertising
providers are critical to ListenFirst.com achieving and maintaining
profitability. The Company is currently operating ListenFirst.com's
website; however management is not optimistic about obtaining other
advertising providers that will allow the subsidiary to achieve and
maintain profitable operations.
Accordingly, management impaired goodwill associated with
ListenFirst.com of $105,629 at November 30, 2001. Although management
believes that no additional impairment of goodwill and other
intangibles is required at this time, additional impairment losses may
be required in the near term.
9
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NEW ACCOUNTING PRONOUNCEMENTS - In August 2001, the FASB issued
Statement of Financial Accounting Standards No. 143, Accounting for
Asset Retirement Obligations. Statement No. 143 addresses financial
accounting and reporting for obligations associated with the
retirement of tangible long-lived assets that result from the
acquisition, construction, development or normal operations of a
long-lived asset. Statement No. 143 is effective for fiscal years
beginning after June 15, 2002. Management does not believe Statement
No. 143 will have a significant effect on the financial position,
results of operations or liquidity of the Company.
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, Accounting for Impairment or Disposal of Long-Lived
Assets, that replaces SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed of. The
provisions of Statement No. 144 are effective for fiscal years
beginning after December 15, 2001 and, generally, are to be applied
prospectively. Statement No. 144 requires that long-lived assets to be
disposed of by sale, including those of discontinued operations, be
measured at the lower of the carrying amount or fair value less costs
to sell, whether reported in continuing or discontinued operations.
Discontinued operations will no longer be measured at net realizable
value or include amounts from operating losses that have not yet
occurred. Statement No. 144 also broadens the definition of the
criteria for reporting discontinued operations to include all
operations within an entity that can be distinguished from the rest of
the entity that will be eliminated from the ongoing operations of the
entity as a result of the disposal. The disposal of the Electronic
Publishing division as further discussed in Note K will qualify as
"discontinued operations" under this new statement. If management
decides to early adopt the provisions of this statement, revenues of
$1,114,082 for the nine months ending May 31, 2002 will be removed
from the results of operations and reported separately and the net
loss from operations will increase $118,956 in the fourth quarter of
2002.
In April 2002, the FASB issued Statement of Financial Accounting
Standards No. 145, Rescission of FASB Statements No. 4, 44,and 64,
Amendment of FASB Statement No. 13, and Technical Corrections, that
rescinds Statement No.'s 4, and 64 related to reporting gains and
losses from debt extinguishments and also rescinds Statement No. 44
related to accounting for intangible assets of motor carriers. It
amends Statement No. 13 to eliminate the inconsistencies between
sales-lease back transactions and certain lease modifications with
economic benefits that are similar to sales-lease back modifications.
This Statement also amends other existing authoritative pronouncements
to make various technical corrections, clarify meanings, or describe
their applicability under changed conditions. Under this statement,
gains and losses on the extinguishment of debt shall no longer be
reported as an extraordinary item. The effective date of Statement No.
145 shall be applied for fiscal years beginning after May 15, 2002.
Any prior period gains and losses on debt extinguishment presented as
an extraordinary item, and not meeting the remaining criteria of SFAS
130, are to be reclassified to conform to current year presentation.
Management intends to early adopt the provisions of this statement in
fourth quarter of 2002. Accordingly, the gain on the debt
extinguishment discussed in Note K will be classified in the results
from continuing operations for the fourth quarter.
MANAGEMENT'S ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
While it is believed that such estimates are reasonable, actual
results could differ substantially from those estimates. Because
goodwill and intangible assets represent assets that are dependent
upon the Company achieving future profitability and remaining in
business,
10
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued
(Unaudited)
they represent significant estimates made by management that are
subject to significant impact in the near term.
REVENUE RECOGNITION - The Company generally recognizes revenue on
services as they are performed and on products when they are sold net
of sales returns. Speaker revenues are recognized when the speech or
event occurs. Electronic publishing revenues are recorded net of a
provision for sales returns and allowances as the Company grants
refunds and returns on electronic publishing products if the software
and publications sold are returned within thirty days. Revenue from
ticket operations is recognized as tickets are sold. Although iExalt
collects ticket receipts representing the full ticket price on behalf
of its clients, the Company only records as revenue the convenience
charges and handling fees included in the ticket price. Advertising
revenue is recognized when published.
EARNINGS PER SHARE - The dilutive effects of stock options and
warrants have not been included in the calculation of earnings per
share as they are anti-dilutive; however, they may become dilutive in
the future.
REVERSE STOCK SPLIT - In December 2001, the Company's Board of
Directors declared a 50 to one (50:1) reverse stock split of the
Company's common stock. Every 50 shares of iExalt, Inc. common stock,
$0.001 par value per share, was to be converted to one share of
iExalt, Inc. common stock, $0.05 par value, and each shareholder was
entitled to receive a payment for any fractional shares that result
from the split. In addition, all holders of options or warrants to
purchase future shares of the Company's common stock were also reduced
on an equal basis of 50 to one. Accordingly, the Company has presented
all equity information as if the reverse stock split had occurred
effective September 1, 2000. The new stock symbol is IEXA and CUSIP
number is 451691208. The Company will not recognize certificates
representing the pre-split shares for voting, distribution, or other
purposes. Old certificates must be replaced with new certificates.
RECLASSIFICATION OF ACCOUNTS - Certain reclassifications have been
made to prior year balances for discontinued operations to conform to
current year presentation.
NOTE B ACQUISITIONS AND DISPOSITIONS
On November 30, 2001 the Company purchased certain assets of Barnabus
Christian Counseling Network, LLC, an on-line counseling company, for
6,500 shares of the Company's common stock. The transaction was
accounted for as a purchase and goodwill was recorded in the amount of
$16,088.
On November 30, 2001 the Company sold certain assets of PremierCare
including the assets related to the Rapha and Barnabus Christian
Counseling Network business to UMC Ten Broeck, Inc. ("Buyer").
Excluded from the asset sale was PremierCare's cash, accounts
receivable, and receivable from related parties. The Buyer did not
assume any liabilities except those liabilities outlined in the
agreement. The purchase price was $1,000,000 cash at closing plus
deferred payments equal to one third of any EBITDA generated by the
business in excess of $500,000 annually for a period of two years
following closing. Total payment in deferred purchase price shall not
exceed $750,000 on an annual basis. Excluding shared services, EBITDA
generated by Premier Care/Rapha for fiscal year
11
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
ending August 31, 2001 exceeded the targeted EBITDA, however, it is
not possible at this time to determine whether future earnings from
the PremierCare assets will be sufficient to exceed the EBITDA
threshold, consequently it is not possible to determine whether the
Company will receive any future payments from this arrangement. (See
Footnote K for details of the assignment of 50% of any payments up to
$150,000.) As part of the sale, the Company entered into a shared
services agreement, whereby management of the Company will provide
consulting services to the Buyer during the two-year period. In
addition, the Company will provide advertising and marketing services
to the Buyer to promote the growth strategy of PremierCare for a term
of not less than three years. Based on the facts and circumstances
existing at the conclusion of the Company's fiscal year end August 31,
2001 and currently existing, management of the Company is of the
opinion that the service contract has an estimated value of
approximately $750,000. Consequently, some of the goodwill, which
represented a portion of the excess cost paid by the Company over the
net book value of PremierCare's assets at the date purchased by the
Company was retained on the Company's books, treated as an intangible
asset and is being amortized over a one-year period, commencing
December 31, 2001, on a straight-line basis. This estimate is subject
to significant near term impairment should future operating results of
the sold operating assets of PremierCare not be sufficient to generate
an adequate amount of earnings.
In December 2001, the Company issued 1,000 shares of its common stock
and $5,000 to acquire the assets related to the "Youth Conference"
including but not limited to the trade names and goodwill of the Youth
Conference, all software, or other electronic information and physical
copies of all data bases to support the bookings and author
relationships including URL's, work in progress, proformas, and
contracts.
In February 2002, the Company purchased Preaching Resources, Inc., a
reference magazine for leaders within the Christian community and an
on-line Internet site, for 25,000 shares of the Company's common stock
and $9,500 cash. The transaction was accounted for as a purchase and
goodwill was recorded in the amount of $102,368. Results of operations
have been included in the statement of operations since the
acquisition date. The Company's acquisition strategy has been to
acquire, develop and manage a large channel of media (print, radio,
software and Internet). The acquisition of Preaching Resources, Inc.
is expected to increase the Company's presence and marketing potential
in the Christian media market through its subscriber base. The founder
and editor of Preaching Resources, Inc. will remain as President and
CEO, and will be entitled to cash and stock bonuses based on the
achievement of certain performance objectives. The purchase agreement
also contains a requirement to pay quarterly cash bonuses that will be
equal to 50% of the net income derived from Preaching Magazine up to
the first $40,000 of annualized net income, and 25% of the next
$40,000 in annualized net income, and 10% of all annualized net income
greater than the initial $80,000 of annualized net income, as
calculated using generally accepted accounting principles for a term
of three years commencing February 1, 2002. The stock bonus will be
equal to 1,500 shares of the Company's common stock, $.05 par value,
for each 1,000 paid subscribers to Preaching Magazine in excess of
5,000 paid subscribers, as of February 28, 2003.
12
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following unaudited pro forma combined results of operations of
the Company for the nine months ended May 2002 and 2001 assume
significant acquisitions and dispositions had occurred as of the
beginning of the respective periods.
PRO FORMA
Nine Months Ended May 31,
-------------------------------
2002 2001
--------------- --------------
Revenues $ 5,138,662 $ 4,267,273
Loss from operations $ (3,583,906) $ (4,333,601)
Net loss $ (4,262,496) $ (4,673,916)
Net loss per share $ (2.74) $ (6.53)
Pro Forma Weighted Average Number of
Shares Outstanding 1,556,453 716,203
The pro forma financial information is not necessarily indicative of
the combined results that would have occurred had the significant
acquisitions and dispositions taken place at the beginning of the
period, nor is it necessarily indicative of results that may occur in
the future.
