As filed with the Securities and Exchange Commission on April 29, 2002
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT
ON
FORM SB-2
UNDER
THE SECURITIES ACT OF 1933
iNLiTE COMPUTERS INCORPORATED
(Name of Small Business Issuer in its charter)
98-0371107
DELAWARE 5045 ______________________
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification No.)
Incorporation or Classification Code
Organization) Number)
UNIT 17, THE ARENA, RALEIGH COURT, CRAWLEY
WEST SUSSEX RH102PD UNITED KINGDOM
011 44 1293 526 060
(Address and telephone number of principal executive
offices and principal place of business)
KEVIN O'BRIEN
PRESIDENT
iNLiTE COMPUTERS INCORPORATED
UNIT 17, THE ARENA, RALEIGH COURT, CRAWLEY
WEST SUSSEX RH102PD, UNITED KINGDOM
011 44 1293 526 060
(Name, address and telephone number of agent for service)
COPY TO:
PAUL J. POLLOCK, ESQ.
PIPER RUDNICK LLP
1251 AVENUE OF THE AMERICAS
NEW YORK, NY 10020
(212) 835-6000
FAX NO.: (212) 835-6001
Approximate date of commencement of proposed sale to the public: AS
SOON AS PRACTICAL AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X] ___________
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ___________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
464(d) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier registration statement for the same
offering. [ ] ___________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ] ___________
CALCULATION OF REGISTRATION FEE
Title of Each Class of Amount Proposed Proposed Amount of
Securities to be to be Maximum Maximum Registration
Registered Registered Offering Price Aggregate Fee (1)
Per Share Offering Price
Common Stock, par value $.001 per share 2,500,000 $0.31 $775,000 $72.00
(1) The registration fee has been calculated pursuant to Rule 457(c) under the
securities act as follows: 2,500,000 multiplied by $.3125, which is the average
of the most recent sales prices (rounded to the nearest cent) for shares of our
common stock issued in private offerings.
THE REGISTRANT AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY
BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
PROSPECTUS
iNLiTE COMPUTERS
INCORPORATED
2,500,000 SHARES OF COMMON
STOCK
This prospectus relates to the sale of up to an aggregate of 2,500,000
shares of our common stock which may be offered for sale from time to time by
the selling stockholders listed on page 27.
There is currently no public market for our common stock.
WE URGE YOU TO READ CAREFULLY THE "RISK FACTORS" SECTION BEGINNING ON PAGE
4 WHERE WE DESCRIBE SPECIFIC RISKS ASSOCIATED WITH AN INVESTMENT IN INLITE AND
THESE SECURITIES BEFORE YOU MAKE YOUR INVESTMENT DECISION.
PER SHARE TOTAL
PUBLIC OFFERING PRICE: $0.31 $775,000
THE SELLING SHAREHOLDERS WILL SELL AT A PRICE OF $0.31 PER SHARE UNTIL OUR
SHARES ARE QUOTED ON THE OTC BULLETIN BOARD AND THEREAFTER AT PREVAILING MARKET
PRICES OR PRIVATELY NEGOTIATED PRICES.
SUBJECT TO COMPLETION
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THE SELLING SHAREHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS APRIL 29, 2002.
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY........................................................1
RISK FACTORS..............................................................4
FORWARD-LOOKING STATEMENTS................................................8
USE OF PROCEEDS...........................................................8
MARKET FOR COMMON EQUITY AND
DIVIDEND POLICY...........................................................9
CAPITALIZATION SCHEDULE..................................................10
MANAGEMENT'S DISCUSSION AND
ANALYSIS.................................................................11
DESCRIPTION OF BUSINESS..................................................15
MANAGEMENT...............................................................22
EXECUTIVE COMPENSATION...................................................23
DISCLOSURE OF COMMISSION
POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES...........................................23
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS.....................................................24
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT...............................................................25
DESCRIPTION OF SECURITIES................................................26
SHARES ELIGIBLE FOR FUTURE SALE..........................................26
SELLING STOCKHOLDERS.....................................................27
PLAN OF DISTRIBUTION.....................................................28
LEGAL MATTERS............................................................29
EXPERTS..................................................................29
WHERE YOU CAN GET MORE
INFORMATION..............................................................29
UNTIL _________, 2002 (90 DAYS FOLLOWING THE EFFECTIVE DATE OF THIS
PROSPECTUS), ALL DEALERS THAT BUY, SELL OR TRADE THESE SHARES OF COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATIONS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding us and the securities being offered for sale by means of
this prospectus and our financial statements and notes to those statements
appearing elsewhere in this prospectus. The summary highlights information
contained elsewhere in this prospectus.
iNLiTE COMPUTERS, INCORPORATED
We are a single-source provider of information technology ("IT")
products, services and support to blue chip and mid-sized companies, colleges,
universities and primary schools, located in the United Kingdom. We are
authorized to resell IT products of industry-leading manufacturers, including
Toshiba, Hewlett-Packard, Compaq, Fujitsu and Intel, including personal
computers, servers, networking equipment and applications software. We also
provide related IT services including network consulting, workstation support
and temporary IT staffing services.
We have successfully developed our own range of computer hardware and
related products, which are marketed under the iNLiTE name. iNLiTE products are
designed specifically for workstation and server platforms and can be customized
to meet specific customer requirements. The range of systems is assembled from
brand name quality components which return a high level of reliability and
durability. iNLiTE products are now recognized within our target markets having
developed an impressive track record with a number of nationwide educational and
corporate organizations.
Our primary business objective is to become a leading single-source
provider of high-quality IT products, services and support in our target
markets. To this end, we intend: (i) to leverage our complementary businesses by
combining the expertise of our technical personnel with our strong product
procurement capabilities; (ii) develop and expand our iNLiTE name product
offerings; (iii) expand our anti-virus product offerings; and (iv) to broaden
our IT service offerings in order to provide additional sales opportunities with
new and existing clients.
We believe that we compete with our competitors by providing a
single-source solution for our customers' IT products and services needs and by
providing a wide range of high-quality services to the management information
systems departments and end-users of our corporate and educational clients. We
also believe that we distinguish ourselves from our competition on the basis of
technical expertise, competitive pricing, vendor alliances, direct sales
strategy and customer service orientation.
CORPORATE BACKGROUND
Our operating subsidiary, Copy Data Limited, was organized in 1995 under
the laws of England and Wales. Effective January 8, 2002, we changed the name of
our operating subsidiary to iNLiTE Computers Limited. Our principal executive
offices are located at Unit 17, The Arena, Raleigh Court, Crawley, West Sussex
RH102PD, United Kingdom. Our telephone number is (011) 44 1293 526 060 and our
facsimile number is (011) 44 1293 528 222.
-1-
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares.
RISK FACTORS
An investment in the securities involves a high degree of risk.
Prospective investors should carefully review the section entitled "Risk
Factors" beginning on page 4, as well as other information provided in this
prospectus.
-ii-
THE OFFERING
Shares offered by the selling stockholders... 2,500,000 shares of common
stock.
Shares outstanding prior to offering 9,000,000
Shares to be outstanding following offering 9,000,000
Offering Price $0.31. The selling
shareholders will sell at a
price of $0.31 per share until
our shares are quoted on the OTC
Bulletin Board and thereafter at
prevailing market prices or
privately negotiated prices.
Dividend policy.............................. We intend to retain any
earnings to finance the
development and growth of our
business. Accordingly, we do
not anticipate that we will
declare any cash dividends on
our common stock for the
foreseeable future. See
"Market For Common Equity and
Dividend Policy" on page 9.
-2-
SUMMARY FINANCIAL INFORMATION
The following summary financial information is taken from our Financial
Statements included elsewhere in this prospectus and should be read along with
the Financial Statements and the related Notes.
INCOME STATEMENT DATA:
Years ended Nine Months
Ended November 30,
February 28, February 29, 2001 2000
2001 2000
Net Sales ........................ $ 7,170,906 $ 5,215,575 $ 6,229,310 $ 5,715,818
Operating Expenses ............... 702,340 584,533 809,464 495,456
Interest Expense ................. 67,120 23,073 32,790 50,384
Net Income (Loss) ................ (69,787) 34,609 (124,567) (18,965)
Basic and Diluted Net Income
(Loss) per Share of
Common Stock .................. $ (0.01) $ 0.01 $ (0.02) $ 0.00
Average Number of shares ......... 6,551,500 6,551,500 7,566,515 6,551,500
BALANCE SHEET DATA:
February 28, 2001 November 30, 2001
Actual As Adjusted
Total Assets .................... $ 1,924,401 $ 2,220,513 $ 2,140,497
Cash ............................ 328 51,187 51,187
Total Liabilities ............... 2,016,184 1,888,044 1,978,028
Working Capital (Deficiency) .... (276,011) 115,079 (54,921)
Stockholders' Equity (Deficiency) (91,783) 332,469 162,469
-3-
RISK FACTORS
The securities we are offering involve a high degree of risk,
including, the risks described below. You should carefully consider the
following risk factors that affect our business and this offering before
investing in the securities.
OUR HISTORY OF OPERATING LOSSES
We incurred net losses of $69,787 for the year ended February 28, 2001,
and $124,567 for the nine months ended November 30, 2001, resulting in an
accumulated deficit of $226,665 for at November 30, 2001. We expect to continue
operating at a net loss through our fiscal year ending February 28, 2002, as we
incur costs related to sales and marketing, product development and
administrative expenses.
WE WILL NEED ADDITIONAL FINANCING IN ORDER TO FULLY IMPLEMENT OUR BUSINESS PLAN
In 2001, we raised $250,000 in equity and received capital
contributions totaling $250,000 from our President, Kevin O'Brien which has been
used to operate our business. In order to grow our business we need to hire
additional sales and marketing staff, invest in product development, information
technology enhancement and acquisitions. The revenues we have generated to date
will not be sufficient to fund our growth plans and we need additional financing
in order to do so. If we do not obtain additional financing we will have to
delay or abandon our growth objectives.
THERE IS NO MARKET FOR OUR COMMON STOCK
There is no trading market for our common stock although we intend to
seek a market maker to sponsor an application to have our shares quoted on the
OTC Bulletin Board. If we are not successful in having our shares included on
the OTC Bulletin Board, our shares will not be readily marketable. Even if we
are successful in our application, there can be no assurance that an active
trading market will develop. If no market develops, it may be difficult or
impossible for you to resell your shares if you should desire to do so.
COMPETITION
Our markets are highly competitive. Our competitive position depends
upon a number of factors including the price, quality and performance of our
products, the level of customer service, and our ability to penetrate our
targeted markets. Within our target markets we encounter direct competition from
established IT products and service providers. In the corporate market our
competitors are established re-sellers of branded computer hardware and products
such as CCD, Compel, and Elcom. In the education market our competitors are
computer hardware and related product providers RM, Viglen and Elonex. We
believe our ability to compete successfully against existing competitors will
depend largely upon our ability to execute our strategy to provide quality
products and superior value added services such as network management and
complete procurement and implementation of IT resources. There can be no
assurance that we will be able to implement this strategy successfully.
-4-
WE FACE COMPETITION FROM ESTABLISHED COMPETITORS
Our primary competitors have significantly greater financial, technical
and marketing resources, and/or greater name recognition, including CCD, Compel,
Elcom, RM, Viglen and Elonex. Some of our competitors have longer operating
histories and greater overall resources than we do. Many of these companies have
more extensive customer bases and broader customer relationships that they could
leverage, including relationships with many of our current and potential
customers. These companies also have significantly more established customer
support and professional services organizations than we do.
WE MAY FACE CONTINUING PRESSURE TO REDUCE PRICES, WHICH COULD NEGATIVELY AFFECT
OPERATING RESULTS AND THE VALUE OF YOUR INVESTMENT.
As the market for IT products has matured, price competition has
intensified and is likely to continue to intensify. Our gross profits, margins
and results of operations could be adversely affected by such continued product
pricing pressure.
