SECURITIES AND EXCHANGE COMMISSION

FORM SB-2

INTELISPAN, INC.

1720 Windward Concourse, Suite 100

JAMES D. SHOOK, ESQ.

Copies to:

ROBERT S. KANT, ESQ.

      Approximate date of proposed sale to the public: As soon as practicable after effectiveness of this registration statement.

      If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.                      

      If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.                      

      If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.                      

      If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.  

CALCULATION OF REGISTRATION FEE

      The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

PROSPECTUS

88,789,128 Shares of Common Stock

INTELISPAN, INC.

           The shareholders of Intelispan, Inc. listed in this prospectus are offering for sale up to 87,630,931 shares of common stock, 1,093,437 shares of common stock issuable upon the exercise of warrants, and 64,760 shares of common stock that may be sold upon the exercise of agent warrants.

      The selling shareholders will determine when they will sell their shares, and in all cases, they will sell their shares at the current market price or at negotiated prices at the time of the sale. We will pay the expenses incurred to register the shares for resale, but the selling shareholders will pay any underwriting discounts, concessions, and brokerage commissions associated with the sale of their shares of common stock. The selling shareholders and the brokers and dealers that they utilize may be deemed to be “underwriters” within the meaning of the securities laws, and any commissions received and any profits realized by them on the sale of shares may be considered to be underwriting compensation.

      We will not receive any of the proceeds of sales by the selling shareholders. Securities laws and Securities and Exchange Commission regulations may require the selling shareholders to deliver this prospectus to purchasers when they resell their shares of common stock.

      Our common stock currently is traded on the NASD over-the-counter bulletin board, or OTCBB, under the symbol “IVPN.” On January 11, 2001, the last sale price of the common stock as reported on the OTCBB was $0.47 per share.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is January   , 2001.

PROSPECTUS SUMMARY

      The following summary is qualified in its entirety by more detailed information appearing elsewhere in this prospectus. This prospectus contains certain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of the factors set forth in this prospectus, including those set forth under “Risk Factors.” You should read the entire prospectus carefully before making an investment decision.

Our Company

Introduction

      We provide managed network services to our customers on an outsourced basis, and we specialize in providing secure and efficient business-to-business communication and professional solutions. We divide this business into the following three separate lines:

	•	Virtual Private Networks. We provide remote and site-to-site access through a secure, virtual private network. A virtual private network is a private network that exists within a public or shared network, including the Internet, through which access is controlled and users can communicate securely.
	•	Managed Network Services. We manage the networks used by our customers. We monitor our customers’ networks and respond to problems to assure the efficient flow of network traffic. We respond to security threats or problems as they are identified.
	•	Professional Services. We provide consulting and electronic services and solutions. These services and solutions are designed to augment and complement the existing resources of information technology managers in planning, operating, and managing their network environment.

      We believe that we differentiate our services by integrating complex technologies to create our own branded network services, which enables our customers to

	•	reduce capital expenditures;
	•	reduce exposure to the risks of outdated technology; and
	•	reduce time and effort expended obtaining and managing qualified technical personnel.

      We also attempt to differentiate our services through a comprehensive service level agreement with our customers whereby we guarantee that our services will be highly available with minimum downtime.

Our Market Opportunity

      Infonetics Research forecasts that the market for managed virtual private network services will grow to approximately $19.3 billion worldwide by 2003. Infonetics Research also projects that worldwide managed network service expenditures will grow from $13.9 billion to $70.6 billion between 2000 and 2004. The Gartner Group predicts that by 2003, more than 137 million users worldwide, including one-third of the U.S. work force, will access computer networks from remote locations. Dataquest predicts that the U.S. market for managed network services will grow from $8.0 billion in 2000 to $17.5 billion in 2004. We believe the following are key driving forces behind our current market opportunity:

	•	the growth of e-commerce between businesses,
	•	the increasing demand for secure computer networks,
	•	the increase in users accessing computer networks from remote locations,
	•	the inability to locate and maintain technical personnel to service information technology infrastructure,

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	•	the increasing demand for cost-efficient outsourced services to support computer networks, and
	•	the adoption of third-party hosting of business applications.

Our Strategy

      Our goal is to be a leading single-source provider of managed network solutions that enable secure and efficient electronic communications among businesses through virtual private networks and the Internet. Key elements of the strategy to achieve this goal include the following:

	•	targeting small- and medium-sized businesses through resellers, system integrators, and strategic relationships;
	•	building a direct sales force and developing a marketing campaign to target specific industries with the greatest perceived demand for our services, such as healthcare and financial services;
	•	increasing brand awareness through an aggressive media campaign;
	•	continuing to pursue strategic relationships to acquire technologies and service offerings to complement and expand our existing service offerings;
	•	providing high-quality service and responsiveness to customers; and
	•	pursuing strategic acquisitions to enhance our technology portfolio, expand our product offerings, and build our distribution channels.

Recent Developments

      Our Board of Directors and our shareholders have approved the reincorporation of our company from Washington to Delaware through a merger into a newly formed Delaware corporation formed solely for the purposes of the reincorporation. Upon effectiveness, the reincorporation provides for the conversion of shares of the Washington corporation into shares of the Delaware corporation, on the basis of one share of common stock of the Delaware corporation for each three shares of common stock previously issued and outstanding. The presently issued and outstanding shares of Series A preferred stock will remain the same, however, the conversion ratio for the Series A preferred stock will be adjusted to reflect the combination of the common stock into a smaller number of shares. Currently, each share of Series A preferred stock is convertible into 50 shares of common stock. After the reincorporation, each share of Series A preferred stock will be convertible into 16.67 shares of common stock. Our Board of Directors may choose to affect the reincorporation at any time in the future, amend or modify the terms of the reincorporation, or may choose to terminate and abandon the reincorporation. Upon the effectiveness of the reincorporation, our company will be governed by a new certificate of incorporation, new bylaws, and Delaware law.

      On June 30, 2000, we acquired all of the capital stock of Devise Associates, Inc., a managed services company that consults, designs, builds, and services computer networks for Fortune 100 companies as well as small and mid-size companies in the Northeast United States. We paid approximately $7.4 million for the capital stock of Devise, consisting of $400,000 in cash and approximately 3.0 million shares of common stock. We believe that this acquisition strengthens our ability to offer services in the managed network line of business, one of our three targeted markets. The acquisition also provides us with a strong existing customer base to refer prospective clients and to cross-sell our services.

Our Offices

      Our principal offices are located at 1720 Windward Concourse, Suite 100, Alpharetta, Georgia 30005, telephone (678) 256-0300, facsimile (678) 256-0301.

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The Offering

SUMMARY CONSOLIDATED FINANCIAL DATA

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RISK FACTORS

      An investment in our common stock involves a high degree of risk. Prospective investors should consider carefully the following risk factors, in addition to the other information contained in this prospectus, before purchasing any of our common stock.

We have incurred substantial losses, and our ability to generate revenue to support our operations is uncertain.

      We have incurred substantial losses since our inception, and currently are experiencing a substantial cash flow deficiency from operations. Our inability to generate revenue sufficient to achieve profitability may have an adverse effect on the market price of our common stock. We expect to incur substantial additional losses for the foreseeable future. We incurred net losses of approximately $573,000 during 1997, approximately $5.2 million during 1998, approximately $5.8 million during 1999, and approximately $8.6 million during the nine months ended September 30, 2000. As of September 30, 2000, we had an accumulated deficit of approximately $20.2 million. Our ability to generate revenue to support our operations is uncertain, and we may never achieve profitability.

We have a limited operating history upon which you can evaluate our potential for future success.

      We began to introduce our products and services during 1998 and have made several changes to our products, pricing structures, and market approach since that time. We have a very limited operating history on which you can evaluate our potential for future success. Rather than relying on historical financial information to evaluate our company, you should evaluate our company in light of the expenses, delays, uncertainties, and complications typically encountered by early-stage businesses, many of which will be beyond our control. Early-stage businesses commonly face risks such as the following:

	•	lack of sufficient capital;
	•	unanticipated problems, delays, and expenses relating to product development and implementation;
	•	lack of intellectual property;
	•	licensing and marketing difficulties;
	•	competition;
	•	technological changes; and
	•	uncertain market acceptance of products and services.

Our limited operating history may make it difficult for us to forecast accurately our operating results.

      Our planned expense levels are and will continue to be based in part on our expectations concerning future revenue, which is difficult to forecast accurately based on our stage of development. We may be unable to adjust spending in a timely manner to compensate for any unexpected shortfall in revenue. Further, business development and marketing expenses may increase significantly as we expand operations. If these expenses precede or are not rapidly followed by a corresponding increase in revenue, our business, operating results, and financial condition may be materially and adversely affected.

The loss of any of our key executives or our failure to attract, integrate, motivate, and retain additional key employees could have a material adverse effect on our business.

      Our success depends to a large degree upon the skills of our senior management team and current key employees and upon our ability to identify, hire, and retain additional sales, marketing, technical, and financial personnel. The loss of any of our key executives or the failure to attract, integrate, motivate, and retain additional key employees could have a material adverse effect on our business. We may be unable to retain our existing key personnel or attract and retain additional key personnel. We depend particularly upon the following key executives: Travis Lee Provow, Chief Executive Officer and President, and David Stinson, Vice

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We depend on key contractual relationships, and the loss of any of those relationships would likely have a material adverse effect on our operations.

