SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report: (Date of earliest event reported):
May 16, 2003 (March 31, 2003)
I-Sector Corporation
(Exact name of registrant as specified in its charter)
Delaware 0-21479 76-0515249
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
6401 Southwest Freeway
Houston, Texas 77074
(Address of Registrant's principal executive offices)
(713) 795-2000
(Registrant's telephone number,
including area code)
(Not Applicable)
(Former name or former address, if changed since last report)
ITEM 5. Other Events
On May 15, 2003, the Company filed a Form 8-K that inadvertently included a
preliminary copy of an announcement of earnings, dated May 14, 2003, for the
quarter ended March 31, 2003. The preliminary copy of the announcement of
earnings included projections of revenue and the net loss expected for the
quarter ending June 30, 2003 that were different from the projections included
in the announcement of earnings made on May 15, 2003.
The Company is amending its Form 8-K soley for the purpose of filing the
following announcement of earnings for the quarter ended March 31, 2003 released
on May 15, 2003:
HOUSTON, May 15, 2003 /PRNewswire/ -- I-Sector Corporation (Nasdaq: ISEC -
news), today announced financial results for its first quarter ended March 31,
2003 and provided an update on its outlook for the future.
FINANCIAL RESULTS
First quarter results were approximately in line with what the company announced
in its statement of March 31, 2003, in which revenue of approximately $9.3
million to $9.6 million and a net loss in the range of $900,000 to $1.1 million
were forecast.
For the company's first quarter ended March 31, 2003:
o Revenue from continuing operations increased 9% to $10.1 million
compared to $9.2 million for the corresponding prior year period.
o The net loss from continuing operations before income taxes was $1.1
million compared to a net loss from continuing operations before
income taxes of $383,000 for the corresponding prior year period.
o Net loss for the quarter was a loss of $1.1 million for the current
period compared to a net income of $805,000 for the corresponding
prior year period, which contained an income tax benefit of $1.2
million.
o Earnings per share (basic and diluted) was a net loss of $0.30 for the
quarter compared to a net income per share of $0.21 for the
corresponding prior year period.
Commenting on the results for the first quarter, James H. Long, President and
CEO of the company stated, "As we announced on March 31, 2003, our revenue for
the first quarter was negatively impacted by softness related to what we believe
was an unwillingness of organizations to proceed with capital expenditures
during the period leading up to the Iraq conflict. In addition, we recognized
costs during the first quarter related to the startup of our Stratasoft India
operation, as well as costs associated with expanding our Valerent business
unit. The combination of these costs and lower revenue contributed to an
increased net loss for the first quarter, as expected."
OUTLOOK
The following statements are made by the company and are based upon current
expectations. These statements are forward-looking, and actual results may
differ materially. The weakness in general economic conditions and the slowdown
in corporate information technology spending experienced during the past three
years has made firm forecasting of future financial performance more difficult
than would otherwise be possible and the visibility for many public companies is
somewhat limited at this time as compared to the past.
o Our strategy is to produce rapid growth of our subsidiary companies,
both through internally generated growth and possibly through
selective acquisitions of complementary companies.
o We expect revenue for our second quarter ending June 30, 2003 to grow
substantially to approximately $13 million to $15 million. The
substantial sequential improvement in revenue is expected to be
primarily related to increased revenue in each of our three subsidiary
companies, with the most substantial increases at our Internetwork
Experts and Valerent subsidiaries. Each of our subsidiary companies
are seeing a substantial improvement in their customer's willingness
to move forward with capital expenditures as compared to during the
first quarter, during which we believe many customers held off on
purchases during the period leading up to the Iraq conflict. In
addition, both Valarent and Stratasoft are expected to benefit from
the expansion efforts that each has recently made during the previous
two quarters and Internetwork Experts is expected to benefit from its
recently announced acquisition of Digital Precision.
o We expect the net loss for the second quarter ending June 30, 2003 to
be approximately $500,000 to $700,000. The sequential improvement in
the net loss as compared to the first quarter is expected to be
primarily related to the expected increase in revenue, somewhat offset
by continued costs related to the expansion of all three of our
subsidiary companies.
o We expect the per share net loss for the second quarter ending June
30, 2003 to be approximately $0.12 to $0.17 per share.
