<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended March 31, 2000.
/ / Transition report under Section 13 or 15(d) of the Exchange Act For the
transition period from to
Commission file number: 33-83526
THE IXATA GROUP, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 95-4453386
- ----------------------------------- -----------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
8080 DAGGET, SUITE 220 SAN DIEGO, CALIFORNIA 92111
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(Address of Principal Executive Offices)
858-677-5580
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(Issuer's Telephone Number, Including Area Code)
Check whether 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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
COMMON STOCK, $0.001 PAR VALUE PER SHARE: 13,691,679 (AS OF MAY 1, 2000)
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Transition Small Business Disclosure Format (check one):
Yes No X
--- ---
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THE IXATA GROUP, INC.
Quarterly Report on Form 10-QSB
For the Quarter Ended March 31, 2000
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THE IXATA GROUP, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Item Page
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<S><C> <C>
PART I -- FINANCIAL INFORMATION 2
Item 1. Financial Statements. 2
Item 2. Management's Discussion and Analysis or Plan of Operations. 15
The Company 15
Recent Events 16
Results of Operations 16
Liquidity and Capital Resources 17
Year 2000 18
Forward-Looking Statements 18
PART II -- OTHER INFORMATION 23
Item 1. Legal Proceedings. 23
Item 2. Changes in Securities and Use of Proceeds. 23
Item 3. Defaults Upon Senior Securities. 23
Item 4. Submission of Matters to a Vote of Security Holders. 23
Item 5. Other Information. 23
Item 6. Exhibits and Reports on Form 8-K. 23
</TABLE>
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Page 1
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THE IXATA GROUP, INC.
Quarterly Report on Form 10-QSB
For the Quarter Ended March 31, 2000
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PART I -- FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
<S> <C>
Condensed Consolidated Balance Sheets................................3-4
Condensed Consolidated Statements of Operations......................5
Condensed Consolidated Statements of Cash Flows......................6-7
Notes to Financial Statements........................................8-14
</TABLE>
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Page 2
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THE IXATA GROUP, INC. AND SUBSIDIARIES
(FORMERLY SECURFONE AMERICA, INC. AND SUBSIDIARIES)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
================================================================================
MARCH 31, 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 371,295 $ 5,869
Marketable equity security (Note 3) 180,000 -
Accounts receivable - net of allowance
for doubtful accounts of $0 and $32,019 in
2000 and 1999, respectively 165,712 8,853
Prepaid assets 5,137 -
- --------------------------------------------------------------------------------
Total current assets 722,144 14,722
FIXED ASSETS - NET 74,057 155,337
GOODWILL - NET 5,699,133 -
OTHER ASSETS - NET 9,058 1,225
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$6,504,392 $ 171,284
================================================================================
</TABLE>
3
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THE IXATA GROUP, INC. AND SUBSIDIARIES
(FORMERLY SECURFONE AMERICA, INC. AND SUBSIDIARIES)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
================================================================================
MARCH 31, 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes payable (Note 4) $ 625,293 $ 870,636
Current portion of capitalized leases 99,814 54,540
Accounts payable and accrued expenses 336,190 426,507
Related party payables 339,056 -
Deferred revenue 102,519 -
Accrued payroll and related taxes 297,021 114,246
Accrued interest 292,158 126,169
- --------------------------------------------------------------------------------
Total current liabilities 2,092,051 1,598,159
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LONG-TERM DEBT (Note 5) 1,440,450 1,140,000
CAPITALIZED LEASES, LESS CURRENT MATURITIES - 45,274
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Total liabilities 3,532,501 2,783,433
COMMITMENTS AND CONTINGENCIES (NOTE 7)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock; 10,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, $.001 par value; 100,000,000
shares authorized, 13,671,679 and
6,091,881 shares issued and outstanding,
respectively 13,672 6,092
Stock subscriptions receivable (2,963) -
Additional paid-in capital 16,065,783 7,237,790
Deficit accumulated during the development
stage (12,984,601) (9,856,031)
Accumulated other comprehensive loss:
Unrealized holding loss on marketable
securities (Note 3) (120,000) -
- --------------------------------------------------------------------------------
Total stockholders' equity (deficit) 2,971,891 (2,612,149)
- --------------------------------------------------------------------------------
$ 6,504,392 $ 171,284
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
4
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THE IXATA GROUP, INC. AND SUBSIDIARIES
(FORMERLY SECURFONE AMERICA, INC. AND SUBSIDIARIES)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
Period from
Inception
(May 20, 1996)
QUARTER ENDED MARCH 31, to March 31,
------------------------------
2000 1999 2000
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<S> <C> <C> <C>
REVENUES $ 82,270 $ - $ 353,859
COSTS, EXPENSES AND OTHER
Selling, general and administrative expenses
(including stock-based compensation of
$264,000 in 1999 and the period from
inception (May 20, 1996) to March 31, 2000) (1,357,991) (29,251) (3,673,859)
Gain on disposal of subsidiary - - 708,419
Restructuring charge
(including stock-based compensation of
$6,211,000 for the period from inception
(May 20, 1996)to March 31, 2000,
respectively) - (364,312) (10,017,906)
Interest expense (74,171) (1,206) (330,508)
Loss on impairment of fixed assets - - (59,543)
Realized gain on sale of marketable securities - - 50,000
Cost of revenues (719) - (17,997)
Interest income 909 - 2,934
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TOTAL COSTS, EXPENSES AND OTHER (1,431,973) (389,945) (13,338,460)
- ----------------------------------------------------------------------------------------------
NET LOSS $ (1,349,702) $ (389,945) $ (12,984,601)
==============================================================================================
NET LOSS PER SHARE:
Net Loss $ (0.11) $ (0.06)
- ----------------------------------------------------------------------------------------------
WEIGHTED-AVERAGE SHARES OUTSTANDING 12,490,354 6,091,881
==============================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
5
<PAGE>
THE IXATA GROUP, INC. AND SUBSIDIARIES
(FORMERLY SECURFONE AMERICA, INC. AND SUBSIDIARIES)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Period from
Inception
(May 20, 1996)
QUARTER ENDED MARCH 31, to March 31,
----------------------------------------
2000 1999 2000
