SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
Amendment No. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
Small Business Issuers
Under Section 12(b) or 12(g) of the Securities Exchange
Act of 1934
INTELLIWORXX, INC.
--------------------------------------------
(Name of Small Business Issuer in its Charter)
Florida 59-3336148
-------------------------------- ----------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
1819 Main Street, 11th Floor Sarasota, Florida 34236
- ---------------------------------------------- -----
(941) 365-7790
-------------------------
(Issuer's Telephone Number)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class to Name of each exchange on which
be registered: each class is to be registered:
N/A N/A
- ---------------------- -------------------------------
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
- --------------------------------------------------------------------------------
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Introduction
- ------------
This discussion summarizes the significant factors affecting the operating
results, financial condition and liquidity/cash flow of the Company during the
period from Inception (February 12, 1998) to December 31, 1998 and the nine
months ended September 30, 1999. This should be read in conjunction with the
financial statements and notes thereto included. As discussed in Note 2 to the
financial statements dated September 30, 1999, meaningful quarterly results are
unavailable for the period from Inception (February 12, 1998) to December 31,
1998 because of the start-up nature of the Company and its lack of dependence on
financial reporting. However, a financial audit was performed as of December 31,
1998 for the period from Inception (February 12, 1998) to December 31, 1998.
Quarterly results are available for the three-month periods ending March 31,
1999, June 30, 1999 and September 30, 1999. The following comments will discuss
the Company's operating results on a standalone basis as opposed to a quarterly
or comparative basis.
Results of Operations
- ---------------------
The Period from Inception (February 12, 1998) to December 31, 1998 ("Prior
Period")
- ---------------------------------------------------------------------------
Revenue for the Prior Period totaled approximately $994,000 consisting primarily
of new product development contracts with a major US automotive manufacturer and
with the US Navy, administered by the National Committee for Manufacturing
Sciences, Inc. ("NCMS"). The attendant cost of revenue totaling approximately
$654,000 consisted of direct development costs incurred by the Company's
hardware and software engineering staff.
Selling, general and administrative expenses for the Prior Period totaled
approximately $1,376,000. These costs provided the basis for the Company's
infrastructure that will maintain the selling and general expenses into the
future.
Depreciation, amortization and interest expense totaled approximately $153,000.
The Nine Months Ended September 30, 1999 ("Current Period")
- -----------------------------------------------------------
Revenue for the Current Period is approximately $1,918,000, consisting of
software and hardware development revenue of approximately $1,279,000 and
product sales of $639,000. The Company began shipping product in February 1999.
Both software and hardware development revenues and product sales in the Current
Period compare favorably to the results in the Prior Period, notwithstanding the
additional one and one-half months in the Prior Period.
<PAGE>
Selling, General and Administration totals approximately $1,480,000 that also
compares favorably to the Prior Period although as a monthly average it exceeds
the Prior Period monthly average. This increase is associated with the Company's
growth as a start-up. Research and Development likewise has increased as the
Company expands its software development capabilities.
Depreciation and Amortization and Interest Expense for the Current Period total
approximately $333,000 and have increased over the Prior Period resulting from
the Company's use of short-term credit facilities to fund the operation.
Liquidity and Capital Resources
- -------------------------------
The Company has financed its operations and capital expenditures primarily
through cash flow from operations, short-term credit facilities and the sale of
the Company's common stock. Long-term lease transactions have also been used by
the Company. For the Prior Period, the Company's primary source of cash was from
financing activities that totaled approximately $888,000. Of this amount, net
proceeds from the issuance of promissory notes totaled approximately $638,000
and proceeds from the sale of its common stock totaled $250,000. For the Current
Period, the Company's primary source of cash was also from financing activities.
Net proceeds from the issuance of promissory notes totaled approximately
$1,365,000 while proceeds from the sale of common stock totaled $750,000.
The Company's cash totaled approximately $76,000 and $22,000 on December 31,
1998 and September 30, 1999 respectively. Capital expenditures for the Prior
Period totaled approximately $374,000, of which approximately $210,000 is
computers and related hardware and software principally used in the Company's
research and development efforts. For the Current Period, the Company spent an
additional $146,000 on capital expenditures which includes those expenditures
financed with capitalized lease obligations totaling $77,000. Such capitalized
leases were entered into to acquire substantially all of the Company's office
furniture.
