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UNITED STATES OMB APPROVAL
SECURITIES AND EXCHANGE COMMISSION ------------------------
Washington, D.C. 20549 OMB Number:3235-0416
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FORM 10-QSB Expires: April 30,2003
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Estimated average burden
hours per response: 32.0
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(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______ to ______.
Commission file number: 0-17978
XPEDIAN, INC.
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(Exact name of small business issuer as specified in its charter)
FLORIDA 59-2720096
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(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
6230 Fairview Road, Suite 102, Charlotte, North Carolina 28210
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(Address of principal executive offices)
(704) 364-2066
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(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report.)
37,175,430 shares of common stock, par value $.01 per share, were outstanding at
May 21, 2001.
Transitional Small Business Disclosure Format (Check one): Yes[__] No[__]
XPEDIAN, INC.
FORM 10-QSB
INDEX
PAGE
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PART I-FINANCIAL INFORMATION
Item 1-Financial Statements (Unaudited)
Balance Sheet - March 31, 2001 (Unaudited) 1
Statements of Loss - Three and Nine Months
ended March 31, 2001 and 2000 (Unaudited) 2
Statements of Cash Flows - Three and Nine Months
ended March 31, 2001 and 2000 (Unaudited) 3
Notes to Financial Statements (Unaudited) 4
Item 2-Management's Discussion and Analysis or Plan of Operation 5
PART II-OTHER INFORMATION
Item 1 -Legal Proceedings 7
Item 2 -Changes in Securities 7
Item 3 -Defaults Upon Senior Securities 7
Item 4 -Submission of Matters to a Vote of Securities Holders 7
Item 5 -Other Information 8
Item 6 -Exhibits and Reports on Form 8-K 8
PART I-FINANCIAL INFORMATION
Item 1-Financial Statements (unaudited)
The financial statements in response to this item are as follows:
XPEDIAN, INC.
Balance Sheet (Unaudited)
March 31, 2001
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 174
Common stock held in escrow 30
Note receivable - consultant 81,664
Advances to Global Vision, Inc. 90,000
Advances to related parties 6,300
Prepaid technology support fees 46,875
Other advances 41,268
Deposits 2,773
Deferred tax asset, less valuation allowance of $1,185,137 -
- -------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 269,084
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $9,416 35,235
OTHER ASSETS
Software licensing agreement 644,370
Security deposits 1,935
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TOTAL OTHER ASSETS 646,305
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TOTAL ASSETS $ 950,624
===============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 192,924
Accrued liabilities 217,968
Loans from related parties 42,768
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TOTAL CURRENT LIABILITIES 453,660
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STOCKHOLDERS' EQUITY
Common stock, $.0001 par value, 100,000,000 shares authorized
and 37,175,430 shares issued and outstanding 3,718
Additional paid-in capital 13,295,951
Accumulated deficit (12,802,645)
Treasury stock, at cost (60)
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TOTAL STOCKHOLDERS' EQUITY 496,964
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 950,624
===============================================================================
(The accompanying notes are an integral part of this financial statement.)
F-1
XPEDIAN, INC.
Statements of Loss (Unaudited)
Nine Months Ended Three Months Ended
March March March March
31, 2001 31, 2000 31, 2001 31, 2000
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EXPENSES
Consulting, professional
and administrative fees $ 446,602 $ 2,626,575 $ 29,882 $ 1,431,807
General and administrative 168,133 67,766 44,403 36,271
Travel & entertainment 18,454 11,653 - 9,953
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TOTAL EXPENSES (633,189) (2,705,994) (74,285) (1,478,031)
OTHER INCOME (LOSS)
Interest income 5,688 - 1,879 -
Commissions 5,712 - 5,712 -
Loss on marketable
securities (44,997) - - -
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TOTAL OTHER INCOME (LOSS) (33,597) - 7,591 -
LOSS FROM CONTINUING OPERATIONS,
BEFORE INCOME TAX BENEFIT (666,786) (2,705,994) (66,694) (1,478,031)
Income tax benefit - - - -
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Net Loss $(666,786) $(2,705,994) $(66,694) $(1,478,031)
===============================================================================
Weighted average shares
outstanding
(basic and diluted) 36,477,759 29,557,016 37,175,430 32,925,089
Net loss per share
(basic and diluted) $ (0.02) $ (0.09) $ (0.00) $ (0.04)
===============================================================================
(The accompanying notes are an integral part of this financial statement.)