NOTE C PROPERTY AND EQUIPMENT
May 31, August 31,
2002 2001
---------- ------------
Computer equipment and software $ 362,622 $ 347,582
Furniture, fixtures and office equipment 184,591 211,061
Automobiles 12,000 190,091
Leasehold improvements 52,854 42,036
---------- ------------
612,067 790,770
Less accumulated depreciation (253,480) (222,741)
---------- ------------
$ 358,587 $ 568,029
========== ============
13
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE D SHORT-TERM BORROWINGS
May 31, August 31,
2002 2001
---------- -----------
Revolving line of credit with bank, interest at prime
payable monthly, due December 18, 2000, guaranteed by
shareholder (1) $ 150,000 $ 150,000
Loan, non-interest bearing, due March 22, 2001 (2) - 180,000
Convertible debenture, due July 15, 2002, interest 14% (3) - 165,936
Promissory note, due December 31, 2001, interest 21% (4) - 75,000
Convertible debenture, due Dec. 29, 2001, interest 11% (5) - 100,000
Convertible debenture, due July 16, 2002, interest 14% (8) 100,000 -
Convertible debenture, due August 1, 2002, interest 8% (9) 80,000 -
Convertible debenture, due Nov. 14, 2002, interest 8% (10) 70,000 -
Convertible debenture, due Aug. 14, 2002, interest 8% (11) 100,000 -
Convertible debenture, due Mar. 12, 2003, interest 10% (12) 50,000 -
Convertible debenture, due Sep. 19, 2002, interest 8% (13) 100,000 -
Convertible debenture, due Apr. 19, 2002, interest 14% (14) 65,000 -
Convertible debenture, due Jun. 14, 2002, interest 14% (15) 87,864 -
Discount on debentures (123,835)
Other unsecured revolving lines of credit in the form of
credit cards with interest ranging from 11.9% to 22.9%,
payable monthly 139,706 87,808
---------- -----------
$ 818,735 $ 758,744
========== ===========
(1) In August 1999, the Company negotiated a $50,000 revolving line of
credit with a bank. The credit line was increased to $150,000 in
December 1999 and guaranteed by a shareholder without the Company's
authority. As more fully discussed in Note K, in late June 2002 the
Company agreed to a compromise settlement that resolves all
obligations related to the $150,000 revolving line of credit
(2) In February 2001, the Company negotiated two loans, each in the
amount of $90,000. The Company issued 25,714 restricted shares of its
common stock in payment of one of the loans in October 2001. In
December 2001, the Company resolved the outstanding balance of the
other loan by issuing 15,000 restricted shares of its common stock.
(3) On February 16, 2001, the Company agreed to issue $180,000 in the
form of a non-interest bearing convertible debenture. The debenture
agreement provides for conversion of $90,000 of the principal for
shares with a conversion price of $9.00 per share, is secured by
existing and future accounts receivable of PremierCare along with a
guarantee from a shareholder, and matured on April 15, 2001.
Additional consideration was issued in the form of warrants for the
purchase of up to 20,000 of the Company's common shares as follows;
16,363 at an exercise price of $5.50 and 3,636 shares at an exercise
price of $9.00. The debenture holder subsequently agreed to extend the
due date to July 15, 2002. The Company agreed to make twelve monthly
payments of $16,164.39 with the first installment due August 15, 2001
including 14% interest per annum, change the debenture conversion
provision to $5.50 per share, and change the exercise price related to
the warrants for the purchase of up to 20,000 shares to $5.50 per
share. In December 2001, the Company repaid the loan in full.
14
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(4) On June 5, 2001, the Company agreed to issue $100,000 in the form
of a convertible debenture. The debenture bears interest payable
monthly of 450 of the Company's restricted common shares, provides for
conversion of $25,000 of the principal for common shares with a
conversion price of $4.00 per share, allows for a placement fee of
2,000 of the Company's restricted common shares if funds are delivered
prior to June 30, 2001, and matures on December 31, 2001. The
conversion was exercised related to the $25,000 and a total of 6,410
of the Company's restricted common shares were issued to the debenture
holder along with 5,150 common shares related to the placement fee and
interest. In December 2001, the Company repaid the loan.
(5) On August 14, 2001, the Company entered into a $140,000 loan
agreement with Cresson Productions, Inc. Borrowings are to be repaid
within six months of funding and bear interest at 11%. As additional
consideration, the Company issued warrants for 8,400 shares of the
Company's common stock at an exercise price of $3.50 related to
transaction placement fees. The warrants are vested and have a
five-year term. The Company has the option to repay the principal and
interest with cash or shares of the Company's common stock which
shares will be valued at the lesser of $10.00 per share or 75% of the
average of the stock's closing price in the previous 5 trading days.
The Company ultimately borrowed $131,000 from the loan facility and in
February 2002 the Company repaid the loan by issuing 83,161 restricted
shares of its common stock to the debenture holder.
(6) On November 8, 2001, the Company entered into a $50,000 promissory
note agreement. The loan bears interest at 14%, provides warrants for
10,000 shares of the Company's common stock at an exercise price of
$2.50 and is payable in twelve monthly installments or in full upon
the closing of the PremierCare asset sale. In December 2001, the
Company repaid the loan in full.
(7) On November 12, 2001, the Company entered into a $100,000
promissory note agreement. The loan bears interest at 14% and is
payable in full within one month or upon the closing of the
PremierCare asset sale. In December 2001, the Company repaid the loan
in full.
(8) On January 16, 2002, the Company agreed to issue $100,000 in the
form of a convertible debenture. The debenture bears interest at 14%,
provides for conversion of the principal and interest for the
Company's common shares with a conversion price of $0.49 and matures
on July 16, 2002. The Company has negotiated a loan agreement that
results in the consolidation of this debenture into a new loan
facility as further discussed in Note K.
(9) On February 1, 2002, the Company agreed to issue $80,000 in the
form of a convertible debenture. The debenture bears interest at 8%,
provides for conversion of the principal and interest for the
Company's common shares with a conversion price of $0.50, and matures
on August 1, 2002.
(10) On February 14, 2002, the Company agreed to issue $70,000 in the
form of a convertible debenture. The debenture bears interest at 8%,
provides for conversion of the principal and interest for the
Company's common shares with a conversion price of $0.525, and
recognized the issuance of warrants dated September 20, 2000 assigned
to Balallan Limited from Travin Investments LLC as valid warrants. The
note matures on November 14, 2002.
(11) On February 20, 2002, the Company agreed to issue $100,000 in the
form of a convertible debenture. The debenture bears interest at 8%,
provides for conversion of the principal and interest for the
Company's common shares with a conversion price of $0.39 and matures
on August 20, 2002. Russell Ivy, Chief Operating Officer for the
Company, is also the sole owner of the company that holds the note.
The Company has negotiated a loan agreement that results in the
consolidation of this debenture into a new loan facility as further
discussed in Note K.
15
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(12) On March 12, 2002, the Company agreed to issue $100,000 in the
form of a convertible debenture. The note bears interest at 10%,
provides for conversion of the principal and interest for the
Company's common shares with a conversion price of $2.00 or sixty five
percent of the closing bid price on the anniversary date, whichever is
lower. The note also provides an option to extend the repayment date
providing the Company compensates the holder $2.00 per paid
subscriber, of the Preaching Magazine, in excess of 7,500 paid
subscribers as an extension fee. The note is secured by fifty one
percent of the outstanding stock of Preaching Resources, Inc. The
Holder was awarded 20,000 shares of the Company's restricted common
stock with certain registration and advertising rights. The Company
guaranteed the value of $2.00 per share or additional shares will be
issued once the Company has received approval of its registration
statement.
(13) On March 19, 2002, the Company agreed to issue $100,000 in the
form of a convertible debenture. The debenture bears interest at 8%,
provides for conversion of the principal and interest for the
Company's common shares with a conversion price of $0.50 and matures
on September 19, 2002. Russell Ivy, Chief Operating Officer for the
Company, is also the sole owner of the company that holds the note.
The Company has negotiated a loan agreement that results in the
consolidation of this debenture into a new loan facility as further
discussed in Note K.
(14) On March 19, 2002, the Company agreed to issue $100,000 in the
form of a convertible debenture. At May 31, 2002, $65,000 had been
received from this debenture. The debenture bears interest at 14%,
provides for conversion of the principal and interest for the
Company's common shares with a conversion price of $0.50 and matures
on April 19, 2002. Russell Ivy, Chief Operating Officer for the
Company, is also the sole owner of the company that holds the note.
The Company has negotiated a loan agreement that results in the
consolidation of this debenture into a new loan facility as further
discussed in Note K. The owner of the debenture has agreed to waive
payment until the debt is consolidated.
(15) On May 14, 2002, the Company agreed to issue $100,000 in the form
of a convertible debenture. At May 31, 2002, $87,864 had been received
from this debenture. The debenture bears interest at 14%, provides for
conversion of the principal and interest for the Company's common
shares with a conversion price of $0.50 and matures on June 14, 2002.
Russell Ivy, Chief Operating Officer for the Company, is also the sole
owner of the company that holds the note. The Company has negotiated a
loan agreement that results in the consolidation of this debenture
into a new loan facility as further discussed in Note K. The owner of
the debenture has agreed to waive payment until the debt is
consolidated.