The Company expects to be able to meet its debt obligations and to finance
operations and capital expenditures through internally generated funds, future
borrowing (including amounts expected to be available under revolving bank
credit facilities, purchase order and accounts receivable financing and capital
lease transactions) and capital stock transactions to possibly include private
placements and a registered offering.
During the next twelve months, the Company does not expect to make any
significant purchases of plant or equipment.
The Company anticipates its number of employees to increase from 35 to 85 during
the next twelve months.
<PAGE>
Impact of Year 2000 Issues
- --------------------------
Due to the method of storing date information in computers using two digits to
indicate the year instead of four digits (for example "99 instead of "1999")
some computer systems may not accept input of, store, manipulate or output dates
in the years 2000 or thereafter without error or interruption. This is known as
the Year 2000 or Y2K problem. It is possible that the Company's software
products and internal information systems and the business systems of its
suppliers or customers will be negatively impacted by Year 2000 problems.
Intelliworxx has conducted a review of its business systems in an attempt to
identify ways in which its systems could be affected by Year 2000 problems.
Based on this review, the Company believes that its internal information systems
are Year 2000 compliant and the Company does not expect the Year 2000 issue to
have a material adverse affect on its systems. However, the Company relies upon
the statements of its software vendors, other parts suppliers and its insurance
and financial institutions. There can be no assurance that these groups will
identify all date-handling problems in advance of their occurrence, or that the
Company will be able to successfully remedy all problems that arise from any
date-handling problems.
All internal information systems of the Company and all software used in
products of the Company were purchased in 1998 or later, well after its software
vendors stated that their products were Year 2000 compliant. The Company
believes that the risk of Year 2000 issues and the costs associated with Year
2000 issues are minimal.
The Company plans to back up to tape all corporate information systems and all
employee computers at the end of the day on December 31, 1999 and to test for
proper functioning on January 1, 2000. Any issues that arise will be addressed
by the Company's software engineers and software vendors.
<PAGE>
ALESSANDRI & ALESSANDRI, P.A.
Certified Public Accountants
- --------------------------------------------------------------------------------
Independent Auditors' Report
Intelliworxx, Inc.
Sarasota, Florida
We have reviewed the accompanying balance sheets of Intelliworxx, Inc.
("Company") as of March 31, June 30, and September 30, 1999 and the related
statements of operations, stockholders' equity, and cash flows for the quarters
and period then ended, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of Intelliworxx, Inc.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to be
in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, certain conditions
indicate that there is substantial doubt about the Company's ability to continue
as a going concern. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Alessandri & Alessandri, P.A.
November 30, 1999
- --------------------------------------------------------------------------------
Accountants & Consultants
5121 Ehrlich Road o Suite 107-B o Tampa, Florida 33624
(813) 969-1995 o Fax (813) 960-2740
Member: American Institute of Certified Public Accountants/
Division of CPA Firms o Member: Florida Institute of
Certified Public Accountants
<PAGE>
<TABLE>
<CAPTION>
INTELLIWORXX, INC.