F-2
XPEDIAN, INC.
Statements of Cash Flows (Unaudited)
Nine Months Ended
March March
31, 2001 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (666,786) $ (2,705,994)
Adjustments to reconcile
net loss to net cash provided
(used) by operating activities:
Common stock issued for services 305,200 2,534,691
Depreciation 8,666 -
Realized loss on sales of trading securities 44,997 -
Increase (decrease) in accounts payable 143,009 (54,605)
Increase in accrued interest receivable (5,625) -
Increase in prepaid fees (46,875) (7,976)
Proceeds from sales of trading securities 249,891 -
Increase in accrued liabilities 69,815 -
Increase in loans from related parties 36,462 -
Decrease in margin loan to
purchase trading securities (98,094) -
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Net cash provided (used) by
operating activities 40,660 (233,884)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock - 840,000
Loan from related party - 90,667
Loan repayment to related party - (86,531)
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Net cash provided by financing activities - 844,136
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CASH FLOWS FROM INVESTING ACTIVITIES
Advances from (to) related parties (90,400) -
Acquisition of software license - (15,000)
Acquisition of property and equipment (9,347) (14,990)
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Net cash used in investing activities (99,747) (29,990)
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NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (59,087) 580,262
CASH AND EQUIVALENTS - BEGINNING 59,261 1,904
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CASH AND EQUIVALENTS - ENDING $ 174 $ 582,166
===============================================================================
SUPPLEMENTAL DISCLOSURES:
Interest received $ 3,809 $ -
Interest paid $ 822 $ -
Income taxes paid $ - $ -
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Common stock issued for services $ 305,200 $ -
Common stock issued for Software License Agreement $ - $ 10,546,800
===============================================================================
(The accompanying notes are an integral part of this financial statement.)
F-4
XPEDIAN, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2001 and 2000
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information, the instructions to Form 10-QSB and item 310 (b) of Regulation SB.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included. For
further information, refer to the Financial Statements and footnotes thereto
included in the Company's Form 10-KSB for the year ended June 30, 2000, as filed
with the Securities and Exchange Commission.
NOTE B - LOSS PER SHARE
Basic and diluted net loss per share was computed based on the weighted average
number of shares of common stock outstanding during the period.
Item 2. Management's Discussion and Analysis or Plan of Operation
This Quarterly Report on Form 10-QSB (the "Report") contains forward looking
statements concerning, among other things, our expected future revenues,
operations and expenditures, competitors or potential competitors, and licensing
and distribution activity. These forward-looking statements are identified by
the use of terms and phrases such as "anticipate," "believe," "could,"
"estimate," "expect," "intent," "may," "will," "plan," "predict," "potential,"
and similar terms and phrases, including references to assumptions. These
statements are contained in each part of this report and any documents
incorporated by reference.
These forward-looking statements represent our expectations, but actual results
could differ materially from those anticipated by the forward looking statements
due to a number of factors, including;
(i) limited operating history; (ii) need for financing; (iii) dependence
upon a single employee; (iv) reliance on a single license; (v) compliance with
law; (vi) lack of sales; (vii) reliance of revenue growth upon economic
conditions; (viii) competition; (ix) control by majority shareholder;
(x) absence of dividends; (xi) government regulation of the Internet; and the
other risks and uncertainties described elsewhere in this report and in our
Annual Report on Form 10-KSB for the fiscal year ended June 30, 2000, under the
caption, "Factors Affecting Future Operating Results" under
Item 2. - "Management's Discussion and Analysis or Plan of Operation."
We are under no obligation to revise or publicly release the results of any
revision to these forward-looking statements. Readers should carefully review
the risk factors described in other documents the Company files from time to
time with the Securities and Exchange Commission ("SEC").
The following discussion and analysis provides information, which our management
believes is relevant to an assessment and understanding of our results of
operations and financial condition. This discussion should be read in
conjunction with financial statements and notes appearing elsewhere in this
report.
4
MANAGEMENT CHANGES AND DIRECTION
We are attempting to dramatically reduce operating expenses and overhead in an
effort to reduce operating costs. At the same time, we are seeking to recover
all outstanding notes and claims for damages.