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,349,702) $ (389,945) $(12,984,601)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 339,736 15,744 1,231,843
Gain on sale of subsidiary - (708,419)
Net loss on stock issued for debt and services - 4,390
Stock issued for services - 103,818
Loss on impairment of fixed assets - 59,543
Stock options granted and contingent shares issued - 6,211,525
Change in operating assets and liabilities:
Accounts receivable 94,071 (1,715) (161,486)
Notes receivable - - 5,833
Royalties receivable - - -
Inventory - - -
Intangible and other assets - - (56,680)
Prepaid assets (5,137) 35,000 (1,712)
Accounts payable, accrued payroll and accrued expenses 115,385 (8,228) 849,572
Related party payables (30,444) - 163,920
Deferred revenue (11,820) - 91,274
Accrued interest 62,921 - 211,891
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Net cash used in operating activities (784,990) (349,144) (4,979,919)
- ----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of subsidiary and related assets - - 498,000
Acquisition of goodwill (investment in subsidiary) - - (181,931)
Cash acquired in acquisition of subsidiary - - 46,978
Purchases of fixed assets (15,864) (157) (374,896)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (15,864) (157) (11,849)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sale of common stock 848,004 - 3,119,251
Proceeds from issuance of long-term debt and notes payable - 362,218 2,316,796
Principal payments on notes payable (2,000) (5,377) (149,428)
Principal payments on capital leases - (3,203) (83,206)
Proceeds from capitalized lease - - 159,650
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Net cash provided by financing activities 846,004 353,638 5,945,686
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 45,150 4,337 371,295
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 326,145 1,532 -
- ----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 371,295 $ 5,869 $ 371,295
==================================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
6
<PAGE>
THE IXATA GROUP, INC. AND SUBSIDIARIES
(FORMERLY SECURFONE AMERICA, INC. AND SUBSIDIARIES)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
================================================================================
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Period from
Inception
(May 20, 1996)
QUARTER ENDED MARCH 31, to March 31,
-----------------------------------------
2000 1999 2000
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<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 11,250 $ 23,967 $ 257,467
Income taxes $ - $ 1,600 $ 4,800
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NONCASH INVESTING AND FINANCING ACTIVITIES:
In March 1997, the Company acquired $159,650 of fixed assets under a
sale-leaseback arrangement, which was being accounted for as a capital lease
agreement.
On December 3, 1997, the Company issued 620,000 conditional shares of common
stock pursuant to various employment, retainer, consulting and fee arrangements
with a fair value of approximately $3,100,000. The fair value of the shares was
calculated using the closing price surrounding the issuance date.
On November 17, 1998, the Company issued 41,665 shares of common stock for
investment banking services and bridge funding with a fair value of
approximately $33,000. The fair value of the shares was calculated using the
closing price surrounding the issuance date.
During 1999, the Company issued 233,288 shares of common stock to satisfy debt
related to professional services with a fair value of approximately $395,000.
The fair value of the shares was calculated using the closing price surrounding
the issuance dates.
During 1999, 1998 and the period from inception (May 20, 1996) to December 31,
1999, the Company granted stock options to purchase 575,000, 550,000, and
430,900 shares, respectively, of the Company's common stock. These stock options
were valued in accordance with SFAS 123 at approximately $264,000, $1,620,000
and $3,111,000, respectively.
During 1999, the Company acquired 600,000 shares of common stock at a fair
market value of $.50 per share as proceeds from the sale of certain assets held
in its wholly-owned subsidiary, SecurFone, Inc. The change in the unrealized
holding loss on marketable securities was $120,000 for the period until
March 31, 2000. In March 2000, the Company issued 600,000 shares of common
stock to Global One, Inc., related to the acquisition of IXATA, Inc.
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
7
<PAGE>
THE IXATA GROUP, INC. AND SUBSIDIARIES
(FORMERLY SECURFONE AMERICA, INC. AND SUBSIDIARIES)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. BASIS OF The accompanying condensed consolidated financial
PRESENTATION statements of The IXATA Group, Inc. and subsidiaries (the
"Company") include the accounts of the Company and its
wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in
consolidation. In the opinion of management, the condensed
consolidated financial statements reflect all normal and
recurring adjustments which are necessary for a fair
presentation of the Company's financial position, results
of operations and cash flows as of the dates and for the
periods presented. The condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial
information. Consequently, these statements do not include
all the disclosures normally required by generally
accepted accounting principles for annual financial
statements nor those normally made in the Company's Annual
Report on Form 10-KSB. Accordingly, reference should be
made to the Company's Form 10-KSB filed on May 16, 2000
and other reports the Company filed with the Securities
and Exchange Commission for additional disclosures,
including a summary of the Company's accounting policies,
which have not materially changed. The consolidated
results of operations for the three months ended March 31,
2000 are not necessarily indicative of results that may be
expected for the fiscal year ending December 31, 2000 or
any future period, and the Company makes no
representations related thereto.
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make certain estimates and assumptions that
affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities and the
results of operations during the reporting period. Actual
results could differ materially from those estimates.
Certain reclassifications have been made to the prior
period financial statements to conform to the current
period presentation.
8
<PAGE>
2. ABBREVIATED An abbreviated summary of the Company's significant
SUMMARY OF accounting policies applied consistently in the
SIGNIFICANT preparation of the accompanying consolidated financial
ACCOUNTING statements follows.
POLICIES
(a) DEVELOPMENT Effective July 1, 1999, the Company is principally engaged
STAGE in developing, marketing and providing global Internet-
OPERATIONS based business-to-business electronic commerce services
for the corporate travel and hospitality markets. Because
the Company had not generated significant revenues as of
March 31, 2000, the Company believes it is in the
development stage at March 31, 2000. The Company also
contracts authorizing certain strategic partners to
sublicense its software. The Company invested significant
capital and effort in development of its databases,
software and customer base throughout 1999 and the first
quarter of 2000.
