<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____ TO _____
COMMISSION FILE NUMBER 000-14747
AZUL HOLDINGS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2751102
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION
OF INCORPORATION OR ORGANIZATION) NUMBER)
4450 ARAPAHOE AVENUE, SUITE 100, BOULDER, CO 80303
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (303) 448-8833
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of November 1, 2000
Common Stock, $.03 par value 3,883,839
(Title of each class) (number of shares)
<PAGE> 2
Form 10-Q
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
as of September 30, 2000 and March 31, 2000..................................3
Consolidated Statements of Operations for the three and
six month periods ended September 30, 2000 and 1999.........................4
Consolidated Statements of Cash Flows for the
six month periods ended September 30, 2000 and 1999.........................5
Notes to Consolidated Financial Statements....................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................8
Item 3. Quantitative and Qualitative Disclosures About Market Risk...............11
Part II. Other Information........................................................12
</TABLE>
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
and Section 27A of the Securities Act of 1933, as amended. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "expects," and similar expressions are
intended to identify forward-looking statements. The important factors discussed
below under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations," including risks related to the Company's
credit line availability and debt restructuring efforts, and the risk factors
set forth in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 2000, among others, could cause actual results to differ materially
from those expressed or implied by forward-looking statements made herein and
presented elsewhere by management from time to time. Such forward-looking
statements represent management's current expectations and are inherently
uncertain. Investors are warned that actual results may differ materially from
management's expectations.
2
<PAGE> 3
ITEM 1.
AZUL HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
September 30, March 31,
2000 2000
------------- ---------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................ $ 3,538 $ 6,890
Accounts receivable, trade, less allowance for doubtful accounts
of $168 at September 30, 2000 and $224 at March 31, 2000 ................ 975 1,747
Notes receivable including $43 of accrued interest ....................... 2,793 --
Other current assets ..................................................... 777 360
-------- --------
Total current assets ................................................. 8,083 8,997
Property and equipment, net ................................................ 607 548
Other assets, net, ......................................................... 207 326
-------- --------
Total assets ....................................................... $ 8,897 $ 9,871
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable to stockholder ............................................. $ 14,927 $ 12,357
Current portion of long-term debt ........................................ 1,884 1,872
Accounts payable and accrued expenses .................................... 2,707 3,592
Other current liabilities ................................................ 2,780 2,937
-------- --------
Total current liabilities ............................................ 22,298 20,758
-------- --------
Notes payable to stockholder - long term ................................... -- 1,850
-------- --------
Total liabilities .................................................... 22,298 22,608
-------- --------
Minority interest in subsidiary ............................................ 1,662 2,072
-------- --------
Commitments and contingencies .............................................. -- --
-------- --------
Stockholders' deficit:
Capital stock:
Series preferred stock, $1.00 par value; 1,700 shares authorized;
no shares issued ...................................................... -- --
Series B convertible preferred stock, $1.00 par value; 300 shares
authorized; 232 shares issued and outstanding at September 30, 2000 and
March 31, 2000 (aggregate liquidation preference of $3,351) ........... 232 232
Series C convertible preferred stock, $.01 par value; 1,000 shares
authorized; 175 shares issued and outstanding at September 30, 2000 and
March 31, 2000 ........................................................ 1,750 1,750
Common stock, $.03 par value; 25,000 shares authorized; 3,997 and 2,991
shares issued at September 30, 2000 and March 31, 2000,
respectively, including treasury stock ................................ 124 90
Additional paid-in capital ............................................... 55,742 51,347
Accumulated deficit ...................................................... (71,742) (67,059)
-------- --------
(13,894) (13,640)
Treasury stock, at cost; 95 shares at September 30, 2000 and
March 31, 2000 ........................................................ 1,169 1,169