BALANCE SHEETS
March 31, 1999, June 30, 1999, and September 30, 1999
- ----------------------------------------------------------------------------------------------------------------------
ASSETS
March 31 June 30 September 30
----------- ----------- -------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 107,976 $ 1,144 $ 21,849
Accounts receivable 639,407 840,637 500,615
Inventory (at acquisition
cost-not in excess of market) 757,088 822,903 820,139
Prepaid expenses 21,916 53,682 56,615
----------- ----------- -----------
Total Current Assets 1,526,387 1,718,366 1,399,218
----------- ----------- -----------
EQUIPMENT AND FURNITURE
Equipment and furniture, at cost
(net of depreciation of $86,401,
$117,507, and $149,000, respectively) 352,577 337,389 316,003
----------- ----------- -----------
OTHER ASSETS
Note receivable from officer 48,100
Software license, at cost (net of
amortization of $11,917,
$14,667, and $19,250, respectively) 43,083 40,334 35,750
Software license deposit 150,000 150,000 150,000
Other 52,448 19,543 106,110
----------- ----------- -----------
Total Other Assets 245,531 209,877 339,960
----------- ----------- -----------
TOTAL $ 2,124,495 $ 2,265,632 $ 2,055,181
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable (including current
portion of capitalized lease payable) $ 224,186 $ 765,051 $ 1,607,905
Accounts payable 1,102,830 982,926 648,968
Wages and related taxes payable 399,816 553,921 934,588
Accrued interest 96,508 148,387 244,192
Other 102,000 42,500 5,000
----------- ----------- -----------
Total Current Liabilities 1,925,340 2,492,785 3,440,653
----------- ----------- -----------
LONG-TERM LIABILITIES
Capitalized lease payable - less current portion 33,091 26,812 20,385
----------- ----------- -----------
Total Liabilities 1,958,431 2,519,597 3,461,038
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock - No Par Value;
25,000,000 shares authorized; none issued
Common Stock - No Par Value; 100,000,000
shares authorized; shares
issued and outstanding 15,199,166 1,929,848 1,929,848 1,929,848
Retained Earnings (deficit) (1,763,784) (2,183,813) (3,335,705)
----------- ----------- -----------
Total Stockholders' Equity 166,064 (253,965) (1,405,857)
----------- ----------- -----------
TOTAL $ 2,124,495 $ 2,265,632 $ 2,055,181
=========== =========== ===========
See Notes to Financial Statements.
<PAGE>
INTELLIWORXX, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
REVENUES $ 893,626
COST OF SALES 390,179
------------
GROSS MARGIN 503,447
------------
OPERATING EXPENSES:
General and administrative 315,492
Sales and marketing 202,603
Research and development 214,644
Depreciation and amortization 31,518
------------
Total Operating Expenses 764,257
------------
LOSS BEFORE OTHER ITEMS (260,810)
OTHER INCOME & EXPENSE
Interest expense (49,734)
------------
NET LOSS $ (310,544)
============
Loss per share $ 0.021
Weighted average number of shares 14,683,833
See Notes to Financial Statements.
<PAGE>
INTELLIWORXX, INC.
STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
Three months Six months
ended ended
June 30, 1999 June 30, 1999
--------------------------------
REVENUES $ 715,932 $ 1,609,558
COST OF SALES 547,134 937,313
------------ ------------
GROSS MARGIN 168,798 672,245
------------ ------------
OPERATING EXPENSES:
General and administrative 209,158 524,649
Sales and marketing 184,799 387,402
Research and development 93,529 308,174
Depreciation and amortization 33,856 65,374
------------ ------------
Total Operating Expenses 521,342 1,285,599
------------ ------------
LOSS BEFORE OTHER ITEMS (352,544) (613,354)
OTHER INCOME & EXPENSE
Miscellaneous income 7,808 7,808
Interest expense (75,293) (125,027)
------------ ------------
NET LOSS $ (420,029) $ (730,573)
============ ============
Loss per share $ 0.028 $ 0.049
Weighted average number of shares 15,199,166 14,942,923
See Notes to Financial Statements.
<PAGE>
INTELLIWORXX, INC.
STATEMENT OF OPERATIONS
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999
- ----------------------------------------------------------------------------------------------------
Three months Nine months
ended ended
September 30, 1999 September 30, 1999
---------------------------------------------
REVENUES $ 308,124 $ 1,917,682
COST OF SALES 335,525 1,272,838
------------ ------------
GROSS MARGIN (27,401) 644,844
------------ ------------
OPERATING EXPENSES:
General and administrative 302,417 827,066
Sales and marketing 265,626 653,028
Research and development 415,371 723,545
Depreciation and amortization 36,076 101,450
------------ ------------
Total Operating Expenses 1,019,490 2,305,089
------------ ------------
LOSS BEFORE OTHER ITEMS (1,046,891) (1,660,245)
OTHER INCOME & EXPENSE
Interest and miscellaneous income 799 8,607
Interest expense (105,800) (230,827)
------------ ------------
NET LOSS $ (1,151,892) $ (1,882,465)
============ ============
Loss per share $ 0.076 $ 0.125
Weighted average number of shares 15,199,166 15,029,276
See Notes to Financial Statements.
