U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): October 1, 1999
iEXALT, INC.
(Exact Name of Registrant as Specified in Charter)
NEVADA
(State or Other Jurisdiction of
Incorporation or Organization
2000-09322 75-1667097
(Commission File Number) (I.R.S. Employer Identification No.)
4301 WINDFERN, HOUSTON, TEXAS 77041
(Address of principal executive offices including zip code)
(281) 600-4000
(Registrant's telephone number, including area code)
SUNBELT EXPLORATION, INC.
(Former name or former address, if changed since last report)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Inapplicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective October 1, 1999, iExalt, Inc., a Nevada corporation ("Company"),
acquired, in an arms-length transaction, all of the issued and outstanding stock
of Wordcross Enterprises, Inc. d/b/a Christian Happenings ("Wordcross"), an Ohio
corporation in the business of publishing and events advertising. As
consideration for the acquisition, the Company issued an aggregate 850,000
shares of authorized but unissued common stock to the two shareholders of
Wordcross. In addition, the shareholders of Wordcross were granted stock options
to purchase an aggregate 250,000 shares of Company common stock at an exercise
price of $1.80 per share. The stock options vest in the amount of 50,000 shares
per year on the anniversary date of the agreement and are subject to the
shareholders remaining in the employ of the Company. The term of the stock
options are three years from the date of vesting. Both of the shareholders have
entered into five year employment agreements with the Company. The transaction
was accounted for as a purchase. The acquisition of Wordcross was deemed
"significant," accordingly, separate historical and pro forma financial
statements are filed herewith.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Inapplicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Inapplicable.
ITEM 5. OTHER EVENTS
Inapplicable.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTOR
Inapplicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
The appropriate financial statements are filed herewith as Annex A.
(b) Pro Forma Financial Information.
The appropriate pro forma financial information relating to the
acquisition is filed herewith as Annex A.
<PAGE>
ITEM 8. CHANGE IN FISCAL YEAR
Inapplicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
iEXALT, INC.
By: /s/ JONATHON GILCHRIST
Jonathan Gilchrist, Secretary
DATE: December 14, 1999
<PAGE>
EXHIBITS
EXHIBIT NO. PAGE
1.1(1) Contract for Sale and Purchase of Wordcross
Enterprises, Inc. ................................. A-1
(1) Previously filed as an exhibit to the Company's Current Report
on Form 8-K filed with the Securities and Exchange Commission
on October 15, 1999 and incorporated herein by reference.
<PAGE>
ANNEX-A
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors of
Wordcross Enterprises, Inc.
We have audited the accompanying balance sheets of Wordcross Enterprises, Inc.
as of September 30, 1999 and December 31, 1998 and the related statements of
income and retained earnings and cash flows for the nine months ended September
30, 1999 and the year ended December 31, 1998. 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wordcross Enterprises, Inc. at
September 30, 1999 and December 31, 1998, and the results of its operations and
its cash flows for the periods then ended, in conformity with generally accepted
accounting principles.
/s/ HARPER & PEARSON COMPANY
Harper & Pearson Company
Houston, Texas
December 3, 1999
<PAGE>
WORDCROSS ENTERPRISES, INC.
BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
- --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
ASSETS 1999 1998
------------- -------------
CURRENT ASSETS
Cash and cash equivalents..................... $ 103,000 $ 2,434
Accounts receivable, net ..................... 84,589 63,111
Loans to shareholders ........................ 5,025 --
Prepaid expenses ............................. 8,031 1,202
Deferred income tax .......................... 32,368 144
--------- ---------
TOTAL CURRENT ASSETS ......................... 233,013 66,891
--------- ---------
PROPERTY AND EQUIPMENT
Furniture and fixtures ....................... 13,343 13,343
Computer systems and equipment ............... 74,041 67,971
Leasehold improvements ....................... 10,639 10,639
--------- ---------
98,023 91,953
Less accumulated depreciation ................ (63,576) (52,168)
--------- ---------
34,447 39,785
--------- ---------
$ 267,460 $ 106,676
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable ................................ $ -- $ 4,003
Loans from shareholders....................... -- 7,334
Accounts payable ............................. 36,075 43,704
Tickets payable .............................. 171,013 24,601
Income tax payable ........................... 32,624 --
--------- ---------
TOTAL CURRENT LIABILITIES .................... 239,712 79,642
--------- ---------
DEFERRED INCOME TAX .............................. 2,755 3,555
--------- ---------
SHAREHOLDERS' EQUITY
Capital stock, no par value, 300
shares authorized, issued
and outstanding ........................... 300 300
Retained earnings ............................ 24,693 23,179
--------- ---------
24,993 23,479
--------- ---------
$ 267,460 $ 106,676
========= =========
<PAGE>
WORDCROSS ENTERPRISES, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1999 1998
-------------- ----------------
REVENUES ....................................... $ 611,686 $ 736,005
