Filed with the Securities and Exchange Commission on August 12, 1998.
Registration No. 333-57173
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3/A
AMENDMENT NO. 2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
X-CEED, INC.
(Exact name of registrant as specified in its charter)
488 Madison Avenue, New York, New York 10022
(212) 753-5511
(Address and telephone number of registrant's principal executive offices)
Delaware 3398 13-3006788
(State or other jurisdiction (Standard Industrial (IRS Employer
of incorporation) Classification Code) I.D. Number)
Werner Haase, President
X-ceed, Inc.
488 Madison Avenue, New York, New York 10022
(212) 753-5511
(Name, address and telephone number of agent for service)
Copies of all Richard J. Blumberg, Esq.
communications to: McLaughlin & Stern, LLP
260 Madison Avenue
New York, New York 10016
(212) 448-1100
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to section 8(a), may
determine.
Approximate date of commencement of proposed sale to the public: from
time to time after the effective date of this Registration Statement depending
on market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [__]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [__] ___
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [__] ___
<TABLE>
Calculation of Registration Fee
<CAPTION>
Title of each class Proposed Proposed maximum
of securities to be Amount to be maximum offering aggregate offering Amount of
registered registered price per unit price registration fee
<S> <C> <C> <C> <C>
Common Stock par 100,000 shares $4.156 $415,600.00 $122.60 (1)
value
$.01 per share
<FN>
(1) Estimated for purposes of this filing pursuant to Rule 457(c) at
$4.156 per share based upon the average of the bid and asked prices of $4.125
and $4.187, respectively, on June 16, 1998.
</FN>
</TABLE>
<PAGE>
PROSPECTUS
X-CEED, INC.
100,000 Shares of Common Stock, Par Value $.01 per Share.
This Prospectus relates to 100,000 shares of Common Stock of
X-ceed, Inc. (the "Company"), par value $.01 per share (the "Shares"), which may
be offered from time to time by the Selling Shareholders. See "Selling
Shareholders." This Prospectus does not relate to the sale or issuance by the
Company of any securities. Any Securities which are offered will be offered for
the account of the Selling Shareholders, who will acquire the securities upon
the exercise of options which are owned by the Selling Shareholders. The Company
will receive the proceeds from the exercise of options payable by the Selling
Shareholders upon the exercise of options. However, the Company will not receive
any proceeds from the sale of the Securities by the Selling Shareholders. The
Company has been advised by the Selling Shareholders that there are no
underwriting arrangements with respect to the sale of the Shares, that the
Shares will be sold by the Selling Shareholders from time to time on the NASDAQ
SmallCap Market at the then prevailing price and in private transactions at
negotiated prices and that usual and customary brokerage fees, if any, will be
paid by the Selling Shareholders in connection therewith.
The Company's Common Stock is traded on the NASDAQ SmallCap
Market under the symbol "XCED." The closing bid quotation for the Common Stock
was $4.125 on June 16, 1998.
----------------------
AN INVESTMENT IN THESE SECURITIES INVOLVES A
HIGH DEGREE OF RISK. (See "Risk Factors.")
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _________, 1998.
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the
Securities Exchange Act of 1934 and in accordance therewith files reports and
information with the securities and exchange Commission (the "Commission"). Such
reports may be inspected at the public reference facilities at the Commission at
Judicial Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following regional offices of the Commission: Suite 1400, 500 West Madison
Street, Chicago, Illinois 60661-2511; Seven World Trade Center, 13th Floor, New
York, NY 10048; Suite 500, 5757 Wilshire Boulevard, Los Angeles, California
90036-3648. Copies of such material may be obtained from the Public Reference
Section of the Commission, Washington, D.C. 20549, at prescribed dates.
-----------------
The Company has continued and will continue to furnish its
security holders with annual reports containing audited financial statements at
the end of each fiscal year. In addition, the Company may, from time to time,
issue unaudited interim reports and financial statements.
THE FOLLOWING LEGEND WILL APPEAR IN RED INK ON THE FRONT PAGE OF THIS
PROSPECTUS IN THE EVENT THAT THE PROSPECTUS IS CIRCULATED PRIOR TO
BEING DECLARED EFFECTIVE BY THE COMMISSION:
"The information contained herein is subject to completion or
amendment. A registration statement relating to these securities has
been filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted prior to
the time the registration statement becomes effective. This prospectus
shall not constitute an offer to sell nor the solicitation of any offer
to buy, nor shall there be any sale of these securities in any state in
which such offers, solicitation or sale would be unlawful prior to
registration or qualification under the laws of any such state."
The Company has filed with the Commission a Registration
Statement on Form S-3 (the "Registration Statement") under the Securities Act of
1933 relating to the securities offered hereby. This Prospectus is filed as part
of the Registration Statement and does not contain all of the information set
forth in the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. Any statements
contained herein concerning the provisions of any document are not necessarily
complete, and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
For further information with respect to the Company and the securities offered
hereby, reference is made to the Registration Statement, including the exhibits
filed as a part thereof and other documents incorporated therein by reference.
Copies of the Registration Statement and the exhibits thereto may be inspected
and copied, at prescribed rates, at the public reference facilities maintained
by the Commission at the addresses set forth above.
