-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NS1NwGHSa/06QnN0NnNYUwNSY3kld8368nbzEwyDb+RJ9dH+i71rVtu792lM89Wy Gu6wlt4gDyzSiRtY23Pg+g== 0000939802-04-000133.txt : 20040329 0000939802-04-000133.hdr.sgml : 20040329 20040329122100 ACCESSION NUMBER: 0000939802-04-000133 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: X-CHANGE CORP CENTRAL INDEX KEY: 0000054424 STANDARD INDUSTRIAL CLASSIFICATION: MACHINE TOOLS, METAL CUTTING TYPES [3541] IRS NUMBER: 431594165 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 002-41703 FILM NUMBER: 04695193 BUSINESS ADDRESS: STREET 1: 36 W. 44TH STREET, SUITE 1209 CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 646-728-7023 MAIL ADDRESS: STREET 1: 36 W. 44TH STREET, SUITE 1209 STREET 2: , CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: DIVERSIFIED TECHNOLOGIES GROUP INC DATE OF NAME CHANGE: 20010330 FORMER COMPANY: FORMER CONFORMED NAME: CASSCO CAPITAL CORP DATE OF NAME CHANGE: 19940804 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL K C JAKES BBQ & GRILL INC DATE OF NAME CHANGE: 19940627 10KSB 1 form10ksb123103.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31,2003 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission file number 002-41703 THE X-CHANGE CORPORATION (Name of Small Business Issuer in Its Charter) Nevada 43-1594165 - --------------------------------------- ------------------------------------ (State of Incorporation or Organization) (I.R.S. Employer Identification No.) 100 Allentown Parkway, Suite 110 Allen, TX 75002 (Address of principal executive offices)(Zip Code) (972) 390-0750 (Issuer's telephone number, including area code) Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock, $.001 par value Title of Class Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 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. [X] YES [ ] NO Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year: $0. As of December 31, 2003, there were 13,002,000 shares of Common Stock outstanding, of which all were held by non-affiliates. The aggregate market value of such Common Stock (based upon the average of the bid and asked prices on December 31, 2003) of the Registrant held by non-affiliates was approximately $650,100. As of December 31, 2003. Documents incorporated by reference: None. Transitional Small Business Disclosure Format (check one): [ ] YES [X] NO THE X-CHANGE CORPORATION FORM 10-KSB TABLE OF CONTENTS
PAGE PART I ITEM 1. Description of Business...................................................3 ITEM 2. Description of Property...................................................4 ITEM 3. Legal Proceedings.........................................................4 ITEM 4. Submission of Matters to a Vote of Security Holders.......................4 PART II ITEM 5. Market for Common Equity and Related Stockholder Matters..................4 ITEM 6. Management's Discussion and Analysis or Plan of Operation.................5 ITEM 7. Financial Statements.....................................................13 ITEM 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.................................................13 PART III ITEM 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16 (a) of the Exchange Act.......................13 ITEM 10. Executive Compensation...................................................17 ITEM 11. Security Ownership of Certain Beneficial Owners and Management...........17 ITEM 12. Certain Relationships and Related Transactions...........................18 ITEM 13. Exhibits and Reports on Form 8-K.........................................18 ITEM 14. Controls and Procedures..................................................19 ITEM 15. Principal Accountant Fees and Services...................................20 Signatures........................................................................22
RISK FACTORS AND CAUTIONARY STATEMENTS Forward-looking statements in this report are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1933, as amended. The Company wishes to inform readers that actual results may differ substantially from such forward-looking statements. Forward-looking statements include statements concerning underlying assumptions and other statements that are other than statements of historical fact. For example, words such as "may," "will," "should," "estimates," "predicts," "potential," "continue," "strategy," "believes," "anticipates," "plans," "expects," "intends" and similar expressions are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the statements, including, but not limited to, the following: the ability of the Company to provide for its obligations, to provide for its working capital needs from operating revenues, to obtain additional financing, to meet competitive challenges and technological changes and other risks as may be detailed in the Company's periodic report filings with the Securities and Exchange Commission. item 1 DESCRIPTION OF BUSINESS On January 15, 2002, the Company closed under an Agreement and Plan of Merger with WEBiX, a privately held Delaware corporation (the "Plan of Merger"), which resulted in WEBiX becoming a wholly owned subsidiary of the Company. The Plan of Merger resulted in the Company acquiring the business and operations of WEBiX in exchange for the issuance by the Company of a controlling interest in its shares to the former shareholders of WEBiX. After closing, the shareholders of the Company elected a new board of directors, which, in turn, appointed new executive officers for the Company. The Company acquired the business and operations of WEBiX by issuing (a) 24,000,000 shares of its Common Stock to the common shareholders of WEBiX on a pro rata basis, (b) 4,000,000 shares of its Series A Convertible Preferred Stock and (c) 40,000,000 warrants to the shareholders of WEBiX' on a pro rata basis. Immediately prior to closing certain existing shareholders of the Company surrendered approximately 9,500,000 shares of Common Stock of the Company to treasury, which reduced the number of outstanding shares of Common Stock of the Company immediately prior to closing to 13,002,000. Following closing the Company had outstanding 37,002,000 shares of Common Stock, 4,000,000 shares of Series A Convertible Preferred Stock (which are convertible into 40,000,000 shares of Common Stock) and 40,000,000 Warrants. On Dec 23, 2002, the company mailed all shareholders a Consent Solicitation for the purpose of entering into and closing under a Securities Repurchase Agreement that, effectively, proposed an unwinding of the Plan of Merger. The solicitation received the requisite number of consents and all conditions precedent to closing were subsequently fulfilled. The parties closed under the Securities Repurchase Agreement on March 13, 2003. The former board of directors resigned effective the closing date. The Repurchase, essentially, resulted in the return of the all of The X-Change Corporation's assets in exchange for the surrender of all securities held by the former WEBiX shareholders and the assumption by WEBiX of all the Company's debt immediately prior to closing. The rescission effected a change in control over the business, policies and affairs of the Company from the WEBiX shareholders to those shareholders holding securities in the Company prior to January 15, 2002. After the rescission was complete the Company had 22,540,000 shares of common stock, which was the amount outstanding immediately prior to closing of the Plan of Merger on January 15, 2002 and is essentially in the same position as it was before the merger. All lock-up agreements pertaining to these shares were released at closing. The common shares are the only securities of the Company now outstanding. ITEM 2 description of PROPERTy The executive office of the Company, as of the date of this report, is located at 100 Allentown Parkway, Suite 110, Allen, TX 75002. The Company is receiving the use of these premises free of charge from its President. The telephone number at this address is (972) 390-0750. ITEM 3 LEGAL PROCEEDINGS There are no pending legal proceedings to which the Company is a party or of which any of its properties are subject, nor are there any proceedings known to the Company to be contemplated by any governmental authority. Additionally, the Company is unaware of any legal proceedings, pending or contemplated, in which any director, officer, affiliate or any principal security holder of the Company is a party or has an interest adverse to the Company. Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS In accordance with Nevada corporate law, no matters were subject to a vote of security holders during the year ended December 31, 2003. PART II item 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Principal Market and Sales Prices for Company's Common Stock As of December 31, 2003, there were 13,002,000 shares of Common Stock of the Company issued and outstanding which were held of record by 218 shareholders. Because brokerage firms hold a substantial number of shares in "street name" on behalf of their customers, the Company is unable to estimate the total number of stockholders represented by these record holders. As of December 31, 2003, there were no shares of Preferred Stock of the Company issued or outstanding. The Company's Common Stock is currently quoted on the OTCBB, under the trading symbol "XCHC." The following table sets forth the range of the high and low bid prices per share of the Common Stock as reported by the NASD during the last two calendar years for the period indicated. Prices reported are based on quotations between dealers, and do not reflect retail mark-up, mark-down or commissions, and may not necessarily represent actual transactions. ------------------------------------------------------------------- Fiscal Year Fiscal Year 2002 2003 ---- ---- ------------------------------------------------------------------- High Low High Low ------------------------------------------------------------------- First Quarter $0.70 $0.10 $0.08 $0.04 ------------------------------------------------------------------- Second Quarter $0.35 $0.07 $0.20 $0.05 ------------------------------------------------------------------- Third Quarter $0.07 $0.05 $0.19 $0.07 ------------------------------------------------------------------- Fourth Quarter $0.07 $0.03 $0.22 $0.05 ------------------------------------------------------------------- Dividends The Company has never paid any cash dividends on its Common Stock. The Company intends to retain and use any future earnings for the development and expansion of its business and does not anticipate paying any cash dividends in the foreseeable future. ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following discussion should be read in conjunction with the Company's audited financial statements and notes thereto which appear elsewhere in this report. The Company ceased all operations in WEBiX during the fourth quarter of 2002 and the acquisition of WEBiX was unwound on March 13, 2003. As is common with development stage companies, the Company has had recurring losses from operations since inception and had a deficit at year-end. The company was able to obtain only enough working capital, as loans, to close its operations in an orderly fashion. Formation of AirGate Technologies and Entry into RFID Market: On February 9, 2004, registrant, The X-Change Corporation, a Nevada corporation ("XCHC"), formed a wholly owned subsidiary, AirGate Technologies, Inc. ("AirGate"), for the purpose of engaging in the development and acquisition of leading-edge wireless internet/networking technologies, principally RFID ("radio frequency identification"). AirGate is proposing to market products and services of unsurpassed convenience, performance, reliability and value in this industry in order to provide customers with innovative wireless RFID solutions at a cost substantially lower than current implementations. Of the many technologies currently undergoing development, management feels wireless technologies, including RFID, qualify as the most likely to have a transformative effect on business in the near-term, essentially transforming how business operates and organizes. Wireless technologies will generate not only new consumer and business products but also entirely new categories of products and services. Wireless technologies are currently transforming the culture of industrialized countries and have the potential to do the same for developing and undeveloped regions of the world. The migration to third-generation cellular-phone technologies, proceeding in fits and starts and at various rates throughout the world, continues to change how people communicate. RFID tags are optimizing business supply chains. A plethora of wireless local-area network (WLAN) standards compete for market share in a variety of applications and niches as newcomers such as ultrawideband applications continue to be developed. The rapid market acceptance of cellular phones and WLANs, including "hotspots" has focused attention on the viability of traditional telecom providers and the cost of wireline technologies. Concurrent with the formation of AirGate, Mr. Mike Sheriff was engaged by XCHC and AirGate to act as their Chairman of the board of directors and chief executive officer, president and treasurer. Mr. Sheriff, in exchange for his services, has received an option to purchase up to 12,000,000 shares of common stock at the market therefore on the date of his engagement. These options and the underlying shares are not registered. The share structure of XCHC was adjusted by several shareholders so that the number of shares outstanding immediately prior to the formation of AirGate was brought down to 13,002,000 in number. Industry Analysis: RFID: Radio frequency identification (RFID) and Electronic Product Code (EPC) technologies are being implemented to improve supply chain efficiency and reduce shrinkage by providing more accurate tracking of goods and assets throughout the chain. RFID are being used to replace the bar codes now used to identify products. Many large retailers, including Wal-Mart, have recently announced their intentions to move over to RFID technology in the near future. RFID allows these companies to track their products using radio-frequency identification tags that can be scanned by radio waves at any time. Recently, there has been a groundswell of RFID-related products and services from IT providers. Microsoft, Intel, IBM and Sun Microsystems have joined vendors such as Texas Instruments, Symbol Technologies, NCR, Accenture and Bearing Point in advocating the technology as the solution for optimizing supply chain operations. An RFID tag is a chip that, even in its simplest form, is superior to standard bar codes. It can contain information such as a product's expiration date and temperature, and it can be scanned from a distance of up to 30 feet. This makes it a lot easier for a retailer to find products in a warehouse and keep track of their condition -- big advantages when it comes to managing inventory. Management believes 2004 will be a crucial year for radio frequency identification (RFID), with large-scale deployments bringing the controversial technology into the mainstream. Manufacturers and distributors of RFID are working to meet the requirements of high-profile deployments from organizations including Wal-Mart and the US Department of Defense, according to IDC. Normally, innovations in the retail industry and Department of Defense do not typically converge. However, the Radio Frequency Identification (RFID) technology is creating precisely the convergence that is about to create a unique set of business opportunities. The Retail Industry and the Department of Defense, constitute the largest global entities, procuring thousands of parts and supplies. Both `industries' have mandated that RFID technology become an inherent part of their operations. With such a large, organized and funded push, RFID is slated to become the `e-barcode', the electronic barcode of the future. Numerous `drivers' are motivating a change of this magnitude, to enumerate a few: accurate and automated inventory management, accurate and secure shipping, track and trace, along with comprehensive Home Land Security management and tracking. Three powerful, compelling and disruptive forces are converging to propel us to an RFID enabled world: the build-out of ubiquitous wireless networks, the absolute needs of Homeland Security and the mandates from deeply funded entities: Department of Defense and WalMart, the largest retail chain in the world. RFID may lead to a universal identifier; wherein distinct `entities' ranging from humans - RFID embedded driver license, a can of Campbell soup, or airline travel tickets or individualized and customized drug-prescription formulation and dispensing, have embedded RFID technology. The simplicity of and Zero-power requirement of an RFID electronic tag has made it technically and financially feasible to usher in a world of universal identification. As a result, of the oncoming RFID tsunami, business opportunities are being created in multiple and diverse vertical industries: from wireless `sensors' to high-speed data links to RFID tag fabrication and finally to the computer systems that will be needed to `ingest' vast amounts of scan data, that has never before existed, and moreover, integrate and evolve current business systems. Once retailers get involved, the number of tags in use will jump from the millions to billions, predicts Bill Allen, a marketing manager at TI, which has sold RFID chips for 15 years. "The supply chain has long been considered the holy grail for RFID," he says. That explains why the $1 billion market for RFID-specific hardware, software, and services could balloon to $3.2 billion by 2008, says Erik Michielsen, senior analyst at tech consultancy ABI Research in Oyster Bay, N.Y. New technologies must be invented, adapted, and marketed in order to gain mind-share, customer-share and revenue share. A strong cycle of innovation is about to be unleashed that will inevitably create a long, sustained period of business acquisitions of fast moving, young