      We enter into licensing, strategic, and other similar contractual relationships under which we utilize proprietary technology and incorporate key products and services into our customer solutions. If any of these relationships are terminated, expired, or breached, or if any of the parties to these agreements cease operations or stop offering its product or service, we would likely lose opportunities to generate revenue and would lose goodwill. We currently depend to a great extent upon three key agreements:

	•	a licensing agreement with Baltimore Technologies, plc, through which we provide the public key infrastructure for our products and services;
	•	a distributor agreement with Altiga Networks (now part of Cisco Systems, Inc.) that enables us to offer Inteligate I and Inteligate II; and
	•	a distributor agreement with Computer Associates, through which we provide a portion of our managed network services and Inteliwatch.

      We are also negotiating other agreements with third parties that will be important to planned products. Any changes to the offerings provided by these third parties under these agreements may require us to change or reengineer our own services that will likely cause a material disruption of our business. In any of such cases, there is no assurance that we would be able to timely modify our services or to replace any of the services on favorable terms or at all.

We would not be able to offer our products without the technology that we license from third parties.

      We license most of the technology integral to our business from third parties, and we do not have any patents or filed copyrights for the technology we utilize. Our success will depend in part on the continued availability of that technology, the technology not infringing the proprietary rights of others, and our not breaching technology licenses. It is uncertain whether any third-party patents will require us to utilize or develop alternate technology, alter our products or services, obtain alternative licenses, or cease activities that infringe on third-parties’ intellectual property rights. We may not be able to obtain any additional required licenses on commercially favorable terms, if at all. Our inability to acquire any third-party product licenses, or to integrate the related third-party products into our products and services, could result in delays in product development unless and until equivalent products can be identified, licensed, and integrated. We also expect to require new licenses in the future as our business expands and technology evolves. Existing or future licenses may not continue to be available to us on commercially reasonable terms. Litigation, which could result in substantial cost to us, may also be necessary to enforce any patents issued or licensed to us or to determine the scope and validity of third-party proprietary rights.

If we do not find additional sources of capital, we may be required to reduce the scope of our business activities until we can obtain other financing.

      We will not receive any proceeds from this offering. We believe that our current capital will satisfy our operating capital needs through May 2001 based upon our currently anticipated business activities, and provided we meet our expected revenue targets. We anticipate incurring substantial losses in the future and will likely require significant additional financing in order to satisfy our cash requirements. Our need for additional capital to finance our operations and growth will be greater should, among other things, our revenue or expense estimates prove to be incorrect. We cannot predict the timing or amount of our capital requirements at this time. We may not be able to obtain additional financing in sufficient amounts or on acceptable terms when needed, which could adversely affect our operating results and prospects.

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Our products and services may not be broadly accepted by the market.

      We offer managed network services and secure electronic business communication solutions. The market for providing integrated, managed, and secure network services is in the early stage of development. It is difficult to predict the rate that this market will grow, if at all, because this market is relatively new and current and future competitors are likely to introduce competing services or products. Our business, operating results, and financial condition would be materially and adversely affected if the markets for our products and services fail to grow, grow more slowly than anticipated, or become more competitive, or if our products and services are not accepted by targeted customers even if a substantial market develops. New or increased competition may result in market saturation, more competitive pricing, or lower margins. Certain critical issues concerning commercial use of our products and services remain unresolved and may impact the growth of these services. These issues include, among others, the ultimate security and reliability of networks, the ease and cost of access, and the quality of service.

Our failure to successfully develop and market new products and services could have a material adverse effect on our operations.

      Any failure by us to anticipate or respond adequately to technological developments, customer requirements, or new design and production techniques or any significant delays in product development or introduction could have a material adverse effect on our operations. The emerging market for our products and services is characterized by rapid technological developments and evolving industry standards. These factors will require us continually to improve the performance and features of our products and services and to introduce new products and services, particularly in response to offerings from our competitors, as quickly as possible. As a result, we will be required to expend substantial funds for and commit significant resources to the conduct of continuing product development. We may not be successful in developing and marketing new products and services that respond to competitive and technological developments and changing customer needs.

We offer some of our services for a fixed monthly charge, and our operating margins will be reduced if our customers use our services at levels greater than we expect.

      We have recently begun to offer to our customers our Inteligate, Inteligate II, and Inteligate III services for a fixed monthly charge in addition to our traditional usage-based pricing model. Our pricing is based upon projected customer use of our services and the projected cost of these services, however, we have little historical basis upon which to estimate these amounts. Higher than expected use by our customers or higher than expected costs would decrease our operating margins. Repeated or significant decreases in our operating margins would have a material adverse effect on our operations.

Increased customer credits required by our service level agreements may have a material adverse effect on our business.

      We have an aggressive service level agreement with our customers whereby we guarantee that our services will be available to our customers. We have not yet fully implemented our technology to measure our service level performance, and until we do, we intend to grant that credit to our customers each month. After we implement the necessary technology and can measure such performance, if we fail to maintain agreed-upon service levels, our service level agreements will require us to grant our customers a credit. Historically, our industry has guaranteed availability of similar services at lower levels, and have required customers to request such credits. We have little historical data upon which to estimate the credits that we may have to grant for failing to maintain the agreed-upon service levels. In addition, our third-party providers normally do not provide us with similar guarantees. Accordingly, our service level agreements could require our company to grant significant credits to customers that would result in higher than expected costs and decreased operating margins. Repeated or significant decreases in our operating margins would have a material adverse effect on our operations.

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Investors may not be able to exercise control over our company as a result of management’s and other principal shareholders’ ownership.

      The current executive officers and directors of our company beneficially own 35.4% of our outstanding common stock. As a result, the executive officers and directors of our company can significantly influence the management and affairs of our company and all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership could have the effect of delaying or preventing a change in control of our company, even when such change of control is in the best interests of shareholders. Control by management might adversely affect the market price of the common stock and the voting and other rights of our company’s other shareholders.

The markets for secure remote access, managed network services, and electronic commerce are highly competitive.

      Our products and services compete in the secure network access and secure business-to-business communication markets with virtual private network providers, value-added network providers, and electronic data interchange providers. Value-added networks are communications networks that provide services beyond normal transmission, such as automatic error detection and correction, data conversion, and message storing and forwarding. The competition in these markets is extremely competitive.

      Competition for our products and services arise from several sources in the virtual private network market. Most major networking device companies provide or have announced intentions to provide encryption or other secure access through their hardware. This group includes Lucent and Cisco; firewall vendors, such as Axent and Checkpoint Software; and modem-pool companies, such as Shiva. Competitors providing or announcing a service-based virtual private network include Sprint, AT&T, GTE, IBM, and WorldCom, as well as smaller companies such as Concentric Networks. In addition, several companies, including Sun Microsystems and Microsoft, provide or have announced their intention to provide software product-based solutions, some of which will be integrated into their operating systems.

      Our products and services compete with different technologies that provide electronic data interchange services including electronic data interchange applications based on value-added networks and other secure document exchange applications. Many existing value-added networks have strong, long-standing relationships with customers and have demonstrated their ability to deliver a complete solution. Competitors in this marketplace include GE Information Services, Sterling Commerce, Commerce One, IBM, Kleinschmidt, and Harbinger. Some of these companies, together with newer entrants in the market, have introduced Internet-based products and services. We may also compete in this segment with enterprise resource software providers that integrate electronic data interchange services into their products, such as PeopleSoft, BAAN, SAP, and Oracle.

      Competition may develop from companies that integrate their current user authentication technology into a network solution. These companies include Entrust, VeriSign, and Baltimore, that utilize public key infrastructure technology, and Security Dynamics, ActivCard, and Vasco, that use other technology in their solutions.

      We also face competition from companies that have begun to offer virtual private networks bundled with hardware or managed network services, including GTE’s Genuity, large telecommnication carriers including AT&T and large network management outsourcing companies, including NetOps, Netsolve, Nortel, Pacific Bell, Sprint, SHL Systemhouse, Unisys, Xerox, Ameritech, Bell Atlantic, Cabletron, Control Data, GTE, Lucent, Motorola, and NCR.

      Although we believe that our products and services will compete favorably in these market segments, we may not maintain a competitive position against current and potential competitors and market acceptance for our products and services has not yet been demonstrated. Many of our current and potential competitors have longer operating histories, greater name recognition, larger installed customer bases, and significantly greater financial, technical, marketing, and sales resources than we do. As a result, competitors may be able to react more quickly to emerging technologies and changes in customer requirements or to devote greater resources to

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Our business relies on the popularity of the Internet as a method of conducting business.

      Our future revenue and any future profits will depend upon the widespread acceptance and use of the Internet and related technologies as an effective medium to conduct business. The failure of the Internet and related technologies to continue to develop as a commercial or business medium to conduct business would adversely affect our business, operating results, and financial condition. The market for Internet-based, business electronic commerce products is relatively new and is evolving rapidly. The acceptance and use of the Internet for business could be limited by a number of factors, such as potential slowing growth and use of the Internet in general, the relative ease of conducting business on the Internet, the efficiencies and improvements that conducting commerce on the Internet provides, concerns about transaction security, and taxation of transactions on the Internet.