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<PAGE>
FORWARD-LOOKING STATEMENTS
All statements other than statements of historical fact
included in this Prospectus regarding the Company's financial position, business
strategy and plans and objectives of management of the Company for future
operations, are forward-looking statements. When used in this Prospectus, words
such as "anticipate," "believe," "estimate," "expect," "intend" and similar
expressions, as they relate to the Company or its management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of the Company's management, as well as assumptions made by and
information currently available to the Company's management. Actual results
could differ materially from those contemplated by the forward-looking
statements as a result of certain factors such as those disclosed under "Risk
Factors," including but not limited to, competitive factors and pricing
pressures, loss of major customers, technological change or difficulties,
product development risks, commercialization and trade difficulties and general
economic conditions. Such statements reflect the current views of the Company
with respect to future events and are subject to these and other risks,
uncertainties and assumptions relating to the operations, results of operations,
growth strategy and liquidity of the Company. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on
behalf are expressly qualified in their entirety by this paragraph.
PROSPECTUS SUMMARY
The following summary information does not purport to be
complete and is qualified in its entirety by reference to the more detailed
information and financial statements appearing elsewhere in this Prospectus or
in documents incorporated by reference. Each prospective investor is urged to
read this Prospectus in its entirety.
THE COMPANY
The Company was originally incorporated under the name
Trilling Resources, Ltd. It changed its name to Trilling Medical Technologies,
Inc. in September 1987 and subsequently to Water-Jel Technologies, Inc. in July
1991. On February 20, 1998, shareholders approved a name change to X-ceed, Inc.
and also approved a change in the Company's state of incorporation from New York
to Delaware. The Company's executive offices are located at 488 Madison Avenue,
New York, NY 10022 and its telephone number is (212) 753-5511.
Since the inception of the Company until 1996, the Company was
primarily engaged in the development, manufacture and marketing of emergency
first aid products for industry and on a limited basis for the consumer
marketplace.
In July 1996, the Company acquired all of the outstanding
stock of Journeycraft, Inc., a company engaged through its X-ceed Performance
Group division in providing services to corporations in the field of performance
improvement and corporate communications and through its Journeycraft Travel
Management division in providing travel management to corporate clients. The
Company also acquired all of the outstanding stock of TheraCom Integrated
Medical Communications, Inc. ("TheraCom"), which is engaged in training and
communications in the health
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<PAGE>
care industry as well as the marketing of innovative products for patient
education, especially in the women's health care field.
As the Company is presently constituted, the Water-Jel First
Aid division manufactures and markets a proprietary line of first aid products
for burns and a line of generic creams and ointments. The proprietary line of
first aid products for burns consists of fire blankets, burn dressings and
topical creams which are marketed to the industrial as well as, on a limited
basis, the consumer marketplaces. The division's generic creams and ointment
product line consists of hydrocortisone cream, triple antibiotic ointment, first
aid cream, antiseptic gel and a hand and body lotion which are marketed under
the WJ brand. The division also provides private label packing of its creams and
ointment products to some of its customers. For the fiscal year ended August 31,
1997, the Water-Jel division's revenues accounted for approximately 8% of the
Company's total revenues.
The X-ceed Performance Group ("X-ceed Performance Group")
assists corporate clients in establishing performance improvement programs such
as sales programs and other marketing and promotional performance programs. This
division derives its revenues from service fees charged the client for
establishing a performance improvement program and fees for monitoring the
programs, as well as mark-ups on the services and merchandise provided as
awards. For the fiscal year ended August 31, 1997, X-ceed Performance Group
accounted for approximately 59% of the Company's total revenues. Approximately
66% of the revenues were derived from two clients, Pfizer, Inc. and MCI
Communications, Inc. A loss of either of these clients' business or a reduction
in fees could have a material effect on the Company's revenues in the future.
See "Risk Factors."
The Journeycorp division provides comprehensive travel
services primarily for business travel, which includes trip planning,
reservations, ticketing and other incidental services. This division also acts
as a consultant regarding corporate travel policies and travel budgeting. The
division derives its revenues from fees and commissions generated from travel
bookings and from hotels, car rental companies and other travel suppliers.
Revenues are also derived from travel consulting fees charged to selected
accounts. At the present time, the airlines are shifting away from paying travel
agents fees, and as a result, this division is reorienting its customer
relationships towards fee-based travel management. However, there can be no
assurance that the division will be successful. (See "Risk Factors.") For the
fiscal year ended August 31, 1997, Journeycorp accounted for approximately 17%
of the Company's total revenues.
The TheraCom Communications subsidiary provides integrated
training, communication and data to the healthcare industry. In this regard,
TheraCom provides all services necessary to organize meetings to assist major
pharmaceutical companies in providing healthcare professionals with current
medical information. TheraCom locates speakers and provides publicity and travel
arrangements. In addition, TheraCom has expanded its operations to include
direct patient education by pharmaceutical companies. For the year ended August
31, 1997, TheraCom's revenues accounted for approximately 14.5% of the Company's
total revenues. These revenues were derived from one customer, Pfizer, Inc.
("Pfizer"). A loss of Pfizer or a reduction in services required by Pfizer could
have a material effect on the Company. (See "Risk Factors.")
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<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below for the Company's
statements of operations for the years ended August 31, 1996 and 1997 and the
balance sheet data of August 31, 1997 are derived from the Company's financial
statements which have been audited by Holtz Rubenstein & Co., LLP, independent
public accountants, and which are incorporated by reference. The statement of
operations data for the nine months ended May 31, 1997 and 1998 and the balance
sheet data at May 31, 1998 are derived from unaudited financial statements which
are incorporated by reference. Management believes that all adjustments
necessary for a fair presentation have been made in such interim periods.
However, the results of operations for the most recent interim period are not
necessarily indicative of the Company's financial results for the entire current
fiscal year.
