<PAGE>
As filed with the Securities and Exchange Commission on August 1, 2000
Registration No. 333-37802
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
Pre-Effective Amendment No. 1 to
FORM SB-2
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933
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XML - GLOBAL TECHNOLOGIES, INC.
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(Name of small business issuer in its Charter)
Colorado 7372 84-1434313
---------------- -------------------- ------------------
(State or other (Primary Standard Industrial (IRS Employer
jurisdiction of Classification Code Number) Identification
incorporation or Number)
organization)
1818 Cornwall Avenue, Suite 9, Vancouver, British Columbia Canada V6J 1C7
(800) 201-1848 (tel) (604) 717-1107 (fax)
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(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Peter Shandro, Chief Executive Officer
1818 Cornwall Avenue, Suite 9,Vancouver, British Columbia V6J 1C7
(800) 201-1848 (tel) (604) 717-1107 (fax)
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(Name, address, including zip code, and telephone number of agent for service
of process)
Copies to:
Clifford L. Neuman, Esq.
Neuman & Drennen, LLC
1507 Pine Street, Boulder, Colorado 80302
(303) 449-2100 (tel) (303) 449-1045 (fax)
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Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of the Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Each Class Offering Aggregate Amount of
of Securities to be Amount to Price Per Offering Registration
Registered be Registered Share (1) Price (1) Fee
-------------------- -------------- --------- --------- ------------
<S> <C> <C> <C> <C>
Common Stock, $.001
par value:
24,335,000(2) $1.50(3) $36,502,500 $9,636.66
---------- --------
TOTAL: $36,502,500 $9,636.66
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Includes 9,730,000 shares of common stock that may be acquired upon
exercise of warrants and options held by the Selling Securityholders and
14,605,000 shares of common stock which have been issued directly to the
Selling Securityholders.
(3) Calculated in accordance with Rule 457(c) under the Securities Act on the
basis of the aggregate exercise price of the warrants and the market value of
the common stock.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
<PAGE>
XML - GLOBAL TECHNOLOGIES, INC.
Cross-Reference Index
<TABLE>
<CAPTION>
Item No. and Heading
In Form SB-2 Location
Registration Statement In Prospectus
---------------------- -------------
<S> <C>
1. Forepart of the Registration Forepart of Registration
Statement and Outside Front Cover Statement and Outside Front
Page of Prospectus Cover Page of Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back
Pages of Prospectus Cover Pages of Prospectus
3. Summary and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds; Risk Factors
5. Determination of Offering Price *
6. Selling Securityholders Selling Securityholders
7. Plan of Distribution Plan of Distribution
8. Legal Proceedings Legal Proceedings
9. Directors, Executive Officers, Management
Promoters and Controlling Persons
10. Security Ownership of Certain Security Ownership of
Beneficial Owners and Management Management and Principal
Stockholders
11. Description of Securities Description of Securities
12. Interest of Named Experts and Counsel Legal Matters; Experts
13. Disclosure of SEC Position on Management - Indemnification
Indemnification for Securities Act Limitation on Liability of
Liabilities Directors
14. Organization Within Last Five Years *
15. Description of Business Prospectus Summary; Risk
Factors; Business
16. Management's Discussion and Management's Discussion and
Analysis or Plan of Operation Analysis of Financial
Condition and Results of
Operations; Financial
Statements; Business
17. Description of Property Business
18. Certain Relationships and Certain Transactions
Related Transactions
19. Market for Common Equity and Market for Common Stock
Related Stockholder Matters
20. Executive Compensation Management - Executive
Compensation
21. Financial Statements Financial Statements
22. Changes in and Disagreements *
with Accountants on Accounting
and Financial Disclosure
</TABLE>
* Omitted from Prospectus because Item is inapplicable or answer is in the
negative
<PAGE>
<PAGE>
PROSPECTUS
XML - GLOBAL TECHNOLOGIES, INC.
24,335,000 Shares Common Stock
----------------------------------------
This is an offering of shares of the common stock of XML - Global
Technologies, Inc. by persons who were issued shares of our common stock or
warrants or options to purchase our common stock in private offerings.
Selling Securityholders holding warrants or options may sell the common stock
covered by this Prospectus when they have exercised their warrants or options
to purchase common stock.
Prior to this offering, there has been no public trading market for our
common stock.
We will not receive any proceeds from the resale of the common stock. If
the Selling Securityholders exercise their warrants or options, we will
receive the exercise price and use the proceeds for working capital. For
information regarding fees and expenses we may pay in connection with the
registration of the common stock covered by this Prospectus, see the section
entitled "Selling Securityholders."
Investing in our common stock involves
a high degree of risk. You should
read the "Risk Factors" beginning on
Page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this Prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
The Date of This Prospectus is July ___, 2000.
<PAGE>
<PAGE>
Prospectus Summary
About our Company
We, together with our subsidiaries, are positioning ourselves to take
advantage of what we believe is one of the most significant trends in business
today: the adoption of a complete, e-business strategy using XML (eXtensible
Markup Language) by global businesses. XML is a markup language that is able
to add structure, intelligence and content identification to information on
the Internet or intranets. By being able to attract and retain persons who
are at the forefront of XML technology, we have been able to identify and
develop several commercial products and services that will enable us to
exploit the XML opportunities. Our primary objective is to assist businesses
in their effort to migrate from existing HTML and EDI (Electronic Data
Interchange) standards to XML. There is an emerging market for XML-based
tools such as our search engine and other e-commerce products which will be
targeted and served by our XML specialists.
Our executive offices are located at 1818 Cornwall Avenue, Suite 9, Vancouver,
British Columbia V6J 1C7 Canada. Our telephone number is (800) 201-1848. Our
Internet Website address is http://www.xmlglobal.com.
About the Offering
This is an offering of shares of our common stock by Selling Securityholders
who were issued shares of our common stock and/or warrants or options to
purchase our common stock. Selling Securityholders who were issued warrants
or options may sell the shares of common stock covered by this Prospectus when
they have exercised their warrants or options to purchase common stock. The
Selling Securityholders are offering 14,605,000 shares of common stock which
they already own and an additional 9,730,000 shares of common stock that may
be acquired by them upon exercise of warrants and options which they currently
hold. We are registering the common stock covered by this Prospectus in order
to fulfill the obligations we have under agreements with the Selling
Securityholders.
<TABLE>
<CAPTION>
<S> <C> <C>
Shares Outstanding Before Offering: 27,505,000
Shares Outstanding After Offering: 37,235,000
Shares Offered by Selling Securityholders: 24,335,000
</TABLE>
<PAGE>
<PAGE>
Summary Financial Data
As we have only been in operation for a brief period of time, our historical
operating information may not be indicative of our future operating results.
<TABLE>
<CAPTION>
Statement of Operations Data: Period Ended Nine Months Ended
June 30, 1999 March 31, 2000
---------------- -----------------
<S> <C> <C>
Total Revenues $ 2,137 $ 30,989
Operating expenses 122,986 1,171,469
Net loss (120,849) (1,114,229)
Net loss applicable to common
stockholders (120,849) (1,114,229)
Basic and diluted loss per share (0.01) (0.06)
Shares used in computing basic
and diluted loss per share 17,500,000 19,662,764
<CAPTION>
At March
31, 2000
--------------------------
At June 30, 1999 Actual Pro Forma
---------------- -------- ------------
<S> <C> <C> <C>
Balance Sheet Data
Working capital
(deficit) $ (173,092) $ 2,403,629 $ 9,403,629
Total assets 88,052 2,634,037 9,634,037
Shareholders' equity
(deficit) (111,020) 2,559,352 9,559,352
</TABLE>
Our operations commenced May 18, 1999. Accordingly, there are no comparative
results of operations.
Between April and May 2000, we sold in a series of private transactions a
total of 5,225,000 shares of our common stock for net proceeds of
approximately $7,000,000. The pro forma balance sheet data as of March 31,
2000 gives retroactive effect to that date of those subsequent financing
activities.
<PAGE>
<PAGE>
RISK FACTORS
An investment in our securities is speculative and involves a high degree of
risk. Please carefully consider the following risk factors, as well as the
possibility of the loss of your entire investment, before deciding to invest
in our securities.
We are an early stage company, we have a history of losses, and we expect
future losses
We have never been profitable, we expect to incur net losses for the
foreseeable future and we may never be profitable. We incurred net losses of
$1,114,229 for the nine months ended March 31, 2000, and $120,849 for the
fiscal year ended June 30, 1999. As of March 31, 2000, we had an accumulated
deficit of $1,235,078.
We have only recently introduced our new products and services. As a
result of our limited operating history it is difficult to forecast our future
operating results. We expect to substantially increase our sales and
marketing, product development and general administrative expenses. As a
result, we will need to generate significant revenues to achieve and maintain
profitability in the future. Our future operating results will depend on many
factors, including:
* The overall growth rate for the markets in which we compete
* The level of market acceptance of, and demand for, XML technology in
general and our XML products in particular
* The level of product and price competition
* Our ability to attract, train and retain consulting, technical and
other key personnel
If the market's acceptance and adoption of XML technologies does not develop,
our future results may suffer
All of our products are based upon and rely solely upon XML technology,
which has only recently been commercially introduced. While we believe XML
has demonstrated clear advantages over HTML platforms in defining the content
of a document, the vast majority of e-commerce still uses HTML. To date,
there has not been widespread adoption of XML technology, products or
applications. Moreover, there may exist resistance among users of Internet
and intranet e-commerce to transition from HTML to XML. Conversely, new
entrants into e-commerce may be slow to adopt XML in the absence of widespread
acceptance of standards to insure compatibility. As a result, numerous
factors, many of which are not in our control, may slow the development of
market adoption for XML technology and as a result, our products and services.
We cannot be sure that XML technology will be adopted as a standard, that
XML based products will achieve broad market acceptance, that our XML products
will be accepted or that other superior technologies will not be developed.
The failure of XML technology to become a standard or the failure of our XML
products to achieve broad acceptance could adversely affect our ability to
generate revenues. The XML technology is one of several competing
technologies used in information exchange and Internet commerce.
Lack of growth or decline in Internet usage or the lack of acceptance of
commerce conducted via the Internet could be detrimental to our future
operating results
Our products enhance a company's ability to transact business and conduct
operations utilizing the Internet. Therefore, our future sales and any future
profits are substantially dependent upon the widespread acceptance and use of
the Internet as an effective medium of commerce by consumers and businesses.
Rapid growth in the use of the Internet and other online services is a recent
development, and we are unsure whether that acceptance and use will continue
to develop, or that a sufficiently broad base of consumers will adopt and
continue to use the Internet and other online services as a medium of
commerce. To be successful, we must rely on consumers and businesses, which
have historically used traditional means of commerce to purchase products,
accepting and utilizing new ways of conducting business and exchanging
information over the Internet.
In addition, the Internet may not be accepted as a viable commercial
marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
enabling technologies and web performance improvements. If the Internet
continues to experience significant growth in the number of users, frequency
of use or an increase in bandwidth requirements, the Internet's infrastructure
may not be able to support the demands placed upon it. In addition, the
Internet could lose its viability due to delays in the development or adoption
of new standards and protocols required to handle increased levels of Internet
activity, or due to increased governmental regulation. If Congress, or other
governing bodies within and outside the United States, decide to alter
materially the current approach to, and level of, regulation of the Internet,
we may need to adapt our technology. Any required adaptation could cause us
to spend significant amounts of time and money. If use of the Internet does
not continue to grow or grows more slowly than expected, if the infrastructure
for the Internet does not effectively support growth that may occur, if
government regulations change, or if the Internet does not become a viable
commercial marketplace, our business will likely suffer.
Intense competition and increasing consolidation in our industry could create
stronger competitors and harm our business
The market for our products is intensely competitive, highly fragmented,
characterized by rapid technological change and significantly affected by new
product introductions. Recent acquisitions of several competitors by large
software companies and other market activities of industry participants have
increased the competition in our market. Our competitors consist of a number
of private and public companies, including, among others, Sequoia Software,
which markets an XML search engine called Xdex for intranet use; Inktomi,
which has already established relationships with companies such as America
Online, British Telecommunications, Cnet, Excite@Home, Intel, Microsoft, Sun
Microsystems and Yahoo, each of which uses XML for various purposes;
Ultraseek, a division of Go.com (a Disney company) whose customers include Sun
Microsystems, 3Com, Ericsson and others; and IBM, which has modified an
existing HTML search tool to accommodate XML documents. In addition, we face
competition from in-house software developers who may develop some or all of
the functionality that our products provide. Many of our competitors have
longer operating histories, significantly greater financial, technical,
marketing and other resources, greater name recognition, a broader range of
products to offer and a larger installed base of customers, any of which
factors could provide them with a significant competitive advantage.
If we fail to develop strategic relationships with industry partners, our
efforts to license our product may be unsuccessful
At the present time, we lack an existing installed customer base to which
our innovative products and services can be offered. As a result, we will
need to establish critical strategic relationships with industry partners who
have large installed customer bases to whom we can offer licenses to our
products, which may be combined or bundled, with their own software. If we are
not successful in establishing these relationships, it will be more difficult
for us to be successful in our efforts to achieve a large customer base for
our products.
In order for our business to be successful, it will be necessary to convince
businesses to adopt a new technology and platform
As we do not have an existing customer base, our success will be
dependent upon our ability to convince business to business e-commerce users
to adopt XML technology. Many business to business e-commerce users already
have long term customer agreements with our e-commerce competitors with whom
we may be unable to establish a strategic partnership. Businesses that have
made substantial up-front payments to our competitors for electronic commerce
solutions may be reluctant to replace their current solution and adopt our
solution. As a result, our efforts to create a larger customer base may be
more difficult than expected even if we are deemed to offer products and
services superior to those of our competitors. In addition, because the
business to business e-commerce market is new and underdeveloped, potential
customers in this market may be confused or uncertain about the relative
merits of each electronic commerce solution or which electronic commerce
solution to adopt, if any. Confusion and uncertainty in the marketplace may
inhibit customers from adopting our solution.
If we fail to develop new products and services in the face of our industry's
rapidly evolving technology, our future results may be adversely affected
Due to the recent emergence of the Internet and the Web as a forum for
conducting business, the market for Web application server systems in which we
participate is subject to rapid technological change, changing customer needs,
frequent new product introductions and evolving industry standards that may
render existing products and services obsolete. Our growth and future
operating results will depend in part upon our ability to enhance existing
applications and develop and introduce new applications or components that:
* meet or exceed technological advances in the marketplace
* meet changing customer requirements
* achieve market acceptance
* integrate successfully with third party software and platforms, and
* respond to competitive products.
Our product development and testing efforts have required, and we are
expected to continue to require, substantial investment. We may not possess
sufficient resources to continue to make the necessary investments in
technology.
We will continue to need significant capital, without which our business may
fail
We have required significant capital to date and will require additional
capital to implement our business plan. We are currently generating only
nominal operating revenues. We have no current arrangements with respect to
other sources of additional financing and there can be no assurance that
additional financing will be available to us on commercially reasonable terms,
or at all. None of the Selling Securityholders have committed or are
obligated to exercise any of the options or warrants that they hold. As a
result, we cannot be sure that we will generate any additional working capital
through the exercise of options or warrants. The inability to obtain
additional financing, when needed, would have a material adverse affect on us,
including possibly requiring us to curtail or cease our operations. To the
extent that future financing involves the sale of our equity securities, our
then existing stockholders, including investors in this offering, could be
substantially diluted.
We need to manage our growth effectively or we may not succeed
We are a growing company. Our ability to manage our growth will depend
in large part on our ability to generally improve and expand our operational
and sales and marketing capabilities, to develop the management skills that
our managers and supervisors, many of whom have been employed by us for a
relatively short time, and to train, motivate and manage both our existing
employees and the additional employees that may be required. Additionally, we
may not adequately anticipate all the demands that growth may impose on our
systems, procedures and structure. Any failure to adequately anticipate and
respond to these demands or manage our growth effectively would have a
material adverse affect on our future prospects.
Security risks of electronic commerce may deter future use of our products and
services
A fundamental requirement to conduct Internet based, business to business
electronic commerce is the secure transmission of confidential information
over public networks. Failure to prevent security breaches in the
marketplaces, or well-publicized security breaches affecting the Web in
general, could significantly harm our business, operating results and
financial condition. We cannot be certain that advances in computer
capabilities, new discoveries in the field of cryptography, or other
developments will not result in a compromise or breach of the algorithms we
use to protect content and transactions or proprietary information in our
databases. Anyone who is able to circumvent our security measures could
misappropriate proprietary, confidential customer information or cause
interruptions in our operations. We may be required to incur significant
costs to protect against security breaches or to alleviate problems caused by
breaches.
If we lose our key personnel or fail to attract and retain additional
personnel, the success and growth of our business may suffer
A significant portion of our management team has been in place for a
relatively short period of time. We do not have written employment agreements
with any of our key personnel. We only have a limited consulting arrangement
with Mr. David Webber, the chief technology leader of the ExpressXchg product.
Our future success will also depend significantly on our ability to attract,
integrate and retain highly skilled technical personnel who are active and
highly regarded in the XML community. As XML technology is relatively new,
the degree to which it is accepted and absorbed in the marketplace is
dependent, in part, upon assembling technology personnel who have the
credibility and skills to successfully promote acceptance of our products. If
we are unable to attract, integrate and retain such persons, our business
could be adversely affected.
The failure to implement successfully our web software and XML search engine
could result in dissatisfied customers and limited sales
Implementation of our Web software and XML search engine involves a
significant commitment of financial and other resources by our customers. The
customer's implementation cycle can be lengthy due to the size and complexity
of their systems and operations. In addition, our customers will rely heavily
on third party systems integrators to assist them with the installation and
use of our products. Our failure or the failure of our alliance partners, our
customers or our third party integrators to implement successfully our
products could result in dissatisfied customers which could adversely affect
our reputation.
Capacity restrictions could reduce the demand and utility for our products
Concurrency restrictions can limit Internet deployment and use capacity.
The boundaries of our XML capacity, in terms of numbers of concurrent users or
interactions, are unknown because, to date, no customer or testing environment
has reached these boundaries. The XML capacity boundaries may, at some future
time, be reached and, when reached, may be insufficient to enable our
customers to achieve their desired levels of information deployment and
exchange. We may lose customers or fail to gain new customers if either of
these occurs.
We are vulnerable to general Internet systems failures or interruptions of our
service
Our success depends on the capacity, reliability and security of our
networking hardware, software and telecommunications infrastructure. Despite
precautions taken by us, our system is susceptible to natural and man-made
disasters. Telecommunications failures, computer viruses, electronic break-
ins or other similar disruptive problems could adversely affect the operation
of our systems. Any such technical failure or security problems could harm
our business, financial condition and results of operations. Periodically, we
may experience unscheduled system downtime that may result in our Website
being inaccessible to customers, or we may experience slow response times
which may result in decreased traffic to our Websites. If these problems
arise, they could materially and adversely affect our business, results of
operations and financial condition.
Our limited ability to protect our intellectual property rights could impair
our ability to compete effectively
Our success and ability to compete are substantially dependent on our
internally developed technologies and intellectual property, which we protect
through a combination of patent, copyright, trademark and trade secret laws,
confidentiality procedures and contractual provisions.
PATENTS
While we have applied for a 51-point patent covering our XML search
engine, we cannot be sure that a patent will issue and, if a patent does
issue, which if any claims will be upheld. Furthermore, the issuance of one
or more patents covering our technology provides no assurance that competitors
will not lawfully develop improvements or alternative approaches which are not
within the scope of our patents' protection. Furthermore, in the event a
competitor does infringe upon one or more of our patents, the prosecution of a
patent infringement claim or the defense of our patent in the same context
will require a substantial expenditure of human and financial resources,
neither of which may be available in sufficient quantity.
TRADEMARKS AND DOMAIN NAMES
We have applied with the U.S. Patent and Trademark Office to register the
following trademarks:
* GoXML
* XOSP
* XHML
* LeCart
* XOP
In addition, we have registered the following domain names:
* www.GoXML.com
* www.lecart.com
* www.cartnetwork.com
* www.cartnetwork.net
* www.convert2xml.com
* www.findxml.com
* www.xslt.com
* www.xosp.com
* www.xosp.net
* www.xosp.org
* www.walkaboutwebs.com
* www.xmldirectory.com
Our trademarks and domain names play an important role in expanding the
awareness of our products on the Internet and developing partnerships between
those who use the Internet to retrieve information and many providers of
products and services available on the web. While we have applied for
registration of the foregoing trademarks and registered domain names in an
effort to protect them, our efforts may be inadequate to prevent others from
claiming violations of their marks and may be inadequate to protect our use of
those names as unique. In addition, trademark protection and the uncertainty
surrounding the legal protections of domain names may be unenforceable or
limited in other countries, and the global nature of the Internet makes it
impossible to control the ultimate destination of our communications. The
regulation of web addresses in the United States and in foreign countries is
subject to change. As a result, we may not be able to acquire or maintain our
web addresses in the future. Furthermore, the relationship between
regulations governing such addresses and the laws protecting trademarks is
unsettled.
In fact, we are aware of a German company that has been using the name
"Go-XML" for its Website. We have made a demand that it cease and desist from
such use, but there can be no assurance that we will be able to prevent or
limit this conflicting and competing use. If we are unsuccessful in these
efforts, our use of the trademark "Go-XML" may be limited or restricted, or,
at the very least, may become so diluted as to lose its value, in which case
we may have to consider rebranding the product.
Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or obtain and use
information that we regard as proprietary. Policing unauthorized use of our
products is difficult and, though we are unable to determine the extent to
which piracy of our software products exists, we expect software piracy to be
a problem. In addition, the laws of some foreign countries do not protect
our proprietary rights to the same extent as the laws of the United States and
Canada (where XML Research is located). Furthermore, our competitors may
independently develop technology similar to ours. The number of intellectual
property claims in our industry may increase as the number of computing
products grows and the functionality of products in different industry
segments overlaps. Although we are not aware that any of our products or
other intellectual property infringe upon the proprietary rights of third
parties, there can be no assurance that third parties will not claim
infringement by us with respect to current or future products. Any of these
claims, with or without merit, could be time consuming to address, result in
costly litigation, cause product shipment delays or require us to enter into
royalty or license agreements. These royalty or license agreements might not
be available on terms acceptable to us or at all, which could have a material
adverse affect on our business.
