U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ____________
Commission File No.: 0-13117
-------
ION NETWORKS, INC.
------------------
(Exact Name of Small Business Issuer in Its Charter)
Delaware 22-2413505
-------- ----------
(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
1551 South Washington Avenue Piscataway, New Jersey 08854
---------------------------------------------------------
(Address of Principal Executive Offices)
(732) 529-0100
--------------
(Issuer's telephone number, including area code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
---
There were 15,198,416 shares of Common Stock outstanding as of August 11, 2000.
Transitional Small Business Disclosure Format:
Yes ___ No X
---
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<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C> <C>
Item 1. Condensed Consolidated Financial Information 3
Condensed Consolidated Balance Sheets as of June 30, 2000
and March 31, 2000 (Unaudited) 4
Condensed Consolidated Statements of Operations for the Three
Months ended June 30, 2000 and 1999 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows for the Three
Months ended June 30, 2000 and 1999 (Unaudited) 6
Condensed Consolidated Statement of Stockholders' Equity for
Three Months ended June 30, 2000 (Unaudited) 7
Notes to Condensed Consolidated Financial Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis 10
PART II. OTHER INFORMATION
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Information.
--------- ------------ --------- ------------
The condensed consolidated financial statements included herein have
been prepared by the registrant without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Although the registrant
believes that the disclosures are adequate to make the information presented not
misleading, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these condensed financial statements be read
in conjunction with the audited financial statements and the notes thereto
included in the registrant's Annual Report on Form 10-KSB for the year ended
March 31, 2000
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<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
------------- --------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents.............................................. $ 5,443,963 $10,381,612
Accounts receivable, net of allowance for doubtful accounts
of $185,000 and $251,000, respectively............................. 1,926,258 4,569,546
Other receivables ..................................................... 141,687 1,560,697
Inventory, net......................................................... 3,463,557 1,924,671
Prepaid expenses and other current assets.............................. 633,462 602,874
--------- ---------
Total current assets ........................................ 11,608,927 19,039,400
Property and equipment at cost, net of accumulated depreciation of
$1,785,658 and $1,566,366, respectively................................... 2,170,921 2,146,956
Capitalized software, less accumulated amortization of $4,886,077 and
$4,259,851, respectively ............................................. 3,919,520 4,185,911
Goodwill and other acquisition - related intangibles, less accumulated
amortization of $1,275,141 and $1,030,334, respectively ............. 1,693,909 1,938,716
Related party notes receivable............................................ 885,000 --
Other assets ............................................................. 86,759 79,258
---------- ----------
Total assets ................................................ $20,365,036 $27,390,241
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital leases...................................... $ 67,900 $ 67,900
Current portion of long-term debt ..................................... 96,000 96,000
Accounts payable and accrued expenses ................................. 1,765,017 2,632,135
Accrued payroll and related liabilities ............................... 657,421 2,139,524
Deferred income ....................................................... 77,185 275,657
Other current liabilities ............................................. 350,184 352,093
---------- ----------
Total current liabilities ................................... 3,013,707 5,563,309
Long-term portion of capital leases...................................... 289,738 302,866
Long-term debt, net of current portion .................................. 122,933 128,129
Commitments and contingencies
Stockholders' equity:
Preferred stock-par value $.001 per share; authorized 1,000,000
shares, none issued .............................................. - -
Common stock, par value $.001 per share; authorized 50,000,000
shares, issued 15,181,470 shares and outstanding 15,119,439
shares at June 30, 2000; issued 15,111,617 shares and outstanding
15,049,586 shares at March 31, 2000............................... 15,181 15,112
Additional paid-in capital ............................................ 35,256,657 35,063,207
Accumulated deficit..................................................... (18,123,618) (13,488,379)
Accumulated other comprehensive (loss) income.......................... (2,363) 13,196
---------- ----------
17,145,857 21,603,136
Less-Treasury stock 62,031 shares, at cost at June 30, 2000 and
March 31, 2000....................................................... (207,199) (207,199)
---------- ----------
Total stockholders' equity............................................... 16,938,658 21,395,937
---------- ----------
Total liabilities and stockholders' equity .............................. $20,365,036 $27,390,241
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
2000 1999
----------- -----------
<S> <C> <C>
Revenue.......................................................... $2,083,504 $4,889,021
Cost of sales ................................................... 1,157,102 1,931,872
----------- -----------
