As filed with the Securities and Exchange Commission on March 26, 2001.
Commission File No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Integrated Spatial Information Solutions, Inc.
(Name of small business issuer in its charter)
COLORADO 7373 84-0868815
--------------------------- ------------------------- ----------------
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Classification Identification
or organization) Code Number) Number)
19039 East Plaza Drive, Suite 245
Parker, Colorado 80134
(720) 851-0716
------------------------------------------------------
(Address and Telephone Number of Registrant's Principal
Executive Office)
Frederick G. Beisser, Vice President - Finance
Integrated Spatial Information Solutions, Inc.
19039 East Plaza Drive, Suite 245
Parker, Colorado 80134
(720) 851-0716
-------------------------------------------------------
(Name, Address and Telephone Number of Agent for Service)
With copies to:
Lester R. Woodward, Esq.
Robert P. Attai, Esq.
Davis Graham & Stubbs LLP
1550 Seventeenth Street, Suite 500
Denver, Colorado 80202
(303) 892-9400
Approximate date of commencement of proposed sale to public:
From time to time after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please 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 462(d) 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
Calculation of Registration Fee
================================================================================
Title of Securities Proposed Maximum Amount of
to be Registered Aggregate Offering Price Registration Fee
- --------------------------------------------------------------------------------
Subscription Rights(1) $0 $ 0
- --------------------------------------------------------------------------------
Common Stock, no par value $2,800,000(2) $700
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(1) Evidencing the rights to subscribe for shares of common stock. Pursuant to
Rule 457(g), no separate registration fee is required for the rights since
they are being registered in the same registration statement as the common
stock underlying the rights.
(2) Consists of _____ shares to be offered by the registrant pursuant to the
rights offering at a price of $__ per share and ____ shares to be offered
by the registrant to Human Vision L.L.C. pursuant to the conversion of a
promissory note at a price of $___ per share. Estimated solely for the
purpose of calculating the registration fee in accordance with Rule 457(o)
under the Securities Act of 1933 on the estimated maximum offering price of
the common stock.
The registrant hereby 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.
Subject to Completion, dated March 26, 2001
PROSPECTUS
Integrated Spatial Information Solutions, Inc.
Common Stock
______ Shares
Integrated Spatial Information Solutions, Inc. is distributing to the
holders of our existing common stock rights to purchase up to an aggregate of
____ shares of its common stock, no par value. If this offering is fully
subscribed, then we will receive a total of $2,800,000. The rights are not
transferable and will not be listed for trading on any stock exchange.
Each shareholder of record as of the close of business on April 30, 2001
will receive a right to purchase ___ share[s] of our common stock at a price of
$___ for each share of common stock owned by the shareholder on that date.
Shareholders who fully exercise their basic subscription rights will be offered
over-subscription rights to purchase any shares remaining available for purchase
after the exercise by other shareholders of their basic subscription rights.
Shareholders may exercise their subscription rights beginning on the date
of this prospectus. The rights will expire if they are not exercised by 5:00
p.m., Mountain Standard Time, on ________, 2001. All proceeds received in this
rights offering will be deposited with Computershare Investor Services as the
escrow agent. If the shares available under the rights are not fully subscribed
by the expiration date, we may offer the remaining available shares to investors
who are not currently shareholders.
We are concurrently registering ____ shares of our common stock, no par
value, for issuance upon conversion of a promissory note executed in favor of
Human Vision L.L.C. at a price of $____ per share.
Our common stock is listed on the Nasdaq Over-the-Counter Bulletin Board
under the symbol "ISSS." On March 23, 2001, the closing price of a share of our
common stock on the Over-the-Counter Bulletin Board was $0.1094.
Per Share Total
--------- -----
Offering price........................... $______ $_______
Estimated Expenses....................... $______ $_______
Net Proceeds to ISIS..................... $______ $_______
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 3.
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 this prospectus. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. We
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 it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
The date of this prospectus is ___, 2001.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of our common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.
Table of Contents
Prospectus
Summary................................................................ 1
Risk Factors........................................................... 3
Use of Proceeds........................................................ 6
Business............................................................... 7
Description of Property................................................ 11
Legal Proceedings...................................................... 11
Management's Discussion and Analysis................................... 12
Description of Securities to be Registered............................. 19
Market for Common Stock................................................ 19
Security Ownership of Certain Beneficial Owners and Management......... 20
Determination of Offering Price........................................ 21
Plan of Distribution................................................... 22
Directors and Executive Officers....................................... 27
Certain Relationships and Related Transactions......................... 29
Executive Compensation................................................. 31
Cautionary Statement Concerning Forward-Looking Statements............. 34
Validity of Securities................................................. 34
Experts................................................................ 35
Disclosure of Commission Position for Securities Act Liabilities....... 35
Where You Can Find More Information.................................... 35
Index to Financial Statements.......................................... F-1
Our executive offices are located at 19039 East Plaza Drive, Suite 245, Parker,
Colorado 80134, and our telephone number is (720) 851-0716. We also have a web
site located at http://www.isis.cc. Any information that is included on or
linked to our web site is not a part of this prospectus.
Until ________,2001, (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as an
underwriter and with respect to unsold allotments or subscriptions.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
those set forth under "Risk Factors" and elsewhere in this prospectus.
The Company
Integrated Spatial Information Solutions ("ISIS") is an information
technology company specializing in the design, implementation and integration of
information management solutions. These include design and development of
computer systems that handle data that may come from or be presented in the
format of a map. Typically we are involved in the design, specification and
implementation of various elements of these systems including software
applications, databases and warehouses and secure data communication networks
that manage, access and use the geographic information assets of our clients
through internet-enabled applications and delivery systems.
The Rights Offering
Grant of basic subscription rights....... All shareholders of record as of
April 30, 2001 will be granted a
non-transferable right to purchase
_____ share[s] of our common stock
at $___ per share for each share of
common stock held by them as of the
record date. We will not issue
fractional shares. We will round
the rights upward to the nearest
whole share.
Shares outstanding/authorized............ As of March 26, 2001, we had
19,546,525 shares of common stock
issued and outstanding. Assuming
full subscription, after the rights
offering, we will have ______
shares issued and outstanding.
Grant of over-subscription rights........ Shareholders who fully exercise
their basic subscription rights
will be offered over-subscription
rights to purchase any shares
remaining available for purchase
after the exercise by other
shareholders of their basic
subscription rights. If
over-subscription requests exceed
the number of shares that are
available, we will allocate the
available shares pro rata among
those rights holders who
over-subscribed. If
over-subscription requests do not
exceed the number of shares that
are available, ISIS will seek to
place the remaining shares with
other investors.
Subscription period...................... The rights offering will remain
open for a 30-day period from
_____, 2001 until _____, 2001,
unless such period is extended by
us, in our sole discretion, for up
to an additional _____ days.
Shareholders who wish to exercise
their subscription rights must
return the completed subscription
documents along with their payment,
as instructed in the subscription
documents, to the subscription
agent, Computershare Investor
1
Services, no later than 5:00 p.m.,
Mountain Standard Time, on ______,
2001, unless the subscription
period is extended by us as
described above.
Use of proceeds.......................... If all of the rights offered are
exercised, then the gross proceeds
to ISIS will be $2,800,000. The
gross proceeds from the offering
will be used to: bring our trade
accounts payable current; pay an
arbitration award to our former
chief financial officer; reimburse
our subsidiary, PlanGraphics, for
expenses incurred on our behalf;
enhance working capital; fund
general corporate purposes; and pay
the costs of the offering.
Offering of Shares Pursuant to Conversion of Promissory Note
We are registering an aggregate of ___ shares of our common stock that may
be issued to Human Vision L.L.C. upon the conversion of a promissory note
executed by ISIS in favor of Human Vision L.L.C. The promissory note dated
February 2, 2001 is in the principal amount of $75,000 and provides that the
outstanding principal and interest owed on the note is convertible at the option
of Human Vision L.L.C. into shares of ISIS common stock. The conversion price is
$___ per share. We will not receive any proceeds from any sale of securities
issued to Human Resources L.L.C.
2
RISK FACTORS
An investment in our common stock involves a high degree of risk.
Prospective purchasers of our common stock should consider carefully the
information set forth below, as well as the other information in this report, in
determining whether to purchase our common stock.
We have incurred recent losses and may not be able to continue as a going
concern.
We have suffered losses from operations in the past, and our ability to
achieve profitability in future reporting periods is uncertain. Since the
acquisition of PlanGraphics, Inc. in September 1997, we have incurred net losses
for the fiscal years ended September 30, 1997, 1998, 1999 and 2000 in the amount
of $2,550,000, $3,000,000, $1,050,000 and $2,570,000, respectively. In
connection with their audit report on our consolidated financial statements as
of and for the year ended September 30, 2000, BDO Seidman, LLP, our independent
certified public accountants, expressed substantial doubt about our ability to
continue as a going concern.
Our inability to complete this rights offering could materially impair our
business.
Our inability to complete this rights offering and raise the expected
proceeds would potentially leave us without adequate working capital which could
materially impair our business and operations.
There is no guarantee that funding will be available in the future at all or on
favorable terms.
We need additional capital to fund our current operations, bring our trade
accounts payable current, satisfy an arbitration award, reimburse PlanGraphics
for funds spent on our behalf and fund future growth. There can be no assurance
that cash flow from operations, coupled with presently available working
capital, will be sufficient to fully fund our expenditures. In addition, our
growth strategy involves the acquisition of existing businesses, products and
technologies. There can be no assurance that the capital resources necessary to
continue operations and fund growth will be available to us, or, if available,
will be available on terms favorable to us. Our failure to obtain additional
capital resources could have a material adverse affect on our business and
financial position.
We may breach covenants in a line of credit that puts us at risk of
relinquishing control of PlanGraphics.
In February 2001, PlanGraphics obtained a letter of credit from Human
Vision L.L.C., a related party, in the amount of $325,000 to serve as collateral
for the extension of an existing lender's line of credit. As a condition to
offering the standby letter of credit, Human Vision L.L.C. required ISIS to
pledge its stock in PlanGraphics as security for ISIS's guaranty to Human Vision
L.L.C.. If continued, our negative cash flows and recurring losses may cause us
to breach certain covenants contained in the existing line of credit. If we
breach the covenants contained in the existing line of credit or if the line of
credit is not paid in full by April 30, 2001, there is a risk that the lending
institution may call the existing line of credit and look to either our accounts
receivable pledged as collateral or to Human Vision L.L.C.'s standby letter of
credit for payment of the debt. If Human Vision L.L.C. were to pay the debt on
behalf of PlanGraphics pursuant to its standby letter of credit, there can be no
assurance that Human Vision L.L.C. would not assume ownership of our stock in
PlanGraphics through our guaranty.
We must keep pace with technological change and evolving industry standards to
compete.
The global information systems market is highly competitive. The market is
characterized by rapidly changing technology, evolving industry standards,
changes in customer needs and the continuing introduction of new products and
3
services. Our competitors may develop services and methodologies that will
render our services or methodologies obsolete or noncompetitive. Our failure to
respond in a timely or effective manner to new and evolving methodologies could
have a material adverse impact on our business.
Our contracts with customers allow for short notice termination and could
adversely affect our revenues.
Substantially all of our contracts with our customers are terminable by the
customer upon short notice, generally 30 days. We are entitled to revenues
earned by performance on such contracts, however, without such revenues being
subject to refund. Competition makes it difficult to obtain agreements that
would provide us with longer cancellation periods. Also, our customers retain us
on a project-by-project basis. Because large engagements often involve multiple
tasks, there is a risk that a customer may terminate or delay a project or
contract with appropriate notice. Such cancellations or delays could adversely
affect our net income as we may be unable to reduce our operating expenses to
adequately offset the loss in revenues.
Difficulties in achieving or managing growth could adversely affect results of
operations.
As part of our growth strategy, we expect to pursue acquisitions of
existing companies, products and technologies. There can be no assurance that if
a favorable acquisition opportunity is presented to us, we will be able to
integrate the acquired business, product or technology into our existing
business.
Our revenues historically are concentrated in a limited number of customers.
We have had some concentration of revenues and associated accounts
receivable balances in certain customers. During the fiscal year ended September
30, 2000, approximately 19.5% of our sales were concentrated in one customer and
during the fiscal year ended September 30, 1999, 12.7% of our sales were
concentrated in that same customer. In addition, at September 30, 2000, a
separate customer accounted for 19% of our outstanding accounts receivable. The
volume of work that we perform for a specific client is likely to vary from
period to period, and a significant client in one period may not use our
services at the same level or at all in a subsequent period. The loss of a key
customer could have an adverse impact on revenues.
Possible infringement of intellectual property rights could harm our business.
Our success depends, in part, on our ability to protect our proprietary
rights and technology. We rely on a combination of statutory and common law
copyright, trademark and trade secret laws, nondisclosure agreements and other
methods to protect our proprietary rights. Despite our efforts to protect those
rights, unauthorized parties may attempt to duplicate or copy aspects of our
services or technologies or to obtain and use information that we regard as
proprietary. There can be no assurance that our efforts to prevent
misappropriation of our methodologies, prior work or technologies will be
adequate. In addition, the laws of many countries do not protect our proprietary
rights to as great an extent as do the laws of the United States. As a
consequence, effective trademark, service mark, copyright and trade secret
protection may not be available in every country in which are products and
services are made available. Our proprietary rights and technology may not be
adequate, and our competitors could independently develop similar rights and
technology. Our failure to meaningfully protect our intellectual property could
have a negative affect on our business or financial results.
4
We rely on key personnel.
Our future success depends in significant part on the continued service of
certain technical and management personnel and our ability to attract and retain
key technical, sales, marketing, information systems, financial and executive
personnel. Key employees of ISIS include Gary S. Murray, Chairman of the Board
of Directors, and John C. Antenucci, Acting Chief Executive Officer. ISIS has
entered into an employment agreement with Mr. Antenucci and a services agreement
with Mr. Murray that expire in September 2003 and June 2001, respectively. Both
agreements contain a non-compete provision that restricts Mr. Antenucci and Mr.
Murray from pursuing, for one year following his termination date unless
otherwise approved by us.
Competition for personnel is intense, and there can be no assurance that
ISIS can retain its key personnel or that it can attract, assimilate or retain
other highly qualified personnel in the future. The loss of key personnel,
especially without advance notice, or the inability to hire or retain qualified
personnel, could have a material adverse effect on our business, financial
condition and results of operation.
Delinquent reporting under the Securities Exchange Act of 1934 may adversely
affect our business.
We were delinquent in filing our Annual Report on Form 10-KSB for the
fiscal year ended September 30, 2000. Our delinquency in filing certain reports
as required by the Securities Exchange Act of 1934 prohibits us from using a
short-form registration statement on Form S-3 to register shares of our common
stock until we are in compliance with Securities Exchange Act filing
requirements for a period of at least twelve calendar months immediately
preceding such registration statement filing. Our inability to use a short form
registration statement may delay future financings. In addition, an extended
delay in filing our periodic reports could cause the NASD to remove us from the
Over-the-Counter Bulletin Board. If our common stock is not traded on the
Over-the-Counter Bulletin Board and, instead is traded on the "pink sheets"
maintained by the National Quotation Bureau, the ability of stockholders to sell
their ISIS common stock may be impaired.
Our stock price is likely to be volatile and could drop unexpectedly.
The price of our common stock has been volatile in the past. The securities
markets have experienced significant price and volume fluctuations in recent
years that have often been unrelated or disproportionate to the operating
performance of particular companies. These fluctuations particularly have
affected the market prices of the stocks of technology and Internet-sector
companies. These broad fluctuations may hurt the market price of our common
stock.
We do not intend to pay dividends.
ISIS has not paid dividends on our common stock since incorporation. We do
not anticipate paying dividends on our common stock in the foreseeable future
and intend to devote any earnings to the development of our business.
Shareholders who do not exercise their rights will experience dilution.
This offering may result in our issuance of up to an additional ___ shares
of our common stock, assuming full exercise of the rights offered pursuant to
the rights offering and conversion of Human Vision L.L.C's promissory note. If a
shareholder chooses not to exercise fully the shareholder's rights, the
shareholder's relative ownership interest in ISIS will be diluted.
5
USE OF PROCEEDS
If Human Vision L.L.C. opts to convert its promissory note, the issuance of
shares of common stock upon such conversion will result in the elimination of
the debt evidenced by the note. No cash proceeds from such conversion will be
received by ISIS.
The gross proceeds that we expect to receive from the rights offering are
estimated to be $2,800,000, assuming a price of $ _____ per share, before
deducting the offering expenses. The offering expenses of this offering are
estimated to be $ ______. The gross proceeds will be used as follows if 100%,
75% or 50% of the maximum offering is sold:
100% 75% 50%
---------- ---------- ----------
Funds available: $2,800,000 $2,100,000 $1,400,000
========== ========== ==========
Proposed uses:
Additional costs of this offering:
Registration, filing & related fees $ 10,000 $ 10,000 $ 10,000
Legal fees 50,000 50,000 50,000
Accounting fees 25,000 25,000 25,000
Printing fees 20,000 20,000 20,000
Subscription agent fees 30,000 30,000 30,000
Investment banking fees & expenses 110,000 85,000 55,000
Payment of arbitration award 390,000 390,000 390,000
Payment of accounts payable to service contractors 180,000 180,000 180,000
Repayment of note to Human Vision L.L.C 75,000 75,000 75,000
Repayment of note to BDO Seidman, LLP 105,000 105,000 105,000
Payment of accounts payable to PlanGraphics 600,000 600,000 300,000
Unallocated working capital 1,205,000 530,000 160,000
---------- ---------- ----------
Total: $2,800,000 $2,100,000 $1,400,000
========== ========== ==========
We have approximately $180,000 outstanding beyond customary terms in
accounts payable to our service providers. These services include printing,
communications, investor relations, legal and accounting. We expect to bring
these accounts payable current with a portion of the proceeds received in this
offering.
As of February 28, 2001 we owed PlanGraphics approximately $560,000 for
expenditures made on behalf of ISIS that include salaries, benefits, litigation
expenses, bookkeeping expenses, insurance, legal fees, accounting fees, rent,
utilities, communications and other common business expenses. We expect that sum
to increase approximately $20,000 to $30,000 per month reflecting business
expenses unrelated to the offering. Depending on whether this offering is fully
subscribed, we estimate that we will reimburse PlanGraphics between $300,000 and
$600,000 from proceeds received in this offering.
We owe BDO Seidman, LLP approximately $130,000 pursuant to a promissory
note dated February 15, 2001 for accounting services. The promissory note
requires payment of approximately $13,000 per month. Payments are currently
being made by PlanGraphics and the balance outstanding shall be paid from the
proceeds of this offering either in a lump-sum or from working capital through
the balance of the term of the promissory note.
6
We owe Human Vision L.L.C. approximately $75,000 pursuant to a promissory
note dated February 2, 2001. Human Vision L.L.C. has the option of converting
the debt to shares of ISIS common stock at the lower of $0.07 per share or the
price per share of the rights offered to existing shareholders. Such shares that
may be issued on conversion of the promissory note are also being registered in
conjunction with the shares being registered pursuant to the rights offering.
In a final arbitration decision dated April 20, 2000, we were ordered to
pay $330,000 to our former chief financial officer for severance compensation
and fees and expenses related to arbitration. The outstanding amount owed on
that award including interest and expenses is approximately $390,000.
The unallocated working capital will be used for general corporate and
working capital purposes.
BUSINESS
Business Development
Integrated Spatial Information Solutions, Inc. ("ISIS") was incorporated as
DCX, Inc., a Colorado corporation, on December 8, 1981. At that time, we
operated in the custom design and contract manufacture of aircraft-related
electronic cable assemblies. As DCX, Inc., we operated principally under
contracts to defense contractors for United States Department of Defense
acquisition programs and military aircraft maintenance support. At that time, we
provided engineering design, prototype development, testing and manufacture of
medium and high technology electronic cable assemblies, wire harnesses,
electromechanical devices, and test equipment for aircraft maintenance
applications.
On September 22, 1997, we acquired all of the outstanding shares of
PlanGraphics, Inc., a professional services information technology company that
specializes in the design and implementation of spatial data management systems
commonly referred to in our industry as geographic information systems, or "GIS"
for short. PlanGraphics, which was incorporated in 1979 in the state of
Maryland, has its headquarters in Frankfort, Kentucky.
Effective as of September 30, 1997, we sold our DCX, Inc. defense
electronics manufacturing assets. On June 29, 1998, we changed our name from
DCX, Inc. to Integrated Spatial Information Solutions, Inc. Our principal
business is now carried out through our wholly owned subsidiary, PlanGraphics,
Inc. PlanGraphics provides business-based solutions to the information
management needs of federal, state and local governments, public and investor
owned utilities, and commercial enterprises where locational or "spatial"
information is mission critical. PlanGraphics services clients through the
definition, design, implementation and operation of e-services and other
computer-based solutions.
