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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED January 31, 2007
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
Commission file number 0-30499
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VISIONGATEWAY, INC.
(Exact name of Registrant as specified in its charter)
Nevada 90-0015691
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12707 High Bluff Drive, Suite 200,
San Diego, California 92130
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (858) 794-1416
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
As of January 31, 2007 there were 43,126,393 shares of the registrant's
common stock outstanding.
Transitional Small Business Disclosure Format. Yes |_|. No |X|.
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No
VISIONGATEWAY, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2007
INDEX
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
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Condensed Consolidated Balance Sheet at January 31, 2007
(unaudited)............... 3
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Condensed Consolidated Statements of Operations (unaudited),......... 4
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Condensed Consolidated Statements of Cash Flows (unaudited)...........6
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Notes to Condensed Consolidated Financial Statements (unaudited)......7
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Item 2. Management's Discussion and Analysis or Plan of Operations...........10
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Item 3. Controls and Procedures..............................................24
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PART II. OTHER INFORMATION
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Item 1. Legal Proceedings....................................................25
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..........25
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Item 3. Defaults Upon Senior Securities......................................25
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Item 4. Submission of Matters to a Vote of Security Holders..................25
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Item 5. Other Information....................................................25
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Item 6. Exhibits and Reports on Form 8-K.....................................26
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
visionGATEWAY, Inc.
Including the accounts of its wholly owned subsidiaries
[A Development Stage Company]
Condensed Consolidated Balance Sheet
January 31, 2007
Unaudited
ASSETS
Assets
Current Assets
Cash $ 17,190
Deposits 125,040
Loans to third parties 88,279
---------------
Total current assets 230,509
Equipment & Property (net) 15,599
---------------
Total Assets $ 246,108
===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Current Liabilities:
Accounts payable $ 344,166
Deferred Management Salaries & Expenses 1,154,353
Accrued liabilities 476,689
Short Term Note Payable 496,467
Related party payable 1,863,190
---------------
Total Liabilities $ 4,334,865
Stockholders' Deficit:
Preferred Stock - 10,000,000 shares authorized,
$.10 par value per share, Nil outstanding 0
Capital Stock - 75,000,000 shares authorized having a
par value of $.004 per share; 43,126,393 shares issued
and outstanding 172,506
Additional paid-in capital 2,167,127
Deficit accumulated during the development stage -6,414,196
Accumulated foreign currency translation adjustment -14,194
---------------
Total Stockholders' Deficit -4,088,757
---------------
Total Liabilities and Stockholders' Deficit $ 246,108
===============
3
visionGATEWAY, Inc.
Including the accounts of its wholly owned subsidiaries
[A Development Stage Company]
Condensed Consolidated Statements of Operations
For the Three Month Periods Ended January 31, 2007 & 2006
3 mths ended 3 mths ended
January 31 January 31
2007 2006
Unaudited Unaudited
--------------- ---------------
Revenues $ 0 $ 0
Research & development 87,795 45,200
General & administrative expenses 335,509 109,191
--------------- ---------------
Operating loss -423,304 -154,391
--------------- ---------------
Net Loss Before Income Taxes -423,304 -154,391
Current Year Provision for Income Taxes 0 0
--------------- ---------------
Net Loss -$423,304 -$154,391
=============== ===============
Other Comprehensive Income
Unrealized gain(loss) on foreign
Currency translation (net of tax) 1,442 -1,137
--------------- ---------------
-421,862 -155,528
=============== ===============
Loss Per Share - basic and diluted -$0.01 -$0.01
=============== ===============
Weighted Average Shares Outstanding 43,126,393 42,343,218
=============== ===============
4
visionGATEWAY, Inc.
Including the accounts of its wholly owned subsidiaries
[A Development Stage Company]
Condensed Consolidated Statements of Operations
For the Nine Month Periods Ended January 31, 2007 & 2006, and for the
Period from Reactivation [November 30, 2001] through January 31, 2007
9 mths ended 9 mths ended Reactivation
January 31 January 31 through
2007 2006 January 31, 2007
Unaudited Unaudited Unaudited
--------------- --------------- ---------------
Revenues $ 1,950 $ 0 $ 55,356
Research & development 253,363 172,203 1,197,053
General & administrative expenses 1,233,866 481,661 5,272,499
--------------- --------------- ---------------
Operating loss -1,485,279 -653,864 -6,414,196
--------------- --------------- ---------------
Net Loss Before Income Taxes -1,485,279 -653,864 -6,414,196
Current Year Provision for Income Taxes 0 0 0
--------------- --------------- ---------------
Net Loss -$1,485,279 -$653,864 -$6,414,196
=============== =============== ===============
Other Comprehensive Income
Unrealized gain(loss) on foreign
Currency translation (net of tax) -5,679 324 -14,194
--------------- --------------- ---------------
-1,490,958 -653,540 -6,428,390
=============== =============== ===============
Loss Per Share - basic and diluted -$0.03 -$0.02 -$0.17
=============== =============== ===============
Weighted Average Shares Outstanding 43,083,027 42,322,747 37,085,404
=============== =============== ===============
5
visionGATEWAY, Inc.
[A Development Stage Company]
Condensed Consolidated Statements of Cash Flows
For the nine months Ended January 31, 2007 & 2006, and for the Period from
Reactivation [November 30, 2001] through January 31, 2007
9 Months 9 Months Reactivation
Ended Ended through
January 31, 2007 January 31, 2006 January 31, 2007
Unaudited Unaudited Unaudited
---------------- ---------------- ----------------
Cash Flows from Operating Activities
Net Loss -$1,485,279 -$653,864 -6,414,196
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 9,239 8,019 59,050
Stock issued for services 92,500 26,600 862,074
Stock based compensation 373,750 10,000 512,350
Change in current assets -213,320 4,261 -213,320
Increase in current liabilities 489,411 293,311 2,216,487
---------------- ---------------- ----------------
Net Cash Used for Operating Activities 733,699 311,673 2,977,555
Cash Flows from Investing Activities
Purchase of property -11,104 0 -72,680
Cash Flows from Financing Activities
Proceeds from borrowing 764,260 319,148 2,361,463
Additional paid in Capital 0 0 720,156
---------------- ---------------- ----------------
Net Cash Provided by Financing Activities 764,260 319,148 3,081,619
Effect Of Exchange Rate on cash and cash Equivalents -5,679 323 -14,194
Net Increase/(Decrease) in Cash 13,778 7,798 17,190
Beginning Cash Balance 3,412 143 0
---------------- ---------------- ----------------
Ending Cash Balance 17,190 7,941 17,190
================ ================ ================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest 7,269 9,562 32,712
Cash paid during the period for income taxes 0 0 0
Supplemental Disclosure of Non-Cash Financing Activities:
Stock issued to relinquish debt 0 0 244,486
6
visionGATEWAY, Inc.
