UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
[OR]
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 1999
Commission File Number: ___________
iEXALT, INC.
NEVADA 75-1667097
(State or other jurisdiction of (I.R.S. Employer incorporation or
organization) Identification No.)
4301 WINDFERN DRIVE
HOUSTON, TEXAS 77041
(Address of principal executive offices)
(281) 600-4000
(Registrant's telephone number, including area code)
(Former address: 2612 Kentucky Ave., Salt Lake City, Utah)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
Registrant's pro forma revenues for the eight months ending August 31, 1999 were
$1,640,000.
The aggregate market value of the voting stock held by nonaffiliates of the
registrant, based on the last sales price as quoted by the OTC Electronic
Bulletin Board on November 1, 1999 was $21,830,184. As of November 1, 1999 the
registrant had 21,912,166 shares of common stock outstanding.
Documents Incorporated by Reference: None.
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TABLE OF CONTENTS
PART I
ITEMS
PAGE
----
ITEM 1. DESCRIPTION OF BUSINESS....................................... 3
ITEM 2. DESCRIPTION OF PROPERTIES..................................... 9
ITEM 3. LEGAL PROCEEDINGS............................................. 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 10
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS...... 10
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.......................... 11
ITEM 7. FINANCIAL STATEMENTS.......................................... 14
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE...................................... 14
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.............. 15
ITEM 10. EXECUTIVE COMPENSATION......................................... 18
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. 19
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................. 19
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K............................... 19
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PART I.
ITEM 1. DESCRIPTION OF BUSINESS
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Form 10-KSB for iEXALT, Inc.
discuss future expectations, contain projections of results of operation or
financial condition or state other forward-looking information. iEXALT, Inc.
wishes to caution readers not to place undue reliance on any forward-looking
statements as these statements are subject to known and unknown risks,
uncertainties, and other factors that could cause the actual results to differ
materially from those contemplated by the statements. The forward-looking
information is based on various factors and is derived using numerous
assumptions. Important factors that may cause actual results to differ from
projections include, for example:
o the success or failure of management's efforts to implement their
business strategy;
o the ability to raise sufficient capital to meet operating requirements;
o the uncertainty of consumer demand for iEXALT's products;
o the ability to compete with major established companies;
o the effect of changing economic conditions;
o the ability to attract and retain quality employees; and
o other risks which may be described in future filings with the SEC.
iEXALT, Inc. does not undertake, and specifically disclaims any
obligation, to publicly release the result of any obligation, to publicly
release the result of any revisions, which may be made to any forward-looking
statements to reflect the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements, except for iEXALT's ongoing
obligation to disclose material information as required by the Federal
Securities laws.
GENERAL
HISTORY
Sunbelt Exploration, Inc., ("Sunbelt"), was originally incorporated as
Louisiana Northern Gas, Inc. a Nevada corporation on April 23, 1979. The name of
the Company was changed to Sunbelt Exploration, Inc. on December 21, 1979.
Sunbelt was primarily engaged in the exploration, development and production of
oil and gas reserves. From the date of its organization until approximately
1989, Sunbelt was involved in the acquisition of producing oil and gas
properties and the operation of a gas liquification plant. These activities were
primarily financed through a public offering completed in 1980 that raised
$1,800,000.
From 1989 until September 1, 1999, Sunbelt had no operations. In February
1990, the U.S. Bankruptcy Court approved an Amended Plan of Reorganization under
Chapter 11 of the U.S. Bankruptcy Code ("Plan") for Sunbelt. The Plan was
affirmed by a Final Decree of the Court on May 11, 1993. Under the Plan, all
assets and liabilities of Sunbelt were liquidated and assigned to unrelated
third parties. Additionally, the Plan and the Court allowed Sunbelt to maintain
its interest in a "take or pay" lawsuit against one of Sunbelt's pre-bankruptcy
customers. Sunbelt was successful in the lawsuit and received final proceeds of
approximately $53,000 in December 1995.
On September 1, 1999, Sunbelt acquired 100% of the stock of iEXALT, Inc. a
Texas corporation ("iEXALT-Texas"), for 18,393,666 shares of Sunbelt common
stock. At the conclusion of the transaction 20,874,166 shares of stock were
issued and outstanding. Prior to that event, at a shareholders' meeting of
Sunbelt held on August 30, 1999 the shareholders of Sunbelt voted to change the
name of the corporation to iEXALT, Inc. and elected Jack I. Tompkins, Donald
Sapaugh, Morris Chapman, Jonathan C. Gilchrist and Hunter M. A. Carr to the
board of directors. Joe Reynolds was elected to the Board subsequent to that
event. In connection with the reorganization, Sunbelt shareholders adopted and
approved the Amended and Restated Articles of Incorporation,
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which authorized changing the name of Sunbelt Exploration, Inc. to iEXALT, Inc.
("iEXALT"). Any references to "iEXALT" or the "Company" refer to activities of
iEXALT including activities of iEXALT-Texas prior to the acquisition on
September 1, 1999.
RECENT DEVELOPMENTS
iEXALT is a company currently developing Internet resources created to
support a safe and efficient environment for families, businesses and Christian
organizations. iEXALT's mission is to use the influence of the Internet as a
positive force in the lives of families, businesses and Christian organizations
by providing filtered Internet access, developing a Christian-based Internet
portal and by creating content-based Web sites that will provide information and
resources for its target markets.
On May 31, 1999 iEXALT acquired the assets and customers of NetXPress, a
Houston, Texas Internet Service Provider, ("ISP") from two iEXALT shareholders
for 3,000,000 shares of iEXALT-Texas, and operates the ISP as WWW.iEXALT.NET. On
June 21, 1999, iEXALT acquired the assets and customers of a second Houston ISP
formerly operated by Interactive Communication Concepts for $15,000 and 72,000
shares of iEXALT-Texas. These two ISPs form the infrastructure for iEXALT to
offer Internet service to its customers. iEXALT has established a strategic
relationship with wholesale access providers that allow it to sell its services
nationally. iEXALT's national service is filtered to block access to
objectionable Internet content such as pornography, hate speech, bomb building,
etc. As a platform for its filtering technology, iEXALT acquired all of the
proprietary assets of netFilter Technologies, a proxy-filtering software company
on October 1, 1999. This acquisition gives iEXALT proprietary control over its
own filtering technology and over the development of future markets for this
technology, including managed access services for the business community.
iEXALT established the foundation for its electronic publishing division
with the acquisition of NavPress Software, an Austin, Texas company, on July 1,
1999 for 900,000 shares of authorized but unissued common stock of iEXALT-Texas
and the issuance of a note payable for $150,000. The name of this company was
then changed to iEXALT Electronic Publishing. The iEXALT Electronic Publishing
division manufactures and markets books and reference materials of interest to
the Christian community using a CD ROM format. iEXALT expects to migrate these
resources to the Internet as a first stage in the development of its Web-based
research products. This division had pro forma revenue of approximately $663,000
for the period which represents approximately 40% of iEXALT's pro forma revenues
for the eight months ending August 31, 1999. The transaction was accounted for
as a purchase and the amount of goodwill recorded was $129,000.
On October 1, 1999, iEXALT acquired all of the issued and outstanding
stock of WordCross Enterprises, Inc. d/b/a Christian Happenings, of Columbus,
Ohio for 850,000 shares of authorized but unissued common stock of iEXALT.
Christian Happenings magazine is an events publication that circulates over
250,000 copies in thirteen regions east of the Mississippi every two months.
This events information will be integrated with iEXALT's events Web site at
WWW.iEVENTS.NET. iEvents.net provides an online calendar of Christian events
nationwide. Christian Happenings also supplies ticketing services for events
throughout the country. Christian Happenings' unaudited revenues for the eight
months ending August 31, 1999 were approximately $911,000 which represents 58%
of iEXALT's pro forma revenues for this period. The transaction was accounted
for as a purchase and the amount of goodwill recorded was $288,000.
iEXALT expects to launch a portal site at WWW.iEXALT.COM before the end of
1999. This Web site will serve as a starting point for families and church
leaders seeking to find Christian-based Internet content and leadership resource
materials. Connections will be provided to various channels such as news,
weather, kid's activities, sports and religion. iEXALT expects to include an
approved-only search engine to allow Internet users a safe portal to Internet
content.
iEXALT is also developing two Web-based leadership resources that it
expects to launch in 2000. The first will be a library of sermon resource
materials for pastors and other church leaders. This product will include
sermons, outlines, quotes, illustrations and humor. The second product will be a
research and reference library of books that will be word searchable as a study
resource for speakers and church leaders.
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INDUSTRY BACKGROUND
THE INTERNET AND THE WORLD WIDE WEB
The Internet and the World Wide Web are fundamentally changing the way
information can be produced, distributed and consumed, lowering the cost of
publishing information and extending its potential reach. Companies from many
industries are publishing product and company information or advertising
materials, collecting customer feedback and demographic information
interactively, and offering their products for sale on the Web. The Web, by
facilitating the publishing and exchange of information, is dramatically
increasing the amount of information available to users. The Internet now
delivers large amounts of negative information along with vast amounts of
positive content.
The Internet is a global collection of thousands of computer networks
interconnected to enable organizations, educational institutions, government
agencies and individuals to communicate electronically, access and share
information, and conduct business. The Internet was historically used by a
limited number of academic institutions, defense contractors and government
agencies. It was used primarily for remote access to host computers and for
sending and receiving electronic mail. Presently, commercial organizations and
individuals are dominating the use of the Internet. Recent technological
advances, improved microprocessor speed and the development of easy-to-use
graphical user interfaces, combined with cultural and business changes, have
enabled the Internet to be integrated into the operations, strategies, and
activities of countless organizations and individuals.
