-----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, UOe2z/HnllwnJqIcyYR6GHkydlwlHW+k2tARrYXSZnv+xdm97wOxYXrHHaPf9vC0 orutDpDExnRNz9VycDXh/Q== 0000889812-00-000093.txt : 20000202 0000889812-00-000093.hdr.sgml : 20000202 ACCESSION NUMBER: 0000889812-00-000093 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991130 FILED AS OF DATE: 20000114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: XCEED INC CENTRAL INDEX KEY: 0000721176 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 133006788 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13049 FILM NUMBER: 507496 BUSINESS ADDRESS: STREET 1: 488 MADISON AVENUE STREET 2: 4TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127535511 MAIL ADDRESS: STREET 1: 488 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: X CEED INC DATE OF NAME CHANGE: 19980302 FORMER COMPANY: FORMER CONFORMED NAME: WATER JEL TECHNOLOGIES INC DATE OF NAME CHANGE: 19950425 FORMER COMPANY: FORMER CONFORMED NAME: TRILLING MEDICAL TECHNOLOGIES INC DATE OF NAME CHANGE: 19910715 10-Q 1 QUARTERLY REPORT U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) |X| Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended November 30, 1999 |_| Transition report under Section 13 or 15(d) of the Exchange Act For the transition period from __________ to __________ Commission file number 0-13049 ------- XCEED INC. - -------------------------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified in its charter) DELAWARE 13-3006788 - -------------------------------- ---------------------- (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 488 MADISON AVENUE, NEW YORK, NEW YORK 10022 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (212) 419-1200 - -------------------------------------------------------------------------------- (Issuer's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the 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. Yes X No ----- ----- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes No ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 18,693,390 as of January 12, 2000 XCEED INC. AND SUBSIDIARIES INDEX PART I ITEM 1. Financial Information Page No. Consolidated balance sheets November 30, 1999 and August 31, 1999 . . . . . . . . . . . . 3 Consolidated statements of operations Three Months Ended November 30, 1999 and 1998 . . . . . . . . 4 Consolidated statements of cash flows Three Months Ended November 30, 1999 and 1998 . . . . . . . . 5 Notes to consolidated financial statements . . . . . . . . . 6-9 ITEM 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations . . . . . . . . . . . . . 10-12 PART II Other Information . . . . . . . . . . . . . . . . . . . . . . 13 Signatures . . . . . . . . . . . . . . . . . . . . . . . . 14 2 XCEED INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousand, except share and per share data)
ASSETS NOVEMBER 30, AUGUST 31, ------ ------------ ---------- 1999 1999 ---- ---- (unaudited) --------- CURRENT ASSETS: Cash and cash equivalents $ 10,189 $ 19,754 Investment in marketable securities 847 367 Accounts receivable, net of allowance for doubtful accounts of $1,790 and $1,190, respectively 13,281 8,999 Program costs and earnings in excess of customer billings 8,081 5,721 Income tax refund receivable 2,437 2,437 Prepaid expenses and other current assets 1,070 1,024 Deferred income taxes 212 358 Net assets held for sale 2,272 2,356 -------------- -------------- Total current assets 38,389 41,016 PROPERTY AND EQUIPMENT, net 4,048 3,268 DUE FROM OFFICER 1,223 1,223 INTANGIBLE ASSETS,net 51,306 40,575 DEFERRED INCOME TAXES 2,597 1,046 OTHER ASSETS 3,595 3,411 -------------- -------------- $ 101,158 $ 90,539 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Notes payable, banks $ 862 $ 862 Accounts payable and accrued expenses 9,375 8,308 Current portion of long-term debt 389 389 Customer billings in excess of program costs and earnings 7,273 3,538 -------------- -------------- Total current liabilities 17,899 13,097 -------------- -------------- LONG-TERM DEBT 2,526 2,625 -------------- -------------- ACCRUED LEASE OBLIGATIONS 875 875 -------------- -------------- OTHER LIABILITIES 288 1,661 -------------- -------------- STOCKHOLDERS' EQUITY: Common stock, $.01 par value, authorized 30,000,000 shares; 18,570,500 and 17,747,554 issued and outstanding, respectively 186 177 Preferred stock, $.05 par value; authorized 1,000,000 shares; -0- issued and outstanding - - Net unrealized gain (loss) on marketable securities 268 (20) Additional paid-in capital 90,104 79,379 Unearned compensation (2,868) (3,216) Deficit (8,049) (3,968) -------------- -------------- 79,641 72,352 Treasury stock, at cost; 15,000 shares, respectively (71) (71) -------------- -------------- 79,570 72,281 -------------- -------------- $ 101,158 $ 90,539 ============== ==============
See notes to consolidated financial statements. 3 XCEED INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