Since we operate primarily through our wholly owned subsidiary,
PlanGraphics, we will often use pronouns such as "we," "us," and "our" in this
prospectus to refer to the Company and our subsidiary, PlanGraphics, Inc.
Business
Introduction
In most business settings today, computers are utilized for three general
purposes: word processing, data management and spreadsheets. For science and
engineering applications, computers have also become critical in alpha-numeric
analysis and design. Within the last 30 years, a new application of computer
7
technology has transformed the application of computer science to cartography,
geography, planning and engineering by both government and private industry.
Known as "Geographic Information Systems" or GIS, this application combines
geography, computer cartography and data management into one tool.
GIS provides a means for managing and analyzing information by relating the
geographic location of a feature or event to other description information. GIS
software allows information, in both graphic or map information and alphanumeric
data to be combined, segregated, modeled, analyzed and displayed.
Once largely limited to local and state government agencies and large
utilities responsible for land and physical asset management, the use of GIS and
other spatial information systems has become widespread. While government
organizations still build and maintain GIS systems to analyze, plan and regulate
land use and natural resources, and utilities continue to use GIS to track and
maintain their physical assets, other uses of GIS have become both more common.
For example, GIS is being used by utilities to acquire and retain high margin
customers, to analyze demographic attributes of potential customers and match
the results with facility capacity, and to identify where facility capacity
needs to be expanded. State and local governments use the technology for
dispatching police and fire resources, responding to catastrophic events,
insuring parity in tax appraisals and locating facilities in areas suitable for
development.
In a January 2001 press release, International Data Corporation of
Framingham, Massachusetts, estimated that the worldwide spatial information
management market reached $1.08 billion in 1999 and would reach $2.1 billion per
year by 2004. These numbers are exclusive of the demand of government and
commercial enterprises to have higher levels of web access and capability for
their information assets - a large portion of which have locational or spatial
components. Spatial and data management applications and services have become
information technology decision-making tools for utilities, local and state
government agencies, and land and resource management organizations. They are
used in a wide range of applications, including land management, mineral
exploration, crop management and forecasting, environmental remediation,
military planning and surveillance, infrastructure development and construction,
and business market analysis.
Such applications and services are part of a broader market, information
systems and the information systems consulting market. In an article in
Washington Technology, published Feburary 19, 2001, Gartner DataQuest of
Stamford, Connecticut, estimated the market for e-government solutions would
increase from $1.9 billion in 2001 to $6.5 billion per year in 2005. Similarly,
in U.S. and Worldwide Markets and Trends, 1996-2003, found in International Data
Corporation's publication #W18902, International Data Corporation projected that
consulting service revenue would grow 14.8% per year, reaching $55 billion by
2003. With the anticipated growth in the IS market, we have decided to expand
the services we offer to meet the growing information and systems integration
needs of public and private enterprises by leveraging our e-services
capabilities and specialization in spatial information systems.
We believe that the information services and technology markets are
undergoing structural changes with an increasing frequency of outsourcing of
many technological and operational functions. These changes create demand for
high quality technology advisory services, project design and management and
professional services.
8
Overview of Operations
We are independent management consultants who develop GIS and information
technology solutions to meet the specific needs of our clients. We do not make
the software, but we fill a wide variety of roles to make state-of-the-art
software work for a particular organization. We are fully integrated GIS
implementers providing our clients with business-based total information
technology solutions.
We serve as architects who work closely with the client to conceive an
appropriate solution, whether it be a new computer application, an entire
information system, or a fundamental reworking of an existing system. For
example, we are helping the Sacramento County, California Assessor's Office
transform the way it manages parcel and property ownership data.
We function as design engineers who define and refine specifications for an
information system and lay out pragmatic, cost-effective ways to achieve a
solution. For example, we are designing and building a spatial data warehouse
for New York City that provides internet-enabled access and applications to a
wealth of city data.
We serve as general contractors who manage the work of several types of
vendors, including software and data conversion vendors. We guide clients
through the process of acquiring technology, installing networks and building
and integrating databases to increase the value of their geographic and spatial
information. For example, we are working as a system and data integrator for the
Metropolitan Sewerage District in Madison, Wisconsin, building on the
information assets of other jurisdictions in the service area and developing GIS
applications specific to the sewerage district.
We function as facility managers, providing on-site professionals who
manage and bring technical experience to operate and maintain information
systems. For example, we have had an on-site team providing data preparation and
quality control for a massive data conversion project for Rhode Island's
Providence Gas Company and we are the GIS project manager to the City of
Columbus, Ohio Department of Technology.
We serve as auditors of information systems. We look for improvements to
existing systems and keep up with ever-changing technology to ensure that
clients are always on the cutting edge of the best practices in the industry.
For example, we facilitated the preparation of a statewide strategy for spatial
information within the state of Oregon.
In short, we build and transform legacy systems into systems that provide
solutions emphasizing the value of locational data. We extend departmental
databases into enterprise assets. We take concepts involving data about places,
time, people and things and build practical, cost-effective capabilities that
can enable a workforce to better meet the needs and demands of its customers.
Although we perform these various functions and services, management views our
operations as one business segment.
Our Sales and Marketing Concept
We conduct our business development using a principal selling model. In
doing so, we draw on PlanGraphics' president and practice managers who manage
business units and have sales responsibility. Each of the practice managers is
supported by a number of executive consultants who have both business
development and executive level service delivery responsibilities. We also
develop business and follow-on assignments through our project managers. In
addition, we maintain business alliances with suppliers of software, data and
professional services, including among others, Oracle, ESRI and Space Imaging.
9
Our customer service philosophy is to fully understand our customers' needs
so that we are able to deliver a high level of value-added services and
after-sales support. We believe that highly differentiated customer service and
technical support is a key competitive asset. Because both GIS and the Internet
are evolving and complex, customers require significant technical support.
Consequently, we have developed proprietary methodologies that assure
consistency in performance and attain maximum customer satisfaction through
attention to customer communication and technical expertise.
We continually monitor our customer service strategy through customer
satisfaction surveys, frequent contact with the executive consultants and
oversight by practice managers and our senior management.
Business Objectives and Milestones
We intend to grow our presence in the information services industry by
building on the reputation and specialty skills of our subsidiary, PlanGraphics,
and to achieve growth rates through proper capitalization at rates that are
equal to or in excess of industry growth rates.
We also believe that there is a market opportunity to consolidate
information services and technology companies thereby transforming us into a
full service information technology services company with a specialized
capability that is proactive in spatial information systems. We further intend
to exploit these market opportunities and to increase revenues by acquiring
companies with capabilities complementing and enhancing our current services
offered to potential clients.
Competition in our Markets
The spatial information management and technology market includes GIS and
is divided into two broad categories: the government sector, which includes
agencies at all levels and is presently the larger of the two categories; and
the commercial sector.
The markets in which we operate are highly competitive and can be
significantly influenced by marketing and pricing decisions of competitors that
have substantially greater resources. We believe that competition will intensify
in the future. Our ability to compete successfully depends on a number of
factors including:
o Market presence and geographic coverage;
o Reputation for reliability, service and effective customer support;
o Breadth and depth of expertise, independence, and sensitivity to the
client's requirement for responsiveness and timeliness; and
o Ability to react to changes in the market and industry and economic trends.
We believe we compete effectively on the basis of breadth and depth of
expertise, independence, and sensitivity to the client's requirement for
responsiveness and timeliness.
Proprietary Rights
We rely on general copyright, trademark and trade secret laws to protect
our methodologies, prior work and technology. ISIS and PlanGraphics have
registered their names and trademarks in the United States and Canada.
PlanGraphics has developed and maintains a proprietary methodology for
conducting its business. This methodology and certainmarketing, customer and
10
prospect data are maintained and handled as trade secrets and are protected by
policy and employment agreements. It is also our policy to require employees and
consultants and, when possible, suppliers to execute confidentiality agreements
upon the commencement of their relationships with us.
Employees
Presently we employ a total of 57 full-time employees and 21 part-time
employees. Five of our employees are in executive management and three have
practice management responsibilities. An additional eight employees are
executive consultants. We employ three individuals dedicated to sales. 28
employees serve in varying capacities as consultants and system developers and
21 others who are paid only for the time billable to clients.
Administrative support consists of accounting, human resources and creative
services. Two executive managers and five staff members are involved in
accounting services and human resources. An additional five individuals are
assigned to creative services and are available to support consulting projects
as well as marketing and sales.
DESCRIPTION OF PROPERTY
Our corporate executive offices are located in Parker, Colorado. We lease
commercial property in several other locations in the United States as well:
Location Property Leased Approximate Size Number of Employees
-------- --------------- ---------------- -------------------
Frankfort, Kentucky land and a building 20,500 square feet 32
Parker, Colorado office space 350 square feet 1
Silver Spring, Maryland office space 3,854 square feet 15 (An additional 23
work in Providence,
Rhode Island at a client
site)
Newport Beach, California office space 600 square feet 3
Newark, New Jersey office space 1,200 square feet 4
The length of our leases varies from one to five years. We believe that
such properties are adequate to meet our current needs. Were any of the existing
leases terminated, we believe that there are affordable alternate facilities
available and such action would not have a material adverse effect on our
business.
LEGAL PROCEEDINGS
ISIS was the respondent in an arbitration claim brought by our former chief
financial officer filed in August 1999 with the American Arbitration Association
in Jacksonville, Florida. He claimed that he was constructively discharged from
ISIS and sought severance compensation equal to three years' compensation, an
amount that he argued was provided for in his employment agreement. We asserted
that he resigned and was not constructively discharged and, accordingly, was not
entitled to severance compensation. The case was arbitrated in February 2000. In
11
a final decision dated April 20, 2000, the arbitrator awarded the former officer
$330,000 in separation payments, fees and expenses. All costs incurred by ISIS
associated with the arbitration award were expensed as of June 30, 2000. On July
18, 2000, we filed an appeal of the award with the State Circuit Court for Duval
County, Florida. The appeal was not sustained. It is anticipated that the
outstanding amount owed on the award including interest and expenses will be
paid out of the proceeds of this offering.
We are engaged in various litigation matters from time to time in the
ordinary course of business. In the opinion of management, the outcome of such
litigation will not materially affect the financial position or results of
operations of ISIS.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read together with ISIS's financial
statements and accompanying notes included elsewhere in this prospectus.
Financial information for each of the two years in the period ended September
30, 2000 has been derived from audited financial statements. Financial
information for the three months ended December 31, 2000 and 1999 has been
derived from unaudited financial statements.
Financial Condition
Going Concern
In connection with their audit report on our consolidated financial
statements as of and for the year ended September 30, 2000, BDO Seidman, LLP,
our independent certified public accountants, expressed substantial doubt about
our ability to continue as a going concern because of recurring net losses and
negative cash flow.
The audited financial statements contained in this prospectus show $17.7
million being invested in or contributed to the company since its inception. Our
stockholders' equity has declined to approximately $3.2 million as a result of a
cumulative deficit of $14.5 million, which includes non-cash charges of $684,000
during the fiscal year ended September 30, 2000, and cumulative non-cash charges
of approximately $2.7 million since October 1, 1997. Our operations are not
currently profitable, although PlanGraphics, when viewed on a stand-alone basis,
has experienced breakeven or better levels of profitability since June 30, 2000,
exclusive of extraordinary expenses including those associated with defending a
non-compete agreement.
We require additional funds to bring current our accounts payable, to
satisfy our obligations to a former officer as a result of an arbitration award,
to repay PlanGraphics for funds advanced in the normal course of business and
for working capital through the fiscal year ending September 30, 2002.
PlanGraphics requires funds in excess of the amounts due from the parent
organization to provide working capital for operations and growth of its
business.
The minimum level of funding that we require to meet the aforementioned
funding requirements for ISIS is approximately $1.4 million. Management intends
to raise approximately $2.8 million through this rights offering. In addition,
management may seek additional and extended lines of credit. Our continued
existence is uncertain if we are not successful in obtaining outside funding in
an amount sufficient for us to meet our working capital requirements as we
resume internal growth.
12
Management believes that we have the capacity to address our immediate
needs for cash and liquidity through an aggressive approach on a number of
fronts. We have entered into a number of formal agreements and promissory notes
as well as informal agreements with vendors and professional service providers
to extend the terms on payables currently due. We also have reduced or delayed
expenditures on items that are not critical to operations. PlanGraphics' credit
line has been extended through April 30, 2001. Furthermore, during the course of
the fiscal year ended September 30, 2000, we were able to reduce monthly cash
flows in excess of $27,000 per month after we made final payments to our former
chief executive officer and to a former shareholder of PlanGraphics as well as
"right"-sized our office leases.
We also will continue to consider periodically the sale of our interest in
Jobsview.com LLC, held by PlanGraphics. The 7.9% ownership interest of this
entity is valued at our original investment cost of $56,400 on the PlanGraphics
balance sheet. Recent sales during calendar year 2000 of equity by Jobsview.com
would value our holdings at approximately $460,000. Efforts to conserve and
develop new sources of cash and equity are complimentary of the improved
operating performance of our operating subsidiary during the past two quarters.
We anticipate the improved results to continue through the remainder of 2001 as
a result of increased contract backlog and assignments as discussed below.
Although management feels there is a reasonable basis to believe that we
will successfully raise the needed funds through equity and debt financing, and
successfully extend or refinance the line of credit, no assumption can be made
that we will be able to raise sufficient capital to sustain operations or that
the subsidiary business will be able to achieve a level of profitability
sufficient to carry the parent company's operating expenses. Even though we have
successfully obtained working capital in the past by extending our line of
credit and raising funds through private placements, there can be no assurance
that we will be successful in the future.
Cash Flow
As of December 31, 2000 we had a net working capital deficit of $1,244,843
as compared to working capital of $124,864 at December 31, 1999. This working
capital deficit resulted primarily from decreased revenue and non-recurring
expenses for litigation settlements.
In the three months ended December 31, 2000, we used net cash of $213,273
in operations, as compared to $238,610 used in operations in the three months
ended December 31, 1999. While long-term liabilities decreased by $241,259,
accounts payable increased by $301,375 and current maturities of notes payable
increased by $502,689. We expect to continue to have operating cash flow
deficiencies for the near future as we develop and expand our business.
In the three months ended December 31, 2000, net cash used in investing
activities was $7,507 as compared to $88,317 of net cash provided by investing
activities in the three months ended December 31, 1999. This was primarily due
to the absence of proceeds from sales of assets in 2000 that occurred in 1999.
We generated net cash of $107,253 from financing activities in the three
months ended December 31, 2000, as compared to net cash of $20,306 in the three
months ended December 31, 1999. This increase in net cash was primarily the
result of increased proceeds from the sale of our common stock in a private
offering and the reduced level of payments on debt and leases.
13
Capital Resources
As of September 30, 2000, we had lease payment commitments through 2005 of
$2,403,075, that will require total annual payments of approximately $572,000
during the fiscal year ending September 30, 2001 as compared to $655,000 for the
fiscal year ended September 30, 2000. Of the required payment amount for the
current fiscal year, approximately $352,000 is for capital lease obligations and
$242,000 relates to operating leases. Management believes normal operating cash
flows are adequate to fund these payments. (See also Note 6 to the September 30,
2000 Financial Statements.) We consider our facilities adequate to support
anticipated sales and operations for the next several years; accordingly, no
major commitment for additional facilities expansion has been entered into for
the year ending September 30, 2001. In recent years, however, we have
transitioned to smaller and less expensive space when possible. Were any of the
existing leases to be terminated we believe there are affordable alternate
facilities available and such action would not have an adverse impact.
Since entering the information technology sector in 1997, we have funded
our operations and working capital needs primarily through the public and
private placement of our equity securities. In addition, a portion of our
capital expenditures has been financed through capital lease obligations payable
to financial institutions. We have also on occasion borrowed limited amounts
from John C. Antenucci, our acting chief executive officer and Gary Murphy,
PlanGraphics' chief financial officer in order to fund temporary working capital
requirements.
During the fiscal year that ended September 30, 2000, we issued 1,658,452
shares of common stock through two private placements in consideration of
approximately $463,000 in gross proceeds. In connection with these sales, we
also issued warrants to purchase 1,232,452 shares of common stock with varying
expiration dates. The warrants are all immediately exercisable and 630,000 are
valid for three years and have an exercise price of $.50 per share and 806,452
are valid for five years and have an exercise price of $0.65 per share.
In October 2000, we completed the sale of another private offering to
accredited investors and officers and directors. Pursuant to that offering, we
issued 580,000 shares of common stock for gross proceeds of $145,000. We also
issued 290,000 warrants to purchase common stock at a price of $0.50 per share,
such warrants being exercisable for three years from the date of issue.
As of December 31, 2000, we had minimal cash and cash equivalents. Our
management team estimates that, based upon current expectations for growth, we
will require additional funding of up to $2.5 million for the recapitalization
of the company and the execution of our current business plan, including the
financing of our anticipated capital expenditures, operating losses and the
evaluation of acquisition targets. Our management team believes that our current
operating funds along with the additional funds generated by this rights
offering will be sufficient to fund our cash requirements through September 30,
2002.
The Company's long-term liquidity requirements may be significant in order
to implement its plans. There can be no guarantee such funds can be secured.
Operations Outlook
We believe that information technology, which includes geographic
information systems or "GIS," continues to be a global market that is rapidly
evolving and becoming the basis for a myriad of new applications and services to
solve customer problems and creating additional markets. We also believe the
potential gross profit margins in information technology are much higher than we
presently experience and we are working to grow the spatial data management and
integration solutions of our GIS business base according to forward looking
statements in our business plan, augmenting growth to be achieved through
acquisitions.
14
As of December 31, 2000, PlanGraphics had work backlog and assignments of
approximately $9.3 million comparing favorably to a total of $5.4 million of
work backlog and assignments at September 30, 1999 and $4.6 million as of
December 31, 1999. We expect this increased level of backlog to result in
significantly higher levels of revenue generation in the fiscal year ending
September 30, 2001.
Currently, we plan to grow internally and through acquisitions. We have
made substantial progress in positioning PlanGraphics as a provider of
Internet-accessible data repositories and warehouses that leverage spatial data.
Several of our current assignments and a material portion of our contract
backlog and assignments are associated with these initiatives. Furthermore our
past marketing investments in China continue to yield results measured by the
increased sales of Ikonos imagery, current and anticipated projects funded by
the World Bank and a number of alliances and business partner arrangements that
have been consummated. In addition, we have taken specific steps to position our
company for additional acquisitions including reorganizing our corporate
governance and management structure and the retention of third party advisors
and investment bankers.
Our management team believes that we have the capacity to address the
immediate needs for cash and liquidity through an aggressive approach on a
number of fronts. We have entered into a number of formal agreements and
promissory notes as well as informal agreements with vendors and professional
service providers to extend the terms on payables currently due. We have reduced
or delayed expenditures on items that are not critical to operations. For
instance, the credit line available to PlanGraphics has been extended through
April 30, 2001.
We also periodically consider the sale of our interest in Jobsview.com
L.L.C., held by PlanGraphics. The 7.9% ownership interest in Jobsview.com is
valued at the investment cost of $56,400 on the PlanGraphics balance sheet.
Recent sales of common stock by Jobsview.com during fiscal year 2000 would value
our holdings at approximately $480,000. Efforts to conserve and to develop new
sources of cash and equity are complimentary to the improved operating
performance of PlanGraphics during the past two quarters. We anticipate the
improvement to continue through the remainder of 2001 and to be accompanied by
positive cash flows.
Results of Operations
3 Months Ended December 31 Years Ended September 30
2000 1999 2000 1999
---- ---- ---- ----
Statement of Operations Information: (unaudited) (unaudited)
Revenues $ 1,649,022 $ 1,806,145 $ 6,048,570 $ 7,990,808
Cost and expenses 1,951,101 2,014,710 7,826,655 9,289,150
Net loss (302,079) (208,565) (1,778,085) (1,298,342)
Balance Sheet Information:
Total Assets 7,722,731 8,960,379 7,731,880 9,156,604
Total current liabilities 2,988,810 2,213,021 2,819,956 2,192,935
Working capital (1,244,843) 120,292 (1,240,722) 251,802
Shareholders Equity 3,046,067 4,818,246 3,199,707 4,947,579
15
Result of Operations for the Three Months ended December 31, 2000
Revenues
Revenues for the three months ended December 31, 2000 were $1,649,022
compared to $1,806,145 for the three months ended December 31, 1999. This is a
decrease of $157,123, or 9%, over the same three-month period from 2000 to 1999.