-------- --------
Total stockholders' deficit ............................................. (15,063) (14,809)
-------- --------
Total liabilities and stockholders' deficit ........................ $ 8,897 $ 9,871
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
AZUL HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
----------------------- -----------------------
2000 1999 2000 1999
------- ------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Systems ...................................... $ 257 $ 623 $ 666 $ 1,386
Service ...................................... 1,402 1,707 3,086 3,568
------- ------- ------- -------
Total revenues ........................... 1,659 2,330 3,752 4,954
------- ------- ------- -------
Cost of sales:
Systems ...................................... 67 187 249 504
Service ...................................... 989 1,230 1,987 2,351
------- ------- ------- -------
Total cost of sales ...................... 1,056 1,417 2,236 2,855
------- ------- ------- -------
Gross margin .................................. 603 913 1,516 2,099
------- ------- ------- -------
Operating expenses:
Research and development ..................... 902 924 1,742 1,705
Marketing, general and administrative ........ 1,659 1,375 3,164 2,840
------- ------- ------- -------
Total operating expenses ................. 2,561 2,299 4,906 4,545
------- ------- ------- -------
Loss from operations .......................... (1,958) (1,386) (3,390) (2,446)
Minority interest share of loss from operations 782 948 1,360 1,750
------- ------- ------- -------
Loss from operations after minority interest .. (1,176) (438) (2,030) (696)
------- ------- ------- -------
Other income (expense), net:
Gain on capital transaction of subsidiary .... 900 -- 900 --
Interest income .............................. 104 7 164 11
Interest expense - third party ............... (31) (36) (62) (72)
Interest expense - stockholder ............... (390) (403) (815) (801)
------- ------- ------- -------
Total other (expense), net ............... 583 (432) 187 (862)
------- ------- ------- -------
Loss before extraordinary item ................ (593) (870) (1,843) (1,558)
Extraordinary gain on extinguishments of debt . -- -- -- 353
Extraordinary (loss) on settlement of accrued
interest by issuance of common stock ......... -- -- (2,793) --
------- ------- ------- -------
Net loss ...................................... (593) (870) (4,636) (1,205)
Accrued preferred stock dividends ............. 23 23 47 47
------- ------- ------- -------
Net loss allocable to common stockholders ..... $ (616) $ (893) $(4,683) $(1,252)
======= ======= ======= =======
Basic and diluted earnings (loss) per share:
Before extraordinary item ................... $ (.15) $ (.31) $ (.50) $ (.56)
Extraordinary item .......................... -- -- (.77) .12
------- ------- ------- -------
Net loss per share .......................... $ (.15) $ (.31) $ (1.28) $ (.44)
======= ======= ======= =======
Basic and diluted weighted average common and
equivalent shares outstanding ............... 3,997 2,854 3,647 2,854
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
AZUL HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended,
September 30,
-----------------------
2000 1999
------- -------
Operations: (Unaudited)
-----------
<S> <C> <C>
Net loss ................................................................... $(4,636) $(1,205)
Adjustments to reconcile net loss to net cash used for operating activities:
Gain on early extinguishments of debt .................................... -- (353)
Gain on capital transaction of subsidiary ................................ (900) --
Depreciation and amortization ............................................ 351 304
Common stock and warrants issued in settlement of accrued interest
and other expense obligations ........................................ 2,998 --
Minority interest share of loss of subsidiary ............................ (1,360) (1,750)
Interest expense related to warrants ..................................... 157 340
Provisions for losses on accounts receivable ............................. (56) (110)
Operating assets and liabilities:
Accounts receivable ...................................................... 828 49
Inventories .............................................................. -- 401
Other assets ............................................................. (235) 13
Accounts payable and accrued expenses .................................... 77 113
Other current liabilities ................................................ (157) (190)
------- -------
Net cash used for operations ............................................... (2,933) (2,388)
------- -------
Investments:
------------
Increases to notes receivable .............................................. (2,750) --
Additions to property and equipment ........................................ (239) (239)
------- -------
Net cash used for investments .............................................. (2,989) (239)
------- -------
Financing:
----------
Proceeds from line of credit from a stockholder ............................ 2,570 1,812
Repayment of line of credit to a stockholder ............................... -- (80)
