As filed with the Securities and Exchange Commission on August 20, 2001.
================================================================================
Commission File No. 333-57632
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 3 to
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 (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or Code Number)
organization)
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:
As soon as possible 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(3)
(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 80,000,000 shares to be offered by the registrant pursuant to
the rights offering at a price of $.035 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.
(3) Registration fee previously paid with initial filing.
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 August 20, 2001
PROSPECTUS
Integrated Spatial Information Solutions, Inc.
Common Stock
Minimum 17,142,858 Shares; Maximum 80,000,000 Shares
Integrated Spatial Information Solutions, Inc. is distributing to the
holders of shares of our common stock, rights to purchase up to an aggregate of
80,000,000 shares of our common stock. 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 four (4) shares of our common stock at a
price of $.035 for each share owned by the shareholder on that date. If the
shares available under the rights are not fully subscribed by the expiration
date, shareholders who fully exercise their basic subscription rights will be
offered over-subscription rights to purchase seven (7) shares of our common
stock for each share owned by the shareholder of any remaining shares, subject
to proration. Any shares remaining may then be offered to non-shareholder
investors identified by ISIS.
Shareholders may exercise their subscription rights beginning on the
date of this prospectus until 5:00 p.m., Mountain Time, on _____, 2001. We, in
our sole discretion, may extend the period for exercising the rights for up to
two additional 30 day periods. The rights offering will not be extended beyond
[105 days following effective date]. All subscriptions will be held in escrow by
our escrow agent, Branch Bank & Trust Company, until accepted by us. If we do
not receive at least $600,000, then the offering will be terminated and all
proceeds received will be returned.
Our common stock is listed on the Nasdaq Over-the-Counter Bulletin
Board under the symbol "ISSS." On August 13, 2001, the closing price of a share
of our common stock on the Over-the-Counter Bulletin Board was $0.06.
Price Per Share Min. Total Max. Total
--------------- ---------- ----------
Offering price ............... $.035 $ 600,000 $2,800,000
Estimated Expenses ........... N/A $ 125,000 $ 125,000
Net Proceeds to ISIS ......... N/A $ 475,000 $2,675,000
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 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.............................................................5
Business....................................................................6
Description Of Property....................................................10
Legal Proceedings..........................................................11
Management's Discussion And Analysis.......................................11
Description Of Securities To Be Registered.................................20
Market For Common Stock....................................................20
Security Ownership Of Certain Beneficial Owners And Management.............21
Determination Of Offering Price............................................23
Plan Of Distribution.......................................................23
Directors And Executive Officers...........................................30
Certain Relationships And Related Transactions.............................31
Executive Compensation.....................................................33
Cautionary Statement Concerning Forward-Looking Statements.................36
Validity Of Securities.....................................................36
Experts....................................................................37
Disclosure Of Commission Position Of Indemnification For
Securities Act Liabilities...............................................37
Where You Can Find More Information........................................37
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.
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
Purpose of the
offering.......... Completion of this rights offering will enable us to raise
up to approximately $2,800,000, before paying the costs of
the offering. The minimum amount necessary to complete the
rights offering is $600,000. The primary purpose of this
offering is to alleviate serious liquidity and capital
adequacy concerns. 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.
Shares outstanding/
authorized........ As of August 13, 2001, we had 19,606,525 shares of common
stock issued and outstanding. Assuming full subscription,
after the rights offering we will have 99,606,525 shares
issued and outstanding.
Grant of basic
subscription
rights............ All shareholders of record of our common stock on April 30,
2001 will be granted a non-transferable right to purchase up
to four (4) shares of our common stock at $.035 per share
for each share of common stock held by them on the record
date. We will not issue fractional shares. We will round the
rights upward to the nearest whole share.
Grant of
over-subscription
rights............ Shareholders who fully exercise their basic subscription
rights will be offered over-subscription rights, subject to
proration, to purchase up to seven (7) shares of our common
stock at $.035 per share for each share of common stock held
by them on the record date of any shares remaining available
for purchase after the exercise of their basic subscription
rights. If over-subscription requests exceed the number of
shares that
1
are available, then we will allocate the available shares
pro-rata among those rights holders who over-subscribe.
Non-Shareholder
Investors......... Remaining shares, if any, may be offered to non-shareholder
investors identified by ISIS.
Subscription
period............ The rights offering will remain open for a 45-day period
from _____, 2001 until _____, 2001, unless such period is
extended by us, in our sole discretion, for up to two
additional 30 day periods. 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 ISIS no later
than 5:00 p.m., Mountain 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.
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 losses in each of the last four years 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.
We may not have sufficient capital to fund our operations if we are unable to
complete this rights offering.
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. 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.
This rights offering may result in a concentration of ownership that produces
conflicts of interest and actions that are not in the best interests of all
shareholders.
If a shareholder elects not to exercise his or her rights to purchase
our stock and insiders elect to exercise their basic and over-subscription
privileges, this rights offering may result in a concentration of ownership
interest. Insider control of a large amount of our common stock could have an
adverse effect on the market price of our common stock. Although they are under
no obligation to do so, if our officers, directors, founders and their
affiliates were to vote together, they would have the ability to control the
election of our board of directors and the outcome of corporate actions
requiring shareholder approval, including mergers and other changes of corporate
control, going private transactions and other extraordinary transactions. This
concentration of ownership may have the effect of delaying or preventing a
change of control of our company, even if this change of control would benefit
shareholders.
Shareholders who do not exercise their rights will experience dilution of their
ownership.
This offering may result in the issuance of up to an additional
80,000,000 shares of our common stock, assuming full exercise of the rights
offered pursuant to the rights offering. If a shareholder chooses not to
exercise fully the shareholder's rights, the shareholder's relative ownership
interest in ISIS will be diluted.
3
Our breach of covenants in a loan agreement may put us at risk of relinquishing
control of PlanGraphics.
On May 31, 2001, PlanGraphics entered into a line of credit with Branch
Banking & Trust Company to replace an expiring line of credit with National City
Bank of Kentucky. The accounts receivable and general intangibles of
PlanGraphics and a pledge of $325,000 in an account held by HumanVision L.L.C.,
a related party, serve as collateral for the line of credit. As a condition to
offering this pledge, HumanVision L.L.C. required PlanGraphics to indemnify it
against any draws or other claims that may be presented under the pledge, ISIS
to guarantee PlanGraphics' indemnification obligations, PlanGraphics to grant a
security interest in its accounts receivable, and ISIS to pledge its stock in
PlanGraphics to HumanVision L.L.C. as security for ISIS's guaranty to
HumanVision L.L.C. If we default on the line of credit and Branch Banking &
Trust Company calls the line of credit, it may look to HumanVision L.L.C.'s
pledge for payment of the debt. If HumanVision L.L.C. were to pay the debt on
behalf of PlanGraphics pursuant to its pledge, there can be no assurance that
HumanVision L.L.C. would not look to ISIS's pledge of its stock in PlanGraphics
and possibly assume ownership of such stock.
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,
the City of New York, 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, Providence Gas Company, 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.
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 2003, respectively. Both
agreements contain a non-compete provision that restricts Mr. Antenucci and Mr.
Murray from, for one year following his termination date unless otherwise
approved by us, performing work either that is in backlog for PlanGraphics or
that PlanGraphics is pursuing. 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 delay future
financings and may result in the NASD removing our shares from the
Over-the-Counter Bulletin Board.
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
4
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.
The United States penny stock rules may make it more difficult for investors to
sell their shares.
Shares of the Company's common stock are subject to rules adopted by
the Securities and Exchange Commission regulating broker-dealer practices in
connection with transactions in "penny stocks." These rules require that prior
to effecting any transaction in a penny stock, a broker or dealer must give the
customer a risk disclosure document that describes various risks associated with
an investment in penny stocks, as well as various costs and fees associated with
such an investment. It is possible that some brokers may be unwilling to engage
in transactions involving shares of the Company's common stock because of these
added disclosure requirements, which would make it more difficult for a
purchaser in this offering to sell his shares.
USE OF PROCEEDS
The maximum gross proceeds that we may receive from the rights offering
are estimated to be $2,800,000, assuming a price of $.035 per share, before
deducting the offering expenses. The offering expenses of this offering are
estimated to be $125,000. 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
Escrow agent and transfer agent fees ............. 20,000 20,000 20,000
Payment of arbitration award ..................... 350,000 350,000 350,000
Payment of accounts payable to service contractors 180,000 180,000 180,000
Repayment of note to HumanVision L.L.C ........... 115,000 115,000 115,000
Repayment of note to BDO Seidman, LLP ............ 58,500 58,500 58,500
Payment of accounts payable to PlanGraphics ...... 800,000 800,000 350,000
Unallocated working capital ...................... 1,171,500 471,500 221,500
---------- ---------- ----------
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.
5
As of July 31, 2001 we owed PlanGraphics approximately $800,000 for
expenditures made on behalf of ISIS, its parent, over the four years since ISIS
acquired 100% of PlanGraphics' stock, 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 up to $800,000 from proceeds received in this offering. The amounts
payable to PlanGraphics will become available to it as working capital.
As of August 15, 2001, we owe BDO Seidman, LLP $58,500 plus interest
pursuant to a promissory note dated February 15, 2001 for accounting services.
The promissory note requires payment of approximately $13,000 per month. 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.
We owe HumanVision L.L.C., a related party, an aggregate of $115,000
pursuant to promissory notes dated February 2, 2001 and May 15, 2001. Pursuant
to a First Amendment to Promissory Notes, the balance of outstanding principal
and accrued and unpaid interest of the notes automatically converts 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, on February 3, 2002 and May 16, 2002,
respectively.
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 $350,000.
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
6
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 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 descriptive 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 February 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
7
#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.
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
8
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.
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
9
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
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,
consultants and, when possible, suppliers to execute confidentiality agreements
upon the commencement of their relationships with us.
Employees
Presently we employ 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 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 the following locations:
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
10
The length of our leases vary 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 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 nine months ended June 30, 2001 and 2000 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
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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.
To address our immediate needs for cash and liquidity, we have entered
into a number of formal and informal agreements with vendors and professional
service providers to extend the terms on payables currently due. Our accounts
payable to trade is approximately $135,877 which includes $104,416 beyond
standard terms and $34,590 in payables covered by informal agreements with three
of our vendors. We also have a short-term note payable with our independent
auditors, BDO Seidman, LLP, that is dated February 15, 2001 and had a balance of
$91,000 at June 30, 2001. PlanGraphics has accounts payable to trade,
subcontractors and vendors of approximately $1,113,982 of which $435,110 is
beyond 30 days. It has a short-term note with Evans, Mechwart, Hambleton &
Tilton, Inc. dated November 7, 2000 with an outstanding balance of $119,280.
PlanGraphics has informal agreements with an additional eight vendors and
subcontractors for a total of $300,960.
We also have reduced or delayed expenditures on items that are not
critical to operations. On May 31, 2001, PlanGraphics obtained a line of credit
with Branch Banking and Trust Company to replace the line of credit with
National City Bank of Kentucky that expired on April 30, 2001. The new line of
credit will expire on February 2, 2002. 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. Sales during calendar year 2000 of equity by Jobsview.com would
value our holdings at approximately $480,000. No sales subsequent to calendar
year 2000 have occurred. We note that the value of our holdings may be
significantly less then the aforementioned amount. 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 believes that there is a reasonable basis to
believe that we will successfully raise the needed funds through equity and debt
financing, 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 June 30, 2001 we had a net working capital deficit of $1,270,486
as compared to a net working capital deficit of $1,017,997 at June 30, 2000.
This increase in working capital deficit resulted
12
primarily from the operating loss offset by funds from the private placement
received in the fiscal quarter ended December 31, 2000.
In the nine months ended June 30, 2001, we used net cash of $259,944 in
operations, as compared to $550,136 used in operations in the nine months ended
June 30, 2000. The reduction in cash use was primarily related to the decreased
operating loss coupled with the increase in accounts receivable offset by
changes in several other operating asset and liability accounts. We expect to
continue to have operating cash flow deficiencies for the near future as we
develop and expand our business.
In the nine months ended June 30, 2001, net cash used in investing
activities was $10,889 as compared to $92,461 of net cash used in investing
activities in the nine months ended June 30, 2000. Decreased equipment purchases
accounted for the change.
We generated net cash of $257,605 from financing activities in the nine
months ended June 30, 2001, as compared to net cash of $413,729 in the nine
months ended June 30, 2000. Due to decreases in losses and improved operations,
cash flow improved to allow for a reduction in the sale of common stock in the
current period. Cash provided by the issuance of common stock decreased by
$312,610 in the current period.
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 $572,434
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 $351,618 is for capital lease obligations and
$220,816 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 that 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. At June 30, 2001 there was no balance outstanding to them and we
owed $115,000 to an entity controlled by a director.
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.
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On February 9, 2001 we borrowed $75,000 from an entity controlled by
one of our directors and executed a convertible promissory note. On May 15, 2001
we borrowed an additional $40,000 from the same entity. The proceeds from these
borrowings were used to meet certain working capital requirements. On May 31,
2001, PlanGraphics obtained a $500,000 line of credit from Branch Banking and
Trust Company to replace the line of credit with National City Bank of Kentucky
that expired on April 30, 2001. The expired line of credit had been extended to
June 11, 2001 and was paid in full on June 1, 2001. The new line of credit will
expire on February 2, 2002.
As of June 30, 2001, 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 the pending
shareholder 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.
PlanGraphics had work backlog and assignments of approximately $9.3
million as of June 30, 2001 and $8.6 million as of September 30, 2000, compared
to $7.1 million of work backlog and assignments as of June 30, 2000 and $5.4
million as of September 30, 1999. Of the $9.3 million, approximately $8.4
million is expected to be completed within 12 months. Revenue from existing
backlog and assignments will be recognized through the fiscal year ending
September 30, 2002. PlanGraphics reports backlog based on executed contracts.
Assignments include contract awards where documentation is pending or task
orders based on existing indefinite quantity contract vehicles. A typical
contract, standard for the industry, includes terms that permit termination for
convenience by either party with 30 days prior notice. Most of our orders are
from existing or previous customers with whom we have a good relationship.
Therefore, we do not anticipate cancellation of such contracts or order
assignments.
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
14
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 new line of credit available to
PlanGraphics expires February 2, 2002.
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
9 Months Ended June 30 Years Ended September 30
2001 2000 2000 1999
---- ---- ---- ----
Statement of Operations
Information: (unaudited) (unaudited)
Revenues $ 5,590,343 $ 4,515,147 $ 6,048,570 $ 7,990,808
Cost and expenses 6,420,009 6,716,207 8,624,384 9,529,713
Net loss (829,666) (2,201,060) (2,575,814) (1,538,905)
Balance Sheet Information:
Total Assets 7,684,468 7,777,419 7,731,880 9,156,604
Total current liabilities 4,922,415 2,498,778 2,819,956 2,192,935
Working capital (1,270,496) (1,017,997) (1,240,722) 251,802
Shareholders Equity 2,762,053 3,542,820 3,199,707 4,947,579
Result of Operations for the Nine Months ended June 30, 2001
Revenues
Revenues for the nine months ended June 30, 2001 were $5,590,343, a 24%
increase from $4,515,147 for the nine months ended June 30, 2000. This is an
increase of $1,075,196 over the same nine-month period from 2001 to 2000 and
resulted entirely from the geographic information systems activities of
PlanGraphics. Management believes that revenues were constrained by delays
encountered in the start up of contracts and work assignments awarded in the
fiscal quarters ended September 30, 2000 and December 31, 2000. As a
consequence, delays of unexpected length impacted our revenue generation in
previous quarters. Notices to proceed were obtained for most of the delayed
assignments by mid-December 2000. Accordingly, we are now experiencing increases
in revenue and expect to see further revenue increases in the ensuing quarters.
