<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended March 31, 2000.
CityXpress.com Corp.
----------------------------
Name of business
Florida N/A
---------------------------- -------------------------------
State of Incorporation IRS Employer Identification No.
Suite 200 1727 West Broadway Vancouver, BC Canada V6J 4W
--------------------------------------------------------
Phone Number 604-638-3811 Fax Number 604-638-3808
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: June 13, 2000 22,322,858 common
shares
Transitional Small Business Disclosure Format (check one) Yes [X] No [ ]
================================================================================
<PAGE> 2
PART I-FINANCIAL INFORMATION
ITEM 1. THIRD QUARTER FINANCIAL STATEMENTS ENDING MARCH 31, 2000
Consolidated unaudited financial statements of the Company for the
three months ended March 31, 2000 and March 31, 1999 and the nine months ended
March 31, 2000 and March 31, 1999. All figures are presented in U.S. Currency,
unless otherwise stated.
<PAGE> 3
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
[See Nature of Business and Liquidity - Note 1]
<TABLE>
<CAPTION>
(expressed in U.S. dollars)
MARCH 31 JUNE 30
2000 1999
$ $
-----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash 17,166 234,214
Accounts and other receivables 57,938 29,350
Prepaid expenses and deposits 119,100 38,762
-----------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 194,204 302,326
-----------------------------------------------------------------------------------------
Property and equipment, net 74,024 99,769
eCommerce technology, net [note 2] 865,584 1,219,734
-----------------------------------------------------------------------------------------
1,133,812 1,621,829
=========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Bank indebtedness 10,665 7,999
Accounts payable and accrued liabilities 275,292 280,154
Deferred revenue 2,819 6,190
Shareholders' loans 51,550 --
Current portion of loan payable [note 3] 6,186 72,704
-----------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 346,512 367,047
-----------------------------------------------------------------------------------------
Loan payable [note 3] 159,891 --
Deferred tax liability 293,100 413,100
-----------------------------------------------------------------------------------------
TOTAL LIABILITIES 799,503 780,147
-----------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock [note 4]
Common stock, $0.001 par value, 50,000,000 13,800 11,383
authorized, issued and outstanding - 22,310,391 at March 31,
2000 and 19,893,333 at June 30, 1999
Common stock to be issued - 12,467 at March 31, 2000
and 627,860 at June 30, 1999 9,570 266,790
Additional paid in capital 4,569,594 3,282,029
Other accumulated comprehensive income 28,212 19,625
Deficit accumulated during the development stage (4,286,867) (2,738,145)
-----------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 334,309 841,682
-----------------------------------------------------------------------------------------
1,133,812 1,621,829
=========================================================================================
</TABLE>
See accompanying notes
<PAGE> 4
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
PERIOD FROM
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS OCTOBER 27, 1997
ENDED ENDED ENDED ENDED (INCEPTION) TO
MARCH 31 MARCH 31 MARCH 31 MARCH 31 MARCH 31
2000 1999 2000 1999 2000
$ $ $ $ $
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE 53,177 4,853 63,580 4,853 75,290
---------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Sales and marketing 34,044 42,598 171,650 113,770 330,439
Product development and technology 222,543 154,097 711,253 287,671 1,293,848
Finance and administration 162,708 449,774 505,994 617,452 2,388,968
---------------------------------------------------------------------------------------------------------------------------------
419,295 646,469 1,388,897 1,018,893 4,013,255
---------------------------------------------------------------------------------------------------------------------------------
Net loss from operations (366,118) (641,616) (1,325,317) (1,014,040) (3,937,965)
Amortization of eCommerce technology (118,050) (78,700) (354,150) (78,700) (550,900)
Interest and miscellaneous income 10,331 1,826 10,745 1,826 13,098
Deferred income tax recovery 40,000 27,500 120,000 27,500 188,900