start-up technology savvy companies. The analyst group of IDC predicts that RFID spending for the US retail supply chain will grow from $91.5 million in 2003 to nearly $1.3 billion in 2008. The IDC study, US RFID for the Retail Supply Chain Spending Forecast and Analysis, 2003-2008 expects hardware purchases to dominate RFID spending over the forecast period, reaching $875 million in 2007. Software spending will accelerate in the second half of the forecast period as more and more companies feel the need for RFID middleware, an Airgate strong point. AirGate's Business Model: Key Business Differentiators: Airgate Technologies' business model consists of several key differentiators that, management feels, will set it apart from its competition. Airgate Technologies' focus is to create long-term shareholder value by: (1) Pursuing intelligent, opportunistic acquisitions of other wireless opportunities whose business plan and operations are complementary; (2) Consolidating redundant functions, such as network operations, billing and accounting and customer support; standardizing on technology and selected vendors; (3) Partnering with wireless and RFID solution providers, both hardware and software; (4) Partnering with industry organizations, highlighting AirGate's wireless solutions; and (5) Building a recognizable brand identity. Because of current RFID mandates from diverse sources, such as retailer WalMart, the Department of Defense, and the expected surge of RFID deployments, a process to ingest data, understand data, present data and detect non-compliance is required. This occurs in the real-time world of RFID. It is AirGate's intent to create a core 'matrix analytic engine,' an (MAE) that can be customized for the unique requirements of various vertical industries, retail, manufacturing, health, etc. AirGate will rely upon its extensive database and telecommunication competencies, plus its offshore capability to provide unparalleled services and capabilities to analyze, interpret and manage complex data. Wireless Connectivity: AirGate will offer, for purposes of employing its RFID solutions, a wireless, high-speed alternative to the costly and time consuming DSL, ADSL, cable modem, and T-1 plans in use today, implementing the 802.11b and 802.11a/g WiFi standard and gravitating to and implementing the 801.16a standard. WiFi is an open standard that enables wireless connectivity with a local area network and/or high-speed access to the Internet. Like other dislocating technologies, WiFi is pervading wireless applications. Because of the growing pervasiveness of the technology, AirGate's technological innovations in RFID can be immediately deployed. Advantages: Mobility: Wireless LAN and RFID implementation provide users with access to real-time information anywhere in their organization. This mobility supports productivity and service opportunities not possible with a wired network and barcodes. Installation Speed, Simplicity and Flexibility: Installing a wireless LAN system is comparatively less time consuming and difficult and reduces costs 50 to 80 percent over traditional wired solutions. Companies can eliminate the need to pull cable through walls and ceilings. Wireless technology allows the network to go where wires cannot go. The LAN/Internet can now be accessed from all over the building, corporate campus or user environment. Relocation of employees within a facility takes minutes instead of days to complete. Productivity is enhanced. Reduced Cost-of-Ownership: In most cases, the initial investment required for 802.11a/b/g Wireless hardware is no higher than the cost of wired LAN hardware. In additional, the overall installation expense and life cycle costs can be significantly lower. Long-term cost benefits are the greatest in dynamic environments requiring frequent moves and changes. This is especially applicable to RFID deployments. The low cost of the wireless technology and the expected rapid decline in RFID as standards formalize makes upgrades easier for the Company as improvements are made in hardware. The high cost of infrastructure for the larger companies inhibits their ability to modify their systems. Scalability: Wireless LAN/Internet access systems can be configured in a variety of topologies to meet the needs of specific applications and installations of RFID. Configurations are easily changed and range from peer-to-peer networks suitable for a small number of users to full infrastructure networks of thousands of users roaming over a broad area, as in open campus environments or large production facilities. Ease of Use: Users are logged on to the LAN/Internet with the usual familiar access protocols, so using the LAN/Internet is easy with the appropriate WiFi tools. Wireless LAN Benefits for RFID Implementation: AirGate has chosen to build its wireless solution on the 802.11a/b/g with 802.16a support because it offers numerous advantages including: o High-speed data transmission for large files and graphics o Standards-based solution supported by major PC and networking vendors o Ability to use standard laptops, browsers and applications o Wide availability of low-cost, 802.11a/b wireless network cards ($150-250; available from Lucent, Cisco, 3Com, online retailers and others) o Large coverage areas--one access point covers 20,000 to 50,000 square feet o 802.16 up to 30 miles non line of sight o Ease of installation and use o Applicability across many environments including hospitality/travel, corporate, retail, manufacturing and residential; applications can be mixed to maximize utilization of coverage area - an important RFID consideration o License free, no fees, no tariffs; no "last mile. Typical Applications: WiFi liberates users from dependence on hard-wired access to the network backbone; giving them anytime, anywhere network access. This freedom to roam offers numerous user benefits for a variety of work environments. RFID in conjunction with wireless networking helps link factory buildings on the outside and factory floor workstations and data collection devices on the inside; improving database access for roving supervisors such as production line managers, warehouse auditors, or construction engineers. In warehouses, mobile stock and inventory personnel can use mobile, forklift mounted data terminals and notebook computers to receive and update stock and inventory information and update and maintain location of stock, pallets and boxes with RFID. RFID enables real-time inventory tracking and reduces the costs of physical inventory counts. Transportation/Distribution: As suggested earlier, RFID systems are uniquely suited for use in the rigorous rail environment. Field programmable tags permit the full industry standard 12-character identification of each car by type, ownership and serial number. Tags are attached to the vehicle undercarriage; antennae are installed between or adjacent to the tracks, and readers or display devices are typically located within 40 to 100 feet in a wayside hut along with other control and communications equipment. A primary objective in rail applications is the improved fleet utilization that permits reductions in fleet size and/or deferral of investment in new equipment. Commercial truckers are using RFID systems to monitor access and egress from terminal facilities. Combined with weigh-in-motion scales, the same systems can be used for transaction recording at refuse dumps, recycling plants, mines and similar operations, or for credit transactions at truck stops or service depots. Industrial: In the plant environment, RFID systems are ideally suited for the identification of high-unit-value products moving through a tough assembly process (e.g., automobile or agricultural equipment production where the product is cleaned, bathed, painted and baked). RF systems also offer the durability essential for permanent identification of captive product carriers such as: Tote boxes, containers, barrels, tubs, and pallets; Tool carriers, monorail and power, and free conveyor trolleys; and Lift trucks, towline carts, and automatic guided vehicles. Primary applications fall into two basic categories: 1. Direct product identification wherein the tag specifically identifies the item to which it is attached (e.g., by part number or serial number or, in the case of read/write systems, assembly or process instructions for the item). 