GROWTH OF THE INTERNET AND ONLINE COMMERCE
Growth in Internet usage has been fueled by a number of factors, including
the large and growing installed base of personal computers in the workplace and
home, advances in the performance and speed of personal computers and modems,
improvements in network infrastructure, easier and cheaper access to the
Internet, and increased awareness of the Internet among businesses and
consumers.
The Internet and other online services are evolving into a unique sales
and marketing channel, just as retail stores, mail-order catalogs and television
shopping have done. Online retailers can interact directly with customers by
frequently adjusting their featured selections, editorial insights, shopping
interfaces, pricing, and visual presentations. The minimal cost to publish on
the Web, the ability to reach and serve a large and global group of customers
electronically from a central location, and the potential for personalized
low-cost customer interaction provides additional economic benefits for online
retailers. Unlike traditional retail channels, online retailers do not have many
of the costs of managing and maintaining a significant retail store
infrastructure or the continuous printing and mailing costs of catalog
marketing. Because of these advantages over traditional retailers, online
retailers have the potential to build large, global customer bases quickly and
to achieve superior economic returns over the long term.
THE ROLE OF iEXALT, INC.
The Internet provides a unique and universal media that can support the
efforts of local churches by uniting them with Christians around the world. The
Internet presents a platform from which millions can be reached and strengthened
through the development of community and the delivery of high quality
information resources.
It is iEXALT's goal to deliver technology solutions that protect and
promote the values of the family based on Christian principles. This includes
effective screening of offensive and destructive content through iEXALT's
filtered Internet service. In addition, iEXALT will develop an effective portal
through which families and members of the target market can access information
they seek on the Internet. To support the needs of Christian leaders, iEXALT
will develop and market a series of subscription-based content products
containing research and reference materials.
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PRODUCTS AND SERVICES
iEXALT.NET
At WWW.iEXALT.NET, iEXALT provides server-based filtered ISP service to
families, businesses and organizations. iEXALT has purchased and integrated two
ISPs in the Houston area and has established a marketing relationship with two
national backbone providers to allow iEXALT to sell its filtered service
nationwide. Contracts have been established with MegaPop and Splitrock Services
giving iEXALT connectivity nationwide. The ISP provides a controlled, filtered
access to the Internet that generally prevents users from accessing pornography,
hate sites, bomb building and other objectionable Internet sites. This is done
by requiring every search request to be processed by iEXALT.net's proxy server
before that search request is approved. On October 1, 1999 iEXALT purchased the
proprietary assets and intellectual property of netFilter Technologies, an
Internet filtering company. This gave the Company ownership of the software,
code and databases necessary to provide proprietary filtering services to
businesses, families and organizations.
iEXALT ELECTRONIC PUBLISHING
iEXALT intends to become a major provider of Christian content and
leadership resource material on the Internet. iEXALT Electronic Publishing,
("IEP"), in business since 1988, publishes hundreds of books and reference works
in CD ROM format. Using the foundation of this content, iEXALT will develop and
deploy Web-based content products. Additional information concerning these
products may be found at WWW.WORDSEARCHBIBLE.COM.
INDEXIT
The first research-based content product will be Indexit, an online
research library of books and reference materials that is expected to be a
premium resource for pastors, speakers and writers in the Christian market.
Thousands of speakers are forced to depend on limited personal libraries each
week in the preparation of their presentations. Indexit is intended to give
instant access to a significantly larger library of material. The Web-based
library will be electronically searchable to allow users to quickly identify and
locate useful information. The product will be marketed on a subscription basis
and is currently in the development stage. The Internet Law Library, Inc. has
agreed to allow iEXALT to use its search engines for this process.
ISERMONS
A second subscription product that iEXALT intends to develop is a database
of sermons, illustrations, quotes, outlines and humor that a speaker can use to
effectively craft a presentation with a minimum investment of time. iSermons is
being designed to reach a similar market to Indexit but provides a more diverse
database of research tools for building sermons. This electronically searchable
database is expected to consist of thousands of sermons by some of the greatest
preachers in Christianity that will allow teachers, speakers and pastors to
enrich their presentations. iSermons is being designed to be a product that will
interactively engage the user by allowing subscribers to upload their own
illustrations, ideas, sermons, outlines or files to private libraries that they
can access and search in conjunction with the rest of the databases.
iEXALT intends to sell this product for a small monthly fee and market it
through magazine and Internet advertising. This product is expected to provide a
platform from which to sell Indexit to the same user base.
iEXALT.COM
iEXALT has begun the development process for a comprehensive Christian
resource Web site iEXALT.com that will serve as the primary portal to the
Internet and to iEXALT's complete family of services. iEXALT.com will function
as both a gateway to the complete family of iEXALT Internet services, and as a
starting point for safe searching of the Internet.
The second phase of development for this portal site will be the
development of an extensive safe search engine. iEXALT plans to provide a "white
list" search engine, which will allow users to search for Internet
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content without fear of landing in hostile territory. iEXALT intends to build
strong communication tools into the Internet Web sites that will allow for
Christian discussion groups, chat rooms, bulletin boards, group messaging, and
other community building activities.
The portal is expected to be a high traffic starting point that will
connect to and promote the complete family of iEXALT businesses and services.
iEXALT.com is designed to become an income source through the sale of
advertising and through promotional alliances with businesses and Christian
organizations that want to promote their products to the Christian community.
iEVENTS.NET
The Christian community has historically been an event-oriented culture.
Recognizing this inclination, iEXALT has developed a nationwide calendar of
Christian events at WWW.iEVENTS.NET. The calendar currently has over 11,000
events listed across the nation that will appeal to Christians of all ages and
denominations. This product allows Internet users to quickly determine what
events are available in their community. It will allow artists, speakers, and
churches to promote events to their community at very little cost.
To support the growth of this segment of iEXALT's market, iEXALT acquired
WordCross Enterprises, Inc. (d/b/a Christian Happenings), of Columbus, Ohio on
October 1, 1999. Christian Happenings, in business since 1983, publishes a
bi-monthly periodical promoting Christian events that is circulated in 13
regions east of the Mississippi to over 250,000 readers. iEXALT intends to
expand the circulation of Christian Happenings magazine to primary regions west
of the Mississippi in 2000.
In addition, Christian Happenings provides ticketing services to numerous
events each year. iEXALT expects to expand the ticketing services of Christian
Happenings and to use the talent and information collected from the publishing
enterprise to populate the iEvents.net Web site.
Revenue for iEvents.net will be generated primarily from advertising and
promotional fees paid by event promoters and performers in addition to fees
collected for ticket sales.
SALES AND MARKETING
iEXALT has begun to deploy a multi-faceted marketing approach intended to
leverage the cross-marketing potential of iEXALT's products and services. For
example, Christian Happenings magazine is used to market the filtered ISP and
IEP products as well as to promote iEvents.
Recognized leaders and affinity groups (churches, para church
organizations, seminaries, etc.) play a major role within the Christian
community. A key marketing strategy of iEXALT will be to leverage the strong
relationships that Company management has within the Christian community to
build on these affinity relationships for the marketing of services to group
constituents. This will allow iEXALT to use the credibility and influence of the
group to introduce its members to iEXALT products. The customer acquisition cost
of this marketing program is expected to be lower than traditional marketing
techniques.
Many of iEXALT's Web sites are designed to be traffic-oriented sites and
can be used free of charge to Internet users. Sites such as iEvents, iEXALT.com
and others are expected to derive their primary revenue from advertising and
promotional fees. Advertising is a growing source of revenue on the Internet and
is expected to increase exponentially in the next few years. These traffic
driven Web sites will act as marketing portals to the family of iEXALT products
and services.
The third group of products will be subscription-based products that users
are expected to pay for on a monthly basis. This will include the ISP filtered
service, iSermons and Indexit. These products are expected to provide long-term
revenue with controlled overhead costs.
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COMPETITION
The number of users of major Internet providers such as America On Line,
Mindspring and Internet America have grown dramatically in recent years. In
addition, electronic commerce and Internet services markets are new, rapidly
evolving and intensely competitive. iEXALT, Inc. expects competition to
intensify in the future. iEXALT will be competing with a variety of other
companies in the service and technology areas that are currently being pursued.
iEXALT.net will face competition from existing filtered Internet companies such
as Rated-G, FamilyClick, Mayberry USA and Family.net and iEXALT expects other
major companies to begin offering filtering options in the next year.
In other sectors of operations, iEXALT will face significant competition
in the marketplace. Several nonprofit companies have initiated Internet portals
aimed at serving the Christian community such as Christianity.com. In addition,
CrossWalk.com, Inc. has established itself as a public company and early leader
in providing information and business services to this target market. iEXALT may
also face competition from other well-financed Internet start-up companies
targeting the same target market as iEXALT. There can be no guarantee that
iEXALT will be able to secure significant protection for service marks or
trademarks. It is possible that competitors will adopt product or service names
similar to iEXALT's, possibly leading to customer confusion.
iEXALT's electronic publishing products will face competition from other
electronic publishers such as Logos, BibleSoft and Parson's Technology. It is
expected that some or all of these competitors of iEXALT Electronic Publishing
will create Internet-based products competitive with iEXALT's online libraries.
iEXALT also expects to see traditional Christian print publishers compete with
iEXALT's Internet products, including Zondervan, Thomas Nelson and Broadman
Holman.