---------------------------------------------------------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD (433,837) (690,990) (1,548,722) (1,063,414) (4,286,867)
=================================================================================================================================
COMPREHENSIVE LOSS
Net loss for the period (433,837) (690,990) (1,548,722) (1,063,414) (4,286,867)
Foreign currency translation 7,833 (9,159) 8,587 (9,159) 28,212
------------------------------------------------------------------------------------------------ --------------------------------
COMPREHENSIVE LOSS FOR THE PERIOD (426,004) (700,149) (1,540,135) (1,072,573) (4,258,655)
=================================================================================================================================
Basic and diluted loss per share [note 4(b)] (0.02) (0.04) (0.07) (0.14)
=================================================================================================================================
</TABLE>
See accompanying notes
<PAGE> 5
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
COMMON COMMON COMMON OTHER
STOCK STOCK ISSUED STOCK TO ADDITIONAL ACCUMULATED
COMMON TO BE AND BE PAID IN COMPREHENSIVE
STOCK ISSUED OUTSTANDING ISSUED CAPITAL LOSS
$ $ $ $ $ $
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Deemed outstanding as of June 30, 1998 800 -- -- -- 276,908 25,519
Deemed common shares issued for services
rendered in prior year 4,739,200 -- -- -- 863,718 --
Deemed common shares issued for services
rendered in current year 1,337,248 -- -- -- 253,936 --
Deemed common shares issued for cash
pursuant to warrants exercised 237,667 -- -- -- 40,337 --
Deemed common shares issued to charitable
organizations 80,000 -- -- -- 15,207 --
Prior year's subscription shares issued in
current year 1,516,380 -- -- -- -- --
Deemed common shares issued pursuant to
private placement 598,705 -- -- -- 175,805 --
Issue costs -- -- -- -- (32,487) --
----------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of January 7, 1999 8,510,000 -- -- -- 1,593,424 25,519
Acquisition of CityXpress.com by WelcomeTo 5,100,000 -- 5,100 -- 719,889 --
Acquisition of Xceedx 6,250,000 -- 6,250 -- 868,750 --
Shares to be issued for services rendered -- 450,000 -- -- 225,000 --
Finders fees acquisition costs -- -- -- -- (225,000) --
Shares issued pursuant to private
placement 33,333 -- 33 -- 99,996 --
Net loss for the period -- -- -- -- -- --
Foreign currency translation -- -- -- -- -- (5,894)
Shares to be issued -- 177,860 -- 266,790 -- --
----------------------------------------------------------------------------------------------------------------------------------
Total shares issued and to be issued as of
June 30, 1999 19,893,333 627,860 11,383 266,790 3,282,029 19,625
Shares issued pursuant to share
subscriptions [note 4(a)(i)] 177,860 (177,860) 178 (266,790) 266,612 --
Shares issued for services [note 4(a)(i)] 450,000 (450,000) 450 -- (450) --
Shares issued pursuant to private
placement [note 4(a)(ii)] 145,260 -- 145 -- 217,745 --
Shares issued pursuant to private
placement [note 4(a)(iii)] 46,666 -- 47 -- 69,953 --
Shares issued pursuant to private
placement [note 4(a)(iv)] 52,855 -- 53 -- 66,016 --
Shares issued pursuant to private
placement [note 4(a)(vi)] 172,617 -- 172 -- (172) --
Shares issued pursuant to private
placement [note 4(a)(v)] 733,800 -- 734 -- 366,166 --
Shares issued pursuant to private
placement [note 4(a)(vii)] 638,000 -- 638 -- 318,362 --
Net loss for the period -- -- -- -- -- --
Foreign currency translation -- -- -- -- -- 8,587
Shares to be issued [note 4(a)(v)] -- 12,467 -- 9,570 -- --
Issue costs -- -- -- -- (16,667) --
----------------------------------------------------------------------------------------------------------------------------------
Total shares issued and to be issued as of
March 31, 2000 22,310,391 12,467 13,380 9,570 4,569,594 28,212
==================================================================================================================================
<CAPTION>
ACCUMULATED TOTAL
DEVELOPMENT STOCKHOLDERS'
STAGE EQUITY
DEFICIT (DEFICIT)
$ $
---------------------------------------------------------------------------
<S> <C> <C>
Deemed outstanding as of June 30, 1998 (1,096,067) (793,640)
Deemed common shares issued for services
rendered in prior year -- 863,718
