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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000.
CityXpress.com Corp.
----------------------------
(Name of business)
Florida 98-0232838
------------------------ -------------------------------
(State of incorporation) (IRS Employer Identification No.)
Suite 200-1727 West Broadway Vancouver, BC Canada V6J 4W
--------------------------------------------------------
(Address of principal executive offices)
Issuer's Telephone Number 604-638-3811 Issuer's Fax Number 604-638-3808
Securities registered under Section 12(g) of the Exchange Act:
Common Shares, Par Value of $0.01 per Share
-------------------------------------------
(Title of Class)
Name of each exchange on which registered:
NASD OTC BULLETIN BOARD
-----------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State issuer's revenues for its most recent fiscal year ended June 30, 2000 is
$133,120.
The aggregate market value of the voting common equity held by non-affiliates
computed at the average bid and asked price of common equity, as of September
13, 2000 based on 15,710,358 non-affiliate common shares is $4,398,900.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: September 29, 2000 23,008,098 common
shares
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X ].
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis explains trends in the Company's
financial condition and results of operations for the year ended June 30, 2000
and 1999. The consolidated financial statements and notes thereto included, as
part of the financial statements should be read in conjunction with these
discussions. All figures are presented in U.S. Currency, unless otherwise
stated.
The Company incurred a net loss for the twelve months ended June 30,
2000 of $2,387,437 as compared to a loss of $1,642,078 for the same period in
1999 an increase of $745,359. The Company recorded revenue of $133,120 for the
year ended June 30, 2000 compared to revenue of $11,710 for the year ended June
30, 1999, an increase of $121,410 over last year. Approximately 98% or $119,032
of this year's revenue increase resulted from our agreement with Lee
Enterprises.
The increase in net loss for the year ended June 30, 2000 of $745,359
is the result of increased expenses resulting primarily from the following
items:
- Increase in and amortization of eCommerce technology of $275,450 for
the year ended June 30, 2000 over the amortization expense recorded for
the same period ending June 30, 1999. The $472,200 of eCommerce
technology amortization expense in the year ended June 30, 2000
reflects a full year amortization of eCommerce technology, which
resulted from the acquisition of Xceedx Technologies on January 27,
1999.
- Increase in depreciation expense of $15,940 for the year ended June 30,
2000 over the same period ending June 30, 1999.
- Increase in advertising costs of $153,348 for the year ended June 30,
2000 over the same period ended June 30, 1999. This amount covers
advertising, promotion and marketing materials to promote the Company's
marketing and sales efforts. Approximately $142,500 of this expense is
a non-cash expense as the advertising and marketing services were
received in exchange for common stock and warrants based on the fair
value of the equity issued.
- Increased costs for licensing the Dun & Bradstreet database of business
information for Canada and the United States of $167,181. For the year
ended June 30, 2000 total cost was $215,287 and for the year ended June
30, 1999 total cost was $48,106.
- Stock-based compensation expense of $277,668 which relates to two
non-cash transactions during the year ended June 30, 2000. The first
component of this non-cash expense resulted from granting employee
options below the fair market value. This resulted in a non-cash
expense for the year of $228,924. The second component of this non-cash
expense relates to granting 541,600 warrants on June 13, 2000 to two
executive officers for guarantees to the Company, of a demand loan,
which resulted in a non-cash expense for the year, ended June 30, 2000
of $48,744.
- Operating loss for year ended June 30, 2000 was decreased by the
revenue increase of $121,410 recorded over the same period last year.
For the year ended June 30, 2000 revenue increased from $11,710 to
$133,120, an improvement of $121,410 or 1,036%. The revenue increase reflects
the launch of our products with the Lee newspaper properties. The main three
components of the $133,120 revenue is training fees of $64,903 or 49% of total
revenue, hosting fees of $52,196 or 39% of total revenue
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and set up fees of $10,060 or 8% of total revenue. These revenue amounts cover
the following categories:
- Training revenue of $64,903: pertains to training the media partners
sales force, web designers and support staff on the Company's products.
