8-K/A 1 e8-ka.txt 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): June 30, 2000 INTELISPAN, INC. --------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter)

1720 Windward Concourse, Suite 100, Alpharetta, Georgia 30005 --------------------------------------------------------------------------- (Address of Principal Executive Office) (Zip Code) Registrant's telephone number, including area code: (678) 256-0300 2 - 2 - INTELISPAN, INC. FORM 8-K/A CURRENT REPORT ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Businesses Acquired. Devise Associates, Inc. Unaudited Balance Sheet ASSETS

3 - 3 - LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable $ 577,703 Line of credit 509,277 Accrued expenses 110,294 Deferred revenue 348,663 Current portion of capital lease obligations 22,401 ----------- Total current liabilities 1,568,338 ----------- NON CURRENT LIABILITIES Notes payable 255,000 Capital lease obligations 12,448 ----------- Total liabilities 1,835,786 ----------- STOCK HOLDERS' DEFICIT Common stock 1,200 Unrealized gains 63,858 Accumulated Deficit (114,818) ----------- Total stockholders' deficit (49,760) ----------- Total liabilities and stockholders' deficit $ 1,786,026 ===========

4 - 4 - Devise Associates, Inc. Unaudited Statement of Operations For the six months ended

5 - 5 - Devise Associates, Inc. Statement of Cash Flows For the six months ended

6 - 6 - REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Devise Associates, Inc.: We have audited the accompanying balance sheets of DEVISE ASSOCIATES, INC. (a New York Corporation) as of December 31, 1999 and 1998 and the related statements of operations, stockholders' equity and comprehensive income, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Devise Associates, Inc. as of December 31, 1999 and 1998 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. /s/ Arthur Andersen LLP Atlanta, Georgia June 23, 2000 7 - 7 - DEVISE ASSOCIATES, INC. BALANCE SHEETS DECEMBER 31, 1999 AND 1998 ASSETS

The accompanying notes are an integral part of these balance sheets. 8 - 8 - DEVISE ASSOCIATES, INC. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

The accompanying notes are an integral part of these statements. 9 - 9 - DEVISE ASSOCIATES, INC. STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

The accompanying notes are an integral part of these statements. 10 - 10 - DEVISE ASSOCIATES, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

The accompanying notes are an integral part of these statements. 11 - 11 - DEVISE ASSOCIATES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 1998 1. NATURE OF BUSINESS AND ORGANIZATION Devise Associates, Inc. (the "Company") is a leading computer systems network integrator with headquarters in New York, New York. The Company provides managed services, consults, designs, builds, and services computer networks. The Company is a Microsoft Certified Solutions Provider, Novell Platinum Partner, and authorized reseller of Computer Associates Unicenter TNG, ARCserve, and Enterprise Edition Software Solutions. Other partners include Nortel Networks, Cisco Systems, Symantec, Checkpoint, Citrix, 3-Com, and AT&T. The Company has been in business since 1985 and supports hundreds of clients in the New York metropolitan area as well as national and international accounts. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States. ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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 dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. REVENUE RECOGNITION The Company generates revenue primarily from service and support, maintenance, implementation, and other services. Service and support, maintenance, and other revenues are recognized as work is performed. Implementation services include delivery of hardware and project implementation. Revenues from hardware sales are recognized upon delivery and revenues for implementation are recognized upon system turnover. DEFERRED REVENUE Deferred revenue represents the liability for advance billings to customers related to projects in progress at period-end. Such amounts are recognized as revenues when the project is completed. CASH AND CASH EQUIVALENTS The Company considers all short-term, highly liquid investments with an original maturity date of three months or less to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value. 12 - 12 - INVESTMENTS IN MARKETABLE SECURITIES The Company follows Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115 mandates that a determination be made of the appropriate classification for debt and equity securities with a readily determinable fair value at the time of purchase and a reevaluation of such designation as of each balance sheet date. At December 31, 1999 and 1998, investments consisted of equity instruments. All investments are deemed by management to be available for sale and are reported at fair value with net unrealized gains or losses reported within stockholders' equity. Realized gains and losses are recorded based on the specific identification method. For the years ended December 31, 1999 and 1998, realized gains were $16,380 and $6,430, respectively. The carrying amount of the Company's investments at December 31, 1999 and 1998 is shown in the table below:

PROPERTY AND EQUIPMENT Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the respective assets for financial reporting purposes. Major additions and improvements are charged to the property accounts while maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed in the current period. Estimated useful lives for the Company's assets are as follows: ~~Computer and computer equipment Five years Furniture and fixtures Seven years~~

At December 31, 1999 and 1998, the Company had $80,195 and $64,156, respectively, equipment under capital leases included in property and equipment. Depreciation expense was $97,508 and 73,997 for the years ended December 31, 1999 and 1998, respectively. LONG-LIVED ASSETS The Company periodically reviews the values assigned to long-lived assets, such as property and equipment, to determine whether any impairments are other than temporary. An impairment will be recognized when the future net cash flows estimated to be generated by the asset are insufficient to recover the current carrying value of the asset. Estimates of future cash flows are based on many factors, including current operating results, expected market trends, and competitive influences. Management believes that the long-lived assets in the accompanying balance sheets are appropriately valued. ADVERTISING COSTS Advertising costs related primarily to print advertising are expensed as incurred. Advertising expenses included in sales and marketing expenses were $20,763 and $5,660 for the years ended December 31, 1999 and 1998, respectively. 13 - 13 - INCOME TAXES Income taxes are payable personally by the stockholders pursuant to an election under Subchapter S of the Internal Revenue Code and similar statutes in applicable states. Accordingly, no provision has been made for deferred or current federal and state income taxes. COMPREHENSIVE INCOME (LOSS) The Company follows SFAS No. 130, "Reporting Comprehensive Income." This statement establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. The Company has chosen to disclose comprehensive income, which consists of net income (loss) and unrealized gains on investments, in the statements of stockholders' equity and comprehensive income. CONCENTRATION OF CREDIT RISK Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivables. The Company's cash investment policies limit investments to short-term, low-risk instruments. Concentrations of credit risk with respect to trade receivables are limited due to the number of customers comprising the customer base. 3. LINE OF CREDIT At December 31, 1999 and 1998, the Company had a $750,000 and $300,000, respectively, working capital line of credit agreement (the "Credit Agreement") with a bank. The Credit Agreement expires May 2001 and carried an interest rate of 8.5% at December 31, 1999. The Company had $379,384 and $0 outstanding at December 31, 1999 and 1998, respectively. At December 31, 1999 and 1998, the Company had $100,000 line of credit ("Credit Agreement #2") with a bank. Credit Agreement #2 expires November 2000 and renews automatically on an annual basis if the Company is in good standing with the bank or becomes a three-year term loan if the Company is deemed not to be in good standing with the bank. Credit Agreement #2 carried an interest rate of 10.75% at December 31, 1999. The Company had $55,000 and $79,000 outstanding at December 31, 1999 and 1998, respectively. At December 31, 1999 and 1998, the Company had a $100,000 line of credit ("Credit Agreement #3") with a bank. Credit Agreement #3 expires August 2002 and carried an interest rate of 13% at December 31, 1999. The Company had $60,000 and $80,000 outstanding at December 31, 1999 and 1998, respectively. 4. CAPITAL LEASES OBLIGATIONS The Company is obligated for certain capital leases for computer and office equipment. Future minimum payments related to these capital leases at December 31, 1999 are as follows: 2000 $ 25,721 2001 16,693 2002 5,391 -------- Total minimum lease payments 47,805 Less interest included in lease payments 5,044 -------- Present value of future minimum lease payments 42,761 Less current portion of capital lease obligations 22,400 -------- Noncurrent capital lease obligations $ 20,361 ========

Capital leases are for computers and computer equipment and furniture and fixtures. Capital Lease property included in property and equipment at December 31, 1999 is as follows: Computers and computer equipment $ 62,345 Furniture and fixtures 16,634 Less accumulated amortization (27,203) -------- $ 51,776 ========

14 - 14 - 5. COMMITMENTS AND CONTINGENCIES The Company has entered into noncancelable operating lease agreements for office space which expire at various dates through June 2008. Future minimum lease payments are due as follows: 2000 $ 235,536 2001 243,171 2002 266,076 2003 266,076 2004 and thereafter 2,010,869 ---------- $3,021,728 ==========