Deemed common shares issued for services
rendered in current year -- 253,936
Deemed common shares issued for cash
pursuant to warrants exercised -- 40,337
Deemed common shares issued to charitable
organizations -- 15,207
Prior year's subscription shares issued in
current year -- --
Deemed common shares issued pursuant to
private placement -- 175,805
Issue costs -- (32,487)
---------------------------------------------------------------------------
Deemed outstanding as of January 7, 1999 (1,096,067) 522,876
Acquisition of CityXpress.com by WelcomeTo -- 724,989
Acquisition of Xceedx -- 875,000
Shares to be issued for services rendered -- --
Finders fees acquisition costs -- --
Shares issued pursuant to private
placement -- 99,999
Net loss for the period (1,642,078) (1,642,078)
Foreign currency translation -- (5,984)
Shares to be issued -- 266,790
---------------------------------------------------------------------------
Total shares issued and to be issued as of
June 30, 1999 (2,738,145) 841,682
Shares issued pursuant to share
subscriptions [note 4(a)(i)] -- --
Shares issued for services [note 4(a)(i)] -- --
Shares issued pursuant to private
placement [note 4(a)(ii)] -- 217,890
Shares issued pursuant to private
placement [note 4(a)(iii)] -- 70,000
Shares issued pursuant to private
placement [note 4(a)(iv)] -- 66,069
Shares issued pursuant to private
placement [note 4(a)(v)] -- --
Shares issued pursuant to private
placement [note 4(a)(vi)] -- 366,900
Shares issued pursuant to private
placement [note 4(a)(vii)] -- 319,000
Net loss for the period (1,548,722) (1,548,722)
Foreign currency translation -- 8,587
Shares to be issued [note 4(a)(ii)] -- 9,570
Issue costs -- (16,667)
---------------------------------------------------------------------------
Total shares issued and to be issued as of
March 31, 2000 94,286,867) 334,309
===========================================================================
</TABLE>
See accompanying notes
<PAGE> 6
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS NINE MONTHS OCTOBER 27, 1997
ENDED ENDED (INCEPTION) TO
MARCH 31, MARCH 31, MARCH 31,
2000 1999 2000
$ $ $
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Loss for the period (1,548,722) (1,063,414) (4,286,867)
Adjustments to reconcile net loss to net cash used
in operating activities
Amortization 354,150 78,700 550,900
Depreciation 34,180 18,276 63,344
Gain on disposal of assets -- -- (28)
Shares issued for services -- 269,143 299,664
Shares to be issued for services 9,570 -- 9,570
Write-down of investment -- -- 3,406
Deferred income tax recovery (120,000) (27,500) (188,900)
Changes in operating assets and liabilities
Accounts and other receivable (28,588) 2,287 (44,713)
Prepaid expenses and deposits (80,338) (11,392) (119,135)
Accounts payable and accrued liabilities (4,862) 8,956 1,113,100
Deferred revenue (3,371) 1,437 2,819
--------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (1,387,981) (723,507) (2,596,840)
--------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Loan advance 169,687 -- 169,687
Repayment of loan payable (76,314) (1,330) (78,976)
Shareholders loans 51,550 -- 51,550
Proceeds from stock issued and to be issued, net 1,023,192 143,318 1,782,019
Proceeds from exercise of warrants -- 40,337 40,337
Borrowings under bank indebtedness 2,666 2,093 10,665
--------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,170,781 184,418 1,975,282
--------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds on disposition of property and equipment -- -- 1,221
Acquisition of property and equipment (8,435) (78,872) (131,272)
Cash acquired on acquisition of subsidiaries -- 763,500 763,500
--------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (8,435) 684,628 633,449
--------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash 8,587 (3,839) 5,275
NET INCREASE (DECREASE) IN CASH DURING THE PERIOD (217,048) 141,700 17,166
Cash, beginning of period 234,214 60,778 --
--------------------------------------------------------------------------------------------------
CASH, END OF PERIOD 17,166 202,478 17,166
==================================================================================================
</TABLE>
See accompanying notes
<PAGE> 7
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(expressed in U.S. dollars)
Information as at March 31, 2000 and for the nine months ended March 31, 2000
and 1999 is unaudited.
