<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the quarterly period ended February 29, 2000
|_| Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to __________
Commission file number 0-13049
XCEED INC.
- --------------------------------------------------------------------------------
(Exact Name of registrant as specified in its charter)
NEW YORK 13-3006788
- ---------------------------------- ----------------------
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
488 MADISON AVENUE, NEW YORK, NEW YORK 10022
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(212) 419-1200
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 21,577,563 as of April 10,
2000
<PAGE>
XCEED INC. AND SUBSIDIARIES
INDEX
PART I
ITEM 1. Financial Information Page No.
Condensed consolidated balance sheets as of
February 29, 2000 and August 31, 1999. . . . . . . . . . 3
Condensed consolidated statements of operations
Six and Three Months Ended
February 29, 2000 and February 28,1999 . . . . . . . . . . . 4
Condensed consolidated statements of cash flows
Six Months Ended February 29, 2000 and February 28,1999 . . . 5
Notes to condensed consolidated financial statements . . . . 6-10
ITEM 2. Management's Discussion and Analysis of
the Financial Condition and
Results of Operations . . . . . . . . . . . . . 11-13
ITEM 3. Quantitative and Qualitative Disclosures
About Market Risk
PART II
Other Information . . . . . . . . . . . . . . . . . . . . . . . 14-15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 16
2
<PAGE>
XCEED INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
ASSETS FEBRUARY 29, AUGUST 31,
2000 1999
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 15,384 $ 19,754
Investment in marketable securities 1,662 367
Accounts receivable, net of allowance for
doubtful accounts of $1,790 and 1,190, respectively 19,799 9,868
Income tax refund receivable 2,947 2,437
Program costs and earnings in excess of customer billings 8,045 3,735
Prepaid expenses and other current assets 1,129 470
Deferred income taxes 358 358
Net assets related to discontinued operations 467 2,999
---------- ----------
Total current assets 49,791 39,988
PROPERTY AND EQUIPMENT, net 19,540 3,268
DUE FROM OFFICER 1,223 1,223
INTANGIBLE ASSETS, net 155,591 42,999
DEFERRED INCOME TAXES 3,099 1,046
OTHER ASSETS 4,317 3,411
---------- ----------
$ 233,561 $ 91,935
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable, bank $ 362 $ 862
Accounts payable and accrued expenses 8,303 9,199
Current portion of long-term debt 881 389
Notes payable, other 3,125 -
Customer billings in excess of program costs 8,834 3,538
---------- ----------
Total current liabilities 21,505 13,988
---------- ----------
LONG-TERM DEBT 2,841 2,625
----------- ----------
ACCRUED LEASE OBLIGATIONS 875 875
----------- ----------
DEFERRED REVENUES - 296
----------- ----------
CUMULATIVE REDEEMABLE CONVERTIBLE PREFERRED STOCK AND DIVIDENDS:
Series A 4%, $.01 par value; authorized 30,000 shares;
30,000 issued and outstanding 30,150 -
----------- ----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, authorized 30,000,000 shares;
21,428,230 and 17,732,554 shares issued and outstanding, respectively 214 177
Preferred stock, $.05 par value; authorized 1,000,000 shares;
-0- issued and outstanding - -
Common stock warrants 4,286 -
Accumulated other comprehensive income 520 (20)
Additional paid-in capital 196,160 78,258
Unearned compensation - (225)
Treasury stock, 15,000 shares, respectively (71) (71)
Accumulated deficit (22,919) (3,968)
---------- ----------
178,190 74,151
---------- ----------
$ 233,561 $ 91,935
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
XCEED INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
FEBRUARY 29, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUES, net $ 41,038 $ 24,249 $ 25,543 $ 17,324
-------------- ---------------- --------------- ----------
COST AND EXPENSES:
Cost of revenues 30,573 18,432 18,661 13,181
Selling, general and administrative 19,237 6,604 10,579 2,867
Research and development - 202 - 89
Depreciation and amortization 5,307 2,964 3,510 1,659
-------------- ---------------- --------------- ----------
55,117 28,202 32,750 17,796
-------------- ---------------- --------------- ----------
OPERATING LOSS (14,079) (3,953) (7,207) (472)
-------------- ---------------- --------------- ----------
OTHER INCOME (EXPENSE):
Interest and dividend income 362 219 204 110
Interest expense (123) (325) (51) (276)
Gain (loss) on sale of investment in
marketable securities 111 (6) 111 (11)
Other (46) (42) (47) (53)
-------------- ---------------- --------------- ----------