Additional government regulations may adversely affect our business
The laws governing Internet transactions remain largely unsettled. The
adoption or modification of laws or regulations relating to the Internet could
harm our business, operating results and financial condition by increasing our
costs and administrative burdens. It may take years to determine whether and
how existing laws such as those governing intellectual property, privacy,
libel, consumer protection and taxation apply to the Internet. Laws and
regulations directly applicable to communications or commerce over the
Internet are becoming more prevalent. We must comply with new regulations in
Europe, Canada and the United States, as well as any other regulations adopted
by other countries where we may do business. The growth and development of
the market for online commerce may prompt calls for more stringent consumer
protection laws, both in the United States and abroad, as well as new laws
governing the taxation of Internet commerce. Compliance with any newly
adopted laws may prove difficult for us and may harm our business, operating
results and financial condition.
In 1998 the United States Government enacted a three-year moratorium
preventing states and local governments from imposing new taxes on electronic
commerce transactions. Upon expiration of this moratorium, if it is not
extended, states or other governments might levy sales or use taxes on
electronic commerce transactions. An increase in taxation of electronic
commerce transactions might also make the Internet less effective for
consumers and businesses.
We may be subject to future product liability claims and our products'
reputations may suffer
Many of our installations will involve projects that are critical to the
operations of our customers' business and provide benefits that may be
difficult to quantify. Any failure in a customer's system could result in a
claim for substantial damages against us, regardless of our responsibility for
the failure. Although our license agreements with our customers will contain
provisions designed to limit contractually our liability for damages arising
from negligent acts, errors, mistakes or omissions, it is possible that these
provisions will not be enforceable in certain instances or would otherwise not
protect us from liability for damages. Although we maintain general liability
insurance coverage, this coverage may not continue to be available on
reasonable terms or at all, or may be insufficient to cover one or more large
claims. Moreover, such insurance coverage may not provide benefits for
certain product liability claims.
In addition, we plan to enter into agreements with our strategic alliance
partners whereby we license our products for integration with the alliance
partners' products. If an alliance partners' product fails to meet customer
expectations or causes a failure in its customer's systems, the reputation of
our products could be materially and adversely affected, even if our products
performed in accordance with their functional specifications.
There is no assurance that a public market for our common stock will develop
There has been no public market for our common stock. We cannot predict
the extent to which investor interest in our common stock will lead to the
development of a trading market or how liquid that market might become,
especially if a large number of shares were introduced into the market upon
exercise of options or warrants. If a market does develop, the price for our
common stock may be highly volatile and may bear no relationship to our actual
financial condition or results of operations.
Our public trading market, if and when it develops, will likely be highly
volatile
We have applied to have our common stock quoted on the OTC Electronic
Bulletin Board, a NASD sponsored and operated quotation system for equity
securities. It is a more limited trading market than the Nasdaq SmallCap
Market, and timely, accurate quotations of the price of our common stock may
not always be available. You may expect trading volume to be low in such a
market. Consequently, the activity of only a few shares may affect the market
and may result in wide swings in price and in volume.
Once our common stock is listed on the OTC Bulletin Board, it will be
subject to the requirements of Rule 15g.9, promulgated under the Securities
Exchange Act as long as the price of our common stock is below $5.00 per
share. Under such rule, broker-dealers who recommend low-priced securities to
persons other than established customers and accredited investors must satisfy
special sales practice requirements, including a requirement that they make an
individualized written suitability determination for the purchaser and receive
the purchaser's consent prior to the transaction. The Securities Enforcement
Remedies and Penny Stock Reform Act of 1990 also requires additional
disclosure in connection with any trades involving a stock defined as a penny
stock. Generally, the Commission defines a penny stock as any equity security
not traded on an exchange or quoted on Nasdaq that has a market price of less
than $5.00 per share. The required penny stock disclosures include the
delivery, prior to any transaction, of a disclosure schedule explaining the
penny stock market and the risks associated with it. Such requirements could
severally limit the market liquidity of the securities and the ability of
purchasers to sell their securities in the secondary market.
If a public trading market does develop, the market price of our common
stock could fluctuate substantially due to:
* quarterly fluctuations in operating results
* announcements of new products or product enhancements by us or our
competitors technological innovations by us or our competitors
* general market conditions or market conditions specific to our or
our customers' industries
* changes in earnings estimates or recommendations by analysts.
Stock prices of Internet related companies have been highly volatile. In
the past, following periods of volatility in the market price of a company's
securities, securities class action litigation has at times been instituted
against that company. If we become subject to securities litigation, we could
incur substantial costs and experience a diversion of management's attention
and resources.
Future sales of our common stock and preferred stock could adversely affect
the market
Future sales of our common stock into the market may also depress the
market price of our common stock if one develops in the future. We have
issued common stock, options and warrants to purchase our common stock. Sales
of these shares of our common stock or the market's perception that these
sales could occur may cause the market price of our common stock to fall.
These sales also might make it more difficult for us to sell equity or equity
related securities in the future at a time and price that we deem appropriate
or to use equity as consideration for future acquisitions.
We have the authority to issue up to 100,000,000 shares of preferred
stock without shareholder approval. The issuance of preferred stock by our
Board of Directors could adversely affect the rights of the holders of our
common stock. An issuance of preferred stock could result in a class of
outstanding securities that would have preferences with respect to voting
rights and dividends and in liquidation over the common stock and could, upon
conversion or otherwise, have all of the rights of our common stock. Our
Board of Directors' authority to issue preferred stock could discourage
potential takeover attempts or could delay or prevent a change in control
through merger, tender offer, proxy contest or otherwise by making these
attempts more difficult or costly to achieve.
A change of control of the company will result in the vesting of all
outstanding stock options issued under our plan
Under the terms of our Equity Incentive Plan, in the event there occurs a
change of control of the Company, all outstanding and unvested stock options
previously granted to our employees, officers, directors and consultants will
immediately become vested and exercisable in their entirety. This vesting
acceleration could deter parties from pursuing business combinations with us
that might otherwise be beneficial to our shareholders.
<PAGE>
<PAGE>
CERTAIN MARKET INFORMATION
There currently exists no public trading market for our common stock, and
there can be no assurance that a public trading market will develop or be
sustained in the future. Without an active public trading market, there can
be no assurances that you will be able to liquidate your investment without
considerable delay, if at all. If a market does develop, the price for our
securities may be highly volatile and may bear no relationship to our actual
financial condition or results of operations. Factors we discuss in this
prospectus, including the many risks associated with an investment in us, may
have a significant impact on the market price of our common stock. Also,
because of the relatively low price of our common stock, many brokerage firms
may not effect transactions in the common stock.
In addition, it is likely that the Company's common stock will be subject
to rules adopted by the Commission regulating broker dealer practices in
connection with transactions in "penny stocks." Those disclosure rules
applicable to "penny stocks" require a broker dealer, prior to a transaction
in a "penny stock" not otherwise exempt from the rules, to deliver a
standardized list disclosure document prepared by the Commission. That
disclosure document advises an investor that investment in "penny stocks" can
be very risky and that the investor's salesperson or broker is not an
impartial advisor but rather paid to sell the shares. It contains an
explanation and disclosure of the bid and offer prices of the security, any
retail charges added by the dealer to those prices (called mark up and mark
downs) and the amount of compensation or profit to be paid or received by the
salesperson in connection with the transaction. The disclosure contains
further warnings for the investor to exercise caution in connection with an
investment in "penny stocks," to independently investigate the security, as
well as the salesperson with whom the investor is working and to understand
the risky nature of an investment in this security. Further, the disclosure
includes information regarding the market for "penny stocks," explanations
regarding the influence that market makers may have upon the market for "penny
stocks" and the risk that one or two dealers may exercise domination over the
market for such security and therefore control and set prices for the security
not based upon competitive forces. The broker dealer must also provide the
customer with certain other information and must make a special written
determination that the "penny stock" is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
Further, the rules require that, following the proposed transaction, the
broker provide the customer with monthly account statements containing market
information about the prices of the securities.
These disclosure requirements may have the effect of reducing the level
of trading activity in the secondary market for our common stock. Many
brokers may be unwilling to engage in transactions in our common stock because
of the added disclosure requirements, thereby making it more difficult for
stockholders to dispose of their shares.
<PAGE>
<PAGE>
FORWARD-LOOKING STATEMENTS
In General
This Prospectus contains statements that plan for or anticipate the
future. Forward-looking statements include statements about the future of the
software development, computer-based project management, consulting and
strategic business consulting industries, statements about our future business
plans and strategies, and most other statements that are not historical in
nature. In this Prospectus, forward-looking statements are generally
identified by the words "anticipate," "plan," "believe," "expect," "estimate,"
and the like. Although we believe that any forward-looking statements we make
in this Prospectus are reasonable, because forward-looking statements involve
future risks and uncertainties, there are factors that could cause actual
results to differ materially from those expressed or implied. For example, a
few of the uncertainties that could affect the accuracy of forward-looking
statements, besides the specific factors identified above in the Risk Factors
section of this Prospectus, include:
* changes in general economic and business conditions affecting the
software development, computer-based project management consulting
and strategic business consulting industries;
* technical developments that make our products or services obsolete;
* changes in our business strategies;
* the level of demand for our products and services; and
* our ability to develop or maintain strategic relationships within
the software development, computer-based project management
consulting and/or strategic business consulting industries.
In light of the significant uncertainties inherent in the forward-looking
statements made in this Prospectus, particularly in view of our early stage of
operations, the inclusion of this information should not be regarded as a
representation by us or any other person that our objectives and plans will be
achieved.
No "Safe Harbor"
The Private Securities Litigation Reform Act of 1995, which provides a
"safe harbor" for similar statements by existing public companies, does not
apply to our offerings.
<PAGE>
<PAGE>
DIVIDEND POLICY
We have not declared or paid cash dividends on our common stock in the
preceding two fiscal years. We currently intend to retain all future
earnings, if any, to fund the operation of our business, and, therefore, do
not anticipate paying dividends in the foreseeable future. Future cash
dividends, if any, will be determined by our Board of Directors, based upon
such factors as the Company's historical and projected earnings, its working
capital surplus and anticipated demands for capital expenditures.
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2000 on
an actual basis and on a proforma basis. The proforma table gives retroactive
effect to March 31, 2000 of our sale of an additional 5,225,000 shares of
common stock for net proceeds of approximately $7,000,000 in private
transactions which were completed in April and May 2000. This section should
be read in conjunction with the consolidated financial statements and related
notes contained elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of March 31, 2000
---------------------
Actual ProForma
--------- -----------
<S> <C> <C>
Shareholders' Equity
Preferred Stock, $.01 par value,
100,000,000 shares authorized;
no shares outstanding $ - $ -
Common Stock, $.0001 par value;
authorized 500,000,000 shares:
21,280,000 issued and
outstanding shares (actual)
and 26,505,000 proforma 2,128 2,651
Additional paid-in capital 3,807,360 10,806,837
Deferred compensation (12,209) (12,209)
Accumulated other comprehensive
income (2,849) (2,849)
Accumulated deficit (1,235,078) (1,235,078)
------------ ------------
Total shareholders' equity and
capitalization $2,559,352 9,559,352
============ ============
</TABLE>
These amounts do not include 4,000,000 shares of common stock we may
issue upon exercise of options which may be granted under our Equity Incentive
Plan. Currently under the Plan we have issued 1,195,000 options which are
subject to outstanding and unexercised options having an exercise price. Of
the 1,195,000 options, 25,000 options are currently not exercisable by the
holder but will vest in the future, subject to the holder's continuing
employment.
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
We have set forth below certain selected financial data. This financial
data was derived from the Consolidated Financial Statements and Notes thereto
included elsewhere in this Prospectus and is qualified by reference to such
Consolidated Financial Statements and the Notes thereto. The financial data
for the nine months ended March 31, 2000 are derived from our unaudited
consolidated financial statements. In our opinion, the consolidated financial
statements for these periods include all adjustments necessary to present
fairly the financial information for such periods.
<TABLE>
<CAPTION>
For the Period
May 18, 1999 to Nine Months Ended
June 30, 1999 March 31, 2000
----------------- -----------------
<S> <C> <C>
Statements of Operations Data
Revenues $ 2,137 $ 30,989
Operating Expenses 122,986 1,171,469
Operating Loss (120,849) (1,140,480)
Other Income (Expenses) - 26,251
Net Income (Loss) (120,849) (1,114,229)
Net (Loss) Per Share (0.01) (0.06)
Average Common Shares
Outstanding 17,500,000 19,662,764
<CAPTION>
June 30, 1999 March 31, 2000
--------------- --------------------
Actual Pro Forma
------ ---------
<S> <C> <C> <C>
Balance Sheet Data
Total Assets $ 88,052 $2,634,037 $9,634,037
Working Capital
(deficiency) (173,092) 2,403,629 9,403,629
Total Liabilities 199,072 74,685 74,685
Accumulated Deficit (120,849) (1,235,078) (1,235,078)
Stockholders' Equity (111,020) 2,559,352 9,559,352
</TABLE>
__________________
Our operations began May 18, 1999. Accordingly, there are no comparative
results of operations.
In April and May 2000, we sold in a series of private transactions a total of
5,225,000 shares of our common stock for net proceeds of approximately
$7,000,000. The pro forma balance sheet data as of March 31, 2000 gives
retroactive effect to that date of those subsequent financing activities.
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF XML - GLOBAL TECHNOLOGIES, INC.
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this
Prospectus. Unless otherwise noted, references to "we," "our," and "us" refer
to XML-Global Technologies, Inc. and its subsidiaries.
Operations
Effective August 27, 1999, XML-Technologies, Inc. and International
Capital Funding, Inc. (ICF) entered into an agreement and plan of
reorganization. In accordance with the plan of reorganization, the
shareholders of XML-Technologies, Inc. received 12.5 million shares of ICF
stock in exchange for the 12.5 million outstanding shares of XML-Technologies,
Inc. The shareholders of ICF retained 5 million shares in exchange for no
assets and the assumption of $2,671 of liabilities of ICF by XML-Technologies,
Inc. The transaction was accounted for as a recapitalization of XML-
Technologies, Inc.
The founders of the Company began working with Extensible Markup Language
("XML") in early 1998 and began to develop software as a group in the fall of
1998. The Company was formed in May 1999 to develop commercial applications
using the founders' XML expertise. In July 1999, we commenced sales of
Cartnetwork, our proprietary e-commerce software and in September 1999, we
announced GoXML, which we believe is the world's first XML search engine. On
September 29, 1999, we filed an application with the United States Patent
Office in respect of our GoXML search engine under the title "Authoring,
altering, indexing, storing and retrieving electronic documents embedded with
contextual markup".
We continue to develop proprietary XML-based solutions for the Internet-
based economy with a focus on e-commerce and the conversion of data from
legacy formats to XML. As an adjunct to our e-commerce business, we develop
Websites for our clients. Our main sources of revenue are currently from the
development of Websites and the licensing of our e-commerce software.
1999 Equity Incentive Plan
On October 19, 1999 the shareholders approved the 1999 Equity Incentive
Plan (the "1999 Plan") which provides for the grant of (1) both incentive and
nonstatutory stock options, (2) stock bonuses, (3) rights to purchase
restricted stock and (4) stock appreciation rights. The 1999 Plan was adopted
by the Board of Directors on September 15, 1999 and provides a means by which
selected officers and employees of and consultants to the Company and its
affiliates may be given an opportunity to purchase stock in the Company, to
assist in attracting and retaining employees holding key positions and to
provide incentives for such persons to exert maximum efforts. The 1999 Plan is
administered by the Board of Directors of the Company, which has exclusive
power over the granting of options and their vesting provisions. The Company
has reserved a total of 4,000,000 shares of Common Stock for issuance under
the 1999 Plan of which 1,165,000 options have been granted to employees,
directors and consultants at an exercise price of $1.00 per share.
Plan of Operations
To date, we have raised net proceeds of approximately $11,400,000 through
private offerings of equity securities. We expect that funds remaining from
these offerings, which amounted to $8.5 million at June 30, 2000, will be
sufficient to fund our operating and investing activities for at least the
next twelve months. Accordingly, we have no plans to raise additional funds
during the next twelve months.
We are currently nearing completion of development of GoXML version 2.0,
which we expect to release, with a software developer kit, in August 2000. We
are also developing expressXCHG version 1.0, which we expect to release in
November 2000.
We plan to continue developing these products and to undertake
development of new products including a version of Ceremony(-Trademark-), a
system for authenticating online transactions, which we have licensed from
PenOp Ltd. We plan to help companies implement XML solutions using our
products and have signed a contract with B2B Internet Inc., a Korean company
that is setting up an Internet-based business-to-business marketplace to serve
the Korean market. The contract value is $950,000 and the work is to be
completed by December 2000. Revenues totaling $225,000 will be subject to
withholding taxes by the Korean tax authorities at a rate of 16.5%. We will
be able to cover these withholding taxes against United States income taxes
otherwise payable, should we become taxable in the future.
We do not expect to undertake any significant purchases or sales of plant
and equipment during the next twelve (12) months. We will continue to acquire
computer hardware and software and office furniture in the ordinary course as
we hire new employees.
At the date of this Registration Statement, we employ approximately
thirty-three (33) staff. We plan to hire a further twenty-five (25) staff
over the next year, consisting of fifteen (15) software engineers, five (5)
implementation specialists and five (5) sales and marketing personnel. The
actual number of staff that we hire will be dependent on how our business
develops and will be subject to our ability to find qualified individuals on
mutually acceptable terms.
Results of Operations
REVENUE. Revenue in the period ended June 30, 1999 was $2,137 which
consisted of the design and implementation of Websites. Revenue in the
current fiscal year consists of fees received from the sale of e-commerce
solutions, their design and Website development, implementation and support.
Revenue was $7,300 for the three months ended March 31, 2000, (down from
$14,400 for the previous fiscal quarter), and $31,000 for the nine-month
period ended March 31, 2000. The decline was due to our emphasis on sales of
our GoXML search engine and while we had three installations under way at
March 31, 2000, we had not invoiced these sales.
RESEARCH AND DEVELOPMENT EXPENSES. Product and content development costs
include expenses we incur to develop our technology and our clients' Websites.
These costs consist primarily of salaries and fees paid to employees and
consultants to develop and maintain software and Websites. For the period
ended June 30, 1999, research and development expenses were $49,809. For the
three and nine months ended March 31, 2000, these costs were $215,900 and
$504,000 respectively. The increased expenditures in the quarter just ended,
which compare to $166,700 for the previous quarter, reflect increased staffing
levels.
SALES AND MARKETING EXPENSES. Marketing, sales and client services costs
include expenses we incur to obtain and maintain client relationships. These
costs include fees paid to contractors and consultants, related travel and
incidental costs and occupancy costs for our Seattle sales office. We did not
incur any sales and marketing expenses in the fiscal period ended June 30,
1999. For the three months ended March 31, 2000, sales and marketing expenses
were $71,400 and are largely unchanged from the $69,200 recorded in the
previous quarter. Total sales and marketing expenses for the nine months ended
March 31, 2000 were $173,500.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of salaries, contractor fees and related costs for general
corporate functions, including travel, finance, accounting and legal expenses.
General and administrative expenses were $70,091 for the period ended June 30,
1999. For the three and nine months ended March 31, 2000, general and
administrative expenses were $183,400 (up from $143,300 in the three months
ended September 30, 1999) and $422,900 respectively. The increase in the last
quarter reflected professional fees associated with licensing our products and
defending our intellectual property and travel costs. In the previous quarter,
we treated $33,700 in professional costs as deferred issue costs associated
with a financing that we were pursuing, however that financing did not
complete and we expensed this amount in the current quarter. We incurred a
further $70,500 in professional costs which we treated as deferred issue costs
and accordingly did not recognize such costs in the statement of operations.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation expense reflects
depreciation of computer hardware, software and equipment over their estimated
useful lives of between two and three years. Depreciation expense was $3,086
for the period ended June 30, 1999. Depreciation expense was $8,700 and
$21,600 respectively for the three and nine months ended March 31, 2000. The
company recorded only nominal amortization expense in regard to trademarks and
patents as these costs largely relate to applications that had not been
granted at March 31, 2000.
FAIR VALUE OF STOCK OPTIONS. The Company reports the financial impact of
stock options issued to employees using APB-25. We record the fair value of
stock options granted to non-employees based on the fair value of the options
at the date the services were performed. We did not grant any stock options
prior to the current fiscal year. During the three months ended March 31,
2000 we granted 275,000 options to non-employees at an exercise price of
$1.00. We estimate that the fair value of each of these options was
approximately $0.22. We have recorded an expense of $49,300 in respect of
options that have vested and a deferred compensation amount of $12,200 in
regard to the remaining options that vest in May and June 2000.
INTEREST INCOME. During the three and nine months ended March 31, 2000,
the company earned interest income of $24,100 and $26,300 respectively on
funds received by way of the issuance of securities. Interest income has
increased over prior periods since funds received from private equity
placements have greatly exceeded operating expenditures with the result that
cash and cash equivalents increased in the period.
Liquidity and Capital Resources
For the period from inception to June 30, 1999, we were primarily
financed by an advance from a shareholder. Since July 1, 1999 we have
operations primarily through the placement of equity securities. In the three
months ended March 31, 2000, we received net proceeds of approximately
$1,585,000 from private offerings of equity securities. Issue costs associated
with these offerings, which have been offset against the net proceeds of the
offering, were not material. In aggregate, we have raised net proceeds of
$3,738,000 through the placement of equity securities. As of June 30, 1999 we
had $9,500 cash and as of March 31, 2000 we had $2,353,800 in cash and cash
equivalents.
Since August 1999, we have received gross proceeds of $11,452,000 from
the private placement of equity securities and the exercise of stock purchase
warrants.
<TABLE>
<CAPTION>
Number of Gross
Date Units Sold $/unit Proceeds
---- ---------- ------ --------
S> <C> <C> <C> <C>
Private Placements
August, 1999 2,330,000 1.00 $ 2,330,000
January, 2000 500,000 2.00 1,000,000
February and
April, 2000 1,000,000 1.00 1,000,000
February, 2000 50,000 1.00 50,000
March, 2000 4,625,000 1.50 6,927,500
April, 2000 100,000 1.00 100,000
---------- ---- -----------
11,417,500
Exercise of Warrants
March, 2000 500,000 .07 35,000
-----------
Total $ 11,452,500
============
</TABLE>
Approximately $8,000,000 is currently held in short term investments.