16
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE E NOTES PAYABLE TO SHAREHOLDERS
May 31, August 31,
2002 2001
-------- -----------
Non-interest bearing note payable to shareholder, due
on demand secured by all assets of NetXpress $350,000 $ 350,000
Unsecured note payable to shareholder, 8% interest,
due on demand 195,000 195,000
Unsecured note payable to shareholder, due on
demand 61,258 -
-------- -----------
$606,258 $ 545,000
======== ===========
In connection with the acquisition of NetXpress, iExalt, Inc. (Texas),
a subsidiary of the Company, assumed a $350,000 note payable to a
shareholder of the Company (iExalt, Inc. Nevada). Under the terms of
this note, the balance becomes payable on demand when net assets of
iExalt, Inc. (Texas) exceed $5,000,000. Demand for payment has been
made, however, as of May 31, 2002, the net assets of iExalt, Inc.
(Texas) do not exceed $5,000,000; therefore, management does not
believe there has been cause for demand of payment. As more fully
discussed in Note K, in late June 2002 the Company agreed to a
compromise settlement that resolves all obligations related to the
$350,000 note payable.
During August 2000, U.S. Sporting Interests, LLC loaned the Company
$195,000 under a demand note with an 8% interest rate. Demand for
payment of the $195,000 has been made. As more fully discussed in Note
K, in late June 2002 the Company agreed to a compromise settlement
that resolves all obligations related to the $195,000 note payable.
On May 30, 2002, Russell Ivy, the Chief Operating Officer and a
shareholder of the Company loaned the Company $61,258. The Company has
negotiated a loan agreement that results in the consolidation of this
amount into a new loan facility as further discussed in Note K.
NOTE F LONG-TERM DEBT
May 31, August 31,
2002 2001
-------- -----------
Note payable to bank, interest at prime payable
quarterly, due June 30, 2001, unsecured, guaranteed
by shareholder $550,000 $ 550,000
Vehicle notes payable, interest ranging from 1.9% to
14.25%, maturing June 2001 to June 2004, secured by
vehicles - 90,785
Notes payable on various insurance policies 15,532 44,256
Other unsecured notes payable, due on demand 6,832 6,853
-------- -----------
572,364 691,894
Less: current maturities 567,864 630,941
-------- -----------
$ 4,500 $ 60,953
======== ===========
17
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The note payable to the bank matured on June 30, 2001; however, the
bank has provided forbearance and the Company continues to accrue
interest payments. As more fully discussed in Note K, in late June
2002 the Company agreed to a compromise settlement that resolves all
obligations related to the $550,000 note payable to the bank
NOTE G SHAREHOLDERS' EQUITY
In October 2001, the Company issued 25,714 shares of the Company's
common stock for repayment of a $90,000 bridge loan that was due in
March 2001.
In October 2001, the Company issued 7,670 shares of the Company's
common stock for incentive compensation to various employees of the
Company and selected speakers who contract to perform at events
arranged by the Company's subsidiary, ChristianSpeakers.
In November 2001 the Company purchased certain assets of Barnabus
Christian Counseling Network, LLC, an on-line counseling company, for
6,500 shares of the Company's common stock.
In December 2001, the Company issued 1,000 shares of its common stock
and $5,000 to acquire the assets related to the "Youth Conference"
including but not limited to the trade names and goodwill of the Youth
Conference, all software, or other electronic information and all
physical copies of all data bases to support the bookings and author
relationships including URL's, work in progress, proformas, and
contracts.
In December 2001, the Company issued 15,000 shares of its common stock
for payment in full of any obligation related to the remaining $90,000
bridge loan provided by TCA Investments.
In December 2001, the Company issued 5,000 shares of its common stock
for settlement with the former owners of PremierCare LLC in regards to
the earn out provisions of the original purchase and sale agreement.
In February 2002 the Company purchased Preaching Resources, Inc., a
reference magazine for leaders within the Christian community and an
on-line Internet site for 25,000 shares of the Company's common stock
and $9,500.
In February 2002 the Company filed a Form S-8 with the Securities and
Exchange Commission to register 240,000 of newly issued shares of the
Company's common stock. The shares were issued as compensation for
certain consulting and legal services.
In February 2002, the Company issued 83,161 shares of its common stock
for payment in full of any obligation related to the convertible
debenture held by Cresson Productions Inc.
In March 2002, the Company issued 50,300 shares of its common stock
for compensation for certain consulting services and 20,000 shares of
its common stock as an inducement to an investor to provide funding
for the Company through a convertible debenture.
In May 2002, the Company issued 275,719 shares of its common stock to
various radio stations for costs related to radio broadcast of the
Life Perspectives program and 85,000 shares of its common stock for
payment of legal services to a shareholder of the Company.
18
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE H STOCK OPTIONS AND WARRANTS
On November 8, 2001, the warrant agreement between the Company and I.
Leonards was amended to add an additional 10,000 shares of the
Company's common stock and the warrant exercise price was reduced to
$2.50 per share. A loan of $50,000 was advanced to the Company at an
interest rate of 14% that was fully repaid in December 2001.
NOTE I INCOME TAXES
The Company has had losses since inception and, therefore, has not
been subject to federal income taxes. As of May 31, 2002 the Company
estimates an accumulated taxable net operating loss ("NOL") carry
forward for income tax purposes of approximately $13.9 million,
resulting in a deferred tax asset of $4.9 million. These carry
forwards begin to expire in 2019 through 2021.
Because U.S. tax laws limit the time and availability during which NOL
and tax credit carry forwards may be applied against future taxable
income and tax liabilities, the Company may not be able to utilize its
NOL and tax credits for federal income tax purposes. A valuation
allowance has been established to fully offset the deferred tax
assets.
NOTE J BUSINESS SEGMENTS
The Company's operations are grouped into three business segments
based on types of service and delivery media: Internet and technology
applications, print publications, and healthcare services. Internet
and technology applications consist of CleanWeb, iExalt.com (portal),
Electronic Publishing, ChristianSpeakers.com, ListenFirst.com, Global
Christian Network, ChristianArtists.com, Gilmore Marketing, iSermons,
the ParentLink, and Life Perspectives. Print publications consist of
Christian Happenings, Christian Times, Preaching Resources, and
Christian Blue Pages. Healthcare services consisted of the counseling
programs of PremierCare, Rapha and Barnabus, which were sold on
November 30, 2001.
19
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The Company's reportable segment information for the nine months ended May 31,
2002 and 2001 are as follows:
Nine Months Internet & Print Health Corporate/ Reporting
Ended Technology Publications Services Other Segments
May 31, (discontinued)
--------------- ------------ -------------- --------------- ------------ ------------
Revenues:
2002 $ 3,501,002 $ 1,637,660 $ - $ - $ 5,138,662
2001 $ 3,654,146 $ 1,487,804 $ - $ - $ 5,141,950
Gross Profit:
2002 $ 1,139,829 $ 500,584 $ - $ - $ 1,640,413
2001 $ 980,188 $ 436,303 $ - $ - $ 1,416,491
Loss from
Operations:
2002 $(1,166,184) $ (261,418) $ - $(2,156,304) $(3,583,906)
2001 $ (767,825) $ (153,839) $ - $(3,761,101) $(4,682,765)
Depreciation /
Amortization:
2002 $ 37,044 $ 36,366 $ - $ 406,102 $ 479,512
2001 $ 144,419 $ 67,858 $ - $ 49,615 $ 261,892
Assets:
2002 $ 1,592,849 $ 1,422,048 $ 38,465 $ 412,742 $ 3,466,104
2001 $ 5,324,471 $ 1,378,258 $ 2,376,637 $ 437,096 9,516,462
The following table reconciles reportable segment gross profit to the
Company's consolidated loss before income taxes as follows:
Nine Months Ended May 31,
-------------------------------
2002 2001
---------------- -------------
Gross profit of reportable segments $ 1,640,413 $ 1,416,491
Other expenses 5,224,319 6,099,256
---------------- -------------
Loss from operations (3,583,906) (4,682,765)
Other Income/(Expense)
Interest income/other (403,250) (6,750)
Interest expense (275,340) (346,914)
Income (Loss) from discontinued operations (200,984) 140,961
Loss from disposal of assets of discontinued (111,649) -
operations
---------------- -------------
Net Loss $ (4,575,129) $ (4,895,468)
================ =============
Revenues totaled $5,138,662 for the nine months ended May 31, 2002,
which is compared to revenues of $5,141,950 from the nine months,
ended May 31, 2001. Revenues from the healthcare segment for the nine
months ended May 31, 2002 totaled $1,122,808 and expenses totaled
$1,323,792, which are shown net as loss from discontinued operations.
Assets related to the Health Services segment were sold on November
30, 2001 resulting in a loss on disposal of assets of $111,649, which
is also shown as loss from discontinued operations on the accompanying
condensed
20
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
consolidated statement of operations. Gross profit for the nine months
ended May 31, 2002 totaled $1,640,413 compared to $1,416,491 for the
nine months ended May 31, 2001.