Rental expenses were approximately $200,000 and $60,000 for the years ended December 31, 1999 and 1998, respectively. RESELLER AGREEMENT During the year ended December 31, 1999, the Company entered into a reseller agreement with a software company. Under the terms of the agreement, the Company will resell purchased software over a period of three years. The agreement requires a minimum guaranteed payment of $460,000 during 2000. At December 31, 1999, the Company had prepaid $60,000 under the agreement and that amount has been included in other current assets. 15 - 15 - LEGAL PROCEEDINGS The Company is subject to legal proceedings and claims that arise in the ordinary course of business. Management is not aware of any asserted or pending litigation or claims against the Company that would have a material adverse effect on the Company's financial condition, results of operations, or liquidity. 6. RELATED PARTY TRANSACTIONS During 1999 and 1998, the Company had outstanding notes of $255,000 and $280,000, respectively, payable to relatives of an officer/principal shareholder of the Company. These notes bear interest at a rate of 10% per annum, mature on the fifteenth anniversary or convert to common stock upon change of control based on the estimated fair market value on the date of promissory note issuance. The notes mature in 2005 and thereafter. 7. SUBSEQUENT EVENT (UNAUDITED) On June 8, 2000, the Company signed a definitive agreement to sell substantially all of its assets and the business related to those assets under the terms of a stock purchase agreement with Intelispan, Inc. Total consideration will be approximately $7 million. 16 - 16 - (b) Pro Forma Financial Information. The following unaudited pro forma condensed consolidated financial statements reflect the results of operations and balance sheet of our company after giving effect to acquisition of Devise. The unaudited pro forma condensed consolidated financial statements are based on the historical consolidated financial statements of our company and the financial statements of Devise, which should be read in conjunction with our financial statements and the notes thereto. In the opinion of management, all adjustments necessary to fairly present this pro forma information have been made. For pro forma purposes, our consolidated statements of operations for the year ended December 31, 1999 and for the six months ended June 30, 2000 have been adjusted to give effect to the acquisition of Devise as if it had occurred on January 1, 1999. The unaudited pro forma information is presented for illustrative purposes only and is not indicative of the operating results or financial position that would occur if the acquisition of Devise had been completed on June 30, 2000, the actual closing date, nor is it indicative of future operating results or financial position of the company. 17 - 17 - INTELISPAN, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (DOLLARS IN THOUSANDS) The following pro forma data represents the net effect of the acquisition of Devise Associates, Inc. as if the acquisition had taken place as of January 1, 1999. Amortization for the acquisition is based upon preliminary allocations of the purchase price goodwill that will be amortized over a period of ten years. Actual amortization may differ depending on the final allocation of the purchase price.

------------------------ (a) Represents the unaudited historical results of Devise Associates, Inc. for the six-month period ended June 30, 2000. (b) Includes the elimination of approximately $22,000 of interest as a result of conversion of and paying off the existing debt of Devise. (c) Reflects increased goodwill amortization resulting from the purchase price allocation. 18 - 18 - INTELISPAN, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (DOLLARS IN THOUSANDS) The following pro forma data represents the net effect of the acquisition of Devise Associates, Inc. as if the acquisition had taken place as of January 1, 1999. Amortization for the acquisition is based upon preliminary allocations of the purchase price to goodwill that will be amortized over ten years. Actual amortization may differ depending on the final allocation of the purchase price.

---------------------- (a) Represents the audited historical results of Devise Associates, Inc. for the fiscal year ended December 31, 1999. (b) Includes the elimination of $56,000 of interest as a result of paying off and conversion of the existing company debt. (c) Reflects increased goodwill amortization resulting from the purchase price allocation. 19 - 19 -

(1) Incorporated by reference to the Registrant's Report on Form 8-K as filed on July 11, 2000. 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 hereunto duly authorized. Date: August 29, 2000 INTELISPAN, INC. By: /s/ Scot A. Brands -------------------------------------- Scot A. Brands Executive Vice President - Chief Financial Officer

INTELISPAN INC /WA/ 8-K/A