<TABLE>
Statement of Operations Data
<CAPTION>
Nine Months Ended
Year Ended August 31, May 31,
1996 1997 1997 1998
<S> <C> <C> <C> <C>
Net sales $54,863,574 $62,885,464 $45,406,465 $44,347,737
Operating income 1,219,044 3,924,206 3,071,031 2,016,728
Net income 632,315 1,876,620 1,624,851 1,288,998
Net income per
common share (1)
-Basic $.09 $.27 $.23 $.18
-Diluted $.09 $.26 $.22 $.16
Weighted average
number of shares
outstanding (1)
-Basic 7,001,295 7,023,770 7,021,145 7,279,691
-Diluted 7,394,012 7,339,625 7,256,262 7,865,096
Balance Sheet Data
Working capital $ 7,964,147 $10,042,076 $ 8,750,912 $16,141,855
Total assets 17,383,178 18,800,080 22,498,212 33,124,330
Long-term debt 90,700 51,500 61,300 22,100
Cash dividends - - - -
- ---------------------------
<FN>
(1) Net Income per common share and weighted average number of shares
outstanding data for periods prior to December 31, 1997 have been retroactively
restated to reflect computation under Financial Accounting Standards Board
Statement No. 128 "Earnings Per Share".
</FN>
</TABLE>
6
<PAGE>
THE OFFERING
Common Stock - 100,000 shares of Common Stock
underlying 100,000 options previously
granted to the Selling Shareholders. The
options permit the holder thereof to
purchase one share of Common Stock for
each option at an exercise price of $1.52
per share.
All expenses relating to the registration
of these securities, estimated at
$18,000, will be borne by the Company.
Use of Proceeds - The Company will not
receive any proceeds from the sale of the
securities. The Company will receive
$152,000, assuming the Selling
Shareholders elect to exercise all of
their options.
RISK FACTORS
Purchase of the securities offered hereby involves a high
degree of risk and prospective purchasers should consider the following Risk
Factors as well as the other information contained in this Prospectus and the
exhibits attached to the Registration Statement as well as Exhibits incorporated
by reference herein.
Competition
In July 1996, the Company acquired all of the outstanding
stock of Journeycraft and TheraCom. These businesses have significantly expanded
the Company's operations. However, the various products and services offered by
these subsidiaries and divisions face intense competition. The following is a
discussion of the competitive factors that each division or subsidiary presently
faces.
The Water-Jel division manufactures and markets a line of
first aid products for burns and a line of generic creams and ointments. There
are other companies, such as Spenco Medical Corporation, C.R. Bard, Inc. and
Johnson & Johnson, which manufacture similar first aid products for burns. These
companies have been established for a longer period of time, are better
established and have financial resources and facilities which are greater than
the division's. While some segments of the burn first aid market are dominated
by large manufacturers, other segments of the market are characterized by
intense competition among smaller manufacturers such as Water-Jel.
The X-ceed Performance Group division, which offers
performance improvement and motivational programs to corporate clients, is faced
with intense competition from several well-established companies, such as Maritz
Inc., Carlson Marketing Group, Inc. and B.I. Performance Group, Inc. These
companies are well established and have greater name recognition than X-ceed
Performance Group. Likewise, they generate revenues far in excess of X-ceed
Performance Group's. They also have a much broader customer base. In addition,
X-ceed Performance Group competes with numerous smaller consultants and likewise
has to compete with corporations' in-house staff who devise performance
improvement and motivational programs. Only recently, X-ceed
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Performance Group introduced "Maestro," a proprietary Inter- and Intranet
software program to be used in conjunction with X-ceed Performance Group's
performance programs. While the Company believes this software is unique,
competitors could introduce their own software programs to monitor performance
improvement programs and compete for business.
The Journeycorp division, which provides comprehensive travel
services for business travel, faces intense competition, since there are more
than 30,000 travel agents in the United States which are capable of providing
business travel services. Journeycorp must also compete with in-house travel
departments and those airlines which require direct booking with the airline.
The TheraCom subsidiary, which provides integrated training,
communications and data to the healthcare industry, competes with many
consultants who provide similar services to the healthcare industry. TheraCom
competes on the basis of price and quality of its services. To date, TheraCom
has only one significant customer, Pfizer, Inc. TheraCom is attempting to
broaden its client base, and no assurances can be made that it will be able to
effectively compete.
Market and Technological Change
Several of the markets in which the Company's products and
services are undergoing technological advances and other changes. In particular,
and because the airlines have lowered the commissions they are willing to pay
travel agents, the corporate travel business is changing from commission to
fee-based services in which corporate travel service providers such as
Journeycorp are paid fixed fees by their clients in lieu of commissions based
upon the volume of travel services purchased. These developments have tended to
reduce the revenues available to travel service providers such as Journeycorp.
Also, the corporate travel business is experiencing technological changes such
as "ticketless" air travel and Internet-based reservation systems which tends to
reduce the need for outside travel agents. These changes are further
accelerating the trend for travel service businesses to act as consultants
working for fixed fees rather than commission-based booking agencies. With
respect to the X-ceed Performance Group division, a significant amount of X-ceed
Performance Group's business is based upon the development of innovative
technologies for delivering incentive programs using the Internet. The Internet
is characterized by rapid technological advances which may render X-ceed
Performance Group's technologies out-of-date or obsolete. There is no assurance
that X-ceed Performance Group will be in a position to adapt to such
technological advances and market changes.