304 (154) 217 (230)
-------------- ---------------- --------------- ----------
LOSS BEFORE INCOME TAXES (13,775) (4,107) (6,990) (702)
INCOME TAX BENEFIT (4,127) (1,106) (2,100) (58)
-------------- ---------------- --------------- ----------
LOSS FROM CONTINUING OPERATIONS (9,648) (3,001) (4,890) (644)
-------------- ---------------- --------------- ----------
DISCONTINUED OPERATIONS:
Income from operations, net of tax provision
of $752, $528, $248 and $36, respectively 995 723 317 88
Gain on sale of discontinued operations,
net of tax provision of $404 605 - 605 -
-------------- ---------------- --------------- ----------
INCOME FROM DISCONTINUED OPERATIONS 1,600 723 922 88
-------------- ---------------- --------------- ----------
NET LOSS (8,048) (2,278) (3,968) (556)
PREFERRED STOCK DIVIDENDS 10,903 - 10,903 -
-------------- ---------------- --------------- ----------
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS $ (18,951) $ (2,278) $ (14,871) $ (556)
============== ================ =============== ==========
NET LOSS PER SHARE APPLICABLE TO COMMON
SHAREHOLDERS
Loss from continuing operations $ (1.10) $ (0.22) $ (0.82) $ (0.05)
Income from discontinued operations 0.06 0.05 0.02 0.01
Gain on sale of discontinued operations 0.03 - 0.03 -
-------------- -------------- ------------- --------------
NET LOSS $ (1.01) $ (0.17) $ (0.77) $ (0.04)
============== ============== ============= ==============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING: 18,754,990 13,562,869 19,266,003 14,022,209
============== ============== ============= ==============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
XCEED INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
February 29, February 28,
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (8,048) $ (2,278)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Gain (loss) on sale of marketable securities (111) 6
Depreciation and amortization 5,421 3,117
Non-cash compensation 435 --
Provision for doubtful accounts 600 --
Deferred income taxes (2,439) (148)
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (5,564) (3,669)
Inventories 1,136 116
Program costs and earnings in excess of customer billings (4,101) 929
Income tax refund receivable (510) --
Prepaid expenses and other current assets (309) 41
Other assets (698) (467)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (1,780) (24)
Income taxes payable -- (219)
Customer billings in excess of program costs and earnings 5,296 5,273
Deferred revenue (557) (76)
-------- --------
Net cash (used in) provided by operating activities (11,229) 2,601
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in marketable securities (550) (285)
Proceeds from sale of marketable securities 644 170
Business acquisitions, net of cash acquired (12,655) (6,286)
Proceeds from sale of fixed assets 650 --
Acquisition of property and equipment (15,091) (397)
-------- --------
Net cash used in investing activities (27,002) (6,798)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (678) (156)
Proceeds from issuance of long-term debt -- 179
Net proceeds from issuance of redeemable preferred stock 29,000 --
Proceeds from excercise of warrants and options 5,539 11,160
-------- --------
Net cash provided by financing activities 33,861 11,183
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,370) 6,986
CASH AND CASH EQUIVALENTS - beginning of period 19,754 13,789
-------- --------
CASH AND CASH EQUIVALENTS - end of period $ 15,384 $ 20,775
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
XCEED INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February 29,2000
(UNAUDITED)
(in thousands, except share and per share data)
1. Basis of Quarterly Presentation:
-------------------------------
The accompanying quarterly financial statements have been prepared in
conformity with generally accepted accounting principles.
The financial statements of the Registrant included herein have been
prepared by the Registrant pursuant to the rules and regulations of the
Securities and Exchange Commission and, in the opinion of management,
reflect all adjustments (consisting of normal and recurring
adjustments) which are necessary to present fairly the results for the
period ended February 29, 2000.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations; however, management believes that the
disclosures are adequate to make the information presented not
misleading. This report should be read in conjunction with the
financial statements and footnotes therein included in the audited
annual report on Form 10-K/A as of August 31, 1999.