The balance has been used as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Research and development expenses $ 553,812
Sales and marketing expenses 173,542
General and administrative expenses 420,531
Capital assets 135,816
Trademarks and patents 39,945
Commissions, professional fees and
other offering costs 784,816
</TABLE>
We have incurred costs to design, develop and implement search engine and
electronic commerce applications and to grow our business. As a result, we
have incurred operating losses and negative cash flows from operations in each
quarter since we commenced operations. As of June 30, 1999 and March 31, 2000,
we had an accumulated deficit of $121,000 and $1,235,000, respectively. The
loss for the period ended June 30, 1999 was funded primarily by an advance
from a shareholder while the subsequent losses have been primarily funded
through private placement of equity securities.
To date, we have experienced negative cash flows from operating
activities. For the period ended June 30, 1999, cash used in our operating
activities was primarily due to operating losses. The net loss for the period
was partially offset by stock issued in exchange for intellectual property
rights and for services of $12,500, non-cash depreciation of $3,100, advances
from directors of $1,200 and net working capital changes of $40,700. For the
nine months ended March 31, 2000, the net cash used in operating activities
was primarily attributable to our net operating loss of $1,114,200. The net
loss for the quarter was partially offset by non-cash depreciation and
amortization of $21,700, the fair value of options granted to employees of
$49,300 and a net cash outflow of $28,500 with respect to working capital
changes. For the nine months ended March 31, 2000, net cash used in operating
activities was therefore $1,071,800.
For the period ended June 30, 1999, we used cash of $62,100 in investing
activities. We spent $48,300 on computer hardware, $7,300 on office equipment
and $7,100 on patent and trademark applications. These amounts were offset by
a recovery of $600 on acquisition of a subsidiary. For the nine months ended
March 31, 2000, net cash used in investing activities was $113,100. We spent
$80,300 on computer hardware, software and equipment and $32,800 on patent and
trademark applications. The computer hardware and software purchases related
to server upgrades and computers used by programmers.
For the period ended June 30, 1999, cash provided by financing activities
was $135,100 in respect of funds received from a shareholder by way of a note
payable. For the nine months ended March 31, 2000, net cash provided by
financing activities was $3,532,500 attributable to the private placements of
equity securities, offset by related issue costs, repayment of the note
payable and the deferred issue costs related to a proposed financing.
Changes in exchange rates had a net effect of decreasing our cash balance
by $3,500.
As of June 30, 1999 and March 31, 2000, we had no contractual capital
commitments outstanding, although we expect that our Vancouver office
relocation and expansion will cost about $50,000.
Our ability to generate significant revenue is uncertain. We incurred net
losses of approximately $497,000 for the quarter ended March 31, 2000. We
expect losses from operations and negative cash flow to continue for the
foreseeable future, at least through the year 2000, as a result of our
expansion plans and our expectation that operating expenses will increase
significantly in the next several years. The rate at which these losses will
be incurred are likely to increase from current levels. Although we have
experienced revenue growth, revenues have been substantially less than
expenses and may not increase in the future. If our revenue does not increase
and if our spending levels are not adjusted accordingly, we may not generate
sufficient revenue to achieve profitability, which would have a materially
adverse effect on our business, financial condition and results of operations.
Even if we achieve profitability, we may not sustain or increase profitability
on a quarterly or annual basis in the future.
Our working capital requirements depend on numerous factors. We have
experienced increased expenditures since inception, consistent with growth in
our operations and staffing, and expect that this trend will continue for the
foreseeable future. We anticipate incurring additional expenses to increase
our marketing and sales efforts, for software and infrastructure development.
Additionally, we will continue to evaluate possible investments in businesses,
products and technologies, the expansion of our marketing and sales programs
and brand promotions. If we experience a shortfall in revenue in relation to
expenses, or if our expenses precede increased revenue, our business,
financial condition and results of operations could be materially and
adversely affected.
We currently estimate that available cash resources at March 31, 2000 in
conjunction with funds raised in April 2000 will be sufficient to meet our
anticipated needs for working capital and capital expenditures through June
2001. We may need to raise additional funds, however, in order to fund more
rapid expansion, to develop new or enhance existing services or products, to
respond to competitive pressures or to acquire complementary products,
businesses or technologies. There can be no assurance that any required
additional financing will be available on terms favorable to us, or at all. If
additional funds are raised by the issuance of equity securities, stockholders
may experience dilution of their ownership interest and these securities may
have rights senior to those of the holders of the common stock. If additional
funds are raised by the issuance of debt, we may be subject to certain
limitations on our operations, including limitations on the payment of
dividends. If adequate funds are not available or are not available on
acceptable terms, we may be unable to fund our expansion, successfully promote
our brand name, take advantage of acquisition opportunities, develop or
enhance services or respond to competitive pressures, any of which could have
a materially adverse effect on our business, financial condition and results
of operations.
Some of our revenues and a substantial portion of our payroll is paid
outside the United States in currencies other than US dollars. Because our
financial results are reported in US dollars, they are affected by changes in
the value of the various foreign currencies in which we make payments in
relation to the US dollar. We do not cover known or anticipated currency
fluctuation exposures through foreign currency exchange option or forward
contracts. The primary currency for which we have foreign currency exchange
rate exposure is the Canadian dollar. Our financial instruments, including
cash, accounts receivable, accounts payable and accrued liabilities are
carried at cost which approximates their fair value because of the short-term
maturity of these instruments.
<PAGE>
<PAGE>
BUSINESS
Overview
We, together with our subsidiaries, are positioning ourselves to take
advantage of what we believe is one of the most significant trends in business
today: the adoption of a complete, e-business strategy using XML (eXtensible
Markup Language) by global businesses. XML is a markup language that is able
to add structure, intelligence and content identification to information on
the Internet or Intranets. By being able to attract and retain persons who
are at the forefront of XML technology, we have been able to identify and
develop several commercial products and services that will enable us to
exploit the XML opportunities. Our primary objective is to assist businesses
in their effort to migrate from existing HTML and EDI standards to XML. There
is an emerging market for XML-based tools such as our search engine and other
e-commerce products which will be targeted and served by our XML specialists.
About XML
Previously Web pages have been written on HTML (HyperText Mark-up
Language). HTML is essentially a presentation technology, concerned with how
a browser should arrange text and graphics on a page.
HTML was never designed or intended to accommodate the complexity and
quantity of information on the Web. HTML browsers cannot identify or
determine the meaning of a word or presentation on a page. For example, if
you were looking for a book authored by a person named "Gold," you may search
terms such as "gold" and "book." Yet, an HTML browser cannot differentiate
between "books by Gold" and "books about gold" and therefore might present the
searcher with irrelevant information.
In response to this acknowledged difficulty, the World Wide Web
Consortium ("W3C"), the industry association that promotes standards for the
evolution of the Web, defined a new mark-up standard known as XML. XML is a
very simple and flexible text format which, like HTML, is tag based and saves
its information in plain text files. However, while HTML defines a set of
tags used for formatting and displaying text, XML defines a set of tags used
for representing text as pieces of information. XML was originally designed
to meet the challenges of large-scale electronic publishing. However, with
new XML tools, products and services being introduced, we believe that the
greatest potential for XML will be related to business-to-business
applications and, in particular, order processing and order fulfillment.
XML allows individual users to easily customize the presentation of their
data to meet their specific needs. XML overcomes the limitation of HTML in
that it:
* Provides metadata, or data about information, that will help people
find information and help information producers and users find each
other.
* Delivers information to users in a form that allows automatic
processing after receipt.
* Enables media independent international electronic publishing.
* Makes it easy for users to process data using inexpensive software.
* Allows users to display information in any form.
The advantages flow from the fact that XML allows each writer to define
the tags that mark up and identify the type of data contained in a particular
document. Commerce on the Internet is undergoing global changes, including a
shift in mark-up language technology. HTML based e-commerce systems have
severe limitations in terms of portability, data recognition and integration
with back-end systems, and generally fail to provide a streamlined client-
friendly approach to e-commerce. XML addresses these limitations, primarily
through its inherent extensibility and is therefore ideal for creating
industry wide shopping systems.
Business strategy
Our marketing strategy
We intend to pursue the global business-to-business e-commerce market
with our search engine and software tools. Our initial marketing strategy
will focus on forming partnerships and affiliations with leading software and
XML companies.
GoXML.com marketing strategy
* Corporate Partnerships and Affiliations. We are developing
strategic alliances with businesses offering complementary software;
for example, database vendors, and related services and system
integrators.
* License GoXML. We will target companies in industry segments, such
as publishing and education, that need to search for information
from many disparate sources. We believe that these companies are
likely to be early adopters of XML and they will find it more cost
effective to license a search engine than develop one. We have
recently licensed GoXML to a Korean company. Direct sales,
telesales and e-support for the marketing campaign form the basis of
our licensing strategy.
* Develop the convert2xml.com Website. This Website will be an
important source of technical information, instructions and
tutorials on how to write XML and will provide free software for
converting simple HTML to XML.
* XSLT.com. We developed this Website to advance XSLT and promote
technical contributions. XSLT is at the recommendation stage of the
W3C and is expected to become the dominant language for template-
based stylizing of XML documents.
XCHG marketing strategy
The end-users for our XML CommercePro software are small and medium e-
commerce businesses seeking an XML-enabled e-commerce solution. In order to
effectively reach such businesses, we market XML CommercePro to e-commerce
hosting businesses, such as ISP's, ASP's and server farms that have multiple
e-commerce clients. By using XML CommercePro, the hosting businesses offer
their clients the ability to XML-enable their e-commerce Websites.
Our sales and marketing approach combines direct sales through our
Seattle and Vancouver offices with a web presence at our CartNetwork site.
The basic software for XML CommercePro is available as a free download at the
CartNetwork site allowing both web hosting businesses and end-users to sample
the software before committing to a purchase.
XML CommercePro marketing strategy
By allowing free downloads (averaging 100 per week) of the LeCart
shopping cart program, we believe that we will expose our XML CommercePro to
its intended audience of small to medium e-commerce providers. XML
CommercePro is XML enabled and appeals to individuals and corporations that
want to be able to sell online and utilize our XML e-commerce solution. The
product is currently being re-branded to focus on the XML capability of the
product as well as to use it as a link to the GoXML.com site and to promote
our core XML products.
Our strategic relationships
We have developed important relationships with many of the leading XML
firms and we are also maintaining an active role in associations and industry
consortiums that are considered leaders in the development of XML standards.
Corporate relationships
We have agreements or are in negotiation with a number of major software
companies for the exchange, development and cross-license of XML and other
applications. We consider the creation and maintenance of these relationships
to be important to our business development and future success.
* PenOp, Ltd.
In May, 2000, we purchased from PenOp, Ltd. a non-exclusive license
to use its patented technology that permits verifiable electronic signatures
for a wide range of eBusiness and web-based systems. Known as "Ceremony," the
technology allows individuals to sign and secure electronic transactions with
an electronic signature that replaces ink signatures for paper transactions.
We paid a total of $250,000 for the license, of which $50,000 comprised a
prepaid royalty. We intend to incorporate Ceremony into several of our
proprietary XML applications.
* B2B Internet, Inc.
In June, 2000, we entered into a software development and license
agreement with B2B Internet, Inc., a Korean internet software and technology
company. Under the agreement, we are developing a net market solution using
our GoXML and expressXCHG products. The product is scheduled to be completed
in December 2000 for a total development fee of $950,000. When completed, the
software will be owned by B2B Internet and will be part of a n integrated
online marketplace that allows buyers and sellers to better communicate and
transact business. Under the agreement we will receive sublicense fees when
B2B Internet sublicenses our products in Korea where they will have exclusive
distribution rights for four years.
Standards associations
* XML EDI. This is a consortium of over 1,500 of the world's leading
technology-based companies co-founded and directed by David Webber, one of our
Directors. Its purpose is to promote the exchange of information and
technology among participants in the XML-EDI industry.
* ebXML. This is an association sponsored by the United Nations and
OASIS whose mandate is to develop standards for businesses to use the Internet
for the exchange of data and e-commerce and business-to-business transactions
using XML. Duane Nickull, our President, is Editor of the Technical
Architectural Committee of ebXML.
* OASIS. OASIS is a non-profit international consortium of users and
vendors dedicated to the promotion of open specifications for the exchange of
structured data. It is focused on the definition and implementation of XML
communication.
In addition, we maintain ongoing dialogues with many technology and
software companies that are involved in the growing XML industry. These
discussions and relationships have not resulted in specific business
arrangements or revenues, but rather they position us to capture possible
future opportunities should they arise.
Products
We have developed and are using our proprietary technology to
commercialize a suite of applications for e-business to help companies convert
from HTML to XML. We believe that this technology, together with technology
we currently have under development, will allow existing businesses to
successfully adopt XML database structures:
* GoXML -- is, we believe, the first context XML search engine,
allowing users to search for terms according to the type of
information they are looking for. Version 1.0 of GoXML was launched
in July 1999 and was designed to handle over 60 million documents.
It is based on our proprietary technology that is patent pending,
and uses a proprietary spidering program that scans the Internet to
find and index XML data. The next release, Version 2.0 together
with a software developer kit, is expected in August 2000 and is
designed to handle up to 200 million complex documents. One
application for the search engine product is for corporate intranets
of companies that have already converted databases to XML. The
Internet-based version of the search engine has been showcasing our
technology since July 1999.
* expressXCHG -- is a patented data transformation tool under final
development that allows direct interface between different systems
including EDI, HTML, EDIFACT / X12, SAP BAPIs with an expected
release in November, 2000. We are developing expressXCHG to be able
to effect the conversion between all of these standards and XML. We
believe this to be a key component to the migration and interchange
of business data on the Internet.
* XML CommercePro -- is an XML enabled multi-user shopping cart system
designed for ISPs (Internet Service Providers), CSPs (Commerce
Service Providers) and ASPs (Application Service Providers). It was
first launched in June 1999 but one of its components, LeCart, has
been commercially available since September 1998. Its setup-once,
run-anywhere design means it not only enables hosted clients'
Websites for e-commerce, but any Website on the Internet as well.
The software has a simple browser-based administration interface
which will allow users to sign up manually or online, thereby
becoming e-commerce enabled immediately.
* XML Data Conversions -- XML Global is developing solutions to enable
Websites to seamlessly integrate an XML-based solution into their
Web presence. One such solution is eXtensible Object Server Pages
(XOSP). XOSP is the XML equivalent to the ASP (Active Server Pages)
standard which was developed by Microsoft. This software allows web
masters and ISPs to mark up HTML documents with XML, thus providing
all of the retrieval benefits of XML to HTML documents. XOSP will
be used along with our other tools to develop other XML-based
business applications.
Competition in general
As in most technology-based industries, competitive advantages in our
industry are gained by speed of market entry, availability of working capital,
scope and scalability of software functionality, adaptability to different
applications, existence or access to distribution channels and, of course,
technological innovation and related patent protection. Our greatest
advantage is in our patented technology; however, many of our competitors have
better finances and have better access to channels of distribution.
Our competitors are frequently quite secretive about their development
efforts, but because of the rapid evolution of XML technology, we expect new
product release will appear quickly and frequently.
Competition with GoXML search engine
Our competition comes from a variety of companies who have adopted XML
and are using various XML-based products for commercial purposes.
Private search engines
* Sequoia Software has what we believe to be the only other pure XML
search engine which is called "Xdex." This is for use in intranet
applications with very small businesses.
* Inktomi has an HTML search engine created at the University of
California at Berkeley. It develops and markets software design for
Internet infrastructure and media companies. It works with leading
companies including America On Line, British Telecommunications,
Cnet, Excite@Home, Intel, Microsoft, Real Networks, Sun Microsystems
and Yahoo. The Inktomi search engine is licensed to both public
search portals and private corporations for their intranets. There
is no public portal for a direct query of the Inktomi index
directly. We believe that Inktomi is the industry leader in search
engine licensing. Based on published reports, it reported 1999
revenues of $71,000,000 and handled 2.9 billion queries in the
fourth quarter alone.
* Ultraseek, as a division of Go.com (a Disney company), launched its
Ultraseek server in 1997 and now claims customers such as Sun
Microsystems, 3Com and Ericsson. Ultraseek's 3.0 version provides
support for indexing and search of XML documents. They have
modified their HTML search engine to recognize XML documents.
Ultraseek is not actively marketed and, to our knowledge, is not a
context-based search engine.
* IBM, like Ultraseek, has modified an existing HTML search tool to
accommodate XML documents. This product has not been commercially
launched to date.
Commercial search engines
We believe that eventually our GoXML.com search engine will compete with
the large Web-based search portals. To date, there are not a sufficient
number of XML documents to make a commercial Internet XML portal competitive
with HTML search portals, and we are not presently capable of competing with
the HTML-based search portals. However, we believe that we ultimately may
compete with the larger HTML based search portals such as Alta Vista, Ask
Geeves, Excite, Go.com, Goto.com, Google, HotBot, Look Smart, Snap and Yahoo.
Competition with expressXCHG
Several companies have developed XML/EDI translation systems that compete
with our expressXCHG transformation software:
* XML Solutions offers its XEDI translator which can convert EDI
documents to XML documents for transmission over the public Internet
or private networks.
* EComXML offers secure EDI/Backoffice integration. Its EComTalk
Server is a secure e-commerce gateway for the exchange of
transaction documents.
* IBM has recently moved into a beta testing stage for its new EDI to
XML translator. When fully deployed, IBM has estimated substantial
savings for its internal systems resulting from a broad
implementation of this translator.
Competition with XML CommercePro
There are many e-commerce shopping cart programs available for sale, and
a growing number available for free on the Internet. Although certain of
these programs directly compete with our bolt-on capability, none of these
programs, we believe, compete with us in being able to input and output XML
product data. We intend to continue to sell and license our product to be
sublicensed, in many cases at very competitive prices. If the use of XML
increases and e-commerce applications begin utilizing XML, we would expect to
experience increased competition.
Intellectual property
Patents and licenses
We have filed a 51 point patent with the United States Patent and
Trademark Office on our XML search engine and are in the process of preparing
two other patents relating to our proprietary technologies. We also have a
perpetual worldwide exclusive license to use and sublicense and make, use and
sell products based on the expressXCHG technology, including, without
limitation, the patented "expressXCHG" software. No assurance can be given
that any patent will be issued or that the scope of any patent protection will
exclude competitors or that any patent, if issued, will be held valid if
subsequently challenged.
We have recently licensed Ceremony from PenOp, Ltd., a technology-based
electronic signature product. This capability will be incorporated into
several of our XML applications.
Other intellectual property
As we discussed under the section "Risk Factors," we have applied with
the United States Patent and Trademark Office to register the following
trademarks, all of which are still pending:
* GoXML
* XOSP
* XHML
* LeCart
* XOP
In addition we have registered the following domain names:
* www.GoXML.com
* www.lecart.com
* www.cartnetwork.com.
* www.cartnetwork.net
* www.convert2xml.com
* www.findxml.com
* www.xslt.com
* www.xosp.com
* www.xosp.net
* www.xosp.org
* www.walkaboutwebs.com
* www.xmldirectory.com
While we have applied for registration of the foregoing trademarks and
registered domain names in an effort to protect them, we cannot be sure of the
nature or extent of the protection afforded, since trademark registration does
not assure any enforceable rights under many circumstances and there exists
significant uncertainty surrounding legal protections of domain names.
In addition, we try to protect our software, to the extent not
patentable, by registering copyrights of the source code. However, there can
be no assurance that any steps that we take in this regard will be adequate to
deter misappropriation of our proprietary rights or independent third parties
developing functionally equivalent products. Despite our precautions,
unauthorized parties may attempt to engineer, reverse engineer, copy, or
obtain and use our products or other information.
Although we believe that our products do not infringe on the intellectual
property rights of others, there can be no assurance that an infringement
claim will not be asserted against us in the future. The prosecution or
defense of any intellectual property litigation can be extremely expensive and
would place a material burden upon our working capital.
Research and development
We have one full time employee devoted to software research and
development and Website development. This person is a software engineer and
architect. In the period ended June 30, 1999, and the nine months ended March
31, 2000, we expended approximately $49,800 and $504,000, respectively, for
research and development costs related to our products.
Employees
We have 31 full time employees most of whom are located at our principal
office in Vancouver, British Columbia. In addition, we also have an
additional labor pool consisting of contract professionals that are hired on a
part-time basis.
Facilities
Our principal executive offices are located in Vancouver, British
Columbia. This office consists of 6,800 square feet which we will hold on a
five-year lease expiring May 31, 2005 with a monthly rent beginning at $4,700
and increasing to $5,500 after two years with triple net adjustments and a
total commitment, including deposits and excluding operating costs, of
$268,500.
Our Seattle, Washington office consists of 500 square feet which we
occupy on a month-to-month basis. The monthly rent at that location is $350,
including common area costs.
Legal proceedings
A German company, Software AG has a Website using the title "Go-XML"
which we believe violates our pending "GoXML" trademark. We have exchanged
correspondence with Software AG but have not initiated legal proceedings. At
the date of this report, there are no pending legal proceedings in which we
are a party and, with the exception of the Software AG matter, we are not
aware of any threatened legal proceedings.
CORPORATE ORGANIZATION
Our Company is comprised of a series of corporations organized in a
multi-tiered arrangement depicted in the following schematic:
XML - Global Technologies, Inc.
(Colorado)
-------------------------------
100% | 100% |
| |
XML Technologies, Inc. DataXchg, Inc.
(Nevada) | (Delaware)
|
100% |
|
XML Global Research, Inc.
(British Columbia, Canada)
|
100% |
|
Walkabout Website Designs, Ltd.
(British Columbia, Canada)
The functions and relationships of these entities to one another can be
summarized as follows:
* XML - Global Technologies, Inc., a Colorado corporation, ("XML
Global") is the parent corporation whose shares of common stock are
registered under the Exchange Act. XML Global is primarily involved
in capital formation and marketing and sales efforts for the
Company's products. In addition, it holds intellectual property
rights, including trademark registration applications, our pending
patent applications and an exclusive license from DataXchg, Inc. to
market the expressXchg product to end users. In addition, upon
completion of the merger of XML Nevada with and into XML Global
(described below), XML Global will hold all intellectual property
and other technology rights previously held by XML Nevada,
including, without limitation, the pending patents and patent
applications in preparation. XML Global has a professional services
agreement with XML Research (described below) pursuant to which XML
Global has been assigned the right to all technology and
intellectual property rights owned by XML Research.