THREE MONTHS ENDED ------------------ NOVEMBER 30, ------------- 1999 1998 ---- ---- REVENUES, net $ 18,207 $ 9,701 ------------ ------------ COST AND EXPENSES: Cost of revenues 11,855 5,193 Selling, general and administraive 10,609 5,418 Stock compensation 349 358 Research and development 18 113 Depreciation and amortization 1,718 911 ------------ ------------ 24,549 11,993 ------------ ------------ OPERATING LOSS (6,342) (2,292) ------------ ------------ OTHER INCOME (EXPENSE): Interest and dividend income 158 109 Interest expense (72) (49) Other, net 1 16 ------------ ------------ 87 76 ------------ ------------ LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX BENEFIT (6,255) (2,216) INCOME TAX BENEFIT (1,783) (728) ------------ ------------ LOSS FROM CONTINUING OPERATIONS (4,472) (1,488) INCOME FROM DISCONTINUED OPERATIONS, net of tax provision of $260 and $172, respectively 391 257 ------------ ------------ NET LOSS $ (4,081) $ (1,231) ============ ============ NET (LOSS) INCOME PER COMMON SHARE Loss from continuing operations ($0.24) ($0.12) Income from discontinued operations 0.02 $0.02 ------------ ------------ Net (loss) ($0.22) ($0.10) ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: 18,240,791 13,687,706 ============ ============
See notes to consolidated financial statements. 4 XCEED INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
Three Months Ended ------------------ November 30, ------------ 1999 1998 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (4,081) $ (1,231) ---------- ---------- Adjustment to reconcile net loss to net cash used in operating activities: Gain on sale of marketable securities - (5) Depreciation and amortization 1,735 947 Non-cash compensation 349 358 Deferred income taxes (1,591) (312) Provision fro doubtful accounts 600 - Changes in operating assets and liabilities: (Increase) decrease in assets: Accounts receivable (4,272) (2,038) Inventories 54 (55) Program costs and earnings in excess of customer billings (2,360) 1,496 Prepaid expenses and other current assets (36) (256) Other assets 73 (94) Increase (decrease) in liabilities: Accounts payable and accrued expenses 764 (1,511) Income taxes payable (5) (249) Customer billings in excess of program costs and earnings 3,735 1,279 Other liabilities (159) (39) ---------- ---------- Total adjustments (1,113) (479) ---------- ---------- Net cash used in by operating activities (5,194) (1,710) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Investment in marketable securities - (130) Proceeds from sale of marketable securities - 62 Business acquisitions, net of cash acquired (4,500) (6,286) Acquisition of property and equipment (933) (234) ---------- ---------- Net cash used in investing activities (5,433) (6,588) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of long-term debt (107) (141) Proceeds from excercise of warrants and options 1,169 297 ---------- ---------- Net cash provided by financing activities 1,062 156 ---------- ---------- NET DECREASE IN CASH AND CASH EQUIVALENTS (9,565) (8,142) CASH AND CASH EQUIVALENTS - beginning of period 19,754 13,789 ---------- ---------- CASH AND CASH EQUIVALENTS - end of period $10,189 $5,647 ========== ==========
See notes to consolidated financial statements. 5 XCEED INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS November 30, 1999 (UNAUDITED) (in thousands, except share and per share data) 1. Basis of Quarterly Presentation: -------------------------------- The accompanying quarterly financial statements have been prepared in conformity with generally accepted accounting principles. The financial statements of the Registrant included herein have been prepared by the Registrant pursuant to the rules and regulations of the Securities and Exchange Commission and, in the opinion of management, reflect all adjustments which are necessary to present fairly the results for the period ended November 30, 1999. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; however, management believes that the disclosures are adequate to make the information presented not misleading. This report should be read in conjunction with the financial statements and footnotes therein included in the audited annual report on Form 10-K as of August 31, 1999. 2. Principles of Consolidation: ---------------------------- The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Upon consolidation, all significant intercompany accounts and transactions are eliminated. 3. Supplemental Information - Statements of Cash Flow: --------------------------------------------------- Three Months Ended November 30, ------------------ 1999 1998 Interest paid.................. $ 72 $ 49 ====== ====== Income taxes paid.............. $ - $291 ====== ====== 6 Non-cash Financing and Investing Activities: -------------------------------------------- Three Months Ended November 30, ------------------ 1999 1998 Common stock issued in connection with acquisitions..... $8,200 $26,120 ====== ======= Stock compensation............... $ 349 $ 358 ====== ======= 4. Earnings (Loss) Per Share: -------------------------- Basic earnings (loss) per common share is computed by dividing the net earnings by the weighted average number of shares of common stock outstanding during the period. Dilutive earnings (loss) per share gives effect to stock using and warrants which are considered to be dilutive common stock equivalents. Treasury shares and shares held in escrow have been excluded from the weighted average number of shares. Net earnings for basic and dilutive computations were equivalent for all periods presented. 