-----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, P2wBPDB/z9L0oUEgWNn6LAQ/ZW2/app3Zes5OdZpO+akxwiRLCTjPRXHSYRLGZnm THGSbyUO7f/yithiQa6oww== 0000940180-00-000437.txt : 20000412 0000940180-00-000437.hdr.sgml : 20000412 ACCESSION NUMBER: 0000940180-00-000437 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990531 FILED AS OF DATE: 20000411 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/A SEC ACT: SEC FILE NUMBER: 000-13049 FILM NUMBER: 598479 BUSINESS ADDRESS: STREET 1: 488 MADISON AVENUE STREET 2: 3TH 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/A 1 AMENDMENT NO. 1 TO FORM 10-Q 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 May 31,1999 / / 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 registrant as specified in its charter) NEW YORK 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) WATER-JEL TECHNOLOGIES, INC. - -------------------------------------------------------------------------------- (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: 16,452,732 as of July 12, 1999 XCEED INC. AND SUBSIDIARIES INDEX PART I ITEM 1. Financial Information Page No. Consolidated balance sheets ....................................... 3 Consolidated statements of operations Nine and Three Months Ended May 31,1999 and 1998 ............................................. 4 Consolidated statements of cash flows Nine Months Ended May 31, 1999 and 1998 ............................................ 5 Notes to consolidated financial statements ........................ 6-8 ITEM 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations ..................................... 9-10 PART II Other Information ................................................... 11 Signatures .......................................................... 12 2 XCEED INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) ASSETS MAY 31, AUGUST 31, --------- ----------- 1999 1998 --------- ----------- (As Restated See Note 3) (unaudited) CURRENT ASSETS: Cash and cash equivalents $23,292 $13,789 Investment in marketable securities 302 97 Accounts receivable, net of allowance for doubtful accounts of $504 and $154 at May 31, 1999 and August 31, 1998, respectively 13,171 5,325 Program costs and earnings in excess of customer billings 2,601 3,287 Inventories 1,142 1,022 Prepaid expenses and other current assets 1,163 861 Deferred income taxes 442 14 ------- ------- Total current assets 42,113 24,395 PROPERTY AND EQUIPMENT, net 3,550 1,533 DUE FROM OFFICER 1,223 1,223 GOODWILL, net 35,895 6,088 TRADEMARKS, net 3,080 -- DEFERRED INCOME TAXES 606 484 OTHER ASSETS 1,093 993 ------- ------- $87,560 $34,716 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 9,786 $ 5,793 Current portion of long-term debt 1,526 41 Income taxes payable, current -- 219 Customer billings in excess of program costs 5,055 1,009 ------- ------- Total current liabilities 16,367 7,062 ------- ------- LONG-TERM DEBT 2,954 -- ------- ------- OTHER LIABILITIES 1,365 -- ------- ------- INCOME TAXES PAYABLE 750 -- ------- ------- ACCRUED LEASE OBLIGATIONS 875 875 ------- ------- DEFERRED REVENUES 503 587 ------- ------- STOCKHOLDERS' EQUITY: Common stock, $.01 par value, authorized 30,000,000 shares; 16,941,099 and 10,277,053 shares issued and outstanding, respectively 169 103 Preferred stock, $.05 par value; authorized 1,000,000 shares; -0- issued and outstanding -- -- Net unrealized gain on marketable securities (22) (27) Additional paid-in capital 68,220 22,657 Unearned compensation (3,295) (112) (Deficit) Retained earnings (255) 3,642 ------- ------- 64,817 26,263 Treasury stock, 15,000 and 15,000 shares, respectively (71) (71) ------- ------- 64,746 26,192 ------- ------- $87,560 $34,716 ======= ======= See notes to consolidated financial statements. 3 XCEED INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per share data) (unaudited)
