<PAGE> 1
FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-94291
SUPPLEMENT NO. 3 DATED
JANUARY 4, 2001 TO PROSPECTUS DATED MAY 15, 2000
INTELISPAN, INC.
QUARTERLY RESULTS
A copy of the Company's Form 10-QSB for the quarterly period ended
September 30, 2000 is attached hereto.
<PAGE> 2
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 000-30359
INTELISPAN, INC.
(Exact name of Small Business Issuer as specified in its charter)
WASHINGTON 91-1738902
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1720 WINDWARD CONCOURSE, SUITE 100
ALPHARETTA, GEORGIA 30005
(Address of principal executive offices)
(678) 256-0300
(Issuer's telephone number)
Check whether the issuer (1) filed all documents and reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports,
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
At November 9, 2000 the Registrant had 109,725,069 shares of Common Stock
outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE> 3
INTELISPAN, INC.
INDEX TO QUARTERLY REPORT
ON FORM 10-QSB
Page
Part I. Financial Statements
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheet............................ 3
Consolidated Statements of Operations................. 4
Consolidated Statements of Cash Flows................. 5
Notes to Consolidated Financial Statements............ 6
Item 2. Management's Discussion and Analysis ................... 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K........................ 13
Signatures................................................................ 14
2
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INTELISPAN, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE RELATED DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
------------------
<S> <C>
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents................................ $ 12,738
Accounts receivable, net................................. 2,210
Prepaid expenses......................................... 599
Other current assets..................................... 699
------------
Total current assets................................. 16,246
Property and equipment, net................................... 4,135
Intangibles, net.............................................. 8,538
Other long-term assets........................................ 132
------------
$ 29,051
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................... $ 2,702
Accrued liabilities...................................... 1,852
Notes payable to shareholders.......................... 57
Other current liabilities................................ 518
------------
Total current liabilities............................ 5,129
Note payable.................................................. 125
Minority Interest............................................. 73
Shareholders' equity:
Preferred Stock, $.0001 par value; 10,000,000 shares
authorized; 22,000 shares issued and outstanding....... ---
Common Stock, $.0001 par value; 250,000,000 shares
authorized; 109,725,069 shares issued and outstanding.. 11
Unrealized gain............................................... 58
Additional paid-in capital.................................... 43,867
Accumulated deficit........................................... (20,212)
-------------
Total shareholders' equity........................... 23,724
$ 29,051
============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
INTELISPAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- --------------------------------
1999 2000 1999 2000
--------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenue.............................................. $ 291 $ 2,172 $ 486 $ 3,086
Cost of sales........................................ 340 2,164 823 3,443
--------------- --------------- ------------- --------------
Gross income (loss)......................... (49) 8 (337) (357)
Operating expenses:
Selling......................................... 445 1,268 839 2,720
General and administrative...................... 887 2,350 2,439 6,786
--------------- --------------- ------------- --------------
Total operating expenses.................... 1,332 3,618 3,278 9,506
--------------- --------------- ------------- --------------
Operating loss.............................. (1,381) (3,610) (3,615) (9,863)
Interest expense..................................... (60) (19) (85) (31)
Interest income...................................... --- 294 --- 903
Other income, net.................................... --- 291 --- 311
Minority interest.................................... 21 16 65 57
--------------- --------------- ------------- --------------
Net loss.................................... (1,420) (3,028) (3,635) (8,623)
Preferred stock dividends............................ --- 55 --- 174
Net loss applicable to common shareholders.. $ (1,420) $ (3,083) $ (3,635) $ (8,797)
=============== =============== ============= ==============
Net loss per common share - basic and diluted........ $ (.07) $ (.04) $ (.19) $ (.12)