2. Carrier identification where content is identified manually (or with a bar code reader) and fed to the control system along with the carrier's machine-readable RF "license plate number." Strategically deployed RF readers accomplish subsequent load tracking. The automotive industry uses RFID systems to track vehicles through assembly, where tags must perform even after repeated subjection to temperatures of 150 to 200 C, painting, etc. A primary objective for use of the technology in this environment is verification of vehicle identity prior to execution of given assembly tasks. Although manufacturers sequentially track vehicles through assembly, undetected removal of a single vehicle from the line could be costly. Because RFID tags need not be "seen" to be read, they can be buried within pallets, tote boxes, and other containers and provide solid performance for the life of the carrier. As an example, in a casting operation RF tags are attached to wire baskets which travel through a variety of degreasing, etching and cleaning tanks by means of an overhead power and free conveyor - not a job for optical or magnetic identification media. In a manner similar to carrier identification, RF tags can be used for tool management. Miniature tags can be placed within tool heads of various types such as block or Cat V-flange, or even within items such as drill bits where individual bits can be read and selected by reader guided robot arms. RFID systems are used for lift truck and guided vehicle identification in a number of installations. One approach buries tags at strategic locations throughout the facility and verifies vehicle location via on-board DC-powered readers. Other users station readers at the ends of warehouse aisles to monitor lift truck activity. Here, throughput rates permit multiplexing multiple antennae per reader. Security and Access Control: The movement and use of valuable equipment and personnel resources can be monitored through RF tags attached to tools, computers, etc. or embedded in credit-card-size security badges. This type of monitoring also provides an extra measure of security for personnel working in high-risk areas in case of an emergency evacuation. Animal Identification: Valuable breeding stock, laboratory animals involved in lengthy and expensive research projects, meat and dairy animals, wildlife, and even prized companion animals all present unique identification problems that can be solved by innovative applications of RFID technology. Results of Operations. There were no revenues from sales for the two years ended December 31, 2003 and 2002. The Company has sustained a net loss of approximately $7,902 for the year ended December 31, 2003, which was due to general and administrative expenses incurred by the Company. Since October 4, 2000, the Company has been in the development stage company and has not begun principal operations. Accordingly, comparisons with prior periods are not meaningful. Liquidity and Capital Resources. The Company generates and uses cash through operating activities and financing activities. During the year ended December 31, 2003, the Company used cash of approximately $6,976 for operating activities. Operating activities during the 2003 year were comprised primarily of organizational activities with business operations. The Company generated cash from financing activities of approximately $6,976, which is primarily due to capital contributed by a shareholder As of December 31, 2003, the Company had working deficit of $926 and a total asset value of $0. ITEM 7 FINANCIAL STATEMENTS The financial statements of the Company as of and for the years ended December 31, 2003 and December 31, 2002 are included immediately following the signature page to this Report beginning at page F-1. ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS on ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT The following table sets forth all of the current directors and executive officers of the Company, including their ages, as of the date of this report.
- ---------------------------------------------- ------------------------- --------------------------------------------- Name Age Positions Held - ---------------------------------------------- ------------------------- --------------------------------------------- Michael Sheriff 58 President, CEO, Treasurer and Chairman of the Board - ---------------------------------------------- ------------------------- --------------------------------------------- Tom Tucker 42 Vice President of Operations - ---------------------------------------------- ------------------------- --------------------------------------------- Ivan Chow 38 Vice President of Software Solutions - ---------------------------------------------- ------------------------- --------------------------------------------- Frank Kwong 55 Advisory Board - ---------------------------------------------- ------------------------- ---------------------------------------------
None of the executive officers, directors and/or control persons of the Company have been convicted in or been the subject of any pending criminal proceedings, or the subject of any order, judgment or decree involving the violation of any state or federal securities laws. No current director has any arrangement or understanding whereby he is or will be selected as a director or as an executive officer. All directors will hold office until the next annual meeting of shareholders and until their respective successors have been duly elected and qualified, unless and until they earlier resign or are removed from office. The executive officers of the Company are elected by the Board of Directors at its annual meeting immediately following the annual meeting of shareholders. The Company does not currently have any standing audit, nominating or compensation committees, or any committee performing similar functions. mICHAEL SHERIFF, 58, Chairman, President & CEO, Treasurer Michael Sheriff, president and chief executive officer of the X-change Corporation, has over twenty-five years of experience in the computer and telecommunications industry. In 1998 Mr. Sheriff founded Net Access Exchange, Inc., dba YPAY. YPAY was a new Internet media network that provided advertisers with a unique and compelling value proposition to reach consumers via the Internet through use of broadband-like rich media over dial-up connections - the first broadband over narrowband advertising and entertainment network. YPAY utilized a patented message delivery system that supports true 1:1 targeting and allows local businesses, not just large multinational advertisers, to harness the power of the Internet with multi-media and market-targeting capabilities not available in any other advertising medium. YPAY was able to eliminate the problems associated with traditional web site, browser-based advertising. In 1995, Mr. Sheriff founded CyberQuest -- a full-service Internet development company -- focusing its efforts on Internet commerce in the business-to-consumer and business-to-business marketplaces. The company also developed, implemented and maintained creative business Web sites, Intranets and databases for client companies. Under Mr. Sheriff's leadership, the company's Internet e-commerce flagship, bid4it, as well as its other e-commerce sites, were developed to bring shopping directly into customers' homes and offices utilizing a revolutionary new "bid-and-ask" matching technology. Mr. Sheriff sold CyberQuest in October 1998 to a NASD OTC:BB listed company. He then served as CEO of the public company, CBQ, Inc., as well as being Chairman of the company's Board of Directors. In 1994, Mr. Sheriff founded and developed Good Stuff Cheap (GSC), a first to market Internet-based retail site. The company was the first to use intelligent shopping agents and was featured in Wired Magazine in December 1994. According to Point Communications, an Internet survey group, GSC was one of the top five retail sites on the Internet in 1994. Internet Marketing Association awarded GSC the top retail site award for December 1995. GSC was also featured on the Discovery Channel in December 1996. Mr. Sheriff is also the former founder, President and CEO of Action Fax International, Inc. Action Fax operates one of the largest public fax networks in the world with locations in most world airports. Prior to ActionFax, Mr. Sheriff was the founder and President of First National Computer Corporation, which pioneered the rental of personal computers. Under his direction, First National Computer became one of the largest PC rental firms in the United States. Mr. Sheriff has held senior sales, marketing and management positions with National Semiconductor, Northern Telecom, SYCOR, Inc. and SINGER. Mr. Sheriff attended the University of Denver School of Business, where he majored in finance and business law. TOM TUCKER, 42, VICE PRESIDENT OF OPERATIONS Tom Tucker has been involved with Internetworking technologies for over 15 years, most recently as a Senior Internet Systems Engineer with Genuity, formerly known as GTE Internetworking and BBN. While at Genuity he provided technical both pre- and post-sales support on IP solutions to customers, architecting IP technology solutions that leveraged Internet technologies including secure eBusiness hosting, dedicated connectivity, broadband connectivity, remote access, managed firewall and Virtual Private Networks. Tom has been instrumental in developing Genuity's Virtual Internet Service Provider platform and closing many large multi-million dollar sales. Prior to Genuity, Tom was an Internetworking Architect and then Director of Intranet Engineering for Associates Information Systems, the information technology division of Associates First Capital, a $12B diversified financial services