The Company's reportable segment information for the three months
ended May 31, 2002 and 2001 are as follows:
Three Months Internet & Print Health Corporate/ Reporting
Ended Technology Publications Services Other Segments
May 31, (discontinued)
--------------- ------------ -------------- --------------- ------------ ------------
Revenues:
2002 $ 1,486,906 $ 626,066 $ - $ - $ 2,112,972
2001 $ 1,458,376 $ 535,219 $ - $ - $ 1,993,595
Gross Profit:
2002 $ 514,679 $ 214,906 $ - $ - $ 729,585
2001 $ 365,563 $ 141,541 $ - $ - $ 507,104
Loss from
Operations:
2002 $ (115,750) $ (54,796) $ - $ (824,970) $ (995,516)
2001 $ (391,810) $ (57,970) $ - $ (774,639) $(1,224,419)
Depreciation /
Amortization:
2002 $ 11,760 $ 15,033 $ - $ 198,020 $ 224,813
2001 $ 49,214 $ 23,505 $ - $ 16,752 $ 89,471
Assets:
2002 $ 1,592,849 $ 1,422,048 $ 38,465 $ 412,742 $ 3,466,104
2001 $ 5,324,471 $ 1,378,258 $ 2,376,637 $ 437,096 $ 9,516,462
The following table reconciles reportable segment gross profit to the
Company's consolidated loss before income taxes as follows:
Three Months Ended May 31,
-------------------------------
2002 2001
-------------- ---------------
Gross profit of reportable segments $ 729,585 $ 507,104
Other expenses 1,725,101 1,731,523
-------------- ---------------
Loss from operations (995,516) (1,224,419)
Other Income/(Expense)
Interest income/other (4,531) (10,062)
Interest expense (196,378) (129,010)
Income(Loss) from discontinued operations (15,602) (7,226)
-------------- ---------------
Net Loss $ (1,212,027) $ (1,370,611)
============== ===============
Revenues totaled $2,112,972 for the three months ended May 31, 2002,
which is a 6% increase compared to revenues from the three months,
ended May 31, 2001. Revenues from the healthcare segment for the three
months ended May 31, 2002 totaled $1,358 and expenses totaled $16,960,
which are shown net as loss from discontinued operations. Gross profit
for the three months ended May 31, 2002 totaled $729,585 compared to
$507,104 for the three months ended May 31, 2001, which is an increase
of $222,481.
21
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE K SUBSEQUENT EVENTS
In June 2002, the Company issued 30,000 of its common shares for
services with consultants. Under the terms of the one-year consulting
agreements, the two consultants will receive additional shares
totaling 30,000 shares upon the expiration of each quarter. The
Company also issued 5,000 of its common shares to one of its employees
as part of a settlement relating to termination of employment.
In June 2002, the Company entered into a 14% loan agreement (the
Agreement) with J.A.K. IV LP (lender) which provides for the possible
funding of up to $1,000,000 in addition to the consolidation and
payment of $464,227 of debt and interest payable outstanding at May
31, 2002. All borrowings, which are subject to pre-approval by a
management committee appointed by the lender, are due on or before May
31, 2003. The management committee is compensated at the rate of
$10,000 per month for services associated with this Agreement. Terms
of the Agreement, which is collateralized by a lien and security
interest in all current and future assets of the Company, and contains
specific operating, financial, and reporting covenants and
requirements, provides for the conversion of outstanding borrowings to
shares of the Company's restricted common stock at $0.225 cents per
share. However, the number of shares subject to this conversion
feature may not exceed 7,500,000. The Agreement also provides for the
issuance of 1,600,000 warrants to purchase common shares of the
Company at a price of $0.50 per share. iExalt is required to reserve,
free from preemptive rights, out of its treasury stock or its
authorized but un-issued shares of common stock, or both, solely for
the purpose of effecting the conversion of the loans, sufficient
shares to provide for the conversion of the loan. All of the Company's
common stock underlying the warrants and conversion rights acquired by
the lender have one demand and unlimited piggyback registration rights
whereby the lender agrees to register (at the lender's expense to a
maximum of $25,000) in the appropriate filing with the United States
Securities & Exchange Commission the underlying shares. The Company is
required to use its best efforts to obtain approval of such
registration, and should the registration of the underlying shares not
be approved within ninety days of filing, the Company will incur a
penalty of 1% per week payable in common stock, for any delay, not to
exceed 500,000 shares in total penalty payment to the lender.
In June 2002, the Company agreed to a settlement that resolves all
obligations related to the disputed shareholder loans with J.
Tompkins, certain bank debt, the note receivable related to the nXp
Technologies, Inc. and compensation claims of ARTA Equity Advisors.
For consideration of assignment from the Company of the assets and
selected liabilities related to the iExalt Electronic Publishing
(ePublishing) business, issuance of 300,000 shares of the Company's
common stock (150,000 restricted shares and 150,000 freely tradable
shares), settlement of claims with the bank related to the line of
credit and the note payable, and execution of an 18 month note payable
with 8% interest payable monthly, to Jack Tompkins in the amount of
$150,000, the parties have agreed to compromise, settle, and provide
for the final termination of all disputes, claims, and controversies.
The agreement requires the assignment to Tompkins of 50% of the
remaining payments that may be received from the receivables of
PremierCare LLC or other payments to which iExalt Nevada is entitled
under the agreements pursuant to which PremierCare was sold. The
Company must remove all restrictions on the 150,000 restricted shares
within a one-year period from the date of this agreement. The
outstanding obligations related to the line of credit and the notes
payable to Chase Bank were purchased by J.A.K. IV LP. Subsequent to
that assignment the Company executed an agreement with J.A.K. IV LP
whereby the parties agreed to modify certain terms related to the
Interim Loan Agreement dated June 24, 2002. The Company agreed to an
advance under the terms of the Interim Agreement of $300,000 to
resolve any outstanding obligation that might remain specifically with
the assigned line of credit and note payable.
22
iEXALT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following unaudited pro forma balance sheet of the Company as of
May 31, 2002 assumes the disposition of ePublishing and settlement of
debt with Chase and claims with Jack Tompkins had taken place on May
31, 2002:
May 31, 2002
------------------------------------------
iExalt & ePublishing Pro Forma
Subsidiaries Disposition Total
------------------------------------------
Current assets $ 718,673 $ (236,656) $ 482,017
Property, plant & equipment 358,587 (31,947) 326,640
Goodwill and other intangibles 2,364,010 (162,349) 2,201,661
Other assets 24,834 (5,900) 18,934
------------------------------------------
Total assets $ 3,466,104 $ (436,852) $3,029,252
==========================================
Current liabilities $ 4,698,913 $ (1,047,665) $3,651,248
Long-term debt and other 6,552 - 6,552
Shareholders' deficit (1,239,361) 610,813 (628,548)
------------------------------------------
Total liabilities & deficit $ 3,466,104 $ (436,852) $3,029,252
==========================================
The following unaudited pro forma results of operations of the Company
for the nine months ended May 31, 2002 and May 31, 2001 assume that
the ePublishing disposition and settlement of debt with Chase and
claims with Jack Tompkins as well as the significant acquisitions and
dispositions discussed in Note B had been completed as of the
beginning of the respective periods.
Nine Months Ended May 31, 2002
------------------------------------------
Pro Forma ePublishing Pro Forma
Note B Disposition Total
------------------------------------------
Revenues $ 5,138,662 $ (1,114,082) $ 4,024,580
Loss from operations $(3,583,906) $ (120,815) $ (3,704,721)
Net loss $(4,262,496) $ (118,956) $ (4,381,452)
Earnings/(loss) per share $ (2.74) $ (2.36)
ProForma Weighted Average
Number of Shares Outstanding 1,856,453 1,856,453
Nine Months Ended May 31, 2001
------------------------------------------
Pro Forma ePublishing Pro Forma
Note B Disposition Total
------------------------------------------
Revenues $ 4,267,273 $ (1,065,967) $ 3,201,306
Loss from operations $(4,333,601) $ (84,931) $ (4,418,532)
Net loss $(4,673,916) $ (83,553) $ (4,757,469)
Earnings/(loss) per share $ (6.53) $ (4.68)
ProForma Weighted Average
Number of Shares Outstanding 716,203 1,016,203
The pro forma financial information is not necessarily indicative of
the combined results that would have occurred had the disposition of
ePublishing taken place at the beginning of the respective periods,
nor is it necessarily indicative of results that may occur in the
future.
23
Part I- Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion should be read together with our financial
statements, which are included earlier within this Form 10-QSB. The discussion
contains certain forward-looking statements regarding our expectations for our
business and our capital resources. These expectations are subject to various
uncertainties and risks that may cause actual results to differ significantly
from these forward-looking statements.
General
iExalt blends the positive modern technologies available through the
Internet with traditional media to provide products, services, and Internet
solutions to Christian families, businesses, schools, communities, and
organizations. iExalt currently publishes Christian electronic books and
reference materials, a Christian events magazine, a Christian business
directory, a Christian newspaper, a Christian Preaching magazine; produces a
radio program five nights per week and is affiliated with a youth oriented
Christian radio program; operates a comprehensive contemporary Christian music
website, one of the largest speakers bureaus dedicated to Christian speakers,
and an agency that provides Christian artists. In addition, iExalt sells tickets
for Christian events, manages one of the most popular Christian portal sites,
provides access to on-line web based sermon resources through its web site, and
provides, through the Internet, a cutting-edge information-packed, online
monthly newsletter for local youth programs called the Parent Link. iExalt
provided psychiatric counseling services for senior citizens from the
implementation and management of geriatric psychiatric programs for hospitals
and other health facilities through November 30, 2001 at which time this
business segment was sold.
iExalt is a company formed to meet the needs of the Christian community.
Our vision is to reflect Jesus Christ by providing the highest quality Christian
products, services and technology solutions. iExalt's primary goals are as
follows:
- Media: iExalt will acquire, develop and expand our
influence through print, radio, television and the
Internet
- Migration: iExalt will migrate each company in the iExalt
family to a Web related strategy
- Market: iExalt will enter fields where we can reasonably
expect to be the dominant entity
- Ministry: iExalt must ensure that each company within the
family of iExalt companies has a ministry focus,
and shares our commitment to the Christian faith
- Monetary: iExalt must create positive returns for our
shareholders
iExalt was originally incorporated as Louisiana Northern Gas, Inc. a Nevada
corporation on April 23, 1979. The name of the Company was changed to Sunbelt
Exploration, Inc. on December 21, 1979. From 1989 until September 1, 1999, the
Company had very limited operations. The Company consummated a merger
(hereinafter referred to as the "Merger") on September 1, 1999 with iExalt,
Inc., a Texas corporation incorporated on January 7, 1999, ("iExalt-Texas")
whereby the shareholders of iExalt-Texas acquired an approximate 89% ownership
interest in the Company. The Merger has been accounted for as a reverse takeover
with the Company being the surviving legal entity and iExalt-Texas being the
acquirer for accounting purposes. Concurrent with the Merger, the Company
changed its name from Sunbelt Exploration, Inc. to iExalt, Inc.