The principal competitive factors affecting the market for iEXALT's
services are the ability to attract customers at favorable customer acquisition
costs, operate Web sites in an uninterrupted manner and with acceptable speed,
provide effective customer service and obtain services at satisfactory prices.
There can be no assurance that iEXALT can maintain its competitive position
against current and potential competitors, especially those with greater
financial, marketing, customer support, technical and other resources.
Competitive factors fall into two broad analytical categories. First,
iEXALT will experience competition from large well-financed Internet and
technology companies seeking to dominate various Internet markets. Second,
iEXALT will face direct competition from competitors attempting to attract
similar target markets.
The Internet is a rapidly developing communication medium that presents
competitive challenges from the introduction of new technologies, new software
capabilities, new marketing strategies and new business models. Because iEXALT
is a direct provider of Internet access and Web hosting services, iEXALT will
face competitive challenges from each new emerging technology.
PERSONNEL
As of November 1, 1999, iEXALT had thirty persons working in various
phases of the business, including independent contractors, on a full-time basis.
No employees or contractors are covered by a collective bargaining agreement.
Management considers relations with its employees and contractors to be
satisfactory.
iEXALT plans to rapidly and significantly expand its operations and
expects that significant expansion of the operations will continue to be
required in order to address potential market opportunities. This rapid growth
is expected to place a significant strain on management, operational and
financial resources. iEXALT's new employees will include a number of key
managerial and technical employees who will need to be integrated into the
management team. iEXALT will also need to expand its accounting and technical
staff. iEXALT can provide no assurance that its current personnel, systems,
procedures and controls will be adequate to support future operations, that
management will be able to identify, hire, train, retain, motivate and manage
required personnel or that management will be able to manage and exploit
existing and potential market opportunities successfully.
iEXALT's success will be significantly impacted by its ability to attract
and maintain key personnel. In particular, iEXALT's success depends on the
continued efforts of its senior management team. The loss of the
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services of any executive officers or other key employees could have a material
adverse effect on iEXALT's business. If iEXALT is unable to manage growth
effectively, its business will be materially adversely affected.
iEXALT's business is labor intensive. There is significant competition for
employees with the skills required to perform the services that iEXALT offers.
Qualified project managers and senior technical staff are in great demand and
are likely to remain a limited resource for the foreseeable future. iEXALT can
provide no assurance that it will be successful in attracting a sufficient
number of highly-skilled employees in the future, or that it will be successful
in retaining, training and motivating employees, and any inability to do so
could impair the ability to adequately manage and complete existing projects and
to bid for or obtain new projects. If iEXALT's employees are unable to achieve
expected performance levels, its business could be adversely affected.
INTELLECTUAL PROPERTY
iEXALT's success is dependent, in part, upon its proprietary methodology
and other intellectual property rights. iEXALT relies upon a combination of
trade secrets, non-disclosure and other contractual arrangements, and copyright
and trademark laws to protect its proprietary rights. iEXALT acquired
proprietary rights to URL's such as iEXALT.com, iEXALT.net, netFilter.com,
iEvents.net, etc. and will seek to protect its brand in the marketplace. In
addition, iEXALT owns the copyright to netFilter software acquired from
netFilter Technologies. iEXALT has entered into confidentiality agreements with
its employees and contractors, and generally requires that consultants and
clients enter into such agreements, and limit access to and distribution of
proprietary information. Despite these efforts to protect such proprietary
rights, unauthorized parties may attempt to copy aspects of iEXALT's services or
to obtain and use information that is proprietary. Policing unauthorized use of
iEXALT's proprietary information is difficult, and litigation may be necessary
to enforce or protect such intellectual property rights or to defend against
claims of infringement or invalidity. iEXALT can provide no assurance that the
steps in this regard will be adequate to deter misappropriation of proprietary
information or that iEXALT will be able to detect unauthorized use and take
appropriate steps to enforce its intellectual property rights. Effective
trademark, service mark, copyright and trade secret protection may not be
available in every country in which the Company's services are distributed or
made available through the Internet, and policing unauthorized use of the
Company's proprietary information is difficult.
REGULATION
iEXALT is not currently subject to direct regulation by any governmental
agency, other than regulations applicable to businesses generally, and laws or
regulations directly applicable to online commerce. However, due to the
increasing popularity and use of the Internet and other online services, it is
possible that a number of laws and regulations may be adopted with respect to
the Internet or other online services covering issues such as user privacy,
pricing, content, copyrights, distribution, and characteristics and quality of
products and services. Furthermore, the growth and development of the market for
online commerce may prompt calls for more stringent consumer protection laws
that may impose additional burdens on those companies conducting business
online. The adoption of any additional laws or regulations may decrease the
growth of the Internet or other online services, which could, in turn, decrease
the demand for iEXALT's services and increase the cost of doing business.
Moreover, the applicability to the Internet and other online services of
existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes, libel and personal privacy is uncertain and
may take years to resolve. Any such new legislation, the application of laws and
regulations from jurisdictions whose laws do not currently apply to iEXALT's
business, or the application of existing laws to the Internet could have a
material adverse affect on iEXALT's business.
ITEM 2. DESCRIPTION OF PROPERTIES
iEXALT owns no real property and currently rents approximately 12,000 square
feet of office space on a month-to-month basis for approximately $3,000 per
month. iEXALT uses this facility for executive, marketing, administrative,
finance and management personnel.
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ITEM 3. LEGAL PROCEEDINGS
There are currently no legal proceedings pending to which iEXALT is a
party or to which any of its properties is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On August 30, 1999, iEXALT's shareholders voted at a special meeting
called pursuant to iEXALT's proxy statement: (a) adopted and approved Amended
and Restated Articles of Incorporation which authorized changing the name of
Sunbelt Exploration, Inc. to iEXALT, Inc. and authorized 20,000,000 shares of
preferred stock, par value $.001; (b) elected Messrs. Jack I. Tompkins, Hunter
M. A. Carr, Donald Sapaugh, Jonathan C. Gilchrist and Morris Chapman as
directors of iEXALT; (c) approved iEXALT's 1999 Directors' Stock Option Plan and
Employees' 1999 Stock Option Plan; and (d) approved a plan of recapitalization
effecting a reverse split of iEXALT's stock on a one-for-ten basis. After the
merger of Sunbelt with iEXALT-Texas, Mr. Joe Hunter Reynolds was elected to the
Board by unanimous consent.
The shareholders approved the August 10, 1999 Exchange Agreement between
Sunbelt and iEXALT-Texas by a vote of 22,446,443 in favor and 1,400 against. The
recapitalization was approved by a vote of 22,445,193 in favor and 2,650 shares
against. The restated Articles of Incorporation were approved by a vote of
22,446,223 in favor and 1,620 against. The election of Messrs. Tompkins, Carr,
Sapaugh, Gilchrist and Chapman was approved by a vote of 22,447,643 in favor and
200 shares against and the proposal to approve the Directors' Stock Option Plan
and Employee's 1999 Stock Option Plan was approved by 22,434,073 in favor and
13,770 shares opposed.
Messrs. Tompkins, Carr, Sapaugh, Gilchrist, Chapman and Reynolds comprise
all the directors of iEXALT.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
Prior to September 1, 1999, there was no trading market for our common
stock; however, iEXALT's shares were eligible for quotation on the OTC
Electronic Bulletin Board under the symbol "SUNX." On September 13, 1999, iEXALT
changed the symbol of its common stock to "IXLT" and began trading on the OTC
Electronic Bulletin Board on September 13, 1999. The market for the common stock
on the OTC Electronic Bulletin Board is limited, sporadic and highly volatile.
The following table sets forth the high and low bid prices per share of the
common stock since inception as reported by the OTC Electronic Bulletin Board.
These prices reflect inter-dealer prices, without retail mark-ups, mark-downs or
commissions, and may not necessarily represent actual transactions.
HIGH LOW
---- ---
FISCAL 1999
-----------
First Quarter n/a n/a
Second Quarter n/a n/a
Third Quarter n/a n/a
Fourth Quarter $8.75 $1.00
10
<PAGE>
On November 23, 1999, the last bid price of iEXALT's common stock as
reported by the OTC Electronic Bulletin Board was $4.12. iEXALT believes that as
of September 1, 1999, there were approximately 3,277 record owners of iEXALT's
common stock.
It is iEXALT's current policy not to pay cash dividends and to retain
future earnings to support growth. Any payment of cash dividends in the future
will be dependent upon the amount of funds legally available therefore,
earnings, financial condition, capital requirements and other factors that the
Board of Directors may deem relevant. iEXALT does not anticipate paying any cash
dividends in the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
On September 1, 1999 Sunbelt Exploration, Inc. acquired 100% of the stock
of iEXALT, Inc. a Texas corporation, for 18,393,666 shares of Sunbelt common
stock. At the conclusion of the transaction 20,874,166 shares of stock were
issued and outstanding. iExalt believes this transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act as a transaction by
an issuer not involving a public offering.
Subsequent to the merger of Sunbelt and iEXALT-Texas, on October 1, 1999
iEXALT issued 850,000 shares of common stock for the acquisition of WordCross
Enterprises, Inc. d/b/a Christian Happenings. In addition, iEXALT issued 60,000
shares of unregistered common stock for the acquisition of certain proprietary
assets of netFilter Technology on October 1, 1999. iEXALT believes these
transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act as transactions by an issuer not involving a public offering.