This decrease was related to delays in the start up of contracts and work
assignments awarded during that the previous quarter. Delays are typical but
unpredictable in length. Despite such delays, revenues for the period ended
December 31, 2000 represented an increase of 6.7% over the previous quarter and
a 44% increase in revenues over the period ended June 30, 2000. This trend of
revenue is a result of increased levels of contracts and assignments developed
over the past six months. As a consequence of this recent development, when
taken in conjunction with the 102% increase in our backlog of work to $9.3
million from $4.6 million last year at this time, we expect to see increased
revenue in the ensuing quarters.
Costs and Expenses
Our total operating costs and expenses for the three months ended December
31, 2000 amounted to $1,951,101 or 118% of revenues. In the same period in 1999,
our total operating costs and expenses were $2,014,710 or 112% of revenues. This
year's costs reflect a $63,609 or 3.2% reduction of operating costs from the
same period in 1999. Reductions in costs were a result of spending constraints
implemented to better align costs with revenues. General and administrative
costs remained constant and all other categories of operating costs were reduced
in approximate proportion to the reduced revenues. Adoption of an aggressive
corporate development and shareholder communication program and increased audit
fees resulted in increased expenses of $103,893 over the period ended December
31, 2000.
Net Loss
Our net operating loss for the three months ended December 31, 2000
increased by $93,514 or 45% over the same period in 1999, as a result of the
increased expenditures on corporate development and shareholder communications.
Our subsidiary, PlanGraphics, had net income for the three months ended
December 31, 2000 of $47,307 compared to net income of $42,504 for the same
period in 1999. This was a recovery from the its $89,672 net loss for the three
months ended September 30, 2000. The operating loss in the prior quarter was
offset in part by a $70,000 settlement of a claim for infringement of a
non-compete agreement to the benefit of PlanGraphics. Management believes
PlanGraphics will continue its six-month trend of positive cash and
profitability.
ISIS's interest expense increased by $7,495 over the prior year as a result
of higher interest rates and a small increase in the average outstanding balance
of PlanGraphics' line of credit. Other income decreased slightly to $13,425 from
the prior year total of $15,952 principally as a result of reduced commissions
on travel expenditures. No preferred stock dividends were paid in the current
period as there was no preferred stock outstanding at December 31, 2000. The
total net loss of $369,252 for the current period is therefore attributable to
holders of common stock.
Contract Backlog
We have a backlog of GIS contracts and work assignments amounting to
approximately $9.3 million. The year prior there was $4.6 million of uncompleted
work in the backlog. We expect this 102% increase in backlog to be result in
significantly increased revenue in the ensuing quarters.
16
Result of Operations for the Year Ended September 30, 2000
Revenues
Our revenues decreased $1,942,238 or 24% from $7,990,808 for the fiscal
year ended September 30, 1999 to $6,048,570 for the fiscal year ended September
30, 2000. We believe this decrease was related to the delay of contract awards
and work assignments that were held in abeyance due to fears of Year 2000
issues. The delays impacted our revenue generation on projects because we
typically encounter some lag time finalizing contractual arrangements and
arranging needed resources before we are able to begin work. The Year 2000
effect on us was a large decrease in revenue.
Costs and Expenses
The costs and expenses for the fiscal year ended September 30, 2000
amounted to $7,826,655, a decrease of $1,462,495, compared to $9,289,150 for the
fiscal year ended September 30, 1999. Significant reductions in costs and
expenses were primarily related to adjustments responding to decreased operating
levels. We reduced direct contract costs by approximately $684,306, salaries and
benefits by approximately $482,394, and general and administrative expenses by
approximately $556,515.
Net Loss
Our operating loss for the fiscal year ended September 30, 2000 was
$1,778,085 compared to $1,298,342 for 1999, a reduction in operating losses of
$479,743. This reduction is a result of reduced revenues offset by cost savings
in direct contract costs, salaries and benefits and general and administrative
expenses.
Interest expense was reduced by $104,264 to $330,004 in 2000 as compared to
$434,268 during 1999, a decrease of 24 percent. The decrease is attributable to
an overall reduction of interest bearing debt. Other income increased over the
prior year total by $33,900 or 40 percent as a result of increased miscellaneous
income.
Our net loss for the fiscal year ended September 30, 2000 was $2,593,816
compared to $1,057,779 for 1999, an overall increase of $1,518,035. The
increased losses for 2000 were primarily due to $589,432 of losses on litigation
settlements described in Note 11 to the September 30, 2000 financial statements
as compared to a gain of $414,312 that we experienced for litigation settlements
in 1999. Net loss attributable to common stockholders amounted to $2,593,816 for
the fiscal year ended September 30, 2000 as compared to $1,094,502 in the prior
year. Preferred stock dividend expense amounted to $18,002 for fiscal year 2000
compared to $36,723 in fiscal year 1999.
Subsequent Events
On February 9, 2001, the board of directors approved a loan of $75,000 from
a director in exchange for a promissory note. The funds are to be used for
certain specified working capital requirements. The board also approved a
resolution authorizing us to provide to a related party a security interest in
the ownership of PlanGraphics as further collateral for the director providing a
standby letter of credit to further collateralize an extension of PlanGraphics'
line of credit with National City Bank of Kentucky. In a related matter,
National City Bank provided an extension of a $500,000 line of credit for our
operating subsidiary through April 30, 2001.
17
In November 2000, we announced that we entered into a Letter of Intent to
acquire certain business assets of both Microhard Technology, Inc and Certified
Professionals and Engineers, Inc. As a result of due diligence reviews we have
decided to allow the Letter of Intent to lapse without a transaction. Both
parties to the Letter on Intent have agreed to work together on a number of
strategic and tactical initiatives and to revisit the acquisition discussions in
the future.
We received notification on November 15, 2000 that our appeal in State
Circuit Court for Duval County, Florida of an arbitration award made to our
former chief financial officer, Robert S. Vail was unsuccessful. The case was
arbitrated in February 2000. In a final decision on April 20, 2000, the
arbitrator awarded Mr. Vail a total of $330,000 plus expenses and interest that
now total approximately $390,000. The arbitration award will be paid with the
proceeds of this rights offering. (See Legal Proceedings on Page 11). Deferred
Tax Valuation Allowance -- FY 2001
We have net operating loss carry-forwards of approximately $10.1 million
(See Note 3 to the Condensed and Consolidated Financial Statements in our Form
10-QSB for December 31, 2000). We have established a 100 % valuation allowance
on the net deferred tax asset arising from the loss carry forwards in excess of
the deferred tax liability. The valuation allowance has been recorded, as our
management has not been able to determine that it is more likely than not that
the deferred tax assets will be realized.
Effect of Recent Accounting Pronouncements
The pronouncements that may affect us in the current fiscal year are:
The Financial Accounting Standards Board has recently issued Statement on
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133, amended by SFAS No. 138,
established standards for recognizing all derivative instruments including those
for hedging activities as either assets or liabilities in the statement of
financial position and measuring those instruments at fair value. This statement
is effective for all fiscal quarters of all fiscal years beginning after June
15, 2000. The adoption of this statement has had no material impact on our
consolidated financial statements.
In March 2000, the Financial Accounting Standards Board issued Emerging
Task Force Issue No. 00-2, "Accounting for Web Site Development Costs" ("EITF
00-2"), which was effective for all such costs incurred for fiscal quarters
beginning after June 30, 2000. EITF 00-2 establishes accounting and reporting
standards for costs incurred to develop a web site based on the nature of each
cost. Currently, as we have no web site development costs, the adoption of EITF
00-2 had no impact on our financial condition or results of operations. To the
extent we begin to enter into such transactions in the future, we will adopt the
issue's disclosure requirements in the quarterly and annual financial statements
for the year ending September 30, 2001.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation" ("FIN 44"), which was effective July 1, 2000, except that certain
conclusions in this Interpretation which cover specific events that occur after
either December 15, 1998 or January 12, 2000 are recognized on a prospective
basis from July 1, 2000. This interpretation clarifies the application of APB
Opinion 25 for certain issues related to stock issued to employees. We believe
our existing stock based compensation policies and procedures are in compliance
with FIN 44 and therefore, the adoption of FIN 44 had no material impact on our
financial condition, results of operations or cash flows.
18
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements" which provides additional guidance in applying generally accepted
accounting principles to revenue recognition in financial statements. SAB 101 is
effective as of the fourth quarter of fiscal year ending September 30, 2001.
Management believes the adoption of this bulletin will have no material impact
on our financial statements.
DESCRIPTION OF SECURITIES TO BE REGISTERED
This prospectus covers our offer and sale of up to ________ shares of
common stock, pursuant to the rights offering described herein and the shares
issuable to Human Vision L.L.C. upon conversion of its promissory note dated
February 2, 2001. In our articles of incorporation, as amended, we are
authorized to issue up to 2,000,000,000 shares of common stock, no par value,
and 20,000,000 shares of preferred stock, par value $.001 per share, designated
as cumulative convertible preferred stock. As of March 26, 2001, we had
19,546,525 shares of our common stock outstanding. No shares of preferred stock
are currently outstanding. All of the issued shares of common stock are fully
paid and non-assessable.
Under our articles of incorporation, all of the shares of common stock rank
equally as to voting rights, participation in a distribution of assets of ISIS
on a liquidation, dissolution or winding-up of ISIS and entitlement to
dividends. The shareholders are entitled to receive notice of all meetings of
shareholders and to attend and vote the shares at the meetings. Each share of
common stock carries with it the right to one vote. Our common stock has no
preemptive or conversion rights.
In the event of a liquidation, dissolution or winding-up of ISIS or other
distribution of our assets, the holders of the shares of common stock will be
entitled to receive ratably and equally all of the assets of ISIS after we have
paid out our liabilities. Distribution in the form of dividends, if any, will be
set by ISIS's board of directors.
We have never declared or paid dividends on our common stock. We do not
anticipate paying any cash dividends in the foreseeable future as we intend to
retain any future earnings to finance growth.
MARKET FOR COMMON STOCK
Our common stock is traded on Nasdaq's Over-the-Counter Bulletin Board
under the symbol "ISSS."
The range of high and low sales prices per share for ISIS common stock as
quoted (without retail markup or markdown and without commissions) on the
Over-the-Counter Bulletin Board for the fiscal years ended September 30, 2000
and September 30, 1999, as well as for the fiscal quarter ended December 31,
2000, is provided below. The figures shown below reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions:
High Price Low Price
---------- ---------
2001
First Quarter $0.23 $0.14
2000
Fourth Quarter $0.38 $0.22
Third Quarter $0.81 $0.22
Second Quarter $0.81 $0.20
First Quarter $.34 $0.20
1999
Fourth Quarter $0.38 $0.27
Third Quarter $0.44 $0.25
Second Quarter $0.66 $0.31
First Quarter $0.40 $0.30
On March 23, 2001, the last reported sales price of our common stock was
$0.1094.
19
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Security ownership of certain beneficial owners:
The following parties own more than five percent of our common stock as of March
26, 2001:
- -----------------------------------------------------------------------------------------------------------
Name and Address of Amount & Nature of
Beneficial Owner Beneficial Ownership Percentage
- -----------------------------------------------------------------------------------------------------------
Ausost Anstalt Schaan 1,433,428 7.3%
Landstrasse 163 Sole dispositive and voting power
9494 Furstentums
Vaduz, Liechtenstein
Balmore S.A. 1,379,697 7.1%
Trident Chambers, Road Town Sole dispositive and voting power
Tortola, British Virgin Islands
Security ownership of management:
The directors and officers of ISIS own the following percentages of our common
stock as of March 26, 2001:
- -------------------------------------------------------------------------------------------------------------------
Name and Address of Amount & Nature of
Beneficial Owner Beneficial Ownership Percentage
- -------------------------------------------------------------------------------------------------------------------
Jean M. Anderson 114,000 0.6%
Director Sole dispositive and voting power
c/o Integrated Spatial Information Solutions
19039 East Plaza Drive, Suite 245
Parker, Colorado 80134
John C. Antenucci 1,824,302(1) 8.5%
President and Director Sole dispositive and voting power
c/o Integrated Spatial Information Solutions
19039 East Plaza Drive, Suite 245
Parker, Colorado 80134
20
- -------------------------------------------------------------------------------------------------------------------
Name and Address of Amount & Nature of
Beneficial Owner Beneficial Ownership Percentage
- -------------------------------------------------------------------------------------------------------------------
Frederick G. Beisser 246,993(2) 1.3%
Chief Financial Officer, Secretary, Treasurer Sole dispositive and voting power
and Director
c/o Integrated Spatial Information Solutions
19039 East Plaza Drive, Suite 245
Parker, Colorado 80134
Raymund E. O'Mara 337,261(3) 1.7%
Director Sole dispositive and voting power
c/o Integrated Spatial Information Solutions
19039 East Plaza Drive, Suite 245
Parker, Colorado 80134
Gary S. Murray 2,438,042(4) 11.1%
Chairman and Director Sole voting power
c/o Integrated Spatial Information Solutions
19039 East Plaza Drive, Suite 245
Parker, Colorado 80134
J. Gary Reed 317,033(5) 1.6%
Director Sole dispositive and voting power
c/o Integrated Spatial Information Solutions
19039 East Plaza Drive, Suite 245
Parker, Colorado 80134
All Directors and Officers 5,297,631 21.3%
As a group (6 persons)
- ---------------
(1) Includes 551,427 shares of common stock issuable pursuant to the exercise
of options and warrants and 13,000 shares of common stock owned by Mr.
Antenucci's spouse, for which he is deemed to be a beneficial owner.
(2) Includes 179,093 shares of common stock issuable pursuant to the exercise
of options and warrants.
(3) Includes 122,500 shares of common stock issuable pursuant to the exercise
of options and warrants.
(4) Includes 195,000 shares of common stock issuable pursuant to the exercise
of options and warrants. Also includes 848,709 shares of common stock and
warrants to purchase 405,000 shares of common stock owned by Human Vision
L.L.C.. Mr. Murray, as the principal owner and executive officer, is a
control person of Human Vision L.L.C.
(5) Includes 304,090 shares of common stock issuable pursuant to the exercise
of options and warrants.
DETERMINATION OF OFFERING PRICE
The board of directors of ISIS decided to set a $ ____ per share
subscription price after considering several factors, including the potential
increase in the number of outstanding shares in the event the rights offering is
fully subscribed. In determining the per share subscription price, the board of
21
directors took into account the recent trading prices of our shares, the
possibility that existing shareholders may wish to purchase additional shares of
common stock from us and the multiples of book value at which shares of
similarly situated companies are trading. The $___ per share subscription price
should not be considered to be an indication of our actual value or of the value
of our common stock. We have neither sought, nor obtained, any valuation opinion
from outside financial advisors or investment bankers.
The Human Vision L.L.C. promissory note provides for a per share conversion
price of the lesser of $.07 or the per share subscription price being offered to
existing shareholders in the rights offering.
PLAN OF DISTRIBUTION
General
We are offering _____ shares of our common stock to our shareholders of
record as of April 30, 2001 at $ ___ per share in this rights offering. We have
not engaged an underwriter in connection with this rights offering. If the
rights offering is fully subscribed, we expect to raise proceeds of
approximately $2,800,000, before offering costs.
Our officers and directors may solicit responses from shareholders
receiving rights to purchase. These individuals will be acting solely on behalf
of ISIS and neither ISIS nor the officers and directors will charge any fee or
receive any commissions for the sales. Based on these facts, the officers and
directors will not register as brokers or dealers.
We have retained Brean Murray & Co., Inc. of New York, New York to assist
us in structuring the rights offering and to provide other financial and
business advisory services. For these services, Brean Murray & Co. will receive
warrants to purchase up to 2% of the shares of common stock outstanding after
the rights offering. Such warrants will expire five years after the date of
issuance and will be exercisable at a price equal to 110% of the exercise price
of the rights.
We have also retained Crossways Consulting Group of Palisades, New York to
identify qualified investors to purchase any shares remaining after the current
shareholders have exercised their basic and over-subscription rights, provide
advisory services on the structure of the rights offering and make
recommendations on the positioning and promotion of ISIS to domestic and
international business opportunities. For these efforts, Crossways Consulting
Group will receive warrants to purchase up to 2% of the shares of common stock
outstanding after the rights offering. Such warrants will expire five years
after the date of issuance and will be exercisable at a price equal to 110% of
the exercise price of the rights.
Description of the Rights Offered
Basic Subscription Rights
We are granting to our shareholders as of the close of business on April
30, 2001, non-transferable basic subscription rights to purchase up to _____
shares of our common stock, at a price of $___ per share, for each share of
common stock held on April 30, 2001.
If all shareholders fully exercise their subscription rights, we will issue
an aggregate of approximately _____ shares of common stock. We will not issue
fractional shares. We will round basic subscription and over-subscription rights
up to the next whole share. The basic subscription and non-subscription rights
are not transferable, except that the assignment by a record or nominee owner of
shares to the beneficial owner will be permitted to the extent allowable under
applicable state securities laws. A shareholder who does not participate in the
22
rights offering will experience ownership dilution. A shareholder may purchase
all or part of the shares to which the shareholder is entitled. Our officers and
directors, in their capacity as shareholders, will have the same rights to
purchase shares in the rights offering as other shareholders.
Our directors and officers hold approximately 21 percent of our presently
outstanding shares. We believe that they will exercise approximately 50 percent
of their shareholder rights during this offering. We further expect that at
least one of these officers and directors will elect to participate in
over-subscription rights, if available.
Shareholders cannot revoke their rights subscription certificates once
submitted. The board of directors reserves the right to modify, postpone or
cancel the rights offering at any time prior to its consummation if it
determines that such modification, postponement or cancellation is in our best
interests.
Over-subscription Rights
Shareholders who fully exercise their basic subscription rights will be
offered over-subscription rights, subject to availability of shares following
the exercise of the basic subscription rights. Pursuant to the grant of
over-subscription rights, shareholders who fully exercise their basic
subscription rights will be entitled to purchase, also at $_____ per share, the
shares remaining available, if any, after exercise of the basic subscription
rights by the other shareholders. In the event that more than the available
number of shares are subscribed to in connection with the exercise of
over-subscription rights, shares will be allocated pro-rata, based on the ratio
that the number of shares subscribed to by each over-subscribing shareholder
bears to the total number of shares that all over-subscribing shareholders seek
to purchase.
Shareholders must elect to exercise their over-subscription rights during
the subscription period, in the manner set forth in the subscription documents
provided to them. As with the basic subscription rights, the exercise of any
over-subscription rights may not be revoked. Payment for the exercise of any
over-subscription rights must be remitted with the payment for basic
subscription rights.
Subscription Agent
By an agreement dated ______, 2001, we appointed Computershare Investor
Services as subscription agent for the offering. We will pay its fees and
expenses related to the offering. You may direct any questions or requests for
assistance concerning the method of exercising your rights, additional copies of
this prospectus, the instructions, any nominee-related documents or other
subscription documents referred to in this prospectus, to the subscription
agent, at the following telephone number and address:
Computershare Investor Services
P.O. Box 1596
Denver, Colorado 80201-1596
(303) 986-5400
Exercise of Rights
You may exercise your rights by delivering the following to the
subscription agent, at or before 5:00 p.m., Mountain Standard Time, on ______,
2001, the date on which the rights expire:
o Your properly completed and executed subscription certificate with any
required signature guarantees or other supplemental documentation; and
23
o Your full subscription price payment for each share subscribed for
under your subscription privileges.
Do not send your subscription certificate and subscription price payment to
ISIS. Please make sure to send it to the subscription agent.
Method of Payment
Your payment of the subscription price must be made in U.S. dollars for the
full number of shares of common stock you are subscribing for by either:
o Check or bank draft drawn upon a U.S. bank or postal, telegraphic or
express money order payable to the subscription agent; or
o Wire transfer of immediately available funds to the subscription
account maintained by the subscription agent for the purpose of
accepting subscription, in accordance with the following wire
instructions: Union Bank & Trust, 100 Broadway, Denver, Colorado
80209, (303) 744-3221, ABA No. 102000908, further credit to 85-02961,
Attention: Computershare Trust Company, Inc., Escrow Agent.
Receipt of Payment
Your payment will be considered received by the subscription agent only
upon:
o Clearance of any uncertified check;
o Receipt by the subscription agent of any certified check or bank draft
drawn on a U.S. bank or of any postal, telegraphic or express money
order; or
o Receipt of collected funds in the subscription account designated
above.