organization recently acquired by Citigroup. While with the Associates, Tom was instrumental in the acceptance and implementation of Internet and Intranet solutions throughout the company. Tom directly managed or coordinated all Intranet development and implementation projects and established technology standards for internal web platforms and applications. Prior to the Associates, Tom was Chief Operating Officer for Private Networks, Inc., PNI. PNI leveraged Internet technologies to provide Extranet services for affinity groups and trade associations. These Extranets provided global Internet access and secured Web based communities for communication between the affinity group and its membership and suppliers of goods and service to those members. Prior to PNI, Tom was a Senior Technical Architect for SHL Systemhouse, where he planned and managed systems and network integration projects. Tom worked directly with customers to define business requirements and strategies for designing and developing integrated client/server solutions based upon open systems architectures. Tom also worked with the sales organization to develop persuasive proposals of targeted technology service offerings in response to customer requests. Prior to SHL, Tom spent five years with GTE Directories in progressively responsible positions. He joined GTE Directories as a Systems Analyst providing UNIX systems administration and application support. Mr. Tucker attended Southern Methodist University in Dallas for four years, where he majored in business and economics. IVAN CHOW, 38, VICE PRESIDENT SOFTWARE SOLUTIONS Ivan Chow has developed and implemented cutting edge software systems since 1990. In 1996, Mr. Chow founded a company, which was called IP Communications, and developed Voice IP gateway over the Internet. As the company's chief technical officer, he directed the company to develop and file two patents on two technical procedures. Besides technical details, Mr. Chow also managed the venture in business and technical process integration. In 1998, IP Communications was sold to a then privately-held company called Ramp Networks, a Delaware corporation. The acquisition increased Ramp Networks' asset value. After months of integration of IP Communications' VoIP technology, Ramp Networks developed several VoIP related products, including Voice over ISDN and Voice over DSL. Ramp Networks went on to an IPO in 1999 and was acquired by Nokia in 2000. Before IP Communications, Mr. Chow worked for Sprint beginning in 1994 and developed a middleware system called Distributed Computing Architecture (DCA). This middleware system, DCA, is still being used today within Sprint's IT back-office, connecting Sprint's PCS and Sprint's Long Distance Division's ordering systems. DCA shields the enterprise from different standards and systems. It allows distributed transactions to go across heterogeneous systems - -- MVS, AIX, HP-UX, Solaris and Windows-based systems. After earning his MS degree in physics, Mr. Chow started working in 1990 in a world-class organization called SuperConducting Super Collider. In 1993, he developed a Yahoo!-like search engine within the organization only few months after he was introduced to the WWW protocol in a seminar at Fermi Labs by its creator, Tim Berners-Lee. Together with the physicists, Ivan developed a real-time data collection system, processing data of petabyte range. FRANK KWONG, 55, ADVISORY BOARD Originally from Hong Kong, Frank Kwong immigrated to the U.S as a teenager. Mr. Kwong has had a life-long interest in computers, system design and program development, both as a user and hobbyist. He achieved U.S. citizenship and was educated as an engineer at the University of Minnesota. In 1976 he began his career with the Donaldson Corporation as an industrial engineer. The Econotherm Corporation recruited Mr. Kwong in 1977. He was design engineer for the company's heat exchanger program. His responsibility included management of the FORTRAN-based computer design programs in an online time-share environment. Mr. Kwong joined the Cabot Corporation in the alloy products fabrication department as design engineer in 1978. His primary responsibility was ASME coded design. He obtained his Professional Engineer license in 1979 and was promoted to Engineering Manager. In 1982, Mr. Kwong was employed by General Motors' Delco division as project leader in semiconductor equipment design. He was the system manager for APPLICON CAD, a leading edge cad/cam development system. During this time, Mr. Kwong formed Computer Accessory Technology, which sold various TRS-80 products. The company was formed and operated with the permission of General Motors. Mr. Kwong served as a staff engineer for GM in Detroit, MI. in 1984, where he began development of cutting-edge computer applications in image processing. Based upon needs he saw at GM, Mr. Kwong began development of ASP-db and took early retirement from GM in 1997. He formed FK & Associates and USIntertech, Inc. to market ASP-db, which was launched in February 1998. USIntertech is a technology service company maintaining a faculty of experienced information technology professionals who deliver results through technology integration services. The Company is a provider of efficient database solutions. With an extensive technology background involving a number of Fortune 100 telecommunications and manufacturing companies, USIntertech offers unrivaled and deliverable solutions. Frank Kwong received his BSc in Mechanical Engineering in 1974, and his MSc in 1976 from the University of Minnesota. He resides with his family in Plano, Texas. Compliance with Section 16(a) of the Exchange Act. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company during its past fiscal year, and Form 5 and amendments thereto furnished to the Company with respect to its most recent fiscal year, there were no directors, officers or shareholders that failed to file, on a timely basis, reports required to be filed under Section 16(a) of the Exchange Act. Audit Committee Financial Expert The Company's board of directors does not have an "audit committee financial expert," within the meaning of such phrase under applicable regulations of the Securities and Exchange Commission, serving on its audit committee. The board of directors believes that all members of its audit committee are financially literate and experienced in business matters, and that one or more members of the audit committee are capable of (i) understanding generally accepted accounting principles ("GAAP") and financial statements, (ii) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (iii) analyzing and evaluating our financial statements, (iv) understanding our internal controls and procedures for financial reporting; and (v) understanding audit committee functions, all of which are attributes of an audit committee financial expert. However, the board of directors believes that there is not any audit committee member who has obtained these attributes through the experience specified in the SEC's definition of "audit committee financial expert." Further, like many small companies, it is difficult for the Company to attract and retain board members who qualify as "audit committee financial experts," and competition for these individuals is significant. The board believes that its current audit committee is able to fulfill its role under SEC regulations despite not having a designated "audit committee financial expert." Item 10. EXECUTIVE COMPENSATION The Company has not paid, nor does it owe, any compensation to executive officers for the year ended December 31, 2003. The Company's by-laws authorize the Board of Directors to fix the compensation of directors, to establish a set salary for each director and to reimburse the director's expenses for attending each meeting of the Board of Directors. As of the date of this Form 10-KSB, no salaries or other compensation have been paid to any of the Board of Directors, individually or as a group. ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the beneficial ownership as of December 31, 2003, of the Common Stock by (1) each person known to the Company to be the beneficial owner of more than five percent of the Common Stock, (2) each director and executive officer of the Company, and (3) all directors and officers of the Company as a group. Information relating to beneficial ownership of the Company is based upon "beneficial ownership" concepts set forth in the rules promulgated under the Exchange Act. Under these rules a person is deemed to be a "beneficial owner" of a security if that person has or shares "voting power," which includes the power to vote or to direct the voting of a security, or "investing power," which includes the power to dispose or to direct the disposition of a security. Under the rules, more than one person may be deemed to be a beneficial owner of the same securities. A person is also deemed to be a beneficial owner of any security as to which that person has the right to acquire beneficial ownership within sixty (60) days from the current date.