(b) GOING CONCERN The accompanying consolidated financial statements as of
March 31, 2000 have been prepared assuming the Company
will continue as a going concern. However, the Company had
working capital deficits of $1,369,907 and $1,723,437 as
of March 31, 2000 and 1999, respectively, and incurred net
losses of $1,349,972, $389,945 and $12,984,601 for the
quarters ended March 31, 2000 and 1999 and for the period
from inception (May 20, 1996) to March 31, 2000,
respectively. These conditions raise substantial doubt
about the Company's ability to continue as a going
concern.
To meet both current and contractual commitments and
business growth objectives, the Company will require
additional financing. To address its financing needs, the
Company is pursuing a multiple phase strategy and has
retained an investment banking firm, Scott & Stringfellow,
Inc., to assist and advise the Company in the process.
During the initial phase, from November 1999 to April
2000, the Company secured financing from private investors
in exchange for shares of the Company's common stock,
raising a net amount of $1.8 million from these
individuals. The second phase of the financing plan is to
raise between $2.5 million and $10 million in equity from
strategic
9
<PAGE>
and institutional investors. This phase is currently
underway, with both strategic and institutional investors
identified and expressing interest to an equity investment
in the Company. There can be no assurance that additional
debt and equity financing needed to fund operations will
be consummated or obtained in sufficient amounts necessary
to meet the Company's needs.
(c) REVENUE The Company recognizes revenue from transaction revenues
RECOGNITION and sales of subscriptions. Transactio revenues are
recognized, net of an allowance for uncollectible amounts,
when substantially all significant services to be provided
by the Company have been performed. Subscription revenues
are recognized over the period of the subscription. An
allowance has been proved for uncollectible accounts based
on management's evaluation of the accounts and the
customer's history.
3. MARKETABLE The cost, unrealized holding loss and fair market value of
SECURITIES marketable securities are as follows:
<TABLE>
<CAPTION>
Unrealized
Cost Holding Loss Fair Value
---------------------------------------------------------
<S> <C> <C> <C>
March 31, 2000 $ 300,000 $ (120,000) $ 180,000
====================================================================================
</TABLE>
The net changes in unrealized holding loss on securities
available for sale charged to stockholder's equity
(deficit) in 2000 was $156,000. The net changes in
unrealized holding loss on securities available for sale
charged to stockholder's equity (deficit) since the
securities were acquired is $120,000. As it is not more
likely than not that the Company will benefit from the
realization of this loss, no tax benefit has been
recorded.
10
<PAGE>
<TABLE>
<CAPTION>
4. NOTES Notes payable - short-term consisted of the
PAYABLE - following:
SHORT-TERM MARCH 31, 2000 1999
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<C> <S> <C> <C> <C>
Note payable to a limited partnership bearing
15% interest; principal and interest due on
November 1, 1999 and was extended as a demand
note; secured by a stock pledge agreement. $ 300,000 $ -
Unsecured note payable; interest at 10% per
annum. Principal and unpaid interest were due
January 30, 1999. The note was extended as a
demand note. 130,000 130,000
Unsecured note payable to an unrelated parties
for advances made to the Company; interest at
10% per annum. Principal and interest were due
on September 1, 1999. The note was extended as
a demand note. 130,000 179,750
Note payable for advances on future sale to
TeleData - 366,233
Note payable for a settlement with the
Company's former CEO to resolve all
outstanding Company obligations related to his
employment; assigned to an unrelated party in
1999; interest at 12% per annum. Principal and
unpaid interest due on demand. 50,000 50,000
Account payable with a vendor converted to a
note on June 21, 1999; interest at 8%; payable
in $2,000 installments of principal and
interest beginning July 1, 1999. 10,365 -
</TABLE>
11
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<TABLE>
<CAPTION>
4. NOTES
PAYABLE - MARCH 31, 2000 1999
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<C> <S> <C> <C> <C>
SHORT-TERM, A two-year unsecured note payable to a
cont'd vendor under an agreement dated October
1997; interest at 6% per annum; monthly
principal and interest payments of $1,407;
unpaid balance is due within twelve months.
Paid in full subsequent to March 31, 2000. 6,928 9,653
Note payable; interest at 10% per annum. The
note was secured with security interest in
50,000 shares of the Company's common stock.
Paid in 1999. - 100,000
Note payable; interest at 10% per annum; due on
February 18, 1999. Paid in 1999. - 35,000
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$ 625,293 $ 870,636
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
5. LONG-TERM Long-term debt consisted of the following:
DEBT
MARCH 31, 2000 1999
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<C> <S> <C> <C> <C>
Convertible debenture in the amount of
$1,000,000 issued August 21, 1998 for advances
made to the Company; interest at 12%, payable
quarterly; principal is payable on the earlier
of 1) the Company's receipt of at least $8
million proceeds from a public offering of
Company securities or 2) August 21, 2001.
Non-detachable warrants for 500,000 shares
exercisable at $2.72 per share were issued in
connection with the convertible debenture. The
warrants expire on August 21, 2003.
</TABLE>
12
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<TABLE>
<CAPTION>
5. LONG-TERM
DEBT, cont'd MARCH 31, 2000 1999
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<C> <S> <C> <C> <C>
securities or 2) August 21, 2001.
Non-detachable warrants for 500,000 shares
exercisable at $2.72 per share were issued
in connection with the convertible
debenture. The warrants expire on August
21, 2003. $ 1,000,000 $ 1,000,000
Advances payable to unrelated parties and
potential investors who have committed the
funds on a long-term basis. Negotiations with
various parties have not characterized the
debt and equity nature of the funds or
finalized interest rates, maturity dates,
repayment terms or other features for the
advances.
430,450 140,000
Note payable to a related party; interest at
5%; principal and interest are due on
February 16, 2004. 10,000 -
-------------------------------------------------------------------------------------
$ 1,440,450 $ 1,140,000
=====================================================================================
</TABLE>
Future minimum principal payments on long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
------------------------------------------------------------------------------------
<S> <C>
2001 -
2002 1,430,450
2003 -
2004 10,000
------------------------------------------------------------------------------------
$1,440,450
====================================================================================
</TABLE>
13
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6. STOCKHOLDERS'
EQUITY
COMMON STOCK In November 1999, the Company offered shares of
its common stock to investors in an offering
exempt from registration pursuant to Regulation
D of the Securities Act of 1933. In the first
quarter of 2000, the Company has sold 1,060,007
shares of common stock for total proceeds to the
Company of $ 848,004 after deduction of the
placement agent fee of $0.05 per share.