BECAUSE WE HAVE NON-EXCLUSIVE RELATIONSHIPS WITH OUR HARDWARE AND COMPONENT
SUPPLIERS, OUR COMPETITORS MAY BE ABLE TO OBTAIN ARRANGEMENTS SIMILAR TO OURS
Our existing relationships with the companies that supply a significant
portion of our hardware and components are non-exclusive. All of these suppliers
may establish or have established relationships with our competitors. Our
competitors may be able to obtain similar or more competitive arrangements with
our suppliers, our business and growth prospects could suffer.
WE RELY ON CONTINUED AUTHORIZATION TO RESELL AND PROVIDE MANUFACTURER AUTHORIZED
SERVICES
Our future success in both sales of brand name products and related
service offerings depends on maintaining our status as an approved reseller of
such brand name products and our continued authorization as a service provider
with respect to those products. We maintain sales and service authorizations for
the brand name products of industry leading manufacturers including Compaq and
Hewlett-Packard. Without such sales and service authorizations, we would be
unable to provide the range of products and services we currently offer. The
sale of Hewlett-Packard and Compaq products accounted for 12% of our total
revenue for the year ended February 28, 2001. There can be no assurance that the
manufacturers and distributors of the products we resell will continue to
authorize us to resell and service those products. The loss of one or more such
authorizations could have a material adverse effect on our business and results
of operations.
OUR INABILITY TO PROVIDE SUFFICIENT QUANTITIES OF OUR PRODUCTS BECAUSE OF OUR
DEPENDENCE ON HARDWARE AND COMPONENTS FROM KEY SOLE SUPPLIERS COULD RESULT IN
DELAYS IN THE DELIVERY OF OUR PRODUCTS AND COULD HARM OUR REVENUES
The hardware, components and equipment used in our products are
obtained from sole sources of supply. If our sole source suppliers or we fail to
obtain components in sufficient quantities when required, delivery of our
products could be delayed resulting in decreased
-5-
revenues. Additional sole-sourced components may be incorporated into our
equipment in the future. We do not have any supply contracts to ensure sources
of supply. In addition, our suppliers may enter into exclusive arrangements with
our competitors, stop selling their products or components to us at commercially
reasonable prices or refuse to sell their products or components to us at any
price, which could harm our operating results.
WE DEPEND ON THIRD PARTY MANUFACTURERS AND ANY DISRUPTION IN THEIR MANUFACTURE
OF COMPUTER HARDWARE AND OUR SYSTEM COMPONENTS WOULD HARM OUR OPERATING RESULTS
All of the computer hardware and system components for our private
label products are provided by our suppliers. The efficient operation of our
business will depend, in large part, on our ability to have our suppliers
continue to manufacture our system components in a timely, cost-effective manner
and in sufficient volumes while maintaining consistent quality. Any
manufacturing disruption could impair our ability to fulfill orders and cause us
to lose customers.
WE OPERATE OUR BUSINESS ON THE BASIS OF PURCHASE ORDERS
We buy our equipment and primarily sell our products and services on
the basis of purchase orders. As a result, our suppliers and customers do not
have any obligation to continue doing business with us and could stop doing
business with us at any time. Many of our customers initially make a limited
purchase of our products and services for pilot programs. Although the sale of
the equipment and services for the pilot programs are final with no right of
return, these customers are under no obligation to purchase additional products
or services from us.
WE DEPEND UPON THIRD-PARTY DISTRIBUTION RELATIONSHIPS
We are not a distributor of the computer hardware and related products
we resell and use in our products. We rely on the distribution arrangements of
our suppliers with the manufacturers of the hardware, components and software we
resell and use in our products. Our suppliers may not be able to increase their
number of distribution relationships in the future, maintain existing
relationships or obtain rights to new product offerings. Currently, our
suppliers act as distributors of computer hardware and related products for
various vendors, including:
- - Compaq
- - Hewlett Packard
- - Toshiba
- - Fujitsu
- - Intel
- - QDI
- - Kingston
These manufacturers have distribution arrangements with a variety of suppliers
and as a result, we cannot guarantee that our suppliers will continue to receive
the volume of products that we need at all times. Periodically, our suppliers'
distribution arrangements must be renegotiated in
-6-
order to continue distributing each vendor's products at competitive prices. As
a result, we cannot be certain that any supplier with whom we do business will
elect to continue their relationship with us in the future on substantially the
same terms and conditions. We believe that an interruption, or substantial
changes in the distribution relationships of our suppliers could have a negative
effect on our business, operating results and/or financial condition.
WE DEPEND ON INCREASED BUSINESS FROM OUR CURRENT CUSTOMERS
If we fail to generate repeat and expanded business from our current
customers, our business and operating results would be harmed. Many of our
customers initially make a limited purchase of our products and services for
pilot programs. These customers may not choose to purchase additional products
or services from us. Because the total amount of revenue we receive in any
period depends in large part on the products we previously sold, any downturn in
our sale of products would negatively impact our future revenues.
WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS FOR OVER A THIRD OF OUR REVENUES
The results of our operations are attributable to a limited number of
sales. During the year ended February 28, 2001, Gehis Ltd. and Moss Pharmacy
accounted for approximately 35% of our revenues. The loss or deferral of one or
more significant sales or failure to collect on a significant accounts
receivable from any of these customers could cause substantial fluctuations in
our results of operations.
WE HAVE NOT YET ACHIEVED FULL MARKET ACCEPTANCE OF OUR PRODUCTS
Although we market our products throughout the United Kingdom, we
cannot assure you that our products will achieve a significant degree of market
acceptance in our geographic markets, and that acceptance, if achieved, will be
sustained for any significant period. Failure of our products to achieve or
sustain market acceptance could have an adverse effect on our business,
financial condition and results of operations.
BECAUSE THE ADOPTION CYCLE FOR OUR PRODUCTS AND SERVICES BY OUR CUSTOMERS WHO
BUY OUR PRODUCTS AND SERVICES MAY BE LONG, OUR STOCK PRICE COULD DECLINE IF
REVENUES ARE DELAYED
We cannot predict the rate of adoption by educational institutions and
business customers of our products and services or the price they may be willing
to pay for our products and services in the future. This may cause a delay in
revenue realization and negatively affect our operating performance. Also,
fluctuations in our operating performance are exacerbated by the length of time
between our first contact with a potential customer and the first revenue from
sales of products and/or services to such customer. If our operating performance
does not meet investor expectations as a result of these delays, the value of
your investment may decline.
OUR NEW PRODUCT AND SERVICE OFFERINGS MAY NOT BE SUCCESSFUL
During 1997, we begin offering new products and services including the
iNLite computer products and network management services. These products and
services remain in an early
-7-
stage of marketing and customer acceptance. Because we have limited experience
in the development, marketing, implementation and deployment of the new product
and service offerings, we cannot be certain we will successfully market and
provide these new offerings in a timely and profitable manner.
DEPENDENCE UPON CURRENT KEY PERSONNEL FOR OUR SUCCESS
If any officers or the following key personnel cease employment with us
before we find qualified replacements, it might have a significant negative
impact on our operations and overall business. Our success is dependent upon the
personal efforts and abilities of our executive officers, including Richard
Hands, Chief Financial Officer and Kevin O'Brien, President.
WE ARE SUBJECT TO RISK FROM EXCHANGE RATE FLUCTUATIONS.
Our transactions with suppliers and customers are effected in pounds
sterling, iNLiTE's functional currency. Our financial statements, included
herein, are reported in U.S. dollars. As a result, fluctuations in the U.S.
dollars to pounds sterling exchange rate may effect the reported financial
results of iNLiTE from one period to the next. iNLiTE does not actively manage
its exposure to such effects.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus under "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis" and
"Description of Business" are forward-looking. We generally identify
forward-looking statements by the use of terminology such as "may," "will,"
"expect," "intend," "plan," "estimate," "anticipate," "believe," or similar
phrases. We base these statements on our beliefs as well as assumptions we made
using information currently available to us. Because these statements reflect
our current views concerning future events, these statements involve risks,
uncertainties and assumptions. Our actual future performance could differ
significantly from these forward-looking statements. These forward-looking
statements involve a number of risks and uncertainties. Important factors that
could cause actual results to differ significantly from our expectations include
matters not yet known to us or not currently considered significant by us.
Actual results may differ significantly from those suggested by the
forward-looking statements for various reasons, including those discussed under
"Risk Factors."
USE OF PROCEEDS
The common stock is being sold by the selling stockholders for their
own account and we will not receive any of the proceeds of this offering.
Expenses we are expected to incur in connection with this registration
are estimated at approximately $170,000. The selling stockholders will pay all
of their underwriting commissions and discounts and counsel fees and expenses in
connection with the sale of the shares covered by this prospectus.
-8-
MARKET FOR COMMON EQUITY AND DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock.
We currently intend to retain future earnings, if any, to finance the
development and expansion of our business and, therefore, we do not anticipate
declaring or paying any cash dividends on our common stock in the foreseeable
future. Our payment of cash dividends, if any, will depend upon our general
financial condition and other factors deemed relevant by our board of directors.
There is currently no public market for our common stock.
"PENNY STOCK" REGULATIONS MAY IMPOSE CERTAIN RESTRICTIONS ON MARKETABILITY OF
OUR COMMON STOCK.
The SEC has adopted regulations which generally define "penny stock" to
be an equity security that has a market price of less than $5.00 per share. Our
common stock may fall within the definition of penny stock and subject to rules
that impose additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and accredited
investors (generally those with assets in excess of $1,000,000, or annual
incomes exceeding $200,000 or $300,000, together with their spouse).
For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's prior written consent to the transaction. Additionally,
for any transaction, other than exempt transactions, involving a penny stock,
the rules require the delivery, prior to the transaction, of a risk disclosure
document mandated by the SEC relating to the penny stock market. The
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell our common stock and may affect
the ability of investors to sell our common stock in the secondary market.
-9-
CAPITALIZATION SCHEDULE
The following table details the capitalization of iNLiTE as of November 30,
2001:
Actual As Adjusted
--------- ---------
Short-term debt $ 810,239 $ 810,239
--------- ---------
Long-term debt 7,469 7,469
Stockholders' equity:
Preferred stock; $.001 par value; 1,000,000 shares
authorized; zero shares issued and outstanding -- --
Common stock; $.001 par value; 50,000,000 shares
authorized; 9,000,000 shares issued and
outstanding 9,000 9,000
Additional paid-in capital 553,552 383,552
Accumulated deficit (226,665) (226,665)
Accumulated other comprehensive loss (3,418) (3,418)
--------- ---------
Total stockholders' equity 332,469 162,469
--------- ---------
Total capitalization $ 339,938 $ 169,938
========= =========
-10-
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of INLITE's
results of operations and financial condition. The discussion should be read
together with our audited financial statements and notes included elsewhere in
this prospectus.
Background and Overview
We are a single-source provider of IT products, services and support to
blue-chip and mid-sized companies, colleges, universities and primary schools
located in the United Kingdom. We were formed in 1995 as an authorized reseller
of computer hardware and software products, and since 1997 we also have been
developing our private label line of computer hardware and offering related IT
services. To date, most of our net sales have been derived from the resale of
brand name IT products however we have been increasing our emphasis upon the
sale of iNLiTE products. For the years ended February 28, 2001 and February 29,
2000, resales of brand name IT products were 69.5% and 79.4%, respectively, of
total revenue and sales of iNLiTE products were 30.5% and 20.6% respectively, of
total revenue.
We have arrangements with a variety of IT product aggregators including
NorthAmber Plc, Ideal Hardware and Hugh Symmonds IT through which we acquire
most of our IT products for resale. These arrangements give us access to an
extensive range and number of products. In general, we order IT products,
including personal computers, servers, networking equipment, and applications
software from such suppliers on an as-needed basis, thereby reducing our need to
carry large inventories. For the year ended February 28, 2001, we acquired
approximately 36% of our products for resale from NorthAmber Plc.