Costs and Expenses
Our total operating costs and expenses for the nine months ended June
30, 2001 amounted to $6,162,439 or 110% of revenues. In the same period in 2000,
our total operating costs and expenses were $5,914,195 or 131% of revenues. This
year's costs reflect a $248,244 or 4.2% increase in operating costs from the
same period in 2000. This increase is due to increases in direct contract costs
and costs including increased fees for audits, investment banking and
shareholder communications. Operating costs
15
for PlanGraphics for the nine months ended June 30, 2001 were $5,254,263 or 94%
of revenues, an increase of 4.2% from $5,039,380 incurred during the same period
in 2000.
Net Loss
Our net operating loss for the nine months ended June 30, 2001
decreased by $826,952 or 59% from last the operating loss of $1,399,048 for the
same period in 2000. In addition to the reductions of operating costs and
expenses, this decrease reflects a 5% reduction in interest expenses and no
charges associated with litigation as was the case in the prior period. Our
subsidiary, PlanGraphics, had net operating income for the nine months ended
June 30, 2001 of $336,079 compared to net operating loss of $524,233 for the
same period in 2000. Management believes PlanGraphics will continue its
nine-month trend of positive cash and profitability.
ISIS's interest expense increased by $68,171 over the prior year as a
result of a $75,000 interest expense associated with the accretion of debt
discount in connection with the beneficial conversion feature of the convertible
promissory notes to HumanVision, L.L.C. This interest charge was offset by a
small decrease in the average outstanding balance of PlanGraphics' line of
credit as compared to the same period in 2000 and lower interest rates. Other
income increased slightly to $60,344 from the prior year total of $34,248
principally as a result of improved commissions received from company travel
transactions. No preferred stock dividends were paid in the current period as
there was no preferred stock outstanding at June 30, 2001. The total net loss,
attributable to holders of common stock, of $829,666 for the current period, a
decrease of 63% or $1,389,396 from the same period last year, resulted
principally from reduced operating losses and from the absence of litigation
settlement costs of $589,432 that were reported in the prior year.
Contract Backlog
We have a backlog of GIS contracts and work assignments amounting to
approximately $9.3 million, compared to $7.01 million at June 30, 2000 and
$8.6million at September 30, 2000. We expect this 31% increase in backlog over
the prior year to be reflected as increased revenue and profitability in the
ensuing quarters as approximately $8.4 million is expected to be completed
within twelve months.
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 distractions caused by
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.
Accounts receivable balances at September 30, 2000 and 1999, include
both billed receivables and work-in-process. The payment terms on accounts
receivable are generally net 30 days and collections generally average 45 to 60
days after invoicing. The actual collection period is consistent with industry
experience with clients in the public sector. While this results in an elevation
and aging of the billed accounts receivable balance, our history reflects
consistent collectibility of the receivable balances. Work-in-process represents
work that has been performed but has not yet been billed. This work will be
billed in accordance with milestones and other contractual provisions. The
amount of unbilled revenues will vary in any given period based upon contract
activity.
16
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 May 15, 2001, we issued a promissory note in favor of HumanVision,
L.L.C., a related party, in the principal amount of $40,000. Pursuant to a First
Amendment to Promissory Notes, the balance of outstanding principal and accrued
and unpaid interest of the note automatically converts 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 on May 16, 2002. Such shares that may be issued
on conversion of the promissory note will be "restricted" as defined in Rule 144
promulgated under the Securities Act of 1933, as amended.
On May 31, 2001, PlanGraphics obtained a line of credit from Branch
Banking and Trust Company in the maximum principal amount of $500,000. This line
of credit, which replaces the National City Bank of Kentucky line of credit,
expires on February 2, 2002. The Branch Banking and Trust Company line of credit
is collateralized by PlanGraphics' accounts receivable and general intangibles
and a pledge of a $325,000 Branch Banking and Trust Company account held by
HumanVision, L.L.C.
On February 9, 2001, the board of directors ratified a loan of $75,000
from HumanVision L.L.C, a related party, in exchange for a promissory note dated
February 2, 2001. The funds were to be used for certain specified working
capital requirements. Pursuant to a First Amendment to Promissory Notes, the
balance of outstanding principal and accrued and unpaid interest of the note
automatically converts 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 on
February 3, 2002. Such shares that may be issued on conversion of the
17
promissory note will be "restricted" as defined in Rule 144 promulgated under
the Securities Act of 1933, as amended.
Also on February 9, 2001, the board approved a resolution authorizing
us to provide to HumanVision, L.L.C. a security interest in the PlanGraphics'
accounts receivable and subordinately, the ownership of PlanGraphics as further
collateral for providing a standby letter of credit to collateralize an
extension of PlanGraphics' line of credit with National City Bank of Kentucky
and subsequently, Branch Banking and Trust Company. Subsequent to this
transaction, National City Bank of Kentucky provided an extension of a $500,000
promissory note for PlanGraphics through June 11, 2001. Effective June 1, 2001,
this promissory note was paid in full and substituted with a line of credit from
Branch Banking and Trust Company.
Historically, PlanGraphics' accounts receivable have been more than
adequate to cover its line of credit and management believes that this will
continue to be the case. Should PlanGraphics default on its line of credit with
Branch Banking and Trust Company and should its accounts receivable be
inadequate to cover its standby letter of credit with HumanVision L.L.C., ISSI
may lose its interest in PlanGraphics which could result in the loss of the
Company's sole source of revenue. HumanVision L.L.C. has not expressed an
interest in obtaining the underlying collateral used to support the standby
letter of credit.
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 $350,000. The arbitration award will be paid with the
proceeds of this rights offering. (See Legal Proceedings on Page 10).
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:
In June 2001 the Financial Accounting Standards Board finalized FASB
Statements No. 141, Business Combinations (SFAS 1421) and No. 142, Goodwill and
Other Intangible Assets (SFAS 142). SFAS 142 requires the use of the purchase
method of accounting and prohibits the use of the pooling-of-interests method of
accounting for business combinations initiated after June 30, 2001. SFAS 142
also requires that we recognize acquired intangible assets apart from goodwill
if the acquired intangible assets meet certain criteria. SFAS 142 applies to all
business combinations initiated after June 30, 2001
18
and for purchase business combinations completed on or after July 1, 2001. It
also requires, upon adoption of SFAS 142, that we reclassify the carrying
amounts of intangible assets and goodwill based on the criteria in SFAS 141.
SFAS 142 requires, among other things, that companies no longer
amortize goodwill, but instead test goodwill for impairment at least annually.
In addition, SFAS 142 requires that we identify reporting units for the purposes
of assessing potential future impairments of goodwill, reassess the useful lives
of other existing recognized intangible assets, and cease amortization of
intangible assets with an indefinite useful life. An intangible asset with an
indefinite useful life should be tested for impairment in accordance with the
guidance on SFAS 142. SFAS 142 is required to be applied in fiscal years
beginning after December 15, 2001 to all goodwill and other intangible assets
recognized at that date, regardless of when those assets were initially
recognized. SFAS 142 requires us to complete a transitional goodwill impairment
test six months from the date of adoption. We are also required to reassess the
useful lives of other intangible assets within the first interim quarter after
adoption of SFAS 142.
The Financial Accounting Standards Board 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.
We accounted for our previous business combinations using the purchase
method. As of June 30, 2001, the net carrying amount of goodwill is $4,039,324
and other intangible assets is nil. Amortization expense during the nine-month
period ended June 30, 2001 was $272,943. Currently, we are assessing but have
not yet determined how the adoption of SFAS 141 and 142 will impact our
financial position and results of operations.
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.
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.
19
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 80,000,000 shares of
common stock, pursuant to the rights offering described herein. 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 August 13, 2001, we had 19,606,525 shares of 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 first three fiscal quarters of the
fiscal year ending September 30, 2001, 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 Third Quarter $0.17 $0.09
Second Quarter $0.24 $0.09
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 $0.34 $0.20
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 August 13, 2001, the last reported sales price of our common stock was $0.06.
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
August 13, 2001:
- ------------------------ --------------------------------------- ----------
Name and Address of Amount & Nature of Beneficial Ownership Percentage
Beneficial Owner
- ------------------------ --------------------------------------- ----------
Ausost Anstalt Schaan 1,433,4281 7.3%
Landstrasse 163 Sole dispositive and voting power
9494 Furstentum
Vaduz, Liechtenstein
Balmore S.A. 1,379,6972 7.1%
Trident Chambers, Road Town Sole dispositive and voting power
Tortola, British Virgin Islands
(1) According to information on Schedule 13G/A filed with the SEC on November
13, 2000, Austost Anstalt Schaan, a corporation organized in Liechtenstein,
holds 1,433,428 shares of ISIS Common Stock. Based on information received
from Ausost Anstalt Schaan, Thomas Hackl, Representative, has sole voting
control over the corporation.
(2) According to information on Schedule 13G filed with the SEC on November 13,
2000, Balmore S.A., a corporation organized in the British Virgin Islands,
holds 1,379,697 shares of ISIS Common Stock. Based on information received
from Balmore S.A., Gisela Kindle, Director, has sole voting control over
the corporation.
Security ownership of management:
The directors and officers of ISIS own the following percentages of our common
stock as of August 13, 2001:
- ------------------------ --------------------------------------- ----------
Name and Address of Amount & Nature of Beneficial Ownership Percentage
Beneficial Owner
- ------------------------ --------------------------------------- ----------
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
21
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
Frederick G. Beisser 251,993(2) 1.3%
Chief Financial Officer, Sole dispositive and voting power
Secretary, Treasurer
andDirector
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 5,302,631 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.
22
(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, options to purchase 645,162 shares of common stock and
warrants to purchase 405,000 shares of common stock owned by
HumanVision L.L.C. Mr. Murray, as a member and sole manager, is a
control person of HumanVision 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 established an offering price per share
of $.035 per share after considering several factors, including the current
market value of the shares and the potential increase in the number of
outstanding shares if the rights offering is fully subscribed. The board
considered the desirability of discounting the price of the shares offered to
the shareholders below the current market price to increase the attractiveness
of the offering to the shareholders. The closing prices of the shares during the
last ten days prior to the meeting of the directors on August 7, 2001 ranged
from $.06 to $.10 per share.
The board of directors also consulted with Brean Murray which provided
information concerning the market valuation of shares of other publicly traded
companies with business and performance characteristics similar to the Company.
These characteristics included trailing twelve month (TTM) sales less than $10
million, net losses in excess of $1 million, current assets of less than $2
million, current liabilities in excess of $4.8 million and working capital less
than $1 million. The review of 9,800 companies yielded 30 companies with
comparable profiles in the services sector with a median market capitalization
to TTM sales ratio of .37. Using this ratio, the market capitalization of ISIS
would be approximately $2.6 million, or approximately $0.13 per share. The board
concluded that these market comparisons confirm that the pricing at $.035 per
share results in an attractive valuation for the shares offered to the existing
shareholders and should serve as an incentive to the shareholders to acquire
additional shares in order to avoid substantial dilution of their existing
holdings.
PLAN OF DISTRIBUTION
General
We are offering 80,000,000 shares of our common stock to our
shareholders of record as of April 30, 2001 at $.035 per share in this rights
offering. Any shares remaining after shareholders have exercised their basic and
over-subscription rights may then be offered to non-shareholder investors
identified by ISIS. We have not engaged an underwriter in connection with this
rights offering. If the offering is fully subscribed, we expect to raise
proceeds of approximately $2,800,000, before offering costs.
Our officers and directors may solicit our shareholders to exercise
their 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,
23
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.
Minimum Amount of Offering
If the rights offering is fully subscribed, we expect to raise proceeds
of approximately $2,800,000, before offering costs. The minimum amount needed by
ISIS to complete the rights offering is $600,000. If that minimum amount is not
reached by the expiration date, or the extended expiration date as described
below, we will instruct the escrow agent to return any amount submitted by
shareholders without interest or deduction as soon as practicable after the
offering is terminated. Officers, directors and beneficial owners of 5% or more
of ISIS common stock will be able to exercise their basic and over-subscription
rights to purchase shares in order to reach the minimum.
Expiration of the Rights
Shareholders may exercise their rights at any time before 5:00 p.m.,
Mountain Time, on ______, 2001, the expiration date for the rights, unless the
expiration date is extended in the sole discretion of ISIS. If a shareholder
does not exercise his or her rights before the expiration date, such unexercised
rights will be null and void. We will not be obligated to honor the exercise of
rights if we receive the documents relating to a shareholder's exercise after
the expiration date of the rights, regardless of when such documents were
transmitted. We may extend the expiration date for up to two additional 30 day
periods by giving oral or written notice to the escrow agent on or before the
scheduled expiration date. If we elect to extend the expiration date of the
rights, we will issue a press release announcing the extension no later than
9:00 a.m., Mountain Time, on the business day before the most recently announced
expiration date. The rights offering will not be extended beyond [105 days
following effective date of registration statement].
Description of the Rights Offered
Basic Subscription Rights
We are granting to our shareholders that are holders of record as of
the close of business on April 30, 2001, non-transferable basic subscription
rights to purchase up to 80,000,000 shares of our common stock, at a price of
$.035 per share, for each share of common stock held on April 30, 2001.
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 rights offering will experience ownership dilution.
A shareholder may purchase all or part of the shares to
24
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% of our presently
outstanding shares. We believe that they will exercise approximately 60% 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.
Over-Subscription Rights
Shareholders who fully exercise their basic subscription rights will be
offered over-subscription rights, subject to availability of shares and subject
to proration, 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 $.035 per share,
up to seven (7) shares of common stock for each share held on April 30, 2001 of
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.
Offering of Unsubscribed Shares to Non-Shareholders
Concurrent with the rights offering, we will offer certain
non-shareholder investors the opportunity to participate in the offering. We
will offer them any remaining shares at $.035 per share after all shareholder
subscriptions have been filled. After existing shareholders have exercised their
rights to purchase, any remaining shares available will be offered to
non-shareholder investors on a first-come, first-serve basis until all shares
offered are purchased.
No underwriter will be involved in the offering to non-shareholder
investors. We have retained Crossways Consulting Group to provide advisory
services on the structure of the rights offering and make introductions of
individuals and organizations to ISIS who may become qualified investors. ISIS's
officers and directors will be acting solely on behalf of ISIS to sell any
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.
Information
Shareholders 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 ISIS, at the following
telephone number and address:
25
Integrated Spatial Information Solutions, Inc.
c/o PlanGraphics, Inc.
112 East Main Street
Frankfort, Kentucky 40601
(502) 223-1501
Escrow Agent
By an agreement dated August ___, 2001, we appointed Branch Bank &
Trust Company as escrow agent for the offering. We will pay its fees and
expenses related to the offering. Upon receipt, ISIS will place in escrow with
the escrow agent, all of the subscription price payments received from
shareholders. The escrow agent is instructed to hold the proceeds of the
offering until the minimum amount of $600,000 has been reached when it will
deliver the proceeds to us. If the $600,000 minimum is not deposited in escrow
by the expiration date or the extended expiration date, the escrow agent will
return the proceeds to the shareholder investors.