5. Income Taxes: ------------- Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. 6. Business Segments: ------------------ a. Segment reporting The Company has two reportable business segments: Integrated Corporate Communications and Travel Management. The Integrated Corporate Communications segment provides marketing and communication services. The segment helps companies develop e-commerce and e-business solutions, improves people and business performance through communication tools, techniques and technologies. The Travel Management segment provides travel-related services and consulting, including reservations and ticketing to major U.S. corporations. The Company's revenues are derived primarily from activities within the United States, and all long-lived assets are located within the United States. 7
Integrated Corporate Travel General Communications Management Corp.(1) Total -------------- ---------- -------- ----- Three months ended November 30, 1999: Revenues from external Customers $15,492 $2,715 $ - $18,207 Intersegment revenues - - - - Segment profit (loss) (5,500) 130 (884) (6,254) Three months ended November 30, 1998: Revenues from external Customers $ 6,927 $2,774 $ - $ 9,701 Intersegment revenues - - - - Segment profit (loss) (2,011) 365 (570) (2,216)
(1) Column represents corporate-related items and, as it relates to segment profit (loss). b. Major customers The Company earned revenues from the following significant customers: %of Amount Total ------ ----- Three months ended November 30, 1999: Integrated corporate communications $1,902 10.4% Three months ended November 30, 1998: Integrated corporate communications $1,324 13.6% 7. Reclassifications: ------------------ Certain reclassifications have been made to the financial statements for the three months ended November 30, 1998 to conform with the classifications used in 1999. 8. Business Combinations: ---------------------- During the three month period ended November 30, 1999, the Company completed the acquisitions of three internet professional services firms in various transactions accounted for as purchase business combinations. The aggregate purchase price of these acquisitions was approximately $12,900, including 434,419 shares of common stock ($8,200) and cash of $4,700. Certain of the agreements provide for additional 8 consideration in the event certain specific performance criteria are met. The acquisition prices were allocated, on an entity-by-entity basis, to the assets acquired, including tangible and intangible assets and liabilities assumed based upon the fair values of such assets and liabilities on the dates of the acquisitions. The historical carrying amounts of the tangible assets and liabilities approximated their fair values on the dates of acquisitions. Approximately $12,448 of the aggregate purchase price was allocated to goodwill and will be amortized over its estimated useful life of seven years. 9 MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------ The following discussion and analysis of financial conditions and results of operations of Xceed Inc. should be read in conjunction with the Company's consolidated financial statements that appear in this document. Overview - -------- The Company is a leading interactive architect and solutions builder as well as an integrated marketing and communications company with interactive services as its core. The Company helps companies develop e-commerce and e-business solutions, improving people and business performance through communication tools, techniques and technologies. The following table sets forth the percentage of total revenues represented by certain items reflected in the Company's consolidated statements of operations. Three Months ended November 30, ------------------------------- 1999 1998 ---- ---- Revenue 100% 100% Operating Expenses: Cost of Revenues 65 54 Selling, general & admin. 59 56 Stock compensation 2 4 Research & development - 1 Depreciation & amortization 9 9 --- --- Total operating expenses 135% 124% --- --- Operating loss (35)% (24)% Net loss (22)% (13)% RESULTS OF OPERATIONS: - ---------------------- Net revenues for the three months ended November 30, 1999 and 1998, respectively, were $18,207 and $9,701 representing a 88% increase. The significant increase in net revenues for the current period is a direct result of the Company's continued rapid growth of its Interactive business, which accounted for substantially all the increase. Cost of revenues for the three months ended November 30, 1999 and 1998 were $11,855 and $5,193, representing an increase of $6,662, or 128% in the current period. This continued increase is a direct result of increased staffing and infrastructure and cost 10 of acquisitions resulting from the rapid growth and continuing increase in market