Proceeds from sale of Subsidiary's Series A Preferred Stock ................ -- 750
------- -------
Net cash provided from financing ........................................... 2,570 2,482
------- -------
Net decrease in cash and cash equivalents .................................. (3,352) (145)
Cash and cash equivalents at the beginning of the period ................... 6,890 446
------- -------
Cash and cash equivalents at the end of the period ......................... $ 3,538 $ 301
======= =======
Supplemental Financing Information:
-----------------------------------
Conversion of debt to equity by stockholder ............................... $ 1,850 $ --
Accrued preferred stock dividends ......................................... 47 47
Payment of prior periods' accrued interest by issuance of common stock .... 1,040 --
Extinguishment of 4% note payable ......................................... -- 347
Extinguishment of Debenture ............................................... -- 25
Value assigned to warrants issued ......................................... 392 --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
AZUL HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Unaudited Interim Information
In the opinion of management, the accompanying financial statements reflect all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the consolidated financial position as of September 30, 2000 and the
consolidated results of operations and consolidated cash flows for the quarter
and six-month periods ended September 30, 2000 and 1999 of Azul Holdings Inc.
("Azul" or the "Company") and its majority-owned subsidiary, Xyvision Enterprise
Solutions, Inc. ("XyEnterprise"). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted as allowed by SEC
rules for interim period financial statements. The consolidated balance sheet as
of March 31, 2000 is summarized from the Company's audited financial statements
for the fiscal year then ended. The Notes to Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 2000 should be read in conjunction with these interim financial
statements.
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 and could impact future results
of operations and cash flows.
The results of consolidated operations for the quarter and the six-month period
ended September 30, 2000 are not necessarily indicative of the results of
consolidated operations that may be expected for the fiscal year ending March
31, 2001.
Note 2. Nature of Business
Azul provides financial and management support to high technology companies. The
Company provides financial capital and managerial and advisory consulting to
these emerging, early stage and mid-stage companies. To date Azul's principal
asset and portfolio company is XyEnterprise, an information content management
and delivery solutions company which previously was a wholly-owned subsidiary of
Azul and in which Azul now has a 53% ownership interest. Tudor Trust, the
largest stockholder of Azul, also has a separate significant ownership interest
in XyEnterprise.
During the second quarter of the current fiscal year, Azul became the senior
lender to PlazaBlue Inc. ("PlazaBlue"), a fine art, antique and collectibles
internet storefront and auction house, formerly known as Antiqnet.com Inc. Tudor
Trust separately controls PlazaBlue. During this period, Azul loaned to
PlazaBlue $2,450,000, with the loan bearing interest at 10% and having a due
date of September 30, 2000. This line of credit is secured by all the assets of
PlazaBlue, which include substantially all the shares of PlazaBlue's
subsidiaries, Antique Networking Inc. ("ANI") and Sloan's Auction Galleries Ltd.
("Sloan's"). PlazaBlue was not able to secure equity funding enabling it to
repay the debt timely. The Company believes the value of the collateral is
greater than the amount outstanding. The parties have informally agreed to
extend the loan maturity date to November 30, 2000.
6
<PAGE> 7
Note 3. Note Payable to Stockholder
Azul has a line of credit with Tudor Trust. The grantor, sole trustee, and sole
current beneficiary of Tudor Trust also serves as Chairman of the Board of
Directors and President of Azul, and as an executive officer and director of
XyEnterprise and PlazaBlue. The line of credit, which is payable on March 31,
2001, has a maximum loan amount of $17,500,000 and is collateralized by the
Company's stock of XyEnterprise and its note receivable from PlazaBlue. This
line of credit has been used for working capital and general business purposes,
and during six month period ended September 30, 2000 an additional $2,570,000
was advanced to the Company, which was used primarily to make the loan to
PlazaBlue discussed in Note 2. Interest on the line of credit is payable on
March 31, 2001 in cash; however, Tudor Trust has the option to receive interest
on a quarterly basis, payable in shares of common stock of the Company based on
the fair market value as determined at the end of each quarter. Since the line
of credit's inception on June 30, 1992, there have been numerous amendments to
the line of credit, with each amendment increasing the maximum loan amount
thereunder and providing other terms and provisions.