Clearance of Uncertified Checks
If you are paying by uncertified personal check, please note that
uncertified checks may take at least five business days to clear. If you wish to
pay the subscription price by uncertified personal check, we urge you to ensure
that your payment is received sufficiently in advance of the time the rights
expire to ensure that your payment is received and cleared by that time. We urge
you to consider using a certified or cashier's check, money order or wire
transfer of funds to avoid missing the opportunity to exercise your rights.
Delivery of Subscription Materials and Payment
You should deliver your executed subscription certificate and payment of
the subscription price to the subscription agent by one of the methods described
below:
o If by mail to: Computershare Investor Services
P.O. Box 1596
Denver, Colorado 80201-1596
24
o If by hand delivery or by overnight courier to:
Computershare Investor Services
12039 West Alameda Parkway
Suite Z-2
Lakewood, Colorado 80228
o You may call the subscription agent at (303) 986-5400.
Your delivery to an address other than the address set forth above will not
constitute valid delivery. You are responsible for the method of delivery of
your subscription certificate with your subscription price payment to the
subscription agent. If you send your subscription certificate and subscription
price payment by mail, we recommend that you send them by registered mail,
properly insured, with return receipt requested. You should allow a sufficient
number of days to ensure delivery to the subscription agent before the time the
rights expire.
Calculation of Rights Exercised
If you do not indicate the number of rights being exercised, or do not
forward full payment of the total subscription price payment for the number of
rights that you indicate are being exercised, then you will be deemed to have
exercised your basic subscription privilege with respect to the maximum number
of rights that may be exercised with the aggregate subscription price payment
you deliver to the subscription agent. If your aggregate subscription price
payment is greater than the amount you owe for your subscription, you will be
deemed to have exercised your over-subscription privilege for the maximum number
of shares. If we do not apply your full subscription price payment to your
purchase of shares of common stock, we will return the excess amount to you by
mail without interest or deduction as soon as practicable after the offering is
completed.
Your Funds Will Be Held by the Subscription Agent Until Shares of Common Stock
are Issued
The subscription agent will hold your payment of the subscription price in
a segregated account with other payments received from other rights holders
until we issue your shares to you.
Notice to Beneficial Holders
If you are a broker, a trustee or a depositary for securities who holds
shares of our existing common stock for the account of others on April 30, 2001,
the record date for the issuance of rights under this offering, you should
notify the beneficial owners of those shares of the offering as soon as possible
to find out their intentions with respect to exercising their rights. You should
obtain instructions from the beneficial owners with respect to the rights, as
set forth in the instructions we have provided to you for your distribution to
beneficial owners. If a beneficial owner so instructs, you should complete the
appropriate subscription certificate and submit it to the subscription agent
with the proper payment. If you hold shares of our existing common stock for the
account of more than one beneficial owner, you may exercise the number of rights
to which all beneficial owners in the aggregate otherwise would have been
entitled had they been direct record holders of our existing common stock on the
record date for the issuance of rights under this offering.
Beneficial Owners
If you are a beneficial owner of shares of our existing common stock or
will receive your rights through a broker, custodian bank or other nominee, we
will ask your broker, custodian bank or other nominee to notify you of this
offering. If you wish to exercise your rights, you will need to have your
25
broker, custodian bank or other nominee act for you. If you hold certificates of
our common stock directly and would prefer to have your broker, custodian bank
or other nominee exercise your rights, you should contact your nominee and
request it to effect the transactions for you. If you wish to obtain a separate
subscription certificate, you should contact the nominee as soon as possible and
request that a separate subscription certificate be provided to you.
Determinations Regarding the Exercise of Your Rights
We will decide all questions concerning the timeliness, validity, form and
eligibility of your exercise of your rights and our determinations will be final
and binding. We, in our sole discretion, may waive any defect or irregularity,
or permit a defect or irregularity to be corrected within a period of time as we
may determine. We may reject the exercise of any of your rights because of any
defect or irregularity. We will not receive or accept any subscription until all
irregularities have been waived by us or cured by you within a period of time as
we decide, in our sole discretion.
Neither we nor the subscription agent will be under any duty to notify you
of any defect or irregularity in connection with your submission of your
subscription certificate and we will not be liable for any failure to notify you
of any defect or irregularity. We reserve the right to reject subscription
certificate if it is not in accordance with the terms of the offering or in
proper form. We will also not accept your subscription certificate if our
issuance of shares of our common stock to you could be deemed unlawful under
applicable law or is materially burdensome to us.
No Revocation
Once you have exercised your subscription privileges, you may not revoke
your exercise. Rights not exercised before the expiration date of the rights
will expire.
Shares Offered to Others
If the shareholders as of the record date do not exercise their rights to
all of the shares available, we will offer the remaining shares to others at
$_______ per share. After the rights expire, we will determine the number of
remaining shares and officers and directors of ISIS will sell such shares. We
have retained Crossways Consulting Group who will provide advisory services on
the structure of the rights offering, introductions of individuals and
organizations to ISIS who may become qualified investors through the purchase of
shares remaining after the offering to existing shareholders and recommendations
on the positioning and promotion of ISIS to domestic and international business
opportunities. ISIS's officers and directors will be acting solely on behalf of
ISIS to sell the remaining shares, and neither the officers and directors nor
ISIS will charge any fee or receive any commissions for the sales. Based on
these facts the officers and directors will not register as brokers or dealers.
Extensions and Termination
We may extend the offering and the period for exercising your rights, in
our sole discretion. In addition, we may terminate the offering at any time
before the time the rights expire.
No Recommendation to Holders of Rights
We are not making any recommendations as to whether or not you should
subscribe for shares of our common stock. You should decide whether to subscribe
for shares based upon your own assessment of your best interests in consultation
with your legal and financial advisors.
26
Regulatory Limitation
We will not be required to issue to you shares of our common stock in the
offering if, in our opinion, you would be required to obtain prior clearance or
approval from any state or federal regulatory authorities to own or control the
shares and if, at the time the rights expire, you have not obtained that
clearance or approval.
Issuance of Common Stock
Computershare Investor Services will issue to you certificates representing
shares of common stock you purchase under the offering as soon as practicable
after the time the rights expire.
Your payment of the aggregate subscription price will be retained by the
subscription agent and will not be delivered to us until your subscription is
accepted and you are issued your share certificates. We will not pay you any
interest on funds paid to the subscription agent, regardless of whether the
funds are applied to the subscription price or returned to you. You will have no
rights as a shareholder of ISIS, with respect to shares of our common stock
subscribed for, until certificates representing the shares are issued to you.
Upon our issuance of the certificates, you will be deemed the owner of the
shares you purchased by exercise of your rights. Unless otherwise instructed in
the subscription certificate, your certificates for shares issued as a result of
your exercise of rights will be registered in your name.
If the offering is not completed for any reason, the subscription agent
will promptly return, without interest or deduction, all funds received by it.
We will retain any interest earned on the funds held by the subscription agent.
Compliance with State Regulations Pertaining to the Offering
We are not making the offering in any state or other jurisdiction in which
it is unlawful to do so. We will not sell or accept an offer to purchase our
common stock from you if you are a resident of any state or other jurisdiction
in which the sale or offer of the rights would be unlawful. We may delay the
commencement of the offering in these states or other jurisdictions to comply
with their laws. We do not expect that there will be any changes in the terms of
the offering. However, we may decide, in our sole discretion, not to modify the
terms of the offering as may be requested by some of these states or other
jurisdictions. If that happens and you are a resident of the state or
jurisdiction that requests the modification, you will not be eligible to
participate in the offering.
DIRECTORS AND EXECUTIVE OFFICERS
The current directors and executive officers of ISIS are:
Name Age Position
---- --- --------
Jeanne M. Anderson 49 Director
John C. Antenucci 54 Vice Chairman, Director, President and
Acting Chief
Executive Officer
of ISIS; President and Chief
Executive Officer
of PlanGraphics, Inc.
27
Name Age Position
---- --- --------
Frederick G. Beisser 58 Director, Vice President - Finance and
Administration, Secretary and Treasurer
Raymund E. O'Mara 60 Director
Gary S. Murray 50 Chairman and Director
J. Gary Reed 51 Director and Chief Operating Officer of
PlanGraphics, Inc.
All directors hold office until the next annual meeting of shareholders and
serve until their successors are duly elected and qualified, or until their
earlier death, resignation or removal.
Jeanne M. Anderson has been a director of our company continuously since 1987
and served as Chairman of the Board of Directors from January 1, 1997 through
October 2, 1997. She is a former President and Chief Executive Officer of ISIS.
She served as President and Chief Executive Officer from October 1, 1991 through
December 31, 1996. Ms. Anderson has been a small business owner and entrepreneur
since retiring from her position as an officer of the company and is presently
engaged in cosmotology and related beauty salon activities.
John C. Antenucci is ISIS's President and Acting Chief Executive Officer and has
been a director since November 3, 1997. He is the founder and has been the
President and Chief Executive Officer of PlanGraphics, Inc. since 1979. He is a
former president of AM/FM International (now GITA), a professional association
for utility industry users of geographic information systems. He is also a
member of the National Academy of Sciences Advisory Committee on the Future of
U.S. Geological Survey and served in a similar capacity on the Academy's
Advisory Committee for Mapping Sciences. He serves as an advisor to Ohio State
University's Center for Mapping, has recently co-authored a chapter of a
to-be-published text book on geographic information systems, global positioning
systems and remote sensing and was editor and co-author of a leading textbook on
geographic information systems. Mr. Antenucci holds an MS in Civil
Engineering/Water Resources from Catholic University of America in Washington,
D.C. and a Bachelor of Civil Engineering from the same institution.
Frederick G. Beisser joined ISIS as Chief Financial Officer in July 1990 and was
promoted to his current position of Vice President - Finance and Administration,
on March 28, 1997. He was elected to the Board of Directors in March 1991 at
which time he also became Treasurer and was subsequently appointed Secretary on
October 1, 1991. Mr. Beisser is a Colorado Certified Public Accountant. Prior to
joining ISIS, he held financial management and controller positions with the
U.S. Air Force in the United States and abroad. Retired with the rank of Major
in 1989, he holds a Ph.D. from American International University in Canoga Park,
California, an MBA from Golden Gate University in San Francisco and a BS in
Business Administration from the University of Southern Colorado in Pueblo,
Colorado. In addition, Mr. Beisser has a diploma from the Air War College. He is
also a member of the Board of Directors of Wastemasters, Inc. of El Reno,
Oklahoma and Titan Motorcycle Co. of America located in Phoenix, Arizona.
Raymund E. O'Mara has been a director of ISIS since November 3, 1997. He is a
principal with Booz Allen & Hamilton, consultants, since 1996. Prior to joining
Booz Allen & Hamilton, Mr. O'Mara retired from the U.S. Air Force in 1994 with
the rank of Major General. From 1993 until his retirement, he was Director,
Defense Mapping Agency, Bethesda, Maryland and prior to that served as Vice
Commander in Chief, Atlantic Command, Norfolk Virginia for two years. Mr. O'Mara
holds a Master of Arts from State University of New York at Plattsburgh, New
York and a BS in Electrical Engineering from the New Jersey Institute of
Technology at Newark.
28
Gary S. Murray was appointed Chairman of the Board of Directors on July 6, 1999
and has served as a director of the Company since June 26, 1998. Mr. Murray is
the founder and managing member of Human Vision L.L.C., an advisory and
investment firm located in Landover, Maryland. He is also co-founder and a
principal of Timebridge Technologies (Lanham, Maryland), an e-commerce firm
specializing in database and network services that was acquired by Dimension
Data Holdings PLC in November 2000. Mr. Murray was founder, chairman and
president of systems integrator Sylvest Management Systems (Lanham, Maryland)
until its acquisition by Federal Data Corporation in June 1997. He holds a BBA
from Howard University, Washington, D.C. and is a Certified Public Accountant.
J. Gary Reed became a director of ISIS on November 3, 1997. He is the Chief
Operating Officer of PlanGraphics, Inc. Mr. Reed has been employed by
PlanGraphics in several capacities since 1995. Prior to joining PlanGraphics, he
held several executive positions during a twenty-one year career with Geonex
Corporation and was named President of that corporation in 1994. Mr. Reed holds
an MBA from the Keller Graduate School of Management in Chicago and a BS in
Biology from Virginia Polytechnic Institute and State University in Blacksburg,
Virginia.
Other Associations
During the past five years, one principal of ISIS has served as a principal
of the following reporting issuers during the periods and in the capacities
noted below:
Principal Reporting Issuer Capacity Period
- ------------ ---------------------- ------------ ---------
Frederick G. Beisser Wastemasters, Inc. Director March 1999 to present
Titan Motorcycles of Director October 2000 to present
America, Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gary S. Murray, Chairman and a director of ISIS, is the principal owner and
executive officer of Human Vision L.L.C.. On July 6, 1999, we entered into a
consulting agreement with Human Vision L.L.C. Compensation for the consulting
services of Human Vision L.L.C. consists of performance options to purchase
322,581 shares of common stock at an exercise price of $0.31 per share if our
market capitalization exceeds $30,000,000 for greater than twenty consecutive
business days at any time prior to June 30, 2001, and an additional 322,581
shares of common stock at an exercise price of $0.31 per share if our market
capitalization exceeds $60,000,000 for greater than twenty consecutive business
days at any time prior to June 30, 2001. The options will be exercisable for a
period of three years from the date of issue. The agreement also provides for a
success fee of 1.5% of the transaction value in the event of a successful merger
or acquisition of stock or assets.
On February 2, 2001, we executed a promissory note with Human Vision L.L.C.
for the sum of $75,000. The note is due on October 21, 2001. The promissory note
bears interest at prime plus six percent and is convertible at the option of the
holder of the note into shares of ISIS common stock at the lower of $.07 per
share or the price per share of any offer to our shareholders of stock or rights
to purchase our common stock. The shares issuable upon conversion of this note
are being registered concurrently with those shares issuable pursuant to the
rights offering.
29
On February 9, 2001, PlanGraphics entered into an agreement with Human
Vision L.L.C. whereby Human Vision L.L.C. agreed to provide a $325,000 standby
letter of credit to National City Bank of Kentucky as additional collateral for
PlanGraphics' existing line of credit. As consideration, PlanGraphics will make
quarterly payments of an amount equal to two percent of the value of the standby
letter of credit. In the event National City Bank calls the standby letter of
credit, PlanGraphics will execute a convertible debt instrument payable to Human
Vision L.L.C. at an annual interest rate of prime plus six percent for a term
not to exceed nine months. At any time prior to the instrument's maturation,
Human Vision L.L.C. may convert the debt and accrued interest into shares of our
common stock valued at $.07 per share. The accounts receivable of PlanGraphics
serve as collateral should the standby letter of credit be called. ISIS also
provided a guarantee to Human Vision L.L.C. offering its stock in PlanGraphics
as consideration.
John C. Antenucci, President and a director of ISIS, is a 10% partner in
the organization that owns the facilities in Frankfort, Kentucky, leased by
PlanGraphics, Inc. The annual lease cost of approximately $327,000 per year for
20,500 square feet. PlanGraphics entered into the lease in 1995, prior to the
acquisition of PlanGraphics by ISIS. When entered into, the lease rate exceeded
the fair market value for similar facilities in the area by approximately 20%.
This transaction, however, was considered to be in the best interests of
PlanGraphics at that time by its Board of Directors.
30
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation paid and accrued by ISIS
for services rendered during the fiscal years ended September 30, 2000,
September 30, 1999 and September 30, 1998 to certain of our executive officers.
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Other Annual Options/ LTIP
Name and Bonus Compensation SARs granted Payouts All Other
Principal Position Year Salary ($) ($) ($) (#) ($) ($)
------------------ ---- ---------- --- --- --- --- ---
John C. Antenucci, Vice 2000 $138,219 - - - - -
Chairman, President 1999 $159,374 - - - - -
and Acting CEO 1998 $175,000 - - 260,853(2) - -
Stephen Carreker, 2000 $17,719 - $240,750(1) - - -
Former Chairman and CEO 1999 $124,808
1998 $175,000 - - 327,655(2) - -
J. Gary Reed, Director 2000 $96,104 $8,000 - - - -
and Chief Operating 1999 $105,660 - - - - -
Officer of PlanGraphics 1998 $106,248 - - 171,348(2) - -
(1) The amount of "Other Compensation" for Mr. Carreker represents the total of
our payments made to him and to his attorney on behalf of Mr. Carreker
pursuant to the settlement agreement we entered into with Mr. Carreker upon
his departure.
(2) Quantity of Stock Options granted during fiscal year 1998 for Carreker,
Antenucci and Reed represents the quantity of antidilution stock options
accrued during the year pursuant to employment agreements (the board of
directors and the employees have agreed to annul this provision for periods
subsequent to June 30, 1998) at prices ranging from $1.125 to $2.125 per
share.
Option/SAR Grants in Last Fiscal Year
We made no grants to the named officers during the fiscal year ended September
30, 2000.
31
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
---- ------------ ------------------ ------------- -------------
John C. Antenucci, Vice
Chairman, President and - - 452,966 / 0(1) -
Action CEO
Stephen Carreker, - - 452,966 / 340,038(2) -
Former Chairman and CEO
J. Gary Reed, Director
and Chief Operating
Officer of PlanGraphics - - 301,934/0(3) -
(1) Mr. Antenucci received fully stock options to purchase 300,000 shares of
our common stock at an exercise price of $1.75 on September 22, 1997. In
addition, Mr. Antenucci is entitled to 268,004 antidilution options related
to his employment agreement that are prorated between immediately vested
and performance options.
(2) Mr. Carreker received options to purchase 30,000 shares of our common stock
at a price of $1.125 on January 2, 1997 that were fully vested upon grant.
In connection with his employment agreement Mr. Carreker received fully
vested stock options to purchase 200,000 shares of our common stock
effective January 7, 1997. In addition, at September 30, 2000, he was
entitled to 301,988 antidilution options related to vested options. All of
these options terminated with the completion of all of our obligations
under the settlement agreement with Mr. Carreker.
(3) Mr. Reed received fully vested options to purchase 200,000 shares of our
common stock at an exercise price of $1.75 on September 22, 1997. In
addition, Mr. Reed is entitled to 101,934 antidilution options related to
his employment agreement that were immediately vested.
Compensation of Directors
Our directors who are employees of our company or our subsidiaries do not
receive any compensation for their services as directors. Nonemployee directors
receive $1,000 for each scheduled board meeting attended in person and $250 for
each scheduled board meeting attended via conference call. Meetings of
committees of the board are compensated at $250 per meeting attended in person
or via conference call. During fiscal year 1999, we instituted a standardized
compensation program for nonemployee directors whereby the nonemployee director
receives stock options on the date of election to the board to purchase 10,000
shares of our common stock at the market price on that date. Such options vest
quarterly provided that the director has attended 75 percent or more of the
scheduled board meetings.
32
One nonemployee director, Ms. Anderson, is compensated at a rate of $850
per month pursuant to a previous agreement. During fiscal year 2000, Ms.
Anderson received $10,421 in fees and expenses for her services as a director.
Effective July 6, 1999, we entered into an Agreement for Services with Mr.
Murray for his services as Chairman of the Board. The agreement expires June 30,
2001 and provides for annual base compensation of $50,000, payable monthly in
shares of our common stock valued at the average price for the five business
days preceding the date of the agreement ($0.2906). The agreement also provides
Mr. Murray with options to purchase 175,000 shares of our common stock per annum
at an exercise price of $0.31 per share, vesting in quarterly installments and
exercisable for three years from the date of the agreement. In addition, Mr.
Murray received fully vested and immediately exercisable incentive options to
purchase 688,235 shares of our common stock at an exercise price of $0.2906.
During fiscal year 2000, Mr. Murray received $4,882 in fees and expenses for his
services as chairman and director.
Employment Contracts and Termination of Employment and Change-in-Control
Agreements.
Mr. Antenucci. ISIS entered into a three-year employment agreement with
John C. Antenucci effective September 22, 1997 that automatically renewed for an
additional three-year term in 2000. The agreement provides for a salary of
$175,000 per year with provisions for bonuses of up to 21% of base salary if
certain goals were achieved. Mr. Antenucci received a one-time advance payment
of $50,000 of his FY 1998 salary for entering into the agreement. On June 26,
1998, the Compensation Committee of the Board of Directors reduced the annual
compensation of Mr. Antenucci by 10 percent to $157,500 annually. This reduction
became effective October 1, 1998. Subsequently, Mr. Antenucci's annual
compensation was again reduced and effective July 2, 1999, his current annual
compensation was set by the Board of Directors at $157,499.
The agreement provided Mr. Antenucci with fully vested stock options to
purchase 300,000 shares of common stock and performance options to purchase
225,000 shares of common stock that vest upon attainment of certain performance
goals. The performance related options to acquire common stock have lapsed and
are no longer valid.