=============== =============== ============= ==============
Weighted average common shares outstanding........... 19,080,920 79,855,374 18,964,816 72,541,891
=============== =============== ============= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
4
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INTELISPAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1999 2000
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................ $ (3,635) $ (8,623)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ......................... 289 979
Bad debt expense ...................................... 17 --
Unrealized loss on sale of property and equipment ..... 5 --
Minority interest ..................................... (65) (57)
Common stock and warrants issued as
compensation for services ......................... 859 186
Unrealized gains on investments ....................... -- 60
Noncash compensation .................................. -- 81
Noncash interest expense .............................. -- 6
Decrease (increase) in assets, net of acquisition:
Accounts receivable ................................. (378) (753)
Prepaid expenses .................................... 122 (450)
Other current assets ................................ 6 (516)
Other long-term assets and intangibles .............. 10 (214)
Increase (decrease) in liabilities, net of acquisition:
Accounts payable .................................... (173) 434
Lease payable ....................................... -- 851
Accrued expenses .................................... 929 (24)
-------- --------
Net cash used in operating activities ............... (2,014) (8,040)
-------- --------
Cash flows from investing activities:
Acquisition of subsidiary, net of cash acquired ..... -- 18
Proceeds from sale of property and equipment ........ 40 --
Purchase of property and equipment .................. (24) (4,129)
-------- --------
Net cash provided by (used in) investing activities . 16 (4,111)
-------- --------
Cash flows from financing activities:
Issuance of common stock ............................ 635 17,399
Costs associated with issuance of common stock ...... -- (1,850)
Proceeds from note payable .......................... 1,428 --
Principal payments on notes payable ................. -- (292)
-------- --------
Net cash provided by financing activities ........... 2,063 15,257
-------- --------
Net increase in cash and cash equivalents .................... 65 3,106
Beginning cash and cash equivalents .......................... 27 9,632
-------- --------
Ending cash and cash equivalents ............................. $ 92 $ 12,738
======== ========
Non cash investing activities:
Stock issued for acquisition ........................ $ -- $ 7,000
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
INTELISPAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of Intelispan, Inc.
have been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-QSB.
Accordingly, they do not include all information and footnotes required by
generally accepted principles for complete financial statements.
(1) INTERIM RESULTS
In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations, and cash flows for the periods
presented have been made. The results of operations for the three-month
and nine-month periods ended September 30, 2000 are not necessarily
indicative of the operating results that may be expected for the entire
year ending December 31, 2000. These financial statements should be
read in conjunction with the Company's consolidated financial
statements and the notes thereto for the fiscal year ended December 31,
1999 contained in the Company's registration statement on Form SB-2
(Registration No. 333-94291).
(2) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions involving
Stock Compensation (an interpretation of APB Opinion No. 25). This
interpretation provides guidance regarding the application of APB
Opinion 25 to stock compensation involving employees. This
interpretation became effective in July 2000 and is not expected to
have a material effect on the Company's consolidated financial
statements.
(3) RECENT TRANSACTIONS
On June 30, 2000, the Company purchased all of the issued and
outstanding common stock of Devise Associates, Inc., ("Devise") a
provider of managed network services. The Company paid approximately
$7.4 million for the capital stock of Devise, consisting of $400,000 in
cash and approximately 3 million shares of our common stock (valued at
$7 million). The aggregate purchase price, including the cost of
acquisition costs of approximately $400,000, was allocated to assets
acquired in the amount of approximately $1.7 million and certain
liabilities assumed in the amount of $1.7 million, based on their
approximate fair market values. The preliminary allocation of excess
purchase price resulted in approximately $7.8 million of goodwill and
is being amortized on a straight-line basis over ten years. This
transaction has been accounted for under the purchase method of
accounting.