[A Development Stage Company]
Notes to Condensed Consolidated Financial Statements (unaudited)
January 31, 2007
NOTE 1 ORGANIZATION AND INTERIM FINANCIAL STATEMENTS
----------------------------------------------
(a) Organization
visionGATEWAY, Inc. (the Company) was organized on September 13, 1999, as
Peninsula Web Pages, Inc., under the laws of the State of Nevada. It
essentially became dormant until November 30, 2001, when its name was
changed to visionGATEWAY, Inc. and it acquired two companies. The Company
is now a holding company for the software business now being organized in
these two wholly owned subsidiaries. Both subsidiaries are Australian
corporations; visionGATEWAY Pty Ltd, a distribution and marketing company,
and Software Innovisions Pty Ltd, a software development company. The
consolidated company is an Enterprise Software Solutions company in the
commercialization stage. It is currently growing its planned principal
operations, which is development, distribution, and marketing of business
software solutions for Internet Resource Management. The accompanying
financial statements include the accounts of the Company as well as its
wholly owned subsidiaries. All intercompany transactions have been
eliminated.
On March 4, 2004, the Company combined with Chiropractic 21 International,
Inc., an inactive public Nevada corporation, for the purpose of
recapitalization. The combination is accounted for as a reverse purchase.
The financial statements of the Company have been prepared in accordance
with U.S. generally accepted accounting principles. The following
summarizes the more significant of such policies:
(b) Interim financial statements
The accompanying condensed consolidated financial statements are unaudited
and have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not
include all of the information and footnotes required by accounting
principles for complete financial statements generally accepted in the
United States of America. In the opinion of management, the accompanying
consolidated financial statements contain all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of our
financial position as of January 31, 2007 and 2006. There has not been any
change in the significant accounting policies of visionGATEWAY, Inc. for
the periods presented. The results of operations for the nine months ended
January 31, 2007 are not necessarily indicative of the results for a
full-year period. It is suggested that these unaudited condensed
consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended April 30,
2006 filed with the Securities and Exchange Commission (the "SEC").
(c) Stock based compensation
On May 1, 2006, the Company adopted the fair value recognition provisions
of Statement of Financial Accounting Standards (SFAS) No. 123R,
"Share-Based Payment," using the modified prospective method.
Consequently, for the three and nine months ended January 31, 2007, the
Company's results of operations reflect compensation expense for new stock
options granted and vested under its stock incentive plans during the
three and nine months ended January 31, 2007 and the unvested portion of
previous stock option grants which vested during the three and nine months
ended January 31, 2007. The amount recognized in the financial statements
related to stock-based compensation was $123,250 and $373,750 for the
three and nine months ended January 31, 2007, respectively.
Prior to the first quarter of fiscal year 2007, the Company accounted for
its stock-based employee compensation arrangements in accordance with the
provisions and related interpretations of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." Had
compensation cost for stock-based compensation been determined consistent
with SFAS No. 123R, the net loss and net loss per share for the three
months ended January 31, 2006 would have been adjusted to the following
pro forma amounts:
7
- ----------------------------------------------- ------------------------ -------------------------
Three Months Nine Months
Ended January 31, 2006 Ended January 31, 2006
- ----------------------------------------------- ------------------------ -------------------------
Net loss, as reported $(154,391) $(653,864)
Compensation cost under fair value- based (123,250) (369,750)
--------- ---------
accounting method, net of tax
Net loss, pro forma (277,641) (1,023,614)
Net loss per common share - Basis and Diluted
As reported $(0.01) $(0.02)
Pro forma $(0.01) $(0.02)
- ----------------------------------------------- ------------------------ -------------------------
Weighted average shares 42,343,218 42,322,747
- ----------------------------------------------- ------------------------ -------------------------
The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing method. The Company uses historical
data to estimate the expected price volatility, the expected option life
and the expected forfeiture rate. The Company has not made any dividend
payments nor does it have plans to pay dividends in the foreseeable
future. The following assumptions were used to estimate the fair value of
options granted during the three and nine months ended January 31, 2006
using the Black-Scholes option-pricing model:
2006
Expected life (years) 10
Interest rate 3.0%
Volatility 100%
Dividend yield 0%
(d) Research & Development Costs
Expensing of Research & Development Costs. Research and Development is
expensed as incurred.
NOTE 2 LIQUIDITY/GOING CONCERN
The Company has accumulated losses through January 31, 2007 amounting to
$6,414,196 has minimal assets, and has a net working capital deficiency at
January 31, 2007 raising substantial doubt about the company's ability to
continue as a going concern.
Management plans include continued development of its planned principal
operations and seeking capital either through a private placement or
public offering. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
8
Fund raising is underway through Aspen Capital Partners Limited the
Company's major shareholder in Australia. A major fund raising is nearing
completion with investment banking groups in Australia.
NOTE 3 ACQUISITIONS
As per the Company's 8K filings during prior periods the Company has
signed Heads of Terms agreements in relation to the acquisition of :
- eBanx (UK) Limited
- Centile Limited
- Saturn IQ plc
As part of the terms of the agreement with eBanx, visionGATEWAY had to pay
an initial deposit of GBP65,000 (USD125,040) representing 10% of the
agreed purchase price. The company is completing due diligence and such
expenses have been included in the accounts. When due diligence is
completed, the Company will move to completion of a Purchase Agreement.
As part of the terms of the arrangement with Centile, visionGATEWAY agreed
to a short term loan to Centile of euro 60,000 (USD79,339). This is a
short term loan repayable within 12 months. Currently the Centile
acquisition is still undergoing due diligence.
The Saturn IQ acquisition is also undergoing due diligence and a purchase
agreement is now expected to be completed before mid April 2007.
NOTE 4 ACCOUNTS PAYABLE
Accounts payable has previously been presented in our accounts as one
number. We are now showing separately that part of payables that
represents amounts owing to executive management for unpaid salaries and
expenses and then the balance of accounts payable.
NOTE 5 PRIOR PERIOD ADJUSTMENTS
During the review of accounts for fiscal year 2006, the Company realized
that the shares granted to a non-executive Director for the first and
second quarters of fiscal year 2006 had not been accounted for in those
quarters. However, they were reflected in the Company's 10KSB filing and
are now shown separately for the nine months to end January 2006 quarter.
The company adjusted the appropriate expense account and "additional paid
in capital" for the July 2006 and October 2006 quarters accordingly.
The amended Accounts for the nine months to January 31, 2006 are as
follows :
Account As originally stated Restated
- -------------------------------------------- -------------------- ---------
Directors Expense/General and Administrative NIL $ 36,600
Net Loss for nine months -$617,264 -$653,864
9
Item 2. Management's Discussion and Analysis of Financial Condition and Plan of
Operations
Forward-Looking Statements
Statements made in this Form 10-QSB, particularly in this section, which are not
purely historical and statements preceded by, followed by or that include the
words "may," "could," "should," "expects," "projects," "anticipates,"
"believes," "estimates," "plans," "intends," "targets," or similar expressions,
are forward-looking statements with respect to the goals, plan objectives,
intentions, expectations, financial condition, results of operations, future
performance and business of the Company.
Forward-looking statements involve inherent risks and uncertainties, and may be
dependent upon important factors (many of which are beyond the Company's
control) that could cause actual results to differ materially from those set
forth in the forward-looking statements, including the following: general
economic or industry conditions, either nationally, internationally or in the
communities in which the Company conducts its business, changes in the interest
rate environment, legislation or regulatory requirements, conditions of the
securities markets, the Company's ability to raise capital, changes in
accounting principles, policies or guidelines, financial or political
instability, acts of war or terrorism, other economic, governmental, regulatory
and technical factors affecting the Company's operations, products, services and
prices.