Security risks of electronic commerce may deter future use of our products and services.

      A fundamental requirement to conducting Internet-based electronic communication and commerce is the secure transmission of confidential information over public networks. Failure to prevent security breaches of business trading communities, or well-publicized security breaches affecting the Internet in general, could deter businesses from conducting electronic transactions and sending communications that transmit confidential information. Advances in computer capabilities, new discoveries in the field of cryptography, and other developments may result in a compromise or breach of the algorithms we use to protect content and transactions. Anyone that is able to circumvent our security measures could misappropriate proprietary confidential user information or cause interruptions in operations. There may be significant cost requirements to protect against security breaches or to alleviate problems caused by breaches. Any such occurrences could materially and adversely affect our business.

Acquisitions could divert management’s time and attention, dilute the voting power of existing shareholders, and have a material adverse effect on our business.

      As part of our growth strategy, we may continue to acquire complementary businesses and assets. Acquisitions that we may make in the future could result in the diversion of time and personnel from our business. We also may issue shares of common stock or other securities in connection with acquisitions, which could result in the dilution of the voting power of existing shareholders and could dilute earnings per share. Any acquisitions would be accompanied by other risks commonly encountered in such transactions, including the following:

	•	difficulties integrating the operations and personnel of acquired companies;
	•	the additional financial resources required to fund the operations of acquired companies;
	•	the potential disruption of our business;
	•	our ability to maximize our financial and strategic position by the incorporation of acquired technology or businesses with our product and service offerings;
	•	the difficulty of maintaining uniform standards, controls, procedures, and policies;
	•	the potential loss of key employees of acquired companies;
	•	the impairment of employee and customer relationships as a result of changes in management; and
	•	significant expenditures to consummate acquisitions.

      As a part of our acquisition strategy, we may engage in discussions with various businesses respecting their potential acquisition. In connection with these discussions, we and each potential acquired business may exchange confidential operational and financial information, conduct due diligence inquiries, and consider the

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      We have historically engaged in, and expect to continue to engage in, discussions with third parties that are interested in acquiring our company. Such an acquisition, whether through a purchase of our assets or capital stock, could have a significant effect on the market price of our common stock, our operations, and our business strategy. In particular, prior to closing any transaction, the price of our common stock may fluctuate with the price of the acquiring company’s stock.

Our proposed growth and expansion could have a material adverse effect on our business.

      We anticipate a period of significant growth in connection with our entry and expansion into our targeted markets. The resulting strain on our managerial, operational, financial, and other resources could be significant. Success in managing this expansion and growth will depend, in part, upon the ability of senior management to manage effectively the growth of our company.

Rights to acquire shares of common stock will result in dilution to other holders of common stock.

      Outstanding stock options and warrants could adversely affect the terms on which we can obtain additional financing, and the holders can be expected to exercise these securities at a time when, in all likelihood, we would be able to obtain additional capital by offering shares of common stock on terms more favorable to us than those provided by the exercise or conversion of these securities. Holders of these securities will have the opportunity to profit from an increase in the market price of our common stock, with resulting dilution in the interests of the holders of common stock. Upon conversion of the Series A preferred stock, there will be outstanding approximately 110,873,196 shares of common stock. In addition, as of January 11, 2001, we have outstanding the following securities:

	•	options held by our directors, officers, and employees to purchase approximately 16,928,708 shares of common stock with exercise prices ranging from $0.42 to $4.00 per share;
	•	warrants to purchase approximately 2,337,377 shares of common stock with exercise prices ranging from $0.75 to $9.00 per share.

Our common stock is a “penny stock,” and compliance with requirements for dealing in penny stocks may make it difficult for holders of our common stock to resell their shares.

      Our common stock currently is deemed to be “penny stock” as that term is defined in Rule 3a51-1 under the Securities Exchange Act of 1934, or Exchange Act. Section 15(g) of the Exchange Act and Rule 15g-2 under the Exchange Act require broker/dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain manually signed and dated written receipt of the document before affecting a transaction in a penny stock for the investor’s account. Compliance with these requirements may make it more difficult for holders of our common stock to resell their shares to third parties or otherwise, which could have a material adverse effect on the liquidity and market price of our common stock.

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      Penny stocks are stocks

	•	with a price of less than $5.00 per share;
	•	that are not traded on a “recognized” national exchange;
	•	whose prices are not quoted on the Nasdaq automated quotation system; or
	•	issued by companies with net tangible assets less than $2.0 million (if the issuer has been in continuous operation for at least three years) or $5.0 million (if in continuous operation for less than three years), or with average revenue of less than $6.0 million for the last three years.

Shares of common stock eligible for sale in the public market may adversely affect the market price of our common stock.

      Sales of substantial amounts of common stock by shareholders in the public market, or even the potential for such sales, are likely to adversely affect the market price of the common stock and could impair our ability to raise capital by selling equity securities. As of the date of this prospectus, 28,720,590 of the 109,773,196 shares of common stock currently outstanding were freely transferable without restriction or further registration under the securities laws, unless held by “affiliates” of our company, as that term is defined under the securities laws. In addition, 91,110,176 shares of common stock have been registered for resale, including the shares registered under this prospectus. We also have outstanding 3,040,517 shares of restricted stock, as that term is defined in Rule 144 under the securities laws, that are eligible for sale in the public market, subject to compliance with the holding period, volume limitations, and other requirements of Rule 144. Moreover, the exercise of outstanding options and warrants and the conversion of Series A preferred stock will result in additional outstanding shares of common stock and will create additional potential for sales of additional shares of common stock in the public market.

The price of our common stock has been volatile.

      The trading volume of our common stock historically has been limited and sporadic, and the stock prices have been volatile. For example, during the last 12 months, our common stock has traded at prices ranging from $0.22 to $7.06. As a result of the limited and sporadic trading activity, the quoted price for our common stock is not necessarily a reliable indicator of its fair market value. The price at which our common stock will trade may be highly volatile and may fluctuate as a result of a number of factors, including the following:

	•	quarterly variations in our operating results;
	•	large purchases or sales of our common stock;
	•	actual or anticipated announcements of new products or services by us, our business partners, or competitors;
	•	investor perception of our business prospects or the Internet industry in general;
	•	general conditions in the markets in which we compete; and
	•	worldwide economic and financial conditions.

We are required to pay dividends on shares of Series A preferred stock, and we do not intend to pay dividends on our common stock.

      We are required to pay quarterly a 10% annual dividend on the Series A preferred stock. The dividends may be paid in either stock or cash. The holders of Series A preferred stock are entitled to receive payment of dividends prior to our paying any dividends to holders of common stock. For the foreseeable future, we intend to retain any remaining future earnings, if any, to finance our operations and do not anticipate paying any cash dividends with respect to our common stock.

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Legal uncertainties surround the development of the Internet, and compliance with any newly adopted laws may prove difficult for our company and may harm our business.

      The laws governing Internet transactions remain largely unsettled. The adoption or modification of laws or regulations relating to the Internet could adversely affect our business, operating results, and financial condition by increasing our costs and administrative expenses. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy, libel, consumer protection, and taxation apply to the Internet. Laws and regulations directly applicable to communications or commerce over the Internet are becoming more prevalent. We must comply with new regulations in the United States, as well as any other regulations adopted by other countries in which we may do business. The growth and development of the market for online commerce may prompt calls for more stringent consumer protection laws, both in the United States and abroad, as well as new laws governing the taxation of Internet commerce. Compliance with any newly adopted laws may prove difficult for our company and may harm our business, operating results, and financial condition.

FORWARD-LOOKING STATEMENTS

      Some of the statements and information contained in this prospectus concerning our future, proposed, and anticipated activities; certain trends with respect to our revenue, operating results, capital resources, and liquidity; the markets in which we compete; the secure business-to-business communication markets in general; and other statements contained in this prospectus regarding matters that are not historical facts are forward-looking statements, as such term is defined in the securities laws. Forward-looking statements, by their very nature, include risks and uncertainties, many of which are beyond our control. Accordingly, actual results may differ, perhaps materially, from those expressed in or implied by the forward-looking statements. Factors that could cause actual results to differ materially include those discussed under “Risk Factors.”

USE OF PROCEEDS

      We will not receive any of the proceeds of sales of common stock by the selling shareholders.

PRICE RANGE OF COMMON STOCK

      Our common stock has been quoted on the OTCBB under the symbol “IVPN” since August 1998. The following table sets forth the high and low sales prices of our common stock for the calendar quarters indicated as reported on the OTCBB.

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      As of January 11, 2001, there were approximately 737 holders of record of our common stock. On January 11, 2001, the closing sales price of our common stock as quoted on the OTCBB was $0.47 per share.

      Our Board of Directors and our shareholders have approved the reincorporation of our company from Washington to Delaware through a merger into a newly formed Delaware corporation formed solely for the purposes of the reincorporation. Upon effectiveness, the reincorporation provides for the conversion of shares of the Washington corporation into shares of the Delaware corporation, on the basis of one share of common stock of the Delaware corporation for each three shares of common stock previously issued and outstanding. Our Board of Directors may choose to affect the reincorporation at any time in the future, amend or modify the terms of the reincorporation, or may choose to abandon the reincorporation. Upon effectiveness, the price of our common stock would be adjusted accordingly, however, we cannot provide assurance that the price of our common stock will remain at the adjusted levels after our common stock is combined.