Dependence on Few Customers
At the present time, almost all of TheraCom's services are
supplied to one customer, Pfizer, Inc. ("Pfizer"). Of the revenues from X-ceed
Performance Group's business, for the fiscal year ended August 31, 1997, 66% was
derived from two clients, Pfizer and MCI Communications, Inc., which represent
35% of revenues and 31% of X-ceed Performance Group's revenues, respectively.
The loss of either of these clients or a reduction in the amount of business
generated from these two clients could materially adversely affect the Company's
future business and prospects.
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<PAGE>
No Contracts with Customers
Generally, the Company does not have any written agreements
with its customers, or such agreements are terminable at will upon relatively
short notice. Unexpected or other termination of relations with significant
customers could adversely affect the Company's business and prospects. See
"Competition" and "Dependence on Few Customers."
Fluctuations in Revenues
For the six months ended February 28, 1998 ("Fiscal 1998"),
the Company's revenues declined by approximately $5,600,000 as compared with the
revenues for the six-month period ended February 28, 1997 ("Fiscal 1997"). A
major portions of this decline was due to a refinement of revenue recognition by
the TheraCom subsidiary. In 1997, the Company's TheraCom division, which
provides integrated training, communication and data to the health care
industry, refined its method of revenue recognition. Previously, the division
recognized the revenues generated from its calendar year programs at the end of
the program. In 1997, based upon its improved accounting information systems and
controls, it was determined that the division recognize revenue and costs on
certain calendar year programs ratably as certain performance criteria occurred.
Revenues recorded by TheraCom approximated $4,187,000 and $5,717,000 for the six
months ended February 28, 1998 and 1997, respectively. The decline in the
Company's revenues for the six months ended February 28, 1997 was also due in
part to the types of award programs required by the clients of the X-ceed
Performance Group division. Because that division is primarily dependent on
business from two major clients, any curtailment or change in the award programs
can result in material fluctuations during quarterly periods. Investors should
therefore be cautioned that because of the dependence on a limited number of
clients, the Company may experience fluctuating revenues and earnings in varying
periods.
Market Acceptance for Company's Products and Services
The Company believes that its ability to market its products
and services requires educating potential users as to their benefits and
applications. This is particularly true for the Internet technologies developed
by X-ceed Performance Group and the first aid product line for burns
manufactured by the Water-Jel division. No assurance can be given that the
Company will be able to successfully increase the market for its products and
services.
Possible Need for Additional Financing
While the Company has sufficient capital resources to conduct
its current activities, it may require additional financing in order to expand
its current operations. There are no definitive plans or arrangements in effect
currently to obtain such additional funds, which could consist of additional
borrowing or the issuance of equity securities either in a public offering or
through a private placement. The timing and amount of any additional financing
that is required to continue the development and marketing of the Company's
services and products and for other purposes will depend on the ability of the
Company to improve its operating results and other factors. There can be no
assurance that any additional financing will be available to the Company on
terms acceptable
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<PAGE>
to the Company or that such additional financing, if available, would not result
in substantial dilution of the equity interests of existing stockholders.
Limited Patents and Proprietary Information
The X-ceed Performance Group division has developed a
proprietary software, "Maestro," which is designed to enable clients to trace
the progress of sales promotion programs and other types of award programs over
the Internet. The clients who elect to utilize Maestro do not receive the
software, but rather are only granted a license to utilize the software, which
is at all times maintained at the Company's offices. The clients feed
information to the "Maestro" program over the Internet by using a sign-on
identification and password. The clients can thereafter gain access with the
proper password to Maestro to enable them to evaluate the progress of their
awards program. The Company does not presently hold a copyright to the Maestro
software but intends to apply with the US Patent and Trademark office for
protection as well as a trademark on the name "Maestro." The actual software is
retained under stringent controls at the Company's offices and only four people
within the Company and under confidentiality agreements have access to the
software and code. Should the Company's Maestro software and other proprietary
technology be disclosed publicly, the business and prospects of the X-ceed
Performance Group could be adversely affected. Likewise, and if there was public
disclosure of the software and codes, the Company at the present time may have
no or very limited legal recourse, unless the Company could demonstrate that the
codes and software were illegally converted or taken or that the clients
violated their licence agreements with the Company.
The design of Water-Jel's Fire Blanket products was protected
by United States and foreign patents which were assigned to the Company in 1979
and 1985. The United States patent which protected a substantial portion of the
Company's technology expired in 1992. New competitors may now enter the
Company's markets. The Company may be materially and adversely affected if the
Company should fail to establish a secure market base before the entrance of
significant new competitors now that the original United States patent has
expired. See "Competition." Further, in January 1995, Water-Jel was granted a
patent for a synthetic fabric containing a therapeutic, non-toxic, water-soluble
and bio-degradable gel used in the Company's Burn Dressing product line. This
patent expires in April 2014. However, no assurance can be given that this
patent will prove enforceable or prevent others from marketing products similar
to, or which perform comparable functions as, the Company's products at the
current time, the Water-Jel burn dressing products covered by this patent
account for approximately thirty percent (30%) of Water-Jel's revenues.