Accordingly, results actually received may differ materially from results
expected in these statements. Forward-looking statements speak only as of the
date they were made. The Company does not undertake, and specifically disclaims,
any obligation to update any forward-looking statements to reflect events or
circumstances occurring after the date such statements were made.
Overview
Description of Business
- ------------------------
visionGATEWAY is a software development & distribution company with R&D group in
Australia, distribution in USA, Europe, Australia/New Zealand and existing
customers across three continents. Although total sales during its last two
fiscal years were minimal, the Company considers itself in the commercialization
stage of its development because of its focus on building its Distribution
channels and markets for its products.
The company provides an extensible platform of software components to power the
`Next Generation Network' (NGN). These components currently include:
* Internet Resource Management & Control
* Secure Mail & Secure Data Sharing
* Voice over IP
The visionGATEWAY NGN platform allows Carriers and other Service Providers to
offer their enterprise, small-business and residential customers
revenue-generating products from Triple Play and beyond.
visionGATEWAY intends to be the first one-stop shop for software required to
build a Next Generation Network (NGN)* and beyond.
*An NGN is the natural progression of the Internet from a simple
file-sharing system to a means of delivering Triple Play (broadband,
voice and media) applications. No other company yet offers a complete and
comprehensive set of applications needed to build an NGN and also offers
a set of value-added NGN applications to enterprise, business and
residential customers.
The company has identified a number of products that it wishes to add to its
product offering and that can either be acquired or licensed on a highly
cost-effective basis. These products will substantially enhance the company's
position as the one-stop shop for Next Generation Network software. They
include:
- integrated encryption and digital rights management system
10
- advanced TV Application Manager for IPTV and hybrid digital TV
solutions
visionGATEWAY is continuing the building of a Global Distribution Network using
its proprietary business model to grow sales through strategic partnerships -
these include the Avnet Partner Solutions distributorships for United Kingdom,
North America, and Australia/New Zealand, as well as joint solution distribution
partnerships with Saturn IQ and NetIntelligence in the UK, Patriot Techcorp in
the USA, and Centile in UK/France.
visionGATEWAY (through its Australian subsidiaries) has been operating for a
total of six years, commencing in 2000. The Company's first product
("INTERScepter(TM)") is an Internet Resource Management & Security solution. It
is an underlying "platform" to manage and control all IP usage. The initial
INTERScepter versions have focused on an enterprise business solution that helps
to improve Company earnings by assisting organizations in understanding,
managing and exploiting Internet usage and valuable resources, including
bandwidth, systems and employee productivity. The INTERScepter(TM) solution
empowers managers to effectively control, schedule and utilize costly Internet
resources, while placing responsibility on users to self manage and modify their
Internet usage behavior.
The Internet is an ever growing global communications and commerce medium.
Traditional organizations (both government and corporate) continue to
demonstrate a significant growth in their need for integration of Internet based
technologies into their core business and marketing needs. As a result, chief
operating and financial officers and managers of business units are faced with
three very compelling issues:
1. Managing large amounts of information from the Internet while
meeting their corporate and government obligations.
2. Measuring and managing the growing non-productive use of the
Internet by staff at work, who use the Internet while at work for
non-productive, personal purposes.
3. Maintaining secure and private internet access for staff, while
reducing risk and liability relative to internet usage.
The Company recognized a market opportunity for the development of software
solutions to identify and redirect non-productive use of staff employees at work
to profitable uses of their time and Internet availability, while maintaining
security and privacy. Based on the Company's preliminary investigations of
market demand for this type of product, it believed that moving forward with the
INTERScepter (TM) project was more than justified.
visionGATEWAY's product innovation for its INTERScepter solution continued with
the release of the Linux platform version in late 2004, and in December 2005
reached a significant milestone with the release of a version for the Home/SOHO
markets, as well as providing many other technical and functional innovations
that enhance saleability.
Designed so it can be embedded onto ADSL/Cable Modems and Wired/Wireless
routers, INTERScepter@Home is specifically targeted to the home, home office and
small business market segments. INTERScepter@Home is engineered using the NG
platform that has been developed by the R&D team as the foundation for all
future INTERScepter product variations. It is further facilitated by not only
providing a single system solution, but also providing a "solution on a chip" to
be OEM'd with communications systems manufacturers and communications bandwidth
suppliers, particularly the ISP market. Discussions with systems manufacturers
have commenced in all regions.
New synergistic products from 3rd parties are regularly being evaluated and
existing contracts have been established with the following for distribution in
our regional markets:
o Saturn IQ - safe and secure email and document storage services
available online and from your desktop using software and encryption
components
11
o NetIntelligence - Internet Security products that provide
comprehensive protection from the threats that the use of the
internet and email can bring for both the home and business.
o Patriot Techcorp - provision of technology solutions to address
compliance with the global legislation issues pertaining to
Anti-Money Laundering (AML), Anti-Terrorism, the USA PATRIOT Act,
Office of Foreign Assets Control (OFAC), the Bank Secrecy Act (BSA),
and other related domestic and foreign governmental regulatory
requirements. These applications, particularly the new Global
Patriot solution, provide unique opportunities in the Financial
Services market place for visionGATEWAY and all its solutions.
Although sales have been minimal to date, the Company has built an international
presence. Its core software research and development team is based in Brisbane,
Australia. The Company's registered office is located in San Diego, California.
New sales opportunities are also being evaluated in Asia, as well as the United
Kingdom. New distribution channels are being negotiated in Australia and New
Zealand through various strategic partners as a result of the release of the
latest NG platform for INTERScepter and the ability to sell as an "appliance".
Sales and Marketing
Sales revenue has minimal over the last two years as the Company has built its
distribution channels and also sought to prove the strength and viability of the
product in various market regions and market segments. Additionally during FY
2006, as a result of market feedback, the company sought to complete version 3
of the INTERScepter product with a focus on :
o Improving technical capabilities by using Linux as the core
operating system platform
o Enhancing scalability by providing a solution for the Home market
o Improving installation flexibility by building a single system
"appliance" version
The first two elements were completed during FY 2006, while the third was
completed early in FY 2007.
INTERScepter (TM) is marketed and sold as a business tool, not as a technical
product, although it is, in the Company's opinion, technically robust and
innovative. The sales proposition is primarily commercial and is targeted at
senior management, not solely the IT department. The Company's business model is
to use outsourced sales channels and to offer meaningful margins to its channel
partners, which will encourage early and considerable commitment. The value
chain in the product also provides substantial service revenue opportunities to
channel partners. The Company offers significant product breadth to meet the
holistic requirements in Internet Resource Management.
The Company's strategic decisions, dependent on available capital, are based on
rapidly building on an international scale. Three key sales channels will be
utilized: strategic distribution partners, large technology resellers and niche
technology firms. Additionally, the Company has set a price point and payment
model that we believe will encourage product trial and adoption. This product
distribution business model also facilitates further growth through the
introduction of complementary products, such as those that have now been put in
place.