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations (unaudited) as if the acquisition
had taken place on January 1, 1999. Such pro forma amounts are not
necessarily indicative of what actual results of operations might have
been if the acquisition had been effective on January 1, 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ -------------------------------
1999 2000 1999 2000
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue.............................................. $ 1,708,934 $ 2,171,771 $ 4,458,208 $ 5,634,848
=========== =========== =========== ============
Gross Profit......................................... 688,889 7,311 1,798,222 1,266,239
=========== =========== =========== ============
Operating loss....................................... (1,427,054) (3,611,575) (3,652,864) (9,823,715)
=========== =========== =========== ============
Net loss per common share............................ $ (.06) $ (.04) $ (.17) $ (.12)
=========== =========== =========== ============
</TABLE>
6
<PAGE> 8
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS
FORWARD LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT RESULTS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements regarding our expected financial position
and operating results, our business strategy, and our financing plans are
forward-looking statements. These statements can sometimes be identified by our
use of forward-looking words such as "may," "will," "anticipate," "estimate,"
"expect," or "intend." Known and unknown risks, uncertainties, and other factors
could cause our actual results to differ materially from those contemplated by
these statements. Such risks and uncertainties are discussed in our filings with
the Securities and Exchange Commission and include our ability to retain and
grow our user base, our ability to successfully install new users and/or
integrate assets obtained through acquisitions, the highly competitive markets
in which we operate, and our ability to respond to technological developments
affecting the industry.
All references to "we", "our", "us" or "Intelispan" refer to
Intelispan, Inc., and its predecessors, operating divisions, and subsidiaries.
This report should be read in conjunction with our Registration
Statement on Form SB-2, filed January 10, 2000 and declared effective May 15,
2000, and all supplements and amendments thereto.
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 divide our business into the following three
separate product and service 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 private networks owned
and 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, equipment
failures and other problems as they are identified.
- Consulting and Solutions Services. We provide consulting and
electronic solutions and services. These services and
solutions are designed to augment and complement the existing
resources of Information Technology managers in planning,
operating and managing their data communication networks.
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
7
<PAGE> 9
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.
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 which generated net proceeds to our company of approximately $17.4
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.
8
<PAGE> 10
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.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
1999 2000 1999 2000
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue.............................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales........................................ 116.8 99.7 169.4 111.6
-------- -------- -------- --------
Gross income (loss)......................... (16.8) 0.3 (69.4) (11.6)
Operating expenses:
Selling......................................... 153.0 58.4 172.8 88.1
General and administrative...................... 305.0 108.2 502.4 219.9
-------- -------- -------- --------
Total operating expenses.................... 458.0 166.6 675.2 308.0
-------- -------- -------- --------
Operating loss.............................. (474.8) (166.3) (744.6) (319.6)
Interest income (expense) other, net................. (20.8) 26.1 (17.4) 38.3
Minority interest.................................... 7.4 0.8 13.4 1.9
-------- -------- -------- --------
Net loss.................................... (488.2)% (139.4)% (748.6)% (279.4)%
======== ======== ======== ========
</TABLE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THE RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999.
Consolidated revenue for the three months ended September 30, 2000 was
approximately $2,172,000, an increase of approximately $1,881,000 from the
three-month period ended September 30, 1999. This represented a percentage
increase of approximately 646.4%. Revenue from our virtual private network
product increased to approximately $342,000 for the three months ended September
30, 2000 from approximately $253,000 for the three months ended September 30,
1999, an increase of approximately 35.2%. This is primarily the result of the
addition of new customers and the increased usage by existing customers. For the
three months ended September 30, 2000, three customers, the only customers
responsible for greater than 10% of the product line revenue, generated revenue
equal to approximately 49.4% of the total product line revenue or approximately
$169,000. For the three months ended September 30, 1999, our largest three
customers generated approximately 52.9% of the product line revenue or
approximately $134,000.
Revenue from our wholesale Internet product increased for the three
months ended September 30, 2000 to approximately $313,000 from approximately
$38,000 for the three-month period ended September 30, 1999, an increase of
approximately 723.7%.
Our professional services and consulting practices generated revenue
for the three months ended September 30, 2000 of approximately $1,519,000. There
were no professional services and consulting practice revenue for the three
months ended September 30, 1999. This revenue is the result of developing a new
line of business internally and the acquisition of Devise Associates, Inc on
June 30, 2000. Approximately $1,406,000 of the professional services line of
business revenue resulted from that acquisition.