<PAGE>
INTELLIWORXX, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (February 12, 1998) TO September 30, 1999
- ---------------------------------------------------------------------------------------------------------
Retained
Common Stock Earnings
Shares $ (Loss)
-----------------------------------------------------------
Issuance of founders shares 999,900
Shares issued to reflect reverse
purchase acquisition 12,000,000 $ 564,748
Proceeds from issuance of common stock 1,000,100 250,100
Common stock issued for liabilities 66,666 100,000
Net Income (Loss) $ (1,453,240)
------------ ------------ ------------
Balance, December 31, 1998 14,066,666 914,848 (1,453,240)
Issuance of shares for notes payable 132,500 265,000
Sale of common shares 1,000,000 750,000
Net Income (Loss) (310,544)
------------ ------------ ------------
Balance, March 31, 1999 15,199,166 1,929,848 (1,763,784)
Net Income (Loss) (420,029)
------------ ------------ ------------
Balance, June 30, 1999 15,199,166 1,929,848 (2,183,813)
Net Income (Loss) (1,151,892)
------------ ------------ ------------
Balance, September 30, 1999 15,199,166 $ 1,929,848 $ (3,335,705)
============ ============ ============
See Notes to Financial Statements.
<PAGE>
INTELLIWORXX, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net Income (Loss) From Operations: $(310,544)
Add: Non-Cash Items
Depreciation and amortization 31,518
Changes in Assets and Liabilities:
Accounts receivable (400,561)
Inventory (546,960)
Prepaid expenses 1,637
Other assets (177,842)
Accounts payable 662,018
Wages and related taxes 127,617
Accrued interest 30,962
---------
Net Cash From (To) Operating Activities (582,155)
---------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Acquisition of equipment and furniture (120,322)
---------
Net Cash From (To) Investing Activities (120,322)
---------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from borrowings 56,023
Repayment of borrowings (72,096)
Proceeds from sale of common stock 750,000
---------
Net Cash From (To) Financing Activities 733,927
---------
Increase (Decrease) in Cash 31,450
Cash Balance, Beginning 76,526
---------
Cash Balance, Ending $ 107,976
---------
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 16,401
Supplemental Disclosures of Non-cash transactions:
A total of 132,500 common shares
were issued in payment of
$265,000 of notes payable
See Notes to Financial Statements.
<PAGE>
INTELLIWORXX, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1999
- ---------------------------------------------------------------------------------------------------------------
Three month Six month
period ended period ended
June 30, 1999 June 30, 1999
-----------------------------------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net Income (Loss) From Operations: $ (420,029) $ (730,573)
Add: Non-Cash Items
Depreciation and amortization 33,856 65,374
Adjustment of note payable (10,308) (10,308)
Changes in Assets and Liabilities:
Accounts receivable (201,230) (601,791)
Inventory (65,815) (612,775)
Prepaid expenses (31,766) (30,129)
Other assets 32,905 (144,937)
Accounts payable (119,904) 542,114
Wages and related taxes 154,105 281,722
Accrued interest 51,879 82,841
Other liabilities (59,500) (59,500)
----------- -----------
Net Cash From (To) Operating Activities (635,807) (1,217,962)
----------- -----------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Acquisition of equipment and furniture (15,919) (136,241)
----------- -----------
Net Cash From (To) Investing Activities (15,919) (136,241)
----------- -----------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from borrowings 853,157 909,180
Repayment of borrowings (308,263) (380,359)
Proceeds from sale of common stock 750,000
----------- -----------
Net Cash From (To) Financing Activities 544,894 1,278,821
----------- -----------
Increase (Decrease) in Cash (106,832) (75,382)
Cash Balance, Beginning 107,976 76,526
=========== ===========
Cash Balance, Ending $ 1,144 $ 1,144
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 15,551
Supplemental Disclosures of Non-cash transactions:
A total of 132,500 common shares were issued in payment of
$265,000 of notes payable
See Notes to Financial Statements.