2. Principle of Consolidation:
--------------------------
The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. Upon consolidation,
intercompany accounts and transactions are eliminated.
3. Supplementary Information - Statements of Cash Flow:
---------------------------------------------------
Six Months Ended
----------------
February 29, February 28,
------------ ------------
2000 1999
---- ----
Interest paid.................. $ 123 $ 327
======== ===========
Income taxes paid.............. $ 113 $ 361
======== ===========
Non-Cash Financing and Investment Activities:
Common stock issued in
connection with acquisitions . $101,224 $26,120
Non-cash compensation . . . . . $ 435 $ -
6
<PAGE>
During the six months ended February 29, 2000, the Company's
acquisition of property and equipment approximating $879 was financed
through long-term debt.
4. Discontinued Operations:
-----------------------
In January 2000, the Company completed the sale of its Water-Jel
division for $4.0 million in cash to an unrelated Company. The selling
price is subject to certain adjustments, which in the opinion of the
Company's management, should not have a significant impact on the
Company's financial condition or results of operations. As a result,
the Company recorded a gain net of expenses of $1.0 million during the
quarter ending February 29, 2000.
In January 2000, the Company's Board of Directors approved a plan to
sell its Journeycorp division. Accordingly, the operating results of
Journeycorp for the quarter and year ended February 29, 2000 and August
31, 1999, respectively, have been segregated from continuing operations
and reported with the Water-Jel results as a separate line item in the
statement of operations.
The Company has restated its prior financial statements to present the
operating results of its Water-Jel and Journeycorp divisions as
discontinued operations. Net assets to be disposed of, at their book
value, have been separately classified in the accompanying balance
sheets at August 31, 1999 and February 29,2000.
Summarized financial information for the Water-Jel and Journeycorp
divisions as discontinued operations for the six months ended February
29, 2000 and February 28, 1999 is as follows:
Six Months Ended
----------------
February 29, February 28,
------------ ------------
2000 1999
---- ----
Revenues. . . . . . . . . . . . . . . $ 7,289 $ 8,101
Income from discontinued
operations, before tax provision. . . 1,747 1,251
Income from discontinued
operations, net of tax provision. . . 995 723
5. Basic and diluted net income per common share:
---------------------------------------------
Basic net income per common share is based on the weighted average
number of shares of common stock outstanding during each year. Diluted
net income per common share is based on the weighted average number of
shares of common stock outstanding during each year, adjusted for the
dilutive effect
7
<PAGE>
of potentially issuable shares of common stock arising from the assumed
exercise of stock options and warrants and conversion of outstanding
Series A Cumulative Convertible Preferred Stock. Basic loss per common
share was computed by dividing net loss less preferred stock dividends
by the average number of shares of common stock outstanding. Diluted
loss per common share does not give effect to the impact of options,
warrants and conversion of preferred shares because their effect is
anti-dilutive for all periods presented.
6. Income Taxes:
------------
Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities,
and are measured using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse.
7. Reclassifications:
-----------------
Certain reclassifications have been made to the financial statements
for the six months ended February 28, 1999 to conform with the
classifications used in 2000.
8. Business Combinations:
---------------------
During the six months ended February 29, 2000, the Company completed
the acquisitions of seven internet professional services firms in
various transactions accounted for as purchase business combinations.
The aggregate purchase price of these acquisitions was approximately
$118,925, including 2,842,891 shares of common stock (having an
approximate value of $101,225) and cash of $17,700. Certain of the
agreements provide for additional consideration in the event certain
specific performance criteria are met.
The acquisition prices were preliminarily allocated, on an
entity-by-entity basis, to the assets acquired, including tangible and
intangible assets and liabilities assumed based upon the fair values of
such assets and liabilities on the dates of the acquisitions. The
historical carrying amounts of the tangible assets and liabilities
approximated their fair values on the dates of acquisitions.
Approximately $117,088 of the aggregate purchase price was allocated to
goodwill and will be amortized over its estimated useful life of seven
years.