Year 2000 Compliance
The Company has taken remedial steps to ensure that its
computer systems are compliant with the Year 2000 ("Y2K"). In this regard, the
X-ceed Performance Group has purchased for internal operations new personal
computers (PCs) which have been tested by the National Software Testing
Laboratories (NSTL) and have been certified as Y2K compliant. With respect to
client support, the division has upgraded its software at no extra cost and is
compliant with Y2K. With respect to the Company's internal software affecting
accounting systems and
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telecommunications, the Company estimates that it will be required to purchase
additional equipment for $15,000 in order to achieve Y2K compliance in this
area. With respect to the Journeycorp division reservation systems, the division
utilizes PC hardware provided by the Sabre Group, the American Airlines
reservations system. American Airlines has given the Company assurances that
their reservations system will be Y2K compliant. Since airline reservations can
be made within a year before the actual flight, American Airlines has until
December 31, 1999 to achieve Y2K compliance. In the event American Airlines
fails to achieve compliance in a timely manner, this could result in material
adverse consequences to Journeycorp's operations and would affect its ability to
provide reservations and ticketing for its clients.
Government Regulation
Water-Jel's emergency first aid products and manufacturing
practices are subject to regulation by the Food and Drug Administration ("FDA")
as well as by similar foreign authorities. The Water-Jel Fire Blanket and Burn
Dressing are medical devices subject to regulation by the FDA. The Company's
generic creams and ointment, Burn Jel and UnBurn line are classified as
over-the-counter drugs. FDA requirements include adherence to good manufacturing
practices, proper labeling, and either premarket notification under section
510(k) of the Medical Device Amendments to the Federal Food, Drug and Cosmetics
Act or premarket approval (depending on the category of product) prior to
commercial marketing in the United States. The Company is also subject to
periodic inspections by the FDA relating to good manufacturing practices. The
FDA has the authority to require a suspension of manufacturing operations if it
finds serious deficiencies. Additional regulation may, in the future, be imposed
by Federal, state or local authorities, particularly the FDA. Any new products
will also be subject to review of various regulatory authorities in virtually
every foreign country in which such products are offered for sale. To the extent
that any new products which Water-Jel may develop are deemed to be new
pharmaceutical or new medical devices, such products will require FDA and other
regulatory clearance and/or approvals prior to marketing. Such governmental
regulation may prevent or substantially delay the marketing of any products
developed by Water-Jel, cause Water-Jel to undertake costly procedures, and
furnish a competitive advantage to the more substantially capitalized companies
which compete with Water-Jel. There can assurance that the Company will have the
requisite financial resources to complete the regulatory approval process with
respect to any new products which may be developed.
Product Liability
To date, there have been no material claims on threatened
claims against the Company by users of its products, particularly the Water-Jel
products, based on a failure to perform as specified. In the event that any
claims for substantial amounts were to be asserted against the Company, they
could have a materially adverse effect on the Company's financial condition and
its ability to distribute its products. The Company maintains $11,000,000 of
general product liability insurance. There is no assurance that this amount will
be sufficient to cover potential claims or that the present amount of insurance
can be maintained at the present level of cost.
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Dependence on Management
The Company is significantly dependent upon the continued
availability of Werner Haase, its Chairman and CEO while Mr. Haase is under an
employment agreement with the Company which terminates in May 2001. The loss or
unavailability of Mr. Haase to the Company for an extended period of time would
have a material adverse effect on the Company's business operations and
prospects. To the extent that Mr. Haase's services would be unavailable to the
Company for any reason, the Company would be required to procure other personnel
to manage and operate the Company. There can be no assurance that the Company
would be able to locate or employ such qualified personnel on acceptable terms.
The Company has "key man" life insurance on Mr. Haase's life in the amount of $2
million.
Control
Werner Haase, the Chairman and CEO of the Company, and his
wife Nurit Kahane, who is a Senior Vice President of the Company, own 2,281,875
shares of the Company's Common Stock, representing approximately 28% of the
total shares outstanding. Mr. Haase also holds options exercisable to purchase
an additional 243,750 shares of Common Stock. Under Delaware law, a simple
majority of stockholders may constitute a quorum for a meeting of stockholders
and may effect any action requiring a vote of stockholders. There are no
requirements for supermajority votes on any matter, nor is there any cumulative
voting for directors. Therefore, Mr. Haase will be in a position to
substantially influence the election of directors and the conduct of the
Company's affairs.
Maintenance Criteria for NASDAQ Securities; Penny Stock Rules
The Company's Common Stock is currently quoted on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") for the
SmallCap Market. To maintain its listing on the NASDAQ SmallCap Market, the
Company must continue to be registered under Section 12(g) of the Securities
Exchange Act of 1934 (the "Exchange Act") and have total assets of at least
$2,000,000, total stockholders' equity of at least $1,000,000, a public float of
at least 100,000 shares with a market value of at least $1,000,000, at least 300
holders, a minimum bid price of $1.00 per share and at least two market makers.
In addition, NASDAQ has proposed increasing the requirements for maintaining a
NASDAQ SmallCap listing to require either: (1) net tangible assets of at least
$2,000,000 or $1,000,000, (2) a market capitalization of $35,000,000 or (3) net
income in at least two of the last three years of $500,000 and a public float of
at least 500,000 shares with a market value of at least $1,000,000. The Company
currently meets all the proposed requirements for maintenance of its listing on
the NASDAQ SmallCap Market. There can be no assurance that the Company in the
future will be able to meet the requirements for continued listing on the NASDAQ
SmallCap Market with respect to the Common Stock. If the Company's securities
fail to maintain NASDAQ SmallCap Market listing, the market value of the Common
Stock likely would decline and purchasers likely would find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of, the
Common Stock.