1. NATURE OF BUSINESS AND LIQUIDITY
These consolidated financial statements are the continuing financial statements
of WelcomeTo Search Engine ("WelcomeTo") (a development stage enterprise), a
British Columbia corporation which was incorporated on October 27, 1997. On
January 7, 1999, WelcomeTo acquired the net assets of CityXpress.com Corp.
(formerly Wicked Wings of Buffalo) ("CityXpress.com"), a United States
non-operating company traded on the NASDAQ OTC Bulletin Board. After the
acquisition, the accounting entity continued under the name of CityXpress.com.
CityXpress.com Corp (the Company) is a software developer and Internet
publisher.
The Company's consolidated financial statements for the period ended March 31,
2000 have been prepared on a going concern basis which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. The Company incurred a loss of $1,548,722 for the
nine months ended March 31, 2000 and has a net working capital deficit of
$152,308 at March 31, 2000 ($64,721 at June 30, 1999). The Company is still a
development stage enterprise and is expected to incur losses and expenditures
prior to the commencement of full-scale operations in the future. The ability of
the Company to continue as a going concern is dependent upon its ability to
achieve profitable operations and to obtain additional capital. The outcome of
these matters cannot be predicted at this time. No assurances can be given that
the Company will be successful in raising sufficient additional capital.
Further, there can be no assurance, assuming the Company successfully raises
additional funds, that the Company will achieve positive cash flow. If the
Company is unable to obtain adequate additional financing, management will be
required to sharply curtail the Company's operating expenses. These financial
statements do not include any adjustments to the specific amounts and
classifications of assets and liabilities, which might be necessary should the
Company be unable to continue in business.
These financial statements have been prepared by management in accordance with
generally accepted accounting principles in the United States and in the opinion
of management reflect all adjustments, which consist only of normal and
recurring adjustments necessary to present fairly the financial position and
results of operations and cash flows.
These financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended June 30,
1999.
2. ECOMMERCE TECHNOLOGY
eCommerce technology arose as part of the acquisition of Xceedx Technologies
Inc. and is being amortized on a straight-line basis over its useful life, which
is 36 months.
<PAGE> 8
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(expressed in U.S. dollars)
Information as at March 31, 2000 and for the nine months ended March 31, 2000
and 1999 is unaudited.
3. LOAN PAYABLE
On January 14, 2000, the Company restructured its credit facility with the bank.
In addition the existing loan was refinanced into a Demand instalment loan
pursuant to which the Company received $169,687 ($250,000 Cdn) with terms
consisting of principal and interest payments of $1,573 ($2,318 Cdn) per month,
starting March 15, 2000.
4. CAPITAL STOCK
[A] ISSUANCE OF SHARES
[i] In July 1999, the company issued 177,860 common shares
pursuant to share subscriptions of $266,790 received prior to
June 30, 1999. In addition, the Company issued 450,000 common
shares in respect of finders' fees incurred prior to June 30,
1999.
[ii] In July and August 1999, the Company issued 145,260 common
shares for cash $217,890. Each common share has one attached
warrant which entitles the holder to acquire one common share
for an exercise price of $1.50 during the first year and $2.00
during the second year. The warrants expire July 14, 2001 to
August 15, 2001.
[iii] In September 1999, the Company received a subscription for
46,666 common shares for $70,000. The shares were issued in
December 1999. Pursuant to the subscription agreement, if at
any time until March 31, 2000 the Company issues common shares
at a share price of less than $1.50 per share, then additional
common shares will be issued to such investors, such that the
effective issue price of the common shares issued is equal to
the lower price paid [see note 4(a)(vi)]. Each common share
has one attached warrant which entitles the holder to acquire
one common share for an exercise price of $1.50 during the
first year and $2.00 during the second year. [see note
4(a)(vi)]. The warrants expire September 30, 2001.
[iv] In October 1999, the Company issued 52,855 common shares for
$66,069. Pursuant to the subscription agreement , if at any
time until March 31, 2000 the Company issues common shares at
a share price of less than $1.25 per share, then additional
common shares will be issued to such investors, such that the
effective issue price of the common shares issued is equal to
the lower price paid [see note 4(a)(vi)]. Each common share
has one attached warrant which entitles the holder to acquire
one common share for an exercise price of $1.25 during the
first year and $2.00 during the second year. [see note
4(a)(vi)]. The warrants expire October 13, 2001.