share of the Company's Interactive business. Selling, general and administrative expenses for the three months ended November 30, 1999 and 1998 were $10,609 and $5,418, respectively, representing an increase of $5,191 or 96% during the current period. The continued increase in selling, general and administrative expense is a direct result of increased selling, marketing and corporate expenses associated with the expansion of the Company's Interactive business. In addition, the Company has incurred additional general and administrative expenses related with acquisitions as part of its ongoing effort to evolve its core business into a fully integrated and communications company. As a percentage of revenues, selling, general and administrative expense increased to 59% during the current period as compared to 56% for the corresponding prior period. Stock compensation expense for the three months ended November 30,1999 were $349 and $358, respectively. These expenses resulted from stock and stock option grants to consultants and employees in lieu of cash payments for services rendered. As a percentage of revenues, stock compensation expense decreased to 2% during the current period from 4% for the corresponding prior period. Depreciation and amortization for the three months ended November 30, 1999 and 1998 were $1,718 and $911, respectively, representing an increase of $807 for the current period. The increase is a result of the amortization of intangible assets from acquisitions made in the Interactive business. In addition, the Company has incurred increased depreciation expense as a result of increased fixed assets purchases of computer and other related equipment. As a percentage of revenues, depreciation and amortization expense approximated 9% for both periods. Other income for the three months ended November 30, 1999 was $87 as compared to $76 for the corresponding prior period. The Company's effective tax rate for the three months ended November 30, 1999 was (28%) as compared to (33)% for the three months ended November 30, 1998. The rate reflects the impact of the amortization of non-tax deductible goodwill in connection with the acquisitions. LIQUIDITY AND CAPITAL RESOURCES: - -------------------------------- At November 30, 1999 the Company had working capital of $20,490 as compared to $27,919 at August 31, 1999. The decrease in working capital for the current period is a result of a decrease in cash and cash equivalent of $9,565. In January 2000, the Company received cash proceeds of $3,828 in connection with the divestiture of the net assets of the Water-Jel First Aid division. 11 The consolidated statement of cash flows for the period ended November 30, 1999 reflects net cash used in operating activities of $5,194 resulting from a net loss of $4,081, an increase in accounts receivable of $3,672, and an increase in customer billings in excess of program costs of $3,735. Cash used in investing activities was $5,433, resulting from business acquisitions of $4,500. Cash provided by financing activities approximated $1,062 resulting from the exercise of warrants and options. The Company's growth strategy is anticipated to be financed through its current cash resources, cash flow from operations and existing and prospective third party credit facilities including a bank line of credit from Chase Manhattan in the amount of $5 million. The Company believes the combination of these sources will be sufficient to fund its operations and to satisfy the Company's cash requirements for the next twelve months. There may be circumstances, however, that would accelerate the Company's use of its liquid resources. If this occurs, the Company may, from time to time, incur additional indebtedness or issue, in public or private transactions, equity or debt securities. However, there can be no assurance that suitable debt or equity financing will be available to the Company. 12 PART II - OTHER INFORMATION --------------------------- ITEM 1 - Legal Proceedings - ------ ----------------- There is no material litigation currently pending against the Company, its officers or employees. ITEM 2 - Changes in Securities - ------ --------------------- None ITEM 3 - Defaults on Senior Securities - ------ ----------------------------- None ITEM 4 - Submission to a Vote of Security Holders - ------ ---------------------------------------- None ITEM 5 - Other Information - ------ ----------------- None ITEM 6 - Exhibits and Reports on Form 8-K - ------ -------------------------------- (a) None (b) None 13 XCEED INC. ---------- 488 MADISON AVENUE ------------------ NEW YORK, N.Y. 10022 -------------------- ------------------------ FILE # 0-13049 ------------------------ SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BY: /s/ Werner Haase ----------------- WERNER HAASE, CEO DATE: January 14, 2000 14 EX-27 2 FDS
5 1 3-MOS AUG-31-2000 NOV-30-1999 10,189 847 15,071 1,790 0 38,389 6,612 2,564 101,158 17,899 2,526 186 0 0 79,384 101,158 18,207 18,207 11,855 11,855 0 0 72 (6,255) (1,783) (4,472) 391 0 0 (4,081) (0.22) (0.22)
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