In addition, if the Company fails the maintain NASDAQ SmallCap
Market listing for its securities, and no other exclusion from the definition of
a "penny stock" under the Exchange
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Act is available, then any broker engaging in a transaction in the Company's
securities would be required to provide any customer with a risk disclosure
document, disclosure of market quotations, if any, disclosure of the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market values of the Company's securities
held in the customer's account. The bid and offer quotation and compensation
information must be provided prior to effecting the transaction and must be
contained on the customer's confirmation. If brokers become subject to the
"penny stock" rules when engaging in transactions in the Company's securities,
they would become less willing to engage in transactions, thereby making it more
difficult for purchasers in this Offering to dispose of their shares.
Future Sales of Common Stock
As of the fiscal year ended August 31, 1997, there were
7,043,180 shares of Common Stock outstanding. Just before the expiration date of
the Class A Warrants, April 30, 1998, holders thereof elected to exercise their
Warrants. The Company has been advised by the Warrant Agent that 1,375,575 Class
A Warrants were exercised just prior to expiration. As of the current time,
there are now 8,544,127 shares of the Common Stock outstanding. Approximately
2,560,625 of the outstanding shares are deemed to be "restricted securities"
("Restricted Securities") within the meaning of Rule 144 promulgated under the
Securities Act of 1933 (the "Act") by virtue of the fact that they are held by
"affiliates" of the Company. All of the Restricted Securities are currently
eligible for public sale in accordance with Rule 144. The remaining 5,983,502
shares are freely tradable without restrictions or further registration under
the Act. Sales made pursuant to Rule 144 could have an adverse effect on the
price of the Common Stock.
No Dividends
The Company has not paid any cash dividends upon its Common
Stock since its inception and, by reason if its present financial status and its
contemplated financial requirements, does not anticipate paying any cash
dividends in the foreseeable future. It is anticipated that earnings, if any,
which may be generated from operations will be used to finance the operations of
the Company.
USE OF PROCEEDS
Assuming the Selling Shareholders exercise all of their
options, the total proceeds to the Company would amount to $152,000. Expenses of
the registration, including legal fees, accounting fees, Blue Sky fees and
miscellaneous expenses are estimated at $18,000, which would leave net proceeds
to the Company from the exercise of the options of $134,000. Any net proceeds
will be added to the working capital of the Company.
SELLING SHAREHOLDERS
The 100,000 shares of Common Stock being offered hereby are
held by three selling shareholders. A Selling Shareholder listed below may
choose not to sell all of the shares of Common Stock owned by such Selling
Shareholder in this offering. The chart below sets forth the
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number of shares to be offered for sale by each such Selling Shareholder, which
information was furnished to the Company by each such Selling Shareholder. The
chart also sets forth the amount and percentage of Common Stock to be owned by
each after completion of the offering, assuming the sale of all such shares
owned by such Selling Shareholder. Unless otherwise indicated, none of the
Selling Shareholders listed has held any position with the Company in the last
three years. The Selling Shareholders have not entered into any arrangements
regarding the sale of their shares and have informed the Company that any shares
sold would be sold in normal brokerage transactions.
Securities Owned Securities Securities to Be
Name before Offering To Be Sold Owned after Offering
- ---- --------------- ---------- --------------------
Robert Daniels (1) 70,000 (2) 70,000 -0-
Gerald J. Resnick (3) 10,000 (2) 10,000 -0-
Neil H. Deutsch (3) 20,000 (2) 20,000 -0-
- --------------
(1) Mr. Daniels was employed by the Company as an Executive Vice
President in charge of Sales and Marketing. He left the Company on June 2, 1995.
In connection with the settlement of litigation involving a claim by the Company
that Mr. Daniels violated an anti-competition agreement and a counter-claim by
Mr. Daniels against the Company, the Company agreed to settle all claims for the
sum of $75,000 and the reinstatement and registration of 100,000 options
previously granted to Mr. Daniels. Mr. Daniels, with the consent of the Company,
assigned 30,000 options to the attorneys who represented him, the other Selling
Shareholders, as payment of legal fees. All of the options are exercisable at
$1.52 per share. A settlement agreement was entered into on June 11, 1998, at
which time the closing price of the Company's Common stock as reported on the
NASDAQ SmallCap Market was $4.25.
(2) The above figures represent options granted to the Selling
Shareholders.
(3) These Selling Shareholders are the attorneys who represented Mr.
Daniels in connection with the litigation referred to in footnote 1 above and
accepted an assignment of options from Mr. Daniels in payment of their legal
fees.
PLAN OF DISTRIBUTION
The shares are being offered for the respective accounts of
the Selling Shareholders. The Company will not receive any of the proceeds from
the sale of securities. The Company will, however, receive the exercise price of
$1.52 per share as set forth in the options for those options exercised by the
Selling Shareholders.
The sale for the shares by the Selling Shareholders may be
effected from time to time in transactions on the NASDAQ SmallCap Market, at
fixed prices or negotiated prices relating to the then prevailing market price.
The Selling Shareholders may effect such transaction by selling the Securities
to or through registered broker-dealers, and such broker-dealers may receive
compensation in the form of discounts or commissions from the Selling
Shareholders and for the purchases of the Securities for which such
broker-dealers may act as agent or to whom they may sell as principal or both.
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The Selling Shareholders and any broker-dealers who act in
connection with the Sale of the securities hereunder may be deemed to be
"underwriters" within the meaning of Section 2 (11) or the Securities Act and
any commissions received by them and any profit received by them on any sale of
the Securities as principal might be deemed to represent underwriting discounts
or commissions under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with this offering are
being passed upon for the Company by McLaughlin & Stern, LLP, 260 Madison
Avenue, New York, New York 10016.