The acquisitions described above were recorded using management's
estimates and preliminary evaluation. The actual purchase price
accounting adjustments to reflect the fair value of net assets will be
based on management's final evaluation, therefore, the information
above is subject to change pending the final allocation of purchase
price.
8
<PAGE>
9. Series A Cumulative Convertible Preferred Stock:
-----------------------------------------------
In January 2000, the Company sold 30,000 shares of Series A Cumulative
Convertible Preferred Stock to a group of investors. The net proceeds
to the Company were approximately $29,000.
Each share of Series A Preferred Stock is convertible, by the holder
and in certain instances by the Company, into shares of the Company's
common stock, subject to certain limitations, at a conversion price per
share of not greater than $36, subject to adjustments as set forth in
the Certificate of Designation, Preferences and Rights of the Series A
Cumulative Convertible Preferred Stock, which the Company filed with
the Securities and Exchange Commission as an exhibit to Form 8-K on
January 20, 2000. The Series A Preferred Stock is also redeemable by
the Company and, in certain instances, by the holder, subject to
certain limitations as set forth in the Certificate of Designation,
Preferences and Rights. In accordance with Emerging Issues Task Force
Consensus No. 98-5, "Accounting for Convertible Securities with
Beneficial Conversion Features," the Company recorded $6,466 of net
proceeds of its sale of Series A Preferred Stock as a dividend in order
to recognize the immediate beneficial conversion feature resulting from
the difference between the fair value of its common stock as of the
date of agreement and the maximum conversion price of $36.
In connection with the issuance, the Company also issued warrants to
purchase 183,273 shares of common stock at an exercise price of $50.10
per share. The warrants expire on January 13, 2005. Utilizing the Black
Scholes option pricing model and relative value method, a value of
$4,286 of the net proceeds was allocated to common stock warrants in
order to recognize the fair value of the warrants at the time of
issuance.
Since the Series A Preferred Stock is convertible at the option of the
holder at any time, the amount that has been ascribed to the warrants
has been reflected as a deemed dividend so that the Series A Preferred
Stock can be carried at its redemption value of $30,000.
The Series A Preferred Stock has a cumulative annual dividend of 4.0%
per annum and is payable quarterly at the option of the Company in cash
or by increasing the aggregate value of the Series A Preferred Stock.
The Series A Preferred Stock has senior preference and priority as to
the dividend as well as distribution and payments upon the liquidation,
dissolution, or winding up of affairs before any payment to other
shareholders of the Company.
9
<PAGE>
In April 2000, the Company issued warrants to purchase an additional
1,350,000 shares of the Company's common stock to the holders of the
Series A Preferred Stock in exchange for a waiver of their rights under
certain provisions of the Subscription Agreement, dated January 13,
2000, which was filed with the Commission as an exhibit to the
Company's Current Report on Form 8-K on January 20, 2000. A form of the
warrants issued in April 2000 to the holders of the Series A Preferred
Stock was filed with the Commission as an exhibit to the Company's
Current report on Form 8-K on April 11, 2000. As a result of the
issuance of these additional warrants in April 2000, an additional
dividend of approximately $7,800, calculated under the Black Sholes
pricing model will be recorded in the third quarter of fiscal 2000.
10
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of financial conditions and
results of operations of Xceed Inc. should be read in conjunction with the
Company's consolidated financial statements that appear in this document.
Overview
The Company is a leading interactive architect and solutions builder as
well as an integrated marketing and communications company with interactive
services as its core. The Company helps companies develop e-commerce and
e-business solutions, improving people and business performance through
communication tools, techniques and technologies.
The following table sets forth the percentage of total revenues
represented by certain items reflected in the Company's consolidated statements
of operations.
Six Months ended
February 29, February 28,
2000 1999
---- ----
Revenue 100% 100%
Operating Expenses:
Cost of Revenues 74 76
Selling, general & admin. 47 27
Research & development --- 1
Depreciation & amortization 13 12
--- ---
Total operating expenses 134% 116%
--- ---
Operating loss (34)% (16)%
--- ---
Loss from continuing operations (24)% (12)%
--- ---
RESULTS OF OPERATIONS:
Net revenues for the six months ended February 29, 2000 and February
28, 1999, respectively, were $41,038 and $24,249, representing a 69% increase.