DIVIDEND POLICY

      We are required to pay a 10% annual dividend on our Series A preferred stock. The dividend is payable quarterly and may be paid in either stock or cash. The holders of the Series A preferred stock will have preference in payment of dividends over the holders of common stock. On November 1, 1999, the first dividend payment became payable on the Series A preferred stock. We paid dividends for November 1, 1999 with 87,453 shares of common stock; February 1, 2000 with 13,913 shares; May 1, 2000 with 26,833 shares; and August 1, 2000 with 28,947 shares. The next dividend was due November 1, 2000 and our board of directors has not determined whether it will be paid with $55,000 cash or 108,640 shares of our common stock.

      For the foreseeable future, we intend to retain any remaining future earnings to finance our operations and do not anticipate paying any cash dividends with respect to our common stock. Subject to the preferences that may be applicable to any then-outstanding preferred stock, the holders of common stock will be entitled to receive such dividends, if any, as may be declared by our board of directors from time to time out of legally available funds. Payments of any cash dividends in the future will depend on our financial condition, results of operations, and capital requirements as well as other factors deemed relevant by our board of directors.

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SELECTED CONSOLIDATED FINANCIAL DATA

      The selected consolidated financial data presented below under the captions “Consolidated Statement of Operations Data” for the period from September 15, 1997 (inception) through December 31, 1997, and for the years ended December 31, 1998 and 1999, and “Consolidated Balance Sheet Data” as of December 31, 1998 and 1999 are derived from the consolidated financial statements of Intelispan, Inc., which have been audited by KPMG LLP, independent certified public accountants. The consolidated financial statements as of December 31, 1998 and 1999 and for the years then ended and the report thereon are included elsewhere in this prospectus. The selected consolidated financial data as of and for the nine months ended September 30, 1999 and 2000 are derived from the unaudited financial statements of Intelispan, Inc. included elsewhere in this prospectus that, in the opinion of management, include all adjustments, consisting of only normal recurring adjustments, that management considers necessary for a fair presentation of the information set forth below. The results of operations for the nine months ended September 30, 1999 and 2000 are not necessarily indicative of the results for the full year. The following data should be read in conjunction with “Management’s Discussion and Analysis” and our consolidated financial statements and notes thereto included elsewhere in this prospectus.

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PRO FORMA FINANCIAL STATEMENTS

      The following unaudited pro forma condensed consolidated financial statements reflect the results of operations of our company after giving effect to the acquisition of Devise. The unaudited pro forma condensed consolidated financial statements are based on the historical consolidated financial statements of our company and the financial statements of Devise, which should be read in conjunction with our financial statements and the notes thereto.

      In the opinion of management, all adjustments necessary to fairly present this pro forma information have been made. For pro forma purposes, our consolidated statements of operations for the year ended December 31, 1999 and for the nine months ended September 30, 2000 have been adjusted to give effect to the acquisition of Devise as if it had occurred on January 1, 1999.

      The unaudited pro forma information is presented for illustrative purposes only and is not indicative of the operating results or financial position that would occur if the acquisition of Devise had been completed on June 30, 2000, the actual closing date, nor is it indicative of future operating results or financial position of the company.

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INTELISPAN, INC.

      The following pro forma data represents the net effect of the acquisition of Devise Associates, Inc. as if the acquisition had taken place as of January 1, 1999. Amortization for the acquisition is based upon preliminary allocations of the purchase price goodwill that will be amortized over a period of ten years. Actual amortization may differ depending on the final allocation of the purchase price.

(a)	Represents the unaudited condensed consolidated financial statements of Intelispan, Inc. for the nine-month period ended September 30, 2000.
(b)	Represents the unaudited historical results of Devise Associates, Inc. for the nine-month period ended September 30, 2000.
(c)	Includes the elimination of approximately $34,000 of interest as a result of conversion of and paying off the existing debt of Devise.
(d)	Reflects increased goodwill amortization resulting from the purchase price allocation for the period January 2000 through June 2000. Amortization for three-month period ended September 30, 2000 is already included in consolidated financial statements of Intelispan, Inc.

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INTELISPAN, INC.

      The following pro forma data represents the net effect of the acquisition of Devise Associates, Inc. as if the acquisition had taken place as of January 1, 1999. Amortization for the acquisition is based upon preliminary allocations of the purchase price to goodwill that will be amortized over ten years. Actual amortization may differ depending on the final allocation of the purchase price.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

      You should read the following discussion and analysis with the selected consolidated financial data, our consolidated financial statements including the notes, and the risk factors, which appear elsewhere in this prospectus.

Overview

      We provide total managed network solutions and specialize in providing secure and efficient business-to-business communication and network management and monitoring services. We believe that we differentiate our services by integrating complex technologies to create our own branded network services, which enable our customers to: reduce capital expenditures; reduce exposure to the risks of outdated technology; and reduce time and effort expended obtaining and managing qualified technical personnel.

      With the shortage of qualified information technology resources in the workplace today, we believe that more and more companies will outsource some or all of their information technology needs. Accordingly, we are positioning our company to handle the increasing outsourcing needs. We design and implement data communications networks, monitor and manage physical networks, and manage the connectivity of remote access to networks. All of this can be done for a fixed monthly fee, permitting easy budgeting for our customers.

      We also attempt to differentiate our services through a comprehensive service level agreement with our customers whereby we guarantee that our services will be highly available with minimum downtime.

      Our results of operations include the results of our wholly owned subsidiary Devise Associates, Inc. Also included in our results are the results of Contego, LLC, a developer of a secure user-authentication product, of which we own 66.8%. The remaining 33.2% ownership in Contego is held by Baltimore Technologies, plc, a United Kingdom-based company. We consolidate our financial reporting with the Contego subsidiary. We believe that at some point in the future, this entity will be dissolved and its operation rolled directly into Intelispan.

      We generate revenue from four primary sources:

	•	Sales of our secure remote access services which include flat monthly fees or monthly fees based on actual hourly usage, plus non-recurring startup costs, and recurring monthly charges for circuit installation and related charges.
	•	Sales of Internet access, both wholesale and retail sales. Historically, these sales have provided the majority of our revenue as we have built market presence and awareness for our other products. We expect Internet revenue growth to slow as the market becomes more mature and our service offering becomes bundled into our virtual private network product offerings.
	•	Sales of our professional services, typically as part of designing or modifying a network prior to providing our other services.
	•	Sales of network management and monitoring services that include flat monthly fees or fees based on the number of devises monitored.

      While historically our revenue has been subject to monthly fluctuations and most of our revenue has been based on actual usage by customers, we expect a large portion of our future virtual private network services revenue to be flat fee driven based on the number of users on the network and not on the amount of hourly usage. We expect this shift to help reduce monthly fluctuations based on the number of workdays in a month and any seasonal fluctuations. We expect the fees that we receive for consulting and implementation services to continue to fluctuate monthly as a result of the inconsistent workflow of consulting engagements. With the development of our managed network services product, we expect variations in consulting revenue to begin to level as a recurring fee model supplants our historical engagement-based revenue.

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      Our operations have been almost entirely funded through equity and convertible debt financing. We have not had lines of credit or other credit facilities available to us. In January and February 2000, we completed equity financing that generated net proceeds to our company of approximately $27.9 million, which we believe will satisfy our operating capital needs into May 2001 based upon our current anticipated business activities and provided we meet our expected revenue targets. In June we secured $2 million of lease financing from Cisco Capital for use in acquiring Cisco network and other equipment. That lease financing agreement was increased to $3.5 million in October 2000. Currently we have purchased approximately $1.2 million of assets under this agreement.

      Our company is changing substantially as a result of the equity funds raised in December 1999 and the first two months of 2000, and we believe that an analysis of our historical operating results is not necessarily meaningful. You should not rely on this information as a basis for predicting future performance.

Results of Operations

      The following table provides, for the periods shown, the percentage of total revenue represented by certain line items included in our consolidated statements of operations.

Nine Months Ended September 30, 2000 Compared With the Results of Operations for the Nine Months Ended September 30, 1999

      Consolidated revenue increased 694% for the nine months ended September 30, 2000 to approximately $3,086,000 from approximately $486,000 for the nine months ended September 30, 1999. Revenue for the virtual private network product line grew to approximately $907,000 for the nine months ended September 30, 2000 from approximately $382,000 for the nine months ended September 30, 1999, an increase of approximately 137.4%. This is primarily the result of new customers and increased usage by existing customers. For the nine months ended September 30, 2000, three customers generated approximately 54.4% of the virtual private network revenue or approximately $493,000. No other customer generated more than 10% of the product line revenue. For the nine months ended September 30, 1999, revenue concentration was diverse with five customers generating in excess of 10% of the product line revenue each, with their combined contribution equal to approximately 75.5% of the product line revenue. The top three customers were responsible for 51.2%, or approximately $189,000.

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      Revenue from our wholesale Internet product line increased approximately $543,000 to approximately $646,000 for the nine months ended September 30, 2000. This represents an increase of approximately 527.2% over the revenue generated by the wholesale Internet product line for the nine months ended September 30, 1999.