In general, there are no ongoing written commitments by customers to
purchase products from us and all product sales are made on a purchase order
basis. Furthermore, as the market for brand name IT products has matured, price
competition has intensified and is likely to continue to intensify. Our gross
profits, margins and results of operations could be adversely affected by such
continued product pricing pressure, a significant reduction in product purchase
orders from our customers, or a disruption in our sources of product supply.
We offer network consulting (including systems integration),
workstation support, training and temporary IT staffing services. Services and
support revenue is recognized as such services are performed. Our network
consulting, workstation support and installation services are billed on a time
and materials basis. Our training and IT staffing services are fee-based on a
per-day basis. Generally, our service arrangements with customers may be
terminated by such customers with limited advance notice and without significant
penalty. The most significant cost relating to the services component of our
business is personnel expenses which consist of salaries, benefits and
payroll-related expenses. Thus, the financial performance of our service
business is based primarily upon billing margins (billable day rates less the
costs to us of such service personnel on a daily basis) and utilization rates
(billable day rates divided by paid days). The future success of the services
component of our business will depend in large part upon our ability to maintain
high utilization rates at profitable billing margins.
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Our cost of sales include primarily, in the case of product sales, the
cost to us of products acquired for resale, and in the case of services and
support revenue, salaries, benefits and payroll related expenses for billable
technical personnel. Our selling expenses consist primarily of personnel costs,
including sales commissions earned by employees involved in the sales of IT
products, services and support. These personnel include direct sales, sales
support and marketing personnel. Sales commissions are recorded as revenue is
recognized. General and administrative expenses consist of all other operating
expenses, including primarily salaries and occupancy costs for administrative,
executive and finance personnel.
We believe that our ability to provide a broad range of technical
services, coupled with our strength in satisfying our clients' IT product
requirements and our long-term relationships with large clients, positions us to
continue to grow the services component of our business while further
strengthening our product sales. As such, we anticipate that an increasing
percentage of our gross profits in the future will be derived from the services
and support component of our business. However, in the near term, we believe
that product sales will continue to generate a significantly larger percentage
of our gross profit, particularly due to our increased emphasis on marketing of
our iNLiTE range of computer hardware.
RESULTS OF OPERATIONS - YEARS ENDED FEBRUARY 28, 2001 AND FEBRUARY 29, 2000
REVENUE
Revenues are generated from sales of computer equipment, maintenance,
technical and consulting services. Total revenues for the years ended February
28, 2001 and February 29, 2000 were $7,170,906 and $5,215,575, respectively,
representing an increase of $1,955,331 or 37.5%. The increase in revenue
resulted primarily from an increase in sales of the iNLiTE range of computer
products to customers in the education market. In fiscal 2001, as compared to
fiscal 2000, we sold an additional 2,200 units of iNLiTE computer products,
resulting in approximately $1,112,000 of additional revenue. The added revenue
was generated primarily from customers in the education market, sales to whom
accounted for 32.5% of total sales for the year ended February 28, 2001 as
compared to 16.3% of total sales for the year ended February 29, 2000.
COST OF GOODS SOLD
Cost of goods sold consists primarily of the purchase of components and
complete products for resale, and the payroll cost of personnel directly
involved in the assembly and installation of the products. Costs of goods sold
for the year ended February 28, 2001 was $6,487,486 or 90.5% of revenues, as
compared to $4,562,864 or 87.5% of revenues for the year ended February 29,
2000. The percentage increase in costs of goods sold was a direct result of
discounting iNLiTE product prices for promotional purposes and purchasing
inefficiencies, which management believes it has taken appropriate steps to
reduce.
OPERATING EXPENSES
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Operating expenses for the years ended February 28, 2001 and February
29, 2000 were $702,340 or 9.8% of sales and $584,533 or 11.2% of sales,
respectively. The increase in operating expenses was a direct result of
recruiting and hiring new sales and administrative staff.
RESULTS OF OPERATIONS - NINE MONTHS ENDED NOVEMBER 30, 2001 AND 2000
REVENUE
Total revenues for the nine months ended November 30, 2001 and November
30, 2000 were $6,229,310 and $5,715,818, respectively, representing an increase
of $513,492 or 9.0%. The increase in revenue resulted primarily from the
increase of sales of our iNLiTE name computer products to existing customers in
both the corporate and education markets as well as the expansion of our
customer base. iNLiTE name computer products sales increased by 67.8% to 3,800
units for the nine month period ended November 30, 2001, as compared to 2,500
units for the nine month period ended November 30, 2000, resulting in
approximately $1,033,000 of additional revenue. The increase in total revenues
for the nine month period ended November 30, 2001 as compared to the nine month
period ended November 30, 2000, was also attributable to the successful
introduction of specialist software, mainly anti-virus applications, into the
corporate market which resulted in sales of approximately $535,000 (8.6% of
total revenue). As a deliberate strategy, we are reducing our offering of third
party hardware so that sales of these products declined from $4,040,000 (70.7%
of total revenue) in 2000 to $2,927,000 (47.0% of total revenue) in 2001.
Revenue from services totaled $57,719 or .9% of total revenue for the nine month
period ended November 30, 2001.
COST OF GOODS SOLD
Costs of goods sold for the nine months ended November 30, 2001 and
November 30, 2000 were $5,530,519 or 88.8% of revenues and $5,191,315 or 90.8%
of revenues, respectively, representing a decrease of 2%. The decrease in costs
of good sold was the result of a more favorable product mix, i.e. sales of
anti-virus applications, which have considerably higher margins than those
obtainable on hardware sales, and improved purchasing efficiencies.
OPERATING EXPENSES
Operating expenses for the nine month period ended November 30, 2001
were $809,464 or 13.0% of revenues as compared to $495,456 or 8.7% of revenues
for the nine month period ended November 30, 2000. The increase in operating
expenses was a direct result of added sales and marketing staff and a finance
director as well as increased administrative costs. In addition, during 2001,
employees and consultants received $56,000 in stock-based compensation and
services.
LIQUIDITY AND CAPITAL RESOURCES
Our operations have been financed primarily through bank borrowings,
accounts receivable factoring, private offerings of our common stock in 2001 for
which we received net proceeds of $250,000 and capital contributions totaling
$250,000 from our President, Kevin O'Brien.
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Net cash used in operations for the for the nine months ended November
30, 2001 was $85,317 compared to $119,901 for the nine months ended November 30,
2000. Net cash used in operations for the nine months ended November 30, 2001
reflects a net loss of $124,567 and an increase in accounts receivable of
$299,041 offset by a decrease in inventory of $162,148 and an increase in
accrued expenses and other current liabilities of $98,794. Net cash used in
operations for the nine months ended November 30, 2000 reflects a net loss of
$18,965 and an increase in inventory of $200,064 offset by an increase in
accounts payable of $144,392.
At November 30, 2001, we have a line of credit agreement with National
Westminster Bank Plc of approximately $214,000. Under the terms of the
agreement, we pay interest at 2.25% above the base rate (6.25% at November 30,
2001) on all amounts up to $214,000 and 4.25% above the base rate (8.25% at
November 30, 2001) on all permitted borrowings greater than $214,000. These
borrowings are guaranteed by Kevin o'Brien, our principal stockholder and
executive officer (limited to approximately $71,000) and Eric o'Brien, a member
of the Board of Directors and stockholder (limited to approximately $228,000).
At November 30, 2001, we have a factoring agreement with GLE Finance
Limited for a line of credit of approximately $1,071,000, which expires in June
2002. The borrowings are based on a percentage of eligible accounts receivable.
Under the terms of the agreement, we pay interest at 2.25% above the base rate
(6.25% at November 30, 2001). Borrowings under the line are secured by all of
our assets and are guaranteed by Kevin o'Brien our principal stockholder and
executive officer (limited to approximately $214,000).
At November 30, 2001 we had bank borrowings of $210,443 and working
capital of $115,079. We anticipate we will increase our capital expenditures and
lease commitments consistent with anticipated growth in operations,
infrastructure and personnel.
As of November 30, 2001 our principal commitment is an obligation of
approximately $684,000 in future lease payments for our warehouse and office
space under a non-cancelable operating lease with Eric o'Brien, a member of the
Board of Directors and stockholder.
Due to the expansion of our customer base and the roll-out of new
products and services, we anticipate requiring additional cash to support the
anticipated growth in accounts receivable and inventory. We also expect our
operating expenses to increase as we aggressively seek to increase our sales and
technical personnel along with a concomitant expansion in our office and
warehouse space and continue development of the iNLiTE range of computer
products. We are considering a variety of funding alternatives including the
issuance of equity securities.
Adequate funds may not be available when needed or not be available on
terms favorable to us. If we are unable to secure sufficient funding, we may be
unable to develop or enhance our products and services, take advantage of
business opportunities, respond to competitive pressures or grow our business as
we hope. This could have a negative effect on our business, financial condition
and results of operations.
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DESCRIPTION OF BUSINESS
Overview
We are a single-source provider of IT products, services and support to
mid-sized companies, colleges, universities and primary schools located
primarily in the United Kingdom. We were formed in 1995 as an authorized
reseller of computer hardware and software products, and since 1997 have been
developing our private label brand of computer hardware and offering related IT
services. To date, most of our net sales have been derived from resale of brand
name IT product sales. For the year ended February 28, 2001, resales of brand
name products were 69.5% of total revenue and sales of iNLiTE name products were
30.5% of total revenue.
Industry Background
Many organizations have become increasingly dependent on the use of IT
as a competitive tool in today's business and education environments. The need
to access and distribute data on a real-time basis throughout an organization
and between organizations has led to the rapid growth in network computing
infrastructures, which connect numerous and geographically dispersed end users
via local and wide area networks. This growth has been driven by the emergence
of industry standard hardware, software and communications tools, as well as the
significant improvement in the performance, capacity and utility of such
network-based equipment and applications.
The acquisition, deployment and implementation of computer networks
has, however, become increasingly complex for large organizations due to rapid
and continual change in IT. Organizations must determine: (i) the type of PC
platform, computer peripherals, and software applications to purchase among a
vast array of product offerings; (ii) the optimal design of the network,
allowing for both the integration of new systems and the upgrade of and
migration from existing systems; and (iii) the level of ongoing support required
by the network and end users. As organizations rely more heavily on IT as a key
component of their operations and as end users demand the latest technologies,
management information systems departments must continually adapt to rapid
change and the increasing complexity of designing, implementing and maintaining
networks and related applications.
As a result of the rapid changes in the IT products market and the
risks associated with large capital expenditures, organizations increasingly
rely on companies which offer and have knowledge of a wide variety of networking
products and the ability to perform related technical services in a
cost-effective manner. Such organizations increasingly require MIS personnel
with diverse technology skill sets in order to effectively adapt to such
constant change. As a result, the costs of hiring, maintaining and continually
educating an MIS department have grown significantly as demand for qualified
personnel has intensified. These factors have motivated organizations to focus
their resources on their core businesses and seek the expertise of independent
providers of IT products and services.
Strategy
We believe that by working with a single-source provider of IT
products, services and support, organizations will be able to adapt more quickly
to technological changes and reduce
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their overall IT costs. Those companies which provide a broad range of product
and service offerings, including network consulting, workstation support,
training, installation and IT staffing services, as well as the ability to work
as integral members of their clients' internal management information system
teams, should be well positioned to capitalize on the anticipated growth of the
IT products and services industry.
Our primary business objective is to become a leading single-source
provider of high-quality IT products, services and support in our target
markets. To this end, we intend to pursue the following strategies.
Expand Offerings of iNLiTE Products
We have successfully developed our own range of computer hardware,
which is marketed under the iNLiTE brand. iNLiTE products are designed
specifically for workstation and server platforms and can be customized to meet
specific customer requirements. The range of systems is assembled from brand
name quality components which return a high level of reliability and durability.
The iNLiTE brand is now recognized within our target markets having developed an
impressive track record with a number of nationwide educational and corporate
organizations.