On September 19, 2001 the Company received notice that 711.NET, Inc., the
purchaser of certain assets of CleanWeb, filed a petition in bankruptcy and that
the case is pending pursuant to Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the Western District of North Carolina. Notice was
given on March 15, 2002 that the 711.NET Trustee had initiated a proposed sale
and liquidation of the 711.NET assets and subsequently the assets were sold. The
Company recognized impairment charges both at August 31, 2001 and an additional
amount at November 30, 2001. Also included within the nine month period ended
May 31, 2002 is a $105,629 impairment loss related to ListenFirst.com, a
subsidiary of the Company. Management learned that the primary advertising
provider of ListenFirst.com, unexpectedly discontinued operations as of December
31, 2001. Although the Company continues to operate ListenFirst.com, other
advertising providers may not be obtained and the Company may be forced to
discontinue these operations in the near future. Management believes no
additional impairment of goodwill and other intangibles is required at this
time.
24
On November 30, 2001 the Company purchased certain assets of Barnabus
Christian Counseling Network, LLC, an on-line counseling company, for 6,500
shares of the Company's common stock. These assets were consolidated with
PremierCare operations and sold.
On November 30, 2001 the Company sold certain assets of PremierCare
including the assets related to the Rapha and Barnabus Christian Counseling
Network business to UMC Ten Broeck, Inc. ("Buyer"). Excluded from the asset sale
is PremierCare's cash, accounts receivable, and receivable from related parties.
The Buyer did not assume any liabilities except those liabilities outlined in
the agreement. The purchase price was $1,000,000 cash at closing plus deferred
payments equal to one third of any EBITDA generated by the business in excess of
$500,000 annually for a period of two years following closing. Total payment in
deferred purchase price shall not exceed $750,000 on an annual basis. Excluding
shared services, EBITDA generated by Premier Care/Rapha for fiscal year ending
August 31, 2001 exceeded the targeted EBITDA, however, it is not possible at
this time to determine whether future earnings from the PremierCare assets will
be sufficient to exceed the EBITDA threshold, consequently it is not possible to
determine whether the Company will receive any future payments from this
arrangement. As part of the sale, the Company entered into a shared services
agreement, whereby management of the Company will provide consulting services to
the Buyer during the two-year period. In addition, the Company will provide
advertising and marketing services to the Buyer to promote the growth strategy
of PremierCare for a term of not less than three years. Based on the facts and
circumstances existing at the conclusion of the Company's fiscal year end August
31, 2001 and currently existing, management of the Company is of the opinion
that the service contract has an estimated value of approximately $750,000.
Consequently, some of the goodwill, which represented a portion of the excess
cost paid by the Company over the net book value of PremierCare's assets at the
date purchased by the Company was retained on the Company's books, treated as an
intangible asset and is being amortized over a one-year period, commencing
December 31, 2001, on a straight-line basis. This estimate is subject to
significant near term impairment should future operating results of the sold
operating assets of PremierCare not be sufficient to generate an adequate amount
of earnings.
In December 2001, the Company issued 1,000 shares of its common stock and
$5,000 to acquire the assets related to the "Youth Conference" including but not
limited to the trade names and goodwill of the Youth Conference, all software,
or other electronic information and all physical copies of all data bases to
support the bookings and author relationships including URL's, work in progress,
proformas, and contracts.
In December 2001, the Company issued 5,000 shares of its common stock to
settle all remaining issues with the former owners of PremierCare LLC in regards
to the earn out provisions of the original purchase and sale agreement.
In December 2001, the Company's Board of Directors declared a 50 to one
(50:1) reverse stock split of the Company's common stock. Every 50 shares of
iExalt, Inc. common stock, $0.001 par value per share, was converted to one
share of iExalt, Inc. common stock, $0.05 par value, and each shareholder was
entitled to receive a payment for any fractional shares that result from the
split. In addition, all holders of options or warrants to purchase future shares
of the Company's common stock were also reduced on an equal basis of 50 to one.
Accordingly, the Company has presented all equity information as if the reverse
stock split had occurred effective September 1, 2000. The new stock symbol is
IEXA and CUSIP number is 451691208. The Company for voting, distribution, or
other purposes will not recognize certificates representing the pre-split
shares. Old certificates must be replaced with new certificates.
In February 2002, the Company filed a Form S-8 with the Securities and
Exchange Commission to register 240,000 of newly issued shares of the Company's
common stock. The shares were issued as compensation for specific consulting and
legal services.
In February 2002, the Company purchased Preaching Resources, Inc., a
reference magazine for leaders within the Christian community and an on-line
Internet site, for 25,000 shares of the Company's common stock and $9,500. The
Company's acquisition strategy has been to acquire, develop and manage a large
channel of media (print, radio, software and Internet). The acquisition of
Preaching Resources, Inc. is expected to increase the Company's presence and
marketing potential in the Christian media market through its subscriber base.
The founder and editor of Preaching Resources, Inc. will remain as President and
CEO, and will be entitled to cash and stock bonuses based on the achievement of
certain performance objectives. The quarterly cash bonus will be equal to 50% of
25
the net income derived from Preaching Magazine up to the first $40,000 of
annualized net income, and 25% of the next $40,000 in annualized net income, and
10% of all annualized net income greater than the initial $80,000 of annualized
net income, as calculated using generally accepted accounting principles. The
stock bonus will be equal to 1,500 shares of the Company's common stock, $.05
par value, for each 1,000 paid subscribers to Preaching Magazine in excess of
5,000 paid subscribers, as of February 28, 2003.
In March 2002, the Company issued 50,300 shares of its common stock for
compensation for certain consulting services and 20,000 shares of its common
stock as an inducement to an investor to provide funding for the Company through
a convertible debenture.
In May 2002, the Company issued 275,719 shares of its common stock to
various radio stations for costs related to radio broadcast of the Life
Perspectives program and 85,000 shares of its common stock for payment of legal
services to a shareholder of the Company.
iExalt has a limited operating history upon which an evaluation of business
results can be based. The Company is involved in a dynamic and rapidly
developing technology and is attempting to incorporate the tremendous power of
the Internet to market its products and services while seeking to generate
revenues from its internet portal through advertising and sponsorship. Partnered
with its technology efforts, iExalt is also providing products and services
through various channels. The risk and rewards associated with start-up ventures
or early developmental companies like iExalt are often volatile. iExalt has
incurred significant net losses since its inception and expects to continue to
operate at a loss unless its companies can generate revenues in excess of
expenditures at a future date. As of May 31, 2002 iExalt has experienced a
cumulative deficit of $21,725,919 comprised of both cash and non-cash
components. Although management's plans may not be successful, it has been
determined that the Company will emphasize the monetary goal, and to that end,
will execute plans that may increase revenues while simultaneously seeking
acquisitions that add immediate positive value to earnings. The Company's
deficit working capital, its lack of access to the debt and equity markets, and
its small market cap among other things significantly limits the Company's
ability to successfully attract quality merger and acquisition candidates.
Results of Operations
Our operating units are grouped into three business segments based on types
of service and delivery media: (1) Internet & Technology Applications, (2) Print
Publications, and (3) Healthcare Services. Internet & Technology Applications
consist of CleanWeb, iExalt.com (portal), Electronic Publishing,
ChristianSpeakers.com, ListenFirst.com, Global Christian Network,
ChristianArtists.com, Gilmore Marketing, iSermons, the ParentLink, and Life
Perspectives radio. Print Publications consist of Christian Happenings,
Christian Times, Preaching Resources, and Christian Blue Pages. Healthcare
Services consisted of the counseling programs of PremierCare, Rapha and Barnabus
that were sold on November 30, 2001.
Net loss for the nine months ended May 31, 2002 totaled $4,575,129 compared
to a net loss of $4,895,468 for the nine months ended May 31, 2001. The loss for
the nine months ended May 31, 2002 includes significant non-cash expenses
totaling $2,521,618 compared to $2,215,451 for the nine months ended May 31,
2001. The non-cash expenses for the nine months ended May 31, 2002 are related
to impairment of CleanWeb and ListenFirst.com assets, depreciation,
amortization, common stock shares issued for services, stock options or warrants
that were issued, preferential conversion rights, and loss on disposition of
assets. The non-cash expenses for the nine months ended May 31, 2001 were
related to business disposals during September 2000, depreciation, amortization,
common stock shares issued for services, and stock options and warrants that
were issued. Excluding these non-cash expenses, the loss for the nine months
ended May 31, 2002 was $2,053,511 compared to $2,680,017 for the nine months
ended May 31, 2001. Net loss for the quarter ended May 31, 2002 totaled
$1,212,027 compared to a net loss of $1,370,611 for the same quarter in fiscal
2001.