Name and address of Beneficial Owner Number of Shares (1) Percent of Class - ------------------------------------ -------------------- ---------------- Cynthia Jared 1,520,000 12% 7451 NE 7th CT Boca Raton, FL 33487 Teresa McKee Address Unknown 1,520,000 12% All directors and executive officers None 0% as a group (4 persons)
- ---------------------- (1) Based upon 13,002,000 shares of Common Stock outstanding on December 31, 2003. ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None Item 13 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Exhibit Name 2.1 Plan of Merger, incorporated by reference to Exhibit 10.1 to Form 8-K dated January 30, 2002 - Previously Filed. 3.1 Articles of Incorporation - Previously Filed. 3.2 Certificate of Amendment to Articles of Incorporation of Registrant filed with the Secretary of State of the State of Nevada on January 14, 2002 - Previously Filed. 3.3 By-Laws - Previously Filed. 4.1 Specimen of Common Stock Certificate - Previously Filed. 4.3 Form of Warrant Agreement, previously filed, incorporated by reference to Exhibit 10.2 to Form 8-K dated January 30, 2002 - Previously Filed. 10.1 License Agreement dated as of June 20, 2001 between WebIAm, Inc. as licensor, and WEBiX Inc. (the predecessor of the Company), as licensee- Previously Filed. 10.2 Amendment to License Agreement dated as of January 15, 2002 - Previously Filed. 10.3 Form of Lock-Up Agreement, incorporated by reference to Exhibit 4.1 to Form 8-K dated January 30, 2002 - Previously Filed. 10.4 Securities Repurchase Agreement - Previously Filed. 21 List of subsidiaries - None 31.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C Section 1350 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * Filed herewith. (b) Reports on Form 8-K filed in the fourth quarter of 2003 There were no Form 8-K's filed during the quarter ended December 31, 2003. ITEM 14. CONTROLS AND PROCEDURES The Company's Chief Executive Officer and Chief Financial Officer have concluded, based on an evaluation conducted within 90 days prior to the filing date of this annual report on Form 10-KSB, that the Company's disclosure controls and procedures have functioned effectively so as to provide those officers the information necessary whether: (i) this annual report on Form 10-KSB contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report on Form 10-KSB, and (ii) the financial statements, and other financial information included in this annual report on Form 10-KSB, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report on Form 10-KSB. There have been no significant changes in the Company's internal controls or in other factors since the date of the Chief Executive Officer's and Chief Financial Officer's evaluation that could significantly affect these internal controls, including any corrective actions with regards to significant deficiencies and material weaknesses. ITEM 15 - PRINCIPAL ACCOUNTANT FEES AND SERVICES The following is a summary of the fees billed to us by Robison, Hill & Company for professional services rendered for the years ended December 31, 2003 and 2002: Service 2003 2002 ------------------------------ ------------- ------------- Audit Fees $ 7,596 $ 14,356 Audit-Related Services - - Tax Fees 130 234 All Other Fees - - ------------- ------------- Total $ 7,726 $ 14,590 ============= ============= Audit Fees. Consists of fees billed for professional services rendered for the audits of our financial statements, reviews of our interim consolidated financial statements included in quarterly reports, services performed in connection with filings with the Securities & Exchange Commission and related comfort letters and other services that are normally provided by Robison, Hill & Company in connection with statutory and regulatory filings or engagements. Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions. Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors The Audit Committee is to pre-approve all audit and non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services as allowed by law or regulation. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specifically approved amount. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval and the fees incurred to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. The Audit Committee pre-approved 100% of the Company's 2003 audit fees, audit-related fees, tax fees, and all other fees to the extent the services occurred after May 6, 2003, the effective date of the Securities and Exchange Commission's final pre-approval rules. SIGNATURES In accordance with Section 13 or 15 (d) 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. THE X-CHANGE CORPORATION (Registrant) Dated: March 24, 2004 By:/s/ Michael Sheriff Michael Sheriff, President and Chief Executive Officer (Principal Executive and Financial Officer) THE X-CHANGE CORPORATION (A Development Stage Company) -:- INDEPENDENT AUDITOR'S REPORT DECEMBER 31, 2003 AND 2002 F-1 CONTENTS
Page Independent Auditor's Report...............................................................................F - 1 Balance Sheets December 31, 2003 and 2002...............................................................................F - 2 Statements of Operations For the Years Ended December 31, 2003 and 2002...........................................................F - 3 Statement of Stockholders' Equity Period February 5, 1969 (inception) (unaudited) to December 31, 2003......................................F - 5 Statements of Cash Flows For the Years Ended December 31, 2003 and 2002...........................................................F - 9 Notes to Financial Statements.............................................................................F - 10
INDEPENDENT AUDITOR'S REPORT The X-Change Corporation (A Development Stage Company) We have audited the accompanying balance sheet of The X-Change Corporation (a development stage company) as of December 31, 2003 and 2002, and the related statements of operations and cash flows for the years ended and the cumulative since October 4, 2000 (inception of development stage) to December31, 2003, and the statement of stockholders' equity since February 5,1969 (inception) to December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The X-Change Corporation (a development stage company) as of December 31, 2003 and 2002 and the results of its operations and its cash flows for the years ended December 31, 2003 and December 31, 2002 and the cumulative since October 4, 2000 (inception of development stage) to December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are F-1 also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Respectfully Submitted, /s/ Robison, Hill & Co. Certified Public Accountants Salt Lake City, Utah March 24, 2004 F-2 THE X-CHANGE CORPORATION (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS
December 31, 2003 2002 ------------------- -------------------- ASSETS: Current Assets: $ - $ - ------------------- -------------------- Total Assets $ - $ - =================== ==================== LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities: $ 926 $ - ------------------- -------------------- Total Current Liabilities 926 - ------------------- -------------------- Stockholders' Equity: Preferred Stock, Par Value $.001, Series A Convertible - 5,000,000 Shares Authorized, 0 Issued at December 31, 2003 and 2002 - - Common Stock, Par value $.001, Authorized 100,000,000 Shares, Issued 13,002,000 and 22,540,000 at December 31, 2003 and 2002 13,002 22,540 Paid-In Capital 580,796 564,282 Retained Deficit (536,688) (536,688) Deficit Accumulated During Development Stage (58,036) (50,134) ------------------- -------------------- Total Stockholders' Equity (926) - ------------------- -------------------- Total Liabilities and Stockholders' Equity $ - $ - =================== ====================
The accompanying notes are an integral part of these financial statements. F-3 THE X-CHANGE CORPORATION (A DEVELOPMENT STAGE COMPANY) STATEMENT OF OPERATIONS
Cumulative Since October 4, 2000 For the Year Ended Inception of December 31, Development --------------------------------------- 2003 2002 Stage ------------------- ------------------ ----------------- Revenues $ - $ - $ - Expenses: General & Administrative 7,902 - 58,036 ------------------- ------------------ ----------------- Operating Loss (7,902) - (58,036) ------------------- ------------------ ----------------- Other Income (Expense): Interest - - - ------------------- ------------------ ----------------- Net Income (Loss) $ (7,902) $ - $ (58,036) =================== ================== ================= Earnings per Share, Basic & Diluted $ - $ - =================== ================== Weighted Average Shares Outstanding 22,444,620 22,540,000 =================== ==================