During the quarter ended September 30, 2000, Tudor Trust converted a loan to
XyEnterprise of $1,850,000 to equity of XyEnterprise.
Note 4. Gain on Capital Transaction of Subsidiary
During the quarter ended September 30, 2000, Tudor Trust converted an
outstanding loan of $1,850,000 owed by XyEnterprise into 649,123 shares of
XyEnterprise common stock at the rate of $2.85 per share, the rate at which
shares were sold to third parties during February 2000. Accordingly, the
Company's proportionate interest in XyEnterprise decreased from 57.4% to 53.8%.
As a result of this increase in the equity of XyEnterprise, the Company
recognized a gain of $900,000.
7
<PAGE> 8
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE MONTH AND SIX MONTH PERIODS
ENDED SEPTEMBER 30, 2000 AND 1999
RESULTS OF OPERATIONS
Revenues for the second quarter of fiscal 2001 were $1,659,000, a decrease
of approximately $671,000, or 29%, from the second quarter of fiscal 2000. For
the six month period ended September 30, 2000, revenues of $3,752,000 were down
from the comparable prior year period by approximately $1,202,000 or 24%.
Revenues reported for each period were all generated by XyEnterprise. During the
first six months of fiscal 2000, as a result of a single contract, system
license fees and related services to one customer accounted for 16% of revenues.
This customer accounted for 41% of the Systems revenue during the six month
period of fiscal 2000. There have been no comparable large individual
transactions in fiscal 2001. Revenue from licensing of Systems decreased during
the second quarter by $366,000, or 59%, and by $720,000, or 52%, for the six
month period. XyEnterprise believes that a number of customers are waiting for
the availability of the new version of the Company's software (Content@XML)
before deciding to place their orders. Content@XML was introduced during August
2000 and has been deployed at several sites during October and November, 2000.
Services revenues declined by $305,000, or 18%, during the quarter and by
$482,000, or 14%, for the six month period. XyEnterprise was able to better
maintain its Services revenue volume through its sales of services during trial
periods and by performing additional work for its existing customers.
Cost of sales declined principally as a result of the decline in revenues.
Gross margins as a percent of revenues declined to 36% during the quarter as
compared to 39% during the second quarter of fiscal 2000. For the six month
period gross margin as a percent of revenues declined to 40% from 42% during the
comparable prior period. This reflects the decision by XyEnterprise to maintain
its consulting and technical staffs pending the release of Content@XML.
Research and development expenses by XyEnterprise in the second quarter and
for the year to date period of fiscal 2001 were similar to the respective
amounts during fiscal 2000. No software costs were capitalized during the
reporting periods.
Marketing, general and administrative expenses increased in fiscal 2001
over levels for the comparable periods of fiscal 2000. The increases resulted
primarily from increased general and administrative costs in XyEnterprise's
European subsidiaries and increased expenses incurred as a result of expanding
XyEnterprise's sales and marketing team and costs incurred during the
introduction of Content@XML.
During the quarter ended September 30, 2000, Tudor Trust converted an
outstanding loan of $1,850,000 owed by XyEnterprise into 649,123 shares of
XyEnterprise common stock at the rate of $2.85 per share, the rate at which
shares were sold to third parties during February 2000. Accordingly, the
Company's proportionate interest in XyEnterprise decreased from 57.4% to 53.8%.
As a result of this increase in the equity of XyEnterprise, the Company
recognized a gain of $900,000.