Gross margin .................................................... 926,402 2,957,149
Research and development expenses ............................ 1,223,929 534,417
Selling, general and administration .......................... 3,333,057 2,591,476
Depreciation and amortization ................................ 1,090,325 922,656
----------- -----------
(Loss) from operations .......................................... (4,720,909) (1,091,400)
Interest income ................................................. 130,115 -
Interest (expense) .............................................. (20,873) (65,632)
----------- -----------
(Loss) before income tax expense ................................ (4,611,667) (1,157,032)
----------- -----------
Income tax expense ........................................... 23,572 -
Net (loss)...................................................... $(4,635,239) $(1,157,032)
=========== ===========
PER SHARE DATA
Net (loss) per share
Basic......................................................... $ (0.31) $ (0.13)
Diluted ...................................................... $ (0.31) $ (0.13)
Weighted average number of common shares outstanding:
Basic ........................................................ 15,123,152 9,035,590
Diluted ...................................................... 15,123,152 9,035,590
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
JUNE 30,
2000 1999
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net (loss) ......................................................... $ (4,635,239) $(1,157,032)
Adjustments to reconcile net (loss) to net cash used in
operating activities:
Depreciation and amortization .................................... 1,090,325 922,656
Non-cash stock-based compensation charges ........................ 82,602
Changes in operating assets and liabilities:
(Increase) decrease in
Accounts receivable .............................................. 2,643,288 (1,199,801)
Other receivables................................................. 1,419,010
Inventory ........................................................ (1,538,886) 240,473
Prepaid expenses and other current assets ........................ (30,588) (116,011)
Other assets ..................................................... (7,501) 90
Increase (decrease) in
Accounts payable and accrued expenses ............................ (867,118) (1,848,292)
Accrued payroll and related liabilities .......................... (1,482,103) (131,822)
Deferred income .................................................. (198,472) (45,884)
Other current liabilities ........................................ (1,909) (730,515)
----------- ----------
Net cash used in operating activities ................................. (3,526,591) (4,066,138)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment .............................. (258,816) (22,660)
Capitalized software ............................................... (359,835) (537,462)
Related party notes receivable...................................... (885,000)
----------- ----------
Net cash used in investing activities ................................ (1,503,651) (560,122)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on revolving line of credit ............................. - 253,720
Proceeds from debt ................................................. - 450,000
Principal payments on debt.......................................... (18,324) (193,558)
Proceeds from sales of common stock / exercise of stock options and
warrants ..................................................... 110,917 5,001,052
----------- ----------
Net cash provided by financing activities ............................. 92,593 5,511,214
----------- ----------
Net (decrease) increase in cash ...................................... (4,937,649) 884,954
Cash and cash equivalents, beginning of year .......................... 10,381,612 165,994
----------- ----------
Cash and cash equivalents, end of period .............................. $ 5,443,963 $1,050,948
=========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Paid-in Accumulated Comprehensive Treasury Stockholders'
Shares Par Value Capital Deficit (Loss)Income Stock Equity
------ --------- ------- ------- ------------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance March 31, 2000 15,111,617 $ 15,112 $35,063,207 $(13,488,379) $ 13,196 $(207,199) $21,395,937
Net loss (4,635,239) (4,635,239)
Exercise of stock options
and warrants 69,853 69 110,848 110,917
Non-cash stock-based
compensation - - 82,602 82,602
Translation adjustments (15,559) (15,559)
---------- -------- ----------- ----------- ----------- --------- -----------
Balance June 30, 2000 15,181,470 $ 15,181 $35,256,657 $(18,123,618) $ (2,363) $(207,199) $16,938,658
========== ======== =========== =========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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<PAGE>
ION NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
Note 1 - Condensed Consolidated Financial Statements:
-----------------------------------------------------
The condensed consolidated balance sheets as of June 30, 2000 and March 31,
2000, the condensed consolidated statements of operations for the three month
periods ended June 30, 2000 and for the same period in 1999 and the condensed
consolidated statements of cash flows for the three month periods then ended
have been prepared by the Company without audit. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary for
the fair presentation of the Company's financial position, results of operations
and cash flows at June 30, 2000 and 1999 have been made.
The Company has significantly increased its research and development activities
and has expanded its sales and marketing infrastructure and related costs in
order to attempt to execute its growth plans. The Company has incurred and
expects to continue to incur significant losses and have significant negative
operating cash flows for the foreseeable future.