SECURITIES ISSUED FOR CASH
Pursuant to a private placement memorandum, iEXALT has issued 128,000
shares of unregistered common stock for cash investment of $230,400 from ten
investors. The Company believes these transactions were exempt from registration
pursuant to Section 4(2) of the Securities Act as transactions by an issuer not
involving a public offering.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements of Sunbelt Exploration, Inc., which are included elsewhere in this
Form 10-K. The following discussion contains certain forward-looking statements
regarding iEXALT's expectations for its business and its capital resources. For
a discussion of certain limitations inherent in such statements, see
"Forward-looking Statements."
GENERAL
Sunbelt originally incorporated as Louisiana Northern Gas, Inc. a Nevada
corporation on April 23, 1979. The name of the corporation was changed to
Sunbelt Exploration, Inc. on December 21, 1979. Sunbelt was primarily engaged in
the exploration, development and production of oil and gas reserves. From the
date of its organization until approximately 1989, Sunbelt was involved in the
acquisition of producing oil and gas properties and the operation of a gas
liquification plant. These activities were primarily financed through a public
offering completed in 1980 that raised $1,800,000.
In February 1990, the U.S. Bankruptcy Court approved an Amended Plan of
Reorganization under Chapter 11 of the U.S. Bankruptcy Code ("Plan") for
Sunbelt. A Final Decree of the court affirmed the Plan on May 11, 1993. Under
the Plan, all assets and liabilities of Sunbelt were liquidated and assigned to
unrelated third parties. Additionally, the Plan and the court allowed Sunbelt to
maintain its interest in a "take or pay" lawsuit against one of Sunbelt's
pre-bankruptcy customers. Sunbelt was successful in the lawsuit and received
final proceeds of approximately $53,000 in December 1995.
11
<PAGE>
From 1989 through August 31, 1999, Sunbelt had no operations.
On September 1, 1999 Sunbelt acquired 100% of the stock of iEXALT, Inc.
("iEXALT-Texas"), a Texas corporation, for 18,393,666 shares of Sunbelt common
stock. In connection with the reorganization, Sunbelt shareholders adopted and
approved the Amended and Restated Articles of Incorporation, which authorized
changing the name of Sunbelt Exploration, Inc. to iEXALT, Inc.
iEXALT is currently developing Internet resources to support a safe and
efficient environment for families, businesses and Christian organizations.
iEXALT's mission is to use the influence of the Internet as a positive force in
the lives of families, businesses and Christian organizations by providing
filtered Internet access, developing a Christian-based Internet portal and by
creating content-based Web sites that will provide information and resources for
its target markets.
SUNBELT EXPLORATION, INC.
LIQUIDITY AND CAPITAL RESOURCES
As of August 31, 1999, Sunbelt had $657 in current assets and $13,520 in
current liabilities. As a result of the merger with iEXALT-Texas on September 1,
1999, iEXALT had current assets of $490,291 and current liabilities of $235,175
as of that date.
To fund the development of its Internet products and services, iEXALT
offered through a Private Placement up to two million shares of common stock at
a price of $1.80 per share. Pursuant to this Private Placement memorandum,
iEXALT has issued 128,000 shares of unregistered common stock for cash
investment of $230,400 from ten investors as of November 1, 1999.
iEXALT's post-merger working capital requirements and cash flow provided
by operating activities can vary from quarter to quarter, depending on revenues,
operating expenses, capital expenditures and other factors. iEXALT's on-going
business will require substantial working capital. It is expected that iEXALT
will need to raise additional capital in order to succeed and to continue in
business. Since inception, iEXALT has experienced negative cash flow from
operations and will continue to experience negative cash flow for some time into
the future. As of October 31, 1999, iEXALT's monthly cash expenditures exceed
its cash receipts by approximately $120,000.
iEXALT has not entered into any arrangements with any financial
institutions or third parties to provide additional financing and, accordingly,
iEXALT's only other liquidity will be proceeds from the Private Placement. If
iEXALT is unable to obtain additional financing or raise adequate working
capital in the amounts desired and on acceptable terms, iEXALT may be required
to reduce significantly the scope of its presently anticipated activities.
Management believes it will be able to eventually generate sufficient cash flows
to meet it obligations on a timely basis, to obtain additional debt and /or
equity financing, and ultimately to attain profitability.
The Company will be required to obtain additional financing or capital to
attain profitable operations. The Company's internally generated cash flows from
operations have historically been and continue to be insufficient for its cash
needs. As of November 23, 1999 the Company's sources of external and internal
financing were limited. It is not expected that the internal source of liquidity
will improve until significant net cash is proved by operating activities, and
until such time, the Company will rely upon external sources for liquidity.
The Company believes that net proceeds of future anticipated securities
offerings, and giving effect to revenues, which are projected to be realized
from operations, should be sufficient to fund ongoing operations and its
business plan. However, there is no assurance that anticipated offerings will be
undertaken, and if undertaken, will be successful or the proceeds derived from
such offerings will, in fact, be sufficient to fund operations and meet the
needs of the Company's business plans. There is no assurance that the current
working capital will be sufficient to cover cash requirements for the balance of
the current fiscal year or to bring the Company to a positive cash flow
position.
RESULTS OF OPERATIONS
Sunbelt incurred expenses during the fiscal year ended August 31, 1999 of
$24,068 in accounting, legal and other corporate expenses in connection with
Sunbelt's efforts to file necessary periodic reports and in reviewing a number
of possible business opportunities during the fiscal year.
PLAN OF OPERATIONS
After the close of Sunbelt's fiscal year-end on August 31, 1999, iEXALT
entered into a number of transactions that has significantly expanded its
operations.
On September 1, 1999, Sunbelt acquired all of the issued and outstanding
stock of iEXALT-Texas. In connection with this merger, Sunbelt changed its name
to iEXALT, Inc. The acquisition was effected through the
12
<PAGE>
issuance of 18,393,666 shares of Sunbelt common stock to the shareholders of
iEXALT-Texas in exchange for all of the outstanding shares of iEXALT-Texas
common stock. The acquisition was accounted for as a reverse acquisition of
Sunbelt effective September 1, 1999. iEXALT's Form 8-K filed October 15, 1999
and Form 8-K/A filed November 15, 1999 relating to this transaction are herein
incorporated by reference.
iEXALT-Texas owns NetXPress, a Houston, Texas based Internet Service
Provider, ("ISP"), and operates the ISP as WWW.iEXALT.NET. In addition,
iEXALT-Texas acquired the assets and customers of a second Houston ISP formerly
operated by Interactive Communication Concepts. These two ISPs form the
infrastructure for iEXALT to offer Internet service to its customers.
iEXALT-Texas has established a strategic relationship with two wholesale access
providers that allows it to sell its filtered ISP services nationally.
iEXALT-Texas' Electronic Publishing division manufactures and markets
books and reference materials of interest to the Christian community using a CD
ROM format. iEXALT expects to migrate these resources to the Internet as a first
stage in the development of its Web-based research products.
On October 1, 1999 iEXALT acquired 100% of the stock of WordCross
Enterprises, Inc. d/b/a Christian Happenings, of Columbus, Ohio for 850,000
shares of restricted common stock of iEXALT. Christian Happenings magazine is an
events publication that circulates over 250,000 copies in thirteen regions east
of the Mississippi every two months. The transaction was accounted for as a
purchase and the amount of goodwill recorded was $288,000. iEXALT intends to
expand the circulation of Christian Happenings magazine to primary regions west
of the Mississippi in 2000.
As a platform for its filtering technology, iEXALT acquired the
proprietary assets of netFilter Technologies, a proxy-filtering software company
on October 1, 1999 for $60,000 and 60,000 shares of authorized but unissued
common stock. This acquisition gives iEXALT proprietary control over its own
filtering technology and over the development of future markets for this
technology including managed access services for the business community. iEXALT
intends to market this product to businesses in 2000.
The Company's financial statements are prepared using principles
applicable to a going concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business. However, the
Company does not have significant cash or other material liquid assets, nor does
it have an established source of revenues sufficient to cover its operating
costs and to allow it to continue as a going concern. the Company may in the
future experience significant fluctuations in its results of operations. Such
fluctuations may result in volatility in the price and/or value of the Company's
common stock. Shortfalls in revenues may adversely and disproportionately affect
the Company's results of operations because a high percentage of the Company's
operating expenses are relatively fixed. Accordingly, the Company believes that
period-to-period comparisons of results of operations should not be relied upon
as an indication of future results of operations. There can be no assurance that
the Company will be profitable.
The Company will be required to obtain additional financing or capital to
attain profitable operations. The Company's internally generated cash flows from
operations have historically been and continue to be insufficient for its cash
needs. As of November 23, 1999 the Company's sources of external and internal
financing were limited. It is not expected that the internal source of liquidity
will improve until significant net cash is proved by operating activities, and
until such time, the Company will rely upon external sources for liquidity.
The Company believes that net proceeds of future anticipated securities
offerings, and giving effect to revenues, which are projected to be realized
from operations, should be sufficient to fund ongoing operations and its
business plan. However, there is no assurance that anticipated offerings will be
undertaken, and if undertaken, will be successful or the proceeds derived from
such offerings will, in fact, be sufficient to fund operations and meet the
needs of the Company's business plans. There is no assurance that the current
working capital will be sufficient to cover cash requirements for the balance of
the current fiscal year or to bring the Company to a positive cash flow
position.
Y2K COMPLIANCE ISSUES
iEXALT's office computers have been purchased in 1999 and have been tested
for year 2000 compliance. the Company is currently reconfiguring and testing
equipment and software employed in the operation of iEXALT's ISP to ensure that
all software and hardware will continue to function properly using four digit
year codes. However, although the Company believes that its systems are Year
2000 compliant, it relies on
13
<PAGE>
computers, lines and services supplied by third parties, which may not be Year
2000 compliant. Failure of such third-party equipment or software could result
in the Company incurring unanticipated loss of service and/or expense in its ISP
operations. A loss of revenue could have a material adverse effect on the
Company's business, results of operations and financial condition.