Leverage Complementary Businesses
We intend to continue to combine the expertise of our technical
personnel with our strong product procurement capabilities to provide
comprehensive IT solutions to mid-sized companies, and educational
institutional. Since our inception, we have operated as an authorized reseller
of IT equipment from leading manufacturers. We have established alliances with
major manufacturers of computer hardware and software so that we may provide our
customers with competitive pricing, ready product availability and value-added
services such as product configuration, testing, warehousing and delivery. We
have also developed related IT services and currently offer network consulting,
workstation support, training and temporary IT staffing services. We believe
that our ability to provide a broad range of technical services, coupled with
our traditional strength in satisfying our clients' hardware requirements,
enables us to strengthen long-term relationships with our existing clients and
affords cross-selling opportunities with new and existing clients.
Vendor Relationships and Procurement
During fiscal 2001, iNLiTE had relationships with a variety of
distributors of brand name IT products. We were a reseller of selected product
lines and single components from major manufacturers, including Toshiba,
Hewlett-Packard, Compaq, Fujitsu, Intel, QDI and Kingston.
Competition
The markets for our products and services are characterized by intense
competition. We believe that the principal competitive factors in the market for
IT products and services include price, customer service, breadth of product and
service offerings, product availability, technical expertise, the availability
of skilled technical personnel, adherence to industry standards, financial
stability and reputation. Our competitors include established computer product
manufacturers, distributors, computer resellers, systems integrators and IT
service providers.
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Many of our current and potential competitors have longer operating histories
and financial, sales, marketing, technical and other resources substantially
greater than those of iNLiTE. As a result, our competitors may be able to adapt
more quickly to changes in customer needs or to devote greater resources than
iNLiTE to the development and sales of IT products and the provision of IT
services. Such competitors could also attempt to increase their presence in our
markets by forming strategic alliances with other competitors or our customers,
offer new or improved products and services to our customers or increase their
efforts to gain and retain market share through competitive pricing. As the
market for IT products has matured, price competition has intensified and is
likely to continue to intensify and has resulted in continued industry-wide
downward pricing pressure. In addition, competition for quality technical
personnel has continued to intensify, resulting in increased personnel costs for
many IT service providers. We believe there are low barriers to entry into our
markets which enable new competitors to offer competing products and services.
We believe that we compete with our competitors by providing a
single-sourced solution for our customers' IT products and services needs and by
providing a wider range of high quality services to the management information
system departments and end users of our clients. We also believe that we
distinguish ourselves from our competition on the basis of our technical
expertise, competitive pricing, vendor alliances, direct sales strategy and
customer service orientation. Based on the level of our recurring business with
many of our large customers, we believe that we compare favorably to many of our
competitors with respect to the principal competitive factors set forth above.
PRODUCTS
Resale
We are a reseller of IT products of leading hardware manufacturers and
software developers. Such products include personal computers, servers,
networking equipment and applications software. Through established vendor
alliances with major aggregators of computer hardware and software, we provide
our customers with competitive pricing and value-added services such as product
configuration, testing, warehousing and delivery. We resell products of
industry-leading manufacturers of computer hardware, software and networking
equipment. Such manufacturers include:
Toshiba
Compaq
Hewlett-Packard
Intel
Fujitsu
In addition, our product configuration and testing services allow us to
customize orders to the needs of customers, thereby ensuring quality control by
minimizing the possibility of delivering defective or improperly configured
equipment. This is accomplished by our ability to provide uniform and consistent
configuration and loading of network and system applications.
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iNLiTE COMPUTERS
We have successfully developed our own range of computer hardware,
which is marketed under the iNLiTE brand. iNLiTE products are designed
specifically for workstation and server platforms and can be customized to meet
specific customer requirements. The range of systems is assembled from brand
name quality components which return a high level of reliability and durability.
The iNLiTE brand is now recognized within our target markets having developed an
impressive track record with a number of nationwide educational and corporate
organizations.
We have been encouraged by the success of the iNLiTE products and are
actively promoting these products both with established and new customers with
the intention of making it the highest growth sector within our company. For the
nine month period ended November 30, 2001, 43.5% of our revenue was derived from
iNLiTE sales figure which was 30.5% at February 2001 with over 3600 units being
supplied on a yearly basis.
The production process of iNLiTE hardware includes rigorous quality
testing leading to minimal returns and failure rate. On-going product
development ensures that iNLiTE products provide the most up to date and current
technology. Component changes are carefully assessed and only implemented if
there is reliability, cost effectiveness and adequate product lifecycle.
Anti-Virus
We are an authorized reseller of anti-virus applications for Network
Associates International, a leading vendor worldwide of anti-virus products that
provides us access to margin healthy products and a unique selling cycle.
Anti-Virus software is deployed to networks to safeguard against virus
infection. As a result of increased electronic traffic being channeled through
intranets and the internet, virus infections can infect a high number of
networks within a very short time. The main route of infection has moved from
media to e-mail which because of the speed of infection requires proactive
decisions concerning the latest anti-virus inoculate software available. Close
contact with our vendor provides our staff with the highest quality of product
knowledge and sales training.
The market for anti-virus products is rapidly changing and requires
up to date products to satisfy customers' needs for inoculate and quarantined
anti-virus applications to protect networks. Virus applications are sold on the
basis of 2 year renewable licenses with the vendor, thereby offering a 24 month
selling cycle after which time the customer must review and renew to ensure
network security.
Network Management Services
A total turnkey solution mainly aimed at the education sector. The
principle elements offered are the supply, installation and configuration of
network systems together with on site and remote hardware support contracts.
ISP, bundling of ranger networked management and administration software is also
provided. The broad range of essential facilities for MIS within education
included within the overall package are:
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1. Overview Network Management Services - designed to deliver a complete
range of installation, configuration and management facilities targeted at
easing the set-up of new MIS facilities and ongoing network management for our
clients in the education sector. We analyze the specific requirements of each
customer and provide a host of modular services that are designed to work in
conjunction with the client's existing MIS resources.
2. Ranger for Networks - a security and administration system that enables
the customer to run a secure, manageable and cost effective network without
compromising network performance or security.
Unlike restrictive security shells which impair the usability of the
Windows interface, Ranger allows a machine to be secured against unauthorized
changes while still maintaining the full "look and feel" of Windows. Network
management and monitoring tools provide live views of user, machine and network
activity, which combined with Ranger's remote control, activity logging, quota
management, account management and network analysis tools give the control
needed to effectively administer networks of all sizes. Ranger is designed to
run on Windows NT, 2000 and Novell networks.
3. Remote Diagnostics/Net Support Manager- enables connection to the
customer's LAN via remote connectivity thus enabling the Overview Network
Management Team to delivery a remote service which includes diagnosing faults,
assisting with the preventative diagnosis systems and walking the customer
through faults diagnostics and fix procedures. Net Support Manager actively
corrects software and system administration issues and offers a direct window
into hardware faults.
4. Ranger Remote Control allows teachers and support staff to display
their PC's screen on any or all of their students' PC screens without the need
for expensive video splitters or additional cabling. Teachers can view and
control students' screens remotely and project either their own or someone
else's screen around a room for interactive demonstrations. By allowing teachers
to monitor, interact with and assist students remotely, networks can be used for
whole-class teaching to interactively assist in the delivery, control and
assessment of ICT curriculum.
5. On-site Hardware Support - We provide the customer 3 years support
packages covering both personal computer and server platforms. As part of this
package, we are committed to delivering a proactive next business day solution
and ensuring that our customers have access to a level of support reducing
system down time to a minimum.
Network Management Services is a move forward for the company which is
continually seeking to add value and continued service rather than the simple
supply and installation of hardware units. We believe the sale of network
managing services provides us access to improved margins and we have targeted
the education sector as an area of maximum growth.
Technical Service and Support
We have developed an experienced and competent technical team and are able
to offer service and support for all of our products. There is increasing demand
for general IT resources, training and recruitment of skilled technicians. With
increasing frequency we are asked to supply temporary contract staff to support
customer's own internal resources and assist with
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peak installation and support requirements. We believe this valuable service
gives us a competitive edge and will become a profitable additional source of
income with significant margins. The intention is to further expand the
technical team ensuring a continued high quality of service.
Value Added Service
The core `value-added service' offered by iNLiTE covers the
reconfiguration of hardware which enables immediate implementation of systems
upon arrival and installation. Value added services are comprised of a host of
services including asset registry, support, systems drive imaging, software
registration, delivery and installation.
SUPPLIERS RELATIONSHIPS AND MANUFACTURING
Our major component, hardware and technology suppliers are listed below:
NorthAmber Plc
KMS
Ideal Hardware
Hugh Symmonds IT
SALES AND MARKETING
We currently focus our sales and marketing efforts on mid-sized
corporations and educational institutions in our target markets through our
marketing staff. We believe that our sales and support personnel provide
effective account penetration and management, enhanced communications and
long-term relationships with our existing clients. To date, we have focused our
sales and marketing efforts on blue chip and mid-sized companies as well as
educational institutions located in the United Kingdom. Given the concentration
of corporations and educational institutions in such region, we do not
anticipate the need to expand the geographic scope of our sales and marketing
efforts outside of our traditional sales area in the near future.
Our marketing staff is responsible for coordinating the various sales and
technical personnel that may be required in soliciting a particular project. Our
marketing efforts include the creation and production of brochures,
telemarketing, direct mail programs, new business marketing, comprehensive
website detailing the range of products and services, targeted advertising
campaign using appropriate trade journals, educational papers, etc., attendance
at major trade exhibitions, traditional face to face approaches by the
experienced sales team, strategies, and sales presentation materials for
prospects. We are recently added a database to our website gives our customers
the ability to purchase our products and services online.
CUSTOMERS
During 2001, we had approximately 170 customers that purchased products
from us or utilized our technical services. Our major customers include:
Gehis Ltd. (Lloyds Chemists)
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Moss Pharmacy (Uni-Chem)
Vosper ThornyCroft
Fleet Support Ltd
Vision Express
Wymondham College
Bridgewater College
Richard Huish College
Harrow College
Homerton College
Coleg Gwent
East Birmingham College
GOVERNMENT REGULATION
We have not been materially impacted by existing government regulation and
are not aware of any potential government regulation that would materially
effect our operations.
CORPORATE HISTORY
We incorporated in the State of Delaware on August 7, 2001 and acquired
our operating subsidiary, CopyData Limited, effective on August 9, 2001.
CopyData Limited was formed and commenced operations on September 25, 1995.
Effective January 8, 2002, we changed the name of CopyData Limited to iNLiTE
Computers Limited.
EMPLOYEES
We have 15 full-time employees. Of these, 2 are in management, 6 are in
sales/ marketing, 3 are in administration and 4 are in production/technical
services.
PROPERTIES
Our headquarters are located at Unit 17, The Arena, Raleigh Court,
Crawley, West Sussex RH102PD, United Kingdom, where we occupy approximately 3200
square feet of leased space under a lease that ends in April 30, 2018. Annual
lease rent under the lease is approximately $42,000.
Our administrative offices are located at Unit 15, The Arena, Raleigh
Court, Crawley, West Sussex RH102PD, United Kingdom, where we occupy
approximately 1800 square feet of space which we lease on a quarter to quarter
basis. Quarterly lease rent is approximately $6,400.
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We have additional storage facilities located at Unit 19, The Arena,
Raleigh Court, Crawley, West Sussex RH102PD, United Kingdom, where we occupy
approximately 600 square feet of space which we lease on a month to month basis.
Monthly rent is approximately $300.