Revenues
Internet & Technology Applications generate revenues from product sales,
speaker fees, artist fees, subscriptions, user fees, and advertising. Revenues
for Print Publications consist of advertising, subscriptions, and ticket service
fees. Healthcare Services revenues were earned from hospitals for providing
services in accordance with our contracts. Total revenues from continuing
operations were $5,138,662 for the nine months ended May 31, 2002 compared with
26
$5,141,950 for the nine months ended May 31, 2001. Decreases in revenues within
the Internet and Technology Applications in total were modest at $153,144;
however, within the individual business units were significant - increases from
ChristianSpeakers of $554,549 (due to an increase in the number of events
played) and revenues from the Regeneration youth worker conference served to
nearly offset the decline from the disposal of Clean Web. The increase in
revenues within the Print Publications segment is primarily due to the
acquisition of Preaching Resources, Inc. and increased advertising sales at
Christian Happenings. Revenue from the healthcare segment for the nine months
ended May 31, 2002 totaled $1,122,808, which is shown net of expenses as loss
from discontinued operations in the financial statements. Revenues for
continuing operations by segment for the two periods are as follows:
Nine Months Ended May 31,
------------------------------------------
2002 2001
-------------------- --------------------
REVENUES Amount Percent Amount Percent
---------- -------- ---------- --------
Internet and Technology Applications $3,501,002 68% $3,654,146 71%
Print Publications 1,637,660 32% 1,487,804 29%
-------------------- --------------------
5,138,662 100% 5,141,950 100%
==================== ====================
Total revenues from continuing operations were $2,112,972 for the three
months ended May 31, 2002 compared with $1,993,595 for the three months ended
May 31, 2001. The increase in revenue within the Internet and Technology
Applications in total was modest at $28,530; however, within the individual
business units was significant - increases from ChristianSpeakers of $269,653
(due to an increase in the number of events played) and revenues from the
Regeneration youth worker conference served to nearly offset the decline from
the disposal of Clean Web. The increase in revenues within the Print
Publications segment is primarily due to the acquisition of Preaching Resources,
Inc. Revenues for continuing operations by segment for the two periods are as
follows:
Three Months Ended May 31,
------------------------------------------
2002 2001
-------------------- --------------------
REVENUES Amount Percent Amount Percent
---------- -------- ---------- --------
Internet and Technology Applications $1,486,906 70% $1,458,376 73%
Print Publications 626,066 30% 535,219 27%
-------------------- --------------------
2,112,972 100% 1,993,595 100%
==================== ====================
Cost of Sales and Services
Cost of Sales and Services for Internet & Technology Applications includes
royalties, direct labor, payments to speakers and artists, Internet
connectivity, and communications costs. Cost of Sales and Services for Print
Publications consists of printing, shipping, delivery, credit card fees and
direct labor. The Cost of Sales and Services was $3,498,249 for the nine months
ended May 31, 2002 compared with $3,725,459 for the nine months ended May 31,
2001. The decrease in Cost of Sales within the Internet and Technology
Applications segment is primarily due to the disposal of Clean Web. The increase
in Cost of Sales within the Print Publications segment is primarily due to the
acquisition of Preaching Resources, Inc. Cost of sales and services from the
healthcare segment for the nine months ended May 31, 2002 totaled $852,478,
which is shown net as loss from discontinued operations in the financial
statements. Cost of Sales and Services by segment for the two periods is as
follows:
Nine Months Ended May 31,
------------------------------------------
2002 2001
-------------------- --------------------
COST OF SALES AND SERVICES Amount Percent Amount Percent
---------- -------- ---------- --------
Internet and Technology Applications $2,361,173 67% $2,673,958 72%
Print Publications 1,137,076 33% 1,051,501 28%
-------------------- --------------------
3,498,249 100% 3,725,459 100%
==================== ====================
27
The Cost of Sales and Services was $1,383,387 for the three months ended
May 31, 2002 compared with $1,486,491 for the three months ended May 31, 2001.
The decrease in Cost of Sales within the Internet and Technology Applications
segment is primarily due to the disposal of Clean Web. Cost of Sales and
Services by segment for the two periods is as follows:
Three Months Ended May 31,
------------------------------------------
2002 2001
-------------------- --------------------
COST OF SALES AND SERVICES Amount Percent Amount Percent
---------- -------- ---------- --------
Internet and Technology Applications $ 972,227 70% $1,092,813 74%
Print Publications 411,160 30% 393,678 26%
-------------------- --------------------
1,383,387 100% 1,486,491 100%
==================== ====================
Selling, General and Administrative
Selling, General and Administrative costs for Internet & Technology
Applications primarily include personnel and advertising costs. Selling, General
and Administrative costs for Print Publications consist of personnel and
communication services. Healthcare Selling, General and Administrative costs are
primarily personnel, travel and transportation. Corporate overhead costs are
primarily professional fees, costs of issuing stock options and warrants and
costs of issuing shares for services.
Selling, General and Administrative costs were $2,217,614 for the nine
months ended May 31, 2002 compared with $4,023,760 for the nine months ended May
31, 2001. Selling, General and Administrative costs for the nine months ended
May 31, 2001 were abnormally high due to stock options granted for services and
marketing. Additionally, $147,857 in SG&A expense for PremierCare and Rapha for
the nine months ended May 31, 2002 was included in loss from discontinued
operations, which is shown net in the financial statements. Selling, General and
Administrative costs by segment for the two periods are as follows:
Nine Months Ended May 31,
------------------------------------------
2002 2001
-------------------- --------------------
SELLING, GENERAL, AND Amount Percent Amount Percent
ADMINISTRATIVE ---------- -------- ---------- --------
Internet and Technology Applications $ 817,474 37% $ 919,702 23%
Print Publications 282,776 13% 234,256 6%
Corporate Overhead 1,117,364 50% 2,869,802 71%
-------------------- --------------------
2,217,614 100% 4,023,760 100%
==================== ====================
Selling, General and Administrative costs were $853,894 for the three
months ended May 31, 2002 compared with $945,078 for the three months ended May
31, 2001. Selling, General and Administrative costs by segment for the two
periods are as follows:
Three Months Ended May 31,
--------------------------------------
2002 2001
------------------ ------------------
SELLING, GENERAL, AND Amount Percent Amount Percent
ADMINISTRATIVE -------- -------- -------- --------
Internet and Technology Applications $315,962 37% $371,835 39%
Print Publications 97,999 11% 73,705 8%
Corporate Overhead 439,933 52% 499,538 53%
------------------ ------------------
853,894 100% 945,078 100%
================== ==================
28
Payroll costs were $1,828,126 for the nine months ended May 31, 2002
compared with $1,685,787 for the nine months ended May 31, 2001. The increase in
payroll costs is primarily due to the addition of salaries for the employees
retained from the sale of PremierCare. $308,751 in payroll costs for PremierCare
and Rapha for the nine months ended May 31, 2002 was included in loss from
discontinued operations, which is shown net in the financial statements. For the
three months ended May 31, 2002, payroll costs were $646,394 compared with
$722,313 for the three months ended May 31, 2001.
Liquidity and Capital Resources
As of May 31, 2002, iExalt had $718,673 in current assets, $4,698,913 in
current liabilities and a retained deficit of $21,725,919. The Company had a net
loss of $4,575,129 for the nine months ended May 31, 2002. Net cash used by
operating activities for the nine-month period ended May 31, 2002 was
$1,314,819.
In August 1999, the Company negotiated a $50,000 revolving line of credit
with a bank. The credit line was increased to $150,000 in December 1999 and
guaranteed by a shareholder without the Company's authority. In late June 2002
the Company agreed to a compromise settlement that resolves all obligations
related to the $150,000 revolving line of credit.
In July 2000, the Company borrowed $550,000 from a bank under a term loan
that was due on June 30, 2001. A shareholder without the Company's approval
guaranteed the note payable. In late June 2002 the Company agreed to a
compromise settlement that resolves all obligations related to the $550,000 bank
loan.
In connection with the acquisition of NetXpress, iExalt, Inc. (Texas), a
subsidiary of the Company, assumed a $350,000 note payable to a shareholder of
the Company (iExalt, Inc. Nevada). Under the terms of this note, the balance
becomes payable on demand when net assets of iExalt, Inc. (Texas) exceed
$5,000,000. Demand for payment has been made, however, as of May 31, 2002, the
net assets of iExalt, Inc. (Texas) do not exceed $5,000,000; therefore,
management does not believe there has been cause for demand of payment. In late
June 2002 the Company agreed to a compromise settlement that resolves all
obligations related to the $350,000 shareholder note payable.
During August 2000, U.S. Sporting Interests, LLC lent the Company $195,000
under a demand note with an 8% interest rate. Demand for payment of the $195,000
has been made. In late June 2002 the Company agreed to a compromise settlement
that resolves all obligations related to the $195,000 demand note.
In February 2001, the Company negotiated two loans, each in the amount of
$90,000. The Company issued 25,714 restricted shares of its common stock in
payment of one of the loans in October 2001. In December 2001, the Company
resolved the outstanding balance of the other loan by issuing 15,000 restricted
shares of its common stock.
On February 16, 2001, the Company agreed to issue $180,000 in the form of a
non-interest bearing convertible debenture. The debenture agreement provides for
conversion of $90,000 of the principal for shares with a conversion price of
$9.00 per share, is secured by existing and future accounts receivable of
PremierCare along with a guarantee from a shareholder, and matured on April 15,
2001. Additional consideration was issued in the form of warrants for the
purchase of up to 20,000 of the Company's common shares as follows; 16,363 at an
exercise price of $5.50 and 3,636 shares at an exercise price of $9.00. The
debenture holder subsequently agreed to extend the due date to July 15, 2002.
The Company has agreed to make twelve monthly payments of $16,164.39 with the
first installment due August 15, 2001 including 14% interest per annum, change
the debenture conversion provision to $5.50 per share, and change the exercise
price related to the warrants for the purchase of up to 20,000 shares to $5.50
per share. In December 2001, the Company repaid the loan in full.
On June 5, 2001, the Company agreed to issue $100,000 in the form of a
convertible debenture. The debenture bears interest payable monthly of 450 of
the Company's restricted common shares, provides for conversion of $25,000 of
the principal for common shares with a conversion price of $4.00 per share,
allows for a placement fee of 2,000 of the Company's restricted common shares if
funds are delivered prior to June 30, 2001, and matures on December 31, 2001.
The conversion was exercised related to the $25,000 and a total of 6,410 of the
Company's restricted common shares were paid to the debenture holder along with
5,150 common shares related to the placement fee and interest. In December 2001,
the Company repaid the loan.