PRO FORMA INFORMATION
The unaudited pro forma results of operations of iEXALT for the eight
months ended August 31, 1999 and for the twelve months ended December 31, 1998
and 1997 (assuming iEXALT-Texas and its acquisitions, and WordCross Enterprises,
Inc. d/b/a Christian Happenings had been acquired on January 1, 1997) are shown
in the footnotes to the financial statements.
ITEM 7. FINANCIAL STATEMENTS
ACCOUNTING AND FINANCIAL DISCLOSURE
iEXALT's financial statements are included herein commencing on page
F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
14
<PAGE>
PART III.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITION
---- --- --------
Morris H. Chapman 58 Director
Jack I. Tompkins 53 Chairman, Chief Executive Officer
Hunter M. A. Carr 51 Vice Chairman
Donald W. Sapaugh 40 Director, President
Jonathan C. Gilchrist 48 Director, Executive Vice President
Joe Hunter Reynolds 77 Director
Kirwin L. Drouet 50 Executive Vice President, Acting
Chief Operating Officer
L. Stanley Coffee 55 Vice President Marketing and Sales
Directors serve until the expiration of their term at the annual meeting
of stockholders. All officers serve at the discretion of the Board of Directors.
There is no family relationship between or among any executive officers and
directors.
JACK I. TOMPKINS, CHAIRMAN, CHIEF EXECUTIVE OFFICER
Jack I. Tompkins has served as Chairman and Chief Executive Officer since
August 30, 1999. He served as Executive Vice President and Chief Financial
Officer of Crescent Real Estate Equities Company until September 30, 1999. From
1996 to the present he served as the managing director of Raintree Capital, a
merchant banking company and Chairman of ARTA Equity Advisors, L.L.C., which was
formed to engage primarily in the business of promoting consolidation and public
offering transaction for groups of companies in large, highly fragmented
industries. From 1988 to 1996 Mr. Tompkins was Senior Vice President and Chief
Financial Officer of Enron Corporation.
Mr. Tompkins began his career with Arthur Young & Company, serving three
years before joining Arthur Andersen, L.L.P., where he was elected to the
partnership in 1981. While at Arthur Andersen, he was in charge of the Merger
and Acquisition Program for the Houston office as well as head of the Natural
Gas Industry Group. Mr. Tompkins is a CPA and received his MBA from Baylor
University in 1969.
HUNTER M. A. CARR, VICE CHAIRMAN
Hunter M. A. Carr has served as Vice-Chairman of the board since August
30, 1999. He founded the Internet Law Library, Inc., which he has served as
Chairman and CEO since July 1, 1999. Prior to that he served for over five years
as the owner and Chief Executive officer of IT/IS, Inc., an automated litigation
support company.
DONALD W. SAPAUGH, DIRECTOR, PRESIDENT
Donald W. Sapaugh has served as Director and President since August 30,
1999. Mr. Sapaugh has served as the President and Chief Executive Officer of
PremierCare, L.L.C. from 1996 to the present. PremierCare provides health care
services to senior citizens. Mr. Sapaugh served as the President and Chief
Executive Officer of Rapha Treatment Centers ("Rapha") for ten years until the
company was sold in 1996. During this period, Mr. Sapaugh created numerous
organizations that provided ministry and services to tens of thousands of
churches, non-profit ministries, Christian artists, denominations and key
individuals. After leaving Rapha, Mr. Sapaugh co-founded OnePlace, LLC, a
Christian Internet company that is now owned by Salem Communications. In
addition to his other duties, Mr. Sapaugh also serves as the President of the
International Christian Internet Association. Mr. Sapaugh serves on many
Christian ministry boards, has authored three books and is a frequent speaker.
15
<PAGE>
JONATHAN C. GILCHRIST, DIRECTOR, EXECUTIVE VICE PRESIDENT, SECRETARY
Jonathan C. Gilchrist has served as Director, Executive Vice President and
Secretary August 30, 1999. Mr. Gilchrist served as Chairman and Chief Executive
Officer of AmericanLawNet.com from its founding in 1997 until January 1999 when
he accepted a position with iEXALT. Prior to forming AmericanLawNet.com, Mr.
Gilchrist practiced law with the law firm of Orgain, Bell & Tucker, L.L.P, from
1993 until 1998. He began his law career with Exxon Company USA in Houston,
Texas after graduating from the University of Alabama School of Law in 1990.
Prior to attending law school, Mr. Gilchrist was a pastor in Tuscaloosa,
Alabama. Mr. Gilchrist spent over twelve years as a seminar speaker, musician
and Christian writer.
MORRIS H. CHAPMAN, DIRECTOR
Morris H. Chapman has served as a Director since August 30, 1999. Dr.
Chapman became President and Chief Executive Officer of the Executive Committee
of the Southern Baptist Convention, on October 1, 1992. He continues to serve in
that position. He served as SBC president from 1990 to 1992 and has been
president of the SBC Pastors' Conference (1986). He was a pastor for 25 years.
Dr. Chapman is the Chairman of the non-profit International Christian
Internet Association, Houston, Texas; a member of the Advisory Board of
Directors, First American National Bank, Nashville, Tennessee; a member of the
National Church Advisory Council, American Bible Society, New York, New York;
and on the Executive Committee, Baptist World Alliance, McLean, Virginia.
Dr. Chapman is a graduate of Mississippi College, Clinton, Mississippi. He
has earned the Master of Divinity and Doctor of Ministry degrees and has also
been awarded two honorary doctorate degrees. He is an author and has traveled
and spoken extensively in the United States and overseas.
JOE HUNTER REYNOLDS, DIRECTOR
Joe Hunter Reynolds, age 77, was elected a director of the registrant
effective September 1, 1999 by unanimous consent of the board of directors.
Following a distinguished legal career, Mr. Reynolds retired and has been Of
Counsel to Schwartz, Junell, Campbell & Oathout, L.L.P. since January 1997.
MR. KIRWIN L. DROUET, EXECUTIVE VICE PRESIDENT, ACTING CHIEF OPERATING
OFFICER AND ASSISTANT SECRETARY
Kirwin L. Drouet became a full-time consultant to iEXALT in June 1999
under an agreement with ARTA Equity Advisors, L.L.C. Mr. Drouet served as Chief
Financial Officer for Stellar Event & Presentation Resources, Inc. from 1998 to
1999. Prior to that he served as the Chief Operating Officer of The Abbey Group,
an events production and rental equipment company. He also served as Vice
President of Administration and Chief Financial Officer for Maxxam Property Co.
Mr. Drouet was the Vice President - Finance of SHRP Capital Corporation until
November 1994. Subsequent to his departure, on April 17, 1995, SHRP Capital and
two affiliates filed voluntary petitions to reorganize under the provisions of
Chapter 11 of the United States Bankruptcy Code. The case was closed on December
19, 1996.
Mr. Drouet began his career with Arthur Andersen & Co. where he practiced
for nine years. He has been involved in numerous development stage companies
including Tollway Partners, Inc. and Rice Exploration Co. He has B.A., B.S. and
a Masters degree from Rice University and is a Texas certified public
accountant.
MR. L. STANLEY COFFEE
L. Stanley Coffee hired by iEXALT in July 1999 to serve as Vice President
of Marketing and Sales. Mr. Coffee has thirty years of sales and marketing
experience and most recently served as a sales consultant for TAM until joining
iEXALT in 1999. He served as Vice President of Energy Management Systems for
Altra Energy from 1995 to 1997. Mr. Coffee has B.A. and M.B.A. degrees from
Texas Tech University. His career has included considerable experience in
technical sales including sales positions with IBM and Honeywell.
16
<PAGE>
SECTION 16(A) COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires iEXALT's
directors and executive officers, and persons who own beneficially more than ten
percent (10%) of the Common Stock of iEXALT, to file reports of ownership and
changes of ownership with the Securities and Exchange Commission. Copies of all
filed reports are required to be furnished to iEXALT pursuant to Section 16(a).
Based solely on the reports received by iEXALT and on written representations
from reporting persons, iEXALT believes that the directors, executive officers,
and greater than ten percent (10%) beneficial owners complied with all
applicable filing requirements during the fiscal year ended August 31, 1999.
17
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by Sunbelt to the executive officer and no other executive officers
received total annual salary and bonus exceeded $100,000 during 1999. Mr. Roger
Lund served as the sole executive officer of Sunbelt Exploration, Inc. during
the fiscal year.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------
AWARDS PAYOUTS
------------------------------ -------
OTHER RESTRICTED SECURITIES ALL OTHER
NAME AND ANNUAL STOCK UNDERLYING LTIP COMPEN-
PRINCIPAL SALARY BONUS COMPEN- AWARDS(S) OPTIONS/SARS PAYOUTS SATION
POSITION YEAR ($) ($) SATION ($) ($) (#) ($) ($)
- ------------------------ ---- ------- ----- ---------- ---------- ------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Roger Lund 1999 $0 cash $0 $0 $0 N/A $0 $0
President, Secretary &
Director
</TABLE>
NOTE: Since iEXALT-Texas was not acquired by Sunbelt Exploration, Inc.
(now iEXALT-Nevada) until after the close of the 1999 fiscal year, there
was no executive compensation paid to iEXALT directors and officers listed
above by Sunbelt. The only executive officer receiving compensation from
iEXALT during the fiscal year was Jonathan Gilchrist who received $16,500
from iEXALT-Texas during the reporting period for services to
iEXALT-Texas.