* XML Technologies, Inc., a Nevada corporation, ("XML Nevada") is a
wholly owned subsidiary of XML Global. Founded in 1999, XML Nevada
holds the assignment of all of the past and future intellectual
property rights developed by our technology founders, Duane Nickull,
Matthew MacKenzie, Jamie Hoglund and Michael Palethorpe, including
the pending patent and agreement with XML Research described above.
XML Nevada was acquired by XML Global in a reorganization in August
1999. In that transaction, the shareholders of XML Nevada were
issued 12,500,000 shares of our common stock in exchange for 100% of
the outstanding common stock of XML Nevada. As a result of this
share exchange, the shareholders of XML Nevada acquired 63% of our
total outstanding shares.
* XML Global Research, Inc., a British Columbia corporation, ("XML
Research") is a wholly-owned British Columbian subsidiary of XML
Nevada. XML Research performs the technology research and
development under contract with XML Nevada. XML Research operates
out of its Vancouver, British Columbia offices and was created to
ensure that the intellectual property developed by the Company's
Canadian-based technology employees is made available to and owned
by XML Nevada.
* Walkabout Website Designs, Ltd., a British Columbia corporation,
("Walkabout") was acquired by XML Research in May 1999 in order to
obtain a client base to be used for beta testing of its technology.
At the present time, Walkabout has no separate employees, offices or
corporate functions.
* DataXchg, Inc., a Delaware corporation, ("DataXchg") was formed by
XML Global and David Webber, a director of the Company in October
1999. Initially, DataXchg was 40% owned by XML Global and 60% owned
by David Webber. In exchange for 60% of the outstanding shares of
DataXchg, David Webber assigned to DataXchg all of his right, title
and interest in and to the intellectual property rights and
underlying technology owned, developed or conceived of by them
pertaining to business-to-business solutions and EDI and XML-EDI
solutions, including, without limitation, the e-business solutions
known as "BizTokens" and the software product known as
"expressXchg", which offers the ability to convert standard EDI
documents into XML format. DataXchg also granted to XML Global an
exclusive perpetual worldwide license to use and sublicense and
make, use and sell products based on the technology and associated
intellectual property rights owned by DataXchg, in consideration for
a variable royalty. In June 2000, we acquired Mr. Webber's 60%
interest in DataXchg, Inc. in consideration of issuing to Mr. Webber
1,000,000 shares of our common stock. As a result of this
transaction, DataXchg became our wholly-owned subsidiary.
We plan to simplify our corporate organization by completing two
statutory mergers: the merger of XML Nevada with and into XML Global, with
XML Global to be the surviving entity; and the merger of Walkabout with and
into XML Research, with XML Research to be the surviving corporation. The
effect of these mergers will be to consolidate all of our intellectual
property and other technology rights, and marketing and sales activity, in XML
Global. XML Research will continue to perform technology research and
development functions under its agreement with XML Nevada which XML Global
will succeed to as a result of the merger.
<PAGE>
<PAGE>
MANAGEMENT
Directors, executive officers and key employees
Our executive officers, key employees and outside Directors and their
respective ages and positions are set forth below:
<TABLE>
<CAPTION>
Name Age Position
-------------------- ---- -------------------------------
<S> <C> <C>
Peter Shandro 56 Chairman of the Board, Chief Executive
Office and Director
Duane Nickull 36 President and Director
Simon Anderson 39 Chief Financial Officer and Director
Matt MacKenzie 22 Vice President Research and Development
Jamie Hoglund 29 Vice President E-Commerce
David Webber 46 Director
</TABLE>
Peter Shandro has been our CEO and a Director since June 1999. He was an
initial founder of XML Technologies, Inc., the Nevada corporation, and
supervised its reorganization with the Company in August 1999. From 1970 to
1982, he was a Partner and Vice President of Marketing with FMH Canada, Ltd.,
a leisure products distribution company. Since 1992, through his privately
owned companies, Noram Capital Partners and Wes-Sport Holdings, Ltd., he has
arranged private debt and equity as well as bank financing for both public and
private companies. He is currently the owner, President and Director of
Spectrum BioTech, Inc., a private company that holds the patents to a unique
self-destructing safety syringe. This company is not currently active. He is
also a partner in Production Finance, Inc., a merchant trade finance company
specializing in financing companies in the leisure and lifestyle products
industry. From 1982 to 1991, he provided management and marketing services for
Noram Recreation, Ltd., a company engaged in the development, financing and
operation of eight aquatic recreation businesses.
Duane Nickull has been our President and Director since August 1999. He
has worked with computers for 19 years and is a certified level 2 HTML
Designer with application skills in Javascript and DHTML. Prior to helping
form and organize XML, from 1986 to 1999 he was President of Nickull-Dowdall
Sales, Ltd., a cosmetics manufacturer.
Simon Anderson has been Chief Financial Officer and Director since June
1999. Mr. Anderson is also a 50% owner and Vice President of MCSI Consulting
Services Inc. from 1996 to present, to which he devotes about half of his time
and attention. Mr. Anderson is both a Chartered Accountant and a Chartered
Business Valuator and was a partner with BDO Dunwoody, an international
accounting and consulting firm, where he specialized in mergers, acquisitions
and valuations. From 1999 to June 2000, he was a director of mv Video, a
Vancouver-based post production facility. From 1999 to 2000 he was Treasurer
of MC2 Learning Systems, Inc. He was also a director of Trade Wind
Communications, Ltd. from March 1997 to June 1999 and a director of
Flexemessaging.com, Inc. from March 1999 to June 1999. Mr. Anderson received
a Bachelor of Commerce in Accounting and Management Information Systems from
the University of British Columbia in May 1983 and became a chartered
accountant upon graduation from the Institute of Chartered Accountants in
British Columbia in 1986. He is also Chartered Business Valuator and has
lectured to Canadian Institute of Charter Business Valuators and the American
Society of Appraisers on valuation matters.
Matthew MacKenzie has been our Vice President of Research and Development
since August 1999. Mr. MacKenzie attended the University of New Brunswick
from September 1996 to April 1999, majoring in Sociology.
Jamie Hoglund has been our Vice President of E-Commerce since August 1999
and a Director of XML Nevada since August 1999. Mr. Hoglund developed his
software programming skills through independent study and work.
David R. R. Webber has been a Vice President of DataXchg and Director of
the Company since October 1999. Mr. Webber is co-founder of the XML/EDI
Group, a consortium which provides technical support to the advancement of
XML/EDI technologies as an emerging worldwide standard. In January 1999, he
founded Gnosis, Inc., a computer consulting firm which he continues to serve
as President. From January 1997 to January 1999, he was a Senior Engineer
with Elumen Solutions, a health care management information systems firm.
From September 1994 to January 1997, he was Project Manager for LNK
Corporation, an information technology research firm. From March 1994 to
September 1994, he was an EDI specialist with DynCorpViar. Mr. Webber has a
degree in Physics with Computing from the University of Kent at Canterbury, UK
which was received in 1976.
No family relationship exists between any of our directors or executive
officers.
Our directors each serve for a term of one year and are elected at each
annual meeting of our shareholders.
Currently, we do not have standing Audit, Compensation or Nominating
Committees of the Board of Directors. We do plan to form an Audit Committee
at the earliest opportunity. No member of the Audit Committee will receive
any additional compensation for his service as a member of that Committee and
members of this committee will be primarily comprised of non-officer
directors. The Audit Committee will be responsible for providing assurance
that financial disclosures made by management reasonably portray our financial
condition, results of operations, plan and long-term commitments. To
accomplish this, the Audit Committee will oversee the external audit coverage,
including the annual nomination of the independent public accountants, review
accounting policies and policy decisions, review the financial statements,
including interim financial statements and annual financial statements,
together with auditor's opinions, inquire about the existence and substance of
any significant accounting accruals, reserves or estimates made by management,
review with management the Management's Discussion and Analysis section of the
Annual Report, review the letter of management representations given to the
independent public accountants, meet privately with the independent public
accountants to discuss all pertinent matters, and report regularly to the
Board of Directors regarding its activities.
We also plan to form a Compensation Committee as soon as possible. No
member of the Compensation Committee will receive any additional compensation
for his service as a member of that Committee. The Compensation Committee
will be responsible for reviewing pertinent data and making recommendations
with respect to compensation standards for our executive officers, including
the President and Chief Executive Officer, establishing guidelines and making
recommendations for the implementation of management incentive compensation
plans, reviewing the performance of the President and CEO, establishing
guidelines and standards for the grant of incentive stock options to key
employees under our Equity Incentive Plan, and reporting regularly to our
Board of Directors with respect to its recommendations.
Advisory Board
In February 2000, our Board of Directors authorized the establishment of
an Advisory Board whose members consist of persons who possess particular
expertise in one or more disciplines that we believe are relevant to our
strategic plan, business development and core technologies. To date, two
persons have agreed to serve as members of the Advisory Board: Scott Briggs
and Mark Van der Griend. The members of the Advisory Board do not exercise or
possess any of the authority of members of our Board of Directors, but are
merely advisors to our board.
1999 Equity Incentive Plan
On September 15, 1999, the Board of Directors authorized, and on October
19, 1999, our stockholders approved, the 1999 Equity Incentive Plan for our
executive and other employees, plus a limited number of outside consultants
and advisors. Under the Equity Incentive Plan, our employees, outside
consultants and advisors may receive awards of non-qualified options and
incentive options, stock appreciation rights or restricted stock. A maximum
of 4,000,000 shares of our common stock are subject to the Equity Incentive
Plan. As of the date of this Memorandum, no stock appreciation rights or
restricted stock has been granted under the Equity Incentive Plan, and options
to purchase 1,195,000 shares of our common stock have been granted, including
options to purchase 125,000 shares which have been granted to our non-employee
director and 60,000 options granted to members of our Advisory Board. To
date, no restricted shares have been issued pursuant to the Plan. The purpose
of the Equity Incentive Plan is to provide employees, including our officers
and employee directors, and non-employee consultants and advisors, with an
increased incentive to make significant and extraordinary contributions to our
long-term performance and growth, to join their interests with the interests
of our shareholders, and to facilitate attracting and retaining employees of
exceptional ability.
The Equity Incentive Plan may be administered by the Board, or in the
Board's sole discretion by the Compensation Committee of the Board or such
other committee as may be specified by the Board to perform the functions and
duties of the Committee under the Equity Incentive Plan. Subject to the
provisions of the Equity Incentive Plan, the Committee and the Board shall
determine, from those eligible to be participants in the Plan, the persons to
be granted stock options, stock appreciation rights and restricted stock, the
amount of stock or rights to be optioned or granted to each such person, and
the terms and conditions of any stock option, stock appreciation rights and
restricted stock.
Under the Equity Incentive Plan, in the event there occurs a change of
control of the company, all outstanding and unexercised options granted to our
key employees, officers, directors and consultants will at once become
immediately vested and exercisable. This provision of the Plan could deter
suitors from seeking business combinations with us that might otherwise be
beneficial to our shareholders.
Director compensation
Under our Equity Incentive Plan, upon their election to our Board of
Directors, non-employee directors are entitled to receive a grant of non-
qualified stock options exercisable to purchase 125,000 shares of our common
stock at an exercise price equal to the market value of our common stock on
the date of grant.
Executive compensation
The following table and discussions summarizes all compensation earned by
or paid to our Chief Executive Officer ("CEO") and the other most highly
compensated executive officers for all services rendered in all capacities to
us and our subsidiaries for each of our last three fiscal years. However, no
disclosure has been made for any executive officer, other than the CEO, whose
total annual salary and bonus is less than $100,000.
<PAGE>
<PAGE>
<TABLE>
TABLE 1
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
----------------------------------
Annual Compensation(1) Awards Payouts
-------------------------- ------------------- ---------
Other All
Annual Restricted Other
Name and Compen- Stock LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($)(2) ($) SARs ($)(#) ($)
--------------- ------- -------- ----- --------- ---------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peter Shandro, CEO 1999 $96,000 -0- -0- -0- 125,000 -0- -0-
----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE>
Employment agreements
To date, we do not have any written employment agreements with any of our
key personnel. It is our intent to enter into such agreements with our key
employees: Messrs. Shandro, Nickull, MacKenzie and Hoglund, as soon as
possible.
We have entered into lock-up and vesting agreements with certain key
personnel pursuant to which their shares of common stock are subject to
vesting over a two year period ending August 2001. It is our intent that
these agreements will provide additional incentive to those employees to
continue devoting their efforts and resources to our success until such time
as their shares of our common stock have become fully vested.
Indemnification and limitation on liability of directors
Our Articles of Incorporation provide that we shall indemnify, to the
fullest extent permitted by Colorado law, any of our directors, officers,
employees or agents who are made, or threatened to be made, a party to a
proceeding by reason of the former or present official position of the person,
which indemnity extends to any judgments, penalties, fines, settlements and
reasonable expenses incurred by the person in connection with the proceeding
if certain standards are met. At present, there is no pending litigation or
proceeding involving any of our directors, officers, employees or agents where
indemnification will be required or permitted. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to our
directors, officers and controlling persons pursuant to the foregoing
provisions, or otherwise, we have been advised that, in the opinion of the
Securities and Exchange Commission (the "Commission"), such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Our Articles of Incorporation limit the liability of our directors to the
fullest extent permitted by the Colorado Business Corporation Act.
Specifically, our directors will not be personally liable for monetary damages
for breach of fiduciary duty as directors, except for (i) any breach of the
duty of loyalty to us or our stockholders, (ii) acts or omissions not in good
faith or that involved intentional misconduct or a knowing violation of law,
(iii) dividends or other distributions of corporate assets that are in
contravention of certain statutory or contractual restrictions,
(iv) violations of certain laws, or (v) any transaction from which the
director derives an improper personal benefit. Liability under federal
securities law is not limited by the Articles.
<PAGE>
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Founders - XML - Global
When we were first organized in 1991, we issued a total of 500,000 shares
of our common stock to a total of 11 investors in consideration of a purchase
price of $.0003 per share. The following sets forth the names and the number
of shares, giving retroactive effect to a 10-for-1 forward split, received by
persons who would be considered promoters:
<TABLE>
<CAPTION>
Name Number of Shares
---- ----------------
<S> <C> <C>
Matthew J. Kavanaugh 2,550,000
Terry Whiteside 500,000
Marshal Griffin 500,000
Equitas Corp. 900,000
</TABLE>
Founders - XML Nevada; the reorganization
In May 1999, XML Nevada was organized through the issuance of 12,500,000
shares of common stock and the simultaneous acquisition of certain
intellectual property and other assets. XML Nevada also formed a wholly owned
subsidiary, XML Research, which in turn acquired 100% of the outstanding stock
of Walkabout Websites. The purpose of these transactions was to consolidate
all of the intellectual property and other assets contributed by Messrs.
Nickull, MacKenzie, Hoglund and Palethorpe into one entity, XML Nevada. The
persons who would be deemed founders of XML Nevada, and the number of shares
of common stock received by each, is set forth below:
<TABLE>
<CAPTION>
Name Number of Shares
---- ----------------
<S> <C> <C>
Duane Nickull 2,000,000 *
Matt MacKenzie 1,500,000 *
Jamie Hoglund 1,500,000 *
Peter Shandro 735,000
Simon Anderson 200,000
Michael Palethorpe 200,000 **
</TABLE>
_________________
* Subject to vesting agreements over a two year period ending August 2001.
** Mr. Palethorpe left the Company in February 2000 and surrendered 600,000
of his shares for cancellation.
In August 1999, XML Global (then known as International Capital Funding,
Inc.) acquired 100% of the issued and outstanding shares of common stock of
XML Nevada. In that transaction, all 12,500,000 shares of XML Nevada were
exchanged on a one-for-one basis for 12,500,000 shares of XML Global, which
then represented approximately 63% of the total issued and outstanding shares
of common stock of XML Global.
DataXchg, Inc.
In 1999, we formed and organized a new company called DataXchg, Inc. 40%
of the equity securities of DataXchg, Inc. was held by us and 60% was held by
David Webber. At that time, David Webber also became a member of our Board of
Directors and a consultant.
Upon its organization, David Webber assigned to DataXchg, Inc. all of the
patents, patent rights and other intellectual property owned by them related
to the Xchg product, an e-business to e-business interchange solution that
permits the conversion of standard EDI documents into an XML format. As part
of the arrangement, DataXchg, Inc. granted to XML Global an exclusive
worldwide license to market, sell and sublicense the Xchg product to end
users, for which DataXchg, Inc. is entitled to a variable royalty depending
upon the nature and configuration of the product marketed and sold.
In June, 2000, we acquired the remaining 60% of DataXchg, Inc. in
exchange for the issuance Mr. Webber of 1,000,000 shares of our common stock.
XMLFund, LLC
In January 2000, we sold to XMLFund, LLC a total of 500,000 Units of our
securities at a price of $2.00 per Unit, for a total cash consideration of
$1,000,000. Each Unit consisted of two shares of our common stock, one
Warrant exercisable for three years to purchase an additional share of common
stock at an exercise price of $2.00 per share, and a second Warrant
exercisable for 60 days to purchase an additional share of our common stock at
an exercise price of $.07 per share. In March 2000, XMLFund, LLC exercised
warrants to purchase 500,000 shares of our common stock at an exercise price
of $.07 per share. The managing partner of XMLFund, LLC, David Pool agreed to
become a member of our Board of Directors subject to our obtaining directors
and officers liability insurance. In addition, XMLFund, LLC was granted a
limited preemptive right on certain future financings that we may undertake.
By virtue of this limited preemptive right, XMLFund, LLC purchased in April
2000 100,000 units at a price of $1.00 per unit, each unit consisting of one
share of our common stock and one warrant exercisable until December 31, 2000
to purchase an additional share of common stock at an exercise price of $4.00
per share. Further, pursuant to the preemptive right, in April 2000 XMLFund,
LLC purchased 8.5 units at a price of $75,000 per unit, each unit consisting
of 50,000 shares of our common stock and warrants exercisable to purchase an
additional 50,000 shares of our common stock for 18 months at an initial
exercise price of $4.00 per share. This preemptive right will terminate upon
our completion of an initial public offering.
<PAGE>
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of our common stock by each person who beneficially owns more than
5% of the common stock; by each of our executive officers named in the
Management section; by each of our Directors; and by all executive officers
and Directors as a group. The table shows the number of shares owned as of
April 1, 2000 and the percentage of outstanding common stock owned as of April
1, 2000, and after the closing of this Offering.
<TABLE>
<CAPTION>
Percentage of Outstanding
Shares Owned(2)
-------------------------
Number of Shares
of Common Stock
Name and Address Beneficially Current
of Beneficial Owner Owned (as of 4/1/00)
------------------- ----------------- -------------------------
<S> <C> <C>
Duane Nickull 2,125,000 7.8%
Peter Shandro 860,000 3.1%
Simon Anderson 325,000 1.2%
Matt MacKenzie 1,625,000 5.9%
Jamie Hoglund 1,600,000 5.9%
Matthew J. Kavanaugh 1,950,000 7.2%
XML Fund, LLC
777 108th Avenue, N.E.
Suite 1800
Bellevue, WA 98004 3,050,000 11.0%
All Officers and Directors
as a Group(5 persons) 6,535,000 23.9%
</TABLE>
Beneficial ownership is based on information provided to us, and the
beneficial owner has no obligation to inform us of or otherwise report any
changes in beneficial ownership. Except as indicated, and subject to
community property laws when applicable, the persons named in the table above
have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them.
The percentages shown are calculated based upon 27,505,000 shares of
common stock outstanding on July 15, 2000. In calculating the percentage of
ownership, unless as otherwise indicated, all shares of common stock that the
identified person or group had the right to acquire within 60 days of July 15,
2000 upon the exercise of options and warrants are deemed to be outstanding
for the purpose of computing the percentage of shares of common stock owned by
such person or group, but are not deemed to be outstanding for the purpose of
computing the percentage of the shares of common stock owned by any other
person.
Unless otherwise stated, the beneficial owner's address is 1818 Cornwall
Avenue, Suite 9, Vancouver, British Columbia V6J 1C7 Canada.
We have granted options to purchase shares of our common stock to our
executive officers. Mr. Nickull was granted options to purchase 125,000
shares, Mr. Shandro was granted options to purchase 125,000, Mr. Anderson was
granted options to purchase 125,000 shares, Mr. MacKenzie was granted options
to purchase 125,000 shares and Mr. Hoglund was granted options to purchase
100,000 shares. The number of shares of common stock shown on the foregoing
table as being beneficially owned by each of these persons includes the shares
of common stock underlying these options.
XML Fund, LLC has warrants to purchase 500,000 shares of common stock at
an exercise price of $2.00 per share, Warrants to purchase an additional
100,000 of common stock at an exercise price of $4.00 per share and Warrants
exercisable to purchase an additional 425,000 shares of common stock at an
initial exercise price of $4.00 per share until October 6, 2000 and thereafter
at an exercise price of $6.00 per share.
Mr. David Pool, the Manager of XML Fund, has agreed to become a director
subject to our obtaining directors' and officers' liability insurance. Upon
his election and including the securities owned by XML Fund, the directors and
officers of the company as a group will consist of six persons, and will be
the beneficial owners of 9,585,000 shares, representing 33.7% of the total
issued and outstanding shares of our common stock.
Lock-up and Vesting Agreements
Messrs. Nickull, Shandro, MacKenzie and Hoglund have each entered into a
Lock-up and Vesting Agreement pursuant to which all of the shares of our
common stock which they own are subject to being returned and forfeited if
their employment terminates. Under the vesting schedule, their shares will
vest on August 29, 2001. Until the shares are vested, they may not be sold.
If the person's employment with the company is terminated before the vesting
date, all unvested shares will be forfeited and revert to our authorized but
unissued shares of common stock.
<PAGE>
<PAGE>
ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Commission. You may read and copy any document we file
at the Commission's Public Reference Rooms in Washington, D.C., New York, New
York, and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for
further information on the Public Reference Rooms. You can also obtain copies
of our Commission filings by going to the Commission's Website at
http://www.sec.gov.