Tudor Trust and the Company, on May 24, 2000, agreed that the interest
payable of $1,040,000 for the period from January 1, 1999 through March 31, 2000
would be paid by the issuance to Tudor Trust of 984,624 shares of the common
stock of the Company and that interest for subsequent periods would, at the
option of Tudor Trust, be paid in cash or in shares of the common stock of the
Company valued for such purposes based upon their public trading market price at
the end of each quarterly interest payment period. The Company also agreed that
on or before March 31, 2001 interest for the period July 1, 1998 through
December 31, 1998 be convertible into 158,266 shares of common stock of the
Company at the request of Tudor. The Company recorded an extraordinary charge of
$2,793,000 to earnings in the first quarter of fiscal 2001 as a result of the
settlement of this interest obligation by the issuance of common stock.
8
<PAGE> 9
The Company accrued dividends of $23,000 and $47,000 during the second
quarters and six month year to date periods of both fiscal 2001 and 2000 with
respect to the Azul Series B Preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company's cash balance was $3,538,000. Cash used
in operations during the six month period ended September 30, 2000 amounted to
$2,933,000 primarily as a result of operational costs from the at XyEnterprise,
principally in the sales and product development areas. Investments in notes
receivable of $2,750,000 and additions to plant, property and equipment of
$239,000 accounted for the $2,989,000 net cash used in investing activities
during the six month period. Cash of $2,570,000 was provided during this period
by advances under the line of credit from Tudor Trust, the Company's largest
shareholder. Total cash used during the six month period amounted to $3,352,000.
Minority interest in subsidiary decreased from $2,072,000 at March 31,
2000 to $1,662,000 at September 30, 2000. Tudor Trust converted its debt from
XyEnterprise of $1,850,000 to 649,123 shares of common stock in XyEnterprise
during the quarter ended September 30, 2000 at the same stock price as the sale
of shares to third parties during February 2000. As a result of this
transaction, there was an increase in the Company's proportionate share of
XyEnterprise's book value. Minority interest was increased by $950,000 and the
Company recorded a gain on the capital transaction of its majority-owned
subsidiary, XyEnterprise. Further, a decrease in the minority interest of
$1,360,000 resulted from the allocation of the proportionate share of the
operating loss of XyEnterprise for the period of April 1, 2000 to September 30,
2000.
As of September 30, 2000, Azul has an amended line of credit pursuant to
which it may borrow up to $17,500,000 from Tudor Trust, the largest stockholder
of the Company, of which approximately $14,927,000 was outstanding at September
30, 2000. The grantor, sole trustee and sole current beneficiary of Tudor Trust
also serves as Chairman of the Board of Directors of Azul and XyEnterprise and
holds other executive officer and director positions with PlazaBlue Inc. This
line of credit, which is payable March 31, 2001, is collateralized by the shares
of XyEnterprise stock held by the Company and its Note Receivable from PlazaBlue
under the line of credit discussed below and has been used for working capital,
general business purposes, and to fund the convertible loan to PlazaBlue. The
first $5,000,000 of the principal balance outstanding bears interest at 6% per
year and the remaining principal balance bears interest at 8% per year.
During the second quarter of fiscal 2001, Azul agreed to extend a line of
credit under which it has advanced funds to PlazaBlue LLC ("PlazaBlue") in the
amount of $2,450,000 to fund working capital. PlazaBlue owns the majority
interest in Antique Networking Inc., developer of a web portal serving a network
of antique dealers (www.antiqnet.com), and Sloan's Auction Galleries, Ltd., one
of the largest auction houses, located in Washington, DC and Miami, Florida. The
loan bears interest at 10% and has a due date of September 30, 2000. PlazaBlue
has not been able to secure equity funding enabling it to repay the debt timely.
The parties have informally agreed to extend the loan maturity date to November
30, 2000.