      For the nine months ended September 30, 2000, professional and consulting services revenue was approximately $1,531,000. We had no professional and consulting services revenue for the nine months ended September 30, 1999. Of the approximately $1,531,000 of professional and consulting services revenue, approximately $125,000 was the result of the development of a new consulting business practice. The remaining $1,406,000 was the result of the acquisition of Devise Associates, Inc.

      Consolidated cost of revenue for the nine months ended September 30, 2000 was approximately $3,443,000, an increase of approximately $2,620,000 over the cost of revenue for the nine months ended September 30, 1999. The cost of providing our virtual private network service increased to approximately $1,903,000 for the nine months ended September 30, 2000 from approximately $697,000 for the nine months ended September 30, 1999. This increase is primarily the result of an increase in variable costs correlating to the increase in revenue and additional costs incurred in building out network infrastructure and a continually manned operations center.

      The increase in the cost of revenue related to the wholesale Internet product increased to approximately $618,000 for the nine months ended September 30, 2000 from approximately $126,000 for the nine months ended September 30, 1999. These costs are predominately variable in nature and increase almost in proportion to the increase in revenue.

      The cost of revenue for the professional and consulting services was approximately $921,000 for the nine months ended September 30, 2000. There were no professional and consulting services’ cost of revenue for the nine months ended September 30, 1999. These consist mainly of employee costs and resold hardware and software costs.

      Consolidated gross loss for the nine months ended September 30, 2000 was approximately ($357,000) an increase of approximately $20,000 from the nine months ended September 30, 1999, which was approximately ($337,000). This increase is primarily the result of the increased costs incurred for network infrastructure and a continually manned operations center.

      Operating expenses, which include selling and general and administrative expenses, for the nine months ended September 30, 2000 were approximately $9,506,000 compared with approximately $3,279,000 for the nine months ended September 30, 1999. Selling expenses were approximately $2,720,000 for the nine months ended September 30, 2000, an increase of approximately $1,881,000 from the nine months ended September 30, 1999. This increase is primarily the result of hiring a full complement of sales management, direct sales, and sales support personnel. Additional expense increases are the result of the additional travel and entertainment incurred by our expanded sales force.

      General and administrative expenses increased to approximately $6,786,000 for the nine months ended September 30, 2000 from approximately $2,440,000 for the nine months ended September 30, 1999. This increase is primarily the result of the growth of our company. As of September 30, 2000, we had 117 employees compared to 16 employees as of September 30, 1999. The additional payroll cost, facilities costs, and general cost of operations for this increase in personnel accounts for the majority of the increase in general and administrative costs. An additional factor giving rise to the increase in general and administrative expenses is professional fees incurred. For the nine months ended September 30, 2000, we incurred professional fees of approximately $1,101,000, an increase of approximately $980,000 over the expenses incurred for the nine months ended September 30, 1999. These fees were primarily the result of the costs of becoming and remaining a reporting public company.

      Our net loss increased for the nine months ended September 30, 2000 to approximately $8,623,000 from approximately $3,635,000 for the nine months ended September 30, 1999. Our net loss per common share for

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      Capital expenditures for the nine months ended September 30, 2000 were approximately $4,129,000 as compared with approximately $42,000 for the nine months ended September 30, 1999. Approximately $1,898,000 was used to acquire additional network equipment and approximately $1,132,000 was used to acquire computer equipment. The remainder was used to acquire furniture and fixtures, software, office equipment, and other equipment. Most of the new fixed assets will be depreciated on a straight-line basis over a three-year period. We financed approximately $1,200,000 of the network equipment through a leasing arrangement with Cisco Capital. The financing will be accounted for as a capital lease.

Results of Operations for Fiscal Years Ended December 31, 1999 and December 31, 1998

      Our total revenue increased 474% to approximately $744,000 for the fiscal year ended December 31, 1999, from approximately $130,000 for the fiscal year ended December 31, 1998. The increase in revenue is primarily due to customers that began use of exSPANd VPN service, which accounted for approximately $564,000, or 76% of total revenue during such period, an increase of 740% from fiscal year ended December 31, 1998. Usage and recurring monthly charges for the exSPANd VPN accounted for approximately $547,000 or 96% of total exSPANd VPN revenue, with the balance comprised of installation and other non-recurring charges. Wholesale and retail sales of Internet access and other income comprised approximately $179,000 or 24% of total revenue.

      During fiscal year ended December 31, 1999, we generated revenue from 17 customers and one reseller. The reseller, Aquis Communications IP, represented approximately 21.8% of our total revenue. This revenue consisted of the resale of Internet services. Three customers, PSI Technologies, California Bank & Trust, and FormFactor, Inc., represented approximately 14.6%, 14.3%, and 9.8%, respectively, of our total revenue, and represented approximately 19.7%, 19.1% and 12.8%, respectively, of the exSPANd VPN revenue.

      Our cost of sales for the fiscal year ended December 31, 1999 was approximately $1,286,000 compared to approximately $915,000 for the fiscal year ended December 31, 1998. Primarily as a result of the increase in the percentage of revenue in the exSPANd VPN service, which has a higher gross margin, our gross margin was a negative 73% in 1999 as opposed to a negative gross margin of 606% in 1998. Our cost of goods sold consists primarily of payments to MCI WorldCom for network usage and the costs of running a network operations center. For the exSPANd-PKI service, we have an additional payment that is made to our majority-owned Contego subsidiary for licensing fees on certain PKI technology used in the product. For our TradeSPAN service, in addition to the network usage fees, we pay certain licensing fees to Cyclone Commerce, Inc., which provides the software technology underlying the product, and a small fee to RSA, Inc. for licensing certain PKI technology used in Cyclone’s product.

      Operating expenses decreased by 6% to approximately $4,827,000 for the fiscal year ended December 31, 1999 from approximately $5,143,000 for the fiscal year ended December 31, 1998. For 1999, payroll and related expenses decreased 18% from 1998, and professional fees decreased 50% in 1999 from 1998. The remaining decrease is largely attributable to a 71% reduction in advertising and marketing expenses as well as maintaining a smaller staff. We expect payroll expenses to substantially increase in the near future as we build our national sales force and increase our management team.

      Capital expenditures for the fiscal year ended December 31, 1999 were approximately $139,000. We expect this amount to increase substantially during fiscal year 2000 as we build out our network infrastructure and servicing capabilities. We expect to depreciate most capital equipment purchases, which will consist primarily of routers, server class computers, software, and network access servers on a straight-line basis over three years.

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      Our net loss increased to approximately $5,807,000 for the fiscal year ended December 31, 1999 from approximately $5,211,000 for the fiscal year ended December 31, 1998. In 1998, we recorded a one-time loss of $225,550 for acquisition break-up fees and related legal expenses. Our net loss per share decreased to $0.28 in 1999 from $0.32 in 1998.

Liquidity and Capital Resources

      As a result of the private placements completed in the first quarter of 2000, our cash and cash equivalents balance as of September 30, 2000 was approximately $12,788,000. For the nine months ended September 30, 2000 our net cash used in operating activities was approximately $8,040,000 compared with approximately $2,014,444 for the nine months ended September 30, 1999. This increase in use of cash is primarily the result of the additional expenses incurred to build out our company infrastructure and operate our business as discussed above.

      Our cash flows used in investing activities was approximately $4,111,000 for the nine months ended September 30, 2000, an increase of $4,127,000 from the nine months ended September 30, 1999. The increase was the result of the acquisition of network and office equipment. We also sold some equipment during the nine months ended September 30, 1999 with a depreciated value of approximately $40,000.

      For the nine months ended September 30, 2000, cash flows provided by financing activities were approximately $15,257,000 compared with $2,063,000 for the nine months ended September 30, 1999. During the nine months ended September 30, 2000, we received approximately $15,550,000 from the private placements of units.

      Our working capital requirements for future periods depend upon numerous factors, including the timing of expenditures related to our network infrastructure, the rate at which we expand our staff, and our ability to meet revenue projections, among other items. While we cannot predict the timing and amount of our future expenditures, we believe that we have sufficient cash on hand to fund our current operations into the second quarter of 2001, provided we meet our expected revenue targets. To help conserve capital, we intend to lease as much equipment as possible if the rates are commercially reasonable.

      Beyond the second quarter of 2001, we may require additional financings, which may come from future equity or debt offerings that could result in further dilution to our shareholders. Adequate capital may not be available at that time and the lack of such capital could adversely affect our business. In the event our ability to obtain future capital looks doubtful, we will exercise prudent business practices and curtail excess spending to maximize our remaining resources.

Acquisition of Devise

      On June 30, 2000, we purchased all of the outstanding common stock of Devise Associates, Inc., a provider of managed network services. The shareholders of Devise received approximately 3.0 million shares of Intelispan common stock and cash consideration of $400,000. Excess purchase price over fair value of net assets acquired of approximately $7.8 million has been recorded as goodwill and is being amortized on a straight-line basis over ten years. This transaction has been accounted for as a purchase.

Changes In Certifying Accountant

      During October 2000, we dismissed KPMG LLP. Our board of directors approved the decision to change accountants.