Mr. Antenucci is entitled to continued base compensation for three years
following date of termination if not for death, disability, cause, voluntary
resignation other than constructive termination or the expiration of the
agreement's term. If termination is for one of the above-stated reasons, all
benefits including salary are continued for 18 months. Mr. Antenucci is entitled
to a three-year consulting period at one half of average annual salary for the
immediately preceding 36-month period should he exercise his option to terminate
his employment voluntarily after June 30, 2000.
Mr. Beisser. On March 28, 1997 we entered into a three-year employment
agreement with our Vice President - Finance & Administration, Frederick G.
Beisser, effective January 1, 1997 that automatically renewed for an additional
three-year term in 2000. The agreement provides for a base salary of $60,000.
The board of directors reduced Mr. Beisser's base salary by 10 percent effective
October 1, 1998 and immediately thereafter restored it to its former level.
Subsequently, the board of directors reduced it to $59,999, its present level,
effective July 2, 1999.
The agreement granted 70,000 fully vested nonqualified stock options to
acquire 70,000 shares of our common stock as an incentive to enter into the
agreement and further granted 50,000 of performance stock options requiring the
attainment of certain goals. The agreement also provides for certain cash bonus
payments upon meeting defined performance goals. The performance related options
to acquire common stock have lapsed and are no longer valid.
33
Under the agreement Mr. Beisser is entitled to continuation of base
compensation for a period of two years if employment is terminated for any
reason other than death, disability, cause, voluntary resignation or the
expiration of the term of the employment agreement; otherwise termination for
the stated reasons results in payment of base salary, performance and incentive
bonuses for 12 months.
Mr. Reed. We entered into a three year employment agreement with the Chief
Operating Officer, J. Gary Reed, of PlanGraphics, Inc., effective September 22,
1997. The employment agreement renewed automatically in 2000 for an additional
three-year term. The agreement set Mr. Reed's base salary at $115,000 per year
with provisions for bonuses of up to 21% of base salary if certain goals are
achieved. The board of directors reduced the base salary by 10 percent to
$103,500 effective October 1, 1998 and to it present level of $103,499 effective
July 2, 1999. Pursuant to the agreement, Mr. Reed also received fully vested
performance based options to purchase 200,000 shares of our common stock. These
performance related options to acquire common stock have lapsed and are no
longer valid.
Under the agreement, Mr. Reed is entitled to continued base compensation
for three years following date of termination if not for death, disability,
cause, voluntary resignation other than constructive termination or the
expiration of the agreement's term; if termination is for one of these reasons
then all benefits including salary are continued for 18 months. Mr. Reed is also
entitled to a three-year consulting period at one half of his average annual
salary for the immediately preceding 36-month period.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements. Such
forward-looking statements may concern, among other things, results of
operations and business prospects, ISIS's ability to operate effectively and
profitably, and other statements of expectations, beliefs, future plans and
strategies, anticipated developments and other matters that are not historical
facts. In particular, any statements, express or implied, concerning future
operating results or the ability to generate revenues and operating income are
forward-looking statements. Such forward-looking statements generally are
accompanied by words such as "expect," "predict," "anticipate," "should,"
"assume," "believe," "plan," "intend," "estimate," "project," "projected," or
other words that convey the uncertainty of future events or outcomes.
Such forward-looking information is based upon management's current plans,
expectations, estimates and assumptions and is subject to a number of risks and
uncertainties that could significantly affect current plans, anticipated
actions, the timing of such actions and ISIS's financial condition and results
of operations. As a consequence, actual results may differ materially from
expectations, estimates or assumptions expressed in or implied by any
forward-looking statements made by or on behalf of ISIS. Also, the impact of
competition on all aspects of the business is not predictable. Additionally,
unpredictable or unknown factors not discussed herein could have material
adverse effects. Forward-looking statements speak only as of the date hereof.
ISIS does not intend to update these cautionary statements.
VALIDITY OF SECURITIES
The validity of the ISIS common stock offered hereby has been passed upon
for ISIS by Davis Graham & Stubbs LLP, Denver, Colorado.
34
EXPERTS
The consolidated financial statements of ISIS as of and for the fiscal
years ended September 30, 2000 and 1999 included in this prospectus have been
audited by BDO Seidman, LLP, independent auditors, as stated in their report
appearing herein and are included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing. The report for
the year ended September 30, 2000 contains a paragraph regarding our ability to
continue as a going concern.
DISCLOSURE OF COMMISSION POSITION OF
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of ISIS pursuant to its articles of incorporation and bylaws, or
otherwise, ISIS has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. If a claim for
indemnification against such liabilities (other than the payment by ISIS of
expenses incurred or paid by a director, officer or controlling person of ISIS
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, ISIS will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
WHERE YOU CAN FIND MORE INFORMATION
ISIS files annual, quarterly and other reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any reports, statements or other information we file at the Securities and
Exchange Commission's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the Securities and Exchange Commission
at 1-800-732-0330 for further information on the public reference rooms. Our
filings are also available to the public from commercial document retrieval
services and at the web site maintained by the Securities and Exchange
Commission at "http://www.sec.gov."
ISIS has filed a registration statement on Form SB-2 to register with the
Securities and Exchange Commission the common stock offered by this prospectus.
This prospectus is part of that registration statement. As allowed by the
Securities and Exchange Commission rules, this prospectus does not contain all
the information you can find in the registration statement or the exhibits to
the registration statement.
You can obtain a complete copy of the registration statement, including
exhibits, without charge by submitting a request in writing or by telephone to
ISIS at the following address:
Frederick G. Beisser
Integrated Spatial Information Solutions, Inc.
19039 East Plaza Drive, Suite 245
Parker, Colorado 80134
(720) 851-0716
35
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants...................... F-2
Consolidated Financial Statements for the Years
Ended September 30, 1999 and 2000
Consolidated Balance Sheets.................................... F-3
Consolidated Statements of Operations.......................... F-5
Consolidated Statements of Stockholders' Equity................ F-6
Consolidated Statements of Cash Flows.......................... F-8
Summary of Accounting Policies................................. F-9
Notes to Consolidated Financial Statements..................... F-16
Condensed Consolidated Balance Sheets as of December 31, 2000
(unaudited) and September 30, 2000 (audited)......................... F-36
Condensed Consolidated Financial Statements for the Three Months Ended
December 31, 1999 and 2000 (unaudited)
Condensed Consolidated Statements of Operations................ F-37
Condensed Consolidated Statements of Cash Flows................ F-38
Notes to Condensed Consolidated Financial Statements........... F-39
Report of Independent Certified Public Accountants
The Board of Directors and Stockholders
Integrated Spatial Information Solutions, Inc.
Frankfort, Kentucky
We have audited the accompanying consolidated balance sheets of Integrated
Spatial Information Solutions, Inc. and subsidiary as of September 30, 2000 and
1999 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 consolidated financial position of
Integrated Spatial Information Solutions, Inc. and subsidiary as of September
30, 2000 and 1999 and the consolidated results of their operations and their
cash flows for each of the years then ended, in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company's significant operating losses
and working capital deficiency raise substantial doubt about its ability to
continue as a going concern. Management's plans regarding those matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/S/ BDO Seidman, LLP
--------------------
Denver, Colorado BDO Seidman, LLP
February 12, 2001
F-2
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Balance Sheets
======================================================================================
September 30, 2000 1999
======================================================================================
Assets
Current:
Cash and cash equivalents $ 20,306 $ 373,825
Accounts receivable, less allowance for doubtful accounts
of $1,007 and $51,577 (Note 2) 1,386,774 1,923,412
Restricted cash -- 25,000
Prepaid expenses and other 172,154 122,500
- --------------------------------------------------------------------------------------
Total current assets 1,579,234 2,444,737
- --------------------------------------------------------------------------------------
Property and equipment:
Land and building under capital lease -
related party (Note 6) 1,866,667 1,866,667
Equipment and furniture 699,165 574,292
Other leased assets 255,600 255,600
- --------------------------------------------------------------------------------------
2,821,432 2,696,559
Less accumulated depreciation and amortization 1,084,027 735,728
- --------------------------------------------------------------------------------------
Net property and equipment 1,737,405 1,960,831
- --------------------------------------------------------------------------------------
Other assets:
Goodwill, net of accumulated amortization of
$1,146,522 and $782,599 4,312,267 4,676,192
Other 102,974 74,844
- --------------------------------------------------------------------------------------
Total other assets 4,415,241 4,751,036
- --------------------------------------------------------------------------------------
$7,731,880 $9,156,604
======================================================================================
See Report of Independent Certified Public Accountants,
summary of accounting policies and notes to consolidated financial statements.
F-3
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Balance Sheets
========================================================================================
September 30, 2000 1999
========================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable - current maturities (Note 3) $ 559,647 $ 222,584
Obligations under capital lease -current (Note 6) 13,286 65,501
Obligations under capital leases - related party,
current (Note 6) 90,091 79,367
Checks written against future deposits 61,612 --
Accounts payable (Note 10) 871,288 480,024
Accrued payroll costs and vacation 325,613 643,423
Accrued expenses 696,841 593,448
Deferred revenue 201,578 108,588
- ----------------------------------------------------------------------------------------
Total current liabilities 2,819,956 2,192,935
- ----------------------------------------------------------------------------------------
Long-term liabilities:
Notes payable, less current maturities (Note 3) -- 200,496
Obligations under capital leases - related
party, less current maturities (Note 6) 1,712,217 1,815,594
- ----------------------------------------------------------------------------------------
Total long-term liabilities 1,712,217 2,016,090
- ----------------------------------------------------------------------------------------
Total liabilities 4,532,173 4,209,025
- ----------------------------------------------------------------------------------------
Commitments and Contingencies (Notes 1, 6, 8, 9, and 11)
Stockholders' equity (Note 7):
Cumulative convertible preferred stock,
$.001 par value, 20,000,000 shares authorized,
0 and 590 shares issued or outstanding -- 1
Common stock, no par value, 2,000,000,000
shares authorized, 18,674,382 and 13,242,112
shares issued and outstanding 14,254,487 13,065,330
Common stock to be issued 25,000 31,500
Additional paid-in capital 3,400,882 3,737,594
Accumulated deficit (14,480,662) (11,886,846)
- ----------------------------------------------------------------------------------------
Total stockholders' equity 3,199,707 4,947,579
- ----------------------------------------------------------------------------------------
$ 7,731,880 $ 9,156,604
========================================================================================
See Report of Independent Certified Public Accountants,
summary of accounting policies and notes to consolidated financial statements.
F-4
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Statements of Operations
===============================================================================
Year Ended September 30, 2000 1999
===============================================================================
Revenues $ 6,048,570 $ 7,990,808
- -------------------------------------------------------------------------------
Cost and expenses:
Direct contract costs 3,681,054 4,365,360
Salaries and employee benefits 1,865,357 2,347,751
General and administrative expenses 1,067,445 1,623,960
Marketing expenses 367,828 244,133
Other operating expenses 844,971 707,946
- -------------------------------------------------------------------------------
Total costs and expenses 7,826,655 9,289,150
- -------------------------------------------------------------------------------
Operating loss (1,778,085) (1,298,342)
- -------------------------------------------------------------------------------
Other income (expense):
Other income 116,674 82,775
Gain on sale of assets (Note 4) 5,033 177,744
Gain (loss) on litigation settlements (Note 11) (589,432) 414,312
Interest expense (330,004) (434,268)
- -------------------------------------------------------------------------------
Total other income (expense) (797,729) 240,563
- -------------------------------------------------------------------------------
Net loss (2,575,814) (1,057,779)
Preferred stock dividends (Note 7) (18,002) (36,723)
- -------------------------------------------------------------------------------
Net loss available to common stockholders $ (2,593,816) $ (1,094,502)
===============================================================================
Basic and diluted loss per common share $ (.16) $ (.09)
- -------------------------------------------------------------------------------
Weighted average number of shares of common stock
outstanding 15,749,738 11,982,785
===============================================================================
See Report of Independent Certified Public Accountants,
summary of accounting policies and notes to consolidated financial statements.
F-5
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
================================================================================
Year Ended
September 30, Series A
1999 Preferred Stock Common Stock
------------------- ---------------------
(See Note 7) Shares Amount Shares Amount
================================================================================
Balance,
October 1, 1998 700 $ 1 11,456,571 $ 12,635,423
Issuance of
common stock
for cash on
options
exercised -- -- 688,235 200,000
Common stock
issued for
services -- -- 455,754 122,319
Conversion of
preferred
stock into
common stock (110) -- 501,552 71,188
Preferred stock
dividends -- -- -- --
Stock options
and warrants
issued for
consulting
services -- -- -- --
Settlement of
legal
disputes
through
issuance of
common stock
warrants -- -- 140,000 36,400
Net loss -- -- -- --
- --------------------------------------------------------------------------------
Balance,
September 30, 1999 590 $ 1 13,242,112 $ 13,065,330
================================================================================
Table continues on following page.
F-6
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity (Continued)
===============================================================================================
Year Ended Additional Paid-in Capital
September 30, --------------------------
1999 Common
Stock to Accumulated
be Issued Common Preferred Deficit Total
===============================================================================================
Balance,
October 1, 1998 $ -- $ 3,298,264 $ 445,400 $(10,792,344) $ 5,586,744
Issuance of
common stock
for cash on
options
exercised -- -- -- -- 200,000
Common stock
issued for
services -- -- -- -- 122,319
Conversion of
preferred
stock into
common stock -- -- (71,188) -- --
Preferred stock
dividends -- -- -- (36,723) (36,723)
Stock options
and warrants
issued for
consulting
services -- 35,718 -- -- 35,718
Settlement of
legal
disputes
through
issuance of
common stock
warrants 31,500 29,400 -- -- 97,300
Net loss -- -- -- (1,057,779) (1,057,779)
- -----------------------------------------------------------------------------------------------
Balance,
September 30, 1999 $ 31,500 $ 3,363,382 $ 374,212 $(11,886,846) $ 4,947,579
===============================================================================================
See Report of Independent Certified Public Accountants,
summary of accounting policies and notes to consolidated financial statements.
F-6(a)
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity (Continued)
=================================================================================
Year Ended
September 30, Series A
1999 Preferred Stock Common Stock
------------------- --------------------------
(See Note 7) Shares Amount Shares Amount
=================================================================================
Balance,
October 1, 1999 590 $ 1 13,242,112 $ 13,065,330
Issuance of
common stock
for cash and
options
exercised -- -- 127,967 30,250
Issuance of
common stock
to related
parties -- -- 852,000 213,000
Issuance of
common stock
to unrelated
parties -- -- 806,452 250,000
Stock issued for
services -- -- 388,979 88,434
Conversion of
preferred
stock into
common stock (590) (1) 2,597,064 374,212
Issuance of
common stock
for preferred
stock
dividends -- -- 181,131 56,151
Preferred stock
dividends -- -- -- --
Stock options
and warrants
issued for
consulting
services -- -- -- --
Settlement of
legal
disputes
through
issuance of
common stock -- -- 202,703 75,000
Settlement of
legal
disputes
through
issuance of
common stock
upon exercise
of options
and warrants -- -- 275,974 102,110
Net loss -- -- -- --
- ---------------------------------------------------------------------------------
Balance,
September 30, 2000 -- $ -- 18,674,382 $ 14,254,487
=================================================================================
Table continues on following page.
F-7
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity (Continued)
=================================================================================================
Year Ended Additional Paid-in Capital
September 30, --------------------------
1999 Common
Stock to Accumulated
be Issued Common Preferred Deficit Total
=================================================================================================
Balance,
October 1, 1999 $ 31,500 $ 3,363,382 $ 374,212 $(11,886,846) $ 4,947,579
Issuance of
common stock
for cash and
options
exercised -- -- -- -- 30,250
Issuance of
common stock
to related
parties -- -- -- -- 213,000
Issuance of
common stock
to unrelated
parties 25,000 -- -- -- 275,000
Stock issued for
services (31,500) -- -- -- 56,934
Conversion of
preferred
stock into
common stock -- -- (374,212) -- (1)
Issuance of
common stock
for preferred
stock
dividends -- -- -- -- 56,151
Preferred stock
dividends -- -- -- (18,002) (18,002)
Stock options
and warrants
issued for
consulting
services -- 37,500 -- -- 37,500
Settlement of
legal
disputes
through
issuance of
common stock -- -- -- -- 75,000
Settlement of
legal
disputes
through
issuance of
common stock
upon exercise
of options
and warrants -- -- -- -- 102,110
Net loss -- -- -- (2,575,814) (2,575,814)
Balance,
September 30, 2000 $ 25,000 $ 3,400,882 $ -- $(14,480,662) $ 3,199,707
=================================================================================================
See Report of Independent Certified Public Accountants,
summary of accounting policies and notes to consolidated financial statements.
F-7(a)
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Statements of Cash Flows
====================================================================================================
Increase (decrease) in Cash and Cash Equivalents
Years Ended September 30, 2000 1999
====================================================================================================
Operating activities:
Net loss $(2,575,814) $(1,057,779)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 715,265 707,946
Provision for losses on accounts receivable (50,570) 110,809
Gain on litigation settlement -- (414,312)
Stocks and warrants issued in settlement of legal disputes 177,110 --
Stock issued for services 88,434 158,719
Stock (issued)/to be issued for litigation settlement (31,500) 31,500
Stock options and warrants issued for consulting services 37,500 65,118
Stock issued as payment of dividends 56,151 --
Gain on sale of assets (5,033) (177,744)
Changes in operating assets and liabilities:
Accounts receivable 587,208 537,645
Prepaid expenses and other (49,654) 41,671
Other assets (28,130) 21,305
Accounts payable 391,264 (199,357)
Accrued expenses (232,419) 320,284
Deferred revenue 92,990 (4,417)
- ----------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (827,198) 141,388
- ----------------------------------------------------------------------------------------------------
Investing activities:
Purchase of equipment (124,873) (97,968)
Proceeds from sale of assets 1,990 1,245,000
Restricted cash 25,000 75,000
- ----------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (97,883) 1,222,032
- ----------------------------------------------------------------------------------------------------
Financing activities:
Checks written against future deposits 61,612 (207,650)
Proceeds from debt 5,316,044 --
Payments on debt (5,179,477) (831,303)
Payments on obligations under capital lease (144,868) (160,044)
Payments on stock purchase liability -- (45,643)
Proceeds from exercise of stock options 30,250 200,000
Proceeds from the issuance of common stock 463,000 --
Proceeds from stock to be issued 25,000 --
Conversion of preferred stock into common stock 1 --
- ----------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 571,562 (1,044,640)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (353,519) 318,780
Cash and cash equivalents, beginning of year 373,825 55,045
- ----------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 20,306 $ 373,825
====================================================================================================
See Report of Independent Certified Public Accountants,
summary of accounting policies and notes to consolidated financial statements.
F-8
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Summary of Accounting Policies
================================================================================
Organization and Business
These consolidated financial statements include the accounts of Integrated
Spatial Information Solutions, Inc. and those of its wholly owned subsidiary
PlanGraphics, Inc. (collectively the "Company"). PlanGraphics, Inc. is an
independent consulting firm specializing in the design and implementation of
Geographic Information Systems ("GIS") as well as advisory services in the
United States and foreign markets. The customer base consists primarily of
utilities, government agencies, and land and resource management organizations.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
it's wholly owned subsidiary. All significant inter-company accounts and
transactions have been eliminated in consolidation.
Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Revenue and Cost Recognition
Revenues from fixed fee projects are recognized on the percent complete method
and as services are provided for time and material projects. Revisions in cost
and profit estimates during the course of the work are reflected in the
accounting period in which they become known.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as supplies, tools, repairs and
depreciation costs. General and administrative costs are charged to expense as
incurred. Deferred revenue primarily represents retainage in connection with
these contracts.
Goodwill
Goodwill represents the excess of the cost over the fair value of its net assets
acquired at the date of acquisition and is being amortized on the straight-line
method over fifteen years. Amortization expense on goodwill was $363,924 and
$322,707 for the fiscal years ended September 30, 2000 and 1999, respectively.
F-9
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Summary of Accounting Policies
================================================================================
Long-Term Assets
Long-lived assets, identifiable intangibles, and associated goodwill are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. If the expected future cash
flow from the use of the assets and its eventual disposition is less than the
carrying amount of the assets, an impairment loss is recognized and measured
using the asset's fair value.
Property, Equipment and Depreciation And Amortization
Property and equipment are recorded at cost. Depreciation is provided primarily
using accelerated methods over the estimated useful lives ranging from 5 to 31
years. Depreciation and amortization expense on property and equipment was
$351,341 and $385,239 for the years ended September 30, 2000 and 1999.