Exercise of Rights
You may exercise your rights by delivering the following to ISIS, at
the above address before 5:00 p.m., Mountain Time, on ______, 2001, the date on
which the rights expire:
o Your properly completed and executed subscription certificate with any
other supplemental documentation; and
o Your full subscription price payment for each share subscribed for
under your subscription privileges.
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 Branch Banking & Trust Company further
credit to Integrated Spatial Information Solutions, Inc.; or
o Wire transfer of immediately available funds to ISIS's account
maintained by the escrow agent for the purpose of holding
subscriptions, in accordance with the following wire instructions:
Branch Banking & Trust Company - Wilson, ABA No. 053-101-121, DDA
168-918-0244 further credit to Integrated Spatial Information
Solutions, Inc., Attention: Trust Department, Margaret Smith,
252-246-4968 (phone).
Receipt of Payment
Your payment will be considered received by ISIS only upon:
o Clearance of any uncertified check;
o Receipt by ISIS of any certified check or bank draft drawn on a U.S.
bank or of any postal, telegraphic or express money order; or
26
o Receipt of collected funds in the escrow 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 ISIS by one of the methods described below:
o If by mail to: Integrated Spatial Information Solutions, Inc.
c/o PlanGraphics, Inc.
112 East Main Street
Frankfort, Kentucky 40601
o You may call us at (502) 223-1501.
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. 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 ISIS 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 us. 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 that can be
purchased with your payment. 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 Forwarded to the Escrow Agent and Held Until the Minimum
Offering Amount Has Been Achieved
The escrow agent will hold your payment of the subscription price in a
segregated account with other payments received from other rights holders until
we receive the minimum amount of $600,000. If that minimum amount is not reached
by the expiration date, or the extended expiration date as described below, the
escrow agent will return any amount submitted by shareholders without interest
or deduction as soon as practicable after the offering is terminated.
27
Notice to Beneficial Holders by Brokers, Trustees and Depositories
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 ISIS 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
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.
We will not 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.
Extensions and Termination
We may extend the offering and the period for exercising your rights,
in our sole discretion. The offering will not be extended beyond [105 days after
effective date of registration statement]. In addition, we may terminate the
offering at any time before the time the rights expire.
28
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.
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 Trust Company, Inc., ISIS's transfer agent, 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 escrow 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 us, 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 escrow 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 escrow 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
29
John C. Antenucci 54 Vice Chairman, Director, President and
Acting Chief
Executive Officer
of ISIS; President
and Chief
Executive Officer
of PlanGraphics,
Inc.
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 cosmetology 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.
30
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.
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 HumanVision 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
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 is 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 the disinterested members of its Board of
Directors.
John C. Antenucci, President and a director of ISIS, personally
guaranteed an obligation of ISIS on September 22, 1997. As consideration for
such guaranty, ISIS agreed to pay Mr. Antenucci 5% of the outstanding loan
balance on an annual basis. ISIS has not paid all monies owed to Mr. Antenucci
pursuant to this agreement and to date, the outstanding balance of the debt owed
Mr. Antenucci is $20,175. The agreement was considered to be in the best
interests of ISIS at the time of agreement by the disinterested members of its
Board of Directors.
31
Gary S. Murray, Chairman and a director of ISIS, is the principal owner
and executive officer of HumanVision L.L.C. On July 1, 2001, we entered into a
consulting agreement with HumanVision L.L.C. Compensation for the consulting
services of HumanVision L.L.C. consists of performance options to purchase
322,581 shares of common stock at an exercise price of $0.11 per share if our
market capitalization exceeds $30,000,000 for twenty of thirty consecutive
business days at any time prior to June 30, 2002, and an additional 322,581
shares of common stock at an exercise price of $0.11 per share if our market
capitalization exceeds $60,000,000 for twenty of thirty consecutive business
days at any time prior to June 30, 2002. 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 in favor of
HumanVision L.L.C. for the sum of $75,000. The note is due on October 21, 2001
and bears interest at prime plus six percent. Pursuant to the First Amendment to
Promissory Notes, executed on May 21, 2001, any balance of outstanding principal
and accrued and unpaid interest as of February 3, 2002 will automatically
convert 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 will be
"restricted" as defined by Rule 144 promulgated under the Securities Act of
1933, as amended.
On February 9, 2001, PlanGraphics entered into an agreement with
HumanVision L.L.C. whereby HumanVision 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 that has been replaced with
the Branch Banking & Trust Company 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 Branch Banking & Trust
Company calls the standby letter of credit, PlanGraphics will execute a
convertible debt instrument payable to HumanVision 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, HumanVision 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 HumanVision L.L.C.
offering its stock in PlanGraphics as consideration.
On May 15, 2001, we executed a promissory note in favor of HumanVision
L.L.C. for the sum of $40,000. The note is due on October 21, 2001 and bears
interest at prime plus six percent. Pursuant to the First Amendment to
Promissory Notes, executed on May 21, 2001, any balance of outstanding principal
and accrued and unpaid interest as of May 16, 2002 will automatically convert
into shares of ISIS common stock at the lower of $.07 per share or the price per
share of any offer to our shareholders of stock or rights to purchase our common
stock. The shares issuable upon conversion of this note will be "restricted" as
defined by Rule 144 promulgated under the Securities Act of 1933, as amended.
32
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation paid and accrued by
ISIS for services rendered during the fiscal years ended September 30, 2000,
September 30, 1999 and September 30, 1998 to certain of our executive officers.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation paid and accrued by
ISIS for services rendered during the fiscal years ended September 30, 2000,
September 30, 1999 and September 30, 1998 to certain of our executive officers.
Long Term
Annual Compensation Compensation
----------------------------------------- --------------------------
Awards Payouts
------ -------
Other Annual Options/ LTIP
Name and Bonus Compen-sation SARs granted Payouts All Other
Principal Position Year Salary ($) ($) ($) (#) ($) ($)
- ------------------------- ---- ---------- ----- -------------- ------------ ------- ---------
John C. Antenucci, 2000 $138,219 - - - - -
Vice 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) - -
<FN>
(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 $2.125 per
share.
</FN>
Option/SAR Grants in Last Fiscal Year
We made no grants to the named officers during the fiscal year ended September
30, 2000.
33
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
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) -
<FN>
(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.
</FN>
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.
34
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 1, 2001, we entered into an Agreement for Services with
Mr. Murray for his services as Chairman of the Board. The agreement expires June
30, 2003 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 ($0.11). The agreement also provides
Mr. Murray with options to purchase 175,000 shares of our common stock per annum
at an exercise price of $0.11 per share, vesting in quarterly installments and
exercisable for three years from the date of the agreement. 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.
35
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.
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.
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.
36
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:
John C. Antenucci
Integrated Spatial Information Solutions, Inc.
c/o PlanGraphics, Inc.
112 East Main Street
Frankfort, Kentucky 40601
(502) 223-1501
37
[Back Cover of Prospectus]
Until ________, 2001, (40 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.
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 and Consolidated Financial Statements for the Nine Months Ended
June 30, 2000 and 2001 (unaudited)
Condensed and Consolidated Balance Sheets as of June 30, 2001
(unaudited) and September 30, 2000 (audited) ........................ F-38
Condensed Consolidated Statements of Operations ................ F-40
Condensed Consolidated Statements of Cash Flows ................ F-41
Notes to Condensed Consolidated Financial Statements ........... F-42
F-1
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Balance Sheets
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
February 12, 2001, except for Note 13,
which is as of June 1, 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
F-7
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,
1999 Series A Additional
Preferred Stock Common Stock Paid-in Capital
--------------- ------------ --------------------
Common
Stock to Accumulated
(See Note 7) Shares Amount Shares Amount be Issued Common Preferred Deficit Total
- ------------------ -------- --------- ---------- ----------- ---------- ---------- -------- ------------ -----------
Balance,
October 1, 1998 700 $ 1 11,456,571 $12,635,423 $ - $3,298,264 $445,400 $(10,792,344) $5,586,744
Issuance of
common stock
for cash on - - 688,235 200,000 - - - - 200,000
options
exercised
Common stock
issued for - - 455,754 122,319 - - - - 122,319
services
Conversion of
preferred
stock into
common stock (110) - 501,552 71,188 - - (71,188) - -
Preferred stock
dividends - - - - - - - (36,723) (36,723)
Stock options
and warrants
issued for - - - - - 35,718 - - 35,718
consulting
services
Settlement of
legal
disputes
through
issuance of
common stock
warrants - - 140,000 36,400 31,500 29,400 - - 97,300
Net loss - - - - - - - (1,057,779) (1,057,779)
- ------------------ -------- --------- ---------- ----------- ---------- ---------- -------- ------------ -----------
Balance,
September 30,
1999 590 $ 1 13,242,112 $13,065,330 $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
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
Year Ended
September 30, Series A Additional Paid-in
2000 Preferred Stock Common Stock Capital
------------------ ------------------- ---------------------
(See Note 7) Common
Stock to Accumulated
Shares Amount Shares Amount be Issued Common Preferred Deficit Total
- ------------------ ------- -------- ---------- ----------- ----------- --------- --------- ------------ ----------
Balance,
October 1, 1999 590 $ 1 13,242,112 $13,065,330 $31,500 $3,363,382 $374,212 $(11,886,846) $4,947,579
Issuance of
common stock
for cash and - - 127,967 30,250 - - - - 30,250
options
exercised
Issuance of
common stock
to related
parties - - 852,000 213,000 - - - - 213,000
Issuance of
common stock
to unrelated
parties - - 806,452 250,000 25,000 - - - 275,000
Stock issued for
services 388,979 88,434 - - - - 88,434
Conversion of
preferred
stock into
common stock (590) (1) 2,597,064 374,212 - - (374,212) - (1)
Issuance of
common stock
for preferred
stock
dividends - - 181,131 56,151 - - - - 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 - - 202,703 75,000 (31,500) - - - 43,500
Settlement of
legal
disputes
through
issuance of
common stock
upon exercise
of options
and warrants - - 275,974 102,110 - - - - 102,110
Net loss - - - - - - - (2,575,814) (2,575,814)
- ------------------ ------- -------- ---------- ----------- ----------- --------- --------- ------------ ----------
Balance,
September 30,
2000 - $ - 18,674,382 $14,254,487 $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
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
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 (176,268) 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 These consolidated financial statements include the accounts
Business 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 The consolidated financial statements include the accounts
Consolidation 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 Revenues from fixed fee projects are recognized on the
Cost Recognition 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 Long-lived assets, identifiable intangibles, and associated
Assets 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, Property and equipment are recorded at cost.
Depreciation is provided primarily Equipment and using
accelerated methods over the estimated useful lives ranging
from 5 to 31 Depreciation years. Depreciation and
amortization expense on property and equipment was And
$351,341 and $385,239 for the years ended September 30, 2000
and 1999. Amortization 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 Concentrations The Company's financial instruments that are
of Credit Risk exposed to concentrations of credit of Credit Risk 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 The estimated fair value of financial instruments has been
Financial determined using available market information or other
Instruments 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 The Company follows the provisions of SFAS No. 131,
Information "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 Costs incurred internally in creating software products for
Software Costs. resale are charged to Software Costs 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 The Company applies Accounting Principles Board Opinion 25,
Plans "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 Effective October 1, 1998, the Company has adopted the
Income 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 The Financial Accounting Standards Board has recently issued
Pronouncements 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 The consolidated financial statements have been prepared
and assuming the Company will continue as a going concern. The
Management Plan 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 replaced by a new credit line (see Note 13).
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 The components of accounts receivable are as follows:
Receivable
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 of $130,788 and $108,588 at
September 30, 2000 and 1999, respectively, represents
amounts billed in excess of amounts earned. Included in the
deferred revenue balance at September 30, 2000 was $70,790
related to retainers received for future services and over
payments by customers on specific invoices.
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. The same customer accounted for 12.7% of revenues
for the year ended September 30, 1999.At September 30, 2000,
two customers accounted for 19.0% and 15.3% (11.4% at
September 30, 1999) of accounts receivable.
3. Notes Notes payable at September 30 are as follows:
Payable
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
7. Equity Preferred Stock
Transactions
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
The Company occasionally issues common stock for the payment
of services, settlement of debt and the payment of preferred
stock dividends. The number of shares of common stock issued
in each instance is representative of the trading price of
the Company's common stock at the date of issue.
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 wrongful termination lawsuit with a
former employee in July 1999. Upon settlement, the former
employee was awarded stock options to purchase 140,000
shares of the Company's common stock at $0.26 per share, the
trading price of the stock on the settlement date, expiring
one year from date of issue. The options were valued under
the Black Scholes model at $16,800. In accordance with the
settlement agreement, the Company waived the payment upon
the individual's exercise of the options in August 1999.
F-25
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 with its former consultants
in February 2000, when the trading price of the Company's
common stock was $0.37 per share. 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 (options to purchase
145,168 shares valued at $53,712 and warrants to purchase
130,806 shares valued at $48,398). The options and warrants
all had an exercise price of $0.37 per share and a term that
expired January 14, 2002. See Note 11 for further
discussion.
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. During fiscal
2000, the Company issued 172,016 shares of common stock to
the director as payment for the $50,000 compensation in
accordance with the agreement. Of these shares issued,
43,014 shares related to the fourth quarter of fiscal 1999,
thus the Company has accrued $12,500 at September 30, 2000
to account for the director's fiscal 2000 fourth quarter
compensation. In addition, as part of the July 1999
agreement, the director received incentive options to
acquire 688,235 shares of common stock at $0.2906 per share,
the average trading price of the Company's common stock for
the five trading days prior the agreement date, which he
exercised on July 13, 1999 for $200,000 in cash. The options
to purchase 688,235 shares of stock had an exercise price of
$0.29 per share and a term which expired on July 5, 2000.
F-26
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 warrants had a term
that expired on October 1, 2004. The stock was subsequently
issued on October 12, 1999, when the trading price of the
Company's stock was $0.21 per share. 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 $25,132. The
options and warrants were valued using the Black Scholes
model in accordance with SFAS No. 123.
F-27
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-28
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-29
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-30
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-31
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
8. Employee 401 (k) Plan
Benefit Plans
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-32
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
10. Related Party A Director of the Company is the principal owner and
Transactions 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-33
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. See Note 7 for further discussion. 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.
F-34
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 Years Ended September 30, 2000 1999
Data to -------------------------------------------------------------------
Statement
of Cash Flows
Cash paid for interest $ 325,722 $ 438,101
Non-cash Investing and Financing
Activities:
Preferred stock dividend accrued 18,002 36,723
Common stock issued for payment of
preferred stock dividends 54,725 -
Conversion of preferred stock into
common stock 374,213 71,188
--------------------------------------------------------------------
13. Subsequent In February 2001 the Board of Directors approved a
Events 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 April 30, 2001 as
the record date and that the rights would be
non-transferable. The terms of the offering have not yet
been finalized.
F-35
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
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 note provides that any balance of
unpaid principal and accrued interest remaining unpaid as of
February 3, 2002 will automatically convert into common
stock at a conversion price of the lesser of $0.07 per
share, or the price of any offering to existing
shareholders. Due to the beneficial conversion feature, the
Company will record a discount on notes payable and accrete
the discount to interest expense over the term of the note,
in accordance with EITF 98-5 and EITF 00-27. 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 PlanGraphic's accounts receivable and
subordinately, the ownership of - PlanGraphics, - as further
collateral for the director providing a standby letter of
credit to further collateralize an extension of their
subsidiary's line of credit with National City Bank of
Kentucky, and subsequently, Branch Banking and Trust
Company. Subsequent to this transaction, National City Bank
provided an extension of a $500,000 line of credit for their
operating subsidiary through April 30, 2001. The line of
credit was subsequently extended through June 11, 2001.