Separately, XyEnterprise has entered into an agreement to loan HyperVision,
Ltd. up to $500,000 to be used for the completion of the development of WorX, a
proprietary software product used to create XML versions of Microsoft Word
files. During September 2000, XyEnterprise advanced $300,000 to Hypervision,
Ltd. under this loan arrangement.
During the quarter ended September 30, 2000, Tudor Trust converted a its
outstanding loan to XyEnterprise of $1,850,000 to common shares of XyEnterprise.
As a result, Azul's ownership interest in XyEnterprise declined from 57.4% to
53.8%.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has sustained recurring
losses from operations, has a working capital deficiency and a stockholders'
deficit, and is in default on interest payments on its 6% Convertible
Subordinated Debentures, 15% Promissory Notes, and its 4% Promissory Notes.
9
<PAGE> 10
The Company, however, anticipates that its cash requirements for fiscal 2001
will be satisfied mainly from its credit lines, or otherwise from Tudor Trust,
assuming the continued forbearance by the holders of Azul's Debentures, 15%
Notes and 4% Notes. As previously reported in Note 8 to the Consolidated
Financial Statements, included in the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 2000, certain defaults exist with respect to the
Debentures, 15% Notes and 4% Notes, and there is an arrearage in the payment of
dividends on the Azul Series B Preferred stock. There has been no material
change with respect to these items as previously reported.
10
<PAGE> 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not currently use derivative financial instruments. The
Company generally places its marketable security investments in high credit
quality instruments, primarily U.S. Government and Federal Agency obligations,
tax-exempt municipal obligations and corporate obligations with contractual
maturities of ten years or less. The Company does not expect any material loss
from its marketable security investments and therefore believes that its
potential interest rate exposure is not material.
Internationally, XyEnterprise invoices customers primarily in local
currency. XyEnterprise is exposed to foreign exchange rate fluctuations from
when customers are invoiced in local currency until collection occurs.
XyEnterprise does not currently enter into foreign currency hedge transactions.
Through September 30, 2000, foreign currency fluctuations have not had a
material impact on the Company's financial position or results of operations.
11
<PAGE> 12
PART II: OTHER INFORMATION
Item 3. Defaults Upon Senior Securities.
As previously reported in Note 8 to the Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 2000, there exists certain defaults with respect to Azul's outstanding
Debentures, 15% Notes and 4% Notes and an arrearage in the payment of dividends
on the Azul Series B Preferred stock. There has been no material change with
respect to these items as previously reported.
Item 4. Submission of Matters to a Vote of Security Holders.
On September 21, 2000, Azul Holdings Inc. held its annual meeting of
stockholders. At that meeting the directors listed below were elected to serve
during the next year as a result of the following vote tabulation:
<TABLE>
<CAPTION>
For Withheld
--------- --------
<S> <C> <C>
Jeffrey L. Neuman 2,564,138 -
Lance Laifer 2,564,138 -
Deborah Seidel 2,564,138 -
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits listed in the Exhibit Index immediately preceding such exhibits
are filed as part of or are included in this report.
(b) Azul filed no reports on Form 8-K during the quarter for which this report
is filed.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
AZUL HOLDINGS INC.
(Registrant)
November 15, 2000
/s/ Edward S. Wittman
--------------------------------------
Edward S. Wittman
Vice President, Chief Financial Officer,
Treasurer and Secretary
(Principal Financial and Accounting Officer)
12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 Secured Advance Facility Loan Agreement dated effective as of June 19, 2000
among Azul Holdings Inc., PlazaBlue Inc. (then Antiqnet.com Inc.), Sloan's Auction
Galleries Ltd. and Antique Networking, Inc.
10.2 Fourth Amendment to Second Amended and Restated Secured Advance Facility Loan
Agreement dated effective as of June 19, 2000 between Azul Holdings Inc. and Jeffrey L.
Neuman as trustee of Tudor Trust
27 Financial Data Schedule (Electronic version only)
</TABLE>
13