--------- ---------
COSTS AND EXPENSES
Direct costs ............................... 173,229 199,560
Direct Labor................................ 260,240 332,945
Selling, general and administrative ........ 162,575 179,209
Depreciation expense ....................... 11,408 12,413
--------- ---------
607,452 724,127
--------- ---------
OPERATING INCOME ............................... 4,234 11,878
OTHER INCOME (EXPENSE)
Interest income ............................ 352 703
Interest expense ........................... (2,481) (427)
--------- ---------
(2,129) 276
--------- ---------
NET INCOME BEFORE INCOME TAXES ................. 2,105 12,154
INCOME TAXES ................................... (591) (1,836)
--------- ---------
NET INCOME ..................................... 1,514 10,318
RETAINED EARNINGS, Beginning of Period ......... 23,179 12,861
--------- ---------
RETAINED EARNINGS, End of Period ............... $ 24,693 $ 23,179
========= =========
<PAGE>
WORDCROSS ENTERPRISES, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................... $ 1,514 $ 10,318
--------- ---------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation .................................... 11,408 12,413
Deferred tax expense (benefit) .................. (33,024) 1,746
Change in operating assets and liabilities:
Accounts receivable, net ...................... (21,478) (15,109)
Prepaid expenses .............................. (6,829) (449)
Accounts payable .............................. (7,629) 4,531
Tickets payable ............................... 146,412 2,952
Income tax payable ............................ 32,624 --
--------- ---------
Total Adjustments .................................. 121,484 6,084
--------- ---------
Net Cash Provided by Operating Activities .......... 122,998 16,402
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment ................. (6,070) (14,485)
--------- ---------
Net Cash Used by Investing Activities .............. (6,070) (14,485)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Changes in loans (to) from shareholders ............ (12,359) 10,355
Repayment of debt .................................. (4,003) (17,507)
--------- ---------
Net Cash Used by Financing Activities .............. (16,362) (7,152)
--------- ---------
NET INCREASE (DECREASE) IN CASH ........................ 100,566 (5,235)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....... 2,434 7,669
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............. $ 103,000 $ 2,434
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ............................. $ 2,481 $ 427
========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY:
Acquisition of equipment through notes payable ..... $ -- $ 13,034
========= =========
<PAGE>
WORDCROSS ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
- --------------------------------------------------------------------------------
NOTE A BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Wordcross Enterprises, Inc. d/b/a Christian Happenings (the Company)
is organized as a "C" corporation in the State of Ohio. The Company
produces and distributes a Christian magazine publication in 13
different regions in the U.S., and serves as a provider of automated
ticketing services for Christian events on behalf of its clients.
The Company generates revenue primarily through advertising fees in
its magazine and has no long-term advertising agreements or
contracts. Although some revenue is derived from subscriptions, the
Company does not ordinarily charge for its magazine that is
delivered to regional churches and other Christian organizations.
Ticket revenue is generated principally from convenience charges and
commissions received by the Company for tickets sold on its client's
behalf. The Company generally has no financial risk for unsold
tickets.
MANAGEMENT'S ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. While it is believed that such estimates are
reasonable, actual results could differ from those estimates.
CONCENTRATIONS OF CREDIT RISK - Financial instruments which
potentially subject the Company to concentrations of credit risk
consist principally of trade receivables and cash. The Company
places its cash with high credit quality financial institutions. To
reduce credit risk, a customer's credit history is reviewed before
extending credit. Management is of the opinion that all accounts
receivable, net of allowances for bad debts, at September 30, 1999
and December 31, 1998 are collectible.
FINANCIAL INSTRUMENTS - The estimated fair values of cash, accounts
receivable, loans to (from) shareholders, accounts payable, tickets
payable, and income taxes payable approximate their carrying value
because of the short-term maturity of these instruments or the
stated interest rates are indicative of market interest rates.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
debt instruments having maturities of three months or less at the
date of purchase to be cash equivalents.
ACCOUNTS RECEIVABLE, NET - Accounts receivable, results from
magazine advertising sales. Accounts receivable is shown net of
allowances for bad debts of $3,000 and $0 at September 30, 1999 and
December 31, 1998, respectively.
PROPERTY AND EQUIPMENT - Property and equipment is carried at
original cost. Maintenance or repair costs are charged to expense as
incurred. When assets are sold or retired, the remaining costs and
related accumulated depreciation are removed from the accounts and
any resulting gain or loss is included in income.