Net revenues for the three months ended February 29, 2000 and February 28, 1999,
respectively, were $25,543 and $17,324 representing a 47% increase. The
increases in net revenues for the six and three months ended February 29, 2000
are primarily attributable to the Company's continued rapid organic growth of
its Interactive business, along with the growth due to acquisitions. The organic
growth was the result of substantial increases in the number and size of
interactive engagements.
Cost of revenues for the six months ended February 29, 2000
11
<PAGE>
and February 28, 1999 were $30,573 and $18,432, representing an increase of
$12,141, or 66% in the current period. Cost of revenues for the three months
ended February 29, 2000 and February 28, 1999 were $18,661 and $13,181,
representing an increase of $5,480, or 42% in the current period. The continued
increase in cost of revenues during the current period is a direct result of
increased staffing requirements, cost of acquisitions and continued increase in
market share of the Company's Interactive business.
Selling, general and administrative expenses for the six months ended
February 29, 2000 and February 28, 1999 were $19,237 and $6,604, respectively,
representing an increase of $12,633, or 191% in the current period. Selling,
general and administrative expenses for the three months ended February 28, 2000
and 1999 were $10,579 and $2,867, representing an increase of $7,712, or 270% in
the current period. The continued increase in selling, general and
administrative expenses during the current period is a result of the Company's
continued effort to evolve its core business into a fully integrated
communications company. A significant portion of this increase has resulted from
expenses related to acquisitions, increased selling, marketing and corporate
expenses. As a percentage of revenues, selling, general and administrative
expense increased to 47% during the current period as compared to 27% for the
corresponding prior period.
Depreciation and amortization expense for the six months ended February
29, 2000 and February 28,1999 were $5,307 and $2,964, respectively, representing
an increase of $2,343, or 79% for the current period. Depreciation and
amortization expense for the three months ended February 29, 2000 and February
28,1999 were $3,510 and $1,659, respectively, representing an increase of
$1,851, or 112% for the current period. The increase in depreciation and
amortization expense during the current period is primarily attributable to the
amortization of intangible assets in connection with acquisitions made in the
Interactive business. Also, the Company is incurring increased depreciation
expense as a result of increased fixed assets purchases of computer and related
equipment. As a percentage of revenues, depreciation and amortization expense
accounted for 13% as compared to 12% for the corresponding prior period.
Other income (expense) for the six months ended February 29, 2000 was
$304 as compared to ($154) for the corresponding prior period. Other income
(expense) for the three months ended February 29, 2000 was $217 as compared to
($230) for the corresponding prior period. The increase in other income
(expense) during the current periods is a result of increased interest income,
decreased interest expense and net gains on sales of marketable securities.
12
<PAGE>
The Company's effective tax benefit rate for the six months ended
February 29, 2000 and February 28, 1999 approximated (30%). This rate reflects
the amortization of non-deductible goodwill in connection with the acquisitions.
LIQUIDITY AND CAPITAL RESOURCES:
Historically, we have primarily relied on our cash flow from
operations, the proceeds from private placements of common stock and preferred
stock and the exercise of warrants and options to finance our working capital
requirements. At February 29, 2000 the Company had working capital of $28,286 as
compared to $26,000 at August 31, 1999.
In January 2000, we received cash proceeds of $3,900 in connection with
the divestiture of net assets of our Water-Jel division. Also, in January 2000,
we received net proceeds of $29,000 from the sale of 30,000 shares of Series A
Cumulative Convertible Preferred Stock.
The condensed statement of cash flows for the six months ended February
29, 2000 reflects net cash used in operating activities of $11,229 reflecting a
net loss of $8,048,an increase in accounts receivable of $5,564 and an increase
in programs costs and earnings in excess of customer billings of $4,101 offset
by an increase in customer billings in excess of program costs of $5,296. Cash
used in investing activities was $27,002, resulting from business acquisitions
of $12,655 and acquisitions of property and equipment of $15,091. Cash provided
by financing activities was $33,861, resulting primarily from the net proceeds
from the issuance of 30,000 shares of Series A Preferred Stock of $29,000.