The majority of the Company's revenues will come from product licenses. As
described above, the Company's first product is the INTERScepter (TM) software
solution. It is sold through a network of distribution channels consisting of
technology resellers and other distribution outlets, which the Company refers to
as its "channel partners." It provides measurable added value to resellers with
only marginal overheads.
Pricing for the INTERScepter (TM) is currently based around a License Pack
followed by an ongoing Update Pack. The pricing is based on the number of
workstations accessing the Internet rather than the number of users in an
organization. Special pricing and bundling has been put together for the new
Home product and for the specialist VoIP module.
12
Channel Partners are contracted to the Company through a Channel Partner
Agreement which sets out the terms and conditions of the arrangement, including
responsibilities of the parties, product pricing, volume discounts, and channel
partner commissions which vary according the value of product sold in a calendar
year.
INTERScepter - The Internet Resource Management (IRM) Solution
The Internet impacts every aspect of today's busy organization so it is no
surprise that an organization can benefit from deploying INTERScepter (TM) to
manage Internet resources.
Internet Resource Management "(IRM)" is the Company's approach to helping
organizations maximize their return on investment in Internet services. Unlike
simple content filtering solutions, IRM calls for a more holistic approach to
understanding and managing the constellation of Internet resources in any
organization.
Most organizations lack a comprehensive understanding of what Internet resources
are being used and how, making it all but impossible to ensure they are being
used productively, or to predict or plan for their growth. With IRM, an
organization can monitor and report usage, set and enforce policies, and improve
productivity.
Competition
The Company does not believe that it has any direct competition with respect to
its INTERScepter (TM) software program and it is not aware of any competitor
offering the same complete solution with the full elements of the software for
sale.
There is, however, substantial indirect competition from products which address
issues of immediate concern to clients such as Internet security and violation
of web resources. These products address "bad behavior" on network usage.
Policing activities tend, however, to intimidate users and bad behavior goes
underground and re-offending will generally occur. INTERScepter (TM) assists
staff to police their own behavior and guides them to do what is more efficient
for the Company.
Competition is also realized from filtering software. Filters eliminate
offending materials from the web but the INTERScepter (TM) approach is one of
self management rather than forced elimination.
Other products which provide reporting and presentation of gathered statistics,
analytics and performance measurement also offer competition for the Company's
product.
There are other competitors in the market as well, however, they mainly supply
the home market for parental control of the Internet. Some other products are
hardware based and cover the aspect of INTERScepter (TM) that controls bandwidth
usage. In the Company's opinion, no other product has the same total coverage as
INTERScepter (TM) .
It must, nevertheless, be considered that competition in the business software
industry is intense, with many companies making entries into the market every
day. Most of the competitors in the industry are very large businesses with far
greater resources than the Company in terms of capital, size and number of
employees. The Company's growth will depend on many variables not in its
control, including the ability to obtain additional funding for its operations
and development plus many other unforeseen economic and competitive conditions.
Sources and availability of raw materials and the names of principal suppliers
The Company is a producer of software and is not dependent on any one supplier
for raw materials for its software products. The underlying technologies are
built on publicly available components that are used in conjunction with other
software products.
Dependence on one or a few customers
13
The Company has outsourced its sales channels and has established or is in
process of making alliances with distribution channels in numerous locations
and, consequently, most of its sales are generated from these various sources.
At this time there is no single reseller or group of resellers upon which the
Company is dependent.
Patents, trademarks, licenses, franchises, concessions, royalty agreements or
labor contracts, including duration
The Company has registered product trade marks, trade names and logos in
Australia and is now in the process of registering these items in the U.S. and
Europe. The Company is dependent on its trademark for INTERScepter (TM) to
distinguish its software from other products in the market and to create a
market identity for its product. Patents are under consideration for version 3
of INTERScepter (TM) .
At the present time there are no patents in effect upon which the Company is
dependent. There are also no concession agreements, franchises, licenses,
royalty agreements or labor agreements in effect at this time.
Government approval
The Company is not subject to direct governmental regulation in the conduct of
its business.
Effect of existing or probable governmental regulations on the business
At the present time, based on the Company's business as now conducted, direct
governmental regulation of its business is not anticipated.
The Company is, however, subject to the Sarbanes-Oxley Act in the conduct of its
business as follows:
Sarbanes-Oxley Act
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002.
This Act imposes a wide variety of new regulatory requirements on publicly-held
companies and their insiders. Many of these requirements will affect the
Company.
The Sarbanes-Oxley Act has required the Company to review its current procedures
and policies to determine whether they comply with the Sarbanes-Oxley Act and
the new regulations promulgated thereunder. The Company will continue to monitor
its compliance with all future regulations that are adopted under the
Sarbanes-Oxley Act and it will take whatever actions are necessary to ensure
that it is in compliance.
This Act may also result in higher operating costs to comply as well as higher
professional fees.
The estimated amount of capital spent during each of the last two fiscal years
on research and development activities.
The estimated amount spent on research and development in the last two fiscal
years is approximately $570,000. All of these expenses have been borne by the
Company.
Costs and effects of compliance with environmental laws (federal state and
local)
The Company has not had any significant cost or effect with respect to
compliance with environmental laws, either in the U.S. or in Australia.
Number of employees and number of full time employees
14
As of January 31, 2007, the total number of employees of the Company is ten (10)
full-time employees of which nine (9) were engaged in production and sales
activities and one (1) was engaged in administrative operations. The Company
also uses the services of numerous part-time employees or contract service
employees in the areas of product development, accounting and sales functions.
These numbers have begun increasing since April 30, 2006 after the slowdown last
year as the company restructured its business strategies. During 2007 the
Company anticipates that it will be increasing its full-time work force as
needed to support its proposed global growth strategy, dependent on future sales
prospects, the availability of capital and the outcome of proposed acquisitions.
Reports to Security Holders
The Company will voluntarily deliver to all Security holders an annual report
which will contain audited financial statements.
The Company regularly files reports with the Securities and Exchange Commission
(the "Commission"). These reports include annual reports on Form 10-KSB,
quarterly reports on Form 10-QSB and current reports on Form 8-K.
The public may read and copy any materials the Company files with the Commission
at the Commission's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information about the Public Reference Room of the
Commission by calling the Commission at 1 800 SEC 0330. The Commission also
maintains an Internet site that contains reports, proxy and information
statements and other information regarding issuers that file electronically that
may be accessed at the Commission's web site address: http://www.sec.gov.
Management's Discussion and Analysis of recent activity and Plan of Operation
The following discussion should be reviewed in conjunction with our consolidated
financial statements and the related notes and other financial information
appearing elsewhere in this report. In addition to historical information, the
following discussion and other parts of this document contain forward-looking
information that involves risks and uncertainties. Please refer to the section
entitled "Forward-Looking Statements" at the beginning of Item 2 of this Form
10-QSB.
The January quarter saw the company continue the execution of its updated
business strategy in anticipation of new funding being finalized by early 2007.
