SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 12, 2002
ION NETWORKS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 000-13117 22-2413505
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(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
1551 South Washington Avenue
Piscataway, New Jersey 08854
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(Address of Principal Executive Offices) (Zip Code)
(Registrant's telephone number, including area code): (732) 529-0100
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
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On November 12, 2002, ION Networks, Inc. (the "Company"), issued a press
release announcing its results for the quarter ended September 30, 2002.
A copy of the press release, which is incorporated by reference herein and
made a part hereof, is filed with this Current Report on Form 8-K as Exhibit
99.1.
Item 7. Financial Statements and Exhibits.
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(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
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Exhibit No. Description
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99.1 Press Release of the Company dated November 12, 2002,
announcing its results for the quarter ended
September 30, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 14, 2002
ION NETWORKS, INC.
/s/ Ted Kaminer
By: ______________________________
Ted Kaminer
Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
EXHIBIT INDEX
Exhibit No. Description
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99.1 Press Release of the Company dated November 12, 2002.
ION NETWORKS' REVENUE INCREASES
59 PERCENT FROM PREVIOUS QUARTER
COMPANY'S GROSS MARGIN CONTINUES TO EXPAND AND SG&A DECLINES
Piscataway, NJ. --(BUSINESS WIRE)-November 12, 2002-ION Networks, Inc. (Nasdaq:
IONN), a leading provider of infrastructure security solutions that protect
critical information and infrastructure from internal and external security
threats, today reported its financial results for the three-month period ended
September 30, 2002. The Company reported net sales of $1.5 million, an increase
of $562,000 or 59 percent over the previous quarter and an increase of $434,000
or 40 percent over the same period of the previous year. The increase in
revenue during the quarter ended September 30, 2002 occurred while gross margin
improved to 63.4% and selling, general and administrative expenses were reduced
by $522,000 or 24%. As a result, the net loss for the quarter fell to $1.4
million or $0.06 per share from $2.1 million or $0.09 per share in the prior
quarter and $2.3 million or $0.13 per share in the three month period ended
September 30, 2001.
Three months Ended Six Months Ended
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9/30/02 9/30/01 6/30/02 9/30/02 9/30/01
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Net sales $1,522 $1,088 $960 $2,482 $3,022
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Gross margin percentage 63.4% 47.4% 62.9% 63.2% 52.7%
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Net loss $ (1,357) $ (2,348) $ (2,052) $ (3,409) $ (4,340)
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Net loss per share $ (0.06) $ (0.13) $ (0.09) $ (0.15) $ (0.24)
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Basic and diluted shares 22,608 18,203 22,601 22,604 18,203
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In 000s except per share amounts
Kam Saifi, ION Network's president and CEO, commented, "ION's new business model
based on its leading infrastructure security solutions has solidified, and we
have made positive progress with respect to our goal of reaching profitability.
Our management team has successfully refocused the company's sales and marketing
effort to fortify existing client relationships and aggressively cultivate new
vertical markets, while implementing cost management measures to align our
expenses relative to the market. In the early stages of our marketing campaign,
ION's quarter-to-quarter revenue growth exceeded 50% while gross margin improved
and operating expenses declined. These successes are highly encouraging,
especially considering that the general U.S. economic recovery has yet to gain
any measurable level of momentum. Growing interest in infrastructure security,
as evidenced by the enthusiastic receptions we receive from existing and
potential clients, is providing improved visibility going forward."
ION's cost containment efforts resulted in a reduction of $522,000 or 24 percent
in selling, general and administrative costs from the previous quarter. In
addition to 'right-sizing' the Company's cost structure, management initiated a
program to establish alternate sales channels, which is designed to replace
fixed personnel costs with costs tied directly to the level of revenue. It also
allows for an efficient expansion of sales distribution into new verticals.
The Company's refocused marketing effort on software and hardware products has
also enabled it to expand its gross margin over the last six months. ION's
gross margin averaged 63 percent over the last two quarters, which compares to
53 percent for the comparable period of the prior year. ION management intends
to further evolve its solutions in an effort to continue to lower costs and
address the needs of the enterprise market.
Mr. Saifi concluded, "With our operational costs tightly managed and our sales
network coordinated for increased market penetration, we are optimistic about
ION's future. Concerns regarding the vulnerability of critical corporate data
and its exposure to infrastructure security breaches are building. While,
economic conditions continue to impact the length of the sales cycle, demand for
effective solutions, such as ION's, is burgeoning and is gaining priority
attention. As the economic recovery progresses, our sales cycle should improve
and support our growth."
CONFERENCE CALL
ION Networks will host a conference call at 5 p.m. (EST) today, Tuesday,
November 12, to discuss the Company's financial results for the quarter. The
conference call can be accessed by dialing 800-834-5978 and providing the
following reservation number: 21004454. It is recommended that participants
call at least 10 minutes before the call is scheduled to begin. The conference
call can also be accessed on the Internet through www.ion-networks.com.
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Participants wishing to use the Internet to participate in the conference call
should allow sufficient time to register, download and install any necessary
audio software prior to the commencement time.