On August 11, 2000, the Company obtained a written commitment for a private
placement of 2,857,142 shares of Common Stock at a price of $1.75 per share, for
a total purchase price of $5,000,000.
The Company's current operating plan includes certain assumptions, the most
significant of which relates to the attainment of significant increases in
future revenues in excess of 1st quarter 2001 revenues. To the extent that those
revenue assumptions are not achieved, the Company will have to raise additional
equity or debt financing and/or curtail certain current expenditures contained
in the Company's current operating plans. There can be no assurance that the
Company will be able to obtain any such financing on acceptable terms, if at
all.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the audited
financial statements and notes thereto included in the annual report on Form
10-KSB for the year ended March 31, 2000.
Note 2 - Inventory:
-------------------
Inventory, net of reserve for obsolescence of $281,000 and $283,000 at June 30,
2000 and March 31, 2000, respectively, consists of the following:
June 30, 2000 March 31, 2000
------------- --------------
Raw materials $ 799,807 $ 782,813
Work in process 270,097 259,180
Finished goods 2,393,653 882,678
Total ----------------------- ---------------------
$ 3,463,557 $ 1,924,671
======================= =====================
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<PAGE>
Note 3 - Earnings Per Share:
----------------------------
The computation of Basic Earnings Per Share is based on the weighted average
number of common shares outstanding for the period. Diluted Earnings Per Share
is based on the weighted average number of common shares outstanding for the
period plus the dilutive effect of common stock equivalents, comprised of
outstanding stock options and warrants.
The following is a reconciliation of the denominator used in the calculation of
basic and diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Three Months
Ended 6/30/00 Ended 6/30/99
------------------- ------------------
<S> <C> <C>
Weighted Average # of Shares Outstanding $ 15,123,152 $ 9,035,590
Incremental Shares for Common Equivalents 1,706,074 2,220,288
------------------- -----------------
Diluted Shares Outstanding $ 16,829,226 $ 11,255,878
=================== =================
</TABLE>
The potential common shares of 1,706,074 and 2,220,288 for the three months
ended June 30, 2000 and 1999, respectively, were excluded from the computation
of earnings per share because their inclusion would have an antidilutive effect.
Note 4 - Comprehensive Income:
------------------------------
The Company adopted Statement of Financial Accounting Standards ("SFAS) No. 130,
"Reporting Comprehensive Income". The following table reflects the
reconciliation between net loss per the financial statements and comprehensive
income.
<TABLE>
<CAPTION>
Three Months Three Months
Ended 6/30/00 Ended 6/30/99
-------------------- ---------------------
<S> <C> <C>
Net (loss) $ (4,635,239) $ (1,157,032)
Effect of foreign currency translation (15,559) 47,858
-------------------- ---------------------
Comprehensive income $ (4,650,798) $ (1,109,174)
==================== ======================
</TABLE>
Note 5 - Income Taxes
---------------------
The Company's valuation allowance against its federal, state and foreign net
operating loss carryforwards and its research and development credits increased
by $1,632,835 during the quarter ended June 30, 2000. The Company has recorded a
full valuation allowance against the federal and state net operating loss
carryforwards and a full valuation allowance against the foreign net operating
loss carryforwards and the research and development credit as management
believes that it is more likely than not that substantially all of the net
operating loss carryforwards and credits will expire unutilized.
Note 6 - New Accounting Pronouncements:
---------------------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities". Among other
provisions, it requires that entities recognize all
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<PAGE>
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Gains and losses resulting
from changes in the fair values of those derivatives would be accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting. This standard, as amended by SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133, and Amendment of FASB Statement No. 133", is
effective for fiscal years beginning after June 15, 2000, though earlier
adoption is encouraged and retroactive application is prohibited. For the
Company this means the standard must be adopted no later than April 1, 2001.
Management, based on its current operations, does not expect the adoption of
this standard to have a material impact on the Company's results of operations,
financial position or cash flows.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements". The SEC delayed the effective
date of this SAB from June 30, 2000 to the fourth quarter of fiscal 2001 for the
Company. The Company has assessed the impact of SAB 101 on its results of
operations and believes that its results of operations for the quarter ended
June 30, 2000 have been presented in accordance with the provisions of the SAB.