Maintenance and repairs are charged to expense as incurred and expenditures for
major improvements are capitalized. When assets are retired or otherwise
disposed of, the property accounts are relieved of costs and accumulated
depreciation and any resulting gain or loss is credited or charged to
operations.
Taxes on Income
The Company accounts for income taxes under Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes." Deferred income taxes
result from temporary differences. Temporary differences are differences between
the tax basis of assets and liabilities and their reported amounts in the
financial statements that will result in taxable or deductible amounts in future
years.
F-10
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Summary of Accounting Policies
================================================================================
Net Loss Per Share
The Company provides for the calculation of "Basic" and "Diluted" earnings per
share in accordance with SFAS No. 128, "Earnings Per Share". Basic earnings per
share includes no dilution and is computed by dividing income (loss) available
to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflect the potential
dilution of securities that could share in the earnings of an entity, similar to
fully diluted earnings per share.
For the years ended September 30, 2000 and 1999, total stock options and stock
warrants convertible into 6,441,916 and 6,961,439 shares of common stock and
preferred stock convertible into 0 and 1,716,114 shares of common stock were not
included in the computation of diluted loss per share because their effect was
anti-dilutive.
Concentrations of Credit Risk
The Company's financial instruments that are exposed to concentrations of credit
risk consist of cash and cash equivalent balances in excess of the insurance
provided by governmental insurance authorities. The Company's cash and cash
equivalents are placed with financial institutions and are primarily in demand
deposit accounts.
Concentrations of credit risk with respect to accounts receivable are associated
with a few customers dispersed across geographic areas. The Company reviews a
customer's credit history before extending credit and establishes an allowance
for doubtful accounts based upon the credit risk of specific customers,
historical trends and other information. Generally, the Company does not require
collateral from its customers, as a significant number of the customers are
governmental entities.
F-11
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Summary of Accounting Policies
================================================================================
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined using
available market information or other appropriate valuation methodologies,
including the Black Scholes model. However considerable judgment is required in
interpreting market data to develop estimates of fair value. Consequently, the
estimates are not necessarily indicative of the amounts that could be realized
or would be paid in a current market exchange. The carrying amounts of financial
instruments reported on the consolidated balance sheets approximate their
respective fair values.
Segment Information
The Company follows the provisions of SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." This statement establishes standards
for the reporting of information about operating segments in annual and interim
financial statements. Operating segments are defined as components of an
enterprise for which separate financial information is available that is
evaluated regularly by the chief operating decision maker(s) in deciding how to
allocate resources and in assessing performance. The Company currently operates
in one business segment.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements, and the reported revenues and expenses during the reporting periods.
The Company's operations require it to make significant assumptions concerning
cost estimates for labor and expenses on contracts in process. Due to the
uncertainties inherent in the estimation process of costs to complete for
contracts in process, it is possible that completion costs for some contracts
may have to be revised in future periods.
F-12
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Summary of Accounting Policies
================================================================================
Capitalized Software Costs
Costs incurred internally in creating software products for resale are charged
to expense until technological feasibility has been established upon completion
of a detail program design. Thereafter, all software development costs are
capitalized until the point that the product is ready for sale and subsequently
reported at the lower of amortized cost or net realizable value.
Stock Option Plans
The Company applies Accounting Principles Board Opinion 25, "Accounting for
Stock Issued to Employees" ("APB Opinion 25"), and the related Interpretation in
accounting for all stock option plans. Under APB Opinion 25, compensation cost
is recognized for stock options issued to employees when the exercise price of
the Company's stock options granted is less than the market price of the
underlying common stock on the date of grant.
SFAS No. 123, "Accounting for Stock-Based Compensation", requires the Company to
provide pro forma information regarding net income (loss) as if compensation
cost for the Company's stock options plans had been determined in accordance
with the fair value based method prescribed in SFAS No. 123. To provide the
required pro forma information, the Company estimates the fair value of each
stock option at the grant date by using the Black-Scholes option-pricing model.
Comprehensive Income
Effective October 1, 1998, the Company has adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." Comprehensive income includes all changes
in equity except those resulting from investments by owners and distribution to
owners. For the fiscal years ended September 30, 2000 and 1999, the Company had
no items of comprehensive income (loss) other than net losses; therefore, a
separate statement of comprehensive income (loss) has not been presented for
these periods.
F-13
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Summary of Accounting Policies
================================================================================
Recent Accounting Pronouncements
The Financial Accounting Standards Board has recently issued Statement on
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133, amended by SFAS No. 138,
established standards for recognizing all instruments including those for
hedging as either assets or liabilities in the of financial position and
measuring instruments at fair value. This Statement is for all fiscal quarters
of all fiscal years beginning after June 15, 2000. Management believes the
adoption of this statement will not have a material impact on the Company's
consolidated statements.
In March 2000, the FASB issued Emerging Issues Task Force Issue No. 00-2,
Accounting for Web Site Development Costs" ("EITF 00-2"), which was for all such
costs incurred for fiscal quarters beginning after June 30, 2000. This Issue
establishes accounting and reporting standards for costs incurred to develop a
web site based on the nature of each cost. Currently, as the Company has no web
site development costs, the adoption of 00-2 had no impact on the Company's
financial or results of operations. To the extent Company begins to enter into
such transactions in the future, the Company will adopt the Issue's disclosure
requirements in the quarterly and annual financial statements for the year
ending September 30, 2001.
In March 2000, the FASB issued FASB Interpretation. 44, "Accounting for Certain
Transactions Stock Compensation" ("FIN 44"), which effective July 1, 2000,
except that certain conclusions in this Interpretation which cover events that
occur after either December, 1998 or January 12, 2000 are recognized on a
prospective basis from July 1, 2000. This Interpretation clarifies the
application of APB 25 for certain issues related to stock issued to employees.
The Company believes its existing stock based compensation policies and
procedures are in compliance with FIN 44 and therefore, the adoption of FIN 44
had no material impact on the Company's financial condition, results of
operations or cash flows.
F-14
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Summary of Accounting Policies
================================================================================
In December 1999, the Securities and Exchange (the "SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements" which provides additional guidance in applying generally accepted
accounting principles to revenue recognition in financial statements. SAB 101 is
effective as of the fourth quarter of fiscal year ending September 30, 2001.
Management believes the adoption of this bulletin will have no material impact
on the Company's financial statements.
Reclassifications
Certain consolidated financial amounts have been reclassified for consistent
presentation.
F-15
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
1. Going Concern and Management Plan
The consolidated financial statements have been prepared assuming the
Company will continue as a going concern. The Company incurred losses
totaling $2,575,814 during the year ended September 30, 2000 and has a
history of losses that have resulted in an accumulated deficit of
$14,480,662 at September 30, 2000.
Management believes that the Company has the capacity to address the
immediate needs for cash and liquidity through an aggressive approach on a
number of fronts. The Company has entered into a number of formal
agreements and promissory notes as well as informal agreements with vendors
and professional service providers to extend the terms on payables
currently due. The Company has also reduced or delayed expenditures on
items that are not critical to operations. The credit line available to
PlanGraphics has been extended through April 30, 2001. Additionally, the
Company has initiated a recapitalization effort based on rights offering to
shareholders of their common stock.
Subsequent to September 30, 2000 the Company completed the sale of a
private offering to accredited investors and officers and directors. The
Company issued 580,000 shares of common stock for gross proceeds of
$145,000. The Company also issued 290,000 warrants to purchase common stock
at a price of $0.50 per share. Included in the gross proceeds is $25,000
received prior to the year ended September 30, 2000, for which shares of
common stock were issued subsequent to September 30, 2000. Accordingly,
$25,000 has been reflected as common stock to be issued in the accompanying
statement of stockholders' equity.
F-16
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
There can be no assurance that any funds required during the next twelve
months or thereafter can be generated from operations or that if such
required funds are not internally generated that funds will be available
from external sources such as debt or equity financings or other potential
sources. The lack of additional capital resulting from the inability to
generate cash flow from operations or to raise capital from external
sources, would force the Company to substantially curtail or cease
operations and would, therefore, have a material adverse effect on its
business. Further, there can be no assurance that any such required funds,
if available, will be available on attractive terms or that they will not
have a significantly dilutive effect on the Company's existing
shareholders.
There is substantial doubt about the Company's ability to continue as a
going concern. These consolidated financial statements do not include any
adjustments relating to the recoverability or classification of asset
carrying amounts or the amounts and classification of liabilities that may
result should the Company be unable to continue as a going concern.
2. Accounts Receivable
The components of accounts receivable are as follows:
September 30, 2000 1999
======================================================================
Contract receivables:
Billed $1,225,741 $1,654,877
Unbilled 162,040 320,112
----------------------------------------------------------------------
1,387,781 1,974,989
Less allowance for doubtful accounts 1,007 51,577
----------------------------------------------------------------------
Accounts receivable, net $1,386,774 $1,923,412
======================================================================
F-17
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
Deferred revenue amounts were $130,788 and $108,629 at September 30, 2000
and 1999, respectively, which represents amounts billed in excess of
amounts earned.
PlanGraphics has historically received greater than 10% of its annual
revenues from one customer. One customer accounted for 19.5% of revenues
for the year ended September 30, 2000, compared to 12.7% of revenue for the
Company's largest customer for the year ended September 30, 1999. In
addition, at September 30, 2000, two customers accounted for 19.0% and
15.3% of accounts receivable, compared to one customer who accounted for
11.4% of accounts receivable at September 30, 1999.
3. Notes Payable
Notes payable at September 30 are as follows:
September 30, 2000 1999
====================================================================
Note payable to bank in variable monthly
payments from $15,000 to $20,832,
interest at 8.5%, collateralized by
equipment and accounts receivable,
maturing on July 24, 2001. Note
paid in full January 10, 2000 $ -- $423,080
Revolving line of credit agreement with
a bank up to $1,200,000, interest
at prime plus 2.0%, collateralized
by accounts receivable, originally
expiring October 31, 2000. On
November 14, 2000 the line was
reduced to $650,000 and extended to
December 31, 2000. On February 9,
2001, the line was reduced to
$500,000 and extended to April 30,
2001. 559,647 --
--------------------------------------------------------------------
559,647 423,080
Less current maturities 559,647 222,584
--------------------------------------------------------------------
Long-term notes payable $ -- $200,496
====================================================================
F-18
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
Principal payments on all notes payable are due by September 30, 2001.
At September 30, 2000, the Company was in violation of certain financial
covenants. The bank has not granted a waiver for the violation. Subsequent
to September 30, 2000, a director has provided a standby letter-of-credit
to further collateralize the line of credit.
4. Sale of Assets
On April 8, 1999, the Company completed the sale of land and a building
located in Franktown, Colorado. The sale generated gross cash proceeds of
$1,245,000, which were used to pay off the corresponding note payable of
$620,000, plus interest (see Note 3) as well as legal fees and
miscellaneous expenses. The Company reported a gain on the sale of the
building of approximately $177,700 during the fiscal year ended September
30, 1999.
5. Taxes on Income
The provision for income taxes consisted of the following:
Year Ended September 30, 2000 1999
=======================================================================
Deferred (provision) benefit:
Federal $ 555,000 $ 100,000
State 57,000 10,000
-----------------------------------------------------------------------
612,000 110,000
(Increase) decrease in valuation allowance (612,000) (110,000)
-----------------------------------------------------------------------
$ -- $ --
=======================================================================
F-19
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
A reconciliation of the effective tax rates and the statutory U.S. federal
income tax rates is as follows:
2000 1999
========================================================================
U.S. federal statutory rates (34.0)% (34.0)%
State income tax benefit, net
of federal tax amount (3.3) (3.3)
Increase in deferred tax asset
valuation allowance 37.3 37.3
------------------------------------------------------------------------
Effective tax rate -- % -- %
========================================================================
Temporary differences that give rise to a significant portion of the
deferred tax asset are as follows:
Years Ended September 30, 2000 1999
=========================================================================
Net operating loss carryforwards $ 3,642,500 $ 3,024,000
Capital loss carryover 114,000 114,000
Expense for stock options and
warrants 212,500 237,000
Provision for losses on accounts
receivable 1,000 19,000
Accrued litigation -- 11,000
Accrued wages and vacation 183,000 136,000
-------------------------------------------------------------------------
Total gross deferred tax asset 4,153,000 3,541,000
Valuation allowance (4,153,000) (3,541,000)
-------------------------------------------------------------------------
Net deferred tax asset $ -- $ --
=========================================================================
F-20
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
A valuation allowance equal to the gross deferred tax asset has been
recorded, as management of the Company has not been able to determine that
it is more likely than not that the deferred tax assets will be realized.
At September 30, 2000, the Company had net operating loss carryforwards of
approximately $9,766,000 with expirations through 2020 and a $305,000
capital loss carryover, which expires through 2002. The utilization of the
loss carry forwards may be limited under Internal Revenue Service Code
Section 382 regulations related to transfers of ownership.
6. Leases
Obligations Under Capital Leases - Related Party
The Company leases an office facility from Capitol View Development, LLC,
and a partnership, which includes a related party, under a triple net
commercial lease. An officer/shareholder owns approximately ten percent of
Capitol View Development. The lease includes an annual base rent increasing
over the term of the lease plus an adjustment based on Capitol View
Development's rate of interest on its loan. The initial lease term is for a
period of fifteen years ending 2010 with five renewal options for a term of
one year each. Annual payments approximate $320,000 per year. The Company
has the option to purchase the facility subsequent to the tenth year of the
term of the lease.
The Company also leases certain equipment under capital leases from a bank.
Original lease terms are for three to five years.
F-21
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
The following is a schedule, by years, of future noncancellable minimum
payments required under these leases, together with their present value as
of September 30, 2000.
Related Party
Year Ending Land and
September 30, Building Equipment Total
=======================================================================
2001 $ 337,089 $ 14,529 $ 351,618
2002 338,133 -- 338,133
2003 337,441 -- 337,441
2004 334,891 -- 334,891
2005 326,082 -- 326,082
Thereafter 1,660,053 -- 1,660,053
-----------------------------------------------------------------------
3,333,689 14,529 3,348,218
Less: amounts
representing
interest 1,531,381 1,243 1,532,624
-----------------------------------------------------------------------
Present value
of minimum
lease payments $1,802,308 $ 13,286 1,815,594
==========================================================
Less: current maturities 103,377
----------
Obligations under capital leases
less current maturities $1,712,217
=======================================================================
As of September 30, 2000 and 1999, accumulated amortization for the
building and equipment under capital lease obligations was $1,197,799 and
$995,617.
F-22
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
Operating Lease Commitments
The Company leases certain office facilities and certain furniture and
equipment under various operating leases. The remaining lease terms range
from one to three years.
Minimum annual operating lease commitments at September 30, 2000 are as
follows:
September 30,
=======================================================================
2001 $ 220,816
2002 169,156
2003 172,920
2004 148,355
2005 3,663
-----------------------------------------------------------------------
$ 714,910
=======================================================================
In January 2001, the Company entered into a lease for its administrative
offices in Colorado. The lease term is for twelve months commencing
February 1, 2001, with monthly lease payments of $750.
Rental expense for the years ending September 30, 2000 and 1999 totaled
approximately $223,215 and $186,800.
F-23
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
7. Equity Transactions
Preferred Stock
In November 1996, the Company amended its articles of incorporation to
provide for a Series A 6% Cumulative Convertible Preferred Stock, $.001 par
value (Series A). The Company designated 1,000,000 shares of Series A as
part of the authorized class of preferred shares. The Series A preferred
stock and any accumulated and unpaid dividends are convertible at the
option of the holder at the lesser of 105% of the average of the closing
bid price per share of the Company's common stock for the five trading days
prior to issuance or 80% of the average of the closing bid price per share
of the Company's common stock for three of the ten trading days preceding
the date of conversion. The Series A Preferred is subject to mandatory
conversions two years after issuance.
During the fiscal year ended September 30, 1999, the holders of the 700
shares of Series A converted 110 shares of the preferred into common stock
at various times during the year in exchange for 501,552 shares of common
stock.
During the fiscal year ended September 30, 2000, the holders of the
remaining 590 shares of Series A converted these shares of the preferred
into common stock at various times during the year in exchange for
2,597,064 shares of common stock. Additionally, the Company issued 181,131
shares of common stock in lieu of payment of preferred stock dividends in
arrears of $56,151.
As of September 30, 1999, dividends in arrears associated with the Series A
amounted to and $36,723. No dividends were in arrears as of September 30,
2000.
F-24
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
Common Stock
During the fiscal year ended September 30, 2000, the Company issued
1,658,452 shares of common stock through two separate private placements.
The Company received $213,000 in gross proceeds from the issuance of
852,000 shares of common stock to officers of the Company. Additionally,
the Company issued 806,452 shares of common stock to outside investors for
$250,000. In connection with these sales, warrants to purchase 1,232,452
shares of common stock were issued. The warrants have varying expiration
dates and are immediately exercisable. Of the warrants issued, 426,000 are
valid for three years at an exercise price of $.50 per share and 806,452
are valid for five years at an exercise price of $.65 per share.
During the fiscal year ended September 30, 1999, the Company exchanged
$122,319 in services for the equivalent value of 455,754 shares of common
stock. The Company also issued 140,000 shares of common stock worth $36,400
in connection with a settlement of a lawsuit with a former employee.
During the fiscal year ended September 30, 2000, the Company exchanged
$88,434 in services for the equivalent value of 388,979 shares of common
stock. The Company also issued 478,677 shares of common stock worth
$177,110 in connection with a settlement of a lawsuit. Of the 478,677
shares issued, 202,703 shares valued at $75,000 were issued directly while
the other 275,974 shares valued at $102,110 were issued upon the immediate
exercise of options and warrants granted in the settlement.
F-25
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
Effective July 1999, the Company entered into an Agreement for Services
with a director of the Company. As part of the agreement, the director's
annual base compensation consists of $50,000, payable in equal monthly
installments in the Company's common stock, and options to purchase 175,000
shares of the Company's common stock at an exercise price of $0.31 per
share each year for three years. As of September 30, 2000 and 1999, none of
the stock had been issued as compensation. The Company has accrued $12,500
at September 30, 2000 and 1999. In addition, the director received
incentive options to acquire 688,235 shares of common stock at $0.2906 per
share, which he exercised on July 13, 1999 for $200,000 in cash.
As part of a settlement agreement to settle all outstanding amounts owed to
a certain consulting firm, the Company issued warrants to purchase 117,623
shares of common stock in January 1999 with a total value of $10,586. The
warrants are exercisable at $0.894 per share through August 18, 2001. The
warrants were valued using the Black Scholes model in accordance with SFAS
123.
On September 22, 1999, the Company settled an arbitration proceeding with
an outside consultant whereby the Company agreed to issue 150,000 shares of
common stock worth $31,500, a warrant to purchase 30,000 shares of common
stock at $1.00 per share and a warrant to purchase 20,000 shares of common
stock at $1.50 per share. The stock was subsequently issued in October
1999. The warrants were valued at $12,600 using the Black Scholes model and
were recorded as consulting expense.
During the fiscal year ended September 30, 1999, the Company issued
additional options and warrants to purchase the Company's common stock in
connection with the settlement of certain legal disputes previously
discussed and for consulting services with a total value of $41,932. The
options and warrants were valued using the Black Scholes model in
accordance with SFAS No. 123.
F-26
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
During the fiscal year ended September 30, 2000, the Company received
proceeds of $30,250 in connection with the exercise of stock options for
the purchase of 127,967 shares of common stock
During the fiscal year ended September 30, 2000, the Company issued
warrants to purchase 125,000 shares of the Company's common stock in
connection with consulting services for a total value of $37,500. The
warrants were valued using the Black Scholes model in accordance with SFAS
No. 123.
Stock Options
The Company's Board of Directors has reserved 300,000, 1,150,000 and
4,000,000 shares under three stock option plans (1991, 1995, and 1997,
respectively). The Company grants options under the Plan in accordance with
the determinations made by the Option Committee. The Option Committee will,
at its discretion, determine the individuals to be granted options, the
time or times at which options shall be granted the number of shares
subject to each option and the manner in which options may be exercised.
The option price shall be the fair market value on the date of the grant
and expire five years subsequent to the date of grant.
The Company applies APB Opinion 25, "Accounting for Stock Issued to
Employees," and related Interpretations in accounting for the plans. Under
APB Opinion 25, when the exercise price of the Company's employee stock
options is less than the market price of the underlying stock on the date
of grant, compensation cost is recognized.