This resulted in a lift in expenditures compared to previous quarters. Apart
from the requirement since May 1, 2006 to reflect the compensation expense for
the granting and vesting of existing options ($123,250 for the quarter), much of
the additional expenditure relates increased marketing with the release of new
product versions, increased travel relating to the proposed acquisitions, and
expenses associated with the funding and M&A activities that are underway. We
also began increasing staffing levels to prepare for the full launch of version
3 of INTERScepter. The company is also reviewing its options from a marketing
and investor relations perspective. From a sales and distribution perspective,
the Company focused on growing our partnerships in the USA and UK with the focus
on leveraging from its existing distribution arrangements as outlined below as
well as promoting the company and product in key market segments. The company
has also appointed key senior managers to help drive these opportunities in the
USA and UK. A key focus from a development perspective has been the completion
of the key phases of INTERScepter Version 3. This has seen the release of the
INTERScepter Home/SOHO and Enterprise "appliance" versions which are being
presented to distributors and communications systems manufacturers for OEM
opportunities. The quarter also saw the introduction of new products through
third party partnerships, focused on internet/email security and compliance, and
more recently Voice over IP (VoIP).
The Directors also noted that, the due diligence was continuing in relation to
the proposed acquisitions. It is considered likely that the first of these will
be completed in the next quarter.
Plan of Operation
15
Synopsis of Business Strategy and Status
visionGATEWAY, Inc. (VGWA) is continuing to execute on its updated business
plan. The Company's plan combines organic growth and acquisitions creating
greater opportunity for revenue and sales growth through an enhanced corporate
and solution package :
>> The company has released the new "appliance" version of INTERScepter
for enterprise and SMB markets;
>> The company has released the new "solution on a chip" box version of
INTERScepter for Home and SOHO (Small Office Home Office) markets -
OEM arrangements are under negotiation;
>> The company is gaining clients and sales plus new products/services
through acquisitions;
>> The company has added additional synergistic products in secure mail
and secure data sharing, internet security, encryption technologies
and VoIP;
>> The company has expanded market coverage to UK and South Africa as
part of our Global Distribution Network;
>> the Saturn IQ acquisition in the UK will bring a portfolio of
revenue generating clients. It is predicted that the immediate sales
opportunities can be converted to revenue of an estimated
(pound)500,000 over the first six months after completion of the
acquisition;
>> The company has commenced our strategic move into China, and
particularly the VoIP market there.
visionGATEWAY looks to provide, for the companies that it acquires, the ability
to obtain the funding they require more cost effectively, strategic leadership
and positioning plus enhanced (global) growth potential. VGWA's objective for
the long term is to grow a successful global technology company.
The funding options the Company is progressing facilitate these objectives, and
the strategic partnerships the Company has and is putting in place provide the
capability to accelerate market access and sales growth.
Funding
The visionGATEWAY business over the last two years has focused on product
development and building its market positioning, presence and global
distribution channels. In the last twelve months, the key aspects of expenditure
have been:
|_| Building distribution and reseller networks and validating product
acceptance in USA, UK, Australia and New Zealand;
|_| Finding and evaluating synergistic 3rd party products to bring to
the distribution mix;
|_| Development of INTERScepter version 2 with significant enhancements
in functionality and a new underlying platform in Linux for the
iGateway component of the product; and
|_| Development of INTERScepter version 3 to address the Home and SOHO
markets.
|_| Development of INTERScepter version 3 single box "appliance"
capability.
Since early 2006, the Company has focused on arranging major funding that will
enable it to take full advantage of the platform that has been built through its
product development and global distribution channels. This funding will be used
to drive sales in global markets with a key focus on the U.S. and UK. It also
enables the Company to focus on some new product initiatives that are aligned to
market needs and sales potential.
In the twelve months ended January 2007, with a cutback in activities,
visionGATEWAY has been able to acquire investment and loan funds for working
capital of approximately US$750,000 from existing and new investors. This has
enabled us to pay key operational expenses in Australia and USA, as well as
travel and marketing expenses related to the development of distribution, M&A
and investor efforts in U.S., UK and Australia/New Zealand.
16
Early in April 2006 visionGATEWAY announced that it had entered into a Standby
Equity Distribution Agreement with Cornell Capital Partners, LP ("Cornell").
Under the agreement, Cornell would provide up to $15 million of funding that can
be accessed at the Company's discretion over a 24-month period by issuing common
stock of the Company, pursuant to the conditions and limitations thereunder. Any
sale of common shares to Cornell would be based on a 3% discount to the lowest
daily volume weighted average price for the five trading days immediately
following the advance notice date. Proceeds received by the Company would enable
it to execute on its established sales growth strategy.
Any sale of common stock under the agreement would occur pursuant to an
effective registration statement, which the Company would establish prior to
selling any shares of common stock that it may sell under the agreement. This
registration statement is yet to be filed and the SEDA facility is yet to be
activated.
While this funding structure provides flexibility to access additional equity
capital at selected times when additional capital or liquidity is desirable to
drive our growth, it needs to be done at a time that is appropriate taking into
account all business and market factors. The Company believes the timing and
market factors have not yet been appropriate to access this facility.
The Company has consequently revised its funding strategy moving forward. The
key elements of the suggested funding strategy as outlined below are clearly
aligned to the updated Corporate Strategy outlined in this report. The company
is seeking current round financing of up to US$10m to meet the key requirements
of driving sales, particularly through the latest "appliance" version 3 of
INTERScepter, through our strategic partnerships in the USA, UK, Europe, South
Africa, Asia and Australia/New Zealand, as well as providing additional working
capital for specific revenue related development projects, and to facilitate the
completion of the acquisitions that are currently underway.
Target Acquisitions
The Company believes these prospective transactions will add real value to the
Company in the future and that they create the clear emerging leader in our
sector. As a combined company, the Company would have a broad product line and
technology portfolio, enabling it to provide unparalleled products and support
for its customers. In addition, the Company believes it will have an increased
ability to address complementary high-growth markets.
As the Company's markets continue their rapid growth, it expects that these
markets will become more attractive to larger players. The combined forces of
the companies VGWA bring together increase its abilities to face these
competitive challenges by creating a more efficient and financially stronger
company, and by increasing the value the Company brings to its customers.
This combination promises to provide strategic advantages that are unavailable
to the individual companies on a standalone basis. The combination would
directly benefit the Company's customers through the strengthening of its
customer support organizations and its ability to tailor new products to service
all segments of the Company's rapidly growing market segments. Furthermore, by
expanding the Company's engineering capacity and broadening its technology
portfolio, it will be able to accelerate the development of products for
complementary markets. The Company's competitive position is further enhanced by
increasing its combined financial strength, and by expanding its management
expertise and experience.
The Company has identified significant synergies among the targeted companies,
such that the acquisition is accretive to the Company's earnings commencing in
the first full quarter of combined operations, excluding one-time costs
associated with the transaction(s). The Company is committed to achieving the
synergies it has identified while enhancing its competitive position and
momentum in the marketplace.
The combined company will continue to be headquartered in the United States. It
will also have a significant R&D presence in Australia, as well as other centers
depending on the acquired companies - most likely Europe. The combined company
would also have sales and support offices in USA, Australia, and Europe.