- Hosting revenue of $52,196: covers the revenues received from hosting
the various CityXpress products solutions such as department stores,
coupon flyers, business directories and eCommerce stores as well as the
revenues received for premier listings, coupons and banner ads.
- Set up revenue of $10,060: covers the revenue received for integration
of a special sections, business directory, or coupon flyer with a
newspapers web site.
The Company recorded cost of sales for the year ended June 30, 2000 of
$211,204 compared to $510 for last year. The cost of sales amount of $211,204
reflects the costs to support the revenue generated by media partners for the
period January to June 30, 2000 and consist of the following expense categories:
- Dun & Bradstreet database costs of $107,644.
- Client services and client support employee compensation expense of
$90,463.
- Miscellaneous supplies and travel costs of $13,097.
In the year ended June 30, 2000 the Company completed a rollout with
Lee Enterprises to eight of their daily newspapers. The Company also implemented
three special sections at three Lee newspaper properties by June 30, 2000. The
Company also implemented four specialty directory web sites for Lee relating to
the recreational vehicle market (RVs) for four state RV web sites by June 30,
2000. Lee Enterprises intends to implement 11 Special Sections at six Lee
newspaper sites by September 2000. Lee has indicated that it intends to continue
the rollout of the Company's products to its daily newspaper locations and
projects implementing 54 Special Sections by September 30, 2001. Since we began
implementation in January 2000 of our products at Lee newspapers revenue to June
30, 2000 is $119,032.
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 on-line presence in their
local communities. MediaNet plans to commence in November with one Radio Station
and to rollout additional stations throughout the next 12 months. No revenue has
been received from MediaNet under this agreement.
FINANCING AND LIQUIDITY
As of June 30, 2000, the Company had a cash balance of $38,963;
accounts and other receivables of $55,123; prepaid expenses of $159,557; a
working capital deficiency of $529,597 that included shareholders' loans of
$252,900; a demand installment loan of $167,213; and accounts payables and
accrued liabilities of $361,921.
As of January 14, 2000, the Company negotiated a restructuring of its
credit facilities whereby its 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. This was an increase of $99,651 over its
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previous loan amount of $70,036 at December 31, 1999. Unless the Bank makes
demand for repayment, the indebtedness is repaid in 180 regular monthly payments
of $1,563, each beginning March 15, 2000. The indebtedness is secured by all
personal property of the Company and is personally guaranteed by Mr. Phil Dubois
and Mr. Ken Bradley, officers of the Company. As of June 30, 2000, the loan
payable under this credit facility had a balance of $167,213.
During the period from January to June 2000, the Company received cash
totaling $252,900 as unsecured shareholder loans from two of its executive
officers. The shareholder loans have variable interest rates. The shareholder
loans have no repayment terms except for two loans that total $168,000 with
monthly repayments terms of $1,510 per month. See audited consolidated financial
statement Note 10 (a) and Item 12 Shareholder Loans.
In the year ended June 30, 2000, the Company raised in separate private
placements a total gross proceeds of $890,100 1,026,169 and issued 1,962,300
2,234,438 common shares.
On August 16, 2000, the Company entered into a Loan and Security
Agreement with its major customer, Lee Enterprises. Under this loan agreement,
the Company entered into two $125,000 promissory notes that bear interest at the
Wall Street Journal prime rate and mature in November 2000. As part of these
Promissory Note Agreements, the Company is obligated to grant to the note holder
2,223,285 common shares of the Company. The terms and exercise price of the
option are being negotiated. Also, in conjunction with these agreements the
Company has signed a Collateral License Agreement covering the Licensing of the
Company's software to Lee should default under the agreement occur. The Company
also signed a three party Escrow Agreement to escrow the CityXpress software
with a third party escrow agent. On September 19, 2000 another Promissory Note
Agreement was entered into for $40,000. The promissory note bears interest at
the Wall Street Journal prime rate and matures in December 2000. As of September
19, 2000 total cash of $290,000 has been received under this agreement.