Note 7 - Related Party Transactions:
------------------------------------
During April 2000, the Company issued a loan to its Chief Executive Officer of
the Company in the amount of $750,000. The loan accrues interest at a rate of
LIBOR plus 1%. This loan is due and payable on June 27, 2005. If the Chief
Executive Officer leaves the employ of the Company or is terminated from his
employment, with or without cause, the principal and accrued interest will be
due and payable in full within thirty (30) days of such termination.
On June 29, 2000, the Company made an advance of $135,000 to its Chief Executive
Officer. The advance was subsequently repaid in full on July 26, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
A number of statements contained in this report are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 that involve risks and uncertainties that could cause actual results to
differ materially from those expressed or implied in the applicable statements.
These risks and uncertainties include, but are not limited to, the recent
introduction of, and the costs associated with, a new product line; dependence
on the acceptance of this new family of products; risks related to technological
factors; potential manufacturing difficulties; dependence on third parties; a
limited customer base; and liability risks.
Results of Operations
---------------------
For the three months ended June 30, 2000 compared to same period 1999
Revenue for the three months ended June 30, 2000, were $2,083,504
compared to revenue of $4,889,021 for the same period in 1999, a decrease of
approximately 57.4%. As previously disclosed, the first quarter revenue was
substantially below previous expectations and planned revenues. The decrease in
revenue was primarily due to delays in ordering from some of the Company's
largest and long standing customers. Also, contributing was the impact of the
delayed introduction of the version of the PRIISMS Manager NPI offering, which
was anticipated to be released in the first quarter, and now scheduled for
release in the second quarter, as well as the longer than expected ramp-up
period of new sales personnel who did not generate the anticipated level of
revenue. The Company is beginning to experience increased activity and order
levels for both new and existing customers.
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<PAGE>
During the quarter ended June 30, 2000, the Company recognized $378,500
in revenues related to the $1.1 million sales backlog reported in the Company's
Form 10-KSB for the fiscal year ended March 31, 2000. The Company expects to
recognize additional revenue from this sales backlog in future quarters,
however, there can be no assurance that all revenue associated with this sales
backlog will ultimately be realized by the Company.
Cost of goods sold for the three months ended June 30, 2000 was
$1,157,102 compared to $1,931,872 for the same period ended June 30, 1999. Cost
of goods sold as a percentage of revenue increased to 55.5% of net revenue for
the three months ended June 30, 2000 compared to 39.5% for the same period in
1999. The quarter ended June 30, 2000 was adversely affected by an increase in
the reserve for excess and obsolete inventory ($50,000). Additionally, certain
overhead costs had a greater impact on the margins in the quarter because of the
low sales volumes.
Research and development expenses, net of capitalized software
development, for the three months ended June 30, 2000 was $1,223,929 compared to
$534,417 for the same period in 1999. As a percentage of net revenue research
and development expenses were 58.7% compared to 10.9% for the same period in
1999. The increased expenditures in the quarter ended June 30, 2000 compared to
the quarter ended June 30, 1999 was the result of increased manpower and other
expenditures required to support and enhance the Company's product portfolio.
The significant increase in the percentage of research and development to net
revenue was primarily caused by lower sales revenues combined with increased
spending levels as discussed above.
Selling, general and administrative expenses for the three months
ended June 30, 2000 were $3,333,057 compared to $2,591,476 for the same period
in 1999. As a percentage of net revenue selling general and administrative
expenses increased to 160.0% compared to 53.0% for the same period in 1999. For
the quarter ended June 30, 2000, the significant increase as a percentage of net
revenue was due to lower revenue. The increase in SG&A expenses for the quarter
ended June 30, 2000 compared to June 30, 1999 was a result of additional
spending related to increased sales and marketing personnel and administrative
infrastructure necessary to execute the Company's growth plans.
Depreciation and amortization expenses, which include depreciation on
equipment, furniture and fixtures along with amortization of capitalized
software and goodwill, was $1,090,325 for the three months ended June 30, 2000
compared to $922,656 in same period in 1999. This expense was primarily the
result of goodwill and capitalized software associated with the SolCom
acquisition in March 1999 and the acquisition of certain assets associated with
LeeMah in February 1999, along with the impact of higher capitalized software
expenses associated with new research and development projects and increased
equipment purchases to support the sales and infrastructure necessary to support
the sales growth.
Income tax provision for the three months ended June 30, 2000 was
$23,572 as compared to $0 at June 30, 1999 due to the required provision for the
reported taxable earnings of the Company's UK subsidiary.