17
Saturn IQ Acquisition
In July, 2006, visionGATEWAY announced the signing of a Heads of Terms to
acquire Saturn IQ and its innovative super fast encryption and media protection
technology. The transaction will, for the first time, bring together management
of internet resources, delivery of media, messages and VoIP and cutting-edge
protection technologies in a unique combined offering to the global IT and
Telecom markets. The acquisition adds both revenue-generating customers and a
specialized security component to visionGATEWAY's expanding product suite.
The acquisition is expected to be completed during April 2007, after which time
Saturn IQ will become a wholly owned subsidiary of visionGATEWAY.
The acquisition of Saturn IQ provides VGWA with an established secure email
product, IQ Confidential, which has generated revenues in the UK and is creating
significant interest in the US. The technology will complement VGWA's existing
offering of internet resource management products and enhance the Company's
offering to VoIP customers.
In addition to IQ Confidential, Saturn IQ has developed a totally new modular
concept in protection technology comprising unique integrated encryption,
digital rights management, and digital fingerprint technology. Saturn IQ's super
fast encryption has demonstrated high strength streaming protection above 200
Mb/s on standard PCs and has immediate applications in the music, digital cinema
film, video, and games distribution sectors.
Digital property security is a hot topic at the moment, as the authorities are
filing more and more legal charges against copyright pirates, peer to peer
networks and users. Unwarranted, unauthorised and swiftly growing snooping
activities are alarming email customers and collaborative workers. visionGATEWAY
now has an opportunity to be suppliers of a critical element in the protection
of both privacy and copyright on the Internet.
With the acquisition of Saturn IQ, visionGATEWAY will swiftly expand all
customer facing operations globally as the Company combines sales teams and
distribution networks. Following the acquisition, the companies would also
realize significant cost savings by integrating their R&D teams together in
visionGATEWAY's R&D Centre in Australia. Saturn IQ will also be renamed
visionGATEWAY plc, a UK company, and become the Company's key location from
which to launch its new sales initiatives into the entire EMEA region.
Focus on VoIP as a Market Driver
In the first half of 2006, visionGATEWAY announced a number of special
initiatives in the VoIP marketplace including an initial distribution agreement
with one of the most innovative VoIP software providers in France. Discussions
are underway to extend these arrangements and product bundling to other VoIP
software providers in the near future.
These arrangements further strengthens visionGATEWAY's position in the growing
VoIP Solutions marketplace and delivers VoIP Solutions through visionGATEWAY's
distribution channels in USA, UK, Australia/NZ, China and elsewhere in Asia. It
also extends the partnership visionGATEWAY already has to deliver a Secure VoIP
solution to the market through the integrated bundling of visionGATEWAY's
INTERScepter VoIP Module with VoIP Application Servers.
The VoIP software products enable Telecommunication Operators (GSM, Wireless),
Media Companies and Service Providers to be at the forefront of VoIP and
multimedia communications, whilst endowing enterprises and residential end users
with top quality IP solutions.
The introduction of the Secure VoIP Module in conjunction with visionGATEWAY is
already creating significant interest in the marketplace. Until now the VoIP
market has been lacking a VoIP Application server with inherent security built
in that can monitor SIP sessions as well as dynamically control open ports on a
local network. The combination of the VoIP APP server with the INTERScepter
security module resolves these issues. This will provide visionGATEWAY and VoIP
software vendors a significant competitive advantage for increasing revenue
potential in this rapidly growing market.
18
visionGATEWAY sees that Internet Resource Management and Security, in
conjunction with applications such as VoIP, are quickly becoming recognised as
top priorities of many organizations. visionGATEWAY's INTERScepter(TM) solution
is designed to alleviate the escalating problems associated with VoIP security
in business, education and government marketplaces. This product will be
available as an enterprise business as well as a carrier solution that helps to
protect internal company networks from outside security threats. The
INTERScepter(TM) solution empowers IT and Telecom managers to effectively
control, schedule and monitor their VoIP Application sessions. The security
aspects of the INTERScepter solution provide expanded benefits to the management
of VoIP technologies within an enterprise as well as at the core of a network.
This product, in conjunction with VoIP software vendors, will provide a very
cost-effective solution for secure VoIP applications to vertical market segments
through ISP's and Telcos as well as distribution channels.
China VoIP Acquisition
Below is an update on the Company's latest initiative that involves a strategic
move into the Chinese VoIP market.
During 2006, VGWA announced the signing of a Heads of Terms with eBanx (UK)
Limited relating to the acquisition of the business of eBanx by visionGATEWAY,
Inc. In order to meet its strategic growth opportunities in the VoIP market,
specifically in China, visionGATEWAY is finalising contractual agreements to
complete the acquisition of eBanx, whereby eBanx will become a wholly owned
subsidiary of visionGATEWAY, Inc.
eBanx (UK) Limited is a Scottish company that was set up over 4 years ago
specifically to hold a 49% share in Beijing Huaying, a Chinese company that was
issued the first VoIP license in Beijing. Beijing Huaying now also owns other
VoIP licenses and has the rights to resell China Telecom, China Unicom and China
Netcom services. It also has the right to develop/acquire its own VoIP
technology and sell that in the Beijing area. Beijing Huaying has also been
approved for a China-wide national VoIP license subject to further
capitalization.
China is, of course, the world's biggest telephone and telecoms market with over
400 million mobile users - more than the USA, Europe and Australia combined -
and a rapidly growing high-speed fiber-to-the-building Internet. This recent
agreement to purchase 49% of Beijing Huaying simultaneously gives VGWA access to
the huge potential of the Chinese telecoms market as well as a base inside China
through which it can sell and distribute existing and future visionGATEWAY
products. Translation of all visionGATEWAY products into Chinese has begun.
Research & Development
The key focus of Research & Development over the last twelve months has been the
development of INTERScepter version 3. This version not only addresses the Home
and SOHO markets, but also provides a single box "appliance" approach, database
independence and significant technological advantages.
As a result of global exposure to the visionGATEWAY Business Model through
investor forums and reseller networks, there is significant interest from other
businesses for the Company to consider adding on synergistic product modules and
expand the product offering.
The INTERScepter (TM) product provides the underlying Internet Resource
Management platform on which other modules can be added.
INTERScepter@Home and for SOHO markets
19
- Single box solution and "Solution on a Chip" for routers/modems
- Home Worker uplink to head office enterprise version
These include modules provided by visionGATEWAY as well as specialist
modules from third parties such as :
|_| Whole of network traffic monitoring, analysis and performance
improvement tools;
|_| Facilities to monitor, control and charge Internet traffic over
mobile telephony (including PDA's with phones);
|_| Facilities to monitor, control and charge VOIP traffic (an
INTERScepter (TM) VoIP Control module is now available);
|_| Specialist security and content review modules as "plug-ins"; and
|_| Process improvement tools e.g. video conferencing.