The accompanying notes are an integral part of these financial statements. F-4 THE X-CHANGE CORPORATION (A Development Stage Company) STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM FEBRUARY 5, 1969 (INCEPTION) TO DECEMBER 31, 2003
Deficit Accumulated Since October 4, 2000 Inception of Preferred Stock Common Stock Paid-In Retained Development Shares Par Value Shares Par Value Capital Deficit Stage ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at February 5, 1969 (inception) -- $ -- -- $ -- $ -- $ -- $ -- June 11, 1969 Issuance of Stock for cash -- -- 928 1 102,154 -- -- Issuance of stock for services -- -- 50 -- 6,137 -- -- Net Loss 1969 to 1993 -- -- -- -- -- (171,352) -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 1993 (unaudited) -- -- 978 1 108,291 (171,352) -- Net Loss -- -- -- -- -- (40,337) -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 1994 -- -- 978 1 108,291 (211,689) -- Issuance of stock for services -- -- 48,200 48 3,676 -- -- Net Income -- -- -- -- -- 99,673 -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 1995 and 1996 -- -- 49,178 49 111,967 (112,016) --
F-5 THE X-CHANGE CORPORATION (A Development Stage Company) STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM FEBRUARY 5, 1969 (INCEPTION) TO DECEMBER 31, 2003 (Continued)
Deficit Accumulated Since October 4, 2000 Inception of Preferred Stock Common Stock Paid-In Retained Development Shares Par Value Shares Par Value Capital Deficit Stage ---------- ---------- ---------- ---------- ---------- ---------- ---------- Issuance of stock for services -- $ -- 157,143 $ 157 $ 36,473 $ -- $ -- Net Loss -- -- -- -- -- (36,630) -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 1997 -- -- 206,321 206 148,440 (148,646) -- Issuance of stock for services -- -- 119,636 120 27,767 -- -- Net Loss -- -- -- -- -- (27,887) -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 1998 -- -- 325,957 326 176,207 (176,533) -- Return of shares to treasury -- -- (85,957) (86) 86 -- -- Issuance of stock for services -- -- 2,760,000 2,760 221,490 -- -- Net Loss -- -- -- -- -- (224,250) -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 1999 as originally reported -- -- 3,000,000 3,000 397,783 (400,783) --
F-6 THE X-CHANGE CORPORATION (A Development Stage Company) STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM FEBRUARY 5, 1969 (INCEPTION) TO DECEMBER 31, 2003 (Continued)
Deficit Accumulated Since October 4, 2000 Inception of Preferred Stock Common Stock Paid-In Retained Development Shares Par Value Shares Par Value Capital Deficit Stage ---------- ---------- ---------- ---------- ---------- ---------- ---------- 50:1 reverse stock split -- $ -- (2,940,000) $(2,940) $ 2,940 $ -- $ -- 4:1 forward stock split -- -- 180,000 180 (180) -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Restated balance at December 31, 1999 -- -- 240,000 240 400,543 (400,783) -- Issuance of stock for cash -- -- 14,300,000 14,300 60,700 -- -- Issuance of stock for services -- -- 8,000,000 8,000 82,000 -- -- Net Loss -- -- -- -- -- (135,905) (44,357) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2000 -- -- 22,540,000 22,540 543,243 (536,688) (44,357) Net Loss -- -- -- -- -- -- (5,777) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2001 -- -- 22,540,000 22,540 543,243 (536,688) (50,134) Contributed Capital -- -- -- -- 21,039 -- -- ---------- ---------- ---------- ---------- ---------- ---------- ----------
F-7 THE X-CHANGE CORPORATION (A Development Stage Company) STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM FEBRUARY 5, 1969 (INCEPTION) TO DECEMBER 31, 2003 (Continued)
Deficit Accumulated Since October 4, 2000 Inception of Preferred Stock Common Stock Paid-In Retained Development Shares Par Value Shares Par Value Capital Deficit Stage ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2002 -- $ -- 22,540,000 $ 22,540 $ 564,282 $ 536,688 $ (50,134) December 31, 2003, Shares Cancelled -- -- (9,538,000) (9,538) 9,538 -- -- Contributed Capital -- -- -- -- 6,976 -- -- Net Income (Loss) -- -- -- -- -- -- (7,902) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2003 -- $ -- 13,002,000 $ 13,002 $ 580,796 $ 536,688 $ (58,036) ========== ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. F-8 THE X-CHANGE CORPORATION (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CASH FLOWS
Cumulative Since October 4, 2000 For the Year Ended Inception of December 31, Development ------------------------------------- 2003 2002 Stage ------------------ ---------------- ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ (7,902) $ - $ (58,036) Adjustments to reconcile net loss to net cash Provided by operating activities: Increase (Decrease) in Accounts Payable 926 (1,218) 30,021 ------------------ ---------------- ------------------ Net Cash Used in Operating Activities (6,976) (1,218) (28,015) ------------------ ---------------- ------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Net Cash Provided by Investing Activities - - - ------------------ ---------------- ------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net Shareholder Loans - (19,821) - Capital Contributed 6,976 21,039 28,015 ------------------ ---------------- ------------------ Net Cash Provided by Financing Activities 6,976 1,218 28,015 ------------------ ---------------- ------------------ Net (Decrease) Increase in Cash and Cash Equivalents - - - Cash and Cash Equivalents at Beginning of Period - - - ------------------ ---------------- ------------------ Cash and Cash Equivalents at End of Period $ - $ - $ - ================== ================ ================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: - ------------------------------------------------- Cash paid during the year for: Interest $ - $ - $ - Franchise and income taxes $ - $ - $ - SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: None - ----------------------------------------------------------- -----------
The accompanying notes are an integral part of these financial statements. F-9 THE X-CHANGE CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of accounting policies for The X-Change Corporation is presented to assist in understanding the Company's financial statements. The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. Nature of Operations and Going Concern The accompanying financial statements have been prepared on the basis of accounting principles applicable to a "going concern", which assume that the Company will continue in operation for at least one year and will be able to realize its assets and discharge its liabilities in the normal course of operations. Several conditions and events cast doubt about the Company's ability to continue as a "going concern". The Company has incurred net losses of approximately $58,000 for the period from October 4, 2000 (inception of development stage) to December 31, 2003, has a liquidity problem, and requires additional financing in order to finance its business activities on an ongoing basis. The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments have been obtained. In the interim, shareholders of the Company have committed to meeting its minimal operating expenses. The Company's future capital requirements will depend on numerous factors including, but not limited to its development, acquisition and marketing of leading-edge wireless internet/networking technologies, principally RFID ("radio frequency identification"). These financial statements do not reflect adjustments that would be necessary if the Company were unable to continue as a "going concern". While management believes that the actions already taken or planned, will mitigate the adverse conditions and events which raise doubt about the validity of the "going concern" assumption used in preparing these financial statements, there can be no assurance that these actions will be successful. If the Company were unable to continue as a "going concern", then substantial adjustments would be necessary to the carrying values of assets, the reported amounts of its liabilities, the reported expenses, and the balance sheet classifications used. F-10 THE X-CHANGE CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Organization and Basis of Presentation The Company was incorporated under the laws of the State of Delaware on February 5, 1969 as Diversified Technologies Group, Inc., the Company reincorporated and changed its domicile to the State of Nevada on October 4, 2000. The Company on December 1, 1999, entered into an agreement (Reorganization Agreement) to acquire all of the outstanding capital stock of S&J (Chatteris) Holdings Limited, a United Kingdom corporation (S&J Holdings). Pursuant to the Reorganization Agreement, the Company agreed to acquire all of the outstanding capital stock of S&J in