[v] In September and December 1999, the Company received
subscriptions for 733,800 common shares for $366,900. These
shares were issued in January 31, 2000. In addition, in
December 1999 and March 2000, the Company received
subscriptions for 12,467 common shares for $9,570. These
shares were issued after March 31, 2000.
4. CAPITAL STOCK (CONT'D)
<PAGE> 9
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(expressed in U.S. dollars)
Information as at March 31, 2000 and for the nine months ended March 31, 2000
and 1999 is unaudited.
With respect to the subscriptions for the 733,800 common shares,
each common share has one attached warrant which entitles the
holder to acquire one common share for an exercise price of $0.50
during the first year and $0.75 during the second year. The
warrants expire September 30, 2001 to December 10, 2001.
[vi] Pursuant to the agreements referred to in notes 4(iii) and (iv)
above, the Company is required to issue an additional 172,617
common shares for no additional consideration. These shares were
issued in January 31, 2000. In addition, the number of warrants
granted was increased by 93,334 to 140,000 and by 79,283 to
132,138, respectively, and the exercise price decreased to $0.50
during the first year and $0.75 during the second year.
[vii] In January 2000, the Company received subscriptions for 638,000
common shares for $319,000. These shares were issued in March
2000. Each share has one attached warrant which entitles the
holder to acquire one common share for an exercise price of $0.50
during the first year and $0.75 during the second year.
[B] BASIC AND DILUTED LOSS PER SHARE
The basic loss per share figures are calculated using the weighted average
number of common shares outstanding. Diluted loss per share is computed giving
effect to all dilutive potential common shares that were outstanding during the
period. For the periods ended March 31, 2000 and 1999, there were no dilutive
potential common shares outstanding.
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
MARCH 31 MARCH 31 MARCH 31 MARCH 31
2000 1999 2000 1999
$ $ $ $
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net loss for the period (433,837) (690,990) (1,548,722) (1,063,414)
Weighted average number of common
shares used in computation 21,201,148 17,776,667 20,683,028 7,344,289
Basic and diluted loss per common share (0.02) (0.04) (0.07) (0.14)
</TABLE>
4. CAPITAL STOCK (CONT'D)
<PAGE> 10
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(expressed in U.S. dollars)
Information as at March 31, 2000 and for the nine months ended March 31, 2000
and 1999 is unaudited.
[C] STOCK OPTIONS
At the Annual General Meeting on August 25, 1999, shareholders approved a stock
option plan which reserved the granting of 2,000,000 options under the plan. The
following are outstanding options issued to acquire common shares.
<TABLE>
<CAPTION>
NO. OF COMMON EXERCISE PRICE
SHARES ISSUABLE $ EXERCISABLE DATES DATE OF EXPIRY
--------------- -------------- ----------------- --------------
<S> <C> <C> <C>
188,333 1.50 July 13, 2000 July 13, 2003
188,333 1.50 July 13, 2001 July 13, 2003
188,334 1.50 July 13, 2002 July 13, 2003
-------
565,000
=======
</TABLE>
The stock options are exercisable over a four-year period ending July
13, 2003 at an exercise price of $1.50 per common share. The options
are exercisable on a cumulative basis at 1/3 per year commencing July
13, 2000.
[D] WARRANTS
At March 31, 2000, the Company has the following warrants outstanding, all of
which expire two years after the grant date.
<TABLE>
<CAPTION>
SHARES TO BE WARRANT GRANT WARRANT PRICE WARRANT PRICE
ISSUED DATE DURING YEAR 1 DURING YEAR 2
------------ ------------- ------------- -------------
<S> <C> <C> <C>
177,860 June 10, 1999 $1.50 $2.00
45,260 July 14, 1999 $1.50 $2.00
100,000 August 15, 1999 $1.50 $2.00
140,000 September 30, 1999 $0.50 $0.75
132,138 October 13, 1999 $0.50 $0.75
325,800 September 30, 1999 $0.50 $0.75
408,000 December 10, 1999 $0.50 $0.75
138,000 January 18, 2000 $0.50 $0.75
500,000 January 31, 2000 $0.50 $0.75
---------
1,967,058
=========
</TABLE>
<PAGE> 11
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(expressed in U.S. dollars)
Information as at March 31, 2000 and for the nine months ended March 31, 2000
and 1999 is unaudited.