      The audit report of KPMG on our consolidated balance sheet as of December 31, 1999 and the related consolidated statements of operations, shareholders’ equity, and cash flows for the year then ended, did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope, or accounting principles. The audit report of KPMG on our consolidated balance sheet as of

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      During the two most recent fiscal years and the interim periods subsequent to December 31, 1999 through October 16, 2000 there have been no reportable events.

      During October 2000, we engaged Arthur Andersen LLP as independent accountants. Our board of directors approved the engagement of Arthur Andersen LLP. We have not consulted Arthur Andersen LLP prior to its engagement regarding the application of accounting principles to a specified transaction, either completed or proposed, the type of audit opinion that might be rendered on our financial statements or any matter that was either the subject of disagreement or a reportable event.

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BUSINESS

      We provide managed network services to our customers on an outsourced basis, and we specialize in providing secure and efficient business-to-business communication and complementary professional services. We divide this business into three separate groups:

	•	Virtual Private Networks. We provide remote and site-to-site access through a secure, virtual private network. A virtual private network is a private network that exists within a public or shared network, including the Internet, through which access is controlled and users can communicate securely.
	•	Managed Network Services. We manage the networks used by our customers. We monitor our customers’ networks and respond to problems to assure the efficient flow of network traffic. We respond to security threats or problems as they are identified.
	•	Professional Services. We provide consulting and electronic commerce services and solutions. These services and solutions are designed to augment and complement the existing resources of information technology managers in planning, operating, and managing their network environment.

      We believe that we differentiate our services by integrating complex technologies to create our own branded network services, which enable our customers to

	•	reduce capital expenditures;
	•	reduce exposure to the risks of outdated technology; and
	•	reduce time and effort expended to obtain and manage qualified technical personnel.

      We also attempt to differentiate our services through a comprehensive service level agreement with our customers whereby we guarantee that our services will be highly available with minimum downtime.

Market Opportunity

      Infonetics Research forecasts that the market for managed virtual private network services will grow to approximately $19.3 billion worldwide by 2003. Infonetics Research also projects that worldwide managed network service expenditures will grow from $13.9 billion to $70.6 billion between 2000 and 2004. The Gartner Group predicts that by 2003, more than 137 million users worldwide, including one-third of the U.S. work force, will access computer networks from remote locations. Dataquest predicts that the U.S. market for managed network services will grow from $8.0 billion in 2000 to $17.5 billion in 2004. Similarly, we believe that the growth of e-commerce between businesses, the increasing demand for secure computer networks, the management of networks, and other factors are key driving forces behind our market opportunity in these sectors.

Strategy

      Our goal is to be a leading single-source provider of managed network solutions that enable secure and efficient electronic communications among businesses through virtual private networks and the Internet. Key elements of the strategy to achieve this goal include the following:

	•	targeting small- and medium-sized businesses through resellers, system integrators, and strategic relationships;
	•	building a direct sales force and developing a marketing campaign to target specific industries with the greatest perceived demand for our services, such as healthcare and financial services;
	•	increasing brand awareness through an aggressive media campaign;
	•	continuing to pursue strategic relationships to acquire technologies and service offerings to complement and expand existing service offerings;

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	•	providing high-quality service and responsiveness to customers through our operations and our consulting group; and
	•	pursuing strategic acquisitions to enhance our technology portfolio, expand our product offerings, and build our distribution channels.

The Need for Integrated Secure Network Access Services and Management

      We believe that companies implementing secure network solutions, including solutions for electronic business communication and secure access, typically face numerous implementation and ongoing network management issues. Secure network solutions require large investments in hardware, software, and personnel. The implementation process is complex and demands a great deal of management time and attention. Computer systems, hardware, and software become obsolete in a relatively short period of time, requiring additional investments from time to time. To support these systems, companies must hire, train, and retain qualified support personnel. As a result, we believe there is a desire by many of these companies to outsource integrated secure network access services.

The Intelispan Solutions

      Our solutions enable customers to electronically communicate and transmit data with their trading partners and others without the up-front costs, complexity, and other capital resources typically required by other virtual private networks. Our solutions are designed to be user-friendly and enable customers to implement them quickly, efficiently, and cost-effectively, thereby allowing customers to focus on their core businesses. We provide our integrated network solutions to customers on a flat-fee or fee-for-usage basis, reducing technological obsolescence and ongoing network maintenance. Our offerings are priced with a flat-monthly or usage-based rate, require little or no up-front capital expense by customers, and our secure access products are protected with Inteliguard, the Intelispan-branded public key infrastructure. We divide our offerings into three service groups:

Virtual Private Networking. Virtual private networks are made secure through encryption or other means so that only authorized users can access the network, preventing unauthorized users from intercepting data, destroying files, or otherwise gaining access to confidential material. Our Inteligate Suite is a suite of virtual private network services that offer enhanced security by using public key infrastructure technology. Public key infrastructure technology uses policies and procedures to manage digital certificates that identify users and control their access to a network or other resource. The Inteligate Suite empowers customers themselves to issue, revoke and create policies and rights for each certificate, rather than relying on the network or a third party to perform those services. Our Inteligate Suite includes:

	•	Inteligate I, a virtual private network that allows users to access securely their private network through an Internet connection provided by a third party;
	•	Inteligate II, a virtual private network that allows users to access securely their private network through an Internet connection provided by us; and
	•	Inteligate III, a virtual private network that exists within a shared network.

	Managed Network Services. With Inteliwatch, we can monitor and proactively respond to critical problems or failures within our customers’ networks. We also provide design, implementation, and modeling services to implement, manage, and grow our customers’ networks.
	Professional Services. Our consultants deliver application, networking, and security solutions. We use technology that enables us to model and simulate a customer’s networking environment, permitting us to model a network and simulate the impact of changes to that network. Our products and services are designed to augment existing information technology departments, as we believe that the projected shortage of such professionals will increase the demand to outsource these services.

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Virtual Private Networks

The Inteligate Suite

      We offer the Inteligate Suite as our branded virtual private network services, consisting of Inteligate I, Inteligate II, and Inteligate III.

      As the cornerstone of this service suite, the Inteligate managed gateway allows secure connectivity for remote users who desire access to the enterprise network through a variety of access points such as modem dial-in access, satellite access, digital subscriber lines, and cable modems. We offer Inteligate I, our basic virtual private network service, which requires the customer to obtain its own Internet access. Through Inteligate I, we provide secure access through that connection to the corporate enterprise. We also offer Inteligate II, with which we provide Internet access along with an aggressive and comprehensive service level agreement for secure virtual private network services over the Internet. The Inteligate III service is available using a private internet protocol network instead of tunneling, which provides both security and a level of reliability not available on the public Internet. Inteligate II and III include an aggressive, guaranteed performance service level agreement.

      Each virtual private network service in the Inteligate suite is available on usage-based billing or a flat-rate plan that includes unlimited usage and is available for the following fixed monthly rates per user: $35 for Inteligate I, $45 for Inteligate II, and $55 for Inteligate III. The Inteligate suite incorporates a robust security framework based upon public key infrastructure technology. We market our Inteligate Suite both as a solution for remote access needs and as a secure business communication product.

InteliCenter

      InteliCenter, which works within Inteligate, is a suite of specialized, browser-based network management tools and database access applications that allow our customers’ network administrators to monitor and manage users of our services. InteliCenter provides network administrators real-time network visibility, allowing them to add or delete users and otherwise control user activity. InteliCenter can be included with any of the services in the Inteligate Suite or the Intelitrade service, and customers may elect to receive more advanced InteliCenter options for an additional charge. With InteliCenter, network administrators can monitor and manage their networks more efficiently by providing administrators the ability to:

	•	troubleshoot and provide customer support;
	•	obtain data necessary for billing and network planning;
	•	monitor the state of dedicated network connections and network access points; and
	•	access our help desk and trouble ticket systems.

Inteliguard and Public Key Infrastructure

      Public key infrastructure technology, the standard for electronic commerce security, refers to a cryptography technology that uses public and private key pairs for encrypting and decrypting sensitive data. Associated with each user is a public key accessible to all users and published on a digital certificate, and a private key held only by that individual. A message encrypted with a user’s public key can only be decrypted by that user’s private key, and vice versa. This technology provides data privacy and ensures data authenticity, integrity, and non-repudiation.

      Our branded premium authentication service, Inteliguard, is provided through an agreement with Baltimore Technologies, plc and integrated into our Inteligate offerings. We believe Inteliguard to be the industry’s only strong network authentication based on public key infrastructure technology. A major benefit over other strong network authentication solutions is that public key infrastructure is transparent to the end user. The Inteliguard service allows enterprise customers control over the registration policy, issuance, revocation, and maintenance of the digital keys and certificates while we manage the certificate handling, storage, retrieval, revocation lists, and authorization functions.

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Managed Network Services

      Our managed network services provide customers with a full suite of services, on a low capital and outsourced basis, for a monthly service fee. We believe that these services meet the needs of the marketplace, which is suffering from

	•	a high demand and turnover rate in qualified personnel;
	•	increased reliance upon corporate networks to conduct their daily business transactions; and
	•	increased threats to corporate networks.

      The core of our managed network services division was acquired in July through our acquisition of Devise Associates, Inc. This division provides the capabilities for providing outsourced services for all aspects of a customer’s network, including establishing security policies, monitoring, intrusion detection, and response.