EXPERTS
The financial statements of X-ceed, Inc. for the fiscal year
ended August 31, 1997, incorporated by reference from the Company's annual
reports on Form 10-KSB, have been examined by Holtz Rubenstein & Co. LLP,
independent certified public accountants, as stated in their report, and are
included in reliance upon the report of such firm and upon their authority as
experts on accounting and auditing.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been filed with the
Commission by the Company, are incorporated herein by reference and made a part
hereof. The Commission file number for documents which are incorporated by
reference is 0-13049.
1. The Company's latest Annual Reports on Form 10-KSB
for the fiscal years ended August 31, 1996 and August
31, 1997 filed pursuant to Section 13(a) of the
Exchange Act which contain financial statements for
the Company's latest fiscal year (August 31, 1997)
for which a Form 10-KSB was required to have been
filed and for the Company's fiscal year ended August
31, 1996.
2. The Company's quarterly reports on Form 10-Q for the
three months ended November 30, 1997, for the three
and six months ended February 28, 1998 and for the
three and nine months ended May 31, 1998.
3. The Company's Current Report on Form 8-K dated May 7,
1998 and amendments thereto.
4. The section entitled "Description of Securities" in
the Company's Registration Statement on Form S-1
(Registration No. 33-23910) declared effective on
October 31, 1988.
In addition, all documents filed by the Company pursuant to
Section 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the termination
of the offering of the Shares shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of
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such documents. Any statement modified in a document incorporated by reference
herein shall be deemed to be contained herein or superseded for purposes hereof
to the extent that a statement contained herein (or in any subsequently filed
document which is also incorporated by reference herein) modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.
A copy of the documents incorporated by reference in this
Prospectus (not including exhibits to the incorporated documents unless the
documents specifically incorporate the exhibits by reference) will be furnished
without charge to each person, including any beneficial owner to whom this
prospectus is delivered, on the written or oral request of such person. All such
requests should be addressed to: Alex Alaminos, Investor Relations, Water-Jel
Technologies, 243 Veterans Blvd., Carlstadt, NJ 07072.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Company's Certificate of Incorporation permits the Company
to indemnify directors, officers, employees and agents to the fullest extent
permissible under the Delaware General Corporation Law.
Insofar as indemnification for liabilities arising under
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Company pursuant to any charter provision, by-law contract
arrangements statute, or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore,
unenforceable.
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- ------------------------------------------ -----------------------------------
No dealer, salesman or any other person
has been authorized to give any
information or to make any representations
other than those contained in this
Prospectus in connection with this
offering and, if given or made, such
information or representations must not be
relied upon as having been authorized by
the Company or the Underwriters. This
Prospectus does not constitute an offer to
sell, or the solicitation of an offer to
buy, any of the securities offered hereby
in any jurisdiction to any person to whom 100,000 Shares
it is unlawful to make such offer or of Common Stock
solicitation in such jurisdiction. Neither ($.01 Par Value)
the delivery of this Prospectus nor any
sale made hereunder shall, under any
circumstances, create any implication that
the information contained herein is
correct as of any time subsequent to the X-ceed, Inc.
date hereof or that there has been no
change in the affairs of the Company since
such date.
--------------------------
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION....................3 __________________________
FORWARD-LOOKING STATEMENTS...............4
PROSPECTUS SUMMARY.......................4 PROSPECTUS
SELECTED FINANCIAL DATA..................6 __________________________
THE OFFERING.............................7
RISK FACTORS.............................7
USE OF PROCEEDS.........................13
SELLING SHAREHOLDERS....................13
PLAN OF DISTRIBUTION....................14
LEGAL MATTERS...........................15
EXPERTS.................................15
INCORPORATION OF CERTAIN INFORMATION
BY REFERENCE.......................15
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES........................16
--------------------------
Until ________________, 1998, all dealers
effecting transactions in these registered
securities, whether or not participating
in this distribution, may be required to
deliver a Prospectus. This is in addition August ____, 1998
to the obligation of dealers to deliver a
Prospectus when acting as Underwriters.
- ------------------------------------------ -----------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution
The expenses in connection with the issuance and distribution
of the securities being registered hereunder are estimate as follows:
Blue Sky qualification fees and expenses..............$ 2,000
Legal fees and expenses..................................8,500
Accountant's fees and expenses...........................6,000
Miscellaneous........................................ 1,500
Total $18,000
ITEM 15. Indemnification of Directors and Officers
Pursuant to Section 145 of the General Corporation Law of
Delaware (the "Delaware Corporation Law"), Article 7 of the Company's
Certificate of Incorporation, a copy of which is filed as Exhibit 3(c) to this
Registration Statement, provides that the Company shall indemnify, to the
fullest extent permitted by Section 145 of the Delaware Corporation Law, as
amended from time to time, each person that such section grants the Corporation
the power to indemnify. Section 145 of the Delaware Corporation Law permits the
Company to indemnify any person in connection with the defense or settlement of
any threatened, pending or completed legal proceeding (other than a legal
proceeding by or in the right of the Company) by reason of the fact that he is
or was a director or officer of the Company or is or was a director or officer
of the Company serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership or other enterprise
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with the defense or
settlement of such legal proceeding if he acted in good faith and in a manner
that he reasonably believes to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action of proceeding, if he had no
reasonable cause to believe that his conduct was unlawful. It the legal
proceeding, however, is by or in the right of the Company, the director or
officer may be indemnified by the Company against expense (including attorneys'
fees) actually and reasonably incurred in connection with the defense or
settlement of such legal proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Company
and except that he may not be indemnified in respect of any claim, issue or
matter as to which he shall have been adjudged to be liable to the Company
unless a court determines otherwise.