NINE MONTHS ENDED THREE MONTHS ENDED ----------------- ------------------ MAY 31, MAY 31, ------- ------- 1999 1998 1999 1998 ---- ---- ---- ---- (As Restated (As Restated See Note 3) See Note 3) REVENUES, net $ 55,690 $ 44,348 $ 23,340 $ 18,193 ----------- ---------- ----------- ---------- COST AND EXPENSES: Cost of revenues 33,957 27,825 14,086 12,484 Selling, general and administrative 21,305 13,496 9,445 4,752 Research and development 447 532 245 69 Depreciation and amortization 4,716 478 1,599 176 ----------- ---------- ----------- ---------- 60,425 42,331 25,375 17,481 ----------- ---------- ----------- ---------- OPERATING (LOSS) INCOME (4,735) 2,017 (2,035) 712 ----------- ---------- ----------- ---------- OTHER INCOME (EXPENSE): Interest and dividend income 444 462 225 206 Interest expense (395) (10) (68) (3) Gain on sale of investment in marketable securities 11 359 17 1 Other 28 43 70 30 ----------- ---------- ----------- ---------- 88 854 244 234 ----------- ---------- ----------- ---------- (LOSS) INCOME BEFORE INCOME TAXES (4,647) 2,871 (1,791) 946 INCOME TAX (BENEFIT) PROVISION (750) 1,582 (172) 493 ----------- ---------- ----------- ---------- NET (LOSS) INCOME ($3,897) $ 1,289 ($1,619) $ 453 =========== ========== =========== ========== NET (LOSS) INCOME PER COMMON SHARES Basic ($0.27) $0.18 ($0.10) $0.06 =========== ========== =========== ========== Diluted ($0.27) $0.16 ($0.10) $0.05 =========== ========== =========== ========== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 14,466,202 7,279,691 16,136,296 7,743,798 =========== ========== =========== ========== Diluted 14,466,202 7,865,096 16,136,296 8,421,620 =========== ========== =========== ==========
See notes to consolidated financial statements. 4 XCEED INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) Nine Months Ended ----------------- May 31, ------- 1999 1998 ---- ---- (As Restated See Note 3) CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income ($ 3,897) $ 1,289 --------- ------- Adjustment to reconcile net (loss) income to net cash provided by operating activities: Gain on sale of marketable securities (11) (359) Depreciation and amortization 4,716 478 Allowances for doubtfull accounts 350 -- Equity gain on investment (28) (43) Deferred tax benefit (550) (54) Changes in operating assets and liabilities: (Increase) decrease in assets: Accounts receivable (5,578) (6,063) Inventories (120) 304 Program costs and earnings in excess of billings 686 763 Prepaid expenses and other current assets (175) (335) Other assets 208 (239) Increase (decrease) in liabilities: Accounts payable and accrued expenses 2,490 3,100 Income taxes payable (219) (82) Customer billings in excess of program costs 3,722 4,339 Deferred revenues (114) -- --------- ------- Total adjustments 5,377 1,809 --------- ------- Net cash provided by operating activities 1,480 3,098 --------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Investment in marketable securities (548) (192) Proceeds from sale of marketable securities 359 805 Business acquisitions, net of cash acquired (5,261) -- Acquisition of property and equipment (1,556) (334) --------- ------- Net cash (used in) provided by investing activities (7,006) 279 --------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of long-term debt (4,854) (29) Proceeds from long-term debt 614 -- Advances to affiliate -- (316) Proceeds from issuances of securities 19,269 5,732 --------- ------- Net cash provided by financing activities 15,029 5,387 --------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS 9,503 8,764 CASH AND CASH EQUIVALENTS - beginning of period 13,789 7,230 --------- ------- CASH AND CASH EQUIVALENTS - end of period $ 23,292 $15,995 ========= ======= See notes to consolidated financial statements. 5 XCEED, INC. AND SUBSIDIARIES ---------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (UNAUDITED) ----------- May 31,1999 ----------- (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 May 31,1999. 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, 1998. 2. Principle 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. Restatement: During 1999, the Company made several business acquisitions. During the first three quarters of 1999, the Company had not completed its evaluation of the useful lives of related goodwill and intangible assets, however had utilized 15 to 25 years for interim reporting purposes. During the fourth quarter of 1999, the Company completed an evaluation of the amortization periods of goodwill and other intangible assets, as a result the Company adopted amortization periods of 7 to 12 years. The impact of this reduction in lives was $1,568 and $575 for the nine and three months ended May 31, 1999. The accompanying financial statements have been restated to reflect the reduced lives. 