We have filed with the Commission a Registration Statement on Form SB-2
to register the shares of our common stock and common stock warrants to be
sold by the Selling Securityholders and issued pursuant to the exercise of the
warrants. This Prospectus is part of that Registration Statement and, as
permitted by the Commission's rules, does not contain all of the information
set forth in the Registration Statement. For further information about us or
our common stock, you may refer to the Registration Statement and to the
exhibits filed as part of the Registration Statement. You can review a copy
of the Registration Statement and its exhibits at the public reference rooms
maintained by the Commission and on the Commission's Website as described
above.
<PAGE>
<PAGE>
SELLING SECURITYHOLDERS
The Selling Securityholders are offering to sell 24,335,000 shares of our
common stock. None of the Selling Securityholders has, or within the past
three years has had, any position, office or other material relationship with
us or any of our predecessors or affiliates, except as noted.
Of the securities being offered,
* 5,000,000 shares of common stock are being offered by Selling
Securityholders who were the original shareholders of ICF prior to
the reverse merger and reorganization, and their assignees,
* 2,330,000 shares of common stock and warrants to purchase an
additional 2,330,000 shares of common stock were sold in a private
offering which closed in August 1999,
* warrants to purchase 200,000 shares of common stock were issued to a
consultant,
* 1,600,000 shares of common stock and warrants to purchase an
additional 600,000 shares of common stock were issued to the XML
Fund, LLC, an institutional investor,
* 1,050,000 shares of our common stock and warrants to purchase an
additional 1,050,000 shares of our common stock were issued in a
private transaction to a private trust and an individual investor,
* 4,625,000 shares of our common stock and warrants to purchase an
additional 4,625,000 shares of our common stock were sold to 50
accredited investors in a private offering which was completed in
April 2000 and
* 462,500 shares of common stock and an additional 462,500 shares of
common stock issuable upon exercise of warrants included in 9.25
units of our securities which may be purchased by Westminster
Securities Corp. upon exercise of its unit purchase option granted
in connection with a private offering which we completed in April
2000.
The following table lists the Selling Securityholders eligible to sell
shares of common stock under this Prospectus, the number of shares
beneficially owned by each Selling Securityholder prior to this offering, and
the maximum number of shares each Selling Securityholder may sell under this
Prospectus. We will not receive any of the proceeds from the sale of our
common stock by the Selling Securityholders. The number of shares owned by
each Selling Securityholder after the offering will depend upon the number of
shares actually sold by each Selling Securityholder.
<TABLE>
<CAPTION>
Number of Maximum Number of
Shares Number of Shares
Beneficially Shares to be Beneficially
Owned Prior Sold in Owned after
to Offering(1) Offering Offering Percent
------------- ----------- ----------- -------
<S> <C> <C> <C> <C>
Amherst Group 500 500 -0- 0%
AMRO International,
SA(7) 1,300,000 1,300,000 -0- 0%
Antilles Partners,
LP(7) 200,000 200,000 -0- 0%
Aspen Gold Group,
Inc.(7) 50,000 50,000 -0- 0%
Austost Anstalt
Schaan(7) 500,000 500,000 -0- 0%
Glenn Bailey(4) 50,000 50,000 -0- 0%
Balmore, SA(7) 500,000 500,000 -0- 0%
Bank Von Ernst(4) 260,000 260,000 -0- 0%
Banqe Ippa & Associes,
Luxemberg(4) 70,000 70,000 -0- 0%
Banque Julius Baer
& Co. Ltd.,
Zurich(4) 80,000 80,000 -0- 0%
Bruce Barr(4) 200,000 200,000 -0- 0%
John Barsoli(7) 50,000 50,000 -0- 0%
Chris Battensbury 500 500 -0- 0%
Bayonet Capital,
LLC(7) 1,000,000 1,000,000 -0- 0%
Aleta M. and Layton
M. Bennett, JTRS(7) 50,000 50,000 -0- 0%
John Bradley 500 500 -0- 0%
Carolyn Brewer 500 500 -0- 0%
Mark Brewer 500 500 -0- 0%
Brewin Nominees
Ltd.(4) 40,000 40,000 -0- 0%
Whitney Briscoe 500 500 -0- 0%
Steve Calandrella 500 500 -0- 0%
Darryl S. Caplan(7) 200,000 200,000 -0- 0%
Vincent Capodanno(7) 100,000 100,000 -0- 0%
Ronald Carlile 500 500 -0- 0%
Susan Carlile 500 500 -0- 0%
Stuart Carmichael 500 500 -0- 0%
Shannon Carthy 1,000 1,000 -0- 0%
Patrick Churchill(4) 120,000 120,000 -0- 0%
Glen Roth, Inc.(7) 50,000 50,000 -0- 0%
000
Richard Cober 500 500 -0- 0%
Jonathan Cohen 200,000 200,000 -0- 0%
Credit Suisse
(Guernsey) Ltd.(4) 160,000 160,000 -0- 0%
Crypto Corporation(7) 100,000 100,000 -0- 0%
CSPS, Inc.(7) 100,000 100,000 -0- 0%
Cycad Limited(7) 200,000 200,000 -0- 0%
Mark DeGeorge(7) 50,000 50,000 -0- 0%
Mark DeStefano(7) 50,000 50,000 -0- 0%
Jim Dixon 500 500 -0- 0%
Randy Doherty 500 500 -0- 0%
Thomas Donino(7) 100,000 100,000 -0- 0%
Don Elving 500 500 -0- 0%
Jennifer Enslein
Trust(7) 50,000 50,000 -0- 0%
Equitas Corp. 900,000 900,000 -0- 0%
Karen Ewenson 500 500 -0- 0%
Harry Faircloth 500 500 -0- 0%
Charles Fowler(4) 50,000 50,000 -0- 0%
Scott Bradley
Frisoli(7) 100,000 100,000 -0- 0%
Golden Securities(4) 400,000 400,000 -0- 0%
Norman Goldstein &
James Jorasch, JTEN(7) 50,000 50,000 -0- 0%
Anthony Griffin 10,000 10,000 -0- 0%
Dan Griffin 500 500 -0- 0%
Gayle Griffin 500 500 -0- 0%
Marshal Griffin 500,000 500,000 -0- 0%
George E. Groehsl(7) 50,000 50,000 -0- 0%
Ms. H.R. Griffiths 1,000 1,000 -0- 0%
Rick Griffiths 500 500 -0- 0%
Egbert Hardenbol(4) 70,000 70,000 -0- 0%
Paul Hazlett 500 500 -0- 0%
HB Trading, Inc.(7) 100,000 100,000 -0- 0%
Scott Hean 2,000 2,000 -0- 0%
Alex Herman 250,000 250,000 -0- 0%
Justin Hilbert(4) 50,000 50,000 -0- 0%
Sheila Hirsch 500 500 -0- 0%
Steven Hirsch(7) 100,000 100,000 -0- 0%
Richard Ilich(7) 50,000 50,000 -0- 0%
International
Distribution Corp.(4) 100,000 100,000 -0- 0%
Mike James 500 500 -0- 0%
Debra Jeske 500 500 -0- 0%
T. J. Jesky (7) 50,000 50,000 -0- 0%
Keith Johnson 10,000 10,000 -0- 0%
Matthew J. Kavanaugh 1,950,000 1,950,000 -0- 0%
Brent King 500 500 -0- 0%
Frank L. Kramer (7) 50,000 50,000 -0- 0%
Ross Kramer 500 500 -0- 0%
John Kubiak 500 500 -0- 0%
Laiy, Ltd. 600,000 600,000 -0- 0%
Ken Lee(4) 20,000 20,000 -0- 0%
Jon Lerner (7) 100,000 100,000 -0- 0%
Lloyds Bank PL1(4) 50,000 50,000 -0- 0%
Jim Locke(4) 10,000 10,000 -0- 0%
Daniel Luskind (7) 50,000 50,000 -0- 0%
Eugene & Eileen
Lynch (7) 50,000 50,000 -0- 0%
Mabcrown, Inc.(7) 600,000 600,000 -0- 0%
Magellan International,
Ltd.(7) 200,000 200,000 -0- 0%
John B. Marsala (7) 50,000 50,000 -0- 0%
William Marshall,
Jr.(4) 200,000 200,000 -0- 0%
Dan McCracken 500 500 -0- 0%
Ian McDougall 500 500 -0- 0%
Rob McKay 500 500 -0- 0%
Joseph P. McKenna 500 500 -0- 0%
Jeffrey McLaughlin (7) 50,000 50,000 -0- 0%
Melborne Investment
Ltd.(4) 300,000 300,000 -0- 0%
Stephan Moses(4) 70,000 70,000 -0- 0%
Dale B. Newburg (7) 100,000 100,000 -0- 0%
Arthur J. Niebauer (7) 50,000 50,000 -0- 0%
Rick Nilsson 500 500 -0- 0%
Nottinghill Resources,
Ltd.(4) 1,000,000 1,000,000 -0- 0%
John P. O'Shea (7) 250,000 250,000 -0- 0%
Gene Paul Percudani (7) 50,000 50,000 -0- 0%
Duane Peterson 250,000 250,000 -0- 0%
Christine Platt 1,000 1,000 -0- 0%
Providence Securities
(Bahamas) Ltd.(4) 470,000 470,000 -0- 0%
M. Psarompa(4) 200,000 200,000 -0- 0%
Thomas Relling 500 500 -0- 0%
David J. Ritchie (7) 100,000 100,000 -0- 0%
Mark Robertson (7) 100,000 100,000 -0- 0%
Ropart Investments,
LLC (7) 200,000 200,000 -0- 0%
Mark C. Ross(4) 200,000 200,000 -0- 0%
Christian Russenberger 100,000 100,000 -0- 0%
Phil Sancken 500 500 -0- 0%
August B. Schwarz (7) 50,000 50,000 -0- 0%
Ralf P. Schwarz (7) 200,000 200,000 -0- 0%
Adam Shandro 1,000 1,000 -0- 0%
Andrew Shandro 500 500 -0- 0%
Matthew Shandro 500 500 -0- 0%
Robert E. Smith 1,000 1,000 -0- 0%
Smithson Ventures (7) 100,000 100,000 -0- 0%
Troy Straith 500 500 -0- 0%
Gary Sukovaty 500 500 -0- 0%
Craig Taubman 500 500 -0- 0%
Gene Taubman 500 500 -0- 0%
Tech-Trade Capital,
LLC (7) 50,000 50,000 -0- 0%
Jay Teitelbaum (7) 100,000 100,000 -0- 0%
Genell Thorn 500 500 -0- 0%
Tomasovich Family
Trust(6) 2,000,000 2,000,000 -0- 0%
Gary Triesman 500 500 -0- 0%
Union Bancaire(4) 170,000 170,000 -0- 0%
Hans van der Griend 500 500 -0- 0%
Mark van der Griend (7) 100,000 100,000 -0- 0%
Vestcom, Ltd.(7) 50,000 50,000 -0- 0%
Willi Vogl 500 500 -0- 0%
Cameron Watt (4) 50,000 50,000 -0- 0%
Willie West, for and on
behalf of(4) 20,000 20,000 -0- 0%
Toucan International
Investments
West Capital &
Associates (7) 100,000 100,000 -0- 0%
Westminster Securities
Corp.(8) 925,000 925,000 -0- 0%
Lane Whiteside 500 500 -0- 0%
Terry Whiteside 500,000 500,000 -0- 0%
E. Evelyn Williamson(4) 200,000 200,000 -0- 0%
Ashley Wills 500 500 -0- 0%
John Wills 500 500 -0- 0%
Albert Wouters(4) 50,000 50,000 -0- 0%
XML Fund, LLC(5) 3,050,000 3,050,000 -0- 0%
Louis Zauderer(7) 400,000 400,000 -0- 0%
Scott Ziegler(7) 100,000 100,000 -0- 0%
</TABLE>
___________________
(1) The number of shares indicated includes shares acquired directly from us
by the Selling Securityholders as well as shares which are issuable upon
the exercise of warrants held by the Selling Securityholders.
(2) Beneficial ownership is based on information provided to us, and the
beneficial owner has no obligation to inform us of or otherwise report
any changes in beneficial ownership. Except as indicated, and subject to
community property laws when applicable, the persons named in the table
above have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them.
(3) The percentages shown are calculated based upon 27,505,000 shares of
common stock outstanding on July 15, 2000. In calculating the percentage
of ownership, unless as otherwise indicated, all shares of common stock
that the identified person or group had the right to acquire within 60
days of July 15, 2000 upon the exercise of options and warrants are
deemed to be outstanding for the purpose of computing the percentage of
shares of common stock owned by such person or group, but are not deemed
to be outstanding for the purpose of computing the percentage of the
shares of common stock owned by any other person.
(4) The selling shareholder was an investor in the Company's private offering
which closed in August 1999. In the offering, the selling shareholder
purchased for $1.00 a unit consisting of one share of common stock and
one warrant exercisable to purchase an additional share of common stock
at an exercise price of $4.00 per share.
(5) XML Fund, LLC is a private investment fund whose manager is David Pool.
In December 1999, the XML Fund purchased 500,000 units at a price of
$2.00 per unit. Mr. Pool has agreed to join our board of directors
subject to our obtaining directors and officers liability insurance. As
part of its agreement, XML Fund has a preemptive right to subscribe for
and purchase its proportionate share of future offerings in order to
maintain its percentage equity interest in the Company.
(6) Includes warrants exercisable until December 31, 2000 to purchase
1,000,000 shares of common stock at an exercise price of $4.00 per share.
(7) The selling shareholder was an investor in the Company's private offering
which closed in April 2000. In the offering, the selling shareholder
purchased for $75,000 units, each unit consisting of 50,000 shares of
common stock and 50,000 warrants. The warrants are exercisable until
October 2001 to purchase an additional share of common stock, initially
at an exercise price of $4.00 per share and beginning October 2000 and
thereafter at an exercise price of $6.00 per share. As an investor in
the April 2000 private offering, the selling shareholder agreed to the
following restriction on resales of securities: Until the earlier of
three months following the date of this Prospectus or September 6, 2000,
the selling shareholder agreed not to make any sales of our securities.
Thereafter, the selling shareholder agreed to limit sales of our
securities to 25% of shares of common stock purchased by the selling
shareholder in our April 2000 offering during each 90 day period. With
respect to shares of common stock which may be acquired by the selling
shareholder upon exercise of warrants, the selling shareholder has agreed
not to sell those shares of common stock until 30 days after the date of
this Prospectus and thereafter limit resales of such shares of common
stock to 25% of such shares owned by the selling shareholder during each
90 day period. The selling shareholder agreed not to sell any of our
shares of common stock or other securities for a 30 day period beginning
the date of this Prospectus; and thereafter the selling shareholder has
agreed to limit resales of our securities to 25% of such securities owned
by the selling shareholder during each 90 day period.
(8) Consists of shares of common stock issuable upon exercise of an option to
buy up to 9.25 of the units sold in our April 2000 offering at a price of
$75,000 per unit. Westminster was granted the option as partial
consideration of its services as our placement agent in the offering.
Does not include 175,000 shares of common stock and 175,000 warrants
owned by John P. O'Shea, a principal of Westminster, which he purchased
as an investor in our April 2000 private offering.
We will pay all expenses to register the shares, except that the Selling
Securityholders will pay any underwriting and brokerage discounts, fees and
commissions, specified attorneys' fees and other expenses to the extent
applicable to them.
We have agreed to indemnify the Selling Securityholders and certain
affiliated parties against specified liabilities, including liabilities under
the Securities Act, as amended, in connection with this offering. The Selling
Securityholders have agreed to indemnify us and our directors and officers, as
well as any persons controlling our Company, against certain liabilities,
including liabilities under the Securities Act. Insofar as indemnification
for liabilities under the Securities Act may be permitted to our directors or
officers, or persons controlling our Company, we have been advised that in the
opinion of the SEC this kind of indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
USE OF PROCEEDS
We will not receive any proceeds when Selling Securityholders sell shares
of common stock under this Prospectus. We have previously received proceeds
from the sale of the common stock and warrants and may receive proceeds from
the exercise of the warrants.
If we receive proceeds from the exercise of warrants, it will be used for
general working capital purposes.
<PAGE>
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus covers the sale of shares of common stock pursuant to the
exercise of outstanding warrants held by the Selling Securityholders as well
as the resale by those Selling Securityholders of additional shares of our
common stock which they have already purchased from us. We are not
registering the resale of the warrants by the Selling Securityholders.
Selling Securityholders may sell their shares of common stock either
directly or through a broker-dealer or other agent at prices related to
prevailing market prices or negotiated prices, in one or more of the
following kinds of transactions:
* Transactions in the over-the-counter market;
* Transactions on a stock exchange that lists our common stock, or
transactions negotiated between Selling Securityholders and
purchasers, or otherwise.
Broker-dealers or agents may purchase shares directly from a Selling
Securityholder or sell shares to someone else on behalf of a Selling
Securityholder. Broker-dealers may charge commissions to both Selling
Securityholders selling common stock, and purchasers buying shares sold by a
Selling Securityholder. If a broker buys shares directly from a Selling
Securityholder, the broker may resell the shares through another broker, and
the other broker may receive compensation from the Selling Securityholder for
the resale.
To the extent required by laws, regulations or agreements we have made,
we will use our best efforts to file a Prospectus supplement during the time
the Selling Securityholders are offering or selling shares covered by this
Prospectus in order to add or correct important information about the plan of
distribution for the shares.
In addition to any other applicable laws or regulations, Selling
Securityholders must comply with regulations relating to distributions by
Selling Securityholders, including Regulation M under the Securities Exchange
Act of 1934, as amended. Regulation M prohibits Selling Securityholders from
offering to purchase and purchasing our common stock at certain periods of
time surrounding their sales of shares of our common stock under this
Prospectus.
Some states may require that registration, exemption from registration or
notification requirements be met before Selling Shareholders may sell their
common stock. Some states may also require Selling Securityholders to sell
their common stock only through broker-dealers.
<PAGE>
<PAGE>
DESCRIPTION OF SECURITIES
Common stock
We are authorized to issue 500,000,000 shares of common stock, par value
$.0001 per share. Except as otherwise expressly provided by law, and subject
to the voting rights provided to the holders of preferred stock by our
Articles of Incorporation, as amended, the common stock shall have voting
rights on all matters requiring a vote of stockholders, voting together with
the holders of preferred stock, as one class. Each share of common stock
issued and outstanding shall be identical in all respects one with the other,
and no dividends shall be paid on any shares of common stock unless the same
is paid on all shares of common stock outstanding at the time of such payment.
Except for and subject to those rights expressly granted to the holders of the
preferred stock, or except as may be provided by the laws of the State of
Colorado, the holders of common stock shall have exclusively all other rights
of stockholders. There is no cumulative voting with respect to the election
of Directors, with the result that the holders of more than 50% of the shares
voting for the election of Directors can elect all of the Directors. The
holders of common stock are entitled to receive dividends if declared by the
Board of Directors out of funds legally available for them. In the event of
liquidation, dissolution or winding up of the Company, the holders of common
stock are entitled to share ratably in all assets remaining which are
available for distribution to them after payment of liabilities and after
provision has been made for each class of stock, if any, having preference
over the common stock. Holders of shares of common stock, as such, have no
conversion, preemptive or other subscription rights, and there are no
redemption provisions applicable to the common stock.
Preferred stock
We are authorized to issue 100,000,000 shares of preferred stock, par
value $.01 per share. Our preferred stock can be issued in one or more series
as may be determined from time-to-time by our Board of Directors. In
establishing a series our Board of Directors shall give to it a distinctive
designation so as to distinguish it from the shares of all other series and
classes, shall fix the number of shares in such series, and the preferences,
rights and restrictions thereof. All shares of any one series shall be alike
in every particular. Our Board of Directors has the authority, without
stockholder approval, to fix the rights, preferences, privileges and
restrictions of any series of preferred stock including, without limitation:
* The rate of distribution
* The price at and the terms and conditions on which shares shall be
redeemed
* The amount payable upon shares for distributions of any kind
* Sinking fund provisions for the redemption of shares
* The terms and conditions on which shares may be converted if the
shares of any series are issued with the privilege of conversion
* Voting rights except as limited by law
Although we currently do not have any plans to issue shares of preferred
stock or to designate any series of preferred stock, there can be no assurance
that we will not do so in the future. As a result, we could authorize the
issuance of a series of preferred stock which would grant to holders preferred
rights to our assets upon liquidation, the right to receive dividend coupons
before dividends would be declared to common stockholders, and the right to
the redemption of such shares, together with a premium, prior to the
redemption to common stock. Our common stockholders have no redemption
rights. In addition, our Board could issue large blocks of voting stock to
fend off unwanted tender offers or hostile takeovers without further
stockholder approval.
Warrant
We have outstanding warrants exercisable to purchase up to 8,905,000
shares of our common stock at prices ranging from $2.00 to $5.00 per share.
Holders of the Warrants do not possess any rights as stockholders of the
Company. Holders of the Warrants have no voting, preemptive, liquidation or
other rights of shareholders, and no dividends will be paid on the Warrants or
the shares underlying the Warrants. In the event of our liquidation,
dissolution or winding up, the holders of the Warrants will not be entitled to
participate in the distribution of our assets.
Transfer agent
Our transfer agent is Corporate Stock Transfer, Inc., 3200 Cherry Creek
Drive South, Suite 430, Denver, Colorado 80209. Their telephone number is
(303) 282-5800.
Reports to shareholders
We intend to furnish annual reports to shareholders which will include
audited financial statements reported on by our certified public accountants.
In addition, we may issue unaudited quarterly or other interim reports to
shareholders as we deem appropriate. We will comply with the periodic
reporting requirements imposed by the Securities Exchange Act of 1934.
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be
passed upon for us by Neuman & Drennen, LLC of Boulder, Colorado.
EXPERTS
Our consolidated financial statements as of June 30, 1999 and for the
period from May 18, 1999 to June 30, 1999 have been included herein in
reliance on the report of Moss Adams, LLP, independent certified public
accountants, appearing elsewhere herein, given upon the authority of that
firm as experts in auditing and accounting.
<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
This index relates to the consolidated financial statements set forth in
this Prospectus of XML - Global Technologies, Inc.
