INX Announces Delay of Fourth Quarter and Year End Results; Comments on Business
March 25 2010 - 8:52PM
Business Wire
INX Inc. (NASDAQ: INXI) (the “Company”; or “INX”) today
announced that it will delay its fourth quarter earnings release
and will not file its Form 10-K for the fiscal year ended December
31, 2009 by March 31, 2010. The financial results release is being
delayed in order to allow the Company additional time for the
reexamination of the timing of its revenue recognition under
Emerging Issues Task Force No. 00-21 ("EITF 00-21"), Revenue
Arrangements with Multiple Deliverables, included in the Accounting
Standards Codification under ASC 605-25.
DELAY OF PUBLICATION OF RESULTS:
During the process of closing its books for 2009, the Company
identified errors in the application of EITF 00-21, including the
identification of and accounting for deliverables under
multi-element arrangements, including the treatment of individual
product items as separate deliverables under multi-element
arrangements, and the Company's application of the residual method
of revenue recognition for such multi-element arrangements. The
Company is in the process of evaluating and quantifying the effect
of these errors on the timing of revenue recognized in its current
and previously issued financial statements.
The Company is working diligently on this matter and will make a
further announcement in a subsequent press release regarding the
timing of the release of financial results and the effect of any
adjustments. The Company intends to file its Annual Report on Form
10-K as soon as practicable. The Company intends to file a Form
12b-25 with the Securities and Exchange Commission requesting an
automatic extension of up to fifteen days to file the Form
10-K.
Commenting on the delay of the financial results, James Long,
INX's Chairman and CEO, said "Unfortunately we must delay the
filing of our Annual Report on Form 10-K and the announcement of
our financial results for the reasons stated. We are hopeful that
we can resolve the issues causing this delay within the 15-day
automatic extension period, and we are making every effort to do
so."
BUSINESS UPDATE:
While the Company is not prepared to announce results for its
most recently completed quarter ended December 31, 2009, in the
interest of transparency, and in an effort to provide investors
with as much meaningful information as possible at this time, the
Company is providing the information below, which information the
Company does not expect to be impacted by the issues related to the
application of EITF 00-21.
For the Company's fourth quarter ended December 31, 2009
(unaudited):
- The Company currently expects to
record a non-cash goodwill impairment charge of approximately $5
million in the quarter related to goodwill associated with past
acquisitions.
- Customer product contract
(order) bookings, which the Company believes provides an indication
of the general trend in customer demand and business activity, were
sequentially flat with the third quarter and increased by
approximately 9% as compared to the prior year period.
- Product deliveries by Cisco
Systems, the Company's primary product supplier, improved somewhat
during the quarter, and net billings to customers for product
shipments increased by approximately 27% compared to the third
quarter, in large part due to Cisco Systems making progress
reducing its larger than normal backlog related to extended lead
times on certain products.
- Cisco Systems' product shipments
during the quarter accelerated late in the quarter. At the same
time, partial shipments of orders made up a larger than normal
portion of total shipments due to continued product availability
issues. These two factors together adversely impacted engineering
utilization and the ability to perform certain professional
services projects because of the lack of availability of the
complete product set required to implement the total solution, or
the required product arriving at the customer location late in the
quarter.
- While we believe that Cisco
Systems made substantial progress on shipping previously
backordered products during the quarter, extended lead times for
many products continued through the end of the fourth quarter and
continue at this time.
- The Company cannot provide
comparative revenue data for the fourth quarter until the issues
are resolved regarding the application of applying EITF 00-21.
As of December 31, 2009 (unaudited):
- Cash and cash equivalents were
approximately $13.2 million, compared to $12.1 million at September
30, 2009 and $10.9 million at December 31, 2008.
- Short-term debt is expected to
be approximately $209,000, compared to $198,000 at September 30,
2009 and $168,000 at December 31, 2008.