<PAGE>
INTELLIWORXX, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999
- ------------------------------------------------------------------------------------------------------------------
Three month Nine month
period ended period ended
September 30, 1999 September 30, 1999
-----------------------------------------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net Income (Loss) From Operations: $(1,151,892) $(1,882,465)
Add: Non-Cash Items
Depreciation and amortization 36,076 101,450
Adjustment of note payable (10,308)
Changes in Assets and Liabilities:
Note receivable (48,100) (48,100)
Accounts receivable 340,022 (261,769)
Inventory 2,764 (610,011)
Prepaid expenses (2,933) (33,062)
Other assets (86,567) (231,504)
Accounts payable (333,958) 208,156
Wages and related taxes 380,667 662,389
Accrued interest 95,805 178,646
Other liabilities (37,500) (97,000)
----------- -----------
Net Cash From (To) Operating Activities (805,616) (2,023,578)
----------- -----------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Acquisition of equipment and furniture (10,106) (146,347)
----------- -----------
Net Cash From (To) Investing Activities (10,106) (146,347)
----------- -----------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from borrowings 919,068 1,753,248
Repayment of borrowings (82,641) (388,000)
Proceeds from sale of common stock 750,000
----------- -----------
Net Cash From (To) Financing Activities 836,427 2,115,248
----------- -----------
Increase (Decrease) in Cash 20,705 (54,677)
Cash Balance, Beginning 1,144 76,526
=========== ===========
Cash Balance, Ending $ 21,849 $ 21,849
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 12,793
Supplemental Disclosures of Non-cash transactions:
A total of 132,500 common shares were issued in payment of
$265,000 of notes payable
See Notes to Financial Statements.
</TABLE>
<PAGE>
INTELLIWORXX, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, June 30, and September 30, 1999
- --------------------------------------------------------------------------------
1. BASIS OF ACCOUNTING:
- -----------------------
The financial statements of Intelliworxx, Inc. ("Company") as of March 31,
June 30, and September 30, 1999 and for the periods then ended have been
prepared on the basis that the Company is a going concern, which contemplates
the realization of assets and satisfaction of liabilities in the normal course
of business, and, accordingly, no adjustments have been recorded because of this
uncertainty. At September 30, 1999 the Company's current assets totaled
$1,399,218 and its current liabilities totaled $3,440,653, for a working capital
deficit of $2,041,435. For the period from inception (February 12, 1998) to
September 30, 1999, the Company incurred losses of $3,335,705, which have
significantly impacted the liquidity and capital resources of the Company.
Since inception, the Company met its cash needs primarily from short-term
borrowings from individuals, a private placement of 2,000,000 of its common
shares for $1,000,000, and from aggregated revenues of $2,912,000. Management
expects to achieve its future cash needs from a combination of revenues, sales
of its equity securities, and continued borrowings, pending attainment of
profitable operations.
2. HISTORY AND OPERATIONS:
- --------------------------
The Company was organized on February 12, 1998 under the laws of the State
of Florida. Since inception, its primary business has been the development of
specialized computer program applications and certain related computer hardware.
On November 20, 1998, the Board of Directors of the Company approved a
merger with Outdoor Resorts, Inc. ("Resorts"), a publicly registered entity,
which merger was consummated on November 23, 1998. Under the terms of the
merger, the stockholders of the Company received 12,000,000 shares of the common
stock of Resorts in exchange for the 600,000 common shares of the Company then
outstanding. At the date of the merger, Resorts did not have any assets or
liabilities. Resorts changed its name to Intelliworxx, Inc. For financial
reporting purposes, this transaction was accounted for as a reverse purchase
acquisition under which the entities were recaptialized to include the
historical financial information of the Company.
During the period from inception (February 12, 1998) to December 31, 1998,
the Company was in its development stage, which stage ended as of December 31,
1998. In the development stage period, the Company did not maintain its
financial records such that meaningful quarterly financial information is
available. The Company's financial statements as December 31, 1998 and for the
period then ended were subjected to a financial audit.