Consolidated Financial Statements as of June 30, 1999 and for the Period May
18, 1999(date of inception) to June 30, 1999
Independent Auditors' Report of Moss Adams, LLP. . . . . .F-2
Consolidated Balance Sheet . . . . . . . . . . . . . . . .F-3
Consolidated Statement of Operations . . . . . . . . . . .F-4
Consolidated Statement of Stockholders' Equity . . . . . .F-5
Consolidated Statement of Cash Flows . . . . . . . . . . .F-6
Notes to Consolidated Financial Statements . . . . . . . .F-7
Condensed Consolidated Unaudited Financial Statements as of and for the Three
and Nine Month Periods Ended March 31, 2000
Condensed Consolidated Balance Sheet . . . . . . . . . . .F-17
Condensed Consolidated Statement of Operations . . . . . .F-18
Condensed Consolidated Statement of Cash Flows . . . . . .F-19
Notes to Consolidated Financial Statements . . . . . . . .F-20
<PAGE>
<PAGE>
Moss-Adams LLP
Certified Public Accountants
114 West Magnolia Street, Suite 301
Bellingham, WA 98225-4318
(360) 676-1920 (tel) (360) 671-5411 (fax)
Independent Auditor's Report
To the Board of Directors and Stockholders
XML - Global Technologies, Inc.
We have audited the accompanying consolidated balance sheet of XML - Global
Technologies, Inc. and Subsidiaries (a development stage company) as of June
30, 1999, and the related consolidated statements of operations, stockholders'
deficit, and cash flows for the period May 18, 1999 (date of inception) to
June 30, 1999. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of XML - Global Technologies, Inc. and Subsidiaries as of June 30, 1999, and
the results of its operations and its cash flows for the period May 18, 1999
(date of inception) to June 30, 1999 in conformity with generally accepted
accounting principles.
MOSS ADAMS LLP
Bellingham, Washington
October 6, 1999, except for Note 1, as to
which the date is November 8, 1999
<PAGE>
<TABLE>
<CAPTION>
XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Balance Sheet
June 30, 1999
ASSETS
------
<S> <C>
Current Assets
Cash $ 9,581
Trade accounts receivable 8,232
Other receivable 3,509
Prepaid expenses 4,658
-------------
Total current assets 25,980
-------------
Property and Equipment, net 54,938
Trademarks and Patents 7,134
-------------
Total Assets $ 88,052
=============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current Liabilities
Trade accounts payable and accrued liabilities $ 55,182
Advances due to directors 8,755
Note payable 135,135
-------------
Total liabilities 199,072
-------------
Stockholders' Deficit
Common stock ($.0001 par value, 500,000,000
shares authorized, 17,500,000 shares issued
and outstanding) 1,750
Additional paid-in capital 8,079
Deficit accumulated during the development stage (120,849)
------------
Total stockholders' deficit (111,020)
------------
Total Liabilities and Stockholders' Deficit $ 88,052
============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Operations
For the Period May 18, 1999 (Date of Inception) to June 30, 1999
<S> <C>
Revenue $2,137
------------
Operating Expenses
Research and development 49,809
General and administrative 70,091
Depreciation 3,086
------------
Total operating expenses 122,986
------------
Net Loss Before Provision for Income Taxes (120,849)
Provision For Income Taxes -
------------
Net Loss $ (120,849)
Earnings (Loss) Per Share
Basic $ (0.01)
============
Diluted $(0.01)
============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Stockholders' Deficit
For the Period May 18, 1999 (Date of Inception) to June 30, 1999
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage Total
------------- ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, May 18,
1999 (date of
inception) - $ - $ - $ - $ -
Share issuances 12,500,000 1,250 11,250 - 12,500
Net loss - - - (120,849) (120,849)
Assumption of
liabilities of
International
Capital Funding,
Inc. 5,000,000 500 (3,171) - (2,671)
------------ ------------ --------- ----------- ----------
BALANCE, June 30,
1999 17,500,000 $ 1,750 $ 8,079 $ (120,849) $(111,020)
============ ============= ========= ============ ==========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Cash Flows
For the Period May 18, 1999 (Date of Inception) to June 30, 1999
<S> <C>
Increase (Decrease) in Cash
Cash Flows From Operating Activities
Net loss $ (120,849)
Adjustments to reconcile net loss to net
cash used in operating activities
Stock issued in exchange for intellectual
property rights and for services 12,500
Depreciation 3,086
Changes in operating assets and liabilities
Trade accounts receivable (1,661)
Other receivable (3,509)
Prepaid expenses (4,658)
Trade accounts payable and accrued liabilities 50,389
Advances due to directors 1,223
------------
Net cash used in operating activities (63,479)
------------
Cash Flows From Investing Activities
Purchases of property and equipment (55,552)
Acquisition of trademarks and patents (7,134)
Acquisition of subsidiary, net of cash acquired 611
------------
Net cash used in investing activities (62,075)
------------
Cash Flows From Financing Activities
Proceeds from issuance of note payable 135,135
------------
Net Change In Cash 9,581
Cash, beginning of period -
------------
Cash, end of period $ 9,581
============
Supplemental Disclosure of Cash Flow Information
Interest paid $ -
============
Income taxes paid $ -
============
Supplemental Schedule of Noncash Transaction
Assumption of liabilities of International
Capital Funding, Inc. $ 2,671
============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<PAGE>
XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 1999
Note 1. Organization, Reverse Acquisition and Subsequent Financing, and
Operations
Organization and Development Stage Operations
---------------------------------------------
Effective August 27, 1999, XML-Technologies, Inc. (XML-Technologies)
and International Capital Funding, Inc. (ICF) entered into an Agreement and
Plan of Reorganization (the Agreement). In accordance with the Agreement,
the stockholders of XML-Technologies received 12.5 million shares of ICF
stock in exchange for the 12.5 million outstanding shares of XML-
Technologies. The stockholders of ICF retained 5 million shares in
exchange for no assets and the assumption of $2,671 of liabilities of ICF
by XML-Technologies. The transaction was accounted for as a
recapitalization of XML-Technologies and the accompanying consolidated
financial statements present the financial position, results of operations,
and cash flows of XML-Technologies. After entering into the Agreement, the
ownership percentage of the original stockholders of XML - Technologies was
reduced from100% to 71%.
ICF was organized in 1991 for the purpose of consummating a merger or
acquisition with a private entity. Prior to entering into the Agreement,
it had no material amount of assets or liabilities and no operations.
Subsequent to completing the Agreement, ICF changed its name to XML-Global
Technologies, Inc. (XML-Global Technologies or the Company) and changed its
year-end to June 30.
The capital structure in the accompanying consolidated financial
statements reflects a ten for one forward stock split of ICF shares
authorized on August 3, 1999 in anticipation of entering into the
Agreement. The activity of ICF for the period July 1, 1999 and August 27,
1999 (date of the Agreement) was not significant and will be included in
the Company's consolidated financial statements for the three months ended
September 30, 1999.
XML-Technologies is a Nevada corporation organized May 18, 1999 to
hold either directly or indirectly all outstanding shares of XML-Global
Research, Inc. and Walkabout Website Designs, Ltd., both of which are
British Columbia corporations. The Company and its subsidiaries engage in
the business of developing internet-based software applications using XML
(Extensible Markup Language). XML is an abbreviated version of SGML
(Standard General Markup Language), the international standard for defining
descriptions of the structure and content of electronic documents.
For the period May 18, 1999 through June 30, 1999, the Company and its
subsidiaries' efforts have been devoted to legal formation; financial
planning; recruiting directors, advisors and employees; and raising
additional financing. Development stage operations during this period have
been financed with a loan from a director of the Company.
Subsequent Financing
--------------------
Concurrent with completing the Agreement, the Company issued 2,330,000
units to investors at $1 per unit for total proceeds of $2,330,000. Costs
associated with issuance were not material. Units issued consist of one
common share and a purchase warrant entitling the holder to acquire one
common share at an exercise price of $4 within the first six months
following the issue date, or $6 within the second six months following the
issue date. The shares issued are exempt from registration in reliance on
Rule 506 of Regulation D of the Securities Act 1933. Net proceeds from the
issuance will be used to help fund the Company's working capital needs
until such time as development stage operations cease and profitable
operations are achieved.
Note 2. Summary of Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of XML-Global Technologies, Inc. and its wholly-owned
U. S. and Canadian subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation.
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements. Actual results could
differ from those estimates.
ALLOWANCE FOR DOUBTFUL ACCOUNTS - The Company considers all trade
accounts receivable to be fully collectible. Accordingly, no allowance for
doubtful accounts has been recorded.
PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets.
INTANGIBLE ASSETS - Legal costs associated with obtaining and
protecting trademarks and patents are capitalized. Once a trademark or
patent is perfected, the related costs are amortized over five years using
the straight-line method.
VALUATION OF LONG-LIVED ASSETS - The Company periodically reviews
long-lived assets, including identifiable intangible assets, whenever
events or changes in circumstances indicate that the carrying amount of an
asset may be impaired and not recoverable. Adjustments are made if the sum
of the expected future undiscounted operating cash flows is less than the
carrying amount.
REVENUE RECOGNITION - The Company recognizes revenue when earned, in
accordance with American Institute of Certified Public Accountants
Statement of Position (SOP) 97-2, Software Revenue Recognition, and SOP 98-
9, Modification of SOP 97-2 with Respect to Certain Transactions.
Royalties based upon licensees' revenues or usage are recognized as
licensees' revenues are earned or usage occurs. In the event that
licensee's revenue recognition criteria are not met, revenue is recognized
when received. Maintenance and subscription revenue is recognized ratably
over the contract period. Revenue attributable to significant undelivered
elements, including maintenance and technical support, is recognized over
the contract period as elements are delivered. Revenues from fixed-price
service contracts and software development contracts requiring significant
production, modification, or customization are recognized using the
percentage-of-completion method. Revenue from service contracts that are
based on time incurred is recognized as work is performed.
RESEARCH AND DEVELOPMENT COSTS - Research and development costs are
expensed as incurred. Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed, does not materially affect the Company.
INCOME TAXES - The Company accounts for income taxes using the
liability method. Deferred taxes are recognized for temporary differences
between the basis of assets and liabilities for financial and income tax
purposes at enacted tax rates. Deferred tax amounts represent the future
tax consequences of those differences, which will be either deductible or
taxable when the assets and liabilities are recovered or settled. Valuation
allowances are established when necessary to reduce deferred tax assets to
the amounts expected to be realized. The Company files a consolidated tax
return in the United States. It files separate tax returns for each of its
Canadian subsidiaries in Canada. Additionally, the Canadian subsidiaries
are subject to provincial income taxes in Canada.
FOREIGN CURRENCY TRANSLATION - All asset and liability accounts of
Canadian operations are translated into U.S. dollars at current exchange
rates. Revenues and expenses are translated using the average exchange rate
prevailing during the period. Foreign currency translation adjustments were
not material during the period May 18, 1999 (date of inception) to June 30,
1999.
EARNINGS PER SHARE - The Company reports earnings per share in
accordance with Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings Per Share.
SEGMENT INFORMATION - The Company reports segment information in
accordance with SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information. SFAS No. 131 requires that reportable segments be
designated using a management approach, which relies on the internal
organization used by management for making operational decisions and
assessing performance. SFAS No. 131 also requires certain disclosures about
products and services, geographic areas, and major customers.
NEW ACCOUNTING STANDARD - In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. Among other provisions, SFAS No. 133 requires that
entities recognize all derivatives as either assets or liabilities in the
balance sheet and measure those financial instruments at fair value.
Accounting for changes in fair value is dependent on the use of the
derivatives and whether such use qualifies as hedging activity. The new
standard, as amended, becomes effective for the Company in fiscal 2001, and
management is currently assessing the impact, if any, it may have on
financial position and results of operations.
Note 3. Mergers and Acquisitions
XML-Global Research, Inc.
-------------------------
Effective May 20, 1999, XML-Technologies, Inc. completed the
acquisition of XML-Global Research, Inc. (Global) by purchasing all
outstanding shares of common stock of Global for a nominal amount. Global
is a British Columbia corporation organized February 4, 1999 for the
purpose of engaging in software development. The acquisition has been
accounted for using the purchase method of accounting for business
combinations. Prior to the acquisition, Global had no significant
operations, and no goodwill was recorded in connection with the
combination.
Walkabout Website Designs, Ltd.
-------------------------------
Effective May 27, 1999, XML-Global Research, Inc. completed the
acquisition of Walkabout Website Designs, Ltd. (Walkabout) by purchasing
all outstanding shares of common stock of Walkabout for a nominal amount.
Walkabout is a British Columbia corporation organized September 1, 1998 for
the purpose of engaging in software development. The acquisition has been
accounted for using the purchase method of accounting for business
combinations; and, accordingly, the operating results of Walkabout have
been included in the Company's financial statements from the date of
acquisition. No goodwill was recorded in connection with the combination.
Note 4. Property and Equipment
<TABLE>
<CAPTION>
Property and equipment consist of the following:
<S> <C> <C>
Computer hardware $ 50,685
Office equipment 7,339
----------
58,024
Accumulated depreciation (3,086)
-----------
$ 54,938
===========
</TABLE>
Note 5. Note Payable
XML-Technologies, Inc. has a $135,000 unsecured note payable to a
director of the Company. The note is denominated in Canadian dollars,
bears interest at 9.25%, and is due on the earlier of demand or September
30, 1999.
Note 6. Income Taxes
<TABLE>
<CAPTION>
The provision for income taxes consists of the following:
<S> <C> <C>
Deferred Canadian federal and provincial
tax benefit $ 48,300
Increase in valuation allowance (48,300)
------------
$ -
============
The total provision differs from the amount computed using U.S.
federal statutory income tax rates as follows:
<CAPTION>
<S> <C> <C>
Net loss before provision for income taxes $(120,849)
U.S. statutory rate 34%
Tax benefit at statutory rate (41,100)
Excess income tax benefit in Canada (7,200)
Increase in valuation allowance 48,300
------------
$ -
=============
</TABLE>
Tax effects of temporary differences that give rise to deferred tax
assets, based on a 40% Canadian tax rate, consist solely of a $48,300 net
operating loss carryforward, which expires in 2006. Management currently
believes uncertainty exists surrounding realization of the deferred tax
asset and has recorded a $48,300 valuation allowance to offset completely
the value of the asset.
Note 7. Earnings per Share
The numerators and denominators of basic and diluted earnings per
share are as follows:
<TABLE>
<S> <C> <C>
Numerator - net loss $(120,849)
============
Denominator - weighted average number
of shares outstanding 17,500,000
============
</TABLE>
At June 30, 1999, the Company had no potential common shares that
would have had a dilutive effect.
Note 8. Stockholders' Equity
Preferred Stock
---------------
The Company has 100,000,000 authorized shares of $0.01 par value
preferred stock. The Board of Directors may authorize issuance of any
number of shares in series and assign specific rights and preferences to
each series without limitation. As of June 30, 1999, no shares have been
issued.
Common Stock and Stock Warrants
-------------------------------
The Company has a single class of $0.0001 par value common stock.
Authorized shares total 500 million. After giving effect to the Agreement
discussed in Note 1 and a ten for one stock split authorized on August 3,
1999, the Company has 17.5 million shares outstanding.
Subsequent to June 30, 1999, and concurrent with entering into the
Agreement discussed in Note 1, the Company issued 2,330,000 units to
investors at $1.00 per unit for total proceeds of $2,330,000. Costs
associated with the issuance were not material. Units issued consist of
one common share and a purchase warrant entitling the holder to acquire one
common share at an exercise price of $4.00 within the first six months
following the issue date or $6.00 within the second six months following
the issue date. The shares issued are exempt from registration in reliance
on Rule 506 of Regulation D of the Securities Act of 1933.
Note 9. Related Party Transactions
During the period May 18, 1999 (date of inception) to June 30, 1999,
the Company paid $6,100 of management fees to directors and to companies
controlled by directors.
Note 10. Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and trade accounts
receivable. The Company places its temporary cash investments with major
Canadian financial institutions. The Company extends credit to customers
based on evaluation of customers' financial condition and credit history.
Collateral is generally not required. Customers include Canadian and U.S.
entities engaged in electronic commerce and software development.
Note 11. Segment and Geographic Information
The Company's primary operations consist of the development and sale
of internet-based software applications and software engineering contracts.
Management assesses the operations of its software sales and engineering
activities as separate segments. However, through June 30, 1999, the
Company's efforts were focused primarily on development stage operations,
and no material activities occurred within these segments. Currently, the
Company also has no major customers. At June 30, 1999, essentially all of
the Company's long lived assets were located in British Columbia, Canada.
Note 12. Fair Value of Financial Instruments
The fair values of cash, trade accounts receivable and payable,
accrued liabilities, advances due to directors, and note payable all
approximate their fair value due to the short-term nature of the
instruments.
Note 13. Year 2000 Issue
Currently, management is reviewing the Company's software programs and
hardware components to determine whether or not modifications will be
required to prevent problems related to the Year 2000 Issue. In connection
with this process, management is currently making an assessment of
potential expense, if any, to be incurred to ensure all of the Company's
computer systems and various other subsystems, are Year 2000 compliant.
Because of the unprecedented nature of the Year 2000 Issue, its
effects and the success of related remediation efforts, if any are
required, will not be fully determinable until the year 2000 and
thereafter. Management cannot assure that the Company is or will be Year
2000 ready, that the Company's remediation efforts will be successful in
whole or in part, or that parties with whom the Company does business will
be Year 2000 ready.
Note 14. Events Subsequent to the Date of the Independent Auditor's Report
(Unaudited)
Formation and Acquisition of DataXchg, Inc. and Licensing Agreement
-------------------------------------------------------------------
In October 1999, the Company and one of its non-employee directors,
David Webber, co-founded DataXchg, Inc. ("DataXchg"), a Delaware
corporation. The Company holds 40% of common shares and David Webber holds
the other 60%. In exchange for the shares, the parties agreed to transfer
all rights to certain technology and other intellectual property related to
certain B2B (Business-to-Business) and XML-EDI (Electronic Data
Interchange) solutions. Neither party has a historical cost basis in the
assets that were transferred to DataXchg.
Under the terms of a licensing agreement, DataXchg granted the Company
the exclusive right to use, develop, and sublicense the technology and
associated intellectual property owned by DataXchg. Pursuant to the
license agreement, the Company will pay royalties to DataXchg equal to 80%
of net revenues derived from the sale and licensing of products that are
either based on the technology owned by DataXchg or jointly developed by
the Company and DataXchg. The Company will pay royalties equal to 20% of
net revenues derived from third party use of the technology and
intellectual rights.
The 40% investment in DataXchg is carried at cost, adjusted for the
Company's proportionate share of undistributed earnings or losses. Through
June 28, 2000, DataXchg had no earnings or losses. Other than the
technology rights transferred to DataXchg in exchange for common shares,
DataXchg has no assets and liabilities. As mentioned above, the technology
has no historical cost basis.
Effective June 28, 2000, the Company acquired Mr. Weber's 60% interest
in DataXchg in exchange for the issuance of 1,000,000 shares of the
Company's common stock. The acquisition has been accounted for as a
purchase. A $1,000,000 value was assigned to the shares given as
consideration for the purchase, based on the share price of other issuances
of Company stock during the period the parties agreed in substance to the
terms of the purchase. The purchase price was allocated to the technology
rights held by DataXchg and will be amortized over four years. DataXchg
has no history of operations; through June 28, 2000, it had no revenues or
expenses. Accordingly, there are no pro forma results of operations to
report for periods ended prior to that date that include DataXchg.
Adoption of 1999 Equity Incentive Plan
--------------------------------------
Effective October 19, 1999, stockholders approved adoption of the 1999
Equity Incentive Plan (the "Plan"). Under the Plan, the Board of Directors
or its designated committee may make grants to employees, officers,
directors, and consultants of the Company and its subsidiaries of (1)
incentive stock options, (2) nonqualified stock options, (3) stock bonuses,
(4) rights to purchase restricted stock, and (5) stock appreciation rights.
The Company has reserved a total of 4 million shares for stock awards to be
issued under the Plan.
The exercise price of incentive stock options can be no less than the
fair value of the Company's common stock on the date of grant. In
instances where an employee owns 10% or more of common shares, the exercise
price can be no less than 110% of fair value. The exercise price of non-
statutory options can be no less than 85% of fair value. The maximum term
of options is 10 years; vesting periods are determined by the Board or its
designated committee on the date of grant.
Through April 27, 2000, the Company had issued 1,165,000 stock options
to employees and non-employees. All the options have an exercise price of
$1.00. The weighted-average remaining contractual life of the options is
4.7 years. Through April 27, 2000, a total of 1,055,000 of the options had
vested. The remaining 110,000 options vest on May 31 and June 30, 2000.
The Company applies the provisions of Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations to account for options and other stock awards issued to
employees. Accordingly, costs for employee stock options or other stock
awards are measured as the excess, if any, of the fair value of the
Company's common stock at the measurement date over the amount the employee
must pay to acquire the stock. The Company applies the provisions of
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, and related interpretations to account for
options and other stock awards issued to independent contractors and other
service providers who are not employees of the Company. SFAS No. 123
requires that the Company apply the fair value method to account for stock
awards issued to non-employees. SFAS No. 123 also requires disclosure of
the pro forma effect of applying the fair value method of accounting for
stock options issued to employees. The Company uses the Black-Scholes
option-pricing model to compute estimated fair value of options and similar
awards, based on applicable assumptions about the weighted average expected
life of options, the volatility of its stock price, its dividend yield
rate, and a risk-free interest rate.
In March 2000, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation. FASB Interpretation No. 44 clarifies that non-employee
members of an entity's Board of Directors do not meet the definition of an
employee, in which case the requirements of SFAS No. 123 must be applied.
However, an exception is made to require the application of APB Opinion No.
25 to stock compensation granted to a non-employee director for services
provided as a director if the director was (a) elected by stockholders or
(b) appointed to a board position that will be filled by stockholder
election when the existing term expires.
Through March 31, 2000, the Company had recognized $49,300 of
compensation for options granted to non-employees. The pro forma effect of
applying the fair value method of accounting for options issued to
employees results in a $129,100 increase in net loss and no increase in net
loss per share for the nine months ended March 31, 2000.
Stock Issuances and Redemption
------------------------------
Subsequent to the merger of XML-Technologies and ICF on August 27,
1999 and the issuance of the units described in Notes 1 and 8 on that same
date, the Company issued additional common shares and stock purchase
warrants, as described below. With the exception of the costs associated
with the units placed by Westminster Securities Corporation, any costs
associated with the issuances were not material. All issuances are exempt
from registration in reliance on Rule 506 of Regulation D or Section 4(2)
of the Securities Act of 1933.