MATERIAL EMPLOYMENT AGREEMENTS
L. STANLEY COFFEE Mr. Coffee was retained as Vice President Marketing and Sales
at a salary of $8,000 per month with bonus and incentive compensation available
in the future based upon performance of the sales department. In addition, he
received an option to purchase 100,000 shares of iEXALT-Texas common stock at a
price of $1.80 each year for three years if he meets certain performance levels
at the end of each year.
EDWARD NOVAK Mr. Novak was the President of WordCross Enterprises, Inc., d/b/a
Christian Happenings, Inc. prior to the October 1, 1999 acquisition of that
enterprise. In connection with the acquisition of WordCross Enterprises, Inc. by
iEXALT-Nevada, Mr. Novak agreed to a five-year employment contract with a salary
of $120,000 per year for his services.
STOCK OPTIONS
Mr. L. Stanley Coffee was granted an option to purchase 100,000 shares of common
stock for $1.80 at the end of each of the first three years of his employment by
iEXALT based upon the achievement of certain sales and marketing goals.
Mr. Novak and Mrs. Novak were granted options to purchase 50,000 shares of
common stock for $1.80 at the end of each of the first five years of their
employment by iEXALT upon the successful completion of their employment
requirements.
On September 1, 1999 iExalt entered in to an agreement for consulting services
with Consulting & Strategy International, Inc., ("CSI"), in partial
consideration for the consulting services to be offered by CSI. CSI it was
granted the right to purchase 600,000 shares of iExalt stock at $1.00 per share
within six months of the execution date of the agreement. In addition, CSI was
granted 250,000 warrants to purchase unregistered common stock at $3.00 per
share; 250,000 warrants to purchase unregistered common stock at $4.00 per
share; 250,000 warrants to purchase unregistered common stock at $5.00 per
share; and 250,000 warrants to purchase unregistered common stock at $7.00 per
share.
On August 30, 1999, the shareholders approved an Employees Stock Option Plan
setting aside 1,000,000 shares of authorized but unissued stock to be
distributed by the compensation committee pursuant to the Plan. As August 31,
1998 no options had been issued pursuant the Plan.
18
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
NAME AND ADDRESS(1) SHARES OF COMMON STOCK PERCENT OF VOTING POWER
------------------- ---------------------- -----------------------
Jack I. Tompkins 4,187,500 19%
Hunter M.A. Carr 4,655,000 22%
Morris H. Chapman 2,700,000 12%
Donald W. Sapaugh 2,200,000 10%
Jonathan C. Gilchrist 2,050,000 9%
All officers and directors
as a Group 16,620,000 76%
- ------------
(1) The address for Messrs. Tompkins, Carr, Chapman, Sapaugh and Gilchrist is
4301 Windfern, Houston, Texas 77041.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 31, 1999 iEXALT-Texas acquired the assets and customers of a
Houston, Texas ISP owned by AgroSource, Inc. and Hunter Community Interests,
Ltd. for 3,000,000 shares of common stock in iEXALT-Texas from certain
shareholders of iEXALT. As part of this acquisition, iEXALT-Texas assumed a
non-interest bearing note for $350,000 payable to a shareholder of iEXALT at
such time that iEXALT's net assets are equal to or exceed $5,000,000.
On June 29, 1999 a shareholder of iEXALT purchased 2,250,000 shares of
iEXALT-Texas' common stock for cash of $500,000 and agreement to furnish certain
services to the Company.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter.
(b) Exhibit Listing
EXHIBIT NUMBER DESCRIPTION
-------------- ----------------------------------------------
2.1 (1) Reorganization Agreement
3.1 (2) Amended and Restated Articles of Incorporation
10.1 (2) 1999 Employee Stock Option Plan
1999 Director's Stock Option Plan
10.2 (3) Employment Agreement - Stan Coffee
10.3 (3) Employment Agreement - Ed Novak
10.4 (3) Consulting and Strategy International
27. (3) Financial Data Schedule
19
<PAGE>
- ---------------
(1) Incorporated by reference to iEXALT's Current Report on Form 8-K filed
with the Commission on September 14, 1999.
(2) Incorporated by reference to iEXALT's Current Report on Form 8-K filed
with the Commission on September 14, 1999.
(3) Filed by attachment.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
iEXALT, INC.
By: /S/ DONALD W. SAPAUGH
Donald W. Sapaugh, President
November 24, 1999
By: /S/ JACK I. TOMPKINS
Jack I. Tompkins, Chairman/CEO
November 24, 1999
By: /S/ KIRWIN DROUET
Kirwin Drouet, Chief Accounting Officer,
Acting COO
November 24, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
--------- -------- ----
/S/ JACK I. TOMPKINS Chairman of the Board November 24, 1999
Jack I. Tompkins
/S/ DONALD W. SAPAUGH Director November 24, 1999
Donald W. Sapaugh
/S/ JONATHAN C. GILCHRIST Director, Secretary November 24, 1999
Jonathan C. Gilchrist
/S/ MORRIS H. CHAPMAN Director November 24, 1999
Morris H. Chapman
______________________ Vice Chairman November __, 1999
Hunter M. A. Carr
/S/ JOE HUNTER REYNOLDS Director November 24, 1999
Joe Hunter Reynolds
21
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE F-
---------
Independent Auditors' Report ....................................... 1
Balance Sheet ...................................................... 2
Statements of Operations ........................................... 3
Statements of Stockholders' Equity (Deficit) ....................... 4
Statements of Cash Flows ........................................... 5
Notes to the Financial Statements .................................. 6
____________________________
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Sunbelt Exploration, Inc.
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance sheet of Sunbelt Exploration, Inc.
(a development stage company) as of August 31, 1999, and the related statements
of operations, stockholders' equity (deficit), and cash flows for the years
ended August 31, 1999 and 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 audits 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 Sunbelt Exploration, Inc. (a
development stage company) as of August 31, 1999 and the results of its
operations and its cash flows for the years ended August 31, 1999 and 1998, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has had limited operations and limited capital
which together raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also discussed in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
JONES, JENSEN & COMPANY
Jones, Jensen & Company
Salt Lake City, Utah
October 12, 1999
F-1
<PAGE>
SUNBELT EXPLORATION, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AUGUST 31,
1999
----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......... $ 657
----------
Total Current Assets.......... 657
----------
TOTAL ASSETS.................. $ 657
==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable................... $ 7,520
Account payable -- related party
(Note 3).......................... 6,000
----------
Total Current Liabilities..... 13,520
----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock; 100,000,000 shares
authorized of $0.001 par value,
2,480,500 shares issued and
outstanding....................... 2,481
Additional paid-in capital......... 65,569
Deficit accumulated during the
development stage................. (80,913)
----------
Total Stockholders' Equity
(Deficit).................... (12,863)
----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT).................... $ 657
==========
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
SUNBELT EXPLORATION, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FROM
FOR THE INCEPTION ON
YEARS ENDED APRIL 23, 1979
AUGUST 31, THROUGH
-------------------------- AUGUST 31,
1999 1998 1999
------------ ------------ ---------------
(UNAUDITED)
<S> <C> <C> <C>
SALES................................ $ -- $ -- $ --
COST OF SALES........................ -- -- --
------------ ------------ ---------------
GROSS MARGIN......................... -- -- --
------------ ------------ ---------------
OPERATING EXPENSES
General and administrative...... 24,068 8,795 80,913
------------ ------------ ---------------
Total Operating Expenses... 24,068 8,795 80,913
------------ ------------ ---------------
Loss from Operations....... (24,068) (8,795) (80,913)
------------ ------------ ---------------
OTHER INCOME (EXPENSE)............... -- -- --
------------ ------------ ---------------
NET LOSS............................. $ (24,068) $ (8,795) $ (80,913)
============ ============ ===============
BASIC LOSS PER SHARE................. $ (0.01) $ (0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING........................ 2,480,500 1,512,827
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
SUNBELT EXPLORATION, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL STOCK DURING THE
--------------------- PAID-IN SUBSCRIPTION DEVELOPMENT
SHARES AMOUNT CAPITAL RECEIVABLE STAGE
----------- ------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at inception, April 23,
1979............................... -- $ -- $-- $ -- $ --
Common stock issued for cash at $0.10
per share.......................... 480,500 481 47,569 -- --
Net loss from inception on April 23,
1979 through August 31, 1995....... -- -- -- -- (48,050)
----------- ------- ----------- ------------- ------------
Balance, August 31, 1995............. 480,500 481 47,569 -- (48,050)
Net loss for the year ended August
31, 1996........................... -- -- -- -- --
----------- ------- ----------- ------------- ------------
Balance, August 31, 1996............. 480,500 481 47,569 -- (48,050)
Net loss for the year ended August
31, 1997........................... -- -- -- -- --
----------- ------- ----------- ------------- ------------
Balance, August 31, 1997............. 480,500 481 47,569 -- (48,050)
Common stock issued for services at
$0.01 per share.................... 200,000 200 1,800 -- --
Common stock issued for cash at $0.01
per share.......................... 800,000 800 7,200 -- --
Common stock issued for subscription
receivable at $0.01 per share...... 1,000,000 1,000 9,000 (10,000) --
Net loss for the year ended August
31, 1998........................... -- -- -- -- (8,795)
----------- ------- ----------- ------------- ------------
Balance, August 31, 1998............. 2,480,500 2,481 65,569 (10,000) (56,845)
Receipt of subscription receivable... -- -- -- 10,000 --
Net loss for the year ended August
31, 1999........................... -- -- -- -- (24,068)
----------- ------- ----------- ------------- ------------
Balance, August 31, 1999............. 2,480,500 $2,481 $65,569 $ -- $(80,913)
=========== ======= =========== ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
SUNBELT EXPLORATION, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FROM
FOR THE INCEPTION ON
YEARS ENDED APRIL 23, 1979
AUGUST 31, THROUGH
--------------------- AUGUST 31,
1999 1998 1999
---------- --------- --------------
<S> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss........................... $ (24,068) $ (8,795) $(80,913)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Common stock issued for
services................... -- 2,000 2,000
Changes in assets and liabilities:
Increase in accounts
payable.................... 4,879 2,641 7,520
Increase in accounts
payable -- related party... 6,000 -- 6,000
---------- --------- --------------
Net Cash Used by
Operating
Activities............ (13,189) (4,154) (65,393)
---------- --------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES.... -- -- --
---------- --------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash....... -- 8,000 56,050
Cash received from stock
subscription receivable.......... 10,000 -- 10,000
---------- --------- --------------
Net Cash Provided by Financing
Activities................. 10,000 8,000 66,050
---------- --------- --------------
NET INCREASE (DECREASE) IN CASH......... (3,189) 3,846 657
CASH AT BEGINNING OF PERIOD............. 3,846 -- --
---------- --------- --------------
CASH AT END OF PERIOD................... $ 657 $ 3,846 $ 657
========== ========= ==============
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR:
Interest........................... $ -- $ -- $ --
Income taxes....................... $ -- $ -- $ --
NON-CASH FINANCING ACTIVITIES:
Common stock issued for services... $ -- $ 2,000 $ 2,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
SUNBELT EXPLORATION, INC.