A replay of the conference call in its entirety will be available approximately
one hour after its completion through ION's website. Directions for accessing
the replay will be displayed in the Investor section of the website.
ABOUT ION NETWORKS
ION Networks, Inc. is a leading provider of infrastructure security and
management solutions. The ION Secure suite helps customers protect critical
infrastructure and maximize operational efficiency while lowering operational
costs. ION Networks' customers include AT&T, Bank of America, British Telecom,
Citigroup, Entergy, Fortis Bank, Oracle, Qwest, SBC, Sprint and the U.S.
Government. Headquartered in Piscataway, New Jersey, the Company has installed
tens of thousands of its products worldwide. More information can be obtained
from www.ion-networks.com.
ION Networks(TM) and ION Secure(TM) are trademarks of ION Networks,
Incorporated. All other trademarks and registered trademarks in this document
are the properties of their respective owners.
Any statements contained in this press release that do not describe historical
facts may constitute forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. Forward-looking statement
include, but are not limited to, statements concerning our plans for reaching
profitability, fortifying existing client relationships, cultivating new
markets, expanding sales distribution, reducing our expenses, refocusing our
marketing effort, increasing market penetration, improving sales cycle and
growth, as well as growing interest in infrastructure security. Any
forward-looking statements contained herein are based on current expectations,
but are subject to a number of risks and uncertainties. The factors that could
cause actual future results to differ materially from the forward-looking
statements include the following: fluctuations in customer demand; changes in
the Company's sales force; fluctuations in spending on technology generally and
security solutions in particular; sufficiency of operating capital; general
economic conditions (both domestic and abroad); the rapid technological change
which characterizes the Company's markets, the risks associated with
competition; the risks associated with the expansion of the Company's
distribution channels; the risk of new product introductions and customer
acceptance of new products; the risks associated with international sales as the
Company expands its markets; and the ability of the Company to compete
successfully in the future, as well as other risks identified in the Company's
Securities and Exchange Commission Filings, including but not limited to those
appearing within the Company's most recent Form 10-KSB and amendments thereto
and our quarterly report on Form 10-QSB for the quarterly period ended June 30,
2002, as amended, filed with the Securities and Exchange Commission on August
21, 2002.
****Financial Tables Follow****
ION NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended For the Six Months Ended
September 30, September 30,
2002 2001 2002 2001
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Net sales $ 1,522,336 $ 1,088,380 $ 2,482,468 $ 3,021,822
Cost of sales 557,564 572,576 914,068 1,430,176
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Gross margin 964,772 515,804 1,568,400 1,591,646
Research and development expenses 280,893 158,622 516,202 508,497
Selling, general and administration 1,614,473 2,250,262 3,751,441 4,535,285
Restructuring charges 154,370 0 154,370 0
Depreciation and amortization 281,596 472,688 563,567 943,964
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Total operating expenses 2,331,332 2,881,572 4,985,580 5,987,746
Loss from operations (1,366,560) (2,365,768) (3,417,180) (4,396,100)
Interest income 15,663 26,250 25,197 73,782
Interest expense (6,255) (8,508) (11,502) (17,624)
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Loss before income tax expense (1,357,152) (2,348,026) (3,403,485) (4,339,942)
Income tax expense 0 0 5,301 0
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Net loss $(1,357,152) $(2,348,026) $(3,408,786) $(4,339,942)
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PER SHARE DATA
Net loss per share
Basic and diluted $ (0.06) $ (0.13) $ (0.15) $ (0.24)
Weighted average number of common
shares outstanding
Basic and diluted 22,608,273 18,203,301 22,604,408 18,203,301
ION NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, March 31,
2002 2002
ASSETS
Current Assets
Cash and cash equivalents $1,723,599 $4,050,657
Accounts receivable, net of allowance for doubtful
accounts of $202,626 and $149,999 respectively 929,468 1,521,230
Inventory, net 1,321,126 1,024,126
Prepaid expenses and other current assets 232,629 492,609
Related party notes receivable 83,657 83,657
Total current assets 4,290,479 7,172,279
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Restricted cash 125,700 125,700
Property and equipment at cost, net of accumulated depreciation of
$2,965,949 and $2,684,152, respectively 597,751 796,625
Capitalized software, less accumulated amortization of $3,755,028 and
$3,412,040, respectively 858,950 908,464
Other assets 71,442 6,653
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Total assets $5,944,322 $9,009,721
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital leases $ 74,426 $ 74,426
Current portion of long-term debt 12,148 33,444
Accounts Payable 1,076,810 917,846
Accrued expenses 345,595 373,766
Accrued payroll and related liabilities 293,874 353,590
Deferred income 176,292 115,927
Sales tax payable 118,829 188,435
Other current liabilities 102,909 73,923
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Total current liabilities 2,200,883 2,131,357
Long-term portion of capital leases 106,754 146,540
Long-term debt, net of current portion - 4,597
Total stockholders' equity 3,636,685 6,727,227
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Total liabilities and stockholders' equity $5,944,322 $9,009,721
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