Effective June 1, 2001, the line of credit had been paid in
full and substituted with a line of credit from Branch
Banking and Trust Company.
Historically, PlanGraphics' accounts receivable has been
more than adequate to cover its line of credit and
management believes that this will continue to be the case.
Should PlanGraphics default on its line of credit with
Branch Banking & Trust Company and its accounts receivable
be inadequate to cover its standby letter of credit with the
related party, the Company may lose its interest in
PlanGraphics which would result in the loss of the Company's
sole source of revenue. The related party has not expressed
an interest in obtaining the underlying collateral used to
support the standby letter of credit.
F-36
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.
On May 15, 2001, ISIS entered into a $40,000 convertible
promissory note with Human Vision bearing interest at the
prime rate as published in the Wall Street Journal plus six
percent per annum. The note has the same terms as the
$75,000 note payable to Human Vision, LLC. Due to the
beneficial conversion feature on the note, the Company will
record a $34,000 discount on notes payable and will accrete
the discount to interest expense in accordance with EITF
98-5 and EITF 00-27.
F-37
Integrated Spatial Information Solutions, Inc., and Subsidiary
Condensed and Consolidated Balance Sheets
June 30 September 30
2001 2000
(Unaudited) (Audited)
- --------------------------------------------------------------------------------
Assets
Current:
Cash and Cash Equivalents $ 7,078 $ 20,306
Accounts receivable (net of allowance
for doubtful accounts of $0 and $1,007) 1,938,876 1,386,774
Prepaid expenses and other 69,227 172,154
- --------------------------------------------------------------------------------
Total current assets 2,015,181 1,579,234
- --------------------------------------------------------------------------------
Property and Equipment:
Land and building under capital
lease - related party 1,866,667 1,866,667
Equipment and furniture 710,052 699,165
Other leased assets 255,602 255,600
- --------------------------------------------------------------------------------
2,832,321 2,821,432
Less accumulated depreciation and amortization 1,289,311 1,084,027
- --------------------------------------------------------------------------------
Net property and equipment 1,543,010 1,737,405
- --------------------------------------------------------------------------------
Other Assets:
Goodwill, net of accumulated amortization 4,039,324 4,312,267
Other 86,953 102,974
- --------------------------------------------------------------------------------
Total other assets 4,126,277 4,415,241
- --------------------------------------------------------------------------------
$7,684,468 $7,731,880
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-38
Integrated Spatial Information Solutions, Inc., and Subsidiary
Condensed and Consolidated Balance Sheets
June 30 September 30
2001 2000
(Unaudited) (Audited)
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current:
Notes payable - current maturities $ 410,551 $ 559,647
Other notes payable 288,530 --
Obligations under capital lease - current 1,630 13,286
Obligations under capital
leases - related party - current 99,074 90,091
Checks written against future deposits 83,313 61,612
Accounts payable 1,297,359 871,288
Accrued payroll costs and vacation 322,362 325,613
Accrued expenses 552,498 696,841
Deferred revenue 230,350 201,578
- --------------------------------------------------------------------------------
Total current liabilities 3,285,677 2,819,956
Long-term Liabilities
Obligations under capital leases - related party 1,636,748 1,712,217
- --------------------------------------------------------------------------------
Total liabilities 4,922,415 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, 19,606,525 and 18,674,382 shares
issued and outstanding at June 30, 2001, and
September 30, 2000, respectively 14,472,515 14,254,487
Common stock to be issued -- 25,000
Additional paid-in capital 3,599,866 3,400,882
Accumulated deficit (15,310,328) (14,480,662)
- --------------------------------------------------------------------------------
Total stockholders' equity 2,762,053 3,199,707
- --------------------------------------------------------------------------------
$ 7,684,468 $ 7,731,880
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-39
Integrated Spatial Information Solutions, Inc., and Subsidiary
Condensed and Consolidated Statements of Operations
(Unaudited)
Nine months ended Three months ended
June 30, June 30,
-------- --------
2001 2000 2001 2000
- ----------------------------------------------------------------------------------------------------------
Revenues $ 5,590,343 $ 4,515,147 $ 2,152,315 $ 1,147,009
Cost and expenses
Salaries and employee benefits 1,240,381 1,417,738 441,344 472,814
Direct contract costs 3,264,887 2,767,865 1,328,942 777,331
General & administrative costs 821,267 931,597 272,651 263,283
Marketing costs 161,249 215,742 57,759 121,039
Public & corporate affairs expense 194,935 65,055 49,362 33,927
Other operating costs 479,720 516,198 156,790 150,156
- ----------------------------------------------------------------------------------------------------------
Total costs and expenses 6,162,439 5,914,195 2,306,848 1,818,550
- ----------------------------------------------------------------------------------------------------------
Operating loss (572,096) (1,399,048) (154,533) (671,541)
- ----------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (317,914) (249,743) (79,151) (76,900)
Gain on Sale of Assets -- 2,915 -- --
Other income 60,344 34,248 15,940 4,436
Loss on litigation -- (589,432) -- (4,540)
- ----------------------------------------------------------------------------------------------------------
Net loss (829,666) (2,201,060) (217,744) (748,545)
Preferred stock dividends -- (18,002) -- --
- ----------------------------------------------------------------------------------------------------------
Net loss attributable to common
stockholders $ (829,666) $ (2,219,062) $ (217,744) (748,545)
- ----------------------------------------------------------------------------------------------------------
Basic and diluted loss per common share:
Loss attributable to common stockholders $ (.04) $ (.14) $ (.01) $ (.04)
Weighted average number of shares of common
stock outstanding 19,556,525 15,846,301 19,576,525 18,579,375
- ------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements
F-40
Integrated Spatial Information Solutions, Inc., and Subsidiary
Condensed and Consolidated Statements of Cash Flow
(Unaudited)
Nine Months Ended June 30, 2001 2000
- -------------------------------------------------------------------------------
Operating Activities:
Net loss $ (829,666) $(2,201,060)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 478,227 542,757
Provision for losses on accounts receivable (1,007)
Stock issued in settlement of litigation -- 175,000
Stock options and warrants issued/to be
issued for services performed 142,400 156,050
Sale of assets -- (2,915)
Write off of acquisition costs 25,608 --
Amortization of debt discount 75,000 --
Changes in operating assets:
(Increase) decrease in accounts receivable (551,095) 671,904
Decrease in prepaid expenses 102,927 31,075
Increase in accounts payable 426,071 300,826
Decrease in accrued expenses (147,594) (296,414)
Increase in deferred revenue 28,772 72,641
Increase in other assets (9,587) --
- -------------------------------------------------------------------------------
Net cash used in operating activities (259,944) (550,136)
- -------------------------------------------------------------------------------
Investing Activities:
Purchase of equipment (10,889) (117,461)
- -------------------------------------------------------------------------------
Restricted cash -- 25,000
- -------------------------------------------------------------------------------
Net cash used in investing activities (10,889) (92,461)
Financing Activities:
Payments on checks written against future deposits 21,701 79,800
Proceeds from borrowing 4,656,831 3,951,244
Payments on debt (4,561,539) (3,987,822)
Proceeds from issuance of common stock 120,000 432,610
Proceeds from exercise of stock options 20,612 --
Payments on stock repurchase liability -- (62,103)
- -------------------------------------------------------------------------------
Net cash provided by financing activities 257,605 413,729
- -------------------------------------------------------------------------------
Net decrease in cash (13,228) (228,868)
Cash and cash equivalents, beginning of period 20,306 373,825
- -------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 7,078 $ 144,957
- -------------------------------------------------------------------------------
See accompanying notes to financial statements
F-41
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 June 30
2001, the consolidated results of our operations for the three and nine-month
periods ended June 30, 2001, and 2000 and statements of cash flows for the
nine-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 nine-month period ended June 30,
2001, are not necessarily indicative of the results to be expected for the full
year ending September 30, 2001.
Certain prior year financial statements have been restated to conform to the
current year presentation.
(2) Accounts Receivable
The components of accounts receivable are as follows:
June 30 September 30
2001 2000
- -------------------------------------------------------------------------------
unaudited
Contract Receivables:
Billed $1,264,387 $1,225,741
Unbilled 674,489 162,040
- -------------------------------------------------------------------------------
1,938,876 1,387,781
Less allowance for doubtful accounts -- 1,007
- -------------------------------------------------------------------------------
Accounts receivable, net $1,938,876 $1,386,774
Deferred revenue amounts were $142,056 and $130,788 at June 30, 2001 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 or
more customers. The City of New York's (NY) Department of Information Technology
and Telecommunications (NYDOITT)accounted for 36% of revenue for the quarter
ended June 30 2001, compared to two customers, the Providence Gas Company of
Rhode Island and the Horry County (SC) who accounted for 25%, and 10% of
revenue, respectively, for the quarter ended June 30, 2000. In addition, at June
30, 2001 two customers, the NYDOITT and the City of Columbus (OH) accounted for
36% and 12% of accounts receivable, compared to three customers, Providence Gas
Company of Rhode Island, EMA Services, Inc., and Nashville-Davidson County (TN)
who accounted for 15%, 14% and 12%, respectively, of accounts receivable at June
30, 2000. NYDOITT is the largest of our current customers and represents
services both as a client and as a contract vehicle utilized by as many as 10
different departments within the New York City government through individual
order assignments. The diversity of order assignments, and range of departments
as clients, diminishes the concentration of revenue and receivables in a manner
not obvious from the financial reports.
F-42
(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 June 30, 2001, the amount of the
net operating loss carryforward balance is estimated at $10.6 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 have recorded a valuation allowance
equal to the excess deferred tax assets at fiscal year end.
(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 and 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 expired April 30, 2001 and we obtained
a replacement line of credit with Branch Banking and Trust Company ("BB&T")
providing for an initial maximum principal amount of $500,000 (See Note 11,
below). The new line of credit was entered into during May 2001. We have
initiated a recapitalization effort based on a rights offering to shareholders
of our common stock (see Note 8, below). 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 and therefore would not have been entitled to
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 costs.
Subsequent to March 31, 2001 we made an initial payment of $48,000 and have
developed a schedule for the balance that is acceptable to both parties.
(6) Sale of Common Stock
During a limited private offering that began in the fourth quarter of the prior
fiscal year we sold 580,000 shares of our common stock and raised $145,000 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. 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 the common stock in this
transaction was exempt from registration under the Securities Act of 1933, as
amended, in reliance upon Section 4(2).
(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 6. to the Consolidated
Financial Statements in Form 10-KSB September 30, 2000.
F-43
(8) Recapitalization
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 SB-2 registration statement and related prospectus documents and to
file them with the SEC. The Board has established April 30, 2001 as the record
date and that the rights will be non-transferable. The company, subsequent to
June 30, 2001, determined that the rights would be priced at $0.035 per share,
that each shareholder will receive four rights for each share held at the record
date and that each shareholder may exercise over-subscription rights up to seven
times their shareholding as of the record date, subject to availability and
prorata allocations of over-subscription requests. We expect to complete the
offering during calendar year 2001.
The Board of Directors authorized consulting agreements with Crossways
Consulting Group, Inc. and Brean Murray & Co., Inc. for advice and assistance in
the completion of our shareholder rights offering. The agreements provide that
we will, upon successful completion of the offering, issue warrants to each of
the companies to acquire common stock in a quantity equal to two percent of the
number of shares outstanding immediately after completing the offering. The
warrant exercise fee will be equal to 110% of the shareholder rights
subscription fee.
(9) Related Party Transaction
On February 9, 2001, the Board of Directors approved a loan of $75,000 and we
entered into a convertible promissory note payable to Human Vision LLC, an
entity controlled by a director. The proceeds are to be used for certain
specified working capital requirements. The note was to mature on October 21,
2001 and was 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 beneficial conversion feature of
$75,000, computed in accordance with the Emerging Issues Task Force ("EITF")
Issue 98-5, has been recorded as a discount on the debt and will be accreted
from the date of issuance to the stated redemption date (originally October 12,
2001, amended on May 15, 2001 to February 2, 2002, 2001) in accordance with EITF
Issue 00-27. On May 15, 2001, we borrowed an additional $40,000 from Human
Vision LLC pursuant to the same terms as the aforementioned promissory note. A
beneficial conversion feature of $34,000 has been reflected as a discount on the
debt and will similarly be accreted from the date of issuance to the stated
redemption date (May 16, 2002). Through June 30, 2001, we have reflected $75,000
of interest expense in connection with the accretion of the discount. The
original convertible promissory note was also amended to no longer allow the
conversion at the option of the holder.
The Board also approved a resolution authorizing us to provide to Human Vision
LLC 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 extensions of the
commercial notes underlying a line of credit for our operating subsidiary
through June 11, 2001. See the discussion in Item 6, Management Discussion and
Analysis in our Form 10-KSB for the fiscal year ended September 30, 2000.
On April 30, 2001 the Line of Credit with National City Bank with a loan balance
of approximately $500,000 expired. During May 2001 our subsidiary obtained a
line of credit from a Maryland based banking institution, BB&T, comparable in
terms with the previous line and for an initial amount of $500,000. The new line
of credit is also collateralized by the accounts receivable of PlanGraphics, a
standby letter of credit provided by a related party, Human Vision L.L.C. and
the personal guarantee of an officer and director.
(10) 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.
F-44
As we incurred net losses in the three and nine-month periods ending June 30,
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 June 30, 2001 and 2000 were 8,070,909 and
6,778,477, respectively.
(11) Supplemental Cash Flow Information
During the nine months ended June 30, 2001 and 2000 we paid $225,200 and
$223,115 for interest expense, respectively.
During the nine months ended June 30, 2001 and 2000, we paid $6,770 and $16,175
for income taxes, respectively.
In accordance with the convertible note issued to Human Vision LLC, we recorded
a discount on the notes of $109,000 and a corresponding credit to additional
paid in capital in connection with a beneficial conversion feature.
(12) Recently Issued Accounting Pronouncements
In June 2001 the Financial Accounting Standards Board finalized FASB Statements
No. 141, Business Combinations (SFAS 1421) and No. 142, Goodwill and Other
Intangible Assets (SFAS 142). SFAS 142 requires the use of the purchase method
of accounting and prohibits the use of the pooling-of-interests method of
accounting for business combinations initiated after June 30, 2001. SFAS 142
also requires that we recognize acquired intangible assets apart from goodwill
if the acquired intangible assets meet certain criteria. AFAS 142 applies to all
business combinations initiated after June 30, 2001 and for purchase business
combinations completed on or after July 1, 2001. It also requires, upon adoption
of SFAS 142, that we reclassify the carrying amounts of intangible assets and
goodwill based on the criteria in SFAS 141.
SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that we identify reporting units for the purposes of
assessing potential future impairments of goodwill, reassess the useful lives of
other existing recognized intangible assets, and cease amortization of
intangible assets with an indefinite useful life. An intangible asset with an
indefinite useful life should be tested for impairment in accordance with the
guidance on SFAS 142. SFAS 142 is required to be applied in fiscal years
beginning after December 15, 2001 to all goodwill and other intangible assets
recognized at that date, regardless of when those assets were initially
recognized. SFAS 142 requires us to complete a transitional goodwill impairment
test six months from the date of adoption. We are also required to reassess the
useful lives of other intangible assets within the first interim quarter after
adoption of SFAS 142.
We accounted for our previous business combinations using the purchase method.