7. SALE OF In conjunction with the Company's acquisition
SECURFONE, of IXATA, Inc. and subsequent to the sale of
INC. its wholly-owned subsidiary, SecurFone, Inc., to
TeleData World Services, Inc. ("TWOS"), the
Company discontinued its prepaid cellular
operations in its entirety, effective June 30,
1999. The operations of the disposed cellular
operations have been reclassified, net, as a
restructuring charge. The Company is now focused
entirely on operations in the e-commerce
industry.
8. COMMITMENTS
AND
CONTINGENCIES
LITIGATION In the normal course of business, the Company is
occasionally named as a defendant in various
lawsuits. It is the opinion of management that
the outcome of any pending lawsuits will not
materially affect the operations or the
financial position of the Company or cash flows.
14
<PAGE>
THE IXATA GROUP, INC.
Quarterly Report on Form 10-QSB
For the Quarter Ended March 31, 2000
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following describes certain factors which produced changes in the results of
operations of The IXATA Group, Inc. (the "Company") during the quarter ended
March 31, 2000 and as compared with the quarter ended March 31, 1999 as
indicated in the Company's Consolidated Financial Statements. The following
should be read in conjunction with the Consolidated Financial Statements and
related notes. Historical results of operations are not necessarily indicative
of results for any future period. All material inter-company transactions have
been eliminated in the results presented in this Quarterly Report.
Certain matters discussed in this Quarterly Report constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 and involve risks and uncertainties. These forward-looking statements
relate to, among other things, expectations of the business environment in which
the Company operates, projections of future performance, perceived opportunities
in the market and statements regarding the Company's mission and vision. The
Company's actual results, performance or achievements may differ significantly
from the results, performance, or achievements expressed or implied in these
forward-looking statements. See "-- Forward-Looking Statements."
THE COMPANY
The Company was organized to develop and market prepaid wireless products and
services in various markets throughout the United States. In late 1998, the
Company established a new strategic objective of refocusing the Company's
mission to pursue new complimentary Internet-related and e-commerce
opportunities. In 1999, the Company actively implemented its new mission by,
among other actions, selling a portion of the Company's business no longer
considered essential for the new strategy and purchasing a company whose
business thrust is in line with the new strategy.
On May 7, 1999, the Company executed an agreement to acquire all outstanding
common stock of IXATA, Inc. ("IXATA.COM"), a privately held provider of
Internet-based information and electronic commerce solutions servicing the
travel and hospitality market. The acquisition was finalized on July 1, 1999 and
is consistent with the Company's new business objectives of pursuing
Internet-based, business-to-business ("B2B") e-commerce opportunities. The
Company plans to significantly expand IXATA.COM's operations to offer new
enhanced information services in the travel market, targeting existing and new
corporate clients, hotel and property management groups, major travel agencies
and worldwide strategic partners.
Upon closing the IXATA.COM acquisition, the Company established itself as a
provider of Internet-based, B2B electronic commerce services in rapidly
growing market for travel information services, serving an expanding base of
more than twenty major Fortune 500 firms and other organizations. IXATA.COM's
principal service, RFP Express-SM-, integrates a user-friendly,
Internet-based interface with a sophisticated data-warehousing system,
interactive telephone and fax technology to deliver automated solutions for
creating, sending, receiving and managing the preferred lodging programs
request for proposal process in the hospitality services market ("RFP
process"), typically involving hundreds or, in some cases, thousands of
properties worldwide. By automating the users' RFP business process, and also
providing user-friendly Internet access to a sophisticated data warehousing
system, RFP Express-SM- provides dramatic cost savings to users, typically
70% or more compared to costs for manual processes. Pricing for RFP Express
includes an annual subscription fee and transaction fees for each RFP
handled. The Internet-based, electronic commerce and operational platforms
developed to support the RFP Express-SM- offering can be used to address
similar needs in other vertical markets.
The Company currently offers B2B e-commerce solutions to all market participants
including:
- Global Corporate Users
- Property Management and Hotel Chains, and
- Mega-Agencies.
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Page 15
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Since closing the IXATA.COM transaction on July 1, 1999, the Company has
provided new funding and achieved more than 300 percent growth of its corporate
customer base. The growth of corporate users and hotel property clients attests
to the Company's increasing market visibility and acceptance within the global
travel community. The Company's Internet-based, e-commerce services are now
being used by more than 70 major corporate users, 1700 hotel properties and four
major travel agencies. While there are no assurances such growth can be
sustained or the Company will have sufficient funding to meet future needs,
management believes the Company's growth and performance to date is consistent
with the Company's objective of attaining a leadership position in the market
for Internet-based, business-to-business e-commerce services.
Effective January 31, 2000, the Company changed its name to The IXATA Group,
Inc. from SecurFone America, Inc. The Company believed it was in the best
interest of the Company to change its corporate name to "The IXATA Group, Inc."
to capitalize upon the success of the Company's IXATA.COM subsidiary and to
establish an image that is consistent with the Company's focus on
Internet-related and e-commerce solutions. The Company believes that the name
change will act as a critical facilitator in the expansion of its business
objective to pursue new opportunities in Internet-based business offerings and
e-commerce markets.
The Company's principal executive offices are located at 8080 Dagget Street,
Suite 220, San Diego, California 92111, and its telephone number is (800)
473-6748.
RECENT EVENTS
On January 30, 1999, the Company executed an agreement with TeleData World
Services, Inc., a publicly traded company ("TWOS"), to sell certain of the
Company's prepaid cellular assets to TWOS for cash and TWOS common stock. On
April 22, 1999, TWOS acquired all outstanding shares of SecurFone, Inc., a
wholly-owned subsidiary of the Company, for $498,000 in cash, 600,000 shares of
unregistered TWOS common stock (subject to Rule 144) valued at $300,000 and the
right to receive additional cash or TWOS stock one year from the date of the
transaction if the market price of the TWOS stock is less than $2.50 per share
on that date. As of April 22, 2000, the market price for TWOS stock was $0.2088,
and the Company is entitled to receive approximately $1.3 million in cash or
TWOS stock. The Company is currently in discussions with TWOS to settle this
matter.