* Effective September 1, 1999, the Company issued a warrant that
entitles the holder to purchase 200,000 shares of common stock
for $5.00 per share. The term of the warrant is five years.
* Effective January 13, 2000, the Company entered into a Securities
Purchase Agreement (the "Agreement") with XML Fund LLC ("XML
Fund"), an unrelated third party. Under the Agreement, XML Fund
agreed to purchase 500,000 units at a price of $2.00 per unit for
total proceeds of $1 million. Each unit consists of two shares
of common stock, one Class A warrant and one Class A-1 warrant.
Each Class A warrant entitles XML Fund to purchase one additional
share of common stock at a price of $2.00 per share, and each
Class A-1 warrant entitles XML Fund to purchase one additional
share of common stock at a price of $0.07 per share. The term of
the Class A warrants is three years and the term of the Class A-1
warrants is 60 days. The Class A-1 warrants were exercised in
March 2000, from which the Company received gross proceeds of
$35,000. Although the exercise price of the Class A-1 warrants
is below the fair value of the Company's stock, the warrants were
not issued in consideration of past or future services received
from XML Fund. The total estimated fair value of all equity
instruments comprising the units sold to XML Fund approximate the
total proceeds received. Accordingly, the Company has recognized
no compensation expense related to the Class A-1 warrants.
If within one year of the sale of the units (or once all warrants
are exercised, if earlier) the Company proposes to register any
of its common stock under the Securities Act of 1993 in
connection with a public offering, the Company agrees to use its
best efforts to register also the shares held by XML Fund. In
the event the Company proposes to offer for sale any new common
shares or securities convertible into common shares, or any other
class of capital stock, the Company has granted XML Fund the
preemptive right to purchase additional shares necessary to
maintain its percentage interest in the Company.
* Effective February 22, February 29, and April 7, 2000, the
Company entered into agreements to issue a total of 1,050,000
units at a price of $1.00 per unit for total proceeds of
$1,050,000. Each unit consists of one share of common stock and
one warrant. Each warrant entitles holders to purchase one
additional share of common stock at a price of $4.00 per share.
The warrants expire on December 31, 2000. If within one year of
the sale of the units the Company proposes to register any of its
common stock under the Securities Act of 1933 in connection with
a public offering, the Company agrees to use its best efforts to
register also the shares issued in these private placements.
* On February 24, 2000, one of the Company's founding stockholders
left the employee of the Company. The employee and the Company
agreed that he would return 600,000 of the 800,000 shares
originally issued to him, at no cost to the Company.
* Effective March 3, 2000, the Company engaged Westminster
Securities Corporation ("Westminster") to serve as its placement
agent for the purpose of offering 105 units at a price of $75,000
per unit for total proceeds of $7,875,000 The Company will pay
Westminster 7% of the gross sales price of all units sold, and
Westminster will have the right to purchase up to 10% of the
units sold.
Each unit consists of 50,000 shares of common stock and 50,000
redeemable warrants. During the first six months of the 18 month
term of the warrants, each warrant entitles holders to purchase
one additional share of common stock at a price of $4.00 per
share. During the following twelve months, holders are entitled
to purchase additional common shares at a price of $6.00 per
share. The warrants are redeemable by the Company at $0.01 per
warrant in the event that (i) the Company registers the shares to
honor the warrants, (ii) the shares are listed on a national
exchange, Nasdaq, or the Over-the-Counter Bulletin Board, (iii)
the closing bid price of such shares for the 20 trading days
prior to redemption is 200% of the exercise price of the
warrants, and (iv) no lockup provisions restrict the resale of
the shares. In connection with the offering, the Company intends
to register up to 5.25 million common shares and 5.25 million
warrants in various states where such securities may be sold.
Through May 3, 2000, the Company had received paid subscriptions
for 9.25 units for gross proceeds of $6,937,500. Related issue
costs were approximately $600,000.
* Effective April 5, 2000, the Company entered into a second
Securities Purchase Agreement (the "Agreement") with XML Fund.
Under this Agreement, XML Fund agreed to purchase 100,000 units
at a price of $1.00 per unit for total proceeds of $100,000.
Each unit consists of one share of common stock and one warrant.
Each warrant entitles XML Fund to purchase one additional share
of common stock at a price of $4.00 per share. The warrants
expire on December 31, 2000. If, within one year of the sale of
the units, the Company proposes to register any of its common
stock under the Securities Act of 1993 in connection with a
public offering, the Company agrees to use its best efforts to
register also the shares held by XML Fund.
New Facility Lease
------------------
In March 2000, the Company entered into a lease agreement for a new
operating facility in Vancouver, British Columbia. Prior to entering into
this agreement, the Company had been renting its existing facility on a
short-term basis. The lease commences on June 1, 2000 and runs for five
years. During the first two years, monthly lease payments are $4,700.
However, the facility is provided at no charge for the first five months of
each of the first two years. During the following three years, monthly
lease payments are $5,500. The lease agreement also requires that the
Company pay its proportional share of operating costs and property taxes.
Future minimum lease payments required under the lease, excluding the
Company's share of operating costs and property taxes, are as follows:
<TABLE>
<CAPTION>
Year Ending
June 30
-----------
<S> <C> <C>
2000 $ 16,800
2001 28,000
2002 38,200
2003 65,500
2004 65,500
2005 54,500
------------
$ 268,500
============
The effect of the scheduled rent increase and "rent holidays" will be
recognized on a straight-line basis over the five-year term of the lease.
<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
XML-Global Technologies, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet
At March 31, 2000 and June 30, 1999
March 31 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $2,353,812 $ 9,581
Trade accounts receivable 8,982 8,232
Other receivable 21,529 3,509
Deposits 22,005 4,658
Deferred income taxes 1,467 -
Deferred issue costs 70,519 -
------------- -------------
2,478,314 25,980
Fixed assets
Computer hardware and software 121,955 50,685
Equipment 18,389 7,339
------------- -------------
140,344 58,024
Accumulated depreciation 25,001 3,086
------------- -------------
115,343 54,938
------------- -------------
Trademarks and patents 40,380 7,134
------------- -------------
Total Assets $2,634,037 $ 88,052
============= =============
Liabilities and Stockholders' Equity (Deficit)
Liabilities
Current liabilities
Accounts payable and accrued
liabilities $ 74,685 $ 55,182
Due to directors - 8,755
Note payable - 135,135
------------ -------------
74,685 199,072
------------ -------------
Total Liabilities 74,685 199,072
------------ -------------
Stockholders' Equity (Deficit)
Common stock 2,128 1,750
Additional paid-in capital 3,807,360 8,079
Deferred compensation (12,209) -
Accumulated other comprehensive
income (2,849) -
Accumulated deficit (1,235,078) (120,849)
------------ -------------
Total Stockholders' Equity (Deficit) 2,559,352 (111,020)
------------ -------------
Total Liabilities and Stockholders'
Equity (Deficit) $2,634,037 $ 88,052
============= =============
</TABLE>
See accompanying notes
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
XML-Global Technologies, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statement of Operations
For the Three Months and for the Nine months Ended March 31, 2000
Three Months Nine months
March 31, 2000 March 31, 2000
-------------- --------------
<S> <C> <C>
Revenue $ 7,330 $ 30,989
------------ ------------
Operating expenses
Research and development 215,914 504,003
Marketing and selling 71,360 173,542
General and administrative 183,444 422,928
Fair value of options granted
to consultants 49,279 49,279
Depreciation and amortization 8,900 21,717
------------ -------------
Total operating expenses 528,897 1,171,469
------------ -------------
Operating loss (521,567) (1,140,480)
Interest Income 24,051 26,251
------------ -------------
Net loss (497,516) (1,114,229)
Accumulated deficit, beginning of
period (737,562) (120,849)
------------ -------------
Accumulated deficit, end of period $(1,235,078) $(1,235,078)
============ =============
Net loss per share - basic and diluted $ (0.02) $ (0.06)
Weighted average number of shares 20,809,670 19,662,764
</TABLE>
See accompanying notes
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
XML-Global Technologies, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statement of Cash Flow
For the Nine Months Ended March 31, 2000
Nine months
March 31, 2000
-----------------
<S> <C>
Cash flows from operating activities
Net loss $ (1,114,229)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation of fixed assets 21,717
Fair value of options granted to consultants 49,279
Changes in assets and liabilities
Accounts receivable (620)
Other receivable (16,824)
Deposits (17,016)
Accounts payable and accrued liabilities 14,725
Due to directors (8,815)
-------------
Net cash used in operating activities (1,071,783)
-------------
Cash flows from investing activities
Fixed assets purchases (80,264)
Trademarks and patents (32,811)
-------------
Net cash used in investing activities (113,075)
-------------
Deferred issue costs (70,487)
Issuance of capital stock, net of issue costs 3,738,171
Repayment of note payable (135,135)
-------------
Net cash provided by financing activities 3,532,549
-------------
Effect of changes in exchange rates (3,460)
-------------
Increase (decrease) in cash 2,344,231
Cash, beginning of period 9,581
-------------
Cash and cash equivalents, end of period $ 2,353,812
=============
</TABLE>
See accompanying notes
<PAGE>
<PAGE>
XML-Global Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. ORGANIZATION AND CESSATION OF DEVELOPMENT STAGE OPERATIONS
Effective August 27, 1999, XML-Technologies, Inc. (XML-Technologies)
and International Capital Funding, Inc. (ICF) entered into an agreement and
plan of reorganization (the Agreement). In accordance with the Agreement,
the stockholders of XML-Technologies received 12.5 million shares of ICF
stock in exchange for the 12.5 million outstanding shares of XML-
Technologies. The shareholders of ICF retained 5 million shares in exchange
for no assets and the assumption of $2,671 of liabilities of ICF by XML-
Technologies. The transaction was accounted for as a recapitalization of
XML-Technologies and the accompanying consolidated financial statements
present the financial position, results of operations, and cash flows of
XML-Technologies.
ICF was organized in 1991 for the purpose of consummating a merger or
acquisition with a private entity. Prior to entering into the Agreement,
it had no material amount of assets or liabilities and no operations.
Subsequent to completing the Agreement, ICF changed its name to XML-Global
Technologies, Inc. (XML-Global Technologies or the Company) and changed its
year-end to June 30.
The capital structure in the accompanying consolidated financial
statements reflects a ten for one stock split of ICF shares authorized on
August 3, 1999 in anticipation of entering into the Agreement. The activity
of ICF for the period July 1, 1999 and August 27, 1999 (date of the
Agreement) was not significant and is included in the Company's
consolidated financial statements for the nine months ended March 31, 2000.
XML-Technologies is a Nevada corporation organized May 18, 1999 to
hold either directly or indirectly all outstanding shares of XML-Global
Research, Inc. and Walkabout Website Designs, Ltd., both of which are
British Columbia corporations. The Company and its subsidiaries engage in
the business of developing Internet-based software applications using XML
(Extensible Markup Language). XML is an abbreviated version of SGML
(Standard General Markup Language), the international standard for defining
descriptions of the structure and content of electronic documents.
For the period May 18, 1999 through June 30, 1999, the Company and its
subsidiaries' efforts were devoted to legal formation; financial planning;
recruiting directors, advisors and employees; and raising additional
financing. Development stage operations during this period were financed
with a loan from a director of the Company. In July 1999, the Company
commenced selling its e-commerce software and accordingly is no longer a
development stage company.
2. BASIS OF PRESENTATION
These condensed consolidated financial statements are unaudited and
reflect all adjustments that, in the Company's opinion, are necessary for a
fair presentation of the results for the interim period. The results of
operations for the current interim period are not necessarily indicative of
results to be expected for the current year or any other period.
These consolidated financial statements should be read in conjunction
with the consolidated financial statements for the period May 18, 1999
(date of inception) to June 30, 1999 and notes thereto included in our 8-
K/A as filed with the Securities and Exchange Commission on November 10,
1999. Comparative statements of operations and cash flows are not
available, as operations did not commence until May 18, 1999.
3. STOCK ISSUANCES AND REDEMPTION
Subsequent to the merger of XML-Technologies and ICF on August 27,
1999 described in Note 1 and the issuance of the units described in Note 5
on that same date, the Company issued additional common shares and stock
purchase warrants, as described below. With the exception of costs
associated with the subsequent Westminster Securities offering described in
Note 8, costs associated with the issuances were not material. All
issuances are exempt from registration in reliance on Rule 506 of
Regulation D or Section 4(2) of the Securities Act of 1933.
Effective January 13, 2000, the Company entered into a Securities
Purchase Agreement (the Agreement) with XMLFund LLC (XMLFund). Under the
Agreement, XMLFund agreed to purchase 500,000 units at a price of $2.00 per
unit for total proceeds of $1 million. Each unit consists of two shares of
common stock, one Class A warrant and one Class A-1 warrant. Each Class A
warrant entitles XMLFund to purchase one additional share of common stock
at a price of $2.00 per share, and each Class A-1 warrant entitles XMLFund
to purchase one additional share of common stock at a price of $0.07 per
share. The term of the $2.00 warrants is three years and the term of the
$0.07 warrants is 60 days. The $0.07 warrants were exercised in March 2000
and the Company received gross proceeds of $35,000. If within one year of
the sale of the units (or once all warrants are exercised, if earlier) the
Company proposes to register any of its common stock under the Securities
Act of 1993 in connection with a public offering, the Company agrees to use
its best efforts to register also the shares held by XMLFund. In the event
the Company proposes to offer for sale any new common shares or securities
convertible into common shares, or any other class of capital stock, the
Company has granted XMLFund the preemptive right to purchase additional
shares necessary to maintain its percentage interest in the Company.
On February 24, 2000, one of the Company's founding stockholders left
the employee of the Company. The employee and the Company agreed that he
would return 600,000 of the 800,000 shares originally issued to him, at no
cost to the Company.
Effective February 22, February 29, and April 7, 2000, the Company
entered into agreements to issue a total of 1,050,000 units at a price of
$1.00 per unit for total proceeds of $1,050,000. Each unit consists of one
share of common stock and one warrant. Each warrant entitles holders to
purchase one additional share of common stock at a price of $4.00 per
share. The warrants expire on December 31, 2000. If within one year of
the sale of the units the Company proposes to register any of its common
stock under the Securities Act of 1933 in connection with a public
offering, the Company agrees to use its best efforts to register also the
shares issued in these private placements. The company placed 550,000 of
these units prior to March 31, 2000 for gross proceeds of $550,000.
4. RELATED PARTY TRANSACTIONS
During the nine months ended March 31, 2000, we repaid the note
payable due to a director of $135,135. We paid $32,500 and $130,000 in the
three and nine months ended March 31, 2000 respectively in management fees
to directors of XML-Global and its subsidiaries and companies controlled by
directors.
5. SHARE PURCHASE WARRANTS
Concurrent with the Agreement discussed in Note 1, the Company issued
2,330,000 units to investors at $1.00 per unit for total proceeds of
$2,330,000. Units issued consist of one share of common stock and a
purchase warrant entitling the holder to acquire one share of common stock
at an exercise price of $4.00 within the first six months following the
issue date, or $6.00 within the second six months following the issue date.
The terms of the warrant were subsequently amended to extend the $4.00
exercise price until December 31, 2000. Approximately $175,000 in costs
were incurred in association with the issuance of these units and have been
offset against the gross proceeds received.
In October 1999 the Company issued a share purchase warrant to
purchase up to 200,000 shares of common stock at a price of $5.00 per
share. The share purchase warrant was issued in exchange for corporate
finance and business development assistance. The warrant is exercisable up
to August 31, 2004.
In connection with the $1,050,000 financing discussed in Note 3, we
issued share purchase warrants each entitling the holder to acquire one
share of common stock at an exercise price of $4.00 until December 31,
2000.
As part of the XMLFund financing the Company issued a share purchase
warrant to purchase up to 1,000,000 shares of common stock. The Company
issued 500,000 Class A warrants and 500,000 Class A-1 warrants. Each Class
A warrant entitles XMLFund to purchase one additional share of common stock
at a price of $2.00 per share, and each Class A-1 warrant in each unit
entitles XMLFund to purchase one additional share of common stock at a
price of $0.07 per share. The term of the $2.00 warrants is three years
and the term of the $0.07 warrants is 60 days. The $0.07 warrants were
exercised in March 2000 and the Company received gross proceeds of $35,000.
6. 1999 EQUITY INCENTIVE PLAN
On October 19, 1999, the Company adopted the 1999 Equity Incentive
Plan (the "1999 Plan") to provide incentives to employees, directors and
consultants. Under the 1999 Plan, the Company has reserved a total of
4,000,000 shares of Common Stock for issuance with the maximum term of
options being ten years. The Board of Directors has the exclusive power
over the granting of options and their vesting provisions. During the three
months ended March 31, 2000, the Company granted 1,165,000 options to
employees, directors and consultants at an exercise price of $1.00 per
share. The options have a seven year term.
A summary of the status of the 1999 Plan during fiscal 2000 is as
follows:
<TABLE>
<CAPTION>
Number Weighted Average
of Options Exercise Price
------------ ------------
<S> <C> <C>
Options outstanding at
June 30, 1999 - $ -
Granted 1,165,000 1.00
Exercised - -
Forfeited - 1.00
------------ ------------
Options outstanding at
March 31, 2000 1,165,000 $ 1.00
------------ ------------
Options exercisable at
March 31, 2000 1,055,000 $ 1.00
------------ ------------
</TABLE>
A summary of stock options outstanding at September 30, 1999 is as
follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------- -------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Out- Contractual Exercise Exer- Exercise
Prices standing Life Price cisable Price
-------- -------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$1.00 1,165,000 4.7 years $1.00 1,055,000 $1.00
</TABLE>
The Company applies the provision of APB Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations to account for
its stock-based awards. Accordingly, costs for employee stock options or
issuance of shares is measured as the excess, if any, of the fair value of
the Company's common stock at the measurement date over the amount the
employee must pay to acquire the stock. The cost for the issuance of
options to non-employees is based on the fair value of the options granted
at the date the services were performed using the Black-Scholes option
pricing model. Compensation expense for the three and nine months ended
March 31, 2000 was $49,279.
SFAS No. 123, Accounting for Stock-Based Compensation, requires
disclosure of the pro forma effect of applying the fair value method of
accounting for stock options. For disclosure purposes, the Company uses
the Black-Scholes option-pricing model to compute estimated fair value,
based on the following assumptions:
<TABLE>
<CAPTION>
2000
----
<S> <C> <C>
Risk-free interest rate 6.0%
Dividend yield rate 0%
Price volatility 20%
Weighted average expected life of options 3 years
</TABLE>
In March 2000, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation. FASB Interpretation No. 44 clarifies that non-employee
members of an entity's Board of Directors do not meet the definition of an
employee, in which case the requirements of SFAS No. 123 must be applied.
However, an exception is made to require the application of APB Opinion No.
25 to stock compensation granted to a non-employee director for services
provided as a director if the director was (a) elected by stockholders or
(b) appointed to a board position that will be filled by stockholder
election when the existing term expires.
Through March 31, 2000, the Company had recognized $49,279 of
compensation for options granted to non-employees. The pro forma effect of
applying the fair value method of accounting for options issued to
employees results in a $129,100 increase in net loss and no increase in net
loss per share for the nine months ended March 31, 2000.
7. COMMITMENTS
In March 2000, the Company entered into a lease agreement for a new
operating facility in Vancouver, British Columbia. Prior to entering into
this agreement, the Company had been renting its existing facility on a
short-term basis. The lease commences on June 1, 2000 and runs for five
years. During the first two years, monthly lease payments are $4,700.
However, the facility is provided at no charge for the first five months of
each of the first two years. During the following three years, monthly
lease payments are $5,500. The lease agreement also requires that the
Company pay its proportional share of operating costs and property taxes.
Future minimum lease payments required under the lease, excluding the
Company's share of operating costs and property taxes, are as follows:
<TABLE>
<CAPTION>
Year Ending
June 30
-----------
<S> <C> <C>
2001 $ 28,000
2002 38,200
2003 65,500
2004 65,500
2005 54,500
----------
$ 251,700
==========
The effect of the scheduled rent increase and "rent holidays" will be
recognized on a straight-line basis over the five-year term of the lease.
8. SUBSEQUENT EVENTS
Effective April 7, 2000, the Company entered into agreements to issue
500,000 units at a price of $1.00 per unit for total proceeds of $500,000.
Each unit consists of one share of common stock and one warrant. Each
warrant entitles holders to purchase one additional share of common stock
at a price of $4.00 per share. The warrants expire on December 31, 2000.
If within one year of the sale of the units the Company proposes to
register any of its common stock under the Securities Act of 1933 in
connection with a public offering, the Company agrees to use its best
efforts to register also the shares issued in these private placements.
Effective April 5, 2000, the Company entered into a second Securities
Purchase Agreement (the Agreement) with XMLFund. Under this Agreement,
XMLFund agreed to purchase 100,000 units at a price of $1.00 per unit for
total proceeds of $100,000. Each unit consists of one share of common
stock and one warrant. Each warrant entitles XMLFund to purchase one
additional share of common stock at a price of $4.00 per share. The
warrants expire on December 31, 2000. If, within one year of the sale of
the units, the Company proposes to register any of its common stock under
the Securities Act of 1933 in connection with a public offering, the
Company agrees to use its best efforts to register also the shares held by
XMLFund.
Effective March 3, 2000, the Company engaged Westminster Securities
Corporation (Westminster) to serve as its placement agent for the purpose
of offering up to 105 units at a price of $75,000 per unit for total
maximum proceeds of $7,875,000. The Company will pay Westminster 7% of the
gross sales price of all units sold, and Westminster will have the right to
purchase up to 10% of the units sold.
Each unit consists of 50,000 shares of common stock and 50,000
redeemable warrants. During the first six months of the 18 month term of
the warrants, each warrant entitles holders to purchase one additional
share of common stock at a price of $4.00 per share. During the following
twelve months, holders are entitled to purchase additional common shares at
a price of $6.00 per share. The warrants are redeemable by the Company at
$0.01 per warrant in the event the Company (i) registers the shares to
honor the warrants, (ii) the shares are listed on a national exchange,
Nasdaq, or the Over-the-Counter Bulletin Board, (iii) the closing bid price
of such shares for the 20 trading days prior to redemption is 200% of the
exercise price of the warrants, and (iv) no lockup provisions restrict the
resale of the shares. In connection with the offering, the Company intends
to register up to 5.25 million common shares and 5.25 million warrants in
various states where such securities may be sold.