      Our main service, preliminarily called Inteliwatch, provides 24-hour monitoring capabilities over a customer network. Inteliwatch monitors each network device including routers, switches, and frame relay networks, to detect activity, warnings, critical problems, or failures. After an event requiring a response is triggered, such as a router failure, we will respond with appropriate action such as telephone contact, opening trouble tickets, or on-site response. Basic services, such as telephone contact, are included in our monthly service fee, while premium services, such as replacing faulty equipment on-site, are offered on an hourly basis for each event.

      We also offer other services to complete this offering, such as intrusion detection and response, firewalls, and security policies.

Professional Services

      Our professional services are focused on developing and delivering a range of services to complement and augment traditional information technology services that are typically available in-house to our customer base. The InteliPro services fill the strategic planning, network baselining, analysis, design, and implementation gaps that exist in virtually every corporate network. Our ProSupport offering enables information technology managers and their staff to use a sample web browser to maintain control and instantly access the specifics of their dynamic networking environments. We also offer document transport and management with our Intelitrade product, which is built upon our relationship with Cyclone Commerce. This product provides secure, efficient, platform independent, and scalable message transfer between commerce-enabled business partners.

Strategic Relationships

      We have the following strategic relationships:

	•	WorldCom. We depend on a non-exclusive, renewable five-year reseller agreement with Worldcom’s UUNET network, which also currently provides us with access to its legacy Gridnet network. Our Inteligate III product is currently available only over the GridNet network.
	•	Baltimore Technologies, plc. We signed a series of agreements with Baltimore in June 2000 that enable us to offer Baltimore’s public key infrastructure products on discounted terms for the next five years. We incorporate Baltimore’s technology as the basis for our Inteliguard public key infrastructure services. As part of the agreement, we obtained licenses to operate as a certificate authority with substantially reduced or prepaid costs for distributing industry standard certificates. We also obtained the right to resell Baltimore software on a preferred discount basis.
	•	Contego, LLC. Contego owns portions of the technology underlying the public key infrastructure technology incorporated in our services and the right to integrate that technology into the Gridnet Network. We have a distribution agreement with Contego, which enables us to integrate this technology into our services. Contego is owned 66.8% by us and 33.2% by Baltimore Technologies plc.

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	•	Cyclone Software Corporation. We license certain software from Cyclone Software Corporation and incorporate that software with other technologies to form part of our Intelishare offerings. Our license agreement with Cyclone expires in June 2003. We pay an annual maintenance fee and may incur certain incremental fees depending on our licensing arrangements with our customers. Cyclone has the non-exclusive right to resell our services.
	•	Altiga Networks, Inc. Our Inteligate I and Inteligate II services incorporate technology from Altiga Networks, Inc., which we obtain pursuant to a distributor agreement with Altiga. Altiga was recently acquired by Cisco Systems, Inc.
	•	Computer Associates, Inc. Our Inteliwatch services and other monitoring services provided by our Network Management Services division rely significantly upon a distributor agreement with Computer Associates; and
	•	Hughes Electronics. Our distributor agreement with the DirecPC division of Hughes Electronics enables us to offer satellite access for our Inteligate products and services.

      We depend upon these strategic relationships and the loss or material change in any of these relationships could have a material adverse effect on our business. We also intend to enter into other strategic relationships to provide or enhance technologies that we need for our offerings in all of our lines of business.

Our Relationship With Contego

      Contego is owned 66.8% by us and 33.2% by Baltimore Technologies plc, which licenses to Contego certain public key infrastructure software technology incorporated into Contego’s technology. The business and affairs of Contego are managed exclusively by a board of three managers, one of whom is Mr. Nelson, the Vice Chairman of our board of directors and an officer of our company. Contego may not enter into certain transactions unless approved by one or more members that own collectively 75% of the membership interests. In effect, both we and Baltimore Technologies must approve certain transactions or corporate activities, including the following:

	•	amendment of the articles of organization or the operating agreement of Contego,
	•	sale or other disposal of all or substantially all of the assets of Contego,
	•	approval of a plan of merger or consolidation of Contego with other businesses,
	•	sale or issuance of an interest in Contego to a third party or admission of new members of Contego,
	•	change of the equity interests or corporate structure of Contego,
	•	removal or replacement of any of the existing managers of Contego, including Mr. Nelson.

Sales and Marketing

      We currently distribute our products and services through our direct sales efforts and third-party resellers. We intend to hire additional sales and marketing personnel and to target Fortune 500 companies, particularly in industries in which we believe there is a high demand for our services, such as health services and finance.

      We also intend to target smaller companies through third-party resellers that typically also sell a bundle of value-added services from other third parties. Because of the variety of products and services they carry, we believe that the resellers are well positioned to access and penetrate customers that we might not otherwise reach. In addition, we have entered into wholesale arrangements that allow third parties to sell our services under their brand names. From time to time, we intend to evaluate the possibility of acquiring reseller and other distribution channels to expand the reach of our distribution network.

      In addition, we intend to enter into strategic marketing relationships with other companies to provide opportunities to cross-market our products with the products and services of the strategic partners.

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      We intend to create an awareness of the Intelispan brand name and to focus on the features of our integrated network services that differentiate them from our competitors. We plan to accomplish this goal through a media campaign and participation in trade shows and industry seminars.

Competition

      Our products and services compete in the secure network access and secure business-to-business communication markets with virtual private network providers, value-added network providers, and electronic data interchange providers. Value-added networks are communications networks that provide services beyond normal transmission, such as automatic error detection and correction, data conversion, and message storing and forwarding. The competition in these markets is extremely competitive.

      Competition for our products and services arise from several sources in the virtual private network market. Most major networking device companies provide or have announced intentions to provide encryption or other secure access through their hardware. This group includes Lucent and Cisco; firewall vendors, such as Axent and Checkpoint Software; and modem-pool companies, such as Shiva. Competitors providing a service-based virtual private network include Sprint, AT&T, GTE, IBM, and MCI WorldCom, as well as smaller companies such as Concentric Networks. In addition, several companies, including Sun Microsystems and Microsoft, provide or have announced their intention to provide software product-based solutions, some of which have been or will be integrated into their operating systems.

      Our products and services compete with different technologies that provide electronic data interchange services including electronic data interchange applications based on value-added networks and other secure document exchange applications. Many existing value-added networks have strong, long-standing relationships with customers and have demonstrated their ability to deliver a complete solution. Competitors in this marketplace include GE Information Services, Sterling Commerce, Commerce One, IBM, Kleinschmidt, and Harbinger. We could even face competition from Cyclone Commerce, which provides much of the technology for our offerings in this marketplace. Some of these companies, together with newer entrants in the market such as Arriba, have introduced Internet-based products and services. We may also compete in this segment with enterprise resource software providers that integrate electronic data interchange services into their products, such as PeopleSoft, BAAN, SAP, and Oracle.

      Competition may develop from companies that integrate their current user authentication technology into a network solution. These companies include Entrust, VeriSign, and Baltimore, which utilize public key infrastructure technology, and Security Dynamics, ActivCard, and Vasco, which use other technology in their solutions.

      Several companies also have begun to offer virtual private networks bundled with hardware or managed network services. For example, GTE’s Genuity recently announced that it would bundle dial-up, dedicated, and digital certificate support. Large carriers, such as AT&T, have announced varying plans to participate in the markets in which we compete. Although their offerings vary, competition may also develop from large network management outsourcing companies, including NetOps, Netsolve, Nortel, Pacific Bell, Sprint, SHL Systemhouse, Unisys, Xerox, Ameritech, Bell Atlantic, Cabletron, Control Data, GTE, Lucent, Motorola, and NCR.

      Although we believe that our products and services will compete favorably in these market segments, we may not maintain a competitive position against current and potential competitors and market acceptance for our products and services has not yet been demonstrated. Many of the current and potential competitors have longer operating histories, greater name recognition, larger installed customer bases, and significantly greater financial, technical, marketing, and sales resources than we do. As a result, competitors may be able to react more quickly to emerging technologies and changes in customer requirements or to devote greater resources to the promotion and sale of their products. In addition, certain of our current competitors in particular segments of the security marketplace may broaden or enhance their offerings to provide a more comprehensive solution competing more effectively with our products and services.

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Third-party Licensed Technology and Intellectual Property

      Our solutions include complex technology, including advanced encryption technology. Other than certain copyrights in software source code owned by Contego, our 66.8% owned subsidiary, we do not have any patents or copyrights for the technology we utilize. Instead, we license most of the technology integral to our business from third parties. Our success will depend in part on this licensed technology not infringing the proprietary rights of others.

      As of May 2000, we had obtained registration for the service mark “Intelispan”. We have not yet filed for registration of the Inteligate, Intelishare, Inteliwatch, Inteliguard, InteliPro, or ProSupport marks. We have never filed copyright applications with the U.S. Patent and Trademark Office or filed for patents, copyrights, or trademarks in any foreign countries.

      We depend upon our licensed technology and only have limited intellectual property. See “Risk Factors — We would not be able to offer our products without the technology that we license from third parties.”

Employees

      As of January 11, 2001, we had 120 full-time employees. Of our employees, 35 are involved in sales and marketing; 67 in technical services, professional, or customer support services; and 18 in finance and administration. No employees are covered by any collective bargaining agreements with us, and we believe that the relationship with our employees is good.