As of June 30, 2001, the net carrying amount of goodwill is $4,039,324 and other
intangible assets is nil. Amortization expense during the nine-month period
ended June 30, 2001 was $272,943. Currently, we are assessing but have not yet
determined how the adoption of SFAS 141 and 142 will impact our financial
position and results of operations.
F-45
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................................. $5,000
Legal fees and expenses.................................... $50,000
Accounting fees and expenses............................... $25,000
Escrow agent fees........................................... $5,000
Transfer agent fees......................................... $15,000
Printing expenses........................................... $10,000
Total $110,700
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ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Over the past three years, ISIS has issued the following securities
without registering them under the Securities Act of 1933:
o On May 15, 2001, ISIS executed a promissory note in favor of HumanVision
L.L.C. for the sum of $40,000. Pursuant to the First Amendment to
Promissory Notes, executed on May 21, 2001, any balance of outstanding
principal and accrued and unpaid interest as of May 15, 2002 will
automatically convert 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 note was 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. The shares issuable
upon conversion of the note will be "restricted" as defined by Rule 144
promulgated under the Securities Act of 1933.
o On February 2, 2001, ISIS executed a promissory note in favor of
HumanVision L.L.C. for the sum of $75,000. Pursuant to the First Amendment
to Promissory Notes, executed on May 21, 2001, any balance of outstanding
principal and accrued and unpaid interest as of February 3, 2002 will
automatically convert 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 note was 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. The shares issuable
upon conversion of the note will be "restricted" as defined by Rule 144
promulgated 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 Rule 506 of
Regulation D promulgated under 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 ISIS reasonably believed
prior to making the sale to be sophisticated investors. The shares were
issued in
II-2
reliance on an exemption from registration under Rule 506 of Regulation D
promulgated under the Securities Act of 1933 in a transaction not involving a
public offering. 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 Rule 506 of Regulation D promulgated under 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).
4.4 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).
II-3
4.6* 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* Escrow Agent Agreement with Branch Bank & Trust Company
10.2 Agreement for Services with Crossways Consulting Group, Inc. dated
February 28, 2001. (filed with Registration Statement on Form SB-2 on
March 26, 2001 and incorporated herein by reference).
10.3 Letter Agreement with Brean Murray & Co., Inc. dated March 13, 2001
(filed with Registration Statement on Form SB-2 on March 26, 2001 and
incorporated herein by reference).
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).
10.5 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).
10.6 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).
10.7* Agreement for Services dated July 1, 2001 between ISIS and Gary S.
Murray.
10.8* Consulting Services Agreement dated July 1, 2001 between ISIS and
HumanVision L.L.C.
10.9 Convertible Promissory Note by and between ISIS and HumanVision L.L.C.
(filed with Annual Report on Form 10-KSB on February 20, 2001 and
incorporated herein by reference).
10.10 Stock Pledge Agreement by and between ISIS and HumanVision L.L.C.
(filed with Annual Report on Form 10-KSB on February 20, 2001 and
incorporated herein by reference).
10.11 Guaranty by ISIS in favor of HumanVision L.L.C. (filed with Annual
Report on Form 10-KSB on February 20, 2001 and incorporated herein by
reference).
10.12 Secured Promissory Note issued to BDO Seidman, LLP dated February 15,
2001 (filed with Registration Statement on Form SB-2/A on June 13,
2001 and incorporated herein by reference).
II-4
10.13 Promissory Note issued to Evans, Mechwart, Hambleton & Tilton, Inc.
dated November 7, 2000 (filed with Registration Statement on Form
SB-2/A on June 13, 2001 and incorporated herein by reference).
10.14 Convertible Promissory Note by and between ISIS and HumanVision,
L.L.C. dated May 15, 2001 (filed with Registration Statement on Form
SB-2/A on June 13, 2001 and incorporated herein by reference).
10.15 First Amendment to Promissory Notes by ISIS for the benefit of
HumanVision LLC dated May 21, 2001 (filed with Registration Statement
on Form SB-2/A on June 13, 2001 and incorporated herein by reference).
10.16 Loan Agreement dated May 31, 2001 by and between Branch Banking and
Trust Company, PlanGraphics, Inc., John C. Antenucci and Robin L.
Antenucci (filed with Registration Statement on Form SB-2/A on June
13, 2001 and incorporated herein by reference).
10.17 Security Agreement dated May 31, 2001 by and between Branch Banking
and Trust Company and PlanGraphics, Inc. (filed with Registration
Statement on Form SB-2/A on June 13, 2001 and incorporated herein by
reference).
10.18 Promissory Note by PlanGraphics, Inc. in favor of Branch Banking and
Trust Company dated May 31, 2001 (filed with Registration Statement on
Form SB-2/A on June 13, 2001 and incorporated herein by reference).
10.19 Guaranty Agreement dated May 31, 2001 by John C. Antenucci (filed with
Registration Statement on Form SB-2/A on June 13, 2001 and
incorporated herein by reference).
10.20* Customer Contract with the City of New York
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;
II-5
(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.
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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 August 20, 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 August 20, 2001
- -----------------------------------------
John C. Antenucci Chief Executive Officer
/s/ Fred G. Beisser Vice President - Finance and August 20, 2001
- ----------------------------------------- Administration, Secretary,
Frederick G. Beisser Treasurer and Director (Principal
Financial and Accounting Officer)
/s/ John C. Antenucci, Attorney-in-Fact Chairman and Director August 20, 2001
- -----------------------------------------
Gary S. Murray
/s/ John C. Antenucci, Attorney-in-Fact Director August 20, 2001
- -----------------------------------------
J. Gary Reed
/s/ John C. Antenucci, Attorney-in-Fact Director August 20, 2001
- -----------------------------------------
Ray O'Mara
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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)
3.2 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).
4.3 Specimen Stock Certificate (filed with Registration Statement on Form
S-18, file no. 33-1484 and incorporated herein by reference).
4.4 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).
4.4 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* 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* Escrow Agent Agreement with Branch Bank & Trust Company
10.2 Agreement for Services with Crossways Consulting Group, Inc. dated
February 28, 2001. (filed with Registration Statement on Form SB-2 on
March 26, 2001 and incorporated herein by reference).
10.3 Letter Agreement with Brean Murray & Co., Inc. dated March 13, 2001
(filed with Registration Statement on Form SB-2 on March 26, 2001 and
incorporated herein by reference).
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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).
10.5 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).
10.6 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).
10.7* Agreement for Services dated July 1, 2001 between ISIS and Gary S.
Murray.
10.8* Consulting Services Agreement dated July 1, 2001 between ISIS and
HumanVision L.L.C.
10.9 Convertible Promissory Note by and between ISIS and HumanVision L.L.C.
(filed with Annual Report on Form 10-KSB on February 20, 2001 and
incorporated herein by reference).
10.10 Stock Pledge Agreement by and between ISIS and HumanVision L.L.C.
(filed with Annual Report on Form 10-KSB on February 20, 2001 and
incorporated herein by reference).
10.11 Guaranty by ISIS in favor of HumanVision L.L.C. (filed with Annual
Report on Form 10-KSB on February 20, 2001 and incorporated herein by
reference).
10.12 Secured Promissory Note issued to BDO Seidman, LLP dated February 15,
2001 (filed with Registration Statement on Form SB-2/A on June 13,
2001 and incorporated herein by reference).
10.13 Promissory Note issued to Evans, Mechwart, Hambleton & Tilton, Inc.
dated November 7, 2000 (filed with Registration Statement on Form
SB-2/A on June 13, 2001 and incorporated herein by reference).
10.14 Convertible Promissory Note by and between ISIS and HumanVision,
L.L.C. dated May 15, 2001 (filed with Registration Statement on Form
SB-2/A on June 13, 2001 and incorporated herein by reference).
10.15 First Amendment to Promissory Notes by ISIS for the benefit of
HumanVision LLC dated May 21, 2001 (filed with Registration Statement
on Form SB-2/A on June 13, 2001 and incorporated herein by reference).
10.16 Loan Agreement dated May 31, 2001 by and between Branch Banking and
Trust Company, PlanGraphics, Inc., John C. Antenucci and Robin L.
Antenucci (filed with Registration Statement on Form SB-2/A on June
13, 2001 and incorporated herein by reference).
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10.17 Security Agreement dated May 31, 2001 by and between Branch Banking
and Trust Company and PlanGraphics, Inc. (filed with Registration
Statement on Form SB-2/A on June 13, 2001 and incorporated herein by
reference).
10.18 Promissory Note by PlanGraphics, Inc. in favor of Branch Banking and
Trust Company dated May 31, 2001 (filed with Registration Statement on
Form SB-2/A on June 13, 2001 and incorporated herein by reference).
10.19 Guaranty Agreement dated May 31, 2001 by John C. Antenucci (filed with
Registration Statement on Form SB-2/A on June 13, 2001 and
incorporated herein by reference).
10.20* Customer Contract with the City of New York
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.
II-10
Exhibit 4.6
FORM OF WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
----------------------------------------------------------
No. 1 _________________ Shares
FOR VALUE RECEIVED, Integrated Spatial Information Solutions, Inc. (the
"Company" or "ISIS"), hereby certifies that Brean Murray & Co., Inc., or a
permitted assign thereof, is entitled to purchase from the Company, at any time
or from time to time commencing September 1, 2001, and prior to 5:00 P.M., New
York City time, on August 31, 2006 (_________________________shares) (_________)
fully paid and nonassessable shares of the Common Stock, of the Company for an
aggregate purchase price of _____________________________dollars ($__________),
computed on the basis of US $0.0385per share. (Hereinafter, (i) said Common
Stock, together with any other equity securities which may be issued by the
Company with respect thereto or in substitution therefore, is referred to as the
"Common Stock," (ii) the shares of the Common Stock purchasable hereunder or
under any other Warrant (as hereinafter defined) are referred to as the "Warrant
Shares," (iii) the aggregate purchase price payable hereunder for the Warrant
Shares is referred to as the "Aggregate Warrant Price," (iv) the price payable
hereunder for each of the Warrant Shares is referred to as the "Per Share
Warrant Price," (v) this Warrant, all identical warrants issued on the date
hereof and all warrants hereafter issued in exchange or substitution for this
Warrant or such other warrants are referred to as the "Warrants" and (vi) the
holder of this Warrant is referred to as the "Holder" and the holder of this
Warrant and all other Warrants are referred to as the "Holders"). The Aggregate
Warrant Price is not subject to adjustment. The Per Share Warrant Price is
subject to adjustment as hereinafter provided; in the event of any such
adjustment, the number of Warrant Shares shall be adjusted by dividing the
Aggregate Warrant Price by the Per Share Warrant Price in effect immediately
after such adjustment.
1. Exercise of Warrant
-------------------
a) Exercise for Cash
--------------------
This Warrant may be exercised, in whole at any time or in part from time to
time, commencing September 1, 2001, and prior to 5:00 P.M., New York City
time, on August 31, 2006, by the Holder by the surrender of this Warrant
(with the subscription form at the end hereof duly executed) at the address
set forth in Subsection 9(a) hereof, together with proper payment of the
Aggregate Warrant Price, or the proportionate part thereof if this Warrant
is exercised in part. Payment for Warrant Shares shall be made by certified
or official bank check payable to the order of the Company. If this Warrant
is exercised in part, this Warrant must be exercised for a number of whole
shares of the Common Stock, and the Holder is entitled to receive a new
Warrant Covering the Warrant Shares which have not been exercised and
setting forth the proportionate part of the Aggregate Warrant Price
applicable to such Warrant Shares. Upon such surrender of this Warrant, the
Company will (a) issue a certificate or certificates in the name of the
Holder for the largest number of whole shares of the Common Stock to which
the Holder shall be entitled and, if this Warrant is exercised in whole, in
lieu of any fractional share of the Common Stock to which the Holder shall
be entitled, pay to the Holder cash in an amount equal to the fair value of
such fractional share (determined in such reasonable manner as the Board of
Directors of the Company shall determine), and (b) deliver the other
securities and properties receivable upon the exercise of this Warrant, or
the proportionate part thereof if this Warrant is exercised in part,
pursuant to the provisions of this Warrant.
b) Cashless Exercise
--------------------
In the event that the Common Stock has become publicly traded, then in lieu
of exercising this Warrant in the manner set forth in paragraph 1(a) above,
the Warrant may be exercised by surrender of the Warrant without payment of
any other consideration, commission or remuneration, by execution of the
cashless exercise subscription form (at the end hereof, duly executed). The
number of shares to be issued in exchange for the Warrant will be computed
by subtracting the Per Share Warrant Price from the closing bid price of
the Common Stock on the date of receipt of the cashless exercise
subscription form, multiplying that amount by the number of shares
represented by the Warrant, and dividing by the closing bid price as of the
same date.
c) Vesting
----------
Notwithstanding anything to the contrary set forth in the foregoing, except
with respect to the provisions set forth in Subsections 3 (i) and 3 (j)
below, this Warrant shall become exercisable as herein provided on the
first business day following the occurrence of both the Vesting Events. As
used herein, the term "Vesting Event" shall mean and refer to the
circumstance where (a) the average weighted bid price, ("AWBP"), on a daily
basis, of a share of the Company's Common Stock (the "Stock") on the stock
exchange or market on which the Stock is primarily traded as reported on
Bloomberg (such price being the AWBP), for a consecutive 20 trading
dayperiod shall exceed 150% of the Per Share Warrant Price and (b) the one
year anniversary of the effective date of this Warrant. The Vesting Event
shall be deemed to have occurred upon the close of (a) such a 20 trading
day period as described above and (b) the first trading day after the first
anniversary of this Warrant if the first anniversary does not fall on a
trading day.