F-27
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
SFAS No. 123, "Accounting for Stock-Based Compensation" requires the
Company to provide pro forma information regarding net income and net
income per share as if compensation costs for the Company's stock option
plans and other stock awards had been determined in accordance with the
fair value based method prescribed in SFAS No. 123. The Company estimated
the fair value of each stock award at the grant date by using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in the years ended September 30, 2000 and 1999:
dividend yield of 0 percent, expected volatility of 95 to 140 percent,
risk-free interest rates between 4 and 6 percent, and expected option lives
of one to five years for all years presented.
Under the accounting provisions for SFAS No. 123, the Company's net loss
and net loss per share would have been adjusted to the following unaudited
pro forma amounts:
Years Ended September 30, 2000 1999
=========================================================================
Net loss
As reported $ (2,575,814) $ (1,057,779)
Pro forma (2,687,093) (1,199,155)
Net loss per share
As reported $ (.16) $ (.09)
Pro forma (.17) (.10)
=========================================================================
F-28
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
A summary of the status of the Company's stock option plans, changes and
outstanding options and warrants as of September 30, 2000 and 1999 and
changes during the years ending on those dates is presented below:
Options Warrants
--------------------------- ----------------------------
Weighted Weighted
Number of Average Number of Average
Shares Exercise Price Shares Exercise Price
==========================================================================
Outstanding 4,512,194 $ 1.47 1,825,686 $ 1.68
10/1/98
Granted 2,274,316 0.35 167,623 0.99
Cancelled (378,110) 1.59 (156,281) 2.16
Exercised (1,283,989) 0.28 -- --
--------------------------------------------------------------------------
Outstanding
09/30/99 5,124,411 1.26 1,837,028 1.57
Granted 804,788 0.28 1,488,258 0.55
Cancelled (1,718,628) 1.22 (690,000) 2.32
Exercised (273,135) 0.31 (130,806) 0.37
--------------------------------------------------------------------------
Outstanding
9/30/00 3,937,436 $ 1.14 2,504,480 $ 0.83
==========================================================================
Exercisable
09/30/00 2,438,334 $ 1.23 2,504,480 $ 0.83
Exercisable
09/30/99 3,352,400 $ 1.36 1,837,028 $ 1.57
==========================================================================
F-29
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
Options Warrants
=====================================================================
Weighted average fair
value of options and
warrants granted
during 2000 $ 0.14 $ 0.38
Weighted average fair
value of options and
warrants granted
during 1999 $ 0.14 $ 0.14
The following information summarizes stock options and warrants outstanding
and exercisable at September 30, 2000:
Outstanding Exercisable
---------------------------------------------------------------------------
Weighted
Average
Remaining Weighted Weighted
Range of Contractual Average Average
Exercise Number Life in Exercise Number Exercise
Prices Outstanding Years Price Exercisable Price
===========================================================================
Options
$0.21-$0.50 1,377,459 1.13 $ 0.29 657,797 $ 0.27
$0.65-$1.13 376,496 1.89 $ 0.98 228,698 0.97
$1.25-$1.75 1,496,844 1.74 $ 1.69 1,155,089 1.67
$1.81-$2.13 686,637 0.70 $ 1.73 396,750 1.72
---------------------------------------------------------------------------
$0.21-$2.13 3,937,436 1.36 $ 1.14 2,438,334 $ 1.23
===========================================================================
Warrants
$0.30-$0.50 551,000 2.78 $ 0.45 551,000 $ 0.45
$0.65-$0.98 1,179,075 3.33 $ 0.70 1,179,075 0.70
$1.00-$1.50 591,490 1.54 $ 1.05 591,490 1.05
$1.87-$2.13 182,915 0.56 $ 1.99 182,915 1.99
---------------------------------------------------------------------------
$0.30-$2.13 2,504,480 2.58 $ 0.83 2,504,480 $ 0.83
===========================================================================
F-30
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
8. Employee Benefit Plans
401 (k) Plan
PlanGraphics, Inc. ("PlanGraphics") has a Section 401(k) deferred
compensation provision covering substantially all employees. The plan
allows participating employees to defer up to 20% of their annual salary
with a tiered matching contribution by PlanGraphics up to 1.75%. Additional
contributions may be made at the PlanGraphics' discretion based upon the
PlanGraphics' performance. The expense charged to operations for the plan
was $49,999 and $50,900 for the years ended September 30, 2000 and 1999 and
includes no discretionary match.
9. Contingency
Self Insurance
The Company is partially self-insured for employee medical liabilities,
which covers risk up to $20,000 per individual covered under the plan. The
Company has purchased excess medical liability coverage (from a national
medical insurance carrier) for individual claims in excess of $20,000 and
approximately $250,000 in the aggregate. Premiums and claim expenses
associated with the medical self-insurance program are included in the
accompanying statement of operations.
Employment Agreements
The Company has entered into employment agreements with two directors that
extend from June 30, 2001 through June 30, 2003. The employment agreements
set forth-annual compensation to the two directors of between $50,000 and
$157,500 each.
F-31
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
10. Related Party Transactions
A Director of the Company is the principal owner and executive officer of
an organization that entered into a consulting agreement with the Company
on July 6, 1999. The agreement ends upon the earlier of June 30, 2001; the
date upon which the Director is not elected as a Director or is removed as
a Director; and the date upon which he does not own more than 50% of the
voting power of the organization. Under the agreement, the organization
will provide certain services related to developing and implementing
actions to increase shareholder value through articulation of a vision for
the Company, identifying and reviewing merger and acquisition candidates,
obtaining capital (debt or equity) to finance mergers and acquisitions, and
recruiting and evaluating candidates for senior executive and director
position. Compensation for these services consists of performance options
in two quantities of 322,581 each to acquire common stock of the Company at
an exercise price of $0.31 per share if the market capitalization of the
Company exceeds $30 million for the first quantity and $60 million for the
second quantity for 20 of 30 consecutive business days at any time prior to
June 30, 2002. As of September 30, 2000, the Company had not achieved the
market capitalization levels, which would require the additional
compensation.
Included in accounts payable at September 30, 2000 is $40,983 of interest
due the CEO for interest in connection with guaranteeing certain debt of
the Company's wholly-owned subsidiary.
11. Litigation
In 1998, the Company had appealed the Government's assessment of excessive
reprocurement costs against the Company on a manufacturing contract
terminated for default. The appeal of the default termination was
unsuccessful. As such, the Company had recorded a reserve for $479,000 as
of September 30, 1998 for potential losses. In March 1999, the assessment
against the Company was settled with the Government for approximately
$65,000, resulting in a recovery of approximately $414,000 from the
September 30, 1998 estimated loss reserve.
F-32
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
The Company was a defendant in an arbitration action brought by its former
Chairman and CEO, alleging "constructive termination" of an employment
agreement. Through a civil claim filed in July 1999 in Denver District
Court, the Company asserted damages incurred by the Company for actions
taken and not taken by the former Chairman and CEO. The matter was resolved
through settlement dated November 19, 1999. The settlement required the
Company to pay a total of $236,250 to the former Chairman and CEO and his
counsel. All costs of the settlement have paid as of September 30, 2000.
The Company was the respondent in an arbitration claim by their former
Chief Financial Officer, which was filed in August 1999 with the American
Arbitration Association. The former CFO claimed that he was constructively
discharged and sought severance compensation equal to three year's
compensation as allegedly provided for in his employment agreement. The
Company asserted that the CFO resigned and was not constructively
discharged; therefore he was entitled to no severance compensation. The
case was arbitrated in February 2000. In a final decision on April 20, 2000
the arbitrator awarded the CFO $330,000 in separation payments, fees and
expenses in the dispute stemming from his employment agreement with the
Company. All costs associated with the arbitration award were expensed as
of June 30, 2000. On July 18, 2000 the Company filed an appeal of that
award. The appeal was not sustained. The Company will have to pay the
former CFO the awarded sum and has entered into discussion with the former
CFO to develop a schedule for the payment.
The Company was the defendant in a claim for damages by former consultants
in July 1999. The Company counterclaimed. As a result of directed mediation
the claims were settled and the Company ultimately paid the consultants
$175,000 in stock. The settlement resulted in an agreement that the
consultants would relinquish its anti-dilution rights to a five-percent
ownership in the company subsequent to the February 15, 2000 settlement
agreement. The Company is engaged in various litigation matters from time
to time in the ordinary course of business. In the opinion of management,
the outcome of any such litigation will not materially affect the financial
position or results of operations of the Company.
F-33
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
The Company is engaged in various litigation matters from time to time in
the ordinary course of business. In the opinion of management, the outcome
of any such litigation will not materially affect the financial position or
results of operations of the Company.
12. Supplemental Data to Statement of Cash Flows
Years Ended September 30, 2000 1999
=======================================================================
Cash paid for interest $325,722 $438,101
Non-cash Investing and Financing
Activities:
Preferred stock dividend accrued 18,002 36,723
Conversion of preferred stock into
common stock 374,213 71,188
=======================================================================
13. Subsequent Events
In February 2001 the Board of Directors approved a recapitalization plan as
a precedent to the further execution of the Company's business plan. The
Board of Directors authorized a right offering to existing shareholders of
their common stock and to certain other qualified parties. The Board
established February 28, 2000 as the record date and that the rights would
be non-transferable. The terms of the offering have not yet been finalized.
On February 9, 2001, the Board of Directors approved a loan in exchange for
a convertible promissory note of $75,000 from a director. The funds are to
be used for certain specified working capital requirements. The Board also
approved a resolution authorizing the Company to provide to a related party
a security interest in the ownership of their subsidiary, PlanGraphics,
Inc. as further collateral for the director providing a standby letter of
credit to further collateralized an extension of their subsidiary's line of
credit with National City Bank of Kentucky. In a related matter, National
City Bank provided an extension of a $500,000 line of credit for their
operating subsidiary through April 30, 2001.
F-34
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
================================================================================
In November 2000 the Company announced that they had entered into a Letter
of Intent to acquire certain business assets of Microhard Technology, Inc.
and Certified Professionals and Engineers, Inc. As a result of due
diligence reviews the Company decided to allow the Letter of Intent to
lapse without a transaction. Both parties to the Letter of Intent have
agreed to work together on a number of strategic and tactical initiatives
and to revisit the acquisition discussions in the future. All costs
associated with the proposed acquisition have been expensed.
F-35
Integrated Spatial Information Solutions, Inc., and Subsidiary
Condensed and Consolidated Balance Sheets
December 31 September 30
2000 2000
(Unaudited) (Audited)
- ------------------------------------------------------------------------------------------------
Assets
Current:
Cash and Cash Equivalents $ 107,253 $ 20,306
Accounts receivable (net of allowance
for doubtful accounts of $3,462 and $1,007) 1,520,984 1,386,774
Prepaid expenses and other 115,730 172,154
- ------------------------------------------------------------------------------------------------
Total current assets 1,743,967 1,579,234
- ------------------------------------------------------------------------------------------------
Property and Equipment:
Land and building under capital
lease - related party 1,866,667 1,866,667
Equipment and furniture 706,668 699,165
Other leased assets 255,602 255,600
- ------------------------------------------------------------------------------------------------
2,828,937 2,821,432
Less accumulated depreciation and amortization (1,154,730) (1,084,027)
- ------------------------------------------------------------------------------------------------
Net property and equipment 1,674,207 1,737,405
- ------------------------------------------------------------------------------------------------
Other Assets:
Goodwill, net of accumulated amortization 4,221,286 4,312,267
Other 83,270 102,975
- ------------------------------------------------------------------------------------------------
Total other assets 4,304,556 4,415,241
- ------------------------------------------------------------------------------------------------
$ 7,722,731 $ 7,731,880
- ------------------------------------------------------------------------------------------------
See accompanying notes to financial statements
F-36
Integrated Spatial Information Solutions, Inc., and Subsidiary
Condensed and Consolidated Balance Sheets
December 31 September 30
2000 2000
(Unaudited) (Audited)
- -------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current:
Notes payable - current maturities $ 780,762 $ 559,647
Obligations under capital lease - current 6,431 13,286
Obligations under capital
leases - related party - current 96,735 90,091
Checks written against future deposits 32,186 61,612
Accounts payable 1,065,655 871,288
Accrued payroll costs and vacation 320,061 325,613
Accrued expenses 494,008 696,841
Deferred revenue 192,972 201,578
------------
Total current liabilities 2,988,810 2,819,956
- -------------------------------------------------------------------------------------------------
Long-term Liabilities
Obligations under capital leases - related party 1,687,853 1,712,217
- -------------------------------------------------------------------------------------------------
Total liabilities 4,676,664 4,532,173
- -------------------------------------------------------------------------------------------------
Commitments and Contingencies:
Stockholders' Equity:
Cumulative convertible preferred stock,
$.001 par value, 20,000,000 shares authorized,
none outstanding -- --
Common stock, no par value, 2,000,000,000
shares authorized, 19,382,955 and
18,674,382 shares issued and outstanding
at December 31, and September 30, 2000,
respectively 14,430,115 14,254,487
Common stock to be issued -- 25,000
Additional paid-in capital 3,465,866 3,400,882
Accumulated deficit (14,849,914) (14,480,662)
- -------------------------------------------------------------------------------------------------
Total stockholders' equity 3,046,067 3,199,707
- -------------------------------------------------------------------------------------------------
$ 7,722,731 $ 7,731,880
- -------------------------------------------------------------------------------------------------
See accompanying notes to financial statements
F-36
Integrated Spatial Information Solutions, Inc., and Subsidiary
Condensed and Consolidated Statements of Operations
(Unaudited)
Three Months Ended December 31, 2000 1999
- -------------------------------------------------------------------------------------------
Revenues $ 1,649,022 $ 1,806,145
- -------------------------------------------------------------------------------------------
Costs and expenses:
Salaries and employee benefits 369,240 458,429
Direct contract costs 968,271 1,018,418
General & Administrative Costs 290,287 294,267
Marketing Costs 40,829 47,716
Being Public & Corporate Affairs 118,291 14,398
Other operating costs 164,183 181,482
- -------------------------------------------------------------------------------------------
Total costs and expenses 1,951,101 2,014,710
- -------------------------------------------------------------------------------------------
Operating loss (302,079) (208,565)
- -------------------------------------------------------------------------------------------
Other Income (expense):
Interest expense (80,597) (73,102)
Other income(expense) 13,424 15,942
- -------------------------------------------------------------------------------------------
Total other income (expense) (67,173) (57,160)
- -------------------------------------------------------------------------------------------
Net loss (369,252) (265,725)
- -------------------------------------------------------------------------------------------
Preferred stock dividends -- (8,850)
- -------------------------------------------------------------------------------------------
Net loss attributable to
common stockholders $ (369,252) $ (274,575)
- -------------------------------------------------------------------------------------------
Basic and diluted loss per common share:
Loss from continuing operations attributable to
common stockholders $ (0.02) $ (0.02)
Loss attributable to common stockholders (0.02) (0.02)
- -------------------------------------------------------------------------------------------
Weighted average number of shares of
common stock outstanding 19,112,635 13,340,118
- -------------------------------------------------------------------------------------------
See accompanying notes to financial statements
F-37
Integrated Spatial Information Solutions, Inc., and Subsidiary
Condensed and Consolidated Statements of Cash Flow
(Unaudited)
Three Months Ended December 31, 2000 1999
- -----------------------------------------------------------------------------------------------
Operating Activities
Net loss $(369,252) $(265,725)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 161,684 181,483
Provision for losses on accounts receivable 2,456 (30,000)
Stock options and warrants issued/to be
issued for services performed 81,000 (5,291)
Sale of assets -- (1,213)
Changes in operating assets:
(Increase) decrease in accounts receivable (81,692) (124,188)
(Increase) decrease in other assets 26,191 (32,556)
Increase in accounts payable 29,543 284,255
Decrease (increase) in accrued expenses (49,561) (309,191)
Increase (decrease) in deferred revenue (8,142) 131,082
Increase in deposits (5,500) (67,266)
- -----------------------------------------------------------------------------------------------
Net cash used in operating activities (213,273) (238,610)
- -----------------------------------------------------------------------------------------------
Investing Activities:
Purchase of equipment (7,507) (88,317)
- -----------------------------------------------------------------------------------------------
Net cash used in investing activities (7,507) (88,317)
- -----------------------------------------------------------------------------------------------
Financing Activities
Payments on checks written against future deposits (29,426) --
Proceeds from borrowing 185,000 --
Payments on debt 11,541 (94,435)
Proceeds from exercise of stock options 20,612 --
Proceeds from Issuance of common stock 120,000 156,041
Payments on stock repurchase liability -- (25,738)
- -----------------------------------------------------------------------------------------------
Net cash provided by financing activities 307,727 35,838
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in cash 86,947 (291,059)
Cash and cash equivalents, beginning of period 20,306
373,825
- -----------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 107,253 $ 82,766
- -----------------------------------------------------------------------------------------------
See accompanying notes to financial statements
F-38
Integrated Spatial Information Solutions, Inc.
and Subsidiaries
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(1) Condensed and Consolidated Financial Statements
The condensed and consolidated financial statements included herein have been
prepared by us without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. We believe that the disclosures are adequate
to make the information presented not misleading. In the opinion of management,
the accompanying unaudited condensed and consolidated financial statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly our consolidated financial position as of December
31, 2000, the consolidated results of our operations for the three-month periods
ended December 31, 2000, and 1999 and statements of cash flows for the
three-month periods then ended.
The accounting policies followed by us are set forth in the annual report of
September 30, 2000, filed on Form 10-KSB and the audited consolidated financial
statements in it with the accompanying notes. While management believes the
procedures followed in preparing these consolidated financial statements are
reasonable, the accuracy of the amounts are in some respects dependent upon the
facts that will exist, and procedures that will be accomplished by us later in
the year.
The consolidated results of operations for the three-month period ended December
31, 2000, are not necessarily indicative of the results to be expected for the
full year ending September 30, 2001.
(2) Accounts Receivable
The components of accounts receivable are as follows:
December 31 September 30
2000 2000
- --------------------------------------------------------------------------------
Contract Receivables:
Billed 1,197,162 1,225,741
Unbilled 327,284 162,040
- --------------------------------------------------------------------------------
1,524,446 1,387,781
Less allowance for doubtful accounts 3,462 1,007
- --------------------------------------------------------------------------------
Accounts receivable, net $ 1,520,984 $1,386,774
Deferred revenue amounts were $127,6821 and $130,788 at December 31. 2000 and
September 30, 2000, respectively, which represents amounts billed in excess of
amounts earned.
We have historically received greater than 10% of annual revenues from one
customer. One customer accounted for 37.5% of revenue for the quarter ended
December 31, 2000, compared to 15.6% of revenue for the largest customer for the
quarter ended December 31, 1999. In addition, at December 31, 2000 two customers
accounted for 32.0% and 13.2% of accounts receivable, compared to two customers
who accounted for 15.8% and 11.4% of accounts receivable at December 31, 1999.
(3) Provision for Income Taxes
At the beginning of the fiscal year we had net operating loss carryforwards of
$9.8 million with expirations through 2020. At December 31, 2000, the amount of
the net operating loss carryforward balance is estimated at $10.1 million. We
expect to incur a minimal amount of alternative minimum tax for the fiscal year.
Since we are unable to determine that deferred tax assets exceeding tax
liabilities are more likely than not to be realized, we will record a valuation
allowance equal to the excess deferred tax assets at fiscal year end.
F-39
(4) Going Concern Issues
As a result of recurring losses from operations over several years, negative
cash flows and certain other factors, the report of our independent certified
public accountants for the fiscal year ended September 30, 2000 includes a
qualification statement in the audit opinion expressing substantial doubt about
our ability to continue as a going concern. Management believes that we have the
capacity to address our immediate needs for cash and liquidity through an
aggressive approach on a number of fronts. We have entered into a number of
formal agreements and promissory notes as well as informal agreements with
vendors and professional service providers to extend the terms on payables
currently due. We also have reduced or delayed expenditures on items that are
not critical to operations. The credit line available to our subsidiary
organization has been extended through April 30, 2001. We have initiated a
recapitalization effort based on a rights offering to shareholders of our common
stock. Furthermore, during the course of FY 2000 we reduced monthly operational
cash flow in excess of $27,000 per month and made final payments to our former
CEO and to a former shareholder of PlanGraphics as well as "right" sizing our
office leases. We recommend you review the Form 10-KSB for September 30, 2000
and read the more extensive Going Concern discussion at the beginning of Item 6,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, appearing on page 12 of that report and footnote 1 to the
consolidated financial statements.
