10-Q 1 irdi1qsb11212002.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB - ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 2002 [ ] 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 0-22349 INTELLIREADY, INC. Exact Name of Registrant as specified in its Charter) Colorado 84-1502078 State or other Jurisdiction of I.R.S. Employer Incorporation or Organization Identification No. 8400 East Prentice Ave., Suite 1500 Greenwood Village, Colorado 80011 (Address of Principal Executive Offices) (Zip Code) (303) 409-7717 (Registrant's Telephone Number, including Area Code) Indicate by check mark whether the Registrant (i) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (ii) has been subject to such filing requirements for the past 90 days.[x]Yes [ ]No Common Stock, no par value 10,683,936 ------------------------------ --------------------------- Title of Class Number of Shares outstanding at November 14, 2002 Transitional Small Business Disclosure Format: Yes No X References in this document to "us," "we," "our" or "the Company" refer to IntelliReady, Inc. and our predecessor company, PanWestern Energy Corp., Inc. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS In the interest of providing the Company's shareholders with certain information regarding the Company, including management's assessment of the Company's future plans and operations, certain statements set forth in this Form 10QSB contain or are based on the Company's projections or estimates of revenue, income, earnings per share and other financial items or relate to management's future plans and objectives or to the Company's future economic and financial performance. All such statements, other than statements of historical fact, contained in this Form 10QSB in "Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations" generally are accompanied by words such as "anticipate," "believe," "intend," "estimate," "project" or "expect" or similar statements. Such statements are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to and in reliance on the safe harbor provisions of such sections. Although any forward-looking statements contained in this Form 10QSB or otherwise expressed by or on behalf of the Company are, to the knowledge and in the judgment of the officers and directors of the Company, reasonable and expected to prove true, management is not able to predict the future with certainty and no assurance can be given that such statements will prove correct. Forward-looking statements involve known and unknown risks and uncertainties which may cause the Company's actual performance and financial results in future periods to differ materially from any projection, estimate or forecasted result. These risks and uncertainties include, among other things: general economic and business conditions; industry conditions and trends; volatility of prices; product supply and demand; market competition; risks inherent in the Company's operations; imprecision of reserve estimates; the Company's ability to replace and expand its business; the Company's ability to generate sufficient cash flow from operations to meet its current and future obligations; the Company's ability to access and terms of external sources of debt and equity capital; such other risks and uncertainties described from time to time in the Company's periodic reports and filings with the Securities and Exchange Commission. These and other risks are described elsewhere in this Form 10QSB and will be described from time to time in the Company's future filings with the Securities and Exchange Commission. Accordingly, shareholders and potential investors are cautioned that certain events or circumstances could cause actual results to differ materially from those projected, estimated or predicted. In addition, forward-looking statements are based on management's knowledge and judgment as of the date of this Form 10QSB, and the Company does not intend to update any forward-looking statements to reflect events occurring or circumstances existing hereafter. Part 1. Financial Information Item 1. Financial Statements