Pursuant to Section 102(b)(7) of the Delaware Corporation Law,
Article 7 of the Certificate of Incorporation of the Company, a copy of which is
filed as Exhibit 3(c) to this Registration Statement, provides that no director
of the Company shall be personally liable to the Company or its stockholders for
monetary damages for any breach of his fiduciary duty as a director; provided,
however, that such clause shall not apply to any liability of a director (i) for
breach of his duty of loyalty to the Company or its stockholders, (ii) for acts
or omissions that are not in good faith
17
<PAGE>
or involve intentional misconduct or a knowing violation of the law, (iii) under
Section 174 of the Delaware Corporation Law, or (iv) for any transaction from
which the director derived an improper personal benefit. The aforesaid provision
also eliminates the liability of any stockholder for managerial acts or
omissions, pursuant to Section 350 of the Delaware Corporation Law or any other
provision of Delaware law, to the same extent that such liability is limited for
a director.
The Company maintains directors and officers liability
insurance.
ITEM 16. Exhibits
(3)(c) Certificate of Incorporation of X-ceed, Inc.(1)
(4)(a) Form of Common Stock (2)
(5) Opinion of McLaughlin & Stern, LLP*
(23)(a) Consent of Holtz Rubenstein & Co. LLP*
(23)(b) Consent of McLaughlin & Stern, LLP (included in Exhibit 5)
- --------------
* Filed herewith.
(1) Incorporated by reference from the Company's Current Report on Form
8-K filed with the Commission on February 27, 1998.
(2) Incorporated by reference from the Company's Registration Statement
on Form S-18 filed with the Commission on April 12, 1984, Commission File No.
2-90512-NY.
ITEM 17. Undertakings
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement (i) to
include any prospectus required by Section 10(a) of the Act and (ii) to reflect
in the prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which individually or in the aggregate represents a fundamental change in the
information in the Registration Statement and (iii) to include any material
information with respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information in the
Registration Statement; provided, however, that if the information required to
be included in a post-effective amendment is included in periodic reports filed
or furnished to the Commission by the Company pursuant to section 13 or Section
15(d) of the Exchange Act, then the Company shall not be required to file a
post-effective amendment.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
18
<PAGE>
(4) That for purposes of determining any liability under the
Securities Act of 1933, each filing of Company's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(5) In the event acceleration is requested by the Company and
insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, X-ceed, Inc., has duly caused this Registration Statement on
Form S-3/A to be signed on its behalf by the undersigned, thereunto duly
authorized, in New York, New York on August 11, 1998.
X-CEED, INC.
By: /s/ Werner G. Haase
Werner G. Haase
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
hereby constitutes and appoints Werner G. Haase his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all pre-effective and post-effective amendments to the Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
/s/ Werner G. Haase Chief Executive 8/11/98
Werner G. Haase Officer, Principal
/s/ Norman Doctoroff, Director 8/11/98
by Werner G. Haase, attorney-in-fact
Norman Doctoroff
/s/ John Bermingham Director 8/11/98
by Werner G. Haase, attorney-in-fact
John Bermingham
20
Exhibit 5
MCLAUGHLIN & STERN, LLP
260 MADISON AVENUE
18TH FLOOR
NEW YORK, NEW YORK 10016
(212) 448-1100
FAX (212) 448-0066
Richard J. Blumberg
Direct Phone: (212) 448-6205
New Jersey Office Millbrook Office
411 Hackensack Avenue Franklin Avenue
Hackensack, New Jersey 07601 P.O. Box 1369
(201) 488-1105 Millbrook, New York 12545
Fax (201) 488-3679 (914) 677-5700
Fax (914) 677-0097
June 16, 1998
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: X-ceed, Inc.
Gentlepersons:
Reference is made to the Registration Statement on Form S-3
(the "Registration Statement") filed with the Securities and Exchange Commission
by X-ceed, Inc. (the "Company").
We hereby advise you that we have examined originals or copies
certified to our satisfaction of the Company's Certificate of Incorporation,
minutes of the meetings of the Board of Directors and Shareholders and such
other documents and instruments, and we have made such examination of law as we
have deemed appropriate as a basis for the opinions hereinafter expressed.
Based on the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly
existing and in good standing under the laws of the State of Delaware.
2. The 100,000 Shares of Common Stock (the subject of the
Registration Statement on Form S-3) subject to the exercise of options pursuant
to the terms of the options granted to the Selling Shareholders will, upon
issuance and the payment of the consideration provided to exercise such options,
be validly issued, fully paid and non-assessable.
In addition, we hereby consent to the reference to this Firm
in this Registration Statement and to the filing of this opinion as an Exhibit
to the Registration Statement.
Very truly yours,
/s/ McLaughlin & Stern, LLP
McLAUGHLIN & STERN, LLP
Exhibit 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference into the Amendment No. 2 to
the Registration Statement on Form S-3 of our report dated November 14, 1997
with respect to the consolidated financial statements of X-ceed, Inc. (formerly
Water-Jel Technologies, Inc. and Subsidiaries) included in the Annual Report on
Form 10-KSB for the year ended August 31, 1997 and to the reference to us under
the heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ Holtz Rubenstein & Co., LLP
Holtz Rubenstein & Co., LLP
Melville, New York
August 11, 1998
Exhibit 23(b)
(included in Exhibit 5)