Consolidated cost of revenue increased for the period ended September
30, 2000 to approximately $2,164,000 from approximately $340,000 for the three
months ended September 30, 1999. The cost of revenue for providing virtual
private network services increased to approximately $952,000 for the three
months ended September 30, 2000 from approximately $298,000 for the three-month
period ended September 30, 1999. The increase in expense is primarily the result
of an increase in variable costs associated with additional revenue and the cost
of additional network infrastructure and our operations center.
9
<PAGE> 11
For the three months ended September 30, 2000, the cost of revenue for
our wholesale Internet product increased to approximately $292,000, an increase
of approximately $910,000 over the costs for the same period in 1999. Costs
associated with this product are almost entirely variable and thus the increase
is the direct result of additional revenue.
The cost of revenue for providing professional and consulting services
was approximately $921,000 for the three months ended September 30, 2000. There
were no costs of revenue for this service offering during the three-month period
ended September 30, 1999. Costs elements of these services consist primarily of
salaries and wages for consultants and the cost of hardware and software that is
resold during implementations.
Gross profit for the three months ended September 30, 2000 increased to
approximately $8,000 from a loss of approximately ($49,000) for the three months
ended September 30, 1999. The gross profit percentage for the three months ended
September 30, 2000 increased to breakeven from a loss of approximately (16.6%)
for the three months ended September 30, 1999.
Consolidated operating expenses for the three months ended September
30, 2000 were approximately $3,618,000 compared to approximately $1,332,000 for
the three months ended September 30, 1999. Selling expenses for the three-month
period ended September 30, 2000 were approximately $1,268,000, an increase of
approximately $823,000 over selling expenses for the three-month period ended
September 30, 1999. The increase is primarily the result of additional payroll
cost associated with additional sales, sales management, and sales operations
headcount.
General and administrative expenses for the three-month period ended
September 30, 2000 were approximately $2,350,000 compared with approximately
$887,000 for the three-month period ended September 30, 1999. The increase in
cost is the result of additional personnel, the cost of increasing operating
locations from one to three, and the carrying cost of supporting additional
personnel. As of September 30, 2000, we had 117 employees compared to 16 as of
September 30, 1999.
The net loss attributed to common shareholders was approximately
$3,083,000 for the three months ended September 30, 2000 compared to
approximately $1,420,000 for the three-month period ended September 30, 1999.
The loss per common share decreased to ($.04) per common share on approximately
79,855,000 shares from ($.07) on approximately 19,081,000 shares for the
three-month period ended September 30, 1999.
Capital expenditures for the three-month period ended September 30,
2000 were approximately $827,000 compared with expenditures of $0 for the three
months ended September 30, 1999. Approximately $514,000 of the expenditures was
for network equipment. This equipment, servers, routers, and other network class
equipment will be depreciated on a straight-line basis over three years.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THE RESULTS OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1999
Consolidate 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.
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.
10
<PAGE> 12
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-month period 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 profit for the nine months ended September 30, 2000
was approximately ($357,000) a decrease of approximately $20,000 from the
nine-month period ended September 30, 1999 that was approximately ($337,000).
This decrease 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 $3,278,000 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 over the nine-month period 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
$2,439,000 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-month period 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 $3,635,000 for the nine months ended
September 30, 1999. Our net loss per common share for the nine months ended
September 30, 2000 decreased to ($.12) per share from ($.19) for the period
ended September 30, 1999. For the nine months ended September 30, 2000 there
were approximately 72,541,000 shares outstanding compared to approximately
18,965,000 shares for the nine months ended September 30, 1999.
11
<PAGE> 13
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.
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 $2,912,000 for the nine months 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 over the nine month period 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 was approximately $15,257,000 compared with $2,063,000 for
the nine months ended September 30, 1999. In 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.
PART II. OTHER INFORMATION.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS.