(A DEVELOPMENT STATE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1999 AND 1998
- --------------------------------------------------------------------------------
NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Sunbelt Exploration, Inc. (Company) was incorporated
on April 23,1979 under the laws of the State of Nevada, primarily for
the purpose of exploration, development and production of oil and gas
reserves.
The Company has limited operations, assets and liabilities.
Accordingly, the Company is dependent upon management and/or
significant shareholders to provide sufficient working capital to
preserve the integrity of the corporate entity during this phase. It
is the intent of management and significant shareholders to provide
sufficient working capital necessary to support and preserve the
integrity of the corporate entity.
ACCOUNTING METHOD - The Company's financial statements are prepared
using the accrual method of accounting. the Company has elected an
August 31 year-end.
CASH AND CASH EQUIVALENTS - Cash equivalents include short-term,
highly liquid investments with maturities of three months or less at
the time of acquisition.
BASIC LOSS PER SHARE - The computations of basic loss per share of
common stock are based on the weighted average number of shares
outstanding during the period of financial statements.
PROVISION FOR TAXES - At August 31, 1999, the Company had net
operating loss carry forwards of approximately $80,000 that may be
offset against future taxable income through 2014. No tax benefit has
been reported in the financial statements, because the Company
believes there is a 50% or greater chance the carryforwards will
expire unused. Accordingly, the potential tax benefits of the loss
carryforwards are offset by a valuation amount of the same amount.
ADDITIONAL ACCOUNTING POLICIES - Additional accounting policies will
be established once planned principal operations commence.
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. Actual
results could differ from those estimates.
NOTE 2 GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company does not have
significant cash or other material assets, nor does it have an
established source of revenues sufficient to cover its operating
costs and to allow it to continue as a going concern. It is the
intent of the Company to be acquired by an existing, operating
company. Until an acquisition or merger occurs, shareholders of the
Company have committed to meeting the Company's operating expenses.
F-6
<PAGE>
NOTE 3 RELATED PARTY TRANSACTIONS
On July 20, 1999, the Company borrowed $6,000 from a related party.
The note has no specific terms, bears no interest, and is payable at
the convenience of the Company. Because the note has no specific
terms, the entire balance is classified as a current liability.
Subsequent to the audit date the entire balance of this note was paid
in full.
In December 1995, the Company paid an entity controlled by a Company
shareholder approximately $35,927 for reimbursement of legal fees
paid on the Company's behalf and management fees related to the
monitoring, management and settlement of the Company's bankruptcy
action.
NOTE 4 REVERSE STOCK SPLIT
In 1998, the Company reverse split shares of its common stock on a
1-for-10 basis. All references to shares outstanding and loss per
share have been adjusted to reflect the effect of the reverse split
on a retroactive basis.
In 1999, the Company again elected to reverse split shares on a
1-for-10 basis. All references to shares outstanding and loss per
share have been adjusted to reflect the effect of the reverse split
on a retroactive basis.
NOTE 5 SUBSEQUENT EVENTS
On September 1, 1999, Sunbelt Exploration, Inc. ("Sunbelt"), a Nevada
corporation, acquired all of the issued and outstanding stock of
iEXALT-Texas. In connection with this merger, Sunbelt changed its
name to iEXALT, Inc. ("iEXALT-Nevada"). The acquisition was effected
through the issuance of 18,393,666 shares of Sunbelt common stock to
the shareholders of iEXALT-Texas in exchange for all of the
outstanding shares of iEXALT-Texas common stock. Upon the closing of
the transaction, there were 20,874,166 shares of common stock issued
and outstanding. Subsequent to the stock record date 30,000
additional shares were issued as of August 31, 1999 pursuant to
iEXALT-Texas' Private Placement Memorandum. The acquisition will be
accounted for as a recapitalization of the Company.
On October 1, 1999, iEXALT-Nevada 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 an events magazine that
circulates over 250,000 copies in thirteen regions of the country
every two months. As consideration for the acquisition, iEXALT-Nevada
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 iEXALT-Nevada 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
iEXALT-Nevada. 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 and the amount of goodwill recorded was $288,000.
The unaudited pro forma results of operations of the Company for the
eight months ended August 31, 1999 and for the twelve months ended
December 31, 1998 and 1997 (assuming iEXALT-Texas and its
acquisitions, and WordCross Enterprises, Inc. had been acquired on
January 1, 1997) are shown below. The pro forma financial information
is prepared on the calendar year basis that will become
iEXALT-Nevada's fiscal year end.
F-7
<PAGE>
SUNBELT EXPLORATION, INC.
(A DEVELOPMENT STATE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA
EIGHT MONTHS ENDED TWELVE MONTHS ENDED TWELVE MONTHS ENDED
AUGUST 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
--------------------- --------------------- ----------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
REVENUES ...................................... $ 1,640,892 $ 2,582,758 $ 2,204,613
NET INCOME(LOSS) .............................. ($ 322,847) ($ 29,033) $ 77,044
EARNING/(LOSS) PER SHARE ...................... ($ 0.015) ($ 0.001) $ 0.004
ProForma Weighted Average
Shares Outstanding ........................ 21,754,166 20,786,493 19,754,166
PRO FORMA AS OF PRO FORMA AS OF PRO FORMA AS OF
AUGUST 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
--------------------- --------------------- ----------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
ASSETS:
Current assets ................................ $ 503,574 $ 162,893 $ 215,134
Property & equipment, net ..................... 107,545 22,394 12,832
Goodwill, net ................................. 468,886 396,293 406,721
Other assets .................................. 3,814 -- --
------------ ------------ ------------
TOTAL ASSETS .................................. $ 1,083,819 $ 581,580 $ 634,687
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities ........................... $ 234,343 $ 212,047 $ 229,983
Long-term debt ................................ 500,000 24,815 40,953
Shareholders' equity .......................... 349,476 344,718 363,751
------------ ------------ ------------
TOTAL LIABILITIES & EQUITY .................... $ 1,083,819 $ 581,580 $ 634,687
============ ============ ============
</TABLE>
The pro forma financial results for WordCross included above are unaudited
for the periods presented.
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 fiscal
1997 or of the future operations of the combined companies.
F-8
EXHIBIT 10.2
[iEXALT Logo] JONATHAN C. GILCHRIST
EXECUTIVE VICE PRESIDENT
4301 WINDFERN
HOUSTON, TEXAS 77041
(281) 600-4000
July 6, 1999
Mr. Stan Coffee
130 Woodhill Road
Kerrville, TX 78208
Re: Contract for services to iEXALT, Inc.
Dear Mr. Coffee:
Pursuant to our earlier discussions, iEXALT hereby offers you a position
as VP Sales & Marketing of iEXALT, Inc. You will be hired initially as a
consultant at a rate of $8,000 per month. You will be converted to employee
status at such time as the Company institutes an employee and benefits program.
You will be given a cash bonus, paid annually, based on $1.00 per new
paying customer added during the previous 12 months not to exceed two times
salary. In other words, if we add 100,000 net paying customers during the
12-month period ending 7/1/2000, then you would earn a cash bonus of $100,000.
In additional, you will be allowed to purchase 100,000 shares of iEXALT
common stock at a price of $0.222 per share (the founder's price) within 30 days
of your hire date as a consultant. You will also be granted options to purchase
300,000 shares of iEXALT common stock at a price of $1.80 per share that would
be exercisable 1/3 when the number of paying customers of iEXALT exceeds
100,000, 1/3 when the number of paying customers exceeds 200,000, and 1/3 when
the number of paying customers exceeds 300,000.
Welcome aboard, we are excited to have you as part of the team.
Sincerely,
Jonathan Gilchrist
EXHIBIT 10.3
The Employment contract dated as of October 1, 1999 between iEXALT, Inc., 4301
Windfern, Houston, TX 77041 ("Company"), and Ed Novak, P.O. Box 326, Galena, OH
43021, and individual ("Employee").