<PAGE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- ----------------------------------------------
CASH AND CASH EQUIVALENTS: Cash and cash equivalents are comprised of cash
and highly liquid investments with a maturity of three months or less when
purchased. The Company has no cash equivalents.
INVENTORY: Inventory is carried at the lower of acquisition cost or market.
EQUIPMENT AND FURNITURE: Equipment and furniture are stated at their
acquisition cost. The cost of replacements, renewals, and betterments, that
neither ad materially to the value of the equipment and furniture, nor
appreciable prolong their lives are charged to expense as incurred. Depreciation
is provided using the straight-line method over the estimated useful lives,
which generally ranges from two to five years.
INTANGIBLE ASSETS: Intangible assets, such as software licenses, are
carried at cost, and are amortized
using the straight-line method over the life of the license.
INCOME TAXES: The provision (benefit) for income taxes is based upon the
pre-tax earnings (loss) reported in the financial statements, adjusted for
transactions that may never enter in the computation of income taxes payable. A
deferred tax asset or liability is recognized for the estimated future tax
affect attributable to temporary differences in the recognition of income and
expenses for financial statements and income tax purposes. A valuation allowance
is provided in the event that the tax benefits are not expected to be realized.
EARNINGS (LOSS) PER SHARE: Earnings (loss) per common share are based upon
the weighted number of common shares outstanding during the period.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION: The Company derives its revenues from sales of
products and from computer software and hardware consulting design services.
Revenues are recognized upon the delivery of the products and services. The
Company also derives revenues under contracts that include either or both the
design, development, and manufacture of computer program applications and
related hardware. Percentage of completion accounting has been adopted by the
Company to recognize revenues from those contracts that extend beyond interim
and annual reporting periods.
RESEARCH AND DEVELOPMENT, ADVERTISING, AND START-UP COSTS: Research and
development, advertising, and start-up costs are charged to expense as incurred.
<PAGE>
CONCENTRATIONS OF RISK and CREDIT RISK: The Company is operating solely in
a specialized part of the computer application industry. Its operations in that
specialized area requires development of unique computer program software and
certain related hardware. Competing entities in the specialized area generally
have more extensive resources and have been operating for longer periods of
time. The Company does not have a material concentration of accounts receivable
or other credit risk.
IMPAIRMENT OF LONG-LIVED ASSETS: The Company has not recognized any charges
from the impairment of its long-lived assets, as it believes that its long-lived
assets have not been impaired.
FINANCIAL INSTRUMENTS: Assets and liabilities, as a matter of accounting
policy, are reflected in the accompanying financial statements at values that
the Company considers to represent their respective fair values.
4. NOTES PAYABLE:
- -----------------
At September 30, 1999, the Company had an aggregate unpaid principal
balance of $1,628,290 of notes payable and capitalized leases payable. None of
the notes payable had collateral, except for one note with a principal balance
of $225,000 that has the personal guarantee of an officer of the Company. The
notes payable bear interest at rates ranging from 10% to 52% per annum and are
due upon demand. During the first quarter of 1999, the Company exchanged
$265,000 of the notes payable for 132,500 common shares.
The Company recorded assets of $60,180 that are represented by capitalized
lease payable of a like amount that had an unpaid balance at September 30, 1999
of $45,222. The capitalized payable bears interest at the per annum rate of
20.95% and is payable in monthly amounts of $2,336 through June 2001.
5. INCOME TAXES:
- ----------------
The provision (benefit) for income taxes differs from the amount of income
tax determined by applying the applicable United States statutory federal income
tax rate to pre-tax income as a result of the following differences at September
30, 1999.
Income tax provision (benefit) at 34% $(640,000)
Increase in rates resulting from
state taxes (68,000)
Valuation allowance 708,000
---------
Effective tax rates $ -0-
The Company will need to realize significant profits to utilize the net
operating losses, all of which may not be available due to the change in control
and issuance of additional stock. Because of these uncertainties, a valuation
allowance was established in the same amounts as the deferred tax assets because
<PAGE>
the benefit is more likely than not to be lost. Net operating losses of the
Company totaled approximately $1,453,000 at December 31, 1998 and expire in
2013, and an additional amount of $1,882,465 that expires in 2014.