29
On August 14, 2001, the Company entered into $140,000 loan agreement with
Cresson Productions, Inc. Borrowings are to be repaid within six months of
funding and bear interest at 11%. As additional consideration, the Company
issued warrants for 8,400 shares of the Company's common stock at an exercise
price of $3.50 related to transaction placement fees. The warrants are vested
and have a five-year term. The Company has the option to repay the principal and
interest with cash or shares of the Company's common stock which shares will be
valued at the lesser of $10.00 per share or 75% of the average of the stock's
closing price in the previous 5 trading days. The Company ultimately borrowed
$131,000 from the loan facility and in February, 2002 the Company repaid the
loan by issuing 83,161 restricted shares of its common stock to the debenture
holder.
On November 8, 2001, the Company entered into a $50,000 promissory note
agreement. The loan bears interest at 14% and is payable in twelve monthly
installments or in full upon the closing of the PremierCare asset sale. In
December 2001, the Company repaid the loan in full.
On November 12, 2001, the Company entered into a $100,000 promissory note
agreement. The loan bears interest at 14% and is payable in full within one
month or upon the closing of the PremierCare asset sale. In December 2001, the
Company repaid the loan in full.
In December 2001, the Company received $1,000,000 in cash from the sale of
the PremierCare subsidiary assets. The cash was used to finance operations, and
repay certain debt and accounts payable.
On January 16, 2002, the Company agreed to issue $100,000 in the form of a
convertible debenture. The debenture bears interest at 14%, provides for
conversion of the principal and interest for the Company's common shares with a
conversion price of $0.49 and matures on July 16, 2002. The Company has
negotiated a loan agreement that results in the consolidation of this debenture
into a new loan facility as further discussed in Note K.
On February 1, 2002, the Company agreed to issue $80,000 in the form of a
convertible debenture. The debenture bears interest at 8%, provides for
conversion of the principal and interest for the Company's common shares with a
conversion price of $0.50, and matures on August 1, 2002.
On February 14, 2002, the Company agreed to issue $70,000 in the form of a
convertible debenture. The debenture bears interest at 8%, provides for
conversion of the principal and interest for the Company's common shares with a
conversion price of $0.525, settles any and all disputes which may have arisen
out of the issuance of warrants dated September 20, 2000 assigned to Balallan
Limited from Travin Investments, LLC, and matures on November 14, 2002.
On February 20, 2002, the Company agreed to issue $100,000 in the form of a
convertible debenture. The debenture bears interest at 8%, provides for
conversion of the principal and interest for the Company's common shares with a
conversion price of $0.39 and matures on August 20, 2002. Russell Ivy, the
Company's Chief Operating Officer is sole owner of the company that holds the
note. The Company has negotiated a loan agreement that results in the
consolidation of this debenture into a new loan facility as further discussed in
Note K.
On March 12, 2002, the Company agreed to issue $100,000 in the form of a
convertible debenture. The debenture bears interest at 10%, provides for
conversion of the principal and interest for the Company's common shares with a
conversion price of $2.00 or sixty five percent of the closing bid price on the
anniversary date, whichever is lower. The note also provides an option to extend
the repayment providing the Company compensates the holder $2.00 per paid
subscriber, of the Preaching Magazine, in excess of 7,500 paid subscribers as an
extension fee. The note is secured by fifty one percent of the outstanding stock
of Preaching Resources, Inc.
On March 19, 2002, the Company agreed to issue $100,000 in the form of a
convertible debenture. The debenture bears interest at 8%, provides for
conversion of the principal and interest for the Company's common shares with a
conversion price of $0.50 and matures on September 19, 2002. Russell Ivy, Chief
Operating Officer for the Company, is the sole owner of the company that holds
the note. The Company has negotiated a loan agreement that results in the
consolidation of this debenture into a new loan facility as further discussed in
Note K.
30
On March 19, 2002, the Company agreed to issue $100,000 in the form of a
convertible debentureAt May 31, 2002, $65,000 had been received from this
debenture. The debenture bears interest at 14%, provides for conversion of the
principal and interest for the Company's common shares with a conversion price
of $0.50 and matures on April 19, 2002. Russell Ivy, Chief Operating Officer for
the Company, is the sole owner of the company that holds the note. The Company
has negotiated a loan agreement that results in the consolidation of this
debenture into a new loan facility as further discussed in Note K.
On May 14, 2002, the Company agreed to issue $100,000 in the form of a
convertible debenture. At May 31, 2002, $87,864 had been received from this
debenture. The debenture bears interest at 14%, provides for conversion of the
principal and interest for the Company's common shares with a conversion price
of $0.50 and matures on June 14, 2002. Russell Ivy, Chief Operating Officer for
the Company, is also the sole owner of the company that holds the note. The
Company has negotiated a loan agreement that results in the consolidation of
this debenture into a new loan facility as further discussed in Note K.
Our working capital requirements vary from quarter to quarter, depending on
revenues, operating expenses, capital expenditures and other factors. Working
capital is critical to our on-going business and from inception has been
provided primarily through external investment instead of cash flow from the
various businesses. Since inception, we have experienced negative cash flow and
expect this to continue unless significant increases to revenue from operations
or additional profitable acquisitions along with further cost reductions are
realized. The Company is currently dependent upon financing from external
sources to remain in business and is anticipated to remain dependent at least
through the end of fiscal 2002. Consequently, it is not expected that the
internal source of liquidity will improve. We will need to rely upon external
sources for liquidity.
We have entered into subsequent debt arrangements with J.A.K. IV LP as
discussed in Note K to provide additional financing. If we are unable to
maintain adequate working capital in the amounts desired and on acceptable
terms, we may be required to reduce the scope of our presently anticipated
activities and we are not able to assure continuation as a going concern.
Our financial statements are prepared using principles applicable to a
going concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. We may in the future experience
significant fluctuations in our results of operations. Such fluctuations may
result in volatility in the price and/or value of our common stock. Shortfalls
in revenues may adversely and disproportionately affect our results of
operations because a high percentage of our operating expenses are relatively
fixed. Accordingly, we believe that period-to-period comparisons of results of
operations should not be relied upon as an indication of future results of
operations.
FORWARD LOOKING INFORMATION
This report on Form 10-QSB includes "forward-looking statements" within the
meaning of SECTION 27A of the Securities Act of 1933 and SECTION 21E of the
Securities Exchange Act of 1934. These forward-looking statements may relate to
such matters as anticipated financial performance, future revenues or earnings,
business prospects, projected ventures, new products and services, anticipated
market performance and similar matters. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for forward-looking statements. To comply
with the terms of the safe harbor, we caution readers that a variety of factors
could cause our actual results to differ materially from the anticipated results
or other matters expressed in our forward-looking statements. These risks and
uncertainties, many of which are beyond our control, include (i) the sufficiency
of our existing capital resources and our ability to raise additional capital to
fund cash requirements for future operations, (ii) uncertainties involved in the
rate of growth and acceptance of the Internet, (iii) adoption by the Christian
community of electronic technology for gathering information, facilitating
e-commerce transactions, and providing new products, websites, and services,
(iv) volatility of the stock market, particularly within the technology sector,
and the ability to use our capital stock as a currency for acquisitions, (v)
general economic conditions, (vi) acts or threats of war, terrorism and the
effects of such acts of or threats on the Company, (vii) the success or failure
of management's efforts to implement the business strategy, (viii) the ability
to develop profitable operations, (ix) the ability to attract and retain quality
employees, and (x) other risks, which may be described in future filings with
the SEC. Although we believe that the expectations reflected in these
forward-looking statements are reasonable, the expectations reflected in these
forward-looking statements may prove to be incorrect.
31
We cannot guarantee any future results, levels of activity, performance or
achievements. Except as required by law, we undertake no obligation to update
any of the forward-looking statements in this Form 10-QSB after the date of this
report.
Part II - Item 2. Changes in Securities
The following transactions involving unregistered securities occurred
during the three months ended May 31, 2002, in transactions in which the Company
relied on the exemption from registration available under SECTION 4(2) of the
Securities Act of 1933, as amended:
In March 2002, the Company issued 50,300 shares of its common stock for
compensation for certain consulting services and 20,000 shares of its common
stock as an inducement to an investor to provide funding for the Company through
a convertible debenture.
In May 2002, the Company issued 275,719 shares of its common stock to
various radio stations for costs related to radio broadcast of the Life
Perspectives program.
Part II - Item 3. Defaults Upon Senior Securities
The Company was in default on the payment of principal under a $550,000
note payable to a bank. The bank provided forbearance and the Company continued
to accrue interest payments. In late June 2002 the Company agreed to a
compromise settlement that resolves all obligations related to the $550,000 bank
note payable.
Part II - Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT DESCRIPTION OF EXHIBIT
------- ------------------------
2.1 Exchange Agreement among the Company, iExalt, Inc.-Texas, and the
Shareholders of iExalt, Inc.-Texas dated August 12, 1999 (filed
as Exhibit 1.1 to the Company's Current Report on Form 8-K, as
filed with the Commission on September 14, 1999, is incorporated
herein by reference).
2.2 Contract for Sale and Purchase of Wordcross Enterprises, Inc.
between the Company and Wordcross Enterprises, Inc. d/b/a
Christian Happenings dated October 1, 1999 (filed as Exhibit 1.1
to the Company's Current Report on Form 8-K, as filed with the
Commission on October 15, 1999, is incorporated herein by
reference).
2.3 Stock Purchase Agreement between the Company and Christian
Speakers, Inc. dated December 1, 1999 (filed as Exhibit 1.1 to
the Company's Current Report on Form 8-K, as filed with the
Commission on December 16, 1999, is incorporated herein by
reference).