o Providing an outlook for any period further out than the near-term
quarter is more challenging and is subject to a lesser degree of
accuracy than our near-term outlook. Based upon our current view of
market conditions, our expected sales and marketing efforts and our
expected expense structure, our current expectations for our third
quarter ending September 30, 2003 are for revenue of approximately $14
million to $18 million with a net loss of approximately $200,000 to
$500,000. Looking further out, we currently expect revenue for our
fourth quarter ending December 31, 2003, to be roughly in the range of
approximately $15 million to $20 million, with net profitability
ranging between approximately a net loss of $100,000 to a net profit
of $200,000. During 2004 and beyond we generally expect revenue to
continue to increase and our operating profitability to continue to
improve. Our expected continued revenue improvements are based upon
our previous and ongoing expenditures to expand all three of our
subsidiary companies, recent contract wins, as well as an expected
improvement in general market conditions.
o The forecasts set forth above are for the current organization and do
not include the effect of any future acquisitions. In addition to
internally generated growth, we anticipate possibly making selective
acquisitions during the next twelve months and beyond that we expect
will, if consummated, add additional revenue. There is no guarantee
that any other suitable acquisitions will be identified or that any
other transactions will be consummated.
Regarding the company's outlook for the future, James H. Long, President and CEO
of the company stated, "The sales funnel reports generated by the sales staff of
our subsidiary companies, which is our best indication of near-term future
outlook for sales, shows a marked improvement in activity for all three of our
subsidiary companies. The recently announced acquisition of Digital Precision by
Internetwork Experts appears to be integrating well and providing the
anticipated positive results. The recent expenditures that we have made to
expand our Stratasoft and Valerent subsidiaries is driving sales activity, as
both of those business units are showing marked improvements in the level of
business activity."
SAFE HARBOR STATEMENT
The statements contained in this document that are not statements of historical
fact, including particularly the statements made in the Outlook section,
including but not limited to, statements identified by the use of terms such as
"anticipate," "appear," "believe," "could," "estimate," "expect," "hope,"
"indicate," "intend," "likely," "may," "might," "plan," "potential," "project,"
"seek," "should," "will," "would," and other variations or negative expressions
of these terms, are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 and involve a number of risks
and uncertainties. The actual results of the future events described in the
forward-looking statements in this document could differ materially from those
stated in the forward-looking statements due to numerous factors including:
o Market and economic conditions
o Risks associated with entry into new markets
o The ability to attract and retain key management, sales and technical
staff
o Unforeseen costs and results related to acquiring and integrating new
businesses
o Catastrophic events
o Uncertainties related to rapid changes in the information technology
industry
o Other risks and uncertainties set forth from time to time in I-
Sector's public statements and its most recent annual report on Form
10K and other public reports and filings
Recipients of this document are cautioned to consider these risks and
uncertainties and to not place undue reliance on these forward-looking
statements.
The company expressly disclaims any obligation or undertaking to update or
revise any forward-looking statement contained herein to reflect any change in
the company's expectations with regard thereto or any change in events,
conditions or circumstances upon which any statement is based.
ABOUT I-SECTOR CORPORATION
I-Sector Corporation, headquartered in Houston, Texas, owns, operates or invests
in companies that are primarily engaged in the area of information technology.
Additional information about I-Sector is available on the Internet at
www.I-Sector.com.
Company Contact:
James H. Long
President and Chief Executive Officer
(713) 795-2000
Investor Relations Contact:
PR Financial Marketing LLC.