In connection with our revitalization, on March 5, 2001, we announced that Clyde
Aycock has assumed the executive positions of president and chairman of our
board of directors. Mr. Aycock is a seasoned corporate executive with 32 years
of commercial banking experience, including the opening of a new Federally
Chartered bank and bringing a failing institution back to sound, profitable
operation.
Mr. Aycock succeeds Dale K. Chapman, who tendered his resignation as president,
CEO and board member. Our board of directors accepted his resignation effective
immediately.
We caution that we are in a precarious position, in that our license agreement
signed by former management has constantly been under threat of revocation, for
fraud and misrepresentation by former management. As a condition to his
acceptance of the position of president, by Mr. Aycock, at a minimum, required
that Commerce Capital Group, LLC consider revising the license agreement and
expand the territory of the license agreement, to at least the four remaining
states (Alabama, Georgia, Mississippi and Tennessee) covered under the existing
agreement. Discussions continue and terms are being resolved and finalized at
this time. The Company intends to make an announcement immediately upon the
conclusion of these discussions.
Consistent with the initiation of our revitalization plans, we will make a
serious commitment to producing revenue for the fourth fiscal quarter. Pursuant
to a meeting of the Board of Directors, we are initiating a revitalization plan
that will embody a complete commitment to producing revenue for at least a part
of this fiscal year. We are concentrating all of our energies and resources on
our primary business objective - online Interactive and Intelligent
Interview(tm) technologies for:
Online Estate Planning
Digital Forms
Electronic Documents
Document Automation
ASP Hosting
Automated Delivery Requests
We are embarking on a new more focused pursuit of our primary business
objectives consistent with the August 2, 1999, license agreement with Commerce
Capital Group LLC.
Additionally, James H. Feeney has resigned as a member of the board of directors
for personal reasons. Feeney's contributions to the board have provided
invaluable insight and direction and he will be missed.
James Kelly has also resigned as a member of the board of directors. Mr. Kelly
stated that he would consider returning to the board at a later date upon
certain conditions. Mr. Kelly's contributions and insights into niche markets
has been valuable, he will also be missed.
We face difficult challenges in restoring investor confidence and marketing and
deploying our business plan, but given the uniqueness of the product and the
fact that there is no direct or comparable competition, we look forward to the
opportunity. We fully intend to pursue new investment capital and expect to
start producing operating revenue before the end of the fourth fiscal quarter.
We are confident in the quality and viability of our product. We fully expect
that our products and services are going to be among the hottest items on the
Internet. In the very near future, we believe that the general markets will
rebound and as financial and legal professional usage of our sites increases we
will be the primary, if not the only source for this technology. In the future,
we will have the ability to develop applications for financial, banking and
legal representatives who will work online with their individual clients,
providing estate and financial services otherwise not available via the
Internet.
As the direct benefactor of sophisticated Web-based technology, we are devoting
all of our resources to the marketing, education and expansion of applications
coming available through the developments of our licensor. We are endeavoring to
resolve a wide variety of complex business applications that generally involve
one to many, one-on-one, in-person interviews. We believe that we have
technology that enhances production, and increases the efficiency of the sales
cycle for a variety of business applications such as: certain dynamic banking,
insurance, legal document, contract, application, loan, real estate, due
diligence and marketing demographic situations. The use of this technology can
provide users with a wide variety of features that enhance their customer
relations, provides more accurate and concise report generation and information
management while lowering costs.
The user experience with this technology is context sensitive and dynamically
drives output to suit the individual's personal needs and objectives. As in the
case of estate planning, we differentiate ourselves from our natural competition
by simplifying the process into a quiet confidential experience free of outside
influences or involvement. This concern cuts across every age bracket, race,
profession and income level, and since approximately 85 to 90 percent of the
U.S. population does not have even a simple will to plan their estate, we expect
that this marketplace has the potential to be very lucrative.
5
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2001, cash and cash equivalents were $174 as compared with
$59,261 at June 30, 2000. We had a deficit in working capital of $184,576 at
March 31, 2001, as compared to positive working capital of $177,691 at June 30,
2000.