<PAGE>
WORDCROSS ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
- --------------------------------------------------------------------------------
NOTE A BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
For financial reporting purposes, depreciation of property and
equipment is provided using the straight-line method based upon the
expected useful lives of the assets. Estimated useful lives of
assets are as follows:
Furniture and fixtures 5 years
Computers and equipment 3 - 5 years
Leasehold improvements 5 years
TICKETS PAYABLE - Tickets payable represents contractual amounts due
to clients for tickets sold by the Company on behalf of the
organizations that sponsor events.
REVENUE RECOGNITION - The Company recognizes revenues on advertising
services when the magazines are published. Revenue from ticket
operations is recognized as tickets are sold. Although the Company
collects ticket receipts representing the full ticket price on
behalf of its clients, it only records as revenue the convenience
charges and handling fees included in the ticket price.
INCOME TAXES -Deferred tax assets and liabilities are recognized
with respect to the tax consequences attributable to the differences
between the financial statement carrying values and tax bases of
assets and liabilities. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which these temporary differences are expected to be
recovered or settled. Further, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
NOTE B NOTES PAYABLE
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------ ------------
Manufacturer's equipment note, principal
and interest at an annual rate of 8.99%,
payable monthly, due July 19, 2003,
secured by equipment. This note was fully
paid subsequent to December 31, 1998 ... $ -- $4,003
======= ======
<PAGE>
NOTE C FEDERAL INCOME TAX
Federal income tax expense consists of the following:
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
Current ................................ $ 33,615 $ 90
Deferred, current ...................... (32,224) 1,076
Deferred, noncurrent ................... (800) 670
-------- --------
$ 591 $ 1,836
======== ========
Deferred income taxes result from timing differences in
reporting income and expenses for financial statement and income tax
purposes. The primary sources of deferred income taxes result from:
(1) the use of different methods of depreciation for income tax and
financial statement purposes, and (2) the effect of recording
receivables and payables for financial statement purposes and the
cash basis reporting for federal income tax purposes. Deferred tax
assets and liabilities at September 30, 1999 and December 31, 1998
are as follows:
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
Current deferred tax asset ............. $ 45,506 $ 9,611
Current deferred tax liability ......... (13,138) (9,467)
-------- --------
Current deferred income tax ............ $ 32,368 $ 144
======== ========
Long-term deferred tax asset ........... $ - $ -
Long-term deferred tax liability ....... (2,755) (3,555)
-------- --------
Long-term deferred income tax .......... $ (2,755) $ (3,555)
======== ========
The differences between the effective rate of income tax expense at
September 30, 1999 and December 31, 1998 and the amounts which would
be determined by applying the statutory U.S. income tax rate of 34%,
to income before income tax expense are explained below according to
the tax implications of various items of income or expense.
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
Provision for income tax expense at U.S.
statutory rates ..................... $ 716 $ 4,132
Change in tax provision resulting from:
Nondeductible entertainment
expenses ......................... 25 81
Surtax exemption .................... (400) (2,309)
Other ............................... 250 (68)
------- -------
Income tax expense ..................... $ 591 $ 1,836
======= =======
<PAGE>
NOTE D RELATED PARTY TRANSACTIONS
Non interest bearing loans to (from) shareholders represent cash
advanced to shareholders as salary advances or amounts contributed
by the shareholders to help meet the short-term cash needs of the
Company.
NOTE E LEASES
The Company leases its office space from the shareholders on an
annual basis. As of September 30, 1999 $3,300 in prepaid rent had
been paid to the shareholders. Total rent expense to related parties
for the nine months ended September 30, 1999 and year ended December
31, 1998 amounted to $9,900 and $12,000 respectively. Subsequent to
September 30, 1999, the Company negotiated a new office lease with a
third party for five years. Future minimum lease payments on a
calendar year basis, the Company's fiscal year end, under
noncancelable operating leases with initial or remaining lease terms
in excess of one year at September 30, 1999 are as follows:
1999 $ 5,560
2000 27,171
2001 27,785
2002 28,428
2003 29,074
2004 and thereafter 27,239
----------
$ 145,257
==========
NOTE F YEAR 2000 (Unaudited)
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date sensitive systems may
recognize the year 2000 as 1900 or some other date resulting in errors
when information using year 2000 dates is processed. In addition,
similar problems may arise in some systems, which use certain dates in
1999 to represent something other than a date. The effects of the Year
2000 Issue may be experienced before, on, or after January 1, 2000,
and if not addressed, the impact on operations and financial reporting
may range from minor errors to significant systems failure which could
affect a Company's ability to conduct normal business operations. The
Company believes that the Year 2000 issue will not have a material
adverse impact on the Company.
<PAGE>
NOTE G SUBSEQUENT EVENT
On October 1, 1999, the Company was acquired by iExalt, Inc.
