·

Total revenue decreased 19.6% to $57.9 million from $71.9 million.

·

Product revenue decreased 21.4% to $46.8 million from $59.6 million, with gross profit margin on product revenue increasing to 21.8% compared to 16.9%.

·

Service revenue decreased 10.7% to $11.0 million from $12.4 million, with gross profit margin on service revenue decreasing to 25.1% compared to 26.4%.

·

Gross profit on total revenue decreased 2.7% to $13.0 million compared to $13.3 million, with gross profit margin on total revenue of 22.4%, compared to 18.5%.

·

Operating loss was $317,000 compared to operating income of $731,000.

·

Net loss was $375,000 compared to net income of $380,000.

·

Diluted net loss per share was $0.04 compared to diluted net income per share of $0.04.

·

Non-GAAP (see attached schedule which reconciles non-GAAP to GAAP) net income was $190,000 compared to $1.2 million; and non-GAAP diluted earnings per share was $0.02 compared to $0.13.

 
 

·

Total revenue decreased 11.3% to $173.5 million from $195.6 million.

·

Product revenue decreased 14.7% to $137.8 million from $161.5 million, with gross profit margin on product revenue increasing to 20.5% compared to 18.0%.

·

Service revenue increased 4.8% to $35.7 million from $34.1 million, with gross profit margin on service revenue decreasing to 27.4% compared to 29.9%.

·

Gross profit on total revenue decreased 3.1% to $38.0 million compared to $39.2 million, with gross profit margin on total revenue of 21.9%, compared to 20.1%.

·

Operating loss was $342,000 compared to operating income of $4.4 million.

·

Net loss was $558,000 compared to net income of $2.5 million.

·

Diluted net loss per share was $0.06 compared to diluted net income per share of $0.29.

·

Non-GAAP (see attached schedule which reconciles non-GAAP to GAAP) net income was $1.2 million compared to $5.3 million; and non-GAAP diluted earnings per share was $0.14 compared to $0.61.

·	Events that occur after the date of this announcement, as the results 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 Form 10-Q 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 attract and retain key management, sales and technical staff, and to successfully manage its technical employee resources, which is key to maintaining gross margin on services revenue.

·	The Company's ability to finance its business operations.

·	Risks associated with the Company’s entry into new markets and the ability of the Company to increase revenues and gain market share in recently opened new markets.

·	Risks associated with the Company’s introduction of offerings of additional areas of technology.

·	The Company's ability to obtain sufficient volumes of products for resale and maintain its relationship with its key supplier, Cisco Systems, Inc.

·	The continuance of, and the Company’s ability to qualify for, sales incentive programs from its key suppliers.

·	The Company's ability to identify suitable acquisition candidates and successfully integrate acquired companies, and the risk of unexpected liabilities or loss of customers and other unforeseeable risks associated with making acquisitions.

·	The Company’s ability to grow its revenues in newly opened and/or acquired offices in new markets.

·	The Company’s ability to manage its business in a manner that results in increased revenues without a proportional increase in the costs of operating its business.

·	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.

		Three Months Ended September 30,								Nine Months Ended September 30,
		2009				2008				2009				2008
GAAP net income (loss)		$	(375	)		$	380			$	(558	)		$	2,504
Equity-based compensation expense from continuing operations			471				479				1,614				1,205
Non-cash income tax expense from continuing operations			46				391				66				1,586
Discontinued operations			48				(9	)			104				(23	)
Non-GAAP net income		$	190			$	1,241			$	1,226			$	5,272
Non-GAAP net income per diluted share		$	0.02			$	0.13			$	0.14			$	0.61
Shares used in computing non-GAAP net income per diluted share			8,927,549				9,338,353				8,818,793				8,579,268

 