We believe the space occupied by our staff is adequate for our current
needs.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors, executive officers and other significant employees and
their ages and positions are as follows:
Name of Individual Age Position with company and subsidiaries
Eric O'Brien 66 Director and Chairman of the Board
Kevin O'Brien 36 Director and President
Richard Hands 62 Director, Secretary and Treasurer
ERIC O'BRIEN has been Chairman of the Board and a director of iNLiTE
since its formation in August 2001. From 1975 to 1997, Mr. O'Brien was the
principal owner and officer of Tristar Cars and Tristar Coach line, a VIP
transport business serving airline and corporate customers that was founded by
Mr. O'Brien. Under Mr. O'Brien's guidance, Tristar grew from a $380,000 per year
business with a fleet of 5 vehicles to a $19,000,000 with more than 300
company-owned vehicles. Mr. O'Brien sold a controlling interest in Tristar to a
syndicate of businessmen headed by Charles Dunstan in 1997. Mr. O'Brien has
served as a consultant to our operating subsidiary iNLiTE Computers Limited.
KEVIN O'BRIEN has been President and a director of iNLiTE since its
formation in August 2001. Mr. O'Brien has served as Chief Executive Officer to
our operating subsidiary iNLiTE Computers Limited since September 1995.
RICHARD HANDS has been Secretary and Treasurer of iNLiTE since November
2001. From May 1998 to October 2001, Mr. Hands served as a Senior Business
Advisor under the Business Link program of Sussex Enterprise in which capacity
he provided advice to a variety of small business enterprises. From August 1992
to October 1996, Mr. Hands was Group Managing Director for the AGI Group, a
manufacturer of electronic equipment for the defense industry.
The directors serve until the next annual meeting of stockholders and
until their respective successors are elected and qualified. Officers serve at
the discretion of the Board of Directors. Eric O'Brien, who serves as a director
and our Chairman of the Board is the father of Kevin O'Brien, a director, and
our President and Chief Executive Officer of iNLiTE.
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DIRECTOR COMPENSATION
We have no established compensation arrangements with our directors but
directors may be reimbursed for their reasonable expenses incurred in connection
with the attendance at board and committee meetings.
EXECUTIVE COMPENSATION
The following table details information for iNLiTE for each of the fiscal
years ended February 28, 2001, 2000 and 1999 concerning compensation of:
- all individuals serving as our chief executive officer during the
fiscal years ended February 28, 2001, 2000 and 1999; and
- each other executive officer or key employee whose total annual salary
and bonus exceeded $100,000 for the fiscal years ended February 28,
2001, 2000 and 1999:
SUMMARY COMPENSATION TABLE
Other Annual
Annual Compensation Compensation
Salary Bonus
Name and Principal Position Year ($) ($) ($)
Kevin O'Brien, President and 2001 $52,000 $0 $7500*
Chief Executive Officer 2000 $57,000 $0 $5000**
1999 $56,000 $0 $0
* Includes health insurance premium of $1,000 and $6500 for lease of a
vehicle.
** Includes health insurance premium of $1,000 and $4000 for lease of a
vehicle.
EMPLOYMENT AGREEMENTS
We have not entered into any employment agreements.
STOCK OPTION GRANTS IN LAST FISCAL YEAR. There were no grants of stock
options during the fiscal year ended February 2001.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
INDEMNIFICATION
Our Certificate of Incorporation and Bylaws provide that none of our
directors shall have any personal liability to iNLiTE or its stockholders for
breach of fiduciary duty as a director, except:
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- for any breach of the director's duty of loyalty to iNLiTE or its
stockholders;
- for acts or failures to act not in good faith or which involve
intentional misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director obtained an improper
personal benefit.
As a result of this provision, iNLiTE and our stockholders may be unable
to obtain money damages from a director for certain breaches of his fiduciary
duty. This provision does not, however, eliminate the directors' fiduciary
responsibilities and, in appropriate circumstances, non-monetary remedies such
as injunctive or other forms of non-monetary relief will remain available under
Delaware law. The provision also does not affect a director's responsibilities
under any other laws, such as the federal securities laws or state or federal
environmental laws.
Our bylaws also provide for the protection from liability of our directors
and officers to the fullest extent authorized by the Delaware General
Corporation Law. Protection from liability may include, if we so decide, the
right of the protected party to be paid expenses in advance of any proceeding
for which protection from liability is available, provided that the payment of
these expenses incurred by a director or officer in advance of the final outcome
of a proceeding may be made only upon delivery to us of a pledge in writing by
or on behalf of the director or officer to repay all amounts paid in advance if
it is ultimately determined that the director or officer is not entitled to be
protected from liability. In addition, our certificate of incorporation provides
that our employees and other agents may be protected from liability consistent
with the Delaware General Corporation law to the extent determined by our board
of directors in its sole discretion.
To the extent protection from liability for liabilities arising under the
securities act may be permitted to our directors, officers and controlling
persons of our company under the provisions described above, or otherwise, we
have been advised that in the opinion of the SEC, this type of protection from
liability is against public policy as expressed in the securities act and is,
therefore, unenforceable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We currently lease office and warehouse space located at Unit 17, The
Arena, Raleigh Court, Crawley, West Sussex RH102PD, United Kingdom, under a
Lease between Eric O'Brien and iNLiTE Computers Limited, relating to Unit R17,
Raleigh Court, Priestly Way, Crawley, West Sussex, dated May 1, 1997. The lease
terminates on April 30, 2018. Annual rent under the lease is approximately
$42,000. As of November 30, 2001, our principal commitment is our obligation
under the lease for approximately $684,000 in future lease payments for our
warehouse and office space. Eric O'Brien, the Lessor under the lease, serves as
our Chairman of the Board and is Kevin O'Brien's father. Kevin O'Brien is our
President, Chief Executive Officer and a member of the Board of Directors.
Payments under the Lease for years ended
-24-
February 28, 2001 and February 29, 2000 were approximately $28,000 and $31,000,
respectively.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table details certain information regarding ownership of our
common stock as of April 22, 2002, and as adjusted to reflect the sale of the
shares offered by each person known by us to own beneficially more than 5% of
the outstanding common stock, by each person who is a director of the company,
by each person listed in the Summary Compensation Table above and by all
directors and officers of the company as a group.
The information contained in the table was provided by the persons listed.
The calculations are based on 9,000,000 shares of common stock outstanding on
April 22, 2002.
Percent of Shares Beneficially Owned
--------------------------------------
After Offering
Number of Shares Before if all Shares Offered
Name and Address Beneficially Owned Offering are Purchased
Kevin O'Brien 6,051,500 67.2% 67.2%
c/o iNLiTE Computers
Incorporated
Unit 17
The Arena
Raleigh Court
West Sussex RH102PD
United Kingdom
Eric O'Brien 150,000 1.7% 1.7%
c/o iNLiTE Computers
Incorporated
Unit 17
The Arena
Raleigh Court
West Sussex RH102PD
United Kingdom
Richard Hands 0 0% 0%
c/o iNLiTE Computers
Incorporated
Unit 17
The Arena
Raleigh Court
West Sussex RH102PD
United Kingdom
All Directors and Executive 6,201,500 68.9% 68.9%
Officers as a Group (3
persons)
-25-
DESCRIPTION OF SECURITIES
iNLiTE is currently authorized to issue 50,000,000 shares of common stock,
of which 9,000,000 shares are issued and outstanding, and 1,000,000 shares of
preferred stock, none of which are issued and outstanding.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share of
record on all matters which stockholders are entitled to vote, including the
election of directors. At our annual meeting, the stockholders elect the
directors by a plurality vote. Holders of our common stock are entitled to
receive, if authorized by the board of directors, dividends and other
distributions in cash, stock or property from our assets or funds legally
available for these purposes, subject to any dividend rights of holders of our
preferred stock. There are no preemptive, conversion, redemption or sinking fund
provisions applicable to our common stock. All outstanding shares of common
stock are fully paid and non-assessable. In the event of our liquidation,
dissolution or winding up, holders of common stock are entitled to share on a
pro rata basis in the assets available for distribution, subject to the rights
of the holders of our preferred stock, if any. Registered stockholders may
transfer their shares by surrendering to our transfer agent their share
certificates properly endorsed or accompanied by proper evidence of that the
shares have been transferred to them or that they authority to transfer the
shares.
PREFERRED STOCK
The Certificate of Incorporation of iNLiTE authorizes the issuance of
1,000,000 shares of preferred stock. No shares of preferred stock are
outstanding, and we have no plans to issue a new series of preferred stock. Our
Board of Directors may, without stockholder approval, issue shares of preferred
stock from time to time in one or more series and, subject to the limitations
contained in the Certificate of Incorporation and any limitations prescribed by
law, establish and designate any such series and fix the number of shares and
the relative rights, conversion rights, voting rights and terms of redemption
(including sinking fund provisions) and liquidation preferences. The issuance of
preferred stock, could, under certain circumstances, have the effect of delaying
or preventing a change in control of the company, but also may negatively affect
the rights of holders of our common stock by placing restrictions upon payments
of dividends to holders of our common stock or by diluting the voting power of
such holders.
TRANSFER AGENT
iNLiTE's transfer agent is Interwest Transfer Company, Inc., 1981 East
Murray Holladay Road, Suite 100, Salt Lake City, Utah 84117.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of common stock in the open market may
adversely affect the market price of our common stock. We have 9,000,000 shares
of common stock outstanding. Of the shares of common stock outstanding, the
2,500,000 shares offered hereby
-26-
will be available for immediate sale in the public market as of the date of this
prospectus, except that any shares acquired by our "affiliates," as that term is
defined in Rule 144 under the Securities Act, generally may be resold in the
public market only in compliance with the provisions of Rule 144 other than the
holding period required by Rule 144. All of the remaining outstanding shares of
common stock are restricted securities within the meaning of Rule 144 and may
not be sold unless they are either registered under the Securities Act or an
exemption from registration is available, or they are sold in compliance with
Rule 144.
In general, under Rule 144, as currently in effect, beginning 90 days
after the date of this prospectus, a person who has beneficially owned
restricted shares for at least one year, including a controlling person, may
sell within any three-month period a number of shares of common stock that does
not exceed a maximum number of shares. This maximum is equal to the greater of
1% of the then outstanding shares of iNLiTE's common stock or the average weekly
trading volume in the common stock during the preceding four weeks. Sales under
Rule 144 are also subject to restrictions relating to manner of sale, notice and
availability of current public information about us. In addition, under Rule
144(k) of the Securities Act, a person who is not our affiliate, has not been an
affiliate of ours within three months prior to the sale and has beneficially
owned shares for at least two years, would be entitled to sell those shares
immediately without regard to volume limitations, manner of sale provisions,
notice or other requirements of Rule 144.
SELLING STOCKHOLDERS
The following table details the name of each selling stockholder, the
number of shares owned by the selling stockholder, and the number of shares that
may be offered for resale under this prospectus. Because each selling
stockholder may offer all, some or none of the shares it holds, and because
there are currently no agreements, arrangements, or understandings with respect
to the sale of any of the shares, no definitive estimate as to the number of
shares that will be held by each selling stockholder after the offering can be
provided. The following table has been prepared on the assumption that all
shares offered under this prospectus will be sold to parties unaffiliated with
the selling stockholders. Except as indicated, none of the selling stockholders
has had a significant relationship with us within the past three years, other
than as a result of the ownership of our shares or other securities. The selling
stockholders have sole voting and investment power with their respective shares.
Percentages in the table below are based on 9,000,000 shares of our common stock
outstanding as of April 22, 2002.