RESULTS OF OPERATIONS
The Company, in the second quarter of 1999, sold the Company's
Buy-The-Minute-TM- product and the Company discontinued operation of the
Company's SFA Local Network Solution. As a result of these transactions, certain
accounts in the prior-year financial statements have been reclassified for
comparative purposes to conform with the presentation in the current-year
financial statements. Revenue, cost of goods sold and operating and other
expenses relating to the prepaid cellular product line have been reclassified as
a restructuring charge, resulting in these items being reported as $0 for
periods prior to the sale and discontinuance of the prepaid cellular products.
The loss in the first quarter of 2000 increased to $1,349,703 from $389,945 in
the first quarter of 1999 primarily due to increased selling, general and
administrative expenses associated with operations of IXATA.COM , offset by a
reduction in the restructuring charge associated with the cellular operation.
The Company purchased its IXATA.COM subsidiary as of July 1, 1999, and has
consolidated financial results for the IXATA.COM subsidiary commencing in the
third quarter of 1999. Therefore, detailed comparison of financial results of
the current financial with those of a year earlier are not meaningful.
Revenues
The Company only purchased IXATA.COM and began the operations of its
Internet-based electronic commerce services in the third quarter of 1999. B2B
e-commerce revenues for the first three months of 2000 increased to $82,270 from
$0 in the first three months of 1999. The increase was from the launch of the
RFP Express-SM- product
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for the travel and hospitality sectors. The Company expects that revenues
from RFP Express-SM- will continue to grow at an accelerated rate on a
long-term basis.
Costs, Expenses and Other
Selling, general and administrative expenses increased to $1,357,991 in the
first three months of 2000 from $29,251 in the first three months of 1999.
This increase was due to the cessation of cellular operations effective June
30, 1999 resulting in negligible ongoing operating expenses in 1998 due to
the refocusing of the Company's direction. See "- The Company." In addition,
the increase in selling, general and administrative expenses was due to the
hiring and development of an experienced management and operations team, as
well as funding the growth of the IXATA e-commerce business. Wages and
associated taxes increased in the first three months of 2000 to $524,600 from
$72,702 in the first three months of 1999. An increase in expenses related to
consulting services required while the Company was building its internal
capabilities rose to $84,600 in the first three months of 2000 from $0 in the
first three months of 1999. The Company expects to reduce its expenditures
for external consultants in the future. Legal and professional fees increased
to $160,429 in the first three months of 2000 from $0 in the first three
months of 1999.
Costs, expenses, and other increased to $1,431,973 in the first three months of
2000 from $389,945 in the first three months of 1999. The increase in operating
expenses was limited because of the cessation of the Company's prepaid cellular
service offering. The Company incurred a restructuring charge of $0 and $361,900
in the first three months of 2000 and 1999, respectively.
Interest expense increased to $74,171 in the first three months of 2000 from $0
in the first three months of 1999 due to the Company's obligations to lenders
that have extended the Company funds for operations since inception. Interest
income increased to $908 in the first three months of 2000 from $0 in the first
three months of 1999. The cost of revenues increased to $719 in the first three
months of 2000 from $0 in the first three months of 1999. The increase was from
the launch of it's the Company's RFP Express-SM- product for the travel and
hospitality sectors.
The net loss in the first three months of 2000 increased to $1,349,703 from
$389,945 in the first three months of 1999. This increase was primarily due to
the increase in selling, and general and administrative expenses partially
offset by the reduction in the restructuring charge associated with the cellular
operation..
LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred significant operating and net losses as a result of the
development and operation of its service platform and supporting networks. The
Company expected that such losses would continue to increase as the Company
focused on the development, construction and expansion of its service platform
and underlying networks and expands its customer base. Cash provided by
operations would not be sufficient to fund the expansion of the product
offerings and resultant subscriber base. The Company is continually reviewing
various sources of additional financing to fund its growth. As of March 31,
2000, the Company had received advances in the amount of $2,067,743 from private
investors.
To meet both current and contractual commitments and business growth objectives,
the Company will require additional financing. To address its financing needs,
the Company is pursuing a multiple phase strategy and has retained an investment
banking firm, Scott & Stringfellow, Inc., to assist and advise the Company in
the process. On October 12, 1999, the Company entered into a relationship with
S&S to act as the exclusive financial advisor to the Company, in connection with
the exploration of potential alternative strategic transactions, including
without limitation one or more private equity offerings, mergers and
acquisitions and a public equity offering. During the initial phase of the
Company's addressing of its financial needs, from November 1999 to April 2000,
the Company secured financing from private investors in exchange for shares of
the Company's common stock, raising a net amount of $1.8 million from these
individuals. The second phase of the financing plan is to raise between $2.5
million and $10 million in equity from strategic and institutional investors.
This phase is currently underway, with
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both strategic and institutional investors identified and expressing interest
to an equity investment in the Company. There can be no assurance that
additional debt and equity financing needed to fund operations will be
consummated or obtained in sufficient amounts necessary to meet the Company's
needs.
At March 31, 2000, the Company had cash and cash equivalents of $371,295 as
compared to $5,869 at March 31, 1999. In addition, the Company had accounts
receivable totaling $165,712 from the sale of the Company's B2B e-commerce
services. Net cash used by operating activities was $784,990 in the first
quarter of 2000 compared to $349,144 in the first quarter of 1999. Net cash used
by investing activities in the first quarter of 2000 was $15,864, consisting of
$15,864 used to purchase equipment as compared with the use of $157 to purchase
equipment in the first quarter of 1999. Net cash provided by financing
activities in the first quarters of 2000 totaled $846,004 which consisted
primarily of $848,004 in proceeds from equity investment to the Company from
private investors as compared with $353,638 in the first quarter of 1999 which
consisted primarily of proceeds from notes payable of $362,218.
YEAR 2000
Year 2000 problems did not impact the Company's internal operations or cause it
to incur material costs to modify its systems. However, unforeseen Year 2000
problems may still cause significant unanticipated expenses. Further, the
Company's key vendors or suppliers may suffer from undiscovered Year 2000
problems, which could harm the Company's business and results of operations.