Properties

      Our corporate headquarters are located in a 11,500 square-foot facility in Alpharetta, Georgia under a five-year lease expiring in February 2004. The facility includes certain network operations and executive and administrative offices. We also lease office space and a network operations centers located in a 5,500 square foot facility in Tempe, Arizona and a 3,100 square-foot space in New York, New York. We have leased certain small colocation facilities through third parties to locate telecommunications equipment in several off-site locations. Although we believe these facilities will be adequate for our needs in the foreseeable future, we are currently investigating additional space to locate a network operations center and to accommodate our growth.

Legal Proceedings

      We are, and may in the future be, party to litigation arising in the ordinary course of our business. We do not consider any current claims to be material to our business, financial condition, or operating results. Our insurance coverage may not be adequate to cover all liabilities arising out of any claims that may be instituted in the future. A lack of insurance coverage may have an adverse effect on our business, financial condition, and operating results.

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MANAGEMENT

      The following table sets forth certain information regarding each of our directors and executive officers:

      Maurice J. Gallagher, Jr. has served as our Chairman of the Board of Directors since February 2000. Mr. Gallagher also serves as the Chairman of the Board of Directors of MGC Communications, Inc., a public company that Mr. Gallagher was instrumental in organizing. Mr. Gallagher is also a founder and Chairman of BankServ, Inc., a private payments company founded in 1996. Mr. Gallagher also served as a director of PurchasePro.com, Inc. during 1998 and 1999. Mr. Gallagher co-founded ValuJet Airlines, Inc. in 1993 and served as director of that company from 1993 until November 1997. Mr. Gallagher also held prior positions with ValuJet from 1993 to 1994, including Chief Financial Officer, and served as Vice Chairman of the Board of Directors from 1994 to 1997. Prior to co-founding ValuJet, Mr. Gallagher was a founder and President of WestAir Holding, Inc., a commuter airline headquartered in Fresno, California. WestAir was sold to Mesa Airlines in June 1992, and Mr. Gallagher was a member of the Mesa board of directors from June 1992 through March 1993.

      Travis Lee Provow has served as our President and Chief Executive Officer since January 2000 and has served as a director of our company since August 1998. From May 1998 to December 1999, Mr. Provow served as the Chief Operating Officer of Slingshot Networks LLC, a provider of digital media storage. From June 1995 to May 1998, Mr. Provow served as the Executive Vice President and Chief Operating Officer of GridNet International, a provider of enhanced data communications services, which Mr. Provow founded and which was purchased by MCI WorldCom in July 1997. Prior to founding GridNet, Mr. Provow spent 15 years with NCR and its successor, AT&T Global Information Services, in various domestic and international technical, marketing, product management, and strategic planning positions, most recently as the Vice President of Retail Product and Systems Marketing. Mr. Provow serves as a director of Slingshot Networks, LLC.

      Peter A. Nelson has served as our Vice Chairman of the Board of Directors since January 2000. Mr. Nelson served as our Chairman of the Board of Directors, President, and Chief Executive Officer from the time he formed our company in September 1997 until January 2000. Mr. Nelson has been an entrepreneur for over 20 years, most recently serving as President and Chief Executive Officer of UniDial Associates from 1993 to the present, President of Neptune Marketing Technologies of Delaware, Inc. from 1995 to 1997, and President of Video Electronics, Inc. from 1979 to 1994. Mr. Nelson serves as a director of UniDial Associates, Inc. and Telecast Communications, Inc., both private companies.

      Scot A. Brands has served as our Vice President and Chief Financial Officer since January 2000. Prior to joining our company, Mr. Brands served as Vice President and General Counsel of Slingshot Networks LLC from May 1999 to December 1999. Prior to that, Mr. Brands served as the Controller and General Counsel for GridNet International from May 1995 to April 1999.

      James D. Shook has served as Vice President, General Counsel, and Secretary of our company since August 1998. From July 1995 to July 1998, Mr. Shook served as Vice President of Operations and General Counsel to Buzzeo, Inc., a developer of enterprise software applications. From 1989 until 1995, Mr. Shook was

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      M. Ponder Harrison has served as Vice President — Marketing of our company since January 2000. Prior to joining our company, Mr. Harrison served as Senior Vice President — Business Development for Meridian Management, SA, a Switzerland-based company that secures and manages global marketing, branding, and licensing agreements on behalf of the International Olympic Committee. From August 1998 through June 1999, Mr. Harrison served as a marketing and brand consultant for start-up Internet and private aviation-related businesses. From November 1997 through July 1998, Mr. Harrison served as the Senior Vice President — Sales and Marketing for AirTran Airlines (which was merged with ValuJet Airlines, of which Mr. Harrison was a founding team member and was Vice President of Marketing from June 1993 until November 1997.) Mr. Harrison began his career in the airline industry in 1983 with Delta Air Lines and has worked in the areas of strategic planning, advertising and sales promotion, international field sales/operations, and analysis.

      Michael S. Falk has served as a director of our company since February 2000. Mr. Falk is the co-founder of Commonwealth Associates, a New York-based merchant bank and investment bank established in 1988 that specializes in early-stage investments in Internet, technology, and telecommunications businesses. Mr. Falk has served as Commonwealth Associate’s Chairman and Chief Executive Officer since 1995. Mr. Falk serves as a director of FutureLink Corp., a public company that serves as an application service provider, and eB2B Commerce, Inc., a public company that provides electronic commerce services.

      Philip R. Ladouceur has served as a director of our company since February 2000. Mr. Ladouceur is the Executive Chairman and Chief Executive Officer of FutureLink Corp., an application service provider. From October 1996 to April 1998, Mr. Ladouceur was President, Chairman and Chief Executive Officer of MetroNet Communications Corp. and served as MetroNet’s Executive Chairman until its merger with AT&T Canada in June 1999. From February 1995 to October 1996, Mr. Ladouceur was Executive Vice President of Operations at Bell Canada International Inc. From October 1992 to February 1995, Mr. Ladouceur was the founding President and Chief Executive Officer of ISM Information Systems Management (Alberta) Ltd., a computer and network management outsourcing company, which was acquired by IBM Global Services. Mr. Ladouceur founded and, from June 1990 to October 1992, was the Managing Director of HDL Capital Corporation, a private merchant bank specializing in business turnarounds, management buyouts, and financing for companies in the telecommunications, technology, software, and retail sectors. From 1986 to 1989, Mr. Ladouceur was Senior Vice President, Finance, Chief Financial Officer, and a director of Rogers Communications Inc., one of the largest cable, cellular and broadcasting companies in North America. Mr. Ladouceur currently serves as a director of AT&T Canada and Cell-Loc Inc., both public companies, and Plan B Communications, a private company.

Meetings and Committees of the Board of Directors

      Our bylaws authorize the Board of Directors to appoint from among its members one or more committees consisting of one or more directors. Our board of directors has established an audit committee and a compensation committee. The audit committee and the compensation committee each consist of our three independent directors. The audit committee reviews the annual financial statements, any significant accounting issues, and the scope of the audit with our independent auditors and discusses with the auditors any other audit-related matters that may arise. The compensation committee reviews and acts on matters relating to compensation levels and benefit plans for our key executives.

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Director Compensation and Other Information

      Directors who are employees of our company do not receive any additional compensation for serving as members of our board of directors. Each director receives reimbursement of expenses for their service as a member of the board of directors. None of our directors receive any cash compensation for their service on our board of directors. Non-employee directors will receive options to purchase 150,000 shares of common stock upon their appointment or election to the board of directors and will receive options to purchase a specified amount of shares of common stock annually. These options will have an exercise price of the fair market value on the date of grant and will vest quarterly in equal amounts over four years. We have granted to each of Messrs. Gallagher and Ladouceur, two of the three directors designated by Commonwealth, options to purchase 150,000 shares of common stock.

Compensation Committee Interlocks and Insider Participation

      We have appointed a compensation committee consisting of three non-employee members of our Board of Directors to make all compensation decisions regarding our executive officers. Historically, our Board of Directors appointed one non-employee member of the Board of Directors who, along with another former non-employee director, made all compensation decisions relating to our executive officers.

EXECUTIVE COMPENSATION

Summary of Cash and Other Compensation

      The following table sets forth certain information concerning the compensation for the fiscal year ended December 31, 2000 earned by our Chief Executive Officer and by three other executive officers whose cash salary and bonus exceeded $100,000 during fiscal 2000. Because only one of these executive officers was employed by our company prior to January 2000, the table also sets forth certain compensation information for that executive officer for the fiscal years ended December 31, 1998 and 1999.

SUMMARY COMPENSATION TABLE

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	January 2000. Mr. Shook began his employment during 1998, and his cash compensation during fiscal 1998 did not exceed $100,000.
(2)	The officers listed also received certain perquisites, the value of which did not exceed 10% of their salaries during fiscal 1998, 1999, or 2000.
(3)	Amounts shown represent matching contributions made by us to our SIMPLE plan.

Option Grants

      The following table provides information on stock options granted to the officers listed during the fiscal year ended December 31, 2000.

OPTION GRANTS IN LAST FISCAL YEAR