We reported losses for the quarter ended March 31, 2001, of $66,694, and will
continue to incur operating losses until our Internet estate planning business
realizes significant revenues and / or other sources of revenue are derived from
outside sources. We have also experienced significant losses from past
operations. We originally had anticipated that our websites and related business
activities would begin producing revenue during the fiscal quarter ended June
30, 2000, and further revised our timetable to realize a small amount of revenue
from operations during the fiscal quarter ended March 31, 2001. However, due to
concerns over the viability of our imminent breach of the license agreement of
August 2, 1999, and continued delays in product launch we are forced us to
revise that estimate to 2001. We may continue to experience losses as we
continue to develop and implement sales and advertising strategies promoting our
financial services products. Our management anticipates that losses should
decrease as time passes due to product sales and resulting revenues.
We will be funding our current expansion into domestic business-to-business
Internet businesses from funds that we derived from equity financing with
outside sources. As we begin to generate revenues, we intend to use both
operating revenues and external sources to fund the future expansion. However,
there can be no assurance that outside financing will be available or that
future revenues will be generated in sufficient amounts or that additional funds
will not be required for the continued expansion of operations. We intend to
meet our short-term and long-term liquidity needs through additional financing
from outside sources. There can be no assurance that we will achieve
profitability or positive cash flow. If we are not successful in raising
sufficient funds, we may be required to limit the scope of our proposed
expansion into domestic business-to-business internet services.
As of the quarter ended March 31, 2001, we had advanced $90,000 toward our
previously announced acquisition of Global Vision, Inc., however, effective
March 1, 2001, we have terminated our relationships with Global - Vision, Inc.
and MCC Insurance Agency, Inc.
RESULTS OF OPERATIONS
Nine months and quarter ended March 31, 2001, compared to nine months and
quarter ended March 31, 2000
Expenses have continued to decrease. The Company reported $633,189 during the
nine months ended March 31, 2001, compared to $2,705,994 during the nine months
ended March 31, 2000. During the quarter ended March 31, 2001, expenses were
$74,285 as compared to $1,478,031 during the quarter ended March 31, 2000. This
decrease is primarily due to the significant decreases in consulting fees. The
expenses reported for the quarter ended March 31, 2000, were almost entirely
made up of fees paid with our common stock registered via an S-8 registration
filed in February 2000, and from which we received no future benefit. The
expenses reported for the quarter ended March 31, 2001, include $8,000 in
director fees that is expected to be paid with our common stock. During this
quarter, expenses have decreased as a result of curtailment of advertising,
marketing, consulting and other professional fees, however expenses are expected
to increase in subsequent periods.
Other Income (Loss) for the nine months ended March 31, 2001, decreased by
$33,597to $(33,597), but increased by $7,591 for the quarter. Interest earnings
during the nine months were $5,688 and commissions were $5,712, but were offset
by $44,997 in losses on marketable securities we owned.
Net loss decreased from $2,705,994 to $666,786 for the nine months and from
$1,478,031 to $66,694 for the quarter. This was primarily due to the decrease in
expenses for those periods as discussed above.
Net Loss Per Share (Basic and Diluted) decreased from $.09 during the nine
months ended March 31, 2000, to $.02 during the nine months ended March 31,
2001, and decreased from $.04 to $.00 during the respective quarters. In the
nine months ended March 31, 2000, the decrease in Net Loss Per Share was due to
the significant increase in issued shares as a result of the license agreement
with Commerce Capital Group, LLC. The issuance of options and S-8 shares for
related parties and consulting services over the last twenty months, and
1,650,000 shares that were issued by former management upon the closing of the
August 2, 1999, license agreement, constitute a substantial dilution ratio of
25%. In the quarter ended March 31, 2001, the decrease in Net Loss Per Share was
due to significant decreases in expenses.
6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We have been told that certain investors in a private placement of our stock
will be filing a request for arbitration to rescind the transaction. As of May
15, 2001, we have not received any official filings seeking the arbitration. We
intend to vigorously defend our position in this matter. We believe we have
sufficient meritorious defenses to any such claims.
Item 2. Changes in Securities
No changes from prior quarter.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders
No matters were submitted to a vote.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
XPEDIAN, INC.
/s/ Clyde Aycock
By: --------------------------------------------
Name: Clyde Aycock
Title: President
Date: May 21, 2001