SHARES NUMBER OF SHARES
OWNED PRIOR TO SHARES WHICH OWNED AFTER
THE OFFERING MAY BE SOLD IN THE OFFERING
--------------------- -------------- --------------------
NAME NUMBER PERCENT THIS OFFERING NUMBER PERCENT
- ----------------- --------- --------- -------------- ------ --------
Colin Frazer 200,000 2.22% 200,000 0 0
Robert Manning 200,000 2.22% 200,000 0 0
Richard Jones 200,000 2.22% 200,000 0 0
Ian Coupland 200,000 2.22% 200,000 0 0
Philip Drazen 200,000 2.22% 200,000 0 0
Ian Brill 200,000 2.22% 200,000 0 0
Stephen Jackson 200,000 2.22% 200,000 0 0
Nigel Manning 200,000 2.22% 200,000 0 0
Gillian Barrow 200,000 2.22% 200,000 0 0
-27-
SHARES NUMBER OF SHARES
OWNED PRIOR TO SHARES WHICH OWNED AFTER
THE OFFERING MAY BE SOLD IN THE OFFERING
--------------------- -------------- --------------------
NAME NUMBER PERCENT THIS OFFERING NUMBER PERCENT
- ----------------- --------- --------- -------------- ------ --------
Geraldine Levine 200,000 2.22% 200,000 0 0
Susan Marshall 200,000 2.22% 200,000 0 0
Acrobat Ltd. 300,000 3.33% 300,000 0 0
PLAN OF DISTRIBUTION
The selling stockholders, including any donees or pledgees who receive
shares from a selling stockholder named above, may offer their shares of common
stock at various times in negotiated transactions or otherwise, or on any
securities exchange where our common stock may be listed in the future.
The offering price for the shares has been determined by management
without the input of the selling stockholders and their representatives. The
selling shareholders will sell at a price of $0.31 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing market prices
or privately negotiated prices.
The selling stockholders may sell their shares directly to purchasers or
may use broker-dealers to sell their shares. Broker-dealers who sell the shares
may receive compensation in the form of discounts, concessions, or commissions
from the selling stockholders or they may receive compensation from purchasers
of the shares for which they acted as agents or to whom they sold the shares as
principal, or both. The compensation as to a particular broker-dealer might be
in excess of customary commissions.
The selling stockholders and these broker-dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended. Any
commissions received by such broker-dealers and any profit on the resale of the
shares sold by them while acting as principals might be deemed to be
underwriting discounts or commissions under the Securities Act of 1933.
iNLiTE has agreed to pay all fees and expenses in connection with
preparing and filing this prospectus and the registration statement of which the
prospectus forms a part. The selling stockholders will pay any brokerage
commissions and similar selling expenses, if any, attributable in connection
with the sale of the shares of common stock including stock transfer taxes due
or payable in connection with the sale of the shares.
iNLiTE has agreed to protect from liability the selling stockholders and
any underwriter of a selling stockholder against certain liabilities, including
liabilities under the Securities Act of 1933. The selling stockholders, each
individually and not jointly, will protect iNLiTE against certain liabilities,
including liabilities under the Securities Act of 1933. The selling stockholders
may agree to protect from liability any agent, dealer, or broker-dealer that
participates in transactions involving sales of the shares against certain
liabilities, including liabilities under the Securities Act of 1933.
-28-
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus and
other legal matters relating to this offering will be passed on by Piper Rudnick
LLP, New York, New York.
EXPERTS
Our financial statements at February 28, 2001 and for the years ended
February 28, 2001 and February 29, 2000 appearing in this prospectus and in the
registration statement have been audited by Mahoney Cohen & Company, CPA, P.C.,
independent auditors as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
WHERE YOU CAN GET MORE INFORMATION
This prospectus forms part of a Registration Statement on Form SB-2 that
we filed with the SEC under the Securities Act with respect to the shares and
contains all the information which we believe is significant to you in
considering whether to make an investment in our common stock. We refer you to
the Registration Statement for further information about us, our common stock
and this offering, including the full texts of exhibits, some of which have been
summarized in this prospectus. At your request, we will provide you, without
charge, a copy of any exhibits to the Registration Statement incorporated by
reference in this prospectus. If you want more information, write or call us at:
c/o iNLiTE Computers Incorporated
Unit 17
The Arena
Raleigh Court
West Sussex RH102PD
UNITED KINGDOM
011 44 1293 526 060
Attn: Kevin O'Brien
Upon the effectiveness of the Registration Statement of which this
prospectus forms a part, we will become subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended and will file reports and other
information with the SEC as required under the Exchange Act. Such reports and
other information filed by iNLiTE are available for inspection and copying at
the public reference facilities of the SEC, 450 Fifth Street, N.W., Washington,
D.C. 20459. Copies of such material may be obtained by mail from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. The SEC also
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants, that file electronically with the SEC.
-29-
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
-30-
iNLiTE COMPUTERS INCORPORATED AND SUBSIDIARY
Index
Page
Independent Auditor's Report F-1
Consolidated Balance Sheets as of February 28, 2001 and
November 30, 2001 (Unaudited) F-2
Consolidated Statements of Operations and Comprehensive
Income (Loss) for the Years Ended February 28, 2001 and February 29,
2000 and for the Nine Months Ended November 30, 2001 and 2000
(Unaudited) F-3
Consolidated Statements of Stockholders' Equity
(Deficiency) for the Years Ended February 28, 2001 and February 29,
2000 and for the Nine Months Ended November 30, 2001 (Unaudited) F-4
Consolidated Statements of Cash Flows for the Years Ended February
28, 2001 and February 29, 2000 and for the Nine
Months Ended November 30, 2001 and 2000 (Unaudited) F-5
Notes to Consolidated Financial Statements F-7
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
iNLiTE Computers Incorporated and Subsidiary
We have audited the accompanying consolidated balance sheet of iNLiTE
Computers Incorporated and Subsidiary as of February 28, 2001, and the related
consolidated statements of operations and comprehensive income (loss),
stockholders' equity (deficiency) and cash flows for the years ended February
28, 2001 and February 29, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of iNLiTE
Computers Incorporated and Subsidiary as of February 28, 2001 and the results of
their operations and their cash flows for the years ended February 28, 2001 and
February 29, 2000, in conformity with accounting principles generally accepted
in the United States of America.
/s/ Mahoney Cohen & Company, CPA, P.C.
New York, New York
July 24, 2001, except for
Note 11, as to which the
date is August 9, 2001
F-1
iNLiTE COMPUTERS INCORPORATED AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS (Note 5)
February 28, November 30,
2001 2001
----------- -----------
(Unaudited)
Current assets:
Cash $ 328 $ 51,187
Accounts receivable, net of allowance
for doubtful accounts of approximately $11,000 1,196,212 1,481,994
Inventory 518,187 350,296
Deferred offering costs -- 80,016
Prepaid expenses and other current assets 9,966 32,161
----------- -----------
Total current assets 1,724,693 1,995,654
Property and equipment, net (Notes 3 and 6) 164,656 171,271
Other assets:
Deferred tax asset (Note 8) 24,759 43,409
Other 10,293 10,179
----------- -----------
Total other assets 35,052 53,588
----------- -----------
$ 1,924,401 $ 2,220,513
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Note payable - bank (Note 4) $ 222,974 $ 210,443
Due to factor (Note 5) 827,668 587,472
Current portion of capital lease
obligations (Note 6) 14,541 12,324
Accounts payable 822,715 847,510
Due to stockholder (Note 7) 34,018 37,199
Accrued expenses and other current liabilities 78,788 185,627
----------- -----------
Total current liabilities 2,000,704 1,880,575
Capital lease obligations (Note 6) 15,480 7,469
Commitments (Note 10)
Stockholders' equity (deficiency):
Preferred stock - $.001 par value:
1,000,000 shares authorized; none issued and
outstanding -- --
Common stock - $.001 par value (Note 11):
50,000,000 shares authorized; 6,551,500 and
9,000,000 shares issued and outstanding at
February 28, 2001 and November 30, 2001,
respectively 6,552 9,000
Additional paid-in capital (Note 11) -- 553,552
Accumulated deficit (102,098) (226,665)
Accumulated other comprehensive income (loss) 3,763 (3,418)
----------- -----------
Total stockholders' equity (deficiency) (91,783) 332,469
----------- -----------
$ 1,924,401 $ 2,220,513
=========== ===========
See accompanying notes.
F-2
iNLiTE COMPUTERS INCORPORATED AND SUBSIDIARY
Consolidated Statements of Operations and Comprehensive Income (Loss)
Year Ended Nine Months Ended
-------------------------------- November 30,
February 28, February 29, --------------------------------
2001 2000 2001 2000
------------- ------------- ------------- ------------
(Unaudited) (Unaudited)
Net sales (Note 9):
Products $ 7,170,906 $ 5,215,575 $ 6,171,591 $ 5,715,818
Services -- -- 57,719 --
------------- ------------- ------------- ------------
Total net sales 7,170,906 5,215,575 6,229,310 5,715,818
Cost of goods sold 6,487,486 4,562,864 5,530,519 5,191,315
------------- ------------- ------------- ------------
Gross profit 683,420 652,711 698,791 524,503
Operating expenses 702,340 584,533 809,464 495,456
------------- ------------- ------------- ------------
Operating income (loss) (18,920) 68,178 (110,673) 29,047
Other expenses:
Loss on disposition of property and
equipment 2,809 1,042 135 2,809
Interest expense 67,120 23,073 32,790 50,384
------------- ------------- ------------- ------------
Total other expenses 69,929 24,115 32,925 53,193
------------- ------------- ------------- ------------
Income (loss) before provision for
(benefit from) income taxes (88,849) 44,063 (143,598) (24,146)
Provision for (benefit from) income
taxes (Note 8) (19,062) 9,454 (19,031) (5,181)
------------- ------------- ------------- ------------
Net income (loss) (69,787) 34,609 (124,567) (18,965)
Other comprehensive income (loss):
Cumulative translation adjustment 4,818 (1,055) (7,181) 3,875
------------- ------------- ------------- ------------
Comprehensive income (loss) $ (64,969) $ 33,554 $ (131,748) $ (15,090)
=========== ============ ============= ===========
Basic and diluted net income (loss)
per common share attributable to
common stockholders (Note 11) $ .(01) $ .01 $ .(02) $ --
=========== ============ ============= ===========
Weighted average number of shares
outstanding (Note 11) 6,551,500 6,551,500 7,566,515 6,551,500
=========== ============ ============= ===========
See accompanying notes.
F-3
iNLiTE COMPUTERS INCORPORATED AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficiency)
Accumulated
Common Stock Additional Other Stockholders'
--------------------------- Paid-In Accumulated Comprehensive Equity
Shares Amount Capital Deficit Income (Loss) (Deficiency)
------------ --------- ----------- ----------- -------------- ------------
Balance, March 1, 1999 6,551,500 $ 6,552 $ -- $ (66,920) $ -- $ (60,368)
Net income -- -- -- 34,609 -- 34,609
Cumulative translation adjustment -- -- -- -- (1,055) (1,055)
------------ --------- ----------- ----------- -------------- ------------
Balance, February 29, 2000 6,551,500 6,552 -- (32,311) (1,055) (26,814)
Net loss -- -- -- (69,787) -- (69,787)
Cumulative translation adjustment -- -- -- -- 4,818 4,818
------------ --------- ----------- ----------- -------------- ------------
Balance, February 28, 2001 6,551,500 6,552 -- (102,098) 3,763 (91,783)
Issuance of Common Stock on August 9,
2001 for cash (at $.125 per share) 2,000,000 2,000 248,000 -- -- 250,000
Issuance of Common Stock on August 9,
2001 for compensation and services (at
$1.25 per share) 448,500 448 55,552 -- -- 56,000
Shareholder contributions -- -- 250,000 -- -- 250,000
Net loss -- -- -- (124,567) -- (124,567)
Cumulative translation adjustment -- -- -- -- (7,181) (7,181)
------------ --------- ----------- ----------- -------------- ------------
Balance, November 30, 2001 (Unaudited) 9,000,000 $ 9,000 $ 553,552 $(226,665) $ (3,418) $ 332,469
============ ========= =========== =========== ============== ============
See accompanying notes.