(5) Litigation
We were the respondent in an arbitration claim by our former Chief Financial
Officer filed in August 1999 with the American Arbitration Association in
Jacksonville, Florida. He claimed that he was constructively discharged and
sought severance compensation equal to three year's compensation as allegedly
provided for in his employment agreement. We asserted that he resigned and was
not constructively discharged; therefore he was entitled to no severance
compensation. The case was arbitrated in February 2000. In a final decision on
April 20, 2000 the arbitrator awarded him, a total of $330,000 in separation
payments, fees and expenses in the dispute stemming from his employment
agreement with us. All costs associated with the arbitration award were expensed
as of June 30, 2000. On July 18, 2000 we filed an appeal of that award in State
Circuit Court for Duval County, Florida. The appeal was not sustained. We will
have to pay our former CFO the awarded sum and have entered into discussion with
him to develop a schedule for the payment. At this point in time the payment
schedule has not yet been finalized.
(6) Sale of Common Stock
During a limited private offering that began in the fourth quarter of this
fiscal year we sold 630,000 shares of our common stock and raised $157,500 with
accredited investors and certain affiliates of our company. The offering
consisted of $1,000 units each of which included 4,000 shares of common stock
and three-year warrants to purchase 2,000 shares of common stock at $0.50 per
share. We expect to receive a portion of the offering, $12,500 for 50,000
shares, in the ensuing quarter. The resulting shares from the offering have not
been registered with the Securities and Exchange Commission and the resulting
shares of stock are subject to the restrictions in Rule 144. The issuance of
this common stock in this transaction was exempt from registration under the
Securities Act of 1933 in reliance upon Section 4(2) promulgated under Section
3(b) of the 1933 Act.
(7) Lease Obligations
We lease various equipment as well as facilities under capital and operating
leases that expire through the year 2005 as noted in Note 7 to the Consolidated
Financial Statements in Form 10-KSB September 30, 2000.
(8) Subsequent Events
On February 9, 2001 the Board of Directors approved a recapitalization plan as a
precedent to the further execution of the company's business plan. The Board of
Directors authorized a rights offering to existing shareholders of our common
stock and to certain other qualified parties. The Board directed management to
prepare the S-1 registration statement and related prospectus documents and to
file them with the SEC. The Board established March 16, 2001 as the record date
and that the rights would be non-transferable. The company determined that it
would establish and announce the pricing, volume, subscription ratio, other
F-40
terms of the offering and the anticipated issuance date at the time of its
filings with the SEC. The offering will be completed during the first half of
calendar year 2001.
On February 9, 2001, the Board of Directors also approved a loan of $75,000 and
we entered into a convertible promissory note payable to an entity controlled by
a director. The proceeds are to be used for certain specified working capital
requirements. The note matures on October 21, 2001 and is convertible into our
common stock at the option of the holder at a designated conversion price of
$0.07 per share or the price per share of any rights offering, whichever is
lower. The Board also approved a resolution authorizing us to provide to a
related party a security interest in the ownership of our subsidiary,
PlanGraphics, Inc. as collateral for providing a standby letter of credit to
further collateralize an extension of our subsidiary's line of credit with
National City Bank of Kentucky. In a related matter, National City Bank provided
an extension of a $500,000 line of credit for our operating subsidiary through
April 30, 2001. See the discussion in Item 6, Management Discussion and Analysis
in our Form 10-KSB for the fiscal year ended September 30, 2000.
We previously reported that our backlog of contracts and assignments increased
from $8.6 million as of September 30, 2000 to $9.3 million as of December 31,
2000 an increase of 8% from the prior quarter and 102% from the comparable
period in the prior year.
In November 2000 we announced that we entered into a Letter of Intent to acquire
certain business assets of both Microhard Technology, Inc and Certified
Professionals and Engineers, Inc. As a result of due diligence reviews we
decided to allow the Letter of Intent to lapse at the end of January, 2001
without a transaction. Both parties to the Letter of Intent have agreed to work
together on a number of strategic and tactical initiatives and to revisit the
acquisition discussions in the future.
(9) Net Loss Per Common Share.
We have adopted Statement of Financial Accounting Standard ("SFAS") No. 128
issued by the Financial Accounting Standards Board. SFAS No. 128 provides for
the calculation of "Basic" and "Diluted" earnings per share. Basic earnings per
share includes no dilution and is computed by dividing loss attributable to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity, in order to disclose
fully diluted earnings per share, when appropriate.
As we incurred net losses in both three month periods ending December 31, none
of our outstanding options or warrants were included in the computation of
diluted earnings per share as their effect would be anti-dilutive. The total of
warrants and options outstanding at December 31, 2000 and December 31, 1999 were
7,008,405 and 6,941,201, respectively.
F-41
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
ISIS is incorporated in the state of Colorado. As permitted by the Colorado
Business Corporation Act, the articles of incorporation of ISIS eliminate the
liability of directors to ISIS or its shareholders for monetary damages for
breach of fiduciary duty as a director, except to the extent otherwise required
by the Colorado Business Corporation Act.
The articles of incorporation provide that ISIS will indemnify any and all
of its directors and officers against expenses actually and necessarily incurred
to them to the fullest extent permitted under Colorado Corporate Code, in
connection with the defense of any action, suit or proceeding in which they or
any of them, are made parties, or a party, by reason of being a director or
officer of ISIS except in relation to matters to which any such director or
officer shall be adjudged in such action, suit or proceeding to be liable for
gross negligence or willful misconduct in the performance of duty.
In addition, the articles of incorporation provide that, to the furthest
extent provided by applicable law, no director of ISIS shall have any personal
liability form monetary damages to ISIS or its shareholders for breach of
fiduciary duty as a director, except that indemnity is not provided to a
director whose conduct involves (1) a breach of the director's duty of loyalty
to ISIS or its shareholders, (2) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (3) acts specified
in section 7-5-114 of the Colorado Business Corporation Act, or (4) any
transaction from which the director derived an improper personal benefit.
The bylaws of ISIS provide similar indemnification provisions.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, payable by ISIS,
in connection with the sale of the common stock being registered (all amounts
are estimated except the Commission Registration Fee).
Commission registration fee....................................... $ 700
Blue Sky fees and expenses........................................ $
Legal fees and expenses........................................... $ 50,000
Accounting fees and expenses...................................... $ 25,000
Subscription agent fees........................................... $ 30,000
Printing expenses................................................. $ 10,000
--------
Total $
========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Over the past three years, ISIS has issued the following shares without
registering them under the Securities Act of 1933:
o During September 2000, ISIS initiated a private placement of units under
which 157 units were subscribed to by a total of six accredited investors
at a price of $1,000 per unit, or total consideration of $157,000. Each
unit consisted of 4,000 shares of common stock and three-year warrants to
purchase 2,000 shares of common stock at $0.50 per share. The units were
issued in reliance on an exemption from registration under Section 4(2) of
the Securities Act of 1933 in a transaction not involving a public
offering. Each investor had access to the same type of information about
ISIS that is typically available in a registration statement.
o In March 2000, ISIS sold 806,452 units in a private offering to two
accredited purchasers, or total consideration of $240,500. Each unit
consisted of one share of common stock and one five-year warrant to
purchase one share of common stock at $0.65 per share. The units were
issued in reliance on an exemption from registration under Section 4(2) of
the Securities Act of 1933 in a transaction not involving a public
offering. Each investor had access to the same type of information about
ISIS that is typically available in a registration statement.
o In January 2000, ISIS sold 213 units in a private offering to six
accredited purchasers at a price of $1,000 per unit, or total consideration
of $213,000. Each unit consisted of 4,000 shares of common stock and
three-year warrants to purchase 2,000 shares of common stock at $0.50 per
share. The units were issued in reliance on an exemption from registration
under Section 4(2) of the Securities Act of 1933 in a transaction not
involving a public offering. Each investor had access to the same type of
information about ISIS that is typically available in a registration
statement.
o On August 19, 1998, ISIS sold a total of 700 shares of its Series A
Preferred Stock in a private offering. The total offering price was
$700,000 and the sale was made to two entities who represented to ISIS that
they were sophisticated investors. The Ridgefield Group of Ridgefield,
Connecticut acted as ISIS's placement agent for the transaction. The
Company paid commissions of 12% of the total offering price to The
Ridgefield Group. The Series A Preferred Stock was convertible to shares of
common stock. On November 14, 1998, the Securities and Exchange Commission
declared effective a registration statement of ISIS that included the
underlying common stock. Shares issued pursuant to this offering have all
converted to shares of common stock.
o On August 18, 1998, ISIS sold 57,142 shares of its common stock to two
sophisticated investors in a private placement. ISIS received cash proceeds
of $50,000. The shares were issued in reliance on an exemption from
registration under Section 4(2) of the Securities Act of 1933 in a
transaction not involving a public offering. Each investor had access to
the same type of information about ISIS that is typically available in a
registration statement.
o On April 17, 1998, ISIS sold 480,000 shares of its common stock to eight
accredited investors in a private placement. The Company received cash
proceeds of $540,000. The shares were issued in reliance on an exemption
from registration under Section 4(2) of the Securities Act of 1933 in a
transaction not involving a public offering. Each investor had access to
the same type of information about ISIS that is typically available in a
registration statement.
o On April 1, 1998, ISIS sold 125,000 shares of its common stock to two
accredited investors, one of whom was affiliated with the Company. The
Company received cash proceeds of $88,000. The shares were issued in
reliance on an exemption from registration under Section 4(2) of the
Securities Act of 1933 in a transaction not involving a public offering.
Each investor had access to the same type of information about ISIS that is
typically available in a registration statement.
ITEM 27. EXHIBITS
Exhibit
Number Description of Exhibit
- ------ ----------------------
2.1 Acquisition Agreement between DCX, Inc. and PlanGraphics, Inc. (filed
with Current Report, Form 8-K, on September 24, 1997 and incorporated
herein by reference)
3.1 Amended and Restated Articles of Incorporation of ISIS (filed with our
Definitive Proxy Statement dated May 3, 1991 and incorporated herein
by reference).
3.2 Articles of Amendment to the Articles of Incorporation dated November
6, 1996 (filed with Current Report, Form 8-K, on November 27, 1996 and
incorporated herein by reference).
3.3 Articles of Amendment to the Articles of Incorporation dated July 30,
1997 (filed with Current Report, Form 8-K, on August 15, 1997 and
incorporated herein by reference).
3.4 Bylaws of ISIS (filed with Registration Statement on Form S-18, file
no. 33-1484 and incorporated herein by reference).
4.1 Specimen Stock Certificate (filed with Registration Statement on Form
S-18, file no. 33-1484 and incorporated herein by reference).
4.2 ISIS 1991 Stock Option Plan (filed with Registration Statement on Form
S-8 on September 30, 1996 and incorporated herein by reference).
4.3 ISIS 1995 Stock Incentive Plan (filed with Registration Statement on
Form S-8 on September 30, 1996 and incorporated herein by reference).
4.3 ISIS Equity Incentive Plan (filed with Annual Report on Form 10-KSB on
January 13, 1998 and incorporated herein by reference).
4.5 ISIS Equity Compensation Plan (filed with Registration Statement on
Form S-8 on September 8, 1999 and incorporated herein by reference).
4.6 Warrants, dated January 15, 1997, issued to Transition Partners
Limited and Copeland Consulting Group, Inc. (filed with Registration
Statement on Form S-3 on November 7, 1997 and incorporated herein by
reference).
4.7 Warrants, dated October 15, 1997, issued to Transition Partners
Limited and Copeland Consulting Group, Inc. (filed with Registration
Statement on Form S-3 on November 7, 1997 and incorporated herein by
reference).
4.9 Warrant, dated October 24, 1997, issued to Gerald Alexander (filed
with Registration Statement on Form S-3 on November 7, 1997 and
incorporated herein by reference).
4.10 Warrants, dated August 19, 1998, issued to Libra Finance and The
Ridgefield Group (filed with Current Report, Form 8-K, on August 20,
1998 and incorporated herein by reference).
4.11** Form of Warrant to be issued to Crossways Consulting Group, Inc. and
Brean Murray & Co., Inc.
5.1** Opinion and Consent of Davis Graham & Stubbs LLP.
10.1** Subscription Agent Agreement with Computershare Trust Company, Inc.
10.2* Agreement for Services with Crossways Consulting Group, Inc. dated
February 28, 2001.
10.3* Letter Agreement with Brean Murray & Co., Inc. dated March 13, 2001.
10.4 Executive Employment Agreement dated March 28, 1997 between ISIS and
Frederick G. Beisser (filed with Quarter Report on Form 10-QSB on May
14, 1997 and incorporated herein by reference).
10.2 Executive Employment Agreement dated September 22, 1997 between ISIS
and John C. Antenucci (filed with Annual Report on Form 10-KSB on
January 13, 1998 and incorporated herein by reference).
10.3 Executive Employment Agreement dated September 22, 1997 between ISIS
and J. Gary Reed (filed with Annual Report on Form 10-KSB on January
13, 1998 and incorporated herein by reference).
10.4 Agreement for Services dated July 6, 1999 between ISIS and Gary S.
Murray (filed with Quarterly Report on Form 10-QSB on August 5, 1999
and incorporated herein by reference).
10.5 Consulting Services Agreement dated July 6, 1999 between ISIS and
Human Vision L.L.C. (filed with Quarterly Report on Form 10-QSB on
August 5, 1999 and incorporated herein by reference).
10.6 Convertible Promissory Note by and between ISIS and Human Vision
L.L.C. (filed with Annual Report on Form 10-KSB on February 20, 2001
and incorporated herein by reference).
10.7 Stock Pledge Agreement by and between ISIS and Human Vision L.L.C.
(filed with Annual Report on Form 10-KSB on February 20, 2001 and
incorporated herein by reference).
10.8 Guaranty by ISIS in favor of Human Vision L.L.C. (filed with Annual
Report on Form 10-KSB on February 20, 2001 and incorporated herein by
reference).
21 List of Subsidiaries (filed with Annual Report on Form 10-KSB on
February 20, 2001 and incorporated herein by reference).
23* Consent of BDO Seidman, LLP
- -------------------
* Filed herewith.
** Final form to be filed via amendment.
ITEM 28. UNDERTAKINGS
The undersigned hereby undertakes that:
(1) It will file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(a) Include any prospectus required by section 10(a)(3) of the Securities
Act;
(b) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(c) Include any additional or changed material information on the plan of
distribution.
(2) For purposes of determining any liability under the Securities Act, 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.
(3) It will file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) It will supplement the prospectus, after the end of the subscription
period, to include the results of the subscription offer, the transactions
by the underwriters during the subscription period, the amount of
unsubscribed securities that the underwriters will purchase and the terms
of any later reoffering. In addition, if the underwriters make any public
offering of the securities on terms different from those on the cover page
of the prospectus, it will file a post-effective amendment to state the
terms of such offering.
(5) For determining any liability under the Securities Act, it will treat 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 it under Rule 424(b)(1) or (4) or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declared it effective.
SIGNATURES
In accordance with 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 of filing on Form SB-2 and authorized this registration to
be signed on its behalf by the undersigned, in the City of Frankfurt, State of
Kentucky on March 23, 2001.
INTEGRATED SPATIAL INFORMATION SOLUTIONS, INC.
By: /s/ John C. Antenucci
---------------------------------------------
John C. Antenucci
President and Acting Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John C. Antenucci and Frederick G. Beisser, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution for him and his name, place and stead, in any
and all capabilities, to sign any and all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits and schedules thereto, including any subsequent registration statement
filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended,
together with all schedules and exhibits thereto and other certificates,
instruments, agreements and other documents as may be necessary or appropriate
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as they might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or their substitute or substitutes, 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 was signed by the following persons in the capacities and
on the dates stated:
/s/ John C. Antenucci President, Director and Acting Chief March 23, 2001
- --------------------------- Executive Officer
John C. Antenucci
/s/ Fred G. Beisser Vice President - Finance and Administration March 23, 2001
- --------------------------- Secretary, Treasurer and Director (Principal
Frederick G. Beisser Financial and Accounting Officer)
/s/ Gary S. Murray Chairman and Director March 23, 2001
- ---------------------------
Gary S. Murray
/s/ J. Gary Reed Director March 23, 2001
- ---------------------------
J. Gary Reed
/s/ Ray O'Mara Director March 23, 2001
- ---------------------------
Ray O'Mara
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------ ----------------------
2.1 Acquisition Agreement between DCX, Inc. and PlanGraphics, Inc. (filed
with Current Report, Form 8-K, on September 24, 1997 and incorporated
herein by reference)
3.1 Amended and Restated Articles of Incorporation of ISIS (filed with our
Definitive Proxy Statement dated May 3, 1991 and incorporated herein
by reference).
3.2 Articles of Amendment to the Articles of Incorporation dated November
6, 1996 (filed with Current Report, Form 8-K, on November 27, 1996 and
incorporated herein by reference).
3.3 Articles of Amendment to the Articles of Incorporation dated July 30,
1997 (filed with Current Report, Form 8-K, on August 15, 1997 and
incorporated herein by reference).
3.4 Bylaws of ISIS (filed with Registration Statement on Form S-18, file
no. 33-1484 and incorporated herein by reference).
4.1 Specimen Stock Certificate (filed with Registration Statement on Form
S-18, file no. 33-1484 and incorporated herein by reference).
4.2 ISIS 1991 Stock Option Plan (filed with Registration Statement on Form
S-8 on September 30, 1996 and incorporated herein by reference).
4.3 ISIS 1995 Stock Incentive Plan (filed with Registration Statement on
Form S-8 on September 30, 1996 and incorporated herein by reference).
4.3 ISIS Equity Incentive Plan (filed with Annual Report on Form 10-KSB on
January 13, 1998 and incorporated herein by reference).
4.5 ISIS Equity Compensation Plan (filed with Registration Statement on
Form S-8 on September 8, 1999 and incorporated herein by reference).
4.6 Warrants, dated January 15, 1997, issued to Transition Partners
Limited and Copeland Consulting Group, Inc. (filed with Registration
Statement on Form S-3 on November 7, 1997 and incorporated herein by
reference).
4.7 Warrants, dated October 15, 1997, issued to Transition Partners
Limited and Copeland Consulting Group, Inc. (filed with Registration
Statement on Form S-3 on November 7, 1997 and incorporated herein by
reference).
4.9 Warrant, dated October 24, 1997, issued to Gerald Alexander (filed
with Registration Statement on Form S-3 on November 7, 1997 and
incorporated herein by reference).
4.10 Warrants, dated August 19, 1998, issued to Libra Finance and The
Ridgefield Group (filed with Current Report, Form 8-K, on August 20,
1998 and incorporated herein by reference).
4.11** Form of Warrant to be issued to Crossways Consulting Group, Inc. and
Brean Murray & Co., Inc.
5.1** Opinion and Consent of Davis Graham & Stubbs LLP.
10.1** Subscription Agent Agreement with Computershare Trust Company, Inc.
10.2* Agreement for Services with Crossways Consulting Group, Inc. dated
February 28, 2001.
10.3* Letter Agreement with Brean Murray & Co., Inc. dated March 13, 2001.
10.4 Executive Employment Agreement dated March 28, 1997 between ISIS and
Frederick G. Beisser (filed with Quarter Report on Form 10-QSB on May
14, 1997 and incorporated herein by reference).
10.2 Executive Employment Agreement dated September 22, 1997 between ISIS
and John C. Antenucci (filed with Annual Report on Form 10-KSB on
January 13, 1998 and incorporated herein by reference).
10.3 Executive Employment Agreement dated September 22, 1997 between ISIS
and J. Gary Reed (filed with Annual Report on Form 10-KSB on January
13, 1998 and incorporated herein by reference).
10.4 Agreement for Services dated July 6, 1999 between ISIS and Gary S.
Murray (filed with Quarterly Report on Form 10-QSB on August 5, 1999
and incorporated herein by reference).
10.5 Consulting Services Agreement dated July 6, 1999 between ISIS and
Human Vision L.L.C. (filed with Quarterly Report on Form 10-QSB on
August 5, 1999 and incorporated herein by reference).
10.6 Convertible Promissory Note by and between ISIS and Human Vision
L.L.C. (filed with Annual Report on Form 10-KSB on February 20, 2001
and incorporated herein by reference).
10.7 Stock Pledge Agreement by and between ISIS and Human Vision L.L.C.
(filed with Annual Report on Form 10-KSB on February 20, 2001 and
incorporated herein by reference).
10.8 Guaranty by ISIS in favor of Human Vision L.L.C. (filed with Annual
Report on Form 10-KSB on February 20, 2001 and incorporated herein by
reference).
21 List of Subsidiaries (filed with Annual Report on Form 10-KSB on
February 20, 2001 and incorporated herein by reference).
23* Consent of BDO Seidman, LLP
- -------------------
* Filed herewith.
** Final form to be filed via amendment.