Based on the expenditures for the year ended June 30, 2000, the Company
forecasts minimum annual operating cash requirements of approximately $1.5
million. The Company as of June 30, 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 Enterprises Inc.
will grow as Lee implements the Company's products at all of its daily
newspapers. Revenue generated from Lee for the period ended June 30, 2000
amounted to $119,032. Revenue from Lee over the next year is expected to
increase as Lee is planning to roll out 54 special sections across their daily
newspaper properties by September 30, 2001, resulting in increased revenue. In
April 2000, the Company 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 at their respective newspaper. The Company believes this
direct contact with each sales manager will
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ensure successful implementation of our products within Lee and maximize the
revenue potential at each Lee newspaper.
The Company also intends to develop additional products in conjunction
with its media partners that will leverage the sales relationship it has
developed with each media partner. These future products will allow the media
company's sales force to have additional products that they can sell to their
local markets. These additional products will result in incremental revenue from
their customer base for the media partner and the Company.
The Company expects to see revenue from MediaNet commencing in November
2000, which will increase as MediaNet implements our eCommerce products at its
affiliate Radio Station Network.
The Company believes it will have revenues from XpressCoupons in the
next three months as the Company establishes sales relationships with national
advertising companies, eCommerce vendors and consumer goods companies.
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 in the next two quarters.
The Company is presently seeking additional funding through private
offerings with individuals and institutions. The Company raised through private
placements a gross proceeds of $1,026,169 in the year ended June 30, 2000. The
Company believes it can continue to raise funds through private offerings and is
actively seeking other private investors.
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 June 30, 2001.
BUSINESS RISKS
The Company faces three significant business risks on a going forward
basis:
- 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
and its agreement with Lee may result in lower revenues than projected.
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 service
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existing media companies. If not, then the Company would have to assess
other market sectors it could penetrate successfully.
ITEM 7. FINANCIAL STATEMENTS
SELECTED FINANCIAL DATA
The consolidated operating results and financial position of the
Company are presented in the following tabulated format. The selected financial
data has been derived from our audited consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States ("US GAAP"). See Item 6 Management's Discussion and
Analysis or Plan of Operation. The following selected financial data is
qualified in its entirety by, and should be read in conjunction with, the
audited consolidated financial statements for the year ended June 30, 2000 and
June 30, 1999. All figures are presented in U.S. Currency, unless otherwise
stated.
<TABLE>
<CAPTION>
==============================================================================
FISCAL YEAR ENDED FISCAL YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999
------------------------------------------------------------------------------
$ $
==============================================================================
<S> <C> <C>
Revenue 133,120 11,710
Cost of sales 211,204 510
Gross profit (loss) (78,084) 11,200
Operating expenses 2,468,848 1,720,592
Net loss for the year (2,387,437) (1,642,078)
Net loss per common share (0.14) (0.12)
==============================================================================
<CAPTION>
==============================================================================
AS AT JUNE 30, 2000 AS AT JUNE 30, 1999
------------------------------------------------------------------------------
$ $
------------------------------------------------------------------------------
<S> <C> <C>
Cash 38,963 234,214
Total current assets 253,643 302,326
Total assets 1,068,525 1,621,829
Total current liabilities 783,240 367,047
Deferred tax liabilities 253,100 413,100
Stockholders' equity 32,185 841,682
Cash dividends 0 0
==============================================================================
</TABLE>
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ITEM 11. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information concerning the
number of shares of the Company's common stock owned beneficially as of June 30,
2000 by (i) each of the Company's directors; (ii) each of the Company's named
executive officers; and (iii) all directors and executive officers of the
Company as a group; and (iv) each person (including any group) known to us to