2.4 Stock Purchase Agreement between the Company and First Choice
Marketing, Inc. dated December 31, 1999 (filed as Exhibit 1.1 to
the Company's Current Report on Form 8-K, as filed with the
Commission on January 28, 2000, is incorporated herein by
reference).
2.5 Agreement and Plan of Reorganization, dated June 28, 2000, among
iExalt, Inc. and its Merger Subsidiaries and PremierCare, LLC and
its Direct and Indirect Members (filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K, as filed with the
Commission on July 26, 2000, is incorporated herein by
reference).
32
2.6 Agreement and Plan of Merger, dated June 28, 2000, among iExalt,
Inc., PCII Combination Corp., and PremierCare Investors, Inc.
(filed as Exhibit 2.2 to the Company's Current Report on Form
8-K, as filed with the Commission on July 26, 2000, is
incorporated herein by reference).
2.7 Agreement and Plan of Merger, dated June 28, 2000, among iExalt,
Inc., PBH Combination Corp., and Premier Behavioral Healthcare,
Inc. (filed as Exhibit 2.3 to the Company's Current Report on
Form 8-K, as filed with the Commission on July 26, 2000, is
incorporated herein by reference).
2.8 Agreement and Plan of Reorganization, dated June 30, 2000, among
iExalt, Inc., KCG Combination Corp., and Keener Communications
Group and its Shareholders (filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K, as filed with the Commission on July
27, 2000, is incorporated herein by reference).
2.9 Agreement of Merger, dated June 30, 2000, among iExalt, Inc., KCG
Combination Corp., and Keener Communications Group (filed as
Exhibit 2.2 to the Company's Current Report on Form 8-K, as filed
with the Commission on July 27, 2000, is incorporated herein by
reference).
2.10 Stock Purchase Agreement, dated September 27, 2000, between
iExalt, Inc. and iExalt Financial Services, Inc. (filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K, as filed
with the Commission on October 12, 2000, is incorporated herein
by reference).
2.11 Stock Exchange Agreement, dated October 24, 2000, between iExalt,
Inc. and Ted L. Parker, the sole shareholder of Cleanweb, Inc.
(filed as Exhibit 2.1 to the Company's Current Report on Form
8-K, as filed with the Commission on November 8, 2000, is
incorporated herein by reference).
2.12 Amended and Restated Asset Purchase Agreement, dated February 12,
2001, between iExalt, Inc. and PsyCare America LLC. (filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K, as filed
with the Commission on February 23, 2001, is incorporated herein
by reference).
2.13 Agreement and Plan of Reorganization, dated November 30, 2000,
between iExalt, Inc., GCN Combination Corp. and Global Christian
Network, Inc. and its Principal Shareholders. (filed as Exhibit
2.1 to the Company's Current Report on Form 8-K, as filed with
the Commission on March 13, 2001, is incorporated herein by
reference).
2.14 Plan of Merger, dated November 30, 2000, between iExalt, Inc.,
GCN Combination Corp. and Global Christian Network, Inc. (filed
as Exhibit 2.2 to the Company's Current Report on Form 8-K, as
filed with the Commission on March 13, 2001, is incorporated
herein by reference).
2.15 Plan Asset Purchase Agreement, dated December 12, 2000, between
iExalt, Inc. and Barry Wineroth trustee for the Showcase
Financial Services, Inc. Profit Sharing Plan. (filed as Exhibit
2.3 to the Company's Current Report on Form 8-K, as filed with
the Commission on March 13, 2001, is incorporated herein by
reference).
2.16 Written Consent of Contingent Closing of Global Christian
Network, Inc., iExalt, Inc., David Fritsche, GCN Combination
Corp. & Princ. Shareholders. (filed as Exhibit 2.4 to the
Company's Current Report on Form 8-K, as filed with the
Commission on March 13, 2001, is incorporated herein by
reference).
2.17 Purchase and Sale Agreement dated May 31, 2001 between iExalt,
Inc. and 711.NET, Inc. (filed as Exhibit 2.4 to the Company's
Current Report on Form 8-K, as filed with the Commission on June
8, 2001, is incorporated herein by reference).
2.18 Purchase and Sale Agreement dated November 28, 2001 between
iExalt, Inc. and UMC Ten Broeck. (filed as Exhibit 10.32 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended
August 31, 2001, is incorporated herein by reference).
33
3.1 Restated Articles of Incorporation of the Company (filed as
Exhibit 3.1 to the Company's Quarterly Report on Form 10-QSB for
the quarter ending February 29, 2000, as filed with the
Commission on April 14, 2000, is incorporated herein by
reference).
3.2 Amended Bylaws of the Company as adopted on April 24, 1979 (filed
as Exhibit 3.2 to the Company's Quarterly Report on Form 10-QSB
for the quarter ending February 29, 2000, as filed with the
Commission on April 14, 2000, is incorporated herein by
reference).
3.3 Certificate of Amendment to Articles of Incorporation For Nevada
Profit Corporations filed subsequent to the annual meeting of
shareholders on March 22, 2002. (filed as Exhibit 3.3 to the
Company's Quarterly Report on Form 10-QSB for the quarter ended
February 28, 2002, is incorporated herein by reference).
4.1 Description of Common Stock, $.05 par value per share
(Registration Statement on Form 8-A, dated July 22, 1980,
Registration Number 0-9322, incorporated herein by reference).
4.2 Warrants issued to TCA Investments, Inc. on September 20, 2000
(filed as Exhibit 4.6 to the Company's Annual Report on Form
10-KSB for the year ended August 31, 2000, is incorporated herein
by reference).
4.3 Warrants issued to Travin Partners LLLP September 20, 2000 (filed
as Exhibit 4.7 to the Company's Annual Report on Form 10-KSB for
the year ended August 31, 2000, is incorporated herein by
reference).
4.4 Warrant issued to Thomson Kernaghan & Co., Ltd. on December 11,
2000. (filed as Exhibit 4.10 to the Company's Quarterly Report on
Form 10-QSB for the quarter ended February 28, 2001, is
incorporated herein by reference).
4.5 Warrant issued to Woodcrest Capital II Limited Partnership on
February 23, 2001. (filed as Exhibit 4.13 to the Company's
Quarterly Report on Form 10-QSB for the quarter ended February
28, 2001, is incorporated herein by reference).
4.6 Warrant issued to Woodcrest Capital, L.L.C. on February 23, 2001.
(filed as Exhibit 4.14 to the Company's Quarterly Report on Form
10-QSB for the quarter ended February 28, 2001, is incorporated
herein by reference).
4.7 Warrant issued to Cresson Productions, Inc. on August 14, 2001.
(filed as Exhibit 4.19 to the Company's Annual Report on Form
10-KSB for the fiscal year ended August 31, 2001, is incorporated
herein by reference).
4.8 Warrant issued to James W. Christian on March 21, 2001. (filed as
Exhibit 10.15 to the Company's Quarterly Report on Form 10-QSB
for the quarter ended February 28, 2001, is incorporated herein
by reference).
10.1 Company's Directors' Stock Option Plan (filed as Exhibit 2.1 to
the Company's Current Report on Form 8-K, as filed with the
Commission on September 14, 1999, is incorporated herein by
reference).
10.2 Amendment to the Director's Stock Option Plan as adopted on March
22, 2002. (filed as Exhibit 3.5 to the Company's Quarterly Report
on Form 10-QSB for the quarter ended February 28, 2002, is
incorporated herein by reference).
10.3 Company 1998 Stock Option Plan (filed as Exhibit 2.2 to the
Company's Current Report on 8-K, as filed with the Commission on
September 14, 1999, is incorporated herein by reference).
34
10.4 Amendment to the 1998 Stock Option Plan as adopted on March 22,
2002. (filed as Exhibit 3.4 to the Company's Quarterly Report on
Form 10-QSB for the quarter ended February 28, 2002, is
incorporated herein by reference).
10.5 Employment Agreement dated November 27, 2000 between iExalt, Inc.
and Chris L. Sisk. (filed as Exhibit 10.4 to the Company's
Quarterly Report on Form 10-QSB for the quarter ended February
28, 2001, is incorporated herein by reference).
10.6 Demand Note dated November 22, 2000 issued to Hunter M.A. Carr.
(filed as Exhibit 10.10 to the Company's Quarterly Report on Form
10-QSB for the quarter ended February 28, 2001, is incorporated
herein by reference).
10.7 Demand Note dated November 22, 2000 issued to Morris Chapman.
(filed as Exhibit 10.11 to the Company's Quarterly Report on Form
10-QSB for the quarter ended February 28, 2001, is incorporated
herein by reference).
10.8 Demand Note dated November 22, 2000 issued to Donald Sapaugh.
(filed as Exhibit 10.12 to the Company's Quarterly Report on Form
10-QSB for the quarter ended February 28, 2001, is incorporated
herein by reference).
10.9 Demand Note dated November 22, 2000 issued to Donald Sapaugh.
(filed as Exhibit 10.13 to the Company's Quarterly Report on Form
10-QSB for the quarter ended February 28, 2001, is incorporated
herein by reference).
10.10 Employment Agreement dated February 28, 2001 between iExalt, Inc.
and Russell Ivy. (filed as Exhibit 10.29 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended August 31, 2001,
is incorporated herein by reference).
--------------
*Filed herewith.
(b) No reports on Form 8-K or Form 8-K/A were filed during the three
months ended May 31, 2002.
35
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
IEXALT, INC.
July 12, 2002 /s/ Donald W. Sapaugh
-------------------------
Donald W. Sapaugh, CEO/Chairman/
President (Principal Executive Officer)
July 12, 2002 /s/ Russell Ivy
-----------------
Russell Ivy, Executive Vice President/
Chief Operating Officer
July 12, 2002 /s/ Chris L. Sisk
-----------------------------------------------
Chris L. Sisk, Executive Vice President/CFO
(Primary Financial Officer)
36