- Long-term debt is expected to be
approximately $222,000, compared to $267,000 at September 30, 2009
and $163,000 at December 31, 2008.
Commenting on the Company's business update announcement, Mr.
Long said "Customer demand has generally improved during the past
several months as we had expected, but some of that improvement in
customer demand has been offset by continued product availability
issues from our primary product supplier, Cisco Systems. Recent
contract bookings and our sales pipeline have continued to improve,
and sales staff input from customers is pointing towards continued
improvement. We believe the product availability issue that we have
been experiencing recently, together with Cisco's recent positive
guidance, are other indicators that the customer demand improvement
we are seeing is occurring on a much broader scale, which is
encouraging from a longer-term perspective. Cisco product
availability has improved somewhat, but continues to be an issue,
and information provided to us by Cisco indicates that they expect
continued improvement on this issue over the coming months."
SAFE HARBOR STATEMENT:
The statements contained in this document that are not
statements of historical fact including but not limited to,
statements identified by the use of terms such as “anticipate,”
“appear,” “believe,” “could,” “estimate,” “expect,” “hope,”
“indicate,” “intend,” “likely,” “may,” “might,” “plan,” “pointing
towards,” “potential,” “project,” “seek,” “should,” “will,”
“would,” and other variations or negative expressions of these
terms, are “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on current expectations and
are subject to a number of risks and uncertainties. The expected
financial results and other financial information contained in this
press release are preliminary and are subject to change until the
point in time at which the Company files its Annual Report on Form
10-K for the year ended December 31, 2009 with the Securities and
Exchange Commission.
The actual results of the future events described in the
forward-looking statements could differ materially from those
stated in the forward-looking statements due to numerous factors,
including:
- Events that occur after the date
of this announcement, as the expected financial results and other
financial information contained herein are subject to change based
upon events or changes to circumstances subsequent to this
announcement until the date that the Company files its Annual
Report on Form 10-K with the Securities and Exchange
Commission.
- Market and economic conditions,
including capital expenditures by enterprises for network,
telephone communications and data center systems products and
services.
- Credit and financial market
conditions that could impact customers' ability to finance
purchases.
- Whether the Company obtains
anticipated contracts and other business, the timing of obtaining
same, and the size and profitability of such contracts and
business.
- The Company's ability to obtain
sufficient volumes of products for resale and maintain its
relationship with its key supplier, Cisco Systems, Inc.
- Unexpected customer contract
cancellations.
- Unexpected losses related to
customer credit risk.
- Uncertainties related to rapid
changes in the information and communications technology
industries.
- Catastrophic events.
- Other risks and uncertainties
set forth from time to time in the Company's public statements and
its most recent Annual Report filed with the SEC on Form 10-K, as
such may be amended from time to time, which the Company makes
available on its web site in PDF format at
www.inxi.com/Information/sec.asp.
Recipients of this document are cautioned to consider these
risks and uncertainties and to not place undue reliance on these
forward-looking statements. All information in this press release
is as of the date of this press release, and the Company expressly
disclaims any obligation or undertaking to update or revise any
forward-looking statement contained herein to reflect any change in
the Company's expectations with regard thereto, or any change in
events, conditions or circumstances upon which any statement is
based.
ABOUT INX INC.:
INX Inc. (NASDAQ: INXI) is a leading U.S. provider of IP network
communications and data center solutions for enterprise
organizations. INX offers a suite of advanced technology solutions
focused around the entire life-cycle of enterprise IP network
communications and data center infrastructure. Service offerings
are centered on the design, implementation and support of network
infrastructure, including routing and switching, wireless,
security, unified communications, and data center solutions such as
storage and server virtualization. Customers include enterprise
organizations such as corporations, as well as federal, state and
local governmental agencies. Because of its focus, expertise and
experience implementing and supporting advanced technology
solutions for enterprises, INX is well positioned to deliver
superior solutions and services to its customers. Additional
information about INX can be found on the Web at www.inxi.com.
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