5. RECENT PRONOUNCEMENT
The Securities and Exchange Commission has issued a Staff Accounting Bulletin
(SAB) No.101, Revenue Recognition in Financial Statements will be effective for
the Company's June 30, 2000 year end. The Company has not determined the impact,
if any, of this pronouncement on its consolidated financial statements.
<PAGE> 12
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company incurred a net loss for the nine months ended March 31,
2000 of $1,548,722 as compared to a loss of $1,063,414 for the same period in
1999 an increase of $485,308. The Company recorded revenue of $53,177 in the
quarter ended March 31, 2000 resulting in nine month revenues of $63,580 an
increase of $58,727 over the same nine month period last year. This revenue
increase consisted primarily from our media partner Lee Enterprises. The
increase in net loss for the nine months ended March 31, 2000 of $485,308 is the
result of increased expenses resulting primarily from the following items:
- Increase in depreciation and amortization of $291,354 over the same
nine month period ending March 31, 2000 and March 31, 1999.
- Cost of the listing information for the database of $127,502 for the
nine months ended March 31, 2000. This cost was incurred for the first
time in the nine months ended March 31, 2000.
- Increase in promotion and marketing materials of $82,199 over the same
nine-month period ending March 31, 2000 and March 31, 1999.
- Increase in general office expenses caused by the increase in employee
count of $45,000 over the same nine-month period ending March 31, 2000
and March 31, 1999.
- Operating expenses reduced by the revenue increase of $58,727 recorded
in the quarter ended March 31, 2000
In the nine months ended March 31, 2000 the Company finalized the
development of its back office administration tool for the eCommerce business
portal and completed the development of XpressCoupons and XpressFlyers. It also
developed the Newspaper Special Section concept. This is a combination of all
our products to duplicate the newspaper special section in an Internet format.
Special Sections will be implemented at 11 Lee sites in the next 6 months for a
total of 33 special sections by September 2000. We also began the implementation
of three regional business portal sites for Lee. Lee portal sites accounted for
$49,289 of revenue in March 2000.
The Company announced on June 15, 2000 a media agreement with MediaNet
Communication Corp. headquartered in Toronto Canada to offer eCommerce solutions
to MediaNet affiliate Radio Stations across Canada. MediaNet plans to offer to
79 affiliate Radio Stations the ability to build an online presence in their
local communities. MediaNet rollout plans commence in August with two Radio
Stations and will increase throughout the next 12 months.
FINANCING AND LIQUIDITY
As of March 31, 2000, the Company had a cash balance of $17,166, a
working capital deficiency of $152,308 that included shareholders' loans of
$51,550 and accounts payables and accrued liabilities of $275,292.
As of January 14, 2000, the Company increased its loan payable by
$99,651 from $70,036 at December 31, 1999 to $169,687 at March 31, 2000 and
negotiated a restructuring of its credit facilities so that the demand loan was
transferred from its subsidiary Xceedx Technologies to the Company. The Company
obtained a Demand Installment Loan of $169,687 ($250,000 Cdn.) from the Canadian
Imperial Bank of Commerce. Borrowings by the Company bear interest at the rate
of the Bank's Prime Rate plus 1% per year. Unless the Bank makes demand for
repayment, the indebtedness is repaid in 180 regular monthly payments of $1,573
($2,318 Cdn.) each beginning March 15, 2000. The indebtedness is secured by all
personal
<PAGE> 13
property of the Company and is personally guaranteed by Mr. Phil Dubois and Mr.
Ken Bradley, officers of the Company. As of March 31, 2000, the loan payable
under this credit facility had a balance of $166,077.
In the nine months ended March 31, 2000, the Company raised in twelve
separate private placements a total of $1,039,859, representing an additional
1,789,198 common shares all of which were issued by March 31,2000. The Company
finalized two private placements in May 2000 for $171,310 for 685,240 shares.