We anticipate financing our growth strategy through current cash
resources, cash flow from operations and existing and prospective third party
credit facilities, including a bank line of credit in the amount of $5,000, all
of which is currently available, as well as through the issuance of equity or
debt securities. We believe the combination of these sources, will be sufficient
to fund our operations and to satisfy our cash requirements for the next 12 to
24 months. There may be circumstances, however, that would accelerate the use of
our liquid resources. If this occurs, we may, from time to time, incur
additional indebtedness or issue, in public transactions, equity or debt
securities.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes regarding the Company's market risk
position from the information provided in form 10-K/A for the fiscal year ended
August 31, 1999.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
There is no material litigation currently pending against the Company,
its officers or employees.
ITEM 2 - Changes in Securities
On January 13, 2000, pursuant to Rule 506 of Regulation D under the
Securities Act of 1933, the Company issued 30,000 shares of Series A
Cumulative Convertible Preferred Stock and warrants to purchase an
aggregate of 183,273 shares of the Company's common stock to a group of
investors consisting of Peconic, Inc., Leonardo, L.P. and HFTP
Investment, L.L.C. The net proceeds to the Company were approximately
$29,000,000.
On January 21, 2000, pursuant to Rule 506 of Regulation D under the
Securities Act of 1933, the Company completed the acquisition, by asset
purchase, of Big Theory, LLC for 335,613 shares of the Company's common
stock having a market value of approximately $12,37,000 and $4,000,000
in cash.
On February 6, 2000, pursuant to Rule 506 of Regulation D under the
Securities Act of 1933, the Company completed the acquisition, by way
of merger, of Sterling Carteret, Inc. for 187,290 shares of the
Company's common stock having a market value of approximately
$7,000,000 and $2,950,000 in cash.
On February 10, 2000, pursuant to Rule 506 of Regulation D under the
Securities Act of 1933, the Company completed the acquisition, by way
of merger, of methodfive, inc. for 1,797,094 shares of the Company's
common stock having a market value of approximately $70,500,000 and
$4,500,000 in cash.
On February 25, 2000, pursuant to Rule 506 of Regulation D under the
Securities Act of 1933, the Company completed the acquisition, by way
of merger, of Pulse Interactive, B.V. for 120,805 shares of the
Company's common stock having a market value of approximately
$4,500,000 and $1,500,000 in cash.
ITEM 3 - Defaults on Senior Securities
None
ITEM 4 - Submission to a Vote of Security Holders
- ------ ----------------------------------------
None
ITEM 5 - Other Information
None
14
<PAGE>
ITEM 6 - Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) 27. Financial Data Schedule
(b) Report on Form 8-K
(1) The Company's Current Report on Form 8-K, as filed
with the Commission on January 20, 2000 reporting the
issuance of 30,000 shares of Series A Cumulative
Convertible Preferred Stock and warrants to purchase
183,273 shares of common stock to a group of
investors.
(2) The Company's Current Report on Form 8-K, as filed
with the Commission on January 28, 2000 regarding the
change in the Company's auditors from Holtz
Rubenstein & Co., LLP to Deloitte & Touche LLP.
(3) The Company's Current Report on Form 8-K, as filed
with the Commission on February 16, 2000 referencing
the acquisition of methodfive, inc. , as amended on
Form 8-K/A on April 11, 2000, in which the Company
filed the following financial statements: (i) audited
financial statements for methodfive, inc., prepared
pursuant to Rule 310(b) of Regulation S-B; and (ii)
pro forma financial information required pursuant to
Rule 310(d) of Regulation S-B.
(4) The Company's Current Report on Form 8-K, as filed
with the Commission on April 11, 2000, reporting the
Company's issuance of warrants to purchase 1,350,000
shares of the Company's common stock to the holders
of the Series A Cumulative Convertible Preferred
Stock.
15
<PAGE>
XCEED INC.
488 MADISON AVENUE
NEW YORK, N.Y. 10022
------------------------
FILE # 0-13049
------------------------
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
BY: /s/ Werner Haase
---------------------------
WERNER HAASE,
Chief Executive Officer
DATE: April 14, 2000
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