FORWARD-LOOKING STATEMENTS
Statements that are not historical facts, including statements about the
Company's confidence in its prospects and strategies and its expectations about
expansion into new markets, growth in existing markets, and the Company's
ability to attract new sources of financing, are forward-looking statements that
involve risks and uncertainties. These risks and uncertainties include, but are
not limited to:
- - THE COMPANY HAS A SHORT OPERATING HISTORY UPON WHICH TO BASE AN INVESTMENT
DECISION. The Company established a new strategic objective of refocusing
the Company's mission to pursue Internet-related and e-commerce
opportunities in late 1998. As a result, its business plan is currently in
the early stage and, accordingly, the Company has a limited operating
history on which to base an evaluation of its business and prospects. The
Company's prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development. To address these risks, the Company must, among other things,
attract a number of major corporate clients/customers and strategic
alliance partners, implement and successfully execute its marketing and
sales strategy, and successfully recruit and motivate qualified sales and
technical personnel. There can be no assurance that the Company will be
successful in addressing these risks, and the failure to do so could have a
material adverse effect on the Company. The likelihood of success of the
Company must be considered in light of the problems, expenses,
complications and delays frequently encountered in connection with the
development of an early stage business. It is impossible to predict the
degree of success the Company will have in achieving the its objectives.
- - THE COMPANY REQUIRES SIGNIFICANT ADDITIONAL CAPITAL, WHICH IT MAY NOT BE
ABLE TO OBTAIN. As the Company continues to implement its business plan,
present sources of financing will not be adequate to support the Company's
increased cash needs. Furthermore, the Company's entry into new Internet
and electronic commerce business areas will create additional demands for
investment capital. The Company may not be able to obtain future equity or
debt financing on satisfactory terms or at all. If the Company fails to
obtain necessary short-term financing, it will not be able to continue
operations. Long-term liquidity will depend on the Company's ability to
obtain long-term financing and attain profitable operations. The Company's
auditors issued an opinion on its most recent audit of the Company's
financial statements that, based on the Company's losses and
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negative working capital, there is substantial doubt about the Company's
ability to continue as a going concern if it does not obtain additional
debt or equity financing.
- - IF THE COMPANY IS UNABLE TO SUCCESSFULLY INTEGRATE IXATA.COM, ITS FINANCIAL
RESULTS WILL SUFFER. The Company completed its acquisition of IXATA.COM on
July 1, 1999. Its future profitability will depend heavily on its ability
to integrate IXATA.COM. Failure to successfully integrate the companies may
cause significant operating inefficiencies and adversely affect
profitability. To successfully integrate the companies, the Company must,
among other things, install and standardize adequate operational, financial
and control systems.
Although the Company has no definitive plans to acquire any business in the
near future, if it does acquire additional companies, it will face business
integration risks similar to those described above. In addition, during the
beginning stage of development and operation, the Company may encounter
expenses and difficulties that it may not expect or are beyond its control.
As a result, it may not be able to achieve or maintain profitability.
- - THE COMPANY'S FAILURE TO PROTECT OR MAINTAIN ITS INTELLECTUAL PROPERTY
RIGHTS COULD PLACE IT AT A COMPETITIVE DISADVANTAGE AND RESULT IN LOSS OF
REVENUE AND HIGHER EXPENSES. The Company's performance and ability to
compete are dependent to a significant degree on its proprietary electronic
commerce system and services. The steps the Company has taken to protect
its proprietary intellectual property rights may not prevent or deter
someone else from using or claiming rights to its intellectual property.
Third party infringement or misappropriation of trade secrets, copyrights,
trademarks or other proprietary information could seriously harm the
Company's business. The Company also cannot assure that it will be able to
prevent the unauthorized disclosure or use of its proprietary knowledge,
practices and procedures if its senior managers or other key personnel
leave it. In addition, although the Company believes that its proprietary
rights do not infringe on the intellectual property rights of others, other
parties may claim that it has violated their intellectual property rights.
These claims, even if not true, could result in significant legal and other
costs and may distract management from day-to-day operations of the
Company.
- - THE COMPANY'S BUSINESS PROSPECTS DEPEND ON DEMAND FOR AND MARKET ACCEPTANCE
OF THE INTERNET. The Company is currently dependent on the Internet as an
access and transmission medium to provide its services. Although the
Company believes that the acceptability and usability of the Internet will
increase over time, any increase in the rates charged by Internet service
providers resulting in a decreased usage of the Internet or decreased use
of the Internet for electronic commerce transactions, would have a
materially adverse effect on the Company's operating margins. Failure to
promote Internet access as the preferred means of accessing the Company's
service could also have a materially adverse effect on the Company,
including the possibility that the Company may need to significantly
curtail or cease its Internet based e-commerce operations or to develop its
own capabilities at a cost in excess of the Company's ability to fund such
undertakings.
- - IF THE COMPANY'S MARKET DOES NOT GROW AS EXPECTED, ITS REVENUES WILL BE
BELOW ITS EXPECTATIONS AND ITS BUSINESS AND FINANCIAL RESULTS WILL SUFFER.
The Company is engaged in a developing business with an unproven market.
Accordingly, it cannot accurately estimate the size of its market or the
potential demand for its services. If its customer base does not expand or
if there is not widespread acceptance of its products and services, its
business and prospects will be harmed. The Company believes that its
potential to grow and increase its market acceptance depends principally on
the following factors, some of which are beyond its control:
(a) the effectiveness of its marketing strategy and efforts;
(b) its product and service quality;
(c) its ability to provide timely, effective customer support;
(d) its distribution and pricing strategies as compared to its
competitors;
(e) its industry reputation; and
(f) general economic conditions.