2. Reservation of Warrant Shares; Listing
--------------------------------------
The Company agrees that, prior to the expiration of this Warrant, the
Company will at all times (a) have authorized and in reserve, and will keep
available, solely for issuance or delivery upon the exercise of this Warrant,
the shares of the Common Stock and other securities and properties as from time
to time shall be receivable upon the exercise of this Warrant, free and clear of
all restrictions on sale or transfer and free and clear of all pre-emptive
rightsProtection Against Dilution
a) If, at any time or from time to time after the date of this Warrant,
the Company shall issue or distribute to the holders of shares of
Common Stock evidences of its indebtedness, any other securities of
the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or
distribution payable in shares of Common Stock, referred to in
Subsection 3(b), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor if
the full amount thereof, together with the value of other dividends
and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to
not more than 5% of the Company's net worth) (any such nonexcluded
event being herein called a "Special Dividend"), the Per Share Warrant
Price shall be adjusted by multiplying the Per Share Warrant Price
then in effect by a fraction, the numerator of which shall be the then
current market price of the Common Stock (defined as the average for
the thirty consecutive business days immediately prior to the record
date of the daily closing price of the Common Stock as reported by the
NASDAQ system) less the fair market value (as determined by the
Company's Board of Directors) of the evidences of indebtedness,
securities or property, or other assets issued or distributed in such
Special Dividend applicable to one share of Common Stock and the
denominator of which shall be such then current market price per share
of Common Stock. An adjustment made pursuant to this Subsection 3(a)
shall become effective immediately after the record date of any such
Special Dividend.
b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number
of shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its
Common Stock any shares of capital stock of the Company, the Per Share
Warrant Price shall be adjusted so that the Holder of any Warrant upon
the exercise hereof shall be entitled to receive the number of shares
of Common Stock or other capital stock of the Company which he would
have owned immediately prior thereto. An adjustment made pursuant to
this Subsection 3(b) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an
adjustment made pursuant to this Subsection 3(b), the Holder of any
Warrant thereafter surrendered for exercise shall become entitled to
receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be
described in a written notice to the Holder of any Warrant promptly
after such adjustment) shall determine the allocation of the adjusted
Per Share Warrant Price between or among shares of such classes or
capital stock or shares of Common Stock and other capital stock.
c) Except as provided in Subsection 3(e), in case the Company shall
hereafter issue or sell any shares of Common Stock for a consideration
per share less than the Per Share Warrant Price on the date of such
issuance or sale, the Per Share Warrant Price shall be adjusted as of
the date of such issuance or sale so that the same shall equal the
consideration per share received by the Company upon such issuance or
sale.
d) Except as provided in Subsection 3(a) and 3(e), in case the Company
shall hereafter issue or sell any rights, options, warrants or
securities convertible into Common Stock entitling the holders thereof
to purchase Common Stock or to convert such securities into Common
Stock at a price per share (determined by dividing (i) the total
amount, if any, received or receivable by the Company in consideration
of the issuance or sale of such rights, options, warrants or
convertible securities plus the total consideration, if any, payable
to the Company upon exercise or conversion thereof (the "Total
Consideration") by (ii) the number of additional shares of Common
Stock issuable upon exercise or conversion of such securities) less
than the then current Per Share Warrant Price in effect on the date of
such issuance or sale, the Per Share Warrant Price shall be adjusted
as of the date of such issuance or sale so that the same shall equal
the price determined by dividing (i) the sum of (a) the number of
shares of Common Stock outstanding on the date of such issuance or
sale multiplied by the Per Share Warrant Price plus (b) the Total
Consideration by (ii) the number of shares of Common Stock outstanding
on the date of such issuance or sale plus the maximum number of
additional shares of Common Stock issuable upon exercise or conversion
of such securities.
e) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a
merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of
the property of the Company as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities with
another corporation (including any exchange effected in connection
with a merger of a third corporation (including any exchange effected
in connection with a merger of a third corporation into the Company),
the Holder of this Warrant shall have the right thereafter to convert
such Warrant into the kind and amount of
securities, cash or other property which he would have owned or have
been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or
conveyance had this Warrant been converted immediately prior to the
effective date of such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and in
any such case, if necessary, appropriate adjustment shall be made in
the application of the provisions set forth in this Section 3 with
respect to the rights and interests thereafter of the Holder of this
Warrant to the end that the provisions set forth in this Section 3
shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities
or be, in relation to any shares of stock or other securities or
property thereafter deliverable on the conversion of this Warrant. The
above provisions of this Subsection 3(4) shall similarly apply to
successive reorganizations, reclassifications, consolidations,
mergers, statutory exchanges, sales or conveyances. The issuer of any
shares of stock or other securities or property thereafter deliverable
on the conversion of this Warrant shall be responsible for all of the
agreements and obligations of the Company hereunder. Notice of any
such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and of said provisions so
proposed to be made, shall be mailed to the Holders of the Warrants
not less than 30 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration
consisting primarily of securities shall be deemed a consolidation or
merger for the foregoing purposes.
f) Other than the adjustments provided for in Subsections 3(i) and 3(j)
hereof, no adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of at
least $0.05 per share of Common Stock; provided, however, that any
adjustments -------- ------- which by reason of this Subsection 3(f)
are not required to be made shall be carried forward and taken into
account in any subsequent adjustment; provided further, however, that
-------- ------- adjustments shall be required and made in accordance
with the provisions of this Section 3 (other than this Subsection
3(f)) not later than such time as may be required in order to preserve
the tax-free nature of a distribution to the Holder of this Warrant or
Common Stock issueable upon exercise hereof. All calculations under
this Section 3 shall be made to the nearest cent or to the nearest
1/100th of a share, as the case may be. Anything in this Section 3 to
the contrary notwithstanding, the Company shall be entitled to make
such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be
advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its
shareholders shall not be taxable.
g) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of
Warrants in accordance with this Section 3, the Company shall promptly
obtain, at its expense, a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors
(who may be the regular auditors of the Company) setting forth the Per
Share Warrant Price and the number of Warrant Shares after such
adjustment or the effect of such modification, a brief statement of
the facts requiring such adjustment or modification and the manner of
computing the same and cause copies of such certificate to be mailed
to the Holders of the Warrants.
h) If the Board of Directors of the Company shall declare any dividend or
other distribution with respect to the Common Stock, other than a cash
distribution out of earned surplus, the Company shall provide notice
thereof to the Holders of the Warrants not less than 15 days
prior to the record date fixed for determining shareholders entitled
to participate in such dividend or other distribution.
i) In the event of a merger, combination, consolidation or the sale of
substantially all of the assets of the Company, if the average trading
price of the Common Stock on NASDAQ for the 30 trading days
immediately preceding the announcement of that event is less than 120%
of the original Per Share Warrant Price (or any subsequently Adjusted
Per Share Warrant Price), then the Per Share Warrant Price will
automatically be adjusted to a price equal to 80% of that average
trading price.
j) During the last month prior to the expiration of this Warrant, if the
average trading price of the Common Stock on NASDAQ for the 30 trading
days preceding that last month is less than 120% of the original Per
Share Warrant Price (or any subsequently Adjusted Per Share Warrant
Price), then the Per Share Warrant Price will be automatically reduced
to a price equal to 80% of that average trading price.
3. Fully Paid Stock; Taxes
-----------------------
The Company agrees that the shares of the Common Stock represented by each
and every certificate for Warrant Shares delivered on the exercise of this
Warrant shall, at the time of such delivery, be validly issued and outstanding,
fully paid and nonassessable, and not subject to pre-emptive rights, and the
Company will take all such actions as may be necessary to assure that the par
value or stated value, if any, per share of the Common Stock is at all times
equal to or less than the then Per Share Warrant Price. The Company further
covenants and agrees that it will pay, when due and payable, any and all Federal
and state stamp, original issue or similar taxes which may be payable in respect
of the issue of any Warrant Share or certificate therefor.
4. Registration Under Securities Act of 1933
-----------------------------------------
a) The Company agrees that if, at any time and from time to time during
the period commencing on February 1, 2000 and ending on January 30,
2005, the Board of Directors of the Company shall authorize the filing
of a registration statement or a post-effective amendment to a
registration statement (any such registration statement being
hereinafter called a "Subsequent Registration Statement") under the
Act other than a registration statement on Form S-8 or other form
which does not include substantially the same information as would be
required in a form for the general registration of securities) in
connection with the proposed offer of any of its securities by it or
any of its shareholders, the Company will promptly: (I) notify the
Holder and each of the Holders, if any, of other Warrants and/or
Warrant Shares that such Subsequent Registration Statement will be
filed and that the Warrant Shares which are then held, and/or which
may be acquired upon the exercise of the Warrants, by the Holder and
such Holders, will, at the Holder's and such Holders' request, be
included in such Subsequent Registration Statement, (ii) include in
the securities covered by such Subsequent Registration Statement all
Warrant Shares which it has been so requested to include, (iii) use
its best efforts to cause such Subsequent Registration Statement to
become effective as soon as practicable and (iv) take all other action
necessary under any Federal or state law or regulation of any
governmental authority to permit all Warrant Shares which it has been
so requested to include in such Subsequent Registration Statement or
to be sold or otherwise disposed of, and will maintain such compliance
with each such Federal and state law and regulation of any
governmental authority for the period necessary for the Holder and
such Holders to effect the proposed sale or other disposition.
b) Whenever the Company is required pursuant to the provisions of this
Section 5 to include Warrant Shares in a registration statement or a
post-effective amendment to a registration statement, the Company
shall (i) furnish each Holder of any such Warrant Shares and each
underwriter of such Warrant Shares with such copies of the prospectus,
including the preliminary prospectus, conforming to the Act, (and such
other documents as each such Holder or each such underwriter may
reasonably request) in order to facilitate the sale or distribution of
the Warrant Shares, (ii) use its best efforts to register or qualify
such Warrant Shares under the blue sky laws (to the extent applicable)
of such jurisdiction or jurisdictions as the Holders of any such
Warrant Shares and each underwriter of Warrant Shares being sold by
such Holders shall reasonably request and (iii) take such other
actions as may be reasonably necessary or advisable to enable such
Holders and such underwriters to consummate the sale or distribution
in such jurisdiction or jurisdictions in which such Holders shall have
reasonably requested that the Warrant Shares be sold.
c) The Company shall pay all expenses incurred in connection with any
registration or other action pursuant to the provisions of this
Section 5, other than underwriting discounts and applicable transfer
taxes relating to the Warrant Shares.
d) The Company will indemnify the Holders of Warrant Shares which are
included in each Subsequent Registration Statement substantially to
the same extent as the Company has indemnified the underwriters (the
"Underwriters") of its public offering of Common Stock pursuant to the
Underwriting Agreement and such Holders will indemnify the Company
(and the underwriters, if applicable) with respect to information
furnished by them in writing to the Company for inclusion therein
substantially to the same extent as the Underwriters have indemnified
the Company.
5. Limited Transferability
-----------------------
This Warrant may not be sold, transferred, assigned or hypothecated by the
Holder until the first anniversary hereof except (a) to any successor firm or
corporation of Brean Murray & Co., Inc., (b) to any of the officers, managing
directors, any associates of Brean Murray & Co., Inc., to a finder that has been
recognized by both parties or of any such successor firm or (c) in the case of
an individual, pursuant to such individual's last will and testament or the laws
of descent and distribution, and is so transferable only upon the books of the
Company which it shall cause to be maintained for the purpose. The Company may
treat the registered Holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit any
Holder of a Warrant or his duly authorized attorney, upon written request during
ordinary business hours, to inspect and copy or make extracts from its books
showing the registered holders of Warrants. All warrants issued upon the
transfer or assignment of this Warrant will be dated the same date as this
Warrant, and all rights of the Holder thereof shall be identical to those of the
Holder.
6. Loss, etc., of Warrant
----------------------
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to the Company, if lost, stolen or destroyed, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver to the Holder a new Warrant of like date, tenor and denomination.
7. Warrant Holder Not Shareholders
-------------------------------
Except as otherwise provided herein, this Warrant does not confer upon the
Holder any right to vote or to consent to or receive notice as a shareholder of
the Company, as such, in respect of any matters whatsoever, or any other rights
or liabilities as a shareholder, prior to the exercise hereof.
8. Communication
-------------
No notice or other communication under this Warrant shall be effective
unless, but any notice or other communication shall be effective and shall be
deemed to have been given if, the same is in writing and is mailed by
first-class mail, postage prepaid, addressed to:
a) the Company at 112 East Main Street, Frankfort, KY 40601, or such
other address as the Company has designated in writing to the Holder.
b) The Holder at 570 Lexington Avenue, 12th Floor, New York, NY 10022, or
such other address as the Holder has designated in writing to the
Company.
9. Headings
--------
The headings of this Warrant have been inserted as a matter of convenience
and shall not affect the construction hereof.
10. Applicable Law
--------------
This Warrant shall be governed by and construed in accordance with the law
of the State of New York without giving effect to the principles of conflicts of
law thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its President & Chief Executive Officer and its corporate seal to be hereunto
affixed by its Secretary this ___day of _________, 2001.
Integrated Spatial Information Solutions, Inc.
By:_______________________________
John C. Antenucci
President & CEO
ATTEST:
Secretary
[Corporate Seal]
SUBSCRIPTION
The undersigned, _________________, pursuant to the provisions of the foregoing
Warrant, hereby agrees to subscribe for and purchase _______________ shares of
the Common Stock of _________. Common stock covered by said Warrant, and makes
payment therefor in full at the price per share provided by said Warrant.
Dated: Signature:
-----------------------
Address:
ASSIGNMENT
----------
FOR VALUE RECEIVED____________________ hereby sells, assigns and transfers unto
__________________the foregoing Warrant and all rights evidenced thereby, and
does irrevocably constitute and appoint , attorney, to transfer said Warrant on
the books of ________.
Dated: Signature:
-----------------------
Address:
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED_________________________ hereby assigns and transfers unto
_________________________the right to purchase ________________ shares of the
Common Stock of ISIS, by the foregoing Warrant, and a proportionate part of said
Warrant and the rights evidenced hereby, and does irrevocably constitute and
appoint , attorney, to transfer that part of said Warrant on the books of
____________.
Dated: Signature:
-----------------------
Address:
CASHLESS EXERCISE SUBSCRIPTION
The undersigned, ______________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe to that number of shares of Common
Stock of _____________ as are issuable in accordance with the formula set forth
in paragraph 1(b) of the Warrant, and makes payment therefore in full by
surrender and delivery of this Warrant.
Dated: Signature:
-----------------------
Address:
Exhibit 10.1
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into as of August 14, 2001,
by and among Integrated Spatial Information Solutions, Inc., a Colorado
corporation (the "Company") and Branch Banking & Trust Company (the "Escrow
Agent").
1. The Company has agreed to place in escrow, with the Escrow Agent,
the proceeds received by the Company from the offering of rights to purchase
shares of its common stock to its existing shareholders (the "Rights Offering"),
to be held in escrow and delivered in accordance with the instructions herein.
The Proceeds, together with any interest or earnings thereon, shall be deposited
into an FDIC insured account or a money-market fund with the Escrow Agent and
disbursed as set forth in this Escrow Agreement.
2. The Company agrees to deliver to the Escrow Agent, as soon as
practicable after the Company's receipt, the following: (a) any and all proceeds
(the "Proceeds") received from investors participating in the Rights Offering
(the "Investors") and (b) copies of the subscription agreements received from
the Investors or similar documentation containing sufficient information,
including but not limited to the names, addresses and subscription amounts, for
each individual Investor. The Escrow Agent will not individually allocate the
Proceeds by shareholder. Individual records will not be established for each
shareholder from the information supplied unless the Proceeds are to be returned
to the Investors as described in Section 3(b) below.
3. Until _______, 2001, unless extended in accordance with Section 4
below (the "Expiration Date"), the Escrow Agent shall hold the Proceeds and
deliver them, together with any interest or earnings thereon (together, the
"Deposit"), pursuant to the following instructions:
a. If, on or before the Expiration Date, the aggregate amount
of the Proceeds held by the Escrow Agent exceeds $600,000, the Escrow Agent
shall, upon written instruction signed by the Company, deliver the Deposit to
the Company.
b. If, on the Expiration Date, the aggregate amount of the
Proceeds held by the Escrow Agent does not exceed $600,000, the Escrow Agent
shall provide written notice to the Company that it is returning the Proceeds to
the Investors and shall give the Company 5 business days to respond with
different instructions. In the event the Company does not provide contrary
instructions within 5 business days, the Escrow Agent shall return the Proceeds
to the Investors to the addresses and in the amounts specified in the
subscription agreements held by the Escrow Agent. Any interest or earnings
accrued and payable on the Proceeds shall be delivered to the Company.
4. If the Company extends the Expiration Date of the Rights Offering in
accordance with the provisions of the prospectus issued to the Investors, a copy
of which is attached hereto as Exhibit A (the "Prospectus"), the Company shall
provide the Escrow Agent written notice of the revised expiration date. The
revised expiration date shall govern the instructions set forth in Section 3
above.
5. Upon delivery of the Deposit to the Company or the Investors, this
Escrow Agreement shall be terminated and the Escrow Agent shall be released and
discharged from all further obligations hereunder.