INTERScepter can also be integrated into Bundled Solutions
>> Secure VoIP
>> iNTERNET TRACKER - INTERScepter plus Billing Solution for Higher
Education market
>> Teleport Vision - Internet based security camera control solution
The technology of INTERScepter enables visionGATEWAY to build and leverage a
number of strategic technology alliances. These can be categorized as follows :
|_| Core components
|X| Linux operating system
|X| Database systems - MS, IBM, Oracle, etc
|X| Client workstations - MS, Linux/Novell, Apple
|X| User Authentication - MS, Novell, etc
|_| Hardware/Networking
|X| Server Appliances - IBM, Intel, HP, Tyan
|X| Wi-Fi - various technology and solution providers
|_| Specialist devices
|X| IP based video conferencing
|X| IP based Security cameras
|X| Voice Over IP (VOIP)
|_| Specialist software plug-ins
|X| Filters
|X| Whole of network bandwidth management
|X| Spam management
|X| E-mail content checking
|X| IM content checking
|_| Telcos and ISP's - differentiate data lines with management tool
New Solutions - INTERScepter@Home - Overview
Designed to be embedded onto ADSL/Cable Modems and Wired/Wireless routers,
INTERScepter@Home is a version of INTERScepter specifically targeted to the
home, home office and small business market segments. INTERScepter@Home has been
engineered using the NG platform that has been developed by the R&D team as the
foundation for all future INTERScepter product variations.
20
A number of brand name Wireless Routers have been used as a "proof of concept"
with the initial version of INTERScepter@Home installed. This work complements
the ongoing work using software-based emulators and ensures the product
functions on physical hardware.
Features / Functionality
The aim of INTERScepter@Home is to provide control and basic usage statistics
for all computers that access the Internet via the INTERScepter@Home hardware
device. INTERScepter@Home manages connected computers with "Access Policies"
that are assigned and usage statistics that are recorded.
Access Policies determine what a computer can access. These are based on port
numbers and time based restrictions. Access Policies also include the ability to
allocate a usage quota to the device or individual computers.
Management of @Home is browser based via a very simple and intuitive interface.
@Home is very simple to configure and requires very little on-going management.
Product Variations
- ------------------------------------- ------------------------------------------------------------------------------------
INTERScepter@Home Basic hardware device with internal control and statistical information.
- ------------------------------------- ------------------------------------------------------------------------------------
INTERScepter@Home Plus is an external application that captures data from a
INTERScepter@Home Plus INTERScepter@Home enabled device and provides more detailed long term
logging. The application is installed on a Microsoft Windows computer on the
internal network to which extended logging information is dumped and reported
on. The Plus application is to be sold as an add-on through retail outlets or
by direct download from visiongateway.net web site. Suitable for environments
where the users require more detailed logging information and have the
resources and knowledge to install and configure.
- ------------------------------------- ------------------------------------------------------------------------------------
INTERScepter@Home ISP This variation offers a "Value Added Service" to an Internet Service
Provider. As customers sign on for an ADSL/Cable service they are supplied
with an INTERScepter@Home configured device which is configured to log usage
information to a central database managed by the ISP. This service maybe
charged by the ISP to the customer as an additional charge. The customer is
then able to report upon their internet usage via a management interface on
the ISPs web site. This variation is an extension of the +Pack solution
suitable for environments where the users require more detailed logging
information but do not have the resources and knowledge to manage internally
as in the Plus model.
- ------------------------------------- ------------------------------------------------------------------------------------
Key Points
Using INTERScepter@Home provides the information required to verify ISP usages
charges.
INTERScepter@Home on a wireless router / gateway protects unsecured wireless
networks by not allowing new computers to access the internet. It will also
identify foreign computers using the unsecured wireless network.
INTERScepter@Home is available on ADSL/Cable modems for new broadband users and
on Wired/Wireless routers for existing broadband users.
INTERScepter@Home is based on the NG/Linux platform and supports a wide variety
of platforms including (but not limited to) PowerPC, ARM, MIPS and Intel CPU's.
New Solutions - INTERScepter v3 Appliance
visionGATEWAY announced the release of the new "Appliance" version of its core
"INTERScepter(TM)" product for Enterprise and Small Medium Business markets in
November.
21
The company is launching a special sales drive with the latest "appliance"
version 3 of INTERScepter, through our strategic partnerships in the USA, UK,
Europe, South Africa, Asia and Australia/New Zealand. 50 appliances are under
order to meet demand over the next few months. This latest INTERScepter
"appliance" version has already been implemented at visionGATEWAY's long term
clients in Australia. One of these in the Higher Education sector has their IT
systems managed by Unisys who have provided accreditation for the new version.
Other installations are being arranged for new client sites in UK and USA.
visionGATEWAY has made arrangements with hardware vendors and distributors for
the immediate provision of "appliance" servers for the new INTERScepter version
to meet the opportunities in our global sales regions that are starting in
March/April.
INTERScepter Version 3.0 - Key Elements
The third iteration of the INTERScepter product was designed to not only address
specific improvements from the previous release, but the product also provides
greater scalability over a wide range of usage scenarios - from installations
with less than 5 workstations up to large corporate or educational institutions
with tens of thousands of workstations.
The key design achievements for INTERScepter 3.0 are:
o INTERScepter and all related products are to be distributed as
`appliance' solutions;
o INTERScepter 3.0 has a scaled down variation that can run on devices
such as small wireless routers for the @Home product;
o All applications run as an `all in one' solution with no
dependencies on third party software products. This reduces the
overall cost of the application to clients. INTERScepter provides a
built in database server and the web based management interface is
provided by the HTTP server built in to the application framework.
Support for external databases can be provided as additional modules
supporting the most common enterprise level database servers (such
as DB2, Microsoft SQL Server and Oracle). The built in database is
capable of providing historical storage of a period of years even
for sites with thousands of workstations;
o The networking model has been completely redesigned so that there
are no longer any external network configuration changes required to
operate the device - installation is as simple as assigning an IP
address to the management port and plugging the cables in. The
device is simply plugged in on the internal network side of the
firewall. The device which runs Version 3.0 includes a redundant
network connection that can be immediately switched to a `pass
through' mode to disable the operation of INTERScepter. This
operation happens automatically in the case of software or hardware
failure;
o Updates to the system are automatic.
In addition to the changes in the platform that INTERScepter runs on there are a
number of improvements made to the application itself. These are:
o The management interface provides finer grained security and a more
intuitive interface. This allows delegation of authority from
section managers down to line managers ensuring that each person can
only access the data they need to access without endangering
privacy.
o INTERScepter 3.0 provides a protocol analyser framework that allows
additional information in the contents of the protocol (for example
VoIP SIP) to be extracted and used as a basis of filtering or in the
contents of reports. The most obvious use for this is providing
caller ID functionality for VOIP traffic. In addition to seeing how
much data was transferred during a call the VOIP protocol, analyser
also shows both the called and calling party, the duration of the
call and the VOIP provider used to facilitate the call. The
INTERScepter VoIP Module is also available separately and can be
integrated with VoIP Application servers.
o The INTERScepter application exports functionality through a secure
remote procedure call interface that can be invoked from any
commonly used programming language. As well as allowing the
development of in house integration modules this also simplifies the
process of building adaptors to allow INTERScepter to work with
existing complementary applications already in the marketplace (such
as financial applications and content filters).
Distribution, Marketing & Sales
* Current Situation
22
INTERScepter is currently installed in 35 sites covering over 5,000 workstations
and 50,000 users. The Company's focus over 2006 and early 2007 has been to
continue to prove the market potential of the product (particularly in the USA
and UK), consolidate case studies of the business value of the product, and to
continue building the distribution and support channels.