- - ANY FAILURE OF THE COMPANY'S INTERNET AND E-COMMERCE INFRASTRUCTURE COULD
LEAD TO SIGNIFICANT COSTS AND DISRUPTIONS WHICH COULD REDUCE REVENUES AND
HARM BUSINESS AND FINANCIAL RESULTS. The Company's success, in particular
its ability to automate the RFP process successfully, largely depends on
the efficient and
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uninterrupted operation of its computer and communications hardware and
software systems. The Company's systems and operations are vulnerable to
damage or interruption from fire, flood, power loss, telecommunications
failure, break-ins, earthquake and similar events. The Company presently
has very limited redundant systems. It does not have a formal disaster
recovery plan and carries no business interruption insurance to compensate
it for losses that may occur. Temporary or permanent loss of data or
systems through casualty or operating malfunction could have a materially
adverse effect on the Company's business.
- - THE COMPANY COULD LOSE CUSTOMERS AND EXPOSE ITSELF TO LIABILITY IF BREACHES
OF ITS NETWORK SECURITY DISRUPT SERVICE TO ITS CUSTOMERS OR JEOPARDIZE THE
SECURITY OF CONFIDENTIAL INFORMATION STORED IN ITS COMPUTER SYSTEMS.
Despite the implementation of network security measures, the Company's
network infrastructure is vulnerable to computer viruses, break-ins and
similar disruptive problems caused by its customers or Internet users. Any
of these acts could lead to interruptions, delays or cessation in service
to the Company's customers and subscribers. Furthermore, such inappropriate
use of the network by third parties could also potentially jeopardize the
security of confidential information stored in the computer systems and the
Company's customers' computer systems, which may result in liability to
existing customers and may also deter potential customers. Any security
measures the Company implements may be circumvented in the future. The
costs and resources required to eliminate computer viruses and alleviate
other security problems may result in interruptions or delays to the
Company's customers that could cause harm to the Company's reputation as
well as its business and financial results.
- - RAPID GROWTH IN THE COMPANY'S BUSINESS COULD STRAIN ITS RESOURCES AND HARM
ITS BUSINESS AND FINANCIAL RESULTS. The planned expansion of the Company's
operations will place a significant strain on its management, financial
controls, operations systems, personnel and other resources. The Company
expects that its customers increasingly will demand additional information,
reports and services related to the services and products the Company
currently provides. If the Company is successful in implementing its
marketing strategy, it also expects the demands on its network
infrastructure and technical support resources to grow rapidly, and it may
experience difficulties responding to customer demand for its services and
providing technical support in accordance with its customers' expectations.
The Company may not be able to keep pace with any growth, successfully
implement and maintain its operational and financial systems or
successfully obtain, integrate and utilize the employees, facilities,
third-party vendors and equipment, or management, operational and financial
resources necessary to manage a developing and expanding business in an
evolving industry. If the Company is unable to manage growth effectively,
it may lose customers or fail to attract new customers and its business and
financial results will suffer.
- - THE COMPANY MAY NOT BE ABLE TO COMPETE IN ITS HIGHLY COMPETITIVE MARKET.
The Internet-based electronic commerce market has become increasingly
competitive due to the entry of large, well-financed service providers into
the market. Other potential competitors in the market for Internet-based
electronic commerce services for the travel and hospitality industry may
include companies with substantially greater financial and marketing
resources than those of the Company. No assurance can be given that
competitors possessing greater financial resources than the Company will
not be able to develop a product which is more appealing or offer similar
products at lower prices than those of the Company. The Company may not be
able to operate successfully in this competitive environment. Direct
competitors today include JBH and Lanyon, among others seeking to enter the
market for e-commerce services targeting the travel and hospitality
sectors. Other potential competitors, such as Ariba, Inc., have existing,
well-established e-commerce platforms and have also indicated an interest
in pursuing IXATA.COM's target market. While to date the market reaction to
the Company's service has been positive vis-a-vis competitive services,
there is no assurance this will continue in the future.
- - THE COMPANY DEPENDS ON THE SERVICES OF SENIOR MANAGEMENT AND OTHER KEY
PERSONNEL AND THE ABILITY TO HIRE, TRAIN AND RETAIN SKILLED EMPLOYEES. The
success of the Company will be dependent on the skill and experience of
certain key employees. The Company believes that the loss of Paul B.
Silverman, CEO, or Andrew H. Kent, CFO, Robert Steiner, President and
Vice-President - Marketing of IXATA.COM, or Fred Gluckman Vice-President
-Technology of IXATA.COM, could disrupt or delay the Company's business or
would otherwise have a material adverse effect on the Company's business.
The Company's future success also depends on its ability to identify,
attract, hire, retain and motivate other well qualified managerial, sales
and marketing
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personnel. There can be no assurance that these professionals will be
available in the market or that the Company will be able to meet their
compensation requirements.
- - RISKS ASSOCIATED WITH OPERATING IN INTERNATIONAL MARKETS COULD RESTRICT THE
COMPANY'S ABILITY TO EXPAND GLOBALLY AND HARM ITS BUSINESS AND PROSPECTS.
The Company markets and sells its services and products in the United
States and internationally. The Company's failure to manage its
international operations effectively could limit the future growth of its
business. There are certain risks inherent in conducting the Company's
business internationally, such as:
(a) changes in international regulatory requirements could restrict
the Company's ability to deliver services to its international
customers;
(b) differing technology standards across countries that may impede
the Company's ability to integrate its product offerings across
international borders;
(c) difficulties collecting accounts receivable in foreign
jurisdictions;
(d) political and economic instability could lead to appropriation of
the Company's physical assets, its ability to deliver its
services to customers and harm its financial results;
(e) protectionist laws and business practices favoring local
competitors; and
(f) potentially adverse tax consequences due to unfavorable changes in
tax laws.
- - GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD LIMIT THE COMPANY'S
BUSINESS OR SLOW ITS GROWTH. Although Internet-based electronic commerce is
not currently subject to government regulation, it is under increased
scrutiny by regulatory agencies and may undergo rapid and drastic
regulatory changes. There can be no assurances that one or more services
currently offered by the Company will not be negatively impacted by
newly-created or interpreted regulations
- - THE COMPANY'S OPERATING RESULTS MAY FLUCTUATE IN FUTURE PERIODS WHICH MAY
CAUSE VOLATILITY OR A DECLINE IN THE PRICE OF ITS COMMON STOCK. The Company
may experience significant fluctuations in its future quarterly operating
results due to a variety of factors, many of which are outside the
Company's control. Such fluctuations may cause the price of its common
stock to fall. Factors that may adversely affect the Company's quarterly
operating results include, without limitation:
(a) the Company's ability to retain existing customers, attract new
customers at a steady rate and maintain customer satisfaction;
(b) the mix of products and services sold by the Company;
(c) the announcement or introduction of new products and services by
the Company and its competitors;
(d) price competition in the industry;
(e) the amount and timing of operating costs and capital expenditures
relating to any expansion of the Company's business, operations
and infrastructure;
(f) governmental regulation; and
(g) general economic conditions and economic conditions specific to the
travel and hospitality industry.