Net loss for the three months ended June 30, 2000 was $4,635,239
compared to a loss of $1,157,032 for the same period in 1999 due to the factors
discussed above.
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<PAGE>
Financial Condition and Capital Resources
-----------------------------------------
Net cash used in operating activities during the quarter ended June 30,
2000 was $3,526,591 compared to net cash used during the same period in 1999 of
$4,066,138. The use of cash was attributed to the net loss from operations. The
net cash used was due to an increase in inventory of $1,538,886 due to lower
sales, and a decrease in accounts payable and accrued expenses of $867,118,
offset partially by the decrease in accounts receivable of $2,643,288 due to
collection efforts and lower sales volumes in the quarter. Other receivables
declined by $1,419,010 which was offset by a decrease in accrued payroll and
related liabilities of $1,482,103 related to the collection of taxes from
foreign employees and subsequent remittance to the appropriate United Kingdom
taxing authorities.
Net cash used by investing activities during the quarter ended June 30,
2000 was $1,503,651 compared to $560,122 for the same period last year. Capital
expenditures increased during the current fiscal quarter as the Company
purchased computers and made other expenditures to support the activities of the
business. Additionally, a loan and advance was made to the Chief Executive
Officer in the amount of $885,000.
Net cash provided by financing activities was $92,593 compared to
$5,511,214 for the same period last year. The prior year amount reflected the
result of a private financing of 2,000,000 shares of Common Stock, the exercise
of warrants and stock options.
On September 30, 1999, the Company entered into a $2,500,000 line of
credit agreement. The line of credit was available through July 15, 2000. At
June 30, 2000, there were no borrowings under the facility. This line of credit
has been terminated and effectively replaced with the $1,500,000 line as noted
below.
On July 15, 2000, the Company entered into a line of credit agreement
for $1,500,000. The line of credit is available through September 30, 2000.
Advances are due at maturity. The line bears interest at the prime rate and is
collateralized by all business assets of the Company. The terms of the line of
credit require the Company to establish a lock-box at the bank upon draw down of
the line which requires all accounts receivable to be sent directly to the
lock-box.
As noted above, the Company has significantly increased its research
and development activities and has expanded its sales and marketing
infrastructure and related costs in order to attempt to execute its growth
plans. The Company has incurred and expects to continue to incur significant
losses and have significant negative operating cash flows for the foreseeable
future.
On August 11, 2000, the Company obtained a written commitment for a
private placement of 2,857,142 shares of Common Stock at a price of $1.75 per
share, for a total purchase price of $5,000,000.
The Company's current operating plan includes certain assumptions, the
most significant of which relates to the attainment of significant increases in
future revenues in excess of 1st quarter 2001 revenues. To the extent that those
revenue assumptions are not achieved, the Company will have to raise additional
equity or debt financing and/or curtail certain current expenditures contained
in the Company's current operating plans. There can be no assurance that the
Company will be able to obtain any such financing on acceptable terms, if at
all.
ACCOUNTING PRONOUNCEMENTS
-------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities". Among other
provisions, it requires that entities recognize
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<PAGE>
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Gains and losses resulting
from changes in the fair values of those derivatives would be accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting. This standard, as amended by SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133, and Amendment of FASB Statement No. 133", is
effective for fiscal years beginning after June 15, 2000, though earlier
adoption is encouraged and retroactive application is prohibited. For the
Company this means the standard must be adopted no later than April 1, 2001.
Management, based on its current operations, does not expect the adoption of
this standard to have a material impact on the Company's results of operations,
financial position or cash flows.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No.
101, "Revenue Recognition in Financial Statements". The SEC delayed the
effective date of this SAB from June 30, 2000 to the fourth quarter of fiscal
2001 for the Company. The Company has assessed the impact of SAB 101 on its
results of operations and believes that its results of operations for the
quarter ended June 30, 2000 have been presented in accordance with the
provisions of the SAB.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
------------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
--------------------------------
(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K:
On June 29, 2000 the Company filed a report on form 8-K,
reporting the issuance of a press release relating to the Company's anticipated
first quarter revenue results.
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<PAGE>
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DATE: August 14, 2000
ION NETWORKS, INC.
/s/ Stephen B. Gray
-----------------------------------------
Stephen B. Gray, President and
Chief Executive Officer
/s/ Alfred M. Leonardi
-----------------------------------------
Alfred M. Leonardi, Chief Financial Officer
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