6. The Escrow Agent shall not be responsible for the performance of any
agreement between the parties hereto except for those agreements and duties that
are explicitly set forth herein. It is
understood and agreed that the duties of the Escrow Agent hereunder are purely
ministerial in nature and that it shall not be liable for any error of judgment
regarding fact or law, or for any act done or omitted to be done, except for its
own negligence or willful misconduct. The Escrow Agent's determination as to
whether an event or condition has occurred, or been met or satisfied, or as to
whether a provision of this Escrow Agreement has been complied with, or as to
whether sufficient evidence of the event or condition or compliance with the
provision has been furnished to it, shall not subject it to any claim,
liability, or obligation whatsoever, even if it shall be found that such
determination was improper or incorrect, provided only that the Escrow Agent
shall not have been guilty of gross negligence or willful misconduct in making
such determination. The Escrow Agent shall not be obligated to take any legal or
other action hereunder that might in its judgment involve expense or liability
unless it shall have been furnished with indemnity acceptable to it. In
addition, the Escrow Agent may consult counsel satisfactory to it, and the
advice or opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered, or omitted by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
7. The Escrow Agent shall not be responsible for the genuineness,
accuracy, or validity of any document or item deposited with it or any notice or
instruction given to it, and it is fully protected in acting in accordance with
any written instruction or instrument given to it hereunder and reasonably
believed by it to have been signed by the proper parties. Each party hereto
represents and warrants that this Escrow Agreement has been duly and validly
authorized, executed, and delivered by such party and constitutes a valid and
binding obligation of such party, enforceable against such party in accordance
with its terms.
8. If at any time the Escrow Agent shall receive conflicting notices,
claims, demands, or instructions with respect to the Proceeds, or if for any
other reason it shall be unable in good faith to determine the party or parties
entitled to receive any part of the Proceeds, the Escrow Agent may refuse to
make any delivery and retain the Proceeds in its possession until the Escrow
Agent shall have received instructions in writing signed by Company, or until
directed by a final, non-appealable order of a court, whereupon the Escrow Agent
shall make such disposition in accordance with such joint instructions or order.
9. (a) Neither the Escrow Agent nor any of its directors, officers, or
employees shall be liable to anyone for any action taken or omitted to be taken
by it or any of its directors, officers, or employees hereunder except in the
case of negligence, bad faith, or willful misconduct. The Company covenants and
agrees to indemnify the Escrow Agent and hold it harmless without limitation
from and against any loss, liability, or expense of any nature incurred by the
Escrow Agent arising out of or in connection with this Escrow Agreement or with
the administration of its duties hereunder, including, but not limited to, legal
fees and expenses and other costs and expenses of defending or preparing to
defend against any claim of liability in the premises, unless such loss,
liability, or expense shall be caused by the Escrow Agent's negligence, bad
faith or willful misconduct. In no event shall the Escrow Agent be liable for
indirect, punitive, special, or consequential damages.
(b) The Company agrees to assume any and all obligations
imposed now or hereafter by any applicable tax law with respect to the payment
of funds or other property under this Escrow Agreement, and to indemnify and
hold the Escrow Agent harmless from and against any taxes, additions for late
payment, interest, penalties, and other expenses, that may be assessed against
the Escrow Agent on any such payment or other activities under this Escrow
Agreement. The Company undertakes to instruct the Escrow Agent in writing with
respect to the Escrow Agent's responsibility, if any, for withholding and other
taxes, assessments, or other governmental charges, certifications, and
governmental reporting in connection with its acting as the Escrow Agent under
this Escrow Agreement. The Company agrees to indemnify and hold the Escrow Agent
harmless from any liability on account of
taxes, assessments, or other governmental charges, including without limitation
the withholding or deduction or the failure to withhold or deduct same, and any
liability for failure to obtain proper certifications or to properly report to
governmental authorities, to which the Escrow Agent may be or become subject in
connection with or which arises out of this Escrow Agreement, including costs,
expenses (including reasonable legal fees and expenses), interest, and
penalties.
10. The Escrow Agent may resign at any time upon giving the
parties hereto ten days' prior written notice to that effect. In such event, the
successor escrow agent shall be such person, firm, or corporation as shall be
selected by Company. It is understood and agreed that such resignation shall not
be effective until a successor agrees to act as escrow agent hereunder;
provided, however, if no successor is appointed and acting hereunder within ten
days after such notice is given, the Escrow Agent may pay and deliver the
Proceeds into any court of competent jurisdiction and may apply to any court of
competent jurisdiction for the appointment of a successor escrow agent. The
provisions of Section 12 hereof shall survive the resignation or removal of the
Escrow Agent or the termination of this Escrow Agreement.
11. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when personally delivered,
two days after deposit in the mail if mailed by certified mail, return receipt
requested, or when received if delivered via Federal Express or similar
overnight courier service, or by facsimile. Such notices or other communications
shall be sent to the following addresses, unless other addresses are
subsequently specified in writing:
If to Company:
Integrated Spatial Information Solutions, Inc.
c/o PlanGraphics, Inc.
112 East Main Street
Frankfurt, KY 40601
Attn: John C. Antenucci, President
Telephone No.: (502) 223-1501
Facsimile No.: (502) 226-2758
If to the Escrow Agent:
Branch Banking & Trust Company
Corporate Trust Department
223 West Nash Street
Wilson, NC 27893
Attn: Margaret Smith, CCTS
Telephone No.: (252) 246-4968
Facsimile No.: (252) 246-3403
12. The Company agrees to pay the Escrow Agent's reasonable
compensation for its normal services hereunder in accordance with Exhibit B
attached hereto, which may be subject to change on an annual basis. The Escrow
Agent shall be entitled to reimbursement on demand for all expenses incurred in
connection with the administration of the escrow created hereby which are in
excess of its compensation for normal services hereunder, including without
limitation, payment of any legal fees and expenses incurred by the Escrow Agent
in connection with the resolution of any claim by any party hereunder.
13. The Company hereby absolutely and irrevocably consents and
submits to the jurisdiction of the courts of the State of Maryland, and of any
federal court located in the State of Maryland having jurisdiction over such
matters, in connection with any actions or proceedings brought against the
Company by the Escrow Agent arising out of or relating to this Escrow Agreement.
In any such action or proceeding, the Company hereby absolutely and irrevocably
waives personal service of any summons, complaint, declaration, or other process
and hereby absolutely and irrevocably agrees that service thereof may be made by
certified or registered first class mail directed to the Company at its
respective address in accordance with Section 11 hereof.
14. The Escrow Agent shall not be responsible for delays or
failures in performance resulting from acts beyond its control. Such acts shall
include but not be limited to acts of God, strikes, lockouts, riots, acts of
war, epidemics, governmental regulations superimposed after the fact, fire,
communication line failures, computer viruses, power failures, earthquakes or
other disasters.
15. This Escrow Agreement and all documents relating thereto,
including, without limitation, (a) consents, waivers, and modifications which
may hereafter be executed, and (b) certificates and other information previously
or hereafter furnished may be reproduced by any photographic, photostatic,
microfilm, optical disk, micro-card, miniature photographic, or other similar
process. The parties hereto agree that any such reproduction shall be admissible
in evidence as the original itself in any judicial or administrative proceeding,
whether or not the original is in existence and whether or not such reproduction
was made by a party in the regular course of business, and that any enlargement,
facsimile, or further reproduction shall likewise to be admissible in evidence.
16. This Escrow Agreement constitutes the entire agreement among the
parties with respect to the subject matter hereof. This Escrow Agreement may not
be amended, supplemented, or discharged, and no provision hereof may be modified
or waived except by an instrument in writing signed by all of the parties
hereto. No waiver of any provision hereof by any party shall be deemed a
continuing waiver of any matter by such party.
17. This Escrow Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland.
18. This Escrow Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Executed counterparts transmitted by fax shall be
effective as originals.
[The remainder of this page is left intentionally blank.]
IN WITNESS WHEREOF, the undersigned have executed this Escrow Agreement
as of the date first set forth above, to be effective as set forth in Section 1
hereof.
ESCROW AGENT:
Branch Banking & Trust Company
By: /s/ Margaret H. Smith
----------------------------
Name: Margaret H. Smith
Title: Vice President
COMPANY:
Integrated Spatial Information Solutions, Inc.
By: /s/ John C. Antenucci
---------------------------
Name: John C. Antenucci
Title: President
EXHIBIT B TO ESCROW AGREEMENT
BB&T Bank : Trust Department
Escrow Agent Fee Schedule
BB&T serves as Escrow Agent, and will invest account assets as specified in the
Escrow Agreement, provide physical custody of assets and documents and will
maintain account records as agreed upon.
Annual Base Fee of $2,500.00 plus, any transaction or document file charges as
follows:
o Document Files /Invoice Processing $75.00 each
o Investment - Security Trade $20.00 each
o Wire Transfers $20.00 each
o Securities Annual Maintenance fee
( Stocks, Bonds, etc.) $20.00 each
o Check Charges and/or Mailings, $15.00 each*
*Postage to be billed to client at cost
Miscellaneous
1. Annual Base Fee is applicable for each annual period or portion
thereof.
2. The ( first) Annual base Fee is due upon acceptance of account.
------------------------------
3. Document File, Wire Transfer, and Securities fees will be billed
monthly.
4. Fees not paid within 30 days will be deducted from account assets.
5. Courier and other delivery charges will be to the account. Routine
mail charges are not billed.
6. Where extraordinary services are required or requested an additional
charge may result based on the time expended, expenses incurred and
the responsibility involved
Accepted By ________________________ Date ________________________
Exhibit 10.7
AGREEMENT FOR SERVICES
This agreement ("Agreement") is made effective July 1, 2001, between
Integrated Spatial Information Solutions, Inc., a Colorado corporation (the
"Company") and Gary S. Murray (the "Executive").
In consideration of the mutual benefits and obligations in this Agreement,
and intending to be legally bound, the Company and Executive agree as follows:
1. OFFICE AND DUTIES
a. Executive shall be retained as the Chairman of the Board of
Directors of the Company. The Executive shall have the duties specified in the
Bylaws of the Company, and such other duties as may be assigned by the Board of
Directors from time to time.
b. Executive agrees to devote as much of his time and effort as
reasonably necessary to the performance of the duties of the office. Executive
may have interests in other business that do not compete with the Company or its
subsidiaries, and may render services for such other business interests,
provided such service does not prevent Executive from performing his duties
under this Agreement.
c. The Company agrees to nominate Executive for election as a member
of the Board of Directors at each meeting of stockholders for the election of
Directors during his employment as Chairman.
2. TERM OF SERVICES
The term of services as Chairman of the Board of Directors shall begin
July 1, 2001and end upon the earlier of (a) June 30, 2003, and (b) the date upon
which he is not elected as a Director or is removed as a Director.
3. COMPENSATION
The Company shall compensate Executive for services as Chairman as
follows:
a. Base Compensation. The annual base compensation payable to
Executive upon commencement of this Agreement shall be:
(1) $50,000, payable in equal monthly installments in shares of
the Company's common stock. The common stock shall be priced at
$.11 per share, which is the five day average immediately prior
to the date of this Agreement; and
(2) Options to purchase 175,000 shares per annum of the Company's
common stock. The Options will be issued under the Company's
Equity Compensation Plan, vested in quarterly installments,
exercisable for 3 years from the date of this Agreement at the
price of $.11 per share.
b. Registration. The Company agrees to file a registration
statement with the Securities and Exchange Commission as soon as practicable to
register the public sale of the common stock underlying the stock options
granted under this Agreement.
c. Reimbursement. The Company shall reimburse Executive for all
reasonable out of pocket expenses incurred by Executive in connection with
performance of his duties upon submission of vouchers, subject to such
guidelines and policies as may be promulgated by the Company.
4. TRADE SECRETS AND CONFIDENTIAL INFORMATION
a. As a material inducement to the Company to enter into this Agreement
and to pay Executive the compensation stated in this Agreement, Executive
covenants and agrees that Executive shall not, at any time, directly or
indirectly, use, disseminate, or disclose for any purposes other than for the
purposes of the Company's business, any of the Company's confidential
information or trade secrets, unless such disclosure is compelled in a judicial
proceeding. Upon termination of this employment, all documents, records,
notebooks, and similar repositories of records containing information relating
to any trade secrets or confidential information then in the Executive's
possession or control, whether prepared by him or by others, shall be left with
the Company or returned to the Company upon its request. This section shall not
restrict the Executive from using his General Knowledge (the ideas, concepts,
know-how and other industry information that is part of his common knowledge)
from pursuit of livelihood subsequent to any termination of this Agreement.
b. During the term of this Agreement and for a period of one (1) year
following the termination of the Agreement, the Executive shall not pursue
business opportunities with or serve as a Consultant or member of the staff in
any capacity to any other companies with whom the Company has had a primary or
subcontractor role during the prior year of employment, without the prior
written permission of the Company. For one year following termination of
employment, the Executive confirms that he will not, without prior written
consent, perform work that the Company or any of its subsidiaries holds in
backlog or is pursing at the time of termination, whether by independent
contract, through a competitor, or by direct employment with client or prospect.
c. This covenant of non-disclosure has been negotiated and agreed to by
and between the Company and Executive with the full knowledge of and pursuant to
the Colorado Trade Secrets Act and is deemed by both parties to be fair and
reasonable.
5. INDEMNIFICATION
So long as Executive is not found by a court of law to be guilty of a
willful and material breach of this Agreement, or to be guilty of gross
misconduct, he shall be indemnified from and against any and all losses,
liability, claims and expenses, damages, or causes of action, proceeding or
investigations, or threats thereof (including reasonable attorney fees and
expenses of counsel satisfactory to and approved by Executive) incurred by
Executive, arising out of, in connection with, or based upon Executive's
services and the performance of his duties pursuant to this Employment
Agreement, or any other matter contemplated by this Employment Agreement,
whether or not resulting in any such liability subject to such limitations as
are provided by the Colorado Business Corporations Act; and Executive shall be
reimbursed by the Company as an when incurred for any reasonable legal and other
damage, liability, action proceeding, investigation or threat thereof, or
producing evidence, producing documents or taking any other action in respect
thereto (whether or not Executive is a defendant in or target of such action,
proceeding or investigation), subject to such limitations as are provided by the
Colorado Business Corporations Act.
6. OTHER MATTERS
a. Successors. The rights and duties of a party hereunder shall not be
assignable by that party; provided, however, that this Agreement shall be
binding upon and inure to the benefit of any successor of the Company, and any
such successor shall be deemed substituted for the Company under the terms of
this Agreement. The term successor shall include any person, firm, corporation
or other business entity which at any time, by merger, purchase or otherwise,
acquires all or substantially all of the assets or business of the Company.
Executive may assign Options issuable under paragraph 3a(2) to an entity of
which the Executive owns more than 50% of the voting power ("Permitted
Transferee"), provided that any options assigned by the Executive shall be void
if the Executive ceases to own more than 50% of the voting power of the entity
holding such options. A Permitted Transferee may transfer such Options to the
Executive at any time prior to the expiration of the Options.
b. Entire Agreement. With respect to the matters specified herein, this
Agreement contains the entire agreement between the parties and supersedes all
prior oral and written agreements, understandings and commitments between the
parties. This Agreement shall not affect the provisions of any other
compensation, retirement or other benefits program of the Company to which
Executive is a party or of which he is a beneficiary. No amendments to this
Agreement may be made except through a written document signed by both parties.
c. Validity. In the event that any provision of this Agreement
is held to be invalid, void or unenforceable, the same shall not affect, in any
respect whatsoever, the validity of any other provision of the Agreement.
d. Paragraphs and Headings. Paragraphs and other headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
e. Notice. Any notice or demand required or permitted to be
given under this Agreement shall be made in writing and shall be deemed
effective upon the personal delivery thereof is delivered or, if by express
delivery service, 24 hours after placing in the control of the express delivery
service; or if mailed, 48 hours after having been deposited in the United States
mail, postage prepaid, and addressed to the respective party as follows:
To the Company: Integrated Spatial Information Solutions, Inc.