6. COMMON AND PREFERRED STOCK
- -----------------------------
PREFERRED STOCK: The Company is authorized to issue 25,000,000 shares of no
par value preferred stock. At September, 1999, no preferred stock had been
issued.
COMMON STOCK: The Company is authorized to issue 100,000,000 shares of
common stock. Dividends are available when declared by the Company. At September
30, 1999, there were 15,199,166 common shares outstanding.
As of October 1999, the Company has granted stock options under incentive
and non-incentive plans for 801,894 common shares that are exercisable at $6 and
$6.70 per share. Fifty percent of the stock options are exercisable on the first
anniversary date of the option, and 25% on each subsequent anniversary. None of
the stock options are exercisable before February 25, 2000.
7. COMMON STOCK OFFERINGS:
- --------------------------
In December 1998 and January 1999, the Company issued 2,000,000 shares of
common stock for a total of $1,000,000 under a registration exemption provided
by Securities and Exchange Commission Rule 504.
8. YEAR 2000 COMPUTER ISSUE:
- ----------------------------
Management asserts that it has reviewed all of its computer programs and
systems and believes that they are Year 2000 compliant. While management cannot
insure that the computer systems of its customers and suppliers are Year 2000
compliant, it believes, based upon inquiries and because their primary customers
and suppliers are generally in, or closely associated with the computer
industry, that such are or will be Year 2000 compliant.
9. COMMITMENTS AND CONTINGENCIES:
- ---------------------------------
The Company leases its facilities under a lease that requires monthly
rental payments of $32,000 per month and expires in September 2004.
The Company is presently, and from time to time, subject to pending claims
and lawsuits arising in the ordinary course of business. In the opinion of
management, the ultimate resolution of these pending legal proceedings will not
have a material adverse affect upon the Company's operations or financial
position.
<PAGE>
10. REVENUES AND ACCOUNTS RECEIVABLES:
- --------------------------------------
During the nine-month period ended September 30, 1999, the Company recorded
revenues of $1,917,682 from product development and contracts ($1,279,014) and
product sales ($638,668). As of March 31, June 30, and September 30, 1999,
accounts receivable included unbilled receivables of $315,700, $503,500, and
$243,560 from development and consulting work.
11. DILUTED EARNINGS PER SHARE:
- -------------------------------
Diluted earnings (loss) per share is not presented because the outstanding
options to purchase 801,894 common shares under the Company's incentive and
non-incentive plans (see Note 6) would cause an anti-dilutive affect upon the
diluted earnings (loss) per share amounts for each of the periods.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
INTELLIWORXX, INC.
Date: December 1, 1999 By: /s/ Kevin B. Rogers
---------------------- ----------------------------------
Kevin B. Rogers, President
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<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-END> SEP-30-1999 SEP-30-1999
<CASH> 21,849 21,849
<SECURITIES> 0 0
<RECEIVABLES> 500,615 500,615
<ALLOWANCES> 0 0
<INVENTORY> 820,139 820,139
<CURRENT-ASSETS> 1,399,218 1,399,218
<PP&E> 465,003 465,003
<DEPRECIATION> 149,000 149,000
<TOTAL-ASSETS> 2,055,181 2,055,181
<CURRENT-LIABILITIES> 3,440,653 3,440,653
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0 0
0 0
<COMMON> 1,929,848 1,929,848
<OTHER-SE> (3,335,705) (3,335,705)
<TOTAL-LIABILITY-AND-EQUITY> 2,055,181 2,055,181
<SALES> 150,500 638,668
<TOTAL-REVENUES> 308,124 1,917,682
<CGS> 99,330 434,294
<TOTAL-COSTS> 335,525 1,272,838
<OTHER-EXPENSES> 1,019,490 2,305,089
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 105,800 230,827
<INCOME-PRETAX> (1,151,892) (1,882,465)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,151,892) (1,882,465)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,151,892) (1,882,465)
<EPS-BASIC> 0.076 0.125
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