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-3 INTELLIREADY, INC. CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-4 INTELLIREADY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-6 INTELLIREADY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - BASIS OF PRESENTATION The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions for Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The information furnished herein reflects all material adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial statements for the period presented. Interim results are not necessarily indicative of the results of operations for the full year. The financial statements and related footnotes should be read in conjunction with the financial statements and footnotes thereto included in the Company's annual report on form 10-KSB filed with the Securities and Exchange Commission for the year ended December 31, 2001. NOTE 2 - LONG-TERM DEBT Long-term debt consisted of the following: The Company issued a senior secured promissory note on February 14, 2001 to New West Holdings, LLC ("NWH") a related party, due on demand, in the principal amount of $315,000 at an annual interest rate of 10%. Additionally, NWH had agreed to fund the Company's operations under a secured line of credit ("LOC") agreement dated February 14, 2001. The terms of this LOC state that the amounts drawn under the LOC are payable on demand and carry an interest rate of 10%, provided that the interest rate may be adjusted in the event the prime interest rate increases. The terms also state that continued funding is at the discretion of NWC, subject to the terms of the LOC. Effective January 1, 2002, the Company's Chairman and NWC agreed to suspend interest, until further notice. The amount of interest that would have accrued during the six months ended June 30, 2002 was $89,120. On May 15 2001, the Company successfully refinanced this indebtedness into a two-year note with Compass Bank. The Company borrowed $1,650,000 on this note. Upon refinancing, the accrued interest owed to NWH was forgiven and the Company realized a gain of $10,017 in the second quarter of 2001. The Company had been in default on its bank debt, and unable to make its interest payments both of which were guaranteed by New West Holdings and the Company's Chairman. On October 17, 2001, pursuant to the terms of the bank agreement and the guarantee of NWH and the Company's Chairman, NWH paid off the bank debt of $1,650,000, which the Company now owes to NWH. This amount was added to the existing NWH LOC. At June 30, 2002 the amount due under the LOC was $1,799,388. At December 31, 2001 the Company was in default on the notes payable -- vehicles debt. The Chairman and largest shareholder had personally guaranteed the debt, and in February 2002 paid of the debt and took possession of the assets. The gain recognized by the Company was $31,349. In connection with financing the Company, its Chairman and NWH have forgiven certain amounts and incurred losses, as follows: Transaction Amount May 2001 financing - interest forgiven $ 10,017 February 2002 guarantee performance - asset value less than debt paid 31,349 January to June 2002 - interest suspended 89,120 -------- Total $130,486 ======== NOTE 3 - DISCONTINUED OPERATIONS The Company had been a provider of wiring and technology for entertainment, communications, and data networks to residential and commercial customers ("Home Automation Business"). While the Company experienced strong revenue growth in the first half of 2001, it did not generate adequate gross profit margins. Beginning in the 3rd quarter 2001, the revenue pipeline shrank significantly. The Company's plan included the acquisition of home automation and related companies. However, the Company could not acquire companies at reasonable purchase prices. In October 2001 management determined that the significant losses would continue and the Company exited the Home Automation Business, and closed its operating subsidiary IntelliReady of Colorado, Inc. The Company has attempted to liquidate its assets and is negotiating with its creditors to settle the amounts owed. The Company has a working capital deficit and a capital deficit. Its ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and ultimately achieve profitable operations. These conditions raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is actively pursuing various business opportunities to acquire or merge with operating businesses. Management intends to seek out additional sources of debt and equity financing and to seek merger and acquisition opportunities with profitable operating companies. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Plan of Operations The Company had been a provider of wiring and technology for entertainment, communication, and data networks to residential and commercial customers (Home Automation Business). The Company's plan included the acquisition of home automation and related companies. However, the Company could not acquire companies at reasonable purchase prices. IROC experienced significant losses during the nine months ended September 30, 2001. After the events of September 11, 2001, management determined in October 2001 that the significant losses would continue and the Company exited the Home Automation Business, and closed its operating subsidiary IntelliReady of Colorado, Inc. The Company has attempted to liquidate its assets and is negotiating with its creditors to settle the amounts owed. The Company's largest creditor is New West Holdings, LLC, ("NWH") IRDI's venture capital investor, which is controlled by IRDI Chairman, Thomas J Wiens. The Company is actively pursuing various business opportunities to acquire or merge with operating businesses. Expected Increases in Employees The Company currently has no employees. If the Company is successful in its acquisition strategy it expects to significantly increase the number of employees over the next twelve months. It is anticipated that most of its labor needs will be met by existing employees of acquired businesses. RESULTS OF OPERATIONS While in the Home Automation Business the Company realized significant revenues growth, but continuously experienced unsatisfactory gross margins as a result of the constant need to deploy crews to wrap up substantially completed jobs. The Company had implemented new processes to improve this situation in current and future contracts and believes that this would have minimized the problem. Additionally, the Company had invested in an infrastructure to do a roll up in the Home Automation Business. Because of market and other conditions, the Company did close on any acquisitions in 2001. As such, in August 2001, the Company eliminated a number of positions to right size its SG&A structure. CAPITAL EXPENDITURES The Company incurred capital expenditures for tenant finish, computer equipment, tools and vehicles, and other office equipment. Capital expenditures totaled $-0- and $54,153 for the periods ended June 30, 2002 and 2001, respectively. CAPITAL RESOURCES The Company had received financings under a line of credit ("LOC") agreement dated February 14, 2001 with NWH. The terms of this LOC state that the amounts drawn under the line are payable on demand and carry an interest rate of ten percent (10%); provided that the interest rate may be adjusted in the event the prime rate increases. As of June 30, 2002, we had drawn $1,799,388 on this LOC. During 2002, our capital resources have been provided primarily through the line of credit with NWH of $32,091. The LOC is secured by a first lien on all assets of the Company. LIQUIDITY The ability to satisfy our obligations depends in great part upon our securing short and long-term financing. We are currently in discussions with other financial institutions to provide additional funding. There is no assurance that short and long-term financing can be obtained to fulfill our capital needs. Without the short or long-term financing, we will need to look for other sources of capital. Item 6. Exhibits and Reports on Form 8-K: None SIGNATURES In accordance with Section 13 or 15 (d) of the Securities Exchange Act, IntelliReady, Inc., caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated:

EXHIBIT INDEX 2(i) Reverse Merger Agreement and Plan of Acquisition dated August 25, 2000 among Registrant and Pan Western Energy Corporation.*** 2(ii) Limited Liability Interest Purchase Agreement dated May 18, 2000 among Registrant and Time Direct, LLC. 2(iii) Wiring Services Agreement dated September 13, 2000 between Registrant and Advanced Custom Systems, Inc. 2(iv) Extension of Wiring Services Agreement between Registrant and Advanced Custom Systems, Inc. dated February 13, 2001. 3(i) Articles of Incorporation of the Registrant. 3(ii) By-Laws of the Registrant. 10(i) Equity Incentive Plan.* 10(ii) Promissory Note effective February 14, 2001 between Registrant and New West Holdings, LLC. 10(iii) Line of Credit effective February 14, 2001 between Registrant and New West Holdings, LLC. 10(iv) Lease Agreement on Registrant's primary property. 16 Letter on Change in Certifying Accountant.** 20(i) Reports on Form 8-K We filed the following reports on Form 8-K during the quarter ended December 31, 2001: None 21 A description of the subsidiaries of the Registrant. * Incorporated by reference from Registrant's Schedule 14C, which was previously filed on October 19, 2000. ** Incorporated by reference from Registrant's Form 8-K, which was previously filed on November 20, 2000. *** Incorporated by reference from Registrant's Form 8-K, which was previously filed on October 19, 2000. DESCRIPTION OF SUBSIDIARIES OF THE REGISTRANT IntelliReady, Inc. (the "Registrant") has one wholly owned subsidiary: 1.Pan Western Acquisition Corp, a Colorado corporation. Pan Western Acquisition Corp has one wholly owned subsidiary: 2.IntelliReady of Colorado, a Colorado corporation. SARBANES-OXLEY SECTION 302 CERTIFICATION I, Thomas J Wiens, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Intelliready, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors and material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 20, 2002 By /s/Thomas J Wiens ------------------ Thomas J. Wiens Chairman Page <2> F-7

INTELLIREADY INC /CO/ 10-Q