Attention: President
112 East Main Street, Frankfort, KY 40601-2314
To the Executive: Garry S. Murray
Suite 8181 Professional Place, Landover, MD. 20785
Either party may change the address to which such notices are to be
addressed by giving the other party notice in the manner set forth in this
Agreement.
f. Attorney's Fees and Costs.In any action at law or in equity to
enforce any of the provisions or rights under this Agreement, the unsuccessful
party to such litigation, as determined by the Court in a final judgment or
decree, shall pay the successful party or parties all costs, expenses and
reasonable attorneys' fees incurred therein by such parry or parties (including
without limitation such costs, expenses and fees on any appeals), and if such
successful party or parties shall recover judgment in any such action or
proceeding, such costs, expenses and attorneys' fees shall be included a part of
such judgment. Notwithstanding the foregoing provision, in no event shall the
successful party or parties be
entitled to recover any amount from the unsuccessful party for costs, expenses
and attorneys' fees that exceed the unsuccessful party's costs, expenses and
attorneys' fees in connection with the action or proceeding.
g. Applicable Law and Dispute Resolution. To the full extent
controllable by stipulation of the parties, this Agreement shall be interpreted
under Colorado law. All disputes arising out of this Agreement will be settled
by binding arbitration in Denver, Colorado, under the rules of the American
Arbitration Association.
Integrated Spatial Information Solutions, Inc.
- ----------------------------- ---------------------------------
By: John Antenucci, President By: Gary S. Murray
Exhibit 10.8
CONSULTING SERVICES AGREEMENT
This consulting services agreement ("Agreement") is made effective July
1, 2001between Integrated Spatial Information Solutions, Inc., a Colorado
corporation (the "Company") and HumanVision, LLC, a Maryland limited liability
company (the "Consultant").
WHEREAS, the Company seeks to increase shareholder value through growth
in revenues and earnings, and
WHEREAS, the Company desires to utilize the experience and services of
the Consultant to achieve its goals because the Consultant, through its
principal executive officer, has experience in developing and implementing
actions to increase shareholder value,
THEREFORE, In consideration of the mutual benefits and obligations in
this Agreement, and intending to be legally bound, the Company and Consultant
agree as follows:
1. RETENTION OF CONSULTANT
-----------------------
a. The Company retains the Consultant to provide the services specified
in this Agreement, and agrees to pay the Consultant the compensation specified
in this Agreement for such services. The Consultant agrees to assign Gary S.
Murray ("Murray"), its principal executive officer, to undertake all of the
requested services.
b. Consultant agrees to direct and permit Murray to devote as much of
his time and effort as reasonably necessary to the performance of the duties
required by this Agreement. Consultant may have interests in other business that
do not compete with the Company or its subsidiaries, and may render services for
such other business interests, provided such service does not prevent Consultant
from performing his duties under this Agreement.
2. CONSULTING PERIOD
-----------------
a. The term of this Agreement shall begin July 1, 2001 and end upon the
earlier of: (1) June 30, 2003; (2) the date upon which Murray is not elected as
a Director or is removed as a Director of the Company; and (3) the date upon
which Murray does not own more than 50% of the voting power of the Consultant.
b. In recognition of the fact that the results of Consultant's efforts
may not be manifested until after the services are rendered, the right to
compensation specified in paragraph 4a shall expire on the earlier of (1) June
30, 2004, and (2) 12 months after the termination of this Agreement.
3. DUTIES OF CONSULTANT
--------------------
a. Consultant shall provide the following professional services to the
Company:
(1) Assist the Company in defining and articulating a vision for
the Company within a three year time horizon;
(2) Assist the Company in identifying and reviewing prospective
merger and acquisition candidate firms;
(3) Participate in the due diligence review of prospective merger
and acquisition candidate firms;
(4) Participate in the negotiation of agreements with prospective
merger and acquisition candidate firms and the
owners/shareholders;
(5) Assist the Company in obtaining capital (debt and/or equity)
to finance merger and acquisition activity;
(6) Assist the Company in recruiting and evaluating candidates
for senior executive and director positions; and
(7) Such other matters as may be assigned by the Board of
Directors and accepted by the Consultant from time to time.
b. Consultant shall deliver reports to the Company's Board of
Directors, from time to time and as requested, and keep the Board
advised of the services and activities performed by the Consultant
under this Agreement.
4. COMPENSATION
------------
The Company shall compensate Consultant for services under this Agreement as
follows:
a. Performance Option. In order to promote goals that may increase
shareholder value, the Consultant shall be eligible to receive
Performance Options as follows:
(1) The Consultant is granted options to purchase 322,581 shares
of the Company's common stock at $.11 per share (which is the per
share market price on the date of this Agreement); provided such
options are only exercisable if the Company's market
capitalization exceeds $30 million on 20 of 30 consecutive
business days at any time prior to June 30, 2002;
(2) In addition to the Options in paragraph 4a(1), the Consultant
is granted options to purchase 322,581 shares of the Company's
common stock at $.11 per share; provided such options are only
exercisable if the Company's market capitalization exceeds $60
million on 20 of 30 consecutive business days at any time prior
to June 30, 2002;
(3) Each Performance Option shall be issued within 30 days
following the date the respective performance goal is achieved,
and shall be exercisable for a period of 3 years from the date of
issue;
(4) For purposes of this Agreement, market capitalization on any
given day shall be equal to the number of common shares issued
and outstanding times the average of the per share closing bid
and ask prices for the common stock as reported on the primary
market where the common stock is traded; and
(5) The Company agrees to file a registration statement with the
Securities and Exchange Commission, as soon as practicable after
the options become exercisable, to register the public sale of
the common stock underlying the Performance Options granted under
this Agreement.
b. Success Fee. In the event the Company successfully completes any
merger with or into another entity (other than an existing subsidiary of
the Company), or any acquisition of stock or assets (other than in the
ordinary course of business and other than with an existing subsidiary of
the Company) during the term of this Agreement, the Company will pay the
Consultant a success fee equal to
one and one-half percent (1.5%) of the transaction value. The success fee
shall be paid in the currency of the deal unless otherwise agreed. For
example, if the Company issues securities in the transaction, the success
fee will be paid to Consultant by the issue of the corresponding amount of
such securities. The transaction value shall be the cost of the transaction
as reflected on the financial records of the Company, or the total dollar
value received by all shareholders of the Company in the case of a merger
into another entity.
c. Reimbursement. The Company shall reimburse Consultant for all
reasonable out of pocket expenses incurred by Consultant in connection with
performance of the assigned duties upon submission of vouchers, subject to
such guidelines and policies as may be promulgated by the Company.
5. TRADE SECRETS AND CONFIDENTIAL INFORMATION
------------------------------------------
a. As a material inducement to the Company to enter into this
Agreement and to pay Consultant the compensation stated in this Agreement,
Consultant covenants and agrees that: (1) Consultant shall hold any of the
Company's confidential information or trade secrets in a confidential
manner; and (2) Consultant shall not, at any time, directly or indirectly,
use, disseminate, or disclose for any purposes other than for the purposes
of the Company's business, any of the Company's confidential information or
trade secrets, unless such disclosure is compelled in a judicial
proceeding. Upon termination of this Agreement, all documents, records,
notebooks, and similar repositories of records containing information
relating to any trade secrets or confidential information then in the
Consultant's possession or control, whether prepared by it or by others,
shall be left with the Company or returned to the Company upon its request.
This section shall not restrict the Consultant from using its General
Knowledge (the ideas, concepts, know-how and other industry information
that is part of its common knowledge) from pursuit of business subsequent
to any termination of this Agreement.
b. For one year following termination of employment, the Consultant
confirms that it will not, without prior written consent, perform work that
the Company or any of its subsidiaries holds in backlog or is pursing at
the time of termination, whether by independent contract, through a
competitor, or by direct employment with client or prospect.
c. This covenant of non-disclosure has been negotiated and agreed to
by and between the Company and Consultant with the full knowledge of and
pursuant to the Colorado Trade Secrets Act and is deemed by both parties to
be fair and reasonable.
6. INDEMNIFICATION
---------------
So long as Consultant is not found by a court of law to be guilty of a
willful and material breach of this Agreement, or to be guilty of gross
misconduct, it shall be indemnified from and against any and all losses,
liability, claims and expenses, damages, or causes of action, proceeding or
investigations, or threats thereof (including reasonable attorney fees and
expenses of counsel satisfactory to and approved by Consultant) incurred by
Consultant, arising out of, in connection with, or based upon Consultant's
services and the performance of its duties pursuant to this Agreement, or any
other matter contemplated by this Agreement, whether or not resulting in any
such liability, subject to such limitations as are provided by the Colorado
Business Corporations Act. Consultant shall be reimbursed by the Company as an
when incurred for any reasonable legal and other damage, liability, action
proceeding, investigation or threat thereof, or producing evidence, producing
documents or taking any other action in respect thereto (whether or not
Consultant is a defendant in or target of such action, proceeding or
investigation), subject to such limitations as are provided by the Colorado
Business Corporations Act.
7. OTHER MATTERS
-------------
a. Successors. The rights and duties of a party hereunder shall not be
assignable by that party; provided, however, that this Agreement shall be
binding upon and inure to the benefit of any successor of the Company, and
any such successor shall be deemed substituted for the Company under the
terms of this Agreement. The term successor shall include any person, firm,
corporation or other business entity which at any time, by merger, purchase
or otherwise, acquires all or substantially all of the assets or business
of the Company.
b. Entire Agreement. With respect to the matters specified herein,
this Agreement contains the entire agreement between the parties and
supersedes all prior oral and written agreements, understandings and
commitments between the parties. No amendments to this Agreement may be
made except through a written document signed by both parties.
c. Validity. In the event that any provision of this Agreement is held
to be invalid, void or unenforceable, the same shall not affect, in any
respect whatsoever, the validity of any other provision of the Agreement.
d. Paragraphs and Headings. Paragraphs and other headings contained in
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
e. Notice. Any notice or demand required or permitted to be given
under this Agreement shall be made in writing and shall be deemed effective
upon the personal delivery thereof is delivered or, if by express delivery
service, 24 hours after placing in the control of the express delivery
service; or if mailed, 48 hours after having been deposited in the United
States mail, postage prepaid, and addressed to the respective party as
follows:
To the Company: Integrated Spatial Information Solutions, Inc.
Attention: President
112 East Main Street, Frankfort, KY 40601-2314
To the Consultant: HumanVision, LLC.
Attention: Garry S. Murray
Suite 200. 8181 Professional Place
Landover, MD 20785
Either party may change the address to which such notices are to be
addressed by giving the other party notice in the manner set forth in this
Agreement.
f. Attorney's Fees and Costs.In any action at law or in equity to
enforce any of the provisions or rights under this Agreement, the
unsuccessful party to such litigation, as determined by the Court in a
final judgment or decree, shall pay the successful party or parties all
costs, expenses and reasonable attorneys' fees incurred therein by such
parry or parties (including without limitation such costs, expenses and
fees on any appeals), and if such successful party or parties shall recover
judgment in any such action or proceeding, such costs, expenses and
attorneys' fees shall be included a part of such judgment. Notwithstanding
the foregoing provision, in no event shall the successful party or parties
be entitled to recover any amount from the unsuccessful party for costs,
expenses and attorneys' fees that exceed the unsuccessful party's costs,
expenses and attorneys' fees in connection with the action or proceeding.
g. Applicable Law and Dispute Resolution. To the full extent
controllable by stipulation of the parties, this Agreement shall be
interpreted under Colorado law, without application of choice of law
principles. All disputes arising out of this Agreement will be settled by
binding arbitration in Denver, Colorado, under the rules of the American
Arbitration Association.
Integrated Spatial Information Solutions, Inc. HumanVision, LLC
- -------------------------------------- ------------------------------
By: John Antenucci, President By: Gary S. Murray, President
Exhibit 10.20
[STATE OF NEW YORK LETTERHEAD]
June 9, 1999
Mr. Richard R. Goodden
PlanGraphics, Inc.
1300 Spring Street
Suite #306
Silver Spring, MD 20910
Dear Ms. [sic] Goodden:
Congratulations! I am pleased to inform you that your bid in response
to RFP# S960275 has been approved by the New York State Office of the State
Comptroller (OSC) for an award of a Back-Drop Contract, Contract Number CMS782A.
Your firm is now eligible to provide Computer related services to New York State
agencies, political subdivisions, and others authorized by law to utilize these
contracts in the following Categories of Expertise and Types of Services:
Category of Expertise Type of Services
--------------------- ----------------
Application Development-MR, PC Consulting and Systems Integration
System Management-MR, PC Consulting and Systems Integration
Business Process Analysis/Re-engineering Consulting
Computer Aided Design & Drafting Consulting
Data Conversion Consulting
Geographic Information Systems Consulting and Systems Integration
Technology Procurement (Marketwatching) Consulting
Workflow Management Services Consulting
Please note that in Section D Back-Drop Contract: General Terms and
Conditions, the order of precedence in paragraph 33.0 should be
(A) Appendix A
(B) RFP
(C) Appendix B
(D) All other Appendices. The order of precedence is now consistent
with Appendix B. OGS apologizes for the error in the original RFP.
I have also included:
o A copy of the Signature and Notary pages signifying the official award
o A copy of the Policy & Procedures Manual for your reference
o Two surveys which we would appreciate your completing and returning as
soon as possible
o A copy of a presentation we gave at the Government Technology
Conference (GTC) on September 15, 1998. It provides an overview of the
OGS Back-Drop Contracts. o Instructions to browse the OGS PSG Internet
site
If there are any questions, please feel free to contact me at 518-473-8079
or by e-mail at sylvia.casper@ogs.state.ny.us. We look forward to a positive
working relationship with PlanGraphics Inc. Thank you.
Sincerely,
/s/ Sylvia Casper
- -----------------
Sylvia Casper
OGS Contract Administration
enclosures
- --------------------------------------------------------------------------------
NEW YORK STATE COMPTROLLER'S CONTRACT #CMS 782A
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Vendor hereby submits these three (3) copies of
its Bid Proposal, this 6th day of May ,19 99 , in response to OGS Request for
Proposals Number S960275, issued on May 1, 1997, which solicits vendors of
information technology consulting, systems integration, and/or training services
on behalf of the State of New York. In submitting its Bid Proposal, Vendor
understands that it will be evaluated for award of a contract upon approval of
the New York State Comptroller, at which time this Bid Proposal and the terms
and conditions of Request for Proposals Number S960275 shall collectively
constitute the Vendor's Back-Drop Contract Agreement with the State of New York.
The parties therefore execute this Signature Page as evidence of that intent and
agreement to the terms contained herein, which agreement will bear New York
Comptroller's Contract Number CMS 782A upon OSC approval. This contract will be
deemed executed as of the day and year indicated below for approval by the New
York State Comptroller, which date also constitutes the starting date of the
contract term. The parties further hereby certify that, where vendor is asked to
execute three (3) original copies of this signature page along with complete
original copies of its Bid Proposal, the approved signature page(s) will be
affixed by the State, upon