own more than five percent (5%) of any class of voting securities of the
Company. Unless otherwise indicated, the shareholders listed possess sole voting
and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF AMOUNT AND NATURE OF (8)
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENTAGE OF CLASS
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Shares Phil Dubois 2,,897,550(1)(7) 12.6%
Suite 200
1727 West Broadway
Vancouver, BC V6J 4W6
-------------------------------------------------------------------------------------------------------------
Common Shares Ken Bradley 2,863,050(2)(7) 12.5%
Suite 200
1727 West Broadway
Vancouver, BC V6J 4W6
-------------------------------------------------------------------------------------------------------------
Common Shares Brent Forgeron 1,130,000 4.9%
23-1243 Thurlow Street
Vancouver, BC V6E 1X4
-------------------------------------------------------------------------------------------------------------
Common Shares Ken Spencer 1,295,240(3)(7) 1,145,240 5.6% 5.0%
Suite 200
1727 West Broadway
Vancouver BC V6J 4W6
-------------------------------------------------------------------------------------------------------------
Common Shares Jim MacKay 250,000(4) 1.1%
Suite 200
1727 West Broadway
Vancouver BC V6J 4W6
-------------------------------------------------------------------------------------------------------------
Common Shares Bob Smart 50,000(5) 0.2%
Suite 200
1727 West Broadway
Vancouver BC V6J 4W6
-------------------------------------------------------------------------------------------------------------
Common Shares Ian Thomas 50,000(6) 0.2%
Suite 200
1727 West Broadway
Vancouver BC V6J 4W6
-------------------------------------------------------------------------------------------------------------
ALL OFFICERS AND DIRECTORS AS A GROUP (7) 8,535,840 8,385,840 37.1% 36.4%
-------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 65,500 shares of common stock owned by Mr. Dubois's wife. Also
includes 270,800 shares of common stock, which may be purchased
pursuant to warrants granted by the Company.
(2) Includes 31,000 shares of common stock owned by Mr. Bradley's wife.
Also includes 270,800 shares of common stock, which may be purchased
pursuant to warrants granted by the Company.
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(3) Includes 100,000 shares of common stock, which may be purchased
pursuant to options granted by the Company.
(4) Includes 250,000 shares of common stock, which may be purchased
pursuant to options granted by the Company.
(5) Includes 50,000 shares of common stock, which may be purchased pursuant
to options granted by the Company.
(6) Includes 50,000 shares of common stock which may be purchased pursuant
to options granted by the Company
(7) Certain of these shares are subject to transfer restrictions.
(8) The percentages in this table are based on a total number of
outstanding common shares equal to 23,008,098.
We are not aware of any arrangement that might result in a change in
control in the future.
ITEM 12. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.
GENERAL
Pursuant to a share purchase agreement dated January 7, 1999, the
shareholders of WelcomeTo sold their 100% interest in WelcomeTo to
CityXpress.com for 8,510,000 shares in CityXpress.com which represented a
controlling interest of approximately 62.5%. For accounting purposes this
transaction was considered the recapitization of WelcomeTo and the acquisition
of CityXpress.com by WelcomeTo. For a more detailed description of this
transaction see Item 1 "Description of Business - Corporate History".
On January 27, 1999, CityXpress.com acquired all of the issued and
outstanding shares of Xceedx by exchanging one share of CityXpress.com for each
share of common stock of Xceedx. As a result CityXpress.com issued 6,250,000
shares of common stock in a private offering under section 4(2) of the
Securities Act. For a more detailed description of this transaction see Item 1
"Description of Business - Corporate History".
The following table details the number of shares issued to the
following executive officers resulting from theses two purchase agreements:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
NAME ACQUISITION DATE COMPANY NUMBER OF SHARES
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Phil Dubois January 27, 2000 Xceedx Technologies 2,561,250
-------------------------------------------------------------------------------------------------------------
Ken Bradley January 27, 2000 Xceedx Technologies 2,561,250
-------------------------------------------------------------------------------------------------------------
Brent Forgeron January 7, 1999 WelcomeTo Search 1,130,000
-------------------------------------------------------------------------------------------------------------
</TABLE>
Except for (a) the issuance of shares of its stock to Mr. Forgeron
pursuant to the Acquisition Agreement between WelcomeTo Search Engine, Inc. and
the Company and the issuance of shares of its stock to Messrs. Dubois and
Bradley pursuant to the Acquisition Agreement between Xceedx Technologies, Inc.