AGREEMENT
1. TERM. The term of this Employment contract shall be for a period of
sixty (60) months to commence on October 1, 1999, and shall expire on
October 1, 2004, unless terminated earlier pursuant to the provisions
set forth below.
2. DUTIES. During the term of this employment contract, Employee shall
perform such duties as may be assigned to him by Company's
President. It is contemplated that Employee will serve as a Vice
President and an executive officer of the Company and as the
President of WordCross Enterprises, Inc. for as long as the Company
elects to operate Christian Happenings as a subsidiary, during the
entire term of this Employment Contract. Employee will use his best
efforts to perform such duties to the best of his ability, and to
the satisfaction of Company.
3. COMPENSATION. As full consideration for the performance by Employee of
all of his obligations under this Employment Contract, Company shall
make the payments and provide the benefits set forth below during the
term of this Employment Contract (the "Compensation"):
A. Salary: One Hundred Twenty Thousand Dollars ($120,000) (the
"Salary") payable in periodic installments in accordance with
Company's policy relating to the payment of salaries generally.
Employee shall be entitled to receive increases to the Salary
consistent with any increases provided to the other executive
officers of the Company.
B. Vacation: Employee shall be entitled to take four (4) weeks vacation
during each calendar year.
C. Healthcare, Bonus Plan, Stock Option, Profit-Sharing & Retirement
Benefits: Employee shall be entitled to participate in the Company's
Healthcare, bonus Plan, Stock Option, Profit-Sharing & Retirement
plans, if any, immediately upon execution of this agreement.
D. Other: Such other benefits as may from time to time be provided
generally to executive officers of Company.
E. Stock Options: Stock Options as set forth in the Acquisition
Agreement executed between WordCross Enterprises and iEXALT, Inc.
4. PLACE OF PERFORMANCE. Employee shall perform his duties under this
Employment Contract at the offices of the Company in Columbus, Ohio
unless otherwise directed by the Board of Directors and in agreement
with the Employee. Should Company and Employee agree to some form
of relocation, Company will reimburse Employee for reasonable
relocation expenses incurred by him. Should Employee's duties
require him to travel, Company will reimburse Employee for
reasonable expenses incurred by him in
<PAGE>
connection therewith in accordance with Company's policy with respect
thereto.
5. TERMINATION UPON DEATH OR DISABILITY. The term of this Employment
Contract shall terminate upon the death of Employee.
6. TERMINATION BY COMPANY FOR CAUSE. Company shall have the right to
terminate the term of this Employment Contract by notice to Employee
if:
A. Employee is convicted of any crime or offense involving money or
other property of the Company, or of any felony; or
B. Employee engages in any misconduct that is injurious to Company or
its reputation in the business community.
7. TERMINATION BY COMPANY WITHOUT CAUSE. Company shall have the right to
terminate Employee without cause upon notice thereof. If Company
terminates Employee under this Section 7, then employee shall be
entitled to receive the Compensation as provided in Section 3 of this
Employment Contract for the remaining term of the Employment Contract.
8. TERMINATION BY EMPLOYEE. Employee shall have the right to terminate the
term of this Employment Contract by notice to Company if Company
breaches this Employment Contract.
9. ARBITRATION. Any controversy or claim arising out of or relating to
this Employment Contract, or the breach thereof, or otherwise relating
to Employee's employment by Company, shall be settled by final and
binding arbitration administered by the American Arbitration
Association in Houston, Texas and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
10. SEVERABILITY. If any of the covenants contained herein or any part
thereof are hereafter construed to be invalid or unenforceable, the
remainder of this Employment contract and any application of the other
provisions of this Employment contract shall not be affected thereby,
but rather shall be enforced to the greatest extent permitted by law.
11. ENTIRE AGREEMENT; CHOICE OF LAW. This Employment Contract contains the
entire agreement of the parties relating to the subject matter
hereof and supersedes all prior agreements or understandings,
written or oral, with respect to such subject. The internal laws of
the state of Texas without reference to its choice of law or
conflicts of law provisions shall govern the validity,
interpretation, construction, performance and enforcement of this
Employment Contract.
12. MISCELLANEOUS. No provision of this Employment Contract may be
modified, waived, or discharged unless such modification, waiver or
discharge is agreed to in a writing signed by Employee and on behalf
of Company by an officer other than Employee. No waiver by either
party hereto at any time of any breach by the other party hereto or
of compliance with any condition or provision of this Employment
Contract to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions of conditions at the same
time or at any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied, have been
made by
<PAGE>
either party with respect to the subject matter hereof that are not set
forth expressly in this Employment contract. This employment Contract
shall be binding upon and shall inure to the benefit of any successors
of the Company.
In witness whereof, this Employment Contract has been executed by the parties
hereto in counterparts as of the date first written above.
iEXALT, Inc.
By /S/ JONATHAN C. GILCHRIST
Jonathan C. Gilchrist, Executive VP
October 1, 1999
Employee:
/S/ ED NOVAK
Ed Novak
October 1, 1999
EXHIBIT 10.4
This Service Agreement is made between Consulting & Strategy International,
L.L.C., ("CSI") 5433 Westheimer, Suite 500, Houston, Texas 77056, and iEXALT,
Inc. ("iEXALT") 4301 Windfern, Houston, Texas 77041, the Parties hereto hereby
agree as follows:
WHEREAS, iEXALT is going public by and through whatever process is most
appropriate, and
WHEREAS, CSI is in the business of consulting with public companies
regarding issues of corporate image, business development and management and
planning strategies, and
IT IS, THERFORE, agreed that:
CSI shall have the right to purchase up to 600,000 additional shares of
iEXALT or its successor's stock, upon iEXALT becoming publicly traded at a price
of $1.00 (one dollar) per share. Such Shares shall have continuing priority
rights on registrations and shall be registered with and as part of the first
block of shares registered by iEXALT after the date of iEXALT becoming publicly
traded, or any subsequent registrations if the option to purchase such shares
has been exercised, in whole or in part, by CSI prior to the preparation date of
any registration statement. CSI must exercise this option on or before six
months after the first day upon which the stock of iEXALT begins full reporting,
full compliance, public trading.
CSI or its designee(s) shall be granted warrants to purchase additional
shares of iEXALT immediately upon iEXALT becoming a "publicly" traded firm. Such
warrants shall be valid to be exercised in whole or parts, for a period of five
years from the date of signing a warrant agreement which shall be in the form
provided, which warrant shall be executed immediately upon iEXALT becoming a
publicly traded firm. The amount of stock covered by the Warrants and the
exercise prices shall be as follows:
250,000 shares at $3.00 per share, which warrant must be exercised within
one year of the average of the bid/ask price of iEXALT remaining at a
minimum $4.00 per share price for any continuous 30 day period.
250,000 shares at $4.00 per share, which warrant must be exercised within
one year of the average of the bid/ask price of iEXALT remaining at a
minimum $5.00 per share price for any continuous 30 day period.
250,000 shares at $5.00 per share, which warrant must be exercised within
one year of the average of the bid/ask price of iEXALT remaining at a
minimum $7.00 per share price for any continuous 30 day period.
250,000 shares at $7.00 per share, which warrant must be exercised within
one year of the average of the bid/ask price of iEXALT remaining at a
minimum $9.00 per share price for any continuous 30 day period.
iEXALT shall execute a detailed Consulting Agreement Contract with CSI
and/or its successor(s) and or designee(s), immediately upon completion of
iEXALT becoming
<PAGE>
publicly traded, which consulting Agreement shall be for a term of five (5)
years and be on CSI's standard form. Consulting Agreement shall call for monthly
payments of 42,500 (twenty-five hundred dollars), per month beginning sixty (60)
days after the date iEXALT becomes publicly traded until the iEXALT stock bid
price exceeds $2.00 (two dollars) per share for 10 consecutive days, at which
time the monthly retainer paid to CSI shall permanently increase to $5,000 (five
thousand dollars) per month until the contract expires or until the stock bid
price of iEXALT exceeds $3.00 (three dollars) per share for ten (10) consecutive
days, at which time the monthly retainer paid CSI shall permanently increase to
$7,500 (seventy-five hundred dollars) per month until the contract expires
(Note: The share price of iEXALT is used as a benchmark for timing of consulting
compensation increased for no other reason than because the stock price is an
indicator of iEXALT's earnings and ability to obtain additional financing or
raise additional funds, and therefore, pay higher consulting fees. CSI shall not
be expected to, nor shall it be allowed to, promote iEXALT's stock or solicit
purchases for iEXALT's shares or be involved in any activities, which prevent
the issuance of S-8 stock to CSI under SEC rules.
If the foregoing is agreeable, please execute below understanding this
contract is totally contingent on iEXALT becoming a publicly traded firm. A
facsimile signature shall be valid as an original.
iEXALT, Inc.
By: /S/ HUNTER M.A. CARR
Hunter M.A. Carr, Vice Chairman
Consulting & Strategy International, L.L.C.
By: /S/ FRANKLIN C. FISHER, JR.
Franklin C. Fisher, Jr., CEO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SUNBELT EXPLORATION, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> AUG-31-1999
<CASH> 657
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 657
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 657
<CURRENT-LIABILITIES> 13,520
<BONDS> 0
0
0
<COMMON> 2,481
<OTHER-SE> (15,344)
<TOTAL-LIABILITY-AND-EQUITY> 657
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 24,068
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (24,068)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,068)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,068)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.00)
</TABLE>