Jim Blackman, President
(713) 256-0369
jimblackman@prfinancialmarketing.com
I-SECTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
March 31, December 31,
2003 2002
---- ----
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,989 $ 3,491
Accounts receivable, net 6,027 6,525
Accounts receivable - affiliates 77 99
Accounts receivable - other 32 57
Notes receivable 629 898
Inventory 868 781
Cost and estimated earnings in excess of billings 908 709
Income taxes receivable 488 488
Other current assets 501 356
-------- --------
Total current assets 11,519 13,404
Property and equipment, net 1,173 1,115
Intangible assets 1,114 1,162
Other assets 43 70
-------- --------
Total $ 13,849 $ 15,751
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 108 $ 157
Accounts payable 4,064 4,844
Billings in excess of cost and estimated earnings 269 75
Accrued expenses 1,929 1,803
Net liabilities related to discontinued operations 646 904
Deferred service revenue 55 81
-------- --------
Total current liabilities 7,071 7,864
Long term debt 228 247
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized, no shares issued
Common stock:
$.01 par value, 15,000,000 shares authorized,
4,442,525 and 4,441,325 shares issued at
March 31, 2003 and December 31, 2002 44 44
Additional paid in capital 10,380 10,379
Treasury stock (811,800 shares, at cost)
at March 31, 2003 and December 31, 2002 (1,373) (1,373)
Retained earnings (2,501) (1,410)
-------- --------
Total stockholders' equity 6,550 7,640
-------- --------
Total $ 13,849 $ 15,751
======== ========
I-SECTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
(Unaudited)
Three Months Ended March 31,
----------------------------
2003 2002
---- ----
Total revenue $ 10,080 $ 9,208
Cost of sales and services 7,805 6,974
----------- -----------
Gross profit 2,275 2,234
Selling, general and administrative expenses 3,376 2,622
----------- -----------
Operating loss (1,101) (388)
Interest and other income 10 5
----------- -----------
Loss from continuing operations before
benefit for income taxes (1,091) (383)
Benefit for income taxes (1,182)
----------- -----------
Net income (loss) from continuing operations (1,091) 799
Discontinued Operations:
Loss on disposal, net of taxes 6
----------- -----------
Net loss $ (1,091) $ 805
=========== ===========
Net income (loss) per share:
Basic:
Net loss from continuing operations $ (0.30) $ 0.21
Loss on disposal, net of taxes 0.00 0.00
----------- -----------
Net loss per share $ (0.30) $ 0.21
=========== ===========
Diluted:
Net loss from continuing operations $ (0.30) $ 0.21
Loss on disposal, net of taxes 0.00 0.00
----------- -----------
Net loss per share $ (0.30) $ 0.21
=========== ===========
Weighted average shares outstanding:
Basic 3,630,285 3,849,525
=========== ===========
Diluted 3,630,285 3,849,525
=========== ===========
Three Months Ended March 31, 2003 Compared To Three Months Ended March 31, 2002
The following table sets forth, for the periods indicated, certain
financial data derived from our unaudited consolidated statements of operations
for the three months ended March 31, 2003 and 2002. The discussion below relates
only to our continuing operations, unless otherwise noted.
Three months ended March 31,
----------------------------------------------
2003 2002
---- ----
Amount % Amount %
------ ------ ------ ------
Revenue
Valerent $ 1,005 10.0 $1,465 15.9
INX 7,138 70.8 5,713 62.0
Stratasoft 2,069 20.5 2,171 23.6
Corporate
Elimination (132) (1.3) (141) (1.5)
-------- --------- -------- -------
Total revenue 10,080 100.0 9,208 100.0
Gross profit (loss):
Valerent 229 22.8 315 21.5
INX 778 10.9 585 10.2
Stratasoft 1,268 61.3 1,334 61.4
Corporate 0 N/A 0 N/A
Elimination 0 0.0 0 0.0
-------- --------- -------- -------
Total gross profit 2,275 22.6 2,234 24.3
Selling, general and administrative
expenses:
Valerent 560 55.7 653 44.6
INX 945 13.2 789 13.8
Stratasoft 1,596 77.1 1,011 46.6
Corporate 275 N/A 169 N/A
-------- --------- -------- -------
Total selling, general and
administrative
Expenses 3,376 33.5 2,622 28.5
Operating loss:
Valerent (331) (32.9) (338) (23.1)
INX (167) (2.3) (204) (3.6)
Stratasoft (328) (15.9) 323 14.9
Corporate (275) N/A (169) N/A
-------- --------- -------- -------
Total operating loss (1,101) (10.9) (388) (4.2)
Interest and other income 10 0.1 5 0.0
-------- --------- -------- -------
Loss before benefit for income taxes (1,091) (10.8) (383) (4.2)
Benefit for income taxes (0.0) 1,182 12.8
-------- --------- -------- -------
Net (loss) income from continuing
operations (1,091) (10.8) 799 8.6
Discontinued operations:
Gain on disposal 0.0 6 0.1
-------- --------- -------- -------
Net (loss) income $ (1,091) (10.8) $ 805 8.7
======== ========= ======== =======
Net (loss) income per share:
Basic:
Net (loss) income from continuing
operations $ (0.30) $ 0.21
Loss on disposal, net of taxes 0.00 0.00
-------- -------
Net income (loss) per share $ (0.30) $ 0.21
======== ========
Diluted:
Net (loss) income from continuing operations $ (0.30) $ 0.21
Loss on disposal, net of taxes 0.00 0.00
-------- --------
Net income (loss) per share $ (0.30) $ 0.21
======== ========
SIGNATURE
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: May 14, 2003
I-SECTOR CORPORATION
By: /s/ JAMES H. LONG
--------------------------------
James H. Long
Chief Executive Officer, Chief
Financial Officer, President and
Chairman of the Board