In addition the arrangements to add new 3rd party products have provided new
opportunities for cross-selling of products into specific target market
segments.
In conjunction with new funding the Company will begin scaling up its resources
to meet the demands of the distribution solutions and channels. The approach is
twofold:
o industry specialization - the Company will bring in industry
specialists to drive sales and market opportunities for its
solutions in specific target sectors
o solution specialization - the Company will bring on board
sales/technical specialists for each of its solutions to work with
the industry specialists and the channels in their sales and ongoing
support of the client base.
The new funding and resources will facilitate these objectives, and provide the
capability to accelerate market access and sales growth.
* Avnet Partner Solutions and visionGATEWAY
VGWA appointed Avnet Partner Solutions as a distributor. The key component of
the Avnet Partner Solutions arrangement is to take INTERScepter (TM) on board in
an "appliance" model variation where INTERScepter (TM) will be linked to IBM
brand servers and taken to Avnet's resellers' major clients. Through this link
with IBM there are opportunities to leverage that company's resources and client
base. IBM has also provided specialist hardware to visionGATEWAY's R&D team to
facilitate the porting of the INTERScepter solution to these systems.
The initial program was targeted at North American customers; but has since been
expanded to Australia/New Zealand, and then to the UK. The partnership with APS
provides INTERScepter on IBM hardware as a preconfigured appliance model for
sales through their many reseller partner channels.
* Specific Sales Potential Overview - UK
The team of APS and VGWA has reviewed the potential opportunities, both against
market potential and against the performance of channel partners. It is believed
that some of the best initial market focus is in the following sectors :
>> Higher Education - a traditional market for INTERScepter with significant
benefits. It should be noted that while the opportunities in this sector
are large, there is often long lead times.
>> Financial Services - this sector has major needs to resolve issues related
to compliance and productivity that involve internet usage.
>> Technology - employees in this industry segment are very high internet
users and productivity is adversely affected as a result. This industry is
also moving towards establishing a larger percentage of home workers who
need to be monitored and controlled to ensure performance levels are being
met.
>> SMB - the small business market sector is in need of business solutions
that can have an immediate impact on improving their bottom line. They are
usually low on internal technical resources to establish these type of
solutions and as a result provide a significant opportunity to channels.
>> Local Government - productivity and risk management are key issues,
however sales lead times can be lengthy.
In conjunction with APS, visionGATEWAY has agreed targets for these particular
initial partners to achieve over the next 18 months. These initial targets have
been validated against a 30 million work station potential market and represent
less than 1% of that market. In addition, APS sees a large potential to
incorporate the new INTERScepter Home/SOHO product for the "Home Worker" as a
key part of the solution for corporates in the UK, particularly in the
Technology sector.
23
* OEM Business Opportunity
visionGATEWAY has also been introduced to other distributors who are responsible
for systems and component sales, and who establish OEM arrangements with
technology manufacturers for the distributors to sell through its channel
partners in the UK and Australia, as well as through large technology retailers.
The objective here is to establish an OEM arrangement for the INTERScepter Home
product on appropriate communications equipment with the large vendors they
already have relationships with. They will also facilitate the preparation,
servicing and sale of a "single box appliance" version of the INTERScepter
solution for the SMB market. These discussions are continuing. As they are
finalized, at that time some estimates of future sales potential of these
product variations will be made.
Item 3. Controls and Procedures
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of our disclosure controls and procedures, as such term
is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Based on this evaluation, our principal
executive officer and our principal financial officer concluded that our
disclosure controls and procedures were effective as of the end of the period
covered by this quarterly report.
24
Part II--OTHER INFORMATION
Item 1. Legal Proceedings
At January 31, 2007 there were no material legal proceedings pending against the
Company and to the knowledge of management, no federal, state or local
governmental agency is presently contemplating any such proceedings against the
Company or any of its affiliates.
No director, executive officer or affiliates of the Company or any owner of five
percent (5%) or more of the Company's common stock is an adverse party to any
action against the Company or its affiliates or otherwise has a material
interest adverse to the Company or any of its affiliates.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
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Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
2.1(1) Agreement and Plan of Reorganization, dated February 27, 2004, by and
among Chiropractic, Vision Nv, and the stockholders of Vision Nv.
2.2(1) Addendum to the Agreement and Plan of Reorganization, dated February 27,
2004.
3.1(2) Articles of Incorporation
3.2(2) Bylaws of Chiropractic 21 International , Inc.
3.3(2) Certificate of Amendment to Articles of Incorporation dated September
23, 1970.
3.4(2) Certificate of Amendment to Articles of Incorporation dated October 29,
1970.
3.5(2) Certificate of Amendment to Articles of Incorporation dated October 6,
1972.
3.6(2) Certificate of Amendment to Articles of Incorporation dated November 4,
1980.
3.7(2) Certificate of Amendment to Articles of Incorporation dated July 15,
1983.
3.8(2) Certificate of Amendment to Articles of Incorporation dated December 29,
1999.
10.1(3) Lease, dated February 15, 2004 by and between vision Gateway Pty Ltd and
Masinello Holdings Pty Ltd.
10.2(3) HQ Global Workplaces Virtual Office Program Service Agreement, dated
December 1, 2003 by and between the visionGATEWAY, Inc. and HQ Global
Workplaces, Inc.
10.3(3) Buy/Sell Agreement, dated May 14, 2004, by and between visionGATEWAY,
Inc. and AVNET, INC.
10.4(3) Letter Agreement regarding Management Services by and between
visionGATEWAY, Inc. and Aspen Capital Partners Pty Ltd.
10.5(3) Letter Agreement regarding Agent and Consulting Arrangements by and
between visionGATEWAY, Inc. and Aspen Capital Partners Pty Ltd.
10.6(3) Letter Agreement regarding Employment of Michael Emerson by and between
visionGATEWAY, Inc., Michael Emerson and MICEL Pty Ltd.
10.7(3) Letter Agreement regarding Agent and Consulting Arrangements by and
between visionGATEWAY, Inc. and MICEL Pty Ltd.
24.1 Power of Attorney (see signature page)
31.1 Certification by Michael Emerson, required by Rule 13a-14(a) or Rule
15d-14(a) of the Exchange Act, promulgated pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification by Martin G. Wotton, required by Rule 13a-14(a) or Rule
15d-14(a) of the Exchange Act, promulgated pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification by Michael Emerson, required by Rule 13a-14(b) or Rule
15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18
of the United States Code, promulgated pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification by Martin G. Wotton, required by Rule 13a-14(b) or Rule
15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18
of the United States Code, promulgated pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
- ---------------
(1) Incorporated by reference to 8-K12G3 filed with the Securities and Exchange
Commission on April 7, 2004.
(2) Incorporated by reference to 10-SB filed with the Securities and Exchange
Commission on April 28, 2000. (3) Incorporated by reference to 10-KSB filed with
the Securities and Exchange Commission on August 19, 2004.
(b) Reports on Form 8-K
We have furnished to the SEC no reports on Form 8-K during the quarter ended
January 31, 2007.
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SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VISIONGATEWAY, INC.
By: /s/ Michael F. Emerson
----------------------------
Michael F. Emerson
Chief Executive Officer
Date: March 22, 2007
27