F-4
iNLiTE COMPUTERS INCORPORATED AND SUBSIDIARY
Consolidated Statements of Cash Flows
Year Ended Nine Months Ended
----------------------------- November 30,
February 28, February 29, -----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income (loss) $ (69,787) $ 34,609 $(124,567) $ (18,965)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Stock-based compensation and services -- -- 56,000 --
Depreciation and amortization 33,290 24,784 28,636 19,102
Loss on disposition of property and
equipment 2,809 1,042 135 2,809
Deferred taxes (19,062) 9,454 (19,031) (5,181)
Change in assets and liabilities:
Accounts receivable (485,467) (297,429) (299,041) (18,621)
Inventory (222,730) (239,717) 162,148 (200,064)
Prepaid expenses and other current
assets (9,142) 10,821 (22,305) (4,521)
Other assets (2,960) (2,521) -- --
Accounts payable 325,464 39,335 33,914 144,392
Accrued expenses and other current
liabilities (50,534) 76,693 98,794 (38,852)
------------ ------------ ------------ ------------
Net cash used in operating
activities (498,119) (342,929) (85,317) (119,901)
------------ ------------ ------------ ------------
Cash flows from investing activities:
Proceeds on sale of property and
equipment 2,238 -- -- 2,238
Purchase of property and equipment (80,901) (7,827) (37,259) --
------------ ------------ ------------ ------------
Net cash provided by (used in)
investing activities (78,663) (7,827) (37,259) 2,238
------------ ------------ ------------ ------------
Cash flows from financing activities:
Proceeds from (repayments of) note payable
- bank, net 193,170 1,031 (10,060) 163,590
Proceeds from (repayments of) factor, net 434,856 434,172 (231,023) 28,311
Payments of capital lease obligations (17,967) (4,419) (9,895) (14,754)
Advances (repayments) to stockholder, net (38,683) (79,423) 3,558 (61,309)
Deferred offering costs -- -- (80,051) --
Proceeds from issuance of common stock
and contribution of capital -- -- 500,000 --
------------ ------------ ------------ ------------
Net cash provided by financing
activities 571,376 351,361 172,529 115,838
------------ ------------ ------------ ------------
Effect of exchange rate changes on cash 5,375 (527) 906 1,786
------------ ------------ ------------ ------------
Net increase (decrease) in cash (31) 78 50,859 (39)
Cash, beginning of period 359 281 328 359
------------ ------------ ------------ ------------
Cash, end of period $ 328 $ 359 $ 51,187 $ 320
============ ============ ============ ============
See accompanying notes.
F-5
iNLITE COMPUTERS INCORPORATED AND SUBSIDIARY
Consolidated Statements of Cash Flows (Concluded)
Supplemental Disclosure of Cash Flow Information
Year Ended
----------------------------------- Nine Months Ended
February 28, February 29, November 30,
----------------------------
2001 2000 2001 2000
----------------------------------------------------------------
(Unaudited) (Unaudited)
Cash paid during the period for:
Interest $ 67,120 $ 23,073 $ 32,790 $ 50,384
Supplemental Schedule of Non-Cash Investing and Financing Activities
During the years ended February 28, 2001 and February 29, 2000, the Company
incurred capital lease obligations of $35,323 and $18,085, respectively, for new
equipment.
See accompanying notes.
F-6
iNLITE COMPUTERS INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited with respect to the nine months ended November 30, 2001 and 2000)
Note 1 - Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of iNLiTE Computers Incorporated ("iNLiTE"), a U.S. holding company, and its
wholly-owned subsidiary iNLiTE Computers Limited, previously named CopyData
Limited, ("CopyData"), a U.K. company, (collectively, the "Company") (see Note
11). CopyData is engaged in the supply of computer hardware and related products
to educational and corporate markets throughout the United Kingdom. The Company
operates as a single segment. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The financial statements have been prepared on the basis of accounting
principles generally accepted in the United States of America.
Interim Financial Statements
The interim financial statements at November 30, 2001 and for the nine
months ended November 30, 2001 and 2000 are unaudited; however, in the opinion
of management, all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation have been included. Results of interim periods
are not necessarily indicative of results for the entire year.
Foreign Currency Translation
The assets and liabilities of CopyData are translated into U.S. dollars
at exchange rates on the respective balance sheet date and revenue and expenses
are translated at average exchange rates for the respective periods. The net
exchange differences resulting from these translations are recorded as a
translation adjustment which is a component of stockholders' equity. CopyData's
functional currency is the British Pound Sterling.
Inventory
Inventory is stated at the lower of cost (first-in, first-out method)
or market and consists entirely of finished goods.
Deferred Offering Costs
Professional fees associated with the registration of the Company's
common stock have been capitalized and will be charged to stockholders' equity
upon the effectiveness of the registration statement. If the registration
statement does not become effective, such costs will be expensed.
F-7
iNLITE COMPUTERS INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited with respect to the nine months ended November 30, 2001 and 2000)
Note 2 - Summary of Significant Accounting Policies (Continued)
Property and Equipment
Property and equipment is recorded at cost. Expenditures for major
additions and betterments are capitalized. Maintenance and repairs are charged
to operations as incurred. Depreciation of property and equipment is computed by
accelerated methods over the assets' estimated lives of five years. Leasehold
improvements are amortized over the lesser of the lease terms or the assets'
useful lives. Upon sale or retirement of property and equipment, the related
cost and accumulated depreciation are removed from the accounts and any gain or
loss is reflected in operations.
Revenue Recognition
Products
The Company recognizes revenue as products are shipped and title passes
to the customer.
Services
The Company recognizes service revenue when the service is completed.
Shipping and Handling Costs
The Company includes shipping and handling costs in cost of goods sold.
Warranty
Estimated future warranty obligations related to certain products are
provided by charges to operations in the period in which the related revenue is
recognized.
Advertising Expenses
Advertising expenses are charged to operations in the period in which
they are incurred. Advertising expenses for the years ended February 28, 2001
and February 29, 2000 were approximately $5,000 and $1,000, respectively.
Advertising expenses for the nine months ended November 30, 2001 and 2000
(unaudited) were approximately $8,000 and $3,000, respectively.
F-8
iNLITE COMPUTERS INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited with respect to the nine months ended November 30, 2001 and 2000)
Note 2 - Summary of Significant Accounting Policies (Continued)
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
Net Income (Loss) per Common Share
The Company calculates net income (loss) per share as required by SFAS
No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary earnings per share, basic earnings per share exclude
any dilutive effect of stock options, warrants and convertible securities.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" ("SFAS 107"), requires all entities to
disclose the fair value of financial instruments, both assets and liabilities
recognized and not recognized on the balance sheet, for which it is practicable
to estimate fair value. SFAS 107 defines fair value of a financial instrument as
the amount at which the instrument could be exchanged in a current transaction
between willing parties. At February 28, 2001 and November 30, 2001, management
believes the fair value of all financial instruments approximated carrying
value.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). The statement establishes
accounting and reporting standards for derivative financial instruments and
hedging activities related to those instruments as well as other hedging
activities. In June 1999, the FASB issued Statement of Financial Accounting
Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities
- - Deferral of the Effective Date of SFAS Statement No. 133 - an Amendment of
FASB Statement No. 133" ("SFAS 137"). SFAS 137 delays the effective date of SFAS
133 to all fiscal quarters of fiscal years beginning after June 15, 2000. Since
inception, the Company has not entered into arrangements that would fall under
the scope of SFAS 133 and related interpretations and amendments and thus, the
Company believes that SFAS 133 will not significantly affect its financial
condition and results of operations.
F-9
iNLITE COMPUTERS INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited with respect to the nine months ended November 30, 2001 and 2000)
Note 2 - Summary of Significant Accounting Policies (Continued)
New Accounting Pronouncements (Continued)
In December 1999, the Securities and Exchange Commission (the "SEC")
issued Staff Accounting Bulletin No. 101, "Revenue Recognition" ("SAB 101"). SAB
101 provides the SEC staff's views in applying generally accepted accounting
principles to selected revenue recognition issues. The Company has implemented
the guidance in SAB 101 for all periods presented.
On June 29, 2001, Statement of Financial Accounting Standards No. 141,
"Business Combinations" ("SFAS 141"), was approved by FASB. SFAS 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Goodwill and certain intangible assets, arising
from these business combinations, will remain on the balance sheet and not be
amortized. On an annual basis, and when there is reason to suspect that their
values have been diminished or impaired, these assets must be tested for
impairment, and write-downs may be necessary. The adoption of SFAS 141 will not
have an effect on the earnings and financial position of the Company.
On June 29, 2001, Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"), was approved by FASB. SFAS
142 changes the accounting for goodwill and indefinite lived intangible assets
from an amortization method to an impairment-only approach. Amortization of
goodwill, including goodwill recorded in past business combinations and
indefinite lived intangible assets, will cease upon adoption of this statement.
Identifiable intangible assets will continue to be amortized over their useful
lives and reviewed for impairment in accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of". The adoption of SFAS 142
will not have an effect on the earnings and financial position of the Company.
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This statement is effective for fiscal years
beginning after June 15, 2002. The Company is currently assessing the impact of
this new standard.
In July 2001, the FASB issued SFAS No. 144, "Impairment or Disposal of
Long-Lived Assets," which is effective for fiscal years beginning after December
15, 2001. The provisions of this statement provide a single accounting model for
impairment of long-lived assets. The Company is currently assessing the impact
of this new standard.
F-10
iNLITE COMPUTERS INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited with respect to the nine months ended November 30, 2001 and 2000)
Note 3 - Property and Equipment
Property and equipment consists of:
February 28, November 30,
2001 2001
---------------- ------------------
(Unaudited)
Office equipment $ 154,841 $ 167,285
Vehicles 5,798 17,923
Leasehold improvements 42,316 48,546
Capitalized equipment 50,357 49,799
--------------- ---------------
253,312 283,553
Less: Accumulated depreciation and
amortization 88,656 112,282
--------------- ---------------
$ 164,656 $ 171,271
=============== ===============
Note 4 - Note Payable - Bank
CopyData has a L150,000 (approximately $217,000 at February 28, 2001
and $214,000 at November 30, 2001 (unaudited)) line of credit agreement with a
commercial bank. Under the terms of the agreement, CopyData pays interest at
2.25% above the base rate (8% at February 28, 2001 and 6.25% at November 30,
2001 (unaudited)) on all amounts up to L150,000 and 4.25% above the base rate
(10% at February 28, 2001 and 8.25% at November 30, 2001 (unaudited)) on all
permitted borrowings greater than L150,000. These borrowings are guaranteed by
the principal stockholder (limited to L50,000) and another stockholder (limited
to L160,000) of the Company.
Note 5 - Due to Factor
CopyData has a financing agreement with a commercial factor for
borrowings based on a percentage of eligible accounts receivable. Under the
terms of the agreement, CopyData pays interest at 1.8% above the base rate
(7.55% at February 28, 2001). Borrowings under the line are secured by all of
CopyData's assets. These borrowings are guaranteed by the principal stockholder
(limited to L50,000).
In June 2001, CopyData replaced its existing financing agreement by
entering into a financing agreement with a new commercial factor for a maximum
L750,000 line of credit (approximately $1,071,000 at November 30, 2001
(unaudited)) which expires in June 2002. The borrowings are based on a
percentage of eligible accounts receivable. Under the terms of the agreement,
CopyData pays interest at 2.25% above the base rate (6.25% at November 30, 2001
(unaudited)). Borrowings under the line are secured by all of CopyData's assets.
These borrowings are guaranteed by the principal stockholder (limited to
L150,000).
F-11
iNLITE COMPUTERS INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited with respect to the nine months ended November 30, 2001 and 2000)
Note 6 - Capital Lease Obligations
Capital lease obligations consists of:
February 28, November 30,
2001 2001
----------------- ----------------
(Unaudited)
Capital lease obligation payable in quarterly
installments of approximately $2,700, including
interest of 17% and maturing in July 2003;
secured by specific equipment with a carrying
value of approximately $29,000 at February 28,
2001 and $23,000 at November 30, 2001
(unaudited) $ 26,883 $ 18,609
Capital lease obligation payable in monthly
installments of approximately $500, including
interest of 13% and maturing in June 2002;
secured by specific equipment with a carrying
value of approximately $10,000 at February 28,
2001 and $8,000 at November 30, 2001
(unaudited) 8,245 3,567
------------ ------------
35,128 22,176
Less: Amount representing interest 5,107 2,383
------------ ------------
30,021 19,793
Less: Current portion 14,541 12,324
------------ ------------
$ 15,480 $ 7,469
============ ============
Maturities of capital lease obligations are as follows:
Year Ending
February 28,
------------
2002 $ 14,541
2003 11,002
2004 4,478
------------
$ 30,021
============
Note 7 - Due to Stockholder
Amounts due to stockholder are non-interest bearing and due on demand.