(iExalt). In consideration for this purchase, the selling
shareholders received 850,000 shares of common stock of iExalt, Inc.
and 250,000 common stock options exercisable at $1.80 per share. The
options vest in the amount of 50,000 shares per year on the
anniversary date of the acquisition. Both shareholders of the
Company have employment agreements for a period of five years with
iExalt.
The selling shareholders of the Company have the right for a period
of time up to twelve months after the close of the transaction to
repurchase their stock by exchanging it for the stock received and
the funds provided by iExalt subsequent to the purchase, if iExalt
fails to meet any one of the following conditions: 1) iExalt fails
to provide funds as required during this twelve month period 2) the
value of iExalt's stock does not reach a market value of $1.80 per
share within six months after the acquisition date or 3) iExalt
files for bankruptcy or receivership during the period.
The period shall expire if iExalt should file a registration
statement at any time during the twelve month period with the
Securities and Exchange Commission relating to iExalt's secondary
offering of its common stock and such secondary offering is
completed; provided that, the selling shareholders are allowed to
include no less than 50,000 - 100,000 shares of its stock in that
offering.
The unaudited pro forma results of operations of iExalt, Inc. and
the Company for the nine months ended September 30, 1999 and for the
twelve months ended December 31, 1998 (assuming WordCross
Enterprises, Inc. had been acquired on January 1, 1998) are shown
below.
<TABLE>
<CAPTION>
BALANCE SHEET AND INCOME STATEMENT AT SEPTEMBER 30, 1999 AND THE NINE MONTH PERIOD THEN ENDED
iEXALT, INC. PRO FORMA WORDCROSS
PRO FORM ADJUSTMENTS ENTERPRISES, INC. iEXALT, INC.
--------------- --------------- --------------- ---------------
(UNAUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues .............................. $ 1,396,823 $ -- $ 611,686 $ 785,137
--------------- --------------- --------------- ---------------
Net Income/(Loss)...................... $ (448,758) A $ (5,400) $ 1,514 $ (444,872)
=============== =============== =============== ===============
Current Assets ........................ $ 770,090 $ -- $ 233,013 $ 537,077
Property & Equipment, Net ............. 121,624 -- 34,447 87,174
Goodwill, Net ......................... 464,314 A 275,400 -- 188,914
Other Assets, Net ..................... 3,814 -- -- 3,814
--------------- --------------- --------------- ---------------
Total Assets .......................... $ 1,359,839 $ 275,400 $ 267,460 $ 816,979
=============== =============== =============== ===============
Current Liabilities ................... $ 621,610 $ 0 $ 239,712 $ 381,898
Long-term Liabilities ................. 502,755 -- 2,755 500,000
Shareholders' Equity .................. 235,474 A 275,400 24,993 (64,919)
--------------- --------------- --------------- ---------------
Total Liabilities & Sharehoders' Equity $ 1,359,839 $ 275,400 $ 267,460 $ 816,979
=============== =============== =============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET AND INCOME STATEMENT AT DECEMBER 31, 1998 AND THE YEAR THEN ENDED
iEXALT, INC. PRO FORMA WORDCROSS
PRO FORM ADJUSTMENTS ENTERPRISES, INC iEXALT, INC.
--------------- --------------- --------------- ---------------
(UNAUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues .............................. $ 1,864,977 $ -- $ 736,005 $ 1,128,972
--------------- --------------- --------------- ---------------
Net Income/(Loss)...................... $ (18,273) A $ (7,200) $ 10,318 $ (21,391)
=============== =============== =============== ===============
Current Assets ........................ $ 226,558 $ -- $ 66,891 $ 159,667
Property & Equipment .................. 46,095 -- 39,785 6,310
Goodwill, Net ......................... 403,493 A 280,800 -- 122,693
--------------- --------------- --------------- ---------------
Total Assets .......................... $ 676,146 $ 280,800 $ 106,676 $ 288,670
=============== =============== =============== ===============
Current Liabilities ................... $ 291,689 $ -- $ 79,642 $ 212,047
Long-term Liabilities ................. 17,033 -- 3,555 13,478
Shareholders' Equity .................. 367,424 A 280,800 23,479 (63,145)
--------------- --------------- --------------- ---------------
Total Liabilities & Sharehoders' Equity $ 676,146 $ 280,800 $ 106,676 $ 288,670
=============== =============== =============== ===============
</TABLE>
NOTE (A) To record goodwill from acquisition of WordCross Enterprises, Inc.
In Management's opinion, the unaudited pro forma combined results of
operations may not be indicative of the actual results that would
have occurred had the acquisition been consummated at the beginning
of 1998 or the future operations of the combined companies.