During August 2000, we completed a private offering to the investors in
the private placements during December 1999, and January and February 2000 to
induce those investors to exercise their warrants. Pursuant to the terms of the
offering and for a limited period of time, we modified the terms of the unit
warrants and agent warrants issued in those private offerings. Accordingly,
holders of such securities were able to exercise, on a "cashless" basis, unit
warrants or agent warrants held at an exercise price of $0.50 per share. This
exercise price represented a $0.25 reduction from the terms of the warrants,
which have an exercise price of $0.75 per share. In addition, for purposes of
the cashless exercise in this offering, the current market value of our common
stock was deemed to be $4.00 per share. As a result, holders of unit warrants
and agent warrants who elected to participate in the offering received
additional shares of our common stock than they otherwise would receive if such
securities were exercised pursuant to the original terms. We did not receive
additional consideration for the warrants in the private offering. We offered
these favorable terms in reliance on an exemption under Section 4(2) of the
Securities Act as a transaction by an issuer not involving any public offering
and Rule 506 of Regulation D of the General Rules and Regulations Under the
Securities Act.
12
<PAGE> 14
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
On July 11, 2000, the Company filed a Form 8-K disclosing its
acquisition of Devise Associates, Inc. on June 30, 2000.
On August 29, 2000, the Company filed a Form 8-K/A amending the Form
8-K filed on July 11, 2000 to include the following financial statements: (1)
the audited financial statements of Devise Associates, Inc. as of and for the
years ended December 31, 1998 and 1999; (2) the unaudited financial statements
of Devise Associates, Inc. as of June 30, 2000 and for the six month periods
ended June 30, 1999 and 2000; and (3) the unaudited pro forma condensed
consolidated statements of operations of Intelispan, Inc. for the six months
ended June 30, 2000 and the twelve months ended December 31, 1999.
On September 14, 2000, the Company filed a Form 8-K announcing the
completion of its private offering of securities to holders of certain warrants
and placement agent warrants as set forth in its press release dated September
12, 2000
13
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date:
INTELISPAN, INC.
By:/s/ Scot A. Brands
---------------------------------------------------
Scot A. Brands
Executive Vice President - Chief Financial Officer
(Principal Accounting Officer)
14
<PAGE> 16
INTELISPAN, INC.
EXHIBIT NUMBER 27
This exhibit contains summary financial information extracted from the
Registrant's financial statements for the period ended September 30, 2000, and
is qualified in its entirety by reference to such financial statements. This
exhibit shall not be deemed filed for purposes of Section 11 of the Securities
Act of 1933 and Section 18 of the Securities Exchange Act of 1934, or otherwise
subject to the liability of such Sections, nor shall it be deemed a part of any
other filing which incorporates this report by reference, unless such other
filing expressly incorporates this Exhibit by reference.
MULTIPLIER 1,000
CURRENCY U.S. Dollars
PERIOD TYPE 9 months
FISCAL YEAR END December 31
PERIOD START January 1, 2000
PERIOD END September 30, 2000
EXCHANGE RATE N/A
CASH 595,614
SECURITIES 12,527,310
RECEIVABLES 2,470,258
ALLOWANCES 164,745
INVENTORY 131,683
CURRENT ASSETS 16,246,153
PP&E 5,228,510
DEPRECIATION 1,093,287
TOTAL ASSETS 29,050,974
CURRENT LIABILITIES 5,125,173
BONDS
PREFERRED MANDATORY
PREFERRED 2
COMMON 10,973
OTHER SE
TOTAL LIABILITY AND EQUITY 29,050,974
SALES 3,086,336
TOTAL REVENUES 3,086,336
CGS 3,442,958
TOTAL COSTS 9,505,670
OTHER EXPENSES (368,478)
LOSS PROVISION
INTEREST EXPENSE 31,247
INCOME PRETAX
INCOME TAX
INCOME CONTINUING (8,796,364)
DISCONTINUED
EXTRAORDINARY
CHANGES
NET INCOME (8,796,364)
EPS BASIC (.12)
EPS DILUTED (.12)