F-12
iNLITE COMPUTERS INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited with respect to the nine months ended November 30, 2001 and 2000)
Note 8 - Income Taxes
The provision for (benefit from) income taxes consists of the
following:
Year Ended
------------------------------------ Nine Months Ended
February 28, February 29, November 30,
-----------------------------------
2001 2000 2001 2000
----------------------------------------------------------------------
(Unaudited) (Unaudited)
United Kingdom:
Deferred $ (19,062) $ 9,454 $ (19,031) $ (5,181)
========= ======= ========= ========
A reconciliation of the statutory United States income tax rate to the
effective income tax rate is as follows:
Year Ended
--------------------------- Nine Months Ended
February 28, February 29, November 30,
--------------------------
2001 2000 2001 2000
----------------------------------------------------
(Unaudited) (Unaudited)
Statutory U.S. income tax rate 34.0% 34.0% 34.0% 34.0%
Income tax rate differential between
the United States and the United
Kingdom (14.0) (13.5) (14.0) (14.0)
Stock-based compensation and
services -- -- (7.8) --
Other 1.5 1.0 1.1 1.5
---- ---- ---- ----
21.5% 21.5% 13.3% 21.5%
==== ==== ==== ====
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
Deferred income taxes result from the effects of net operating loss
carryforwards that may be applied to future taxable income. At February 28,
2001, CopyData has a net operating loss carryforward in the United Kingdom of
approximately $117,000 that can be carried forward indefinitely.
F-13
iNLITE COMPUTERS INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited with respect to the nine months ended November 30, 2001 and 2000)
Note 9 - Concentration of Credit Risk and Major Customers
Accounts Receivable
Credit risk with respect to trade receivables is limited because a
large number of geographically diverse customers make up the Company's customer
base. The Company controls credit risk through its credit evaluation process,
credit limits and monitoring procedures. Bad debt expenses have been
insignificant, and generally, the Company does not require collateral or other
security to support accounts receivable.
Major Customers
Sales to two customers accounted for approximately 35% and 42% of the
total sales for the years ended February 28, 2001 and February 29, 2000,
respectively. Sales to one and two customer(s) accounted for approximately 20%
and 44% of the total sales for the nine months ended November 30, 2001 and 2000,
respectively (unaudited).
Note 10 - Commitments
The Company leases its warehouse and office space from a stockholder of
the Company under a non-cancellable operating lease which expires in 2018. The
Company's future minimum lease payments, excluding escalation charges, are as
follows:
Year Ending
February 28,
------------
2002 $ 38,000
2003 42,000
2004 42,000
2005 42,000
2006 42,000
2007 and thereafter 506,000
--------
$712,000
========
Rent expense charged to operations for the years ended February 28,
2001 and February 29, 2000 was approximately $33,000 and $31,000, respectively.
Rent expense for the nine months ended November 30, 2001 and 2000 (unaudited)
was approximately $42,000 and $19,000, respectively. Included in rent expense
for the year ended February 28, 2001 and for the nine months ended November 30,
2001 (unaudited) is approximately $5,000 and $17,000, respectively, of amounts
paid to an unrelated party on a month-to-month lease.
F-14
iNLITE COMPUTERS INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited with respect to the nine months ended November 30, 2001 and 2000)
Note 11 - Subsequent Events
Acquisition
iNLiTE was incorporated in the State of Delaware on August 7, 2001 and
merged effectively on August 9, 2001 with CopyData, a private company
incorporated in England.
Pursuant to this merger, iNLiTE issued 7,000,000 shares of its common
stock for all of the common stock of CopyData. As a result of this acquisition,
the sole stockholder of CopyData effectively acquired iNLiTE and control
thereof. In conjunction with the exchange of shares, the then stockholder of
iNLiTE gave 448,500 shares to certain employees and consultants valued at
$56,000, the fair market value at the date of issuance. Accordingly, this
acquisition has been accounted for as a reverse acquisition for financial
statement purposes and the accompanying consolidated financial statements give
effect to the merger for all periods presented. In addition, the then sole
stockholder sold 500,000 shares of his common stock to outside investors for
$250,000, of which he contributed the proceeds to the Company.
Common Stock
On August 9, 2001, iNLiTE sold 2,000,000 shares of its common stock to
other investors for a total of $250,000.
F-15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following sets forth the estimated expenses payable in connection with
the preparation and filing of this Registration:
Securities and Exchange Commission
Registration Fee ........................... $ 72.00
Printing and Engraving Expenses.............. 10,000.00
Accounting Fees and Expenses................. 78,928.00
Legal Fees and Expenses...................... 75,000.00
Blue Sky Fees and Expenses................... 5,000.00
Transfer Agent's and Registrar's Fees and
Expenses..................................... 1,000.00
-----------
Total................................ $170,000.00
ITEM 25. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
iNLiTE is required by its By-Laws and Certificate of Incorporation to
protect from liability, to the fullest extent permitted by law, each person that
iNLiTE is permitted to protect from liability. iNLiTE's Charter requires it to
protect from liability such parties to the fullest extent permitted by Sections
102(b)(7) and 145 of the Delaware General Corporation Law.
Section 145 of the Delaware General Corporation Law permits iNLiTE to
protect from liability its directors, officers, employees or agents against
expenses, including attorney's fees, judgments, fines and amounts paid in
settlements actually and reasonably incurred in relation to any action, suit, or
proceeding brought by third parties because they are or were directors,
officers, employees or agents of the corporation. In order to be eligible for
such indemnification, however, the directors, officers, employees or agents of
iNLiTE must have acted in good faith and in a manner they reasonably believed to
be in, or not opposed to, the best interests of iNLiTE. In addition, with
respect to any criminal action or proceeding, the officer, director, employee or
agent must have had no reason to believe that the conduct in question was
unlawful.
In derivative actions, iNLiTE may only protect from liability its
officers, directors, employees and agents against expenses actually and
reasonably incurred in connection with the defense or settlement of a suit, and
only if they acted in good faith and in a manner they reasonably believed to be
in, or not opposed to, the best interests of the corporation. Indemnification is
not permitted in the event that the director, officer, employee or agent is
actually adjudged liable to iNLiTE unless, and only to the extent that, the
court in which the action was brought so determines.
II-1
iNLiTE's Certificate of Incorporation permits it to protect from liability
its directors except in the event of: (1) any breach of the director's duty of
loyalty to iNLiTE or its stockholders; (2) any act or failure to act that is not
in good faith or involves intentional misconduct or a knowing violation of the
law; (3) liability arising under Section 174 of the Delaware General Corporation
Law, relating to unlawful stock purchases, redemptions, or payment of dividends;
or (4) any transaction in which the director received an improper personal
benefit.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following securities were issued by iNLiTE Computers Incorporated
within the past three years and were not registered under the Securities Act of
1933, as amended (the "Act"). All of these securities are considered to be
restricted securities for the purposes of the Act. All certificates representing
these issued and outstanding restricted securities of the company contain
appropriate text detailing their restricted status and the company has issued
"stop transfer" instructions to its transfer agent for these securities.
1. On August 9, 2001, we entered into a share exchange with the
stockholder of CopyData Limited, a company formed under the laws of United
Kingdom and Wales ("CopyData"), pursuant to which we issued 7,000,000 shares of
our common stock in exchange for 100 shares of CopyData's capital stock, which
constitutes all of CopyData's issued and outstanding capital stock. All
7,000,000 shares of our common stock contemplated by the exchange have been
issued. Upon the consummation of the share exchange, CopyData became a wholly
owned subsidiary of iNLiTE. The issuance of these shares was exempt from the
registration requirements of the securities act under Regulation S as a
transaction involving an offer and sale made outside of the United States. In
conjunction with the exchange of shares, the then stockholder of iNLiTE gave
448,500 shares to certain employees and consultants.
2. On August 9, 2001 we issued 2,000,000 restricted shares of our common
stock to purchasers in a private offering to persons resulting in gross proceeds
of $250,000. No commissions were paid. All of the purchasers in the private
offering were non "U.S. persons" as such term is defined in Rule 902(k)(1) of
Regulation S. The issuance of these shares was exempt from the registration
requirements of the securities act under Regulation S as a transaction involving
an offer and sale made outside of the United States.
ITEM 27. EXHIBITS AND SCHEDULES.
2.1 Exchange Agreement dated as of August 9, 2001 between iNLiTE Computers
Incorporated and Kevin O'Brien
3.1 Certificate of Incorporation of iNLiTE Computers Incorporated filed
with the Secretary of State of the State of Delaware on August 7, 2001
3.2 By-laws of iNLiTE Computers Incorporated
4.1 Form of Common Stock Certificate of iNLiTE Computers Incorporated
II-2
4.2 Form of Preferred Stock Certificate of iNLiTE Computers Incorporated
5 Opinion of Piper Rudnick LLP*
10.1 Form of Employment Contract
10.2 Syncline Industrial Properties Limited and Raleigh Court (Discovery
Parle) Limited and Audio Connections Limited, Lease, dated 11th December 1998.
10.3 Counterpart Lease between Eric O'Brien and CopyData, relating to Unit
R17, Raleigh Court, Priestly Way, Crawley, West Sussex, dated May 1, 1997
10.4 Service Level Agreement between CopyData and Gehis Limited, dated
January 4, 2001
10.5 All Assets Debenture given by CopyData in favor of GLE Invoice
Finance Ltd. Regarding CopyData Limited, dated June 18, 2001
10.6 GLE Invoice Finance Ltd. Factoring Agreement, executed June 18, 2001
10.7 Form of Subscription Agreement
21 Subsidiaries of the Company
23.1 Consent of Mahoney Cohen & Company, CPA, P.C.
* To be filed by amendment.
ITEM 28. UNDERTAKINGS.
The undersigned Registrant undertakes:
(a)(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually
or taken as a whole, represent a fundamental change in the
information detailed in the Registration Statement; and
(iii) To include any significant information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any significant change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be considered to be
a new registration statement
II-3
relating to the securities offered therein, and the offering of the securities
at that time shall be considered to be the initial bona fide offering of the
securities.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant pledges to supplement the prospectus, after
the expiration of the subscription period, to detail the results of the
subscription offer, the transactions by the underwriter, during the subscription
period, the amount of unsubscribed securities to be purchased by the
underwriter, and the terms of any subsequent reoffering of the securities. If
any public offering by the underwriter is to be made on terms differing from
those set forth on the cover page of the prospectus, a post-effective amendment
will be filed to set forth the terms of such offering.
(c) "Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as express in the Act and is, therefore, unenforceable.
(d)(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post- effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and authorized this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on the 29th day of April, 2002.
iNLiTE COMPUTERS INCORPORATED
By /s/ Kevin O'Brien
------------------------------
Kevin O'Brien, President
Each person whose signature appears below hereby constitutes and appoints
Kevin O'Brien his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying all that said attorney-in-fact and agent or his substitute or
substitutes, or any of them, may lawfully do or cause to be done by virtue
hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/Kevin O'Brien Director and President April 29, 2002
- ----------------------------- (Principal Executive Officer)
Kevin O'Brien
/s/Kevin O'Brien Director and Chairman April 29, 2002
- ------------------------------
Eric O'Brien
/s/Kevin O'Brien Secretary and Treasurer April 29, 2002
- ----------------------------- (Principal Financial and
Richard Hands Accounting Officer)
II-5