4. Supplemental Information - Statements of Cash Flow: Nine Months Ended May 31, ---------------------- 1999 1998 Interest paid ............................ $ 396 $ 10 ====== ====== Income taxes paid ........................ $ 413 $1,442 ====== ====== 5. Stockholders' Equity: a. Common Stock During the three months ended November 30, 1998, the Company issued 3,332,057 shares in connection with the Mercury Seven, Inc. and Zabit & Associates, Inc. mergers. During the three months ended May 31, 1999, the Company issued 210,000 shares of common stock in connection with the acquisition of Troon Ltd. 6 The Company entered into agreements to acquire the 50% interest in Xceed Atlanta held by the minority stockholder for consideration of $1,365 of the Company's common stock. Accordingly, effective April 1, 1999, the accounts of Xceed Atlanta have been consolidated with the Company, and all significant intercompany accounts and transactions have been eliminated. During the three months ended May 31, 1999, the Company issued 537,109 shares of common stock in connection with a private placement with the Deikel Group and received proceeds of $5,500. In June 1999 an additional $4,500 was received from a second private placement with this investor. b. Warrants On January 21, 1999, the Company's Board of directors voted unanimously to redeem the Company's outstanding Redeemable Class B warrants. A notice of redemption was sent to the holders on January 22, 1999. Under the terms, the warrant holders had until February 20, 1999 to exercise their warrants at an exercise price of $6 per share and receive one share of common stock. In the event a holder elected not to exercise, the Company would redeem the warrant by paying the holder a price of $.40 per warrant. As a result, the Company received $11,130 and issued 1,844,923 shares of common stock. 8. Earnings Per Share: Basic earnings 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 per share gives effect to stock options and warrants which are considered to be dilutive common stock equivalents. Treasury shares have been excluded from the weighed average number of shares. Net earnings for basic and dilutive computations were equivalent for all periods presented. The following is a reconciliation of the weighted average shares: Nine Months Ended Three Months Ended May 31, May 31, ----------------- ------------------ 1999 1998 1999 1998 ---- ---- ---- ---- Basic 14,466,202 7,279,691 16,136,296 7,743,798 effect of dilutive securities -- 585,405 -- 677,822 ---------- ---------- ---------- ---------- Diluted 14,466,202 7,865,096 16,136,296 8,421,620 ========== ========== ========== ========== 7 9. Income Taxes: Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases 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. 10. Amortization: The amortization period of intangible assets is as follows: Goodwill 7 to 12 years Trademarks 20 years Unearned Compensation 4 years 8 MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS: Net revenues for the nine months ended May 31, 1999 and 1998, respectively, were $55,690 and $44,348, representing a 26% increase. Net revenues for the three months ended May 31, 1999 and 1998, respectively, were approximately $23,340 and $18,193 representing a 28% increase. The increase in net revenue for the nine and three months ended May 31, 1999 are primarily attributable to the operations of the newly acquired Technology divisions (Reset, Inc., Mercury Seven, Inc. and Zabit & Associates, Inc.) and the consolidation of the Xceed Atlanta Division effective April 1, 1999. Cost of revenues for nine months ended May 31, 1999 and 1998 were $33,957 and $27,825, representing 61% and 63% of net revenues, respectively. Cost of revenues for the three months ended May 31,1999 and 1998 were $14,086 and $12,484, representing 60% and 69% of net revenues, respectively. The increase in cost of revenues during the nine and three months ended May 31, 1999 are attributable to additional staffing requirements of the Company's Technology divisions. Selling, general and administrative expenses for the nine months ended May 31, 1999 and 1998 were $21,305 and $13,496, representing 38% and 30% of net revenues, respectively. Selling, general and administrative expenses for the three months ended May 31, 1999 and 1998 were $9,445 