		Three Months Ended September 30,
		2009				2008
						(As Restated)
Revenue:
Products		$	46,813			$	59,576
Services			11,046				12,366
Total revenue			57,859				71,942
Cost of products and services:
Products			36,620				49,509
Services			8,272				9,107
Total cost of products and services			44,892				58,616
Gross profit			12,967				13,326
Selling, general and administrative expenses			13,284				12,595
Operating (loss) income			(317	)			731
Interest and other income, net			83				106
(Loss) income from continuing operations before income taxes			(234	)			837
Income tax expense			93				466
Net (loss) income from continuing operations			(327	)			371
(Loss) income from discontinued operations, net of income taxes			(48	)			9
Net (loss) income		$	(375	)		$	380
Net (loss) income per share:
Basic:
(Loss) income from continuing operations		$	(0.04	)		$	0.04
Loss from discontinued operations, net of income taxes			—				—
Net (loss) income per share		$	(0.04	)		$	0.04
Diluted:
(Loss) income from continuing operations		$	(0.04	)		$	0.04
Loss from discontinued operations, net of income taxes			—				—
Net (loss) income per share		$	(0.04	)		$	0.04
Shares used in computing net (loss) income per share:
Basic			8,927,549				8,746,691
Diluted			8,927,549				9,338,353

 

		Nine Months Ended September 30,
		2009				2008
						(As Restated)
Revenue:
Products		$	137,834			$	161,497
Services			35,706				34,079
Total revenue			173,540				195,576
Cost of products and services:
Products			109,619				132,457
Services			25,926				23,894
Total cost of products and services			135,545				156,351
Gross profit			37,995				39,225
Selling, general and administrative expenses			38,337				34,850
Operating (loss) income			(342	)			4,375
Interest and other income (expense), net			100				(65	)
(Loss) income from continuing operations before income taxes			(242	)			4,310
Income tax expense			212				1,829
Net (loss) income from continuing operations			(454	)			2,481
(Loss) income from discontinued operations, net of income taxes			(104	)			23
Net (loss) income		$	(558	)		$	2,504
Net (loss) income per share:
Basic:
(Loss) income from continuing operations		$	(0.05	)		$	0.31
Loss from discontinued operations, net of income taxes			(0.01	)			—
Net (loss) income per share		$	(0.06	)		$	0.31
Diluted:
(Loss) income from continuing operations		$	(0.05	)		$	0.29
Loss from discontinued operations, net of income taxes			(0.01	)			—
Net (loss) income per share		$	(0.06	)		$	0.29
Shares used in computing net (loss) income per share:
Basic			8,818,793				7,958,966
Diluted			8,818,793				8,579,268

 

		September 30, 2009				December 31, 2008
ASSETS
Current Assets:
Cash and cash equivalents		$	12,116			$	10,937
Accounts receivable, net of allowance of $895 and $735			45,807				52,866
Inventory, net			1,681				2,406
Other current assets			1,408				1,275
Total current assets			61,012				67,484
Property and equipment, net of accumulated depreciation of $6,957 and $5,429			4,576				5,207
Goodwill			13,954				12,751
Intangible assets, net of accumulated amortization of $2,943 and $2,346			1,554				1,852
Other assets			53				—
Total assets		$	81,149			$	87,294
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	5,721			$	5,170
Accounts payable - floor plan			31,294				40,002
Accrued expenses			6,910				6,899
Current portion of capital lease obligations			198				77
Notes payable			—				91
Other current liabilities			1,042				1,072
Total current liabilities			45,165				53,311
Long-term Liabilities:
Long-term portion of capital lease obligations			267				163
Other long-term liabilities			608				250
Total long-term liabilities			875				413
Commitments and contingencies (Note 9)
Stockholders’ Equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized, no shares issued			—				—
Common stock, $.01 par value, 15,000,000 shares authorized, 8,975,403 and 8,709,304 shares issued and outstanding			89				87
Additional paid-in capital			52,837				50,742
Accumulated deficit			(17,817	)			(17,259	)
Total stockholders’ equity			35,109				33,570
Total liabilities and stockholders’ equity		$	81,149			$	87,294