and the Company, (b) the compensation described herein, and (c) advances to and
by certain officers to cover expenses, all of which were reimbursed or repaid
without interest, no director, executive officer, holder of ten percent of the
Company's outstanding common stock, or any relative or spouse of any of the
foregoing persons, or any relative of such spouse, who has the same house as
such person or who is a director or officer of any parent or subsidiary of the
Company, to the Company's knowledge, had a material interest either direct or
indirect, in any particular transaction or series of transactions to which the
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Company or any subsidiary was a party, during the two fiscal years ended June
30, 1999 and June 30, 2000.
SHAREHOLDER LOANS
During, the year ended June 30, 2000, the Company entered into
unsecured shareholder loan agreements for $252,900 with the Company's President
& CEO and Chief Operating Officer & CFO. As of June 30, 2000, the installment
and demand shareholder loans have various interest rates attached to them as
detailed below:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
NAME LOAN DESCRIPTION ANNUAL INTEREST OUTSTANDING
RATE AT JUNE 30, 2000 AMOUNT
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Phil Dubois Loan payable equal monthly Interest rate of 10% $ 84,300
installments of $755
-------------------------------------------------------------------------------------------------------------
Phil Dubois Loan payable on demand CIBC Visa interest rate of 19.5% $ 16,860
-------------------------------------------------------------------------------------------------------------
Phil Dubois Loan payable on demand Scotia McLeod interest rate of $ 16,860
9.5%
-------------------------------------------------------------------------------------------------------------
TOTAL
PHIL DUBOIS $118,020
============================================================================================================
Ken Bradley Loan payable equal monthly Interest rate of 10% $ 84,300
installments of $755
-------------------------------------------------------------------------------------------------------------
Ken Bradley Loan payable on demand Interest rate of 4.5% $ 33,720
-------------------------------------------------------------------------------------------------------------
Ken Bradley Loan payable on demand TD Bank select line interest rate $ 16,860
of 10.25%
-------------------------------------------------------------------------------------------------------------
TOTAL
KEN BRADLEY $134,880
=============================================================================================================
TOTAL SHAREHOLDER LOANS $252,900
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</TABLE>
EXECUTIVE OFFICER WARRANTS
On June 13, 2000, the Company granted 541,600 warrants to two of the
Company's executive officers as consideration for their guarantee of the demand
installment loan with the CIBC bank and for two shareholder loans totaling
$168,600 which was obtained by securing a mortgage on personal property owned by
the two executive officers. The details of the warrant grant are listed below as
of June 30, 2000:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
NAME WARRANT GRANT DATE WARRANT PRICE WARRANT GRANT WARRANT EXPIRY
$US AMOUNT DATE
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Phil Dubois June 13, 2000 $0.25 270,800 June 13, 2002
-------------------------------------------------------------------------------------------------------------
Ken Bradley June 13, 2000 $0.25 270,800 June 13, 2002
-------------------------------------------------------------------------------------------------------------
TOTAL 541,600
-------------------------------------------------------------------------------------------------------------
</TABLE>
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ITEM 13. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
During the year ended June 30, 2000, Form 3s for Mr. Dubois Mr.
Bradley, Mr., Forgeron, Mr. MacKay, Mr. Spencer, Mr. Smart and Mr. Thomas were
not timely filed.
ITEM 14. REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the last quarter of the
Company's year ended June 30, 2000.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused the report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CityXpress.com Corp.
By /s/ Ken Bradley
--------------------------------------
Ken Bradley
Chief Operating Officer & CFO
Date October 23, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
the report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Phil Dubois Director, President and CEO October 20, 2000
-----------------
/s/ Ken Bradley Director, Chief Operating Officer & CFO October 20, 2000
-----------------
Director (Ken Spencer) October 20, 2000
/s/ Bob Smart Director October 20, 2000
-----------------
/s/ Ian Thomas Director October 20, 2000
-----------------
</TABLE>
37