In April 2000, the Company received paid subscriptions for 92.5 units
for gross proceeds of $6,937,500. Related costs of issuance were
approximately $600,000.
<PAGE>
<PAGE>
========================================================================
You should rely only on the information contained in this document or that
we have referred you to. We have not authorized anyone to provide you with
information that is different. This Prospectus is not an offer to sell
common stock and is not soliciting an offer to buy common stock in any
state where the offer or sale is not permitted.
XML - Global Technologies, Inc.
24,335,000 Shares of Common Stock
August ___, 2000
========================================================================
Until ___________, 2000 (25 days after
the date of this prospectus), all dealers
effecting transactions in the shares
offered by this prospectus - whether
or not participating in the offering -
may be required to deliver a copy
of this prospectus. Dealers may also be
required to deliver a copy of this prospectus
when acting as underwriters and for their
unsold allotments or subscriptions.
TABLE OF CONTENTS
-----------------
Page
----
Prospectus Summary 2
Risk Factors 4
Certain Market Information 14
Forward-Looking Statements 15 ____________________________
Dividend Policy 16
Capitalization 16 Prospectus
Selected Financial Data 17 ____________________________
Management Discussion 18
Business 24
Management 35
Certain Transactions 40 August _____, 2000
Principal Stockholders 42
Additional Information 44
Selling Securityholders 45
Use of Proceeds 54
Plan of Distribution 55
Description of Securities 56
Legal Matters 57
Experts 57
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The only statute, charter provision, bylaw, contract, or other
arrangement under which any controlling person, director or officers of the
Registrant is insured or indemnified in any manner against any liability
which he may incur in his capacity as such, is as follows:
Sections 7-109-101 through 7-109-110 of the Colorado Corporation Code
provide as follows:
7-109-101. Definitions. As used in this article:
(1) "Corporation" includes any domestic or foreign entity that
is a predecessor of a corporation by reason of a merger or other
transaction in which the predecessor's existence ceased upon
consummation of the transaction.
(2) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a
corporation, is or was serving at the corporation's request as a
director, officer, partner, trustee, employee, fiduciary, or
agent of another domestic or foreign corporation or other person
or of an employee benefit plan. A director is considered to be
serving an employee benefit plan at the corporation's request if
his or her duties to the corporation also impose duties on, or
otherwise involve services by, the director to the plan or to
participants in or beneficiaries of the plan. "Director"
includes, unless the context requires otherwise, the estate or
personal representative of a director.
(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation incurred with respect to a
proceeding to pay a judgment, settlement, penalty, fine,
including an excise tax assessed with respect to an employee
benefit plan, or reasonable expenses.
(5) "Official capacity" means, when used with respect to a
director, the office of director in a corporation and, when used
with respect to a person other than a director as contemplated in
section 7-109-107, the office in a corporation held by the
officer or the employment, fiduciary, or agency relationship
undertaken by the employee, fiduciary, or agent on behalf of the
corporation. "Official capacity" does not include service for
any other domestic or foreign corporation or other person or
employee benefit plan.
(6) "Party" includes a person who was, is, or is threatened to
be made a named defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal.
7-109-102. Authority to indemnify directors.
(1) Except as provided in subsection (4) of this section, a
corporation may indemnify a person made a party to a proceeding
because the person is or was a director against liability
incurred in the proceeding if:
(a) The person conducted himself or herself in
good faith; and
(b) The person reasonably believed:
(i) In the case of conduct in an official capacity
with the corporation, that his or her conduct was
in the corporation's best interests; and
(ii) In all other cases, that his or her conduct was at
least not opposed to the corporation's best
interests; and
(c) In the case of any criminal proceeding, the person had
no reasonable cause to believe his or her conduct was unlawful.
(2) A director's conduct with respect to an employee benefit
plan for a purpose the director reasonably believed to be in the
interests of the participants in or beneficiaries of the plan is
conduct that satisfies the requirement of subparagraph (ii) of
paragraph (b) of subsection (1) of this section. A director's
conduct with respect to an employee benefit plan for a purpose
that the director did not reasonably believe to be in the
interests of the participants in or beneficiaries of the plan
shall be deemed not to satisfy the requirements of paragraph (a)
of subsection (1) of this section.
(3) The termination of a proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent is not, of itself, determinative that the director did
not meet the standard of conduct described in this section.
(4) A corporation may not indemnify a director under this
section:
(a) In connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable to the
corporation; or
(b) In connection with any other proceeding charging that
the director derived an improper personal benefit, whether or not
involving action in an official capacity, in which proceeding the
director was adjudged liable on the basis that he or she derived
an improper personal benefit.
(5) Indemnification permitted under this section in connection
with a proceeding by or in the right of the corporation is
limited to reasonable expenses incurred in connection with the
proceeding.
7-109-103. Mandatory indemnification of directors. Unless
limited by its articles of incorporation, a corporation shall
indemnify a person who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which the person
was a party because the person is or was a director, against
reasonable expenses incurred by him or her in connection with the
proceeding.
7-109-104. Advance of expenses to directors.
(1) A corporation may pay for or reimburse the reasonable
expenses incurred by a director who is a party to a proceeding in
advance of final disposition of the proceeding if:
(a) The director furnishes to the corporation a written
affirmation of the director's good faith belief that he or she
has met the standard of conduct described in section 7-109-102;
(b) The director furnishes to the corporation a written
undertaking, executed personally or on the director's behalf, to
repay the advance if it is ultimately determined that he or she
did not meet the standard of conduct; and
(c) A determination is made that the facts then known to those
making the determination would not preclude indemnification under
this article.
(2) The undertaking required by paragraph (b) of subsection (1)
of this section shall be an unlimited general obligation of the
director but need not be secured and may be accepted without
reference to financial ability to make repayment.
(3) Determinations and authorizations of payments under this
section shall be made in the manner specified in section 7-109-
106.
7-109-105. Court-ordered indemnification of directors.
(1) Unless otherwise provided in the articles of incorporation,
a director who is or was a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to
another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court
considers necessary, may order indemnification in the following
manner:
(a) If it determines that the director is entitled to
mandatory indemnification under section 7-109-103, the court
shall order indemnification, in which case the court shall also
order the corporation to pay the director's reasonable expenses
incurred to obtain court-ordered indemnification.
(b) If it determines that the director is fairly and
reasonable entitled to indemnification in view of all the
relevant circumstances, whether or not the director met the
standard of conduct set forth in section 7-109-102 (1) or was
adjudged liable in the circumstances described in section 7-109-
102 (4), the court may order such indemnification as the court
deems proper; except that the indemnification with respect to any
proceeding in which liability shall have been adjudged in the
circumstances described in section 7-109-102 (4) is limited to
reasonable expenses incurred in connection with the proceeding
and reasonable expenses incurred to obtain court-ordered
indemnification.
7-109-106. Determination and authorization of indemnification of
directors.
(1) A corporation may not indemnify a director under section 7-
109-102 unless authorized in the specific case after a
determination has been made that indemnification of the director
is permissible in the circumstances because the director has met
the standard of conduct set forth in section 7-109-102. A
corporation shall not advance expenses to a director under
section 7-109-104 unless authorized in the specific case after
the written affirmation and undertaking required by section 7-
109-104 (1) (a) and (1) (b) are received and the determination
required by section 7-109-104 (1) (c) has been made.
(2) The determinations required by subsection (1) of this
section shall be made:
(a) By the board of directors by a majority vote of those
present at a meeting at which a quorum is present, and only
those directors not parties to the proceeding shall be counted in
satisfying the quorum; or
(b) If a quorum cannot be obtained, by a majority vote of a
committee of the board of directors designated by the board of
directors, which committee shall consist of two or more directors
not parties to the proceeding; except that directors who are
parties to the proceeding may participate in the designation of
directors for the committee.
(3) If a quorum cannot be obtained as contemplated in paragraph
(a) of subsection (2) of this section, and a committee cannot be
established under paragraph (b) of subsection (2) of this
section, or, even if a quorum is obtained or a committee is
designated, if a majority of the directors constituting such
quorum or such committee so directs, the determination required
to be made by subsection (1) of this section shall be made:
(a) By independent legal counsel selected by a vote of the
board of directors or the committee in the manner specified in
paragraph (a) or (b) of subsection (2) of this section or, if a
quorum of the full board cannot be obtained and a committee
cannot be established, by independent legal counsel selected by a
majority vote of the full board of directors; or
(b) By the shareholders.
(4) Authorization of indemnification and advance of expenses
shall be made in the same manner as the determination that
indemnification or advance of expenses is permissible; except
that, if the determination that indemnification or advance of
expenses is permissible is made by independent legal counsel,
authorization of indemnification and advance of expenses shall be
made by the body that selected such counsel.
7-109-107. Indemnification of officers, employees, fiduciaries,
and agents.
(1) Unless otherwise provided in the articles of incorporation:
(a) An officer is entitled to mandatory indemnification under
section 7-109-103, and is entitled to apply for court-ordered
indemnification under section 7-109-105, in each case to the same
extent as a director;
(b) A corporation may indemnify and advance expenses to an
officer, employee, fiduciary, or agent of the corporation to the
same extent as to a director; and
(c) A corporation may also indemnify and advance expenses to
an officer, employee, fiduciary, or agent who is not a director
to a greater extent, if not inconsistent with public policy, and
if provided for by its bylaws, general or specific action of its
board of directors or shareholders, or contract.
7-109-108. Insurance. A corporation may purchase and maintain
insurance on behalf of a person who is or was a director,
officer, employee, fiduciary, or agent of the corporation, or
who, while a director, officer, employee, fiduciary, or agent of
the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee,
fiduciary, or agent of another domestic or foreign corporation or
other person or of an employee benefit plan, against liability
asserted against or incurred by the person in that capacity or
arising from his or her status as a director, officer, employee,
fiduciary, or agent, whether or not the corporation would have
power to indemnify the person against the same liability under
section 7-109-102, 7-109-103, or 7-109-107. Any such insurance
may be procured from any insurance company designated by the
board of directors, whether such insurance company is formed
under the laws of this state or any other jurisdiction of the
United States or elsewhere, including any insurance company in
which the corporation has an equity or any other interest through
stock ownership or otherwise.
7-109-109. Limitation of indemnification of directors.
(1) A provision treating a corporation's indemnification of, or
advance of expenses to, directors that is contained in its
articles of incorporation or bylaws, in a resolution of its
shareholders or board of directors, or in a contract, except an
insurance policy, or otherwise, is valid only to the extent the
provision is not inconsistent with sections 7-109-101 to 7-109-
108. If the article of incorporation limit indemnification or
advance of expenses, indemnification and advance of expenses are
valid only to the extent not inconsistent with the articles of
incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's
power to pay or reimburse expenses incurred by a director in
connection with an appearance as a witness in a proceeding at a
time when he or she has not been made a named defendant or
respondent in the proceeding.
7-109-110. Notice to shareholder of indemnification of director.
If a corporation indemnifies or advances expenses to a director
under this article in connection with a proceeding by or in the
right of the corporation, the corporation shall give written
notice of the indemnification or advance to the shareholders with
or before the notice of the next shareholders' meeting. If the
next shareholder action is taken without a meeting at the
instigation of the board of directors, such notice shall be given
to the shareholders at or before the time the first shareholder
signs a writing consenting to such action.
* * *
Article IX, Section 1 of the Articles of Incorporation of the Company
provides, in pertinent part:
The Board of Directors of the corporation shall have the power to
indemnify any director, officer, employee or agent of the
corporation to the fullest extent permitted by the Colorado
Corporation Code as presently existing or as hereafter amended.
Article XII of the Articles of Incorporation of the Company provides,
in pertinent part:
To the fullest extent permitted by the Colorado Corporation Code
as the same exists or may hereafter be amended, a director of
this corporation shall not be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as
a director.
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses of the offering, all of which are to be borne
by the Company, are as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEC Filing Fee $ 9,636.66
Printing Expenses 5,000.00
Accounting Fees and Expenses 25,000.00
Legal Fees and Expenses 25,000.00
Blue Sky Fees and Expenses 5,000.00
Registrar and Transfer Agent Fee 5,000.00
Miscellaneous 25,363.34
------------
Total $ 100,000.00
</TABLE>
Item 26. Recent Sales of Unregistered Securities.
1. In August 1999, the Company issued 12,500,000 shares of common
stock in exchange for 12,500,000 shares of common stock of XML
Technologies, Inc., a Nevada corporation. The shares were issued to 23
persons, all of whom qualified as "accredited investors" within the meaning
of Rule 501(a) of Regulation D under the Securities Act. The securities,
which were taken for investment and subject to appropriate transfer
restrictions, were issued without registration under the Securities Act
pursuant to the exemptions set forth in Section 4(2) of the Securities Act
and Rule 506 of Regulation D thereunder.
2. In August 1999, we issued and sold a total of 2,330,000 units in
consideration of $1.00 per unit. The units consisted of one share of
common stock and one warrant exercisable until December 31, 2000 to
purchase an additional share of common stock at an exercise price of $4.00
per share. The shares were issued exclusively to investors who qualified
as "accredited investors" within the meaning of Rule 501(a) of Regulation D
under the Securities Act. The securities, which were taken for investment
and subject to appropriate transfer restrictions, were issued without
registration under the Securities Act pursuant to the exemptions set forth
in Section 4(2) of the Securities Act and Rule 506 of Regulation D
thereunder.
3. In September 1999, we issued warrants exercisable to purchase
200,000 shares of our common stock at an exercise price of $5.00 per share
to a consultant in consideration of consulting services. The warrants were
issued to one consultant who qualified as an "accredited investor" within
the meaning of Rule 501(a) of Regulation D under the Securities Act. The
securities, which were taken for investment and subject to appropriate
transfer restrictions, were issued without registration under the
Securities Act pursuant to the exemptions set forth in Section 4(2) of the
Securities Act.
4. In January 2000, we issued to one private investment fund 500,000
units in consideration of payment in the amount of $2.00 per unit. Each
unit consisted of two shares of our common stock, one warrant exercisable
for three years to purchase an additional share of common stock at $2.00
per share and an additional warrant exercisable for 60 days to purchase an
additional share of common stock at an exercise price of $.07 per share.
The units were issued to one institutional investor that qualified as an
"accredited investor" within the meaning of Rule 501(a) of Regulation D
under the Securities Act. The securities, which were taken for investment
and subject to appropriate transfer restrictions, were issued without
registration under the Securities Act pursuant to the exemptions set forth
in Section 4(2) of the Securities Act and Rule 506 of Regulation D
thereunder.
5. In February 2000, we sold to a private trust 500,000 units at a
price of $1.00 per unit. Each unit consisted of one share of common stock
and one warrant exercisable until December 31, 2000 to purchase an
additional share of common stock at an exercise price of $4.00 per share.
The investor qualified as an "accredited investor" within the meaning of
Rule 501(a) of Regulation D under the Securities Act. The securities,
which were taken for investment and subject to appropriate transfer
restrictions, were issued without registration under the Securities Act
pursuant to the exemptions set forth in Section 4(2) of the Securities Act
and Rule 506 of Regulation D thereunder.
6. In April 2000, we sold to two investors 150,000 units at a price
of $1.00 per unit. Each unit consisted of one share of our common stock
and one additional warrant exercisable until December 31, 2000 to purchase
an additional share of common stock at an exercise price of $4.00 per
share. The investors qualified as "accredited investors" within the
meaning of Rule 501(a) of Regulation D under the Securities Act. The
securities, which were taken for investment and subject to appropriate
transfer restrictions, were issued without registration under the
Securities Act pursuant to the exemptions set forth in Section 4(2) of the
Securities Act and Rule 506 of Regulation D thereunder.
7. In April 2000, we sold an aggregate of 92.5 units at a price of
$75,000 per unit. Each unit consisted of 50,000 shares of our common stock
and 50,000 warrants exercisable for 18 months to purchase an additional
share of common stock, initially at an exercise price of $4.00 per share
and $6.00 after six months. The units were sold to 50 investors, each of
which qualified as an "accredited investor" within the meaning of Rule
501(a) of Regulation D under the Securities Act. The securities, which
were taken for investment and subject to appropriate transfer restrictions,
were issued without registration under the Securities Act pursuant to the
exemptions set forth in Section 4(2) of the Securities Act and Rule 506 of
Regulation D thereunder.
8. In April 2000, we issued to an investment banker a unit purchase
option exercisable to purchase for 18 months 9.25 units at an exercise
price of $75,000 per unit. Each unit consists of 50,000 shares of our
common stock and 50,000 warrants. The investment banker qualified as an
"accredited investor" within the meaning of Rule 501(a) of Regulation D
under the Securities Act. The securities, which were taken for investment
and subject to appropriate transfer restrictions, were issued without
registration under the Securities Act pursuant to the exemptions set forth
in Section 4(2) of the Securities Act and Rule 506 of Regulation D
thereunder.
9. In March 2000, we issued 500,000 shares of our common stock in
consideration of $.07 per share pursuant to the exercise of the warrant
issued to the private investment fund as part of the units identified in
Paragraph 4 above. The shares were issued to one investor who qualified as
an "accredited investor" within the meaning of Rule 501(a) of Regulation D
under the Securities Act. The securities, which were taken for investment
and subject to appropriate transfer restrictions, were issued without
registration under the Securities Act pursuant to the exemptions set forth
in Section 4(2) of the Securities Act and Rule 506 of Regulation D
thereunder.
10. In April 2000, we sold to the same private trust identified in
Paragraph 5 above an additional 500,000 units at a price of $1.00 per unit.
Each unit consisted of one share of common stock and one warrant
exercisable until December 31, 2000 to purchase an additional share of
common stock at an exercise price of $4.00 per share. The investor
qualified as an "accredited investor" within the meaning of Rule 501(a) of
Regulation D under the Securities Act. The securities, which were taken
for investment and subject to appropriate transfer restrictions, were
issued without registration under the Securities Act pursuant to the
exemptions set forth in Section 4(2) of the Securities Act and Rule 506 of
Regulation D thereunder.
11. In June 2000 we issued to Mr. David Webber, one of our directors,
1,000,000 shares of our common stock in exchange for 60% of the issued and
outstanding shares of common stock of DataXchg, Inc. Mr. Webber qualified
as an "accredited investor" within the meaning of Rule 501(A) of Regulation
D under the Securities Act. The securities, which were taken for
investment and subject to appropriate transfer restrictions, were issued
without registration under the Securities Act pursuant to the exemptions
set forth in Section 4(2) of the Securities Act and Rule 506 of Regulation
D thereunder.
Item 27. Exhibits.
a. The following Exhibits are filed as part of this Registration
Statement pursuant to Item 601 of Regulation S-K:
Exhibit No. Title
----------- -----
* 3.1 Articles of Incorporation dated June 11, 1991
*** 3.2 Articles of Amendment to Articles of Incorporation
dated October 19, 1999
* 3.3 Bylaws
*** 4.1 Specimen Common Stock Certificate
*** 4.2 Specimen Warrant Certificate
*** 4.3 1999 Equity Incentive Plan
*** 5.0 Opinion of Neuman & Drennen, LLC
** 10.1 Agreement and Plan of Reorganization dated as of August
27, 1999
*** 10.2 Purchase Agreement between International Capital
Funding, Inc. and Jonathan Cohen dated September 1,
1999
*** 10.3 Registration Rights Agreement between International
Capital Funding, Inc. and Jonathan Cohen dated
September 1, 1999
*** 10.4 Joint Venture Technology Agreement between XML - Global
Technologies, Inc., Gnosis, Inc. and David R. R. Webber
dated as of November 18, 1999
*** 10.5 Consulting Agreement between Data Xchg, Inc. and David
Webber
*** 10.6 License Agreement between Data Xchg, Inc. and XML -
Global Technologies, Inc.
*** 10.7 Pre-Incorporation Agreement between XML - Global
Technologies, Inc. and David Webber
*** 10.8 Form of Lock-up and Vesting Agreement
*** 10.9 Securities Purchase Agreement between XML - Global
Technologies, Inc. and XML Fund, LLC dated January 13,
2000
*** 10.10 Securities Purchase Agreement between XML - Global
Technologies, Inc. and XML Fund, LLC dated April 5,
2000
*** 10.11 Securities Purchase Agreement between XML - Global
Technologies, Inc. and the Tomasovich Family Trust
*** 10.12 Securities Purchase Agreement between XML - Global
Technologies, Inc. and Tomasovich Family Trust
*** 10.13 Unit Purchase Option Agreement between XML - Global
Technologies, Inc. and Westminster Securities Corp.
*** 10.14 Commercial Lease with Radical Entertainment Ltd. dated
May 5, 1999
10.15 Software Development and License Agreement between
B2Binternet, Inc. and XML - Global Technologies, Inc.
dated June 12, 2000
10.16 Letter Agreement between PenOp, Limited and XML -
Global Technologies, Inc. dated June 1, 2000
**** 10.17 Agreement to Exchange Stock dated June 28, 2000 with
David Webber
*** 22.0 List of Subsidiaries
23.1 Consent of Neuman & Drennen, LLC
23.2 Consent of Moss Adams
_________________
* Incorporated by reference from the Registration Statement on Form 10-
SB filed with the Commission on November 18, 1997
** Incorporated by referenced from the Current Report on Form 8-K which
was filed with the Commission on September 8, 1999
*** Previously filed.
**** Incorporated by reference from the Current Report on Form 8-K which
was filed with the Commission on June 30, 2000
Item 28. Undertakings.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement;
(iii) Include any additional or changed material information on
the plan of distribution.
2. That, for determining liability under the Securities Act, to
treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be
the initial bona fide offering.
3. To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be available to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred and paid by
a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered hereby, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SB-2 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized. In the City of Vancouver, British Columbia,
Canada, on the 1st of August, 2000.
XML - GLOBAL TECHNOLOGIES, INC.,
a Colorado corporation
By: /s/ Duane Nickull
----------------------------------
Duane Nickull, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities with XML - Global Technologies, Inc. and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Peter Shandro Chairman of the Board, CEO, 8/1/00
----------------------- Director
Peter Shandro
/s/ Duane Nickull President, Director 8/1/00
-----------------------
Duane Nickull
/s/ Simon Anderson Chief Financial Officer, 8/1/00
----------------------- Director
Simon Anderson
/s/ David Webber Director 8/1/00
-----------------------
David Webber