Further, stock prices and trading volumes for many Internet companies
fluctuate widely for a number of reasons, including some reasons which may
be unrelated to their businesses or results of operations. This market
volatility, as well as general domestic or international economic, market
and political conditions, could materially adversely affect the price of
the Company's stock without regard to the Company's operating performance.
In addition, the Company's operating results may be below the expectations
of public market analysts and investors. If this were to occur, the market
price of the stock would likely significantly decrease.
- - THE COMPANY'S EXECUTIVE OFFICERS, DIRECTORS, AND PARTIES RELATED TO THEM,
IN THE AGGREGATE, CONTROL 53% OF THE COMPANY'S COMMON STOCK AND MAY HAVE
THE ABILITY TO CONTROL MATTERS REQUIRING STOCKHOLDER APPROVAL. The
Company's executive officers, directors and parties related to them own a
large enough stake in the Company to determine matters presented to
stockholders, the approval of significant corporate transactions, such as
any merger, consolidation or sale of all or substantially all of the
Company's assets, and the control of the management and affairs of the
Company. In addition, certain executive officers, directors and other
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shareholders, representing 65% of the Company's outstanding common stock,
have entered into a Voting Agreement in which the parties agree to vote
their shares for certain directors. As a result, these stockholders may
have the ability to control the election and removal of directors.
Accordingly, this concentration of ownership may have the effect of
delaying, deferring or preventing a change in control of the Company,
impede a merger, consolidation, takeover or other business combination
involving the Company or discourage a potential acquirer from making a
tender offer or otherwise attempting to obtain control of the Company,
which in turn could have an adverse effect on the market price of the
Company's common stock.
- - THE COMPANY'S COMMON STOCK MAY BE DELISTED FROM THE NASDAQ OVER-THE-COUNTER
BULLETIN BOARD SERVICE. In order to maintain the listing of its common
stock for trading on the Nasdaq Over-the-Counter Bulletin Board Service,
the Company must make required filings with the Securities and Exchange
Commission. If the Company's stock were to be delisted, there would be no
public market for the Common Stock and stockholders would have difficulty
liquidating their investment. The Company has been deliquent in its filings
and Nasdaq has appended an "E" to the Company's trading symbol, indicating
it is not in compliance with its filing requirements. Although the Company
believes that the filing of this Quartery Report with the Securities and
Exchange Commission brings the Company into compliance, allowing it to
retain its stock listing on the Nasdaq Bulletin Board, there can be no
assurance that it will be able to do so.
These and other risks described in this Quarterly Report must be considered by
any investor or potential investor in the Company.
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PART II -- OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS.
From time to time, the Company is involved in legal matters which are incidental
to its operations. See Part I, Item 3, "Legal Proceedings," of the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1999 for a
description of significant pending legal proceedings. In the opinion of
management, the ultimate resolution of pending matters will not have a material
adverse effect on the Company's financial condition or results of operations.
ITEM 2.CHANGES IN SECURITIES AND USE OF PROCEEDS.
For rendering brokering services and as a part of the transaction to purchase
IXATA.COM, the Company issued Global One, Inc. ("Global") 600,000 shares of the
Company's common stock on March 28, 2000. Global is an international business
corporation in Nevis, British Virgin Islands. The Company believes the issuance
to be exempt under Section 4(2) of the Securities Act.
In November of 1999, the Company offered equity investments to private parties
in an offering exempt from registration pursuant to Regulation D of the
Securities Act of 1933. As of April 7, 2000, the Company had sold 2,254,659
shares of its unregistered common stock for $0.85 a share in connection with the
offering. Proceeds to the Company were $1,803,726 after the deduction of Scott &
Stringfellow, Inc.'s ("S&S") placement agent fee of $0.05 per share. The
purchasers in the offering were granted the right in certain instances to
include their shares in future offerings of registered stock by the Company.
For rendering investment banking services, the Company agreed to issue 643,553
warrants to S&S for the price of $0.01 per warrant. These warrants expire in
October of 2004. The exercise price of the warrants is $1.687 per warrant. The
warrants will be exercisable after the earlier of (1) one year from November 2,
1999, (2) immediately upon change of control of the Company, or (3) upon closing
of a firmly underwritten public offering of the Company's equity securities. S&S
purchased these warrants on April 3, 2000.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES.
No defaults upon senior securities occurred during the first quarter of 2000.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of the Company's security holders in the first
quarter of 2000.
ITEM 5.OTHER INFORMATION.
None.
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits being filed with this Quarterly Report:
27 Financial Data Schedule
(b) The Company filed the following Current Reports on Form 8-K in the
first quarter of 2000:
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Form 8-K/A dated July 1, 1999 regarding the acquisition of IXATA, Inc. filed
with the Securities and Exchange Commission (the "SEC") on March 10, 2000.
Form 8-K dated January 31, 2000 regarding the name change filed with the SEC on
February 7, 2000.
Form 8-K dated April 22, 1999 regarding the sale of prepaid cellular assets to
TeleData World Services, Inc. filed with the SEC on March 13, 2000.
Form 8-K dated March 28, 2000 related to a change of auditors for the Company
from Conte Co., C.P.A., Inc. to Nation Smith Hermes Diamond, APC, filed with the
SEC on April 24, 2000.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Company caused
this Quarterly Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
The IXATA Group, Inc.
Date: May 22, 2000 /s/ Paul B. Silverman
---------------------
By Paul B. Silverman,
Chief Executive Officer
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<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 371,295
<SECURITIES> 180,000
<RECEIVABLES> 165,712
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