exchange for shares of Common Stock. The Reorganization Agreement required S&J Holdings to perform certain conditions, including the delivery of audited financial statements. These conditions had not been fulfilled by February 14, 2000; therefore, the agreement was rescinded and deemed to have been void and of no effect from the beginning as if the acquisition had not occurred. All shares issued in the acquisition were returned to treasury. The Company also attempted two acquisitions in 2000, neither of which were able to deliver the required financial statements. The first was rescinded and the second was not consummated. In June 2001, the Company entered into a reorganization agreement that was later rescinded for failure to provide adequate compliance with the representations, warranties and covenants of the agreement. In July 2001, the Company changed its name to The X-Change Corporation. On January 15, 2002, the Company merged with WEBiX, Inc. This merger resulted in the Company acquiring the business and operations of WEBiX, in exchange for the issuance by the Company of a controlling interest in its shares to the former shareholders of WEBiX. On March 13, 2003, the Company repurchased its shares and disposed of WEBiX and reentered the development stage. Nature of Business The Company has no products or services as of December 31, 2003. On February 9, 2004, the Company formed a wholly owned subsidiary, Air Gate Technologies, Inc. ("Air Gate"), for the purpose of engaging in the development and acquisition of leading-edge wireless internet/networking technologies, principally RFID ("radio frequency identification"). Cash and Cash Equivalents For the purpose of reporting cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. F-11 THE X-CHANGE CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Concentrations of Credit Risk The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. Pervasiveness of Estimates The preparation of financial statements in conformity with generally accepted accounting principles required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Stock Compensation for Non-Employees The Company accounts for the fair value of its stock compensation grants for non-employees in accordance with FASB Statement 123. The fair value of each grant is equal to the market price of the Company's stock on the date of grant if an active market exists or at a value determined in an arms length negotiation between the Company and the non-employee. Earnings (Loss) per Share Basic loss per share has been computed by dividing the loss for the year applicable to the common stockholders by the weighted average number of common shares outstanding during the years. There were no common equivalent shares outstanding at December 31, 2003 and 2002. NOTE 2 - INCOME TAXES As of December 31, 2003, the Company had a net operating loss carryforward for income tax reporting purposes of approximately $594,123 that may be offset against future taxable income through 2021. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carryforwards will expire unused. Accordingly, the potential tax benefits of the loss carryforwards are offset by a valuation allowance of the same amount. F-12 THE X-CHANGE CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS NOTE 3 - DEVELOPMENT STAGE COMPANY/ GOING CONCERN The Company has not begun principal operations and as is common with a development stage company, the Company has had recurring losses during its development stage. Continuation of the Company as a going concern is dependent upon obtaining the additional working capital necessary to be successful in its planned activity, and the management of the Company has developed a strategy, which it believes will accomplish this objective through additional equity funding and long term financing, which will enable the Company to operate for the coming year. NOTE 4 - COMMITMENTS As of December 31, 2003, all activities of the Company have been conducted by corporate officers from either their homes or business offices. Currently, there are no outstanding debts owed by the company for the use of these facilities and there are no commitments for future use of the facilities. NOTE 5 - PREFERRED STOCK The Company has authorized a total of 10,000,000 shares of Preferred Stock. Series A Convertible Preferred Stock is the initial series of Preferred Stock. This series shall consist of 5,000,000 shares with a par value of $.001. The Corporation is under no obligation to pay dividends or to redeem the Series A Convertible Preferred Stock. This series of stock is convertible into 10 shares of Common Stock at the option of the shareholder or upon automatic conversion. In the event of any liquidation, dissolution or winding-up of the Corporation, the holders of outstanding shares of Series A Preferred shall be entitled to be paid out of the assets of the Corporation available for distribution to shareholders, before any payment shall be made to or set aside for holders of the Common Stock, at an amount of $1 per share. As a result of the March 13, 2003 repurchase agreement all 5,000,000 shares were returned to treasury. NOTE 6 - STOCK TRANSACTIONS On December 31, 2003, certain shareholders contributed back to capital. F-13 THE X-CHANGE CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS NOTE 7 - MERGER/ACQUISITION On January 15, 2002, the Company and its newly created wholly owned subsidiary X-Change Technologies Corp, merged with WEBiX, Inc. (a Florida Corporation). As a result, the Company acquired the business and operations of WEBiX, in exchange for the issuance of a controlling interest in The X-Change Corporations' shares to the former shareholders of WEBiX. Under the Plan of Merger, 24,000,000 shares of Common Stock, 4,000,000 shares of Series A Convertible Preferred Stock (convertible into 40,000,000 shares of Common Stock) and 40,000,000 warrants were issued. In addition, certain existing shareholders of the Company surrendered approximately 9,500,000 shares of Common Stock to treasury. In connection with this merger, the par value of the Series A Convertible Preferred Stock changed from $.01 to $.001. On March 13, 2003, the Company rescinded its agreement with X-Change Technologies. The rescission, essentially, resulted in the return of all X-Change Corporation's assets in exchange for the surrender of all securities held by the former X-Change Technologies shareholders in the Company and the assumption by X-Change Technologies Corp. of all the Company's debt immediately prior to closing. The rescission effected a change in control over the business, policies and affairs of the Company from the X-Change shareholders to those shareholders holding securities in the Company prior to January 15, 2002. As a result, 15,062,000 shares of common stock and 5,000,000 shares of preferred stock were returned to treasury and the Company had 22,540,000 shares of common stock, which was the amount outstanding immediately prior to closing of the X- Change Technologies Corp. acquisition on January 15, 2002. All lock-up agreements pertaining to these shares were released effective with the closing. NOTE 8 - SUBSEQUENT EVENTS On February 9, 2004, the Company formed a wholly owned subsidiary, Air Gate Technologies for the purpose of engaging in the development and acquisition of leading-edge wireless internet/networking technologies, principally radio frequency identification. Concurrent with the formation of the subsidiary Michael Sheriff was engaged to be the a new President, CEO, treasurer and chairman of the board. In exchange for his services, Mr Sheriff received an option to purchase 12,000,000 shares of common stock at the market price on the date of his engagement. F-14 EX-31 3 form10ksb123103ex31.txt Exhibit 31.1 Section 302 Certifications I, Michael Sheriff, certify that: 1. I have reviewed this annual report on form 10-KSB of The X- Change Corporation, Inc., 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report. 4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange act rules 13a-15(e) and 15d-15(e) for the small business issuer and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report on such evaluation; and c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: March 24, 2004 /S/ Michael Sheriff Michael Sheriff C.E.O., President, Director (Principal Executive Officer) EX-32 4 form10ksb123103ex32.txt Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of The X-Change Corporation, Inc. on Form 10-KSB for the year ending December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael Sheriff, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /S/ Michael Sheriff Michael Sheriff C.E.O., President, Director (Principal Executive Officer) March 24, 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----