The Company also converted consulting services worth $9,570 to 12,467
common shares in March 2000.
Based on the expenditures for the nine months ended March 31, 2000, the
Company forecasts minimum annual operating cash requirements of approximately
$1.5 million. The Company as of March 31, 2000 does not have sufficient
financial resources to maintain current operations or to undertake all of its
planned development programs and capital equipment purchases for the next 12
months. Revenue generated under agreements with additional media companies will
help to offset the Company's cash flow shortfall.
PLAN OF OPERATION
The Company is dependent on obtaining new financing for ongoing
operation, capital expenditures and working capital. There is no assurance that
such financing will be available when required by or under terms favorable to
the Company.
The Company anticipates that media revenue from Lee will grow as they
implement additional portal sites at their newspapers. Revenue for the period
ended March 31, 2000 amounted to $53,177. Revenue for the fourth quarter from
Lee is expected to exceed the previous period revenue as additional portal sites
are implemented. Lee is committed to implementing 33 Special Sections by
September 30, 2000, which will result in additional incremental revenue. The
Company in April 2000 implemented a business development program with Lee that
will include a CityXpress.com business development employee working with each
Lee Newspaper sales manager to maximize the Internet revenue opportunities using
CityXpress.com products. The Company believes this direct contact with each
sales manager will ensure successful implementation of our products within Lee
and maximize the revenue potential at each Lee Newspaper.
The Company expects to see revenue from MediaNet commencing in August
2000 which will increase as they implement our eCommerce products at their
affiliate Radio Station Network.
The Company is actively calling on other media companies regarding its
product offerings. Each additional media company agreement will generate
additional revenue and cash flow. Management is confident it will be successful
in closing additional media agreements.
The Company has made application to increase its demand loan to
$339,374 ($500,000 Cdn.). If approved this increase would double the existing
credit under the demand loan with the Canadian Imperial Bank of Commerce.
<PAGE> 14
The Company is presently seeking additional funding through private
offerings with individuals and institutions. The Company raised through private
placements $1,039,859 in the nine months ended March 31, 2000. The Company
believes it can continue to raise funds through private offerings. The Company
has just finalized two private placements for $171,310 and is actively seeking
other private investors in the range of $100,000 to $500,000 to increase its
cash position.
The management of the Company believes that it will generate sufficient
cash through private offerings, customer revenue and operating loans to fund its
operations for the 12-month period ending March 31, 2001.
BUSINESS RISKS
The Company faces three significant business risks on a going forward
bases:
- Raising the equity financing needed to operate the Company at its
current operating level and providing the operating funds, capital
additions and repayment of liabilities in a timely manner. If the
Company is unsuccessful in this regard it will be required to reduce
operating expenditures to a level that will be in line with cash flows.
- The Company may be unsuccessful in obtaining additional media partners
or the Lee agreement may be unsuccessful in generating revenues. In
either case, the Company would have to re-evaluate its business model
to determine if there was another partnership arrangement that would
provide the economic, cash flow or business advantages it currently
believes will be provided by media companies. The Company at this time
cannot assess whether it could find other business partners and
negotiate favorable terms that would provide the necessary revenue and
cash flow required by the Company.
- A major competitor or new company could dominate the market sector
being targeted by the Company. The Company would then have to assess
the impact of the situation. The regional eCommerce market sector is
large and there may be room for two suppliers to media companies. If
not, then the Company would have to assess what other market sector it
could successfully.
<PAGE> 15
PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings
ITEM 2. CHANGES IN SECURITIES
There has been no change in securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There have been no defaults by the Company regarding any senior
securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no submissions by the Company regarding a vote of
security holders.
ITEM 5. OTHER INFORMATION
The Company's Form 10 was declared effective by the Securities and
Exchange Commission on May 19, 2000.
ITEM 6. EXHIBITS AND REPORTS
None.
In accordance with the requirements of the Exchange Act,
the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
CityXpress.com Corp.
Date July 3, 2000 /s/ Ken Bradley
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Signature
Ken Bradley
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Print Name
Chief Operating Officer & CFO
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Title