and $4,752, representing 40% and 26% of net revenues, respectively. The increase in selling, general and administrative expenses during the nine and three months ended May 31, 1999 are attributable to the additional expenses borne by the Company as a result of its acquisitions. Research and development expenses for the nine and three months ended May 31, 1999 were $447 and $245, incurred in connection with the continuing development of E-Commerce ventures. Research and development expenses for the nine and three months ended May 31, 1998 were $532 and $69, incurred in connection with the development of the Performance Group's Maestro software. Depreciation and amortization expense during the nine and three months ended May 31, 1999 was $4,716 and $1,599 primarily resulting from the goodwill and unearned compensation related to the Company's acquired divisions which were not present in the corresponding periods. Other income for the nine months ended May 31, 1999 was $88 as compared to $854 for the corresponding prior period. Other income for the three months ended May 31, 1999 was $244 as compared to $234 for the corresponding prior period. The significant decrease during the nine months ended May 31, 1999 is a result of increased interest expense resulting from debt incurred in connection with the Zabit & Associates, Inc. acquisition. 9 The Company's effective tax rate for the nine months ended May 31, 1999 was (16%). This rate reflects the amortization of non-deductible goodwill in connection with the acquisitions. LIQUIDITY AND CAPITAL RESOURCES: At May 31, 1999, the Company had working capital of $25,746 as compared to $17,333 at August 31, 1998. The significant increase in working capital is derived primarily from the receipt of proceeds of $11,130 as result of the exercise of the Company's outstanding Class B warrants. In addition, the Company received $5,500 upon closing of the first of two trenches of a private offering of securities commenced by the Company during the third quarter. Subsequently, during the fourth quarter, the Company received proceeds of $4,500 upon closing of the second and final trench of the private offering. The consolidated statement of cash flows for the nine months ended May 31, 1999 reflects net cash provided by operating activities of $1,480. This resulted from net loss of $3,897, an increase in accounts payable and accrued expenses of $2,490 and an increase in customer billings in excess of programs costs of $3,722 offset by an increase in accounts receivable of $5,578. Cash provided by investing activities was $7,006, consisting principally of net cash used in business acquisitions of $5,261 and acquisitions of property and equipment of $1,556 and investments in marketable securities of $548. Cash provided by financing activities approximated $15,029 consisting primarily of proceeds from the issuance of securities of $19,269, offset by the net payments of debt of $4,240. During the nine months ended May 31, 1999, the Company entered into agreements to acquire Troon, Ltd. and the 50% interest in Xceed Atlanta held by the minority shareholder. Consideration for these acquisitions include $1,605 of the Company's common stock and $30 cash. The Company believes that it has adequate working capital for at least the next twelve months of operations at current levels. As of July 8, 1999 the Company had approximately $24,258 in cash and cash equivalents. 10 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) Exhibits (20) (g) Notice of redemption of the Company's Class B Warrants as incorporated by reference on Form 8-K (1) (b) Report on Form 8-K (1) The Company's Current Report on Form 8-K, as filed with the Commission January 28, 1999 referencing the merger of Reset, Inc. and Mercury Seven, Inc., wholly owned subsidiaries of the Company, into the Company and further referencing the issuance of a Notice of Redemption of the Company's Class B Warrants. 11 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: April 11, 2000 -------------- 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS AUG-31-1999 MAY-31-1999 23,292 302 13,675 504 1,142 42,113 7,451 3,901 87,560 16,367 2,954 169 0 0 64,577 87,560 55,690 55,690 33,957 33,957 0 350 395 (4,647) (750) (3,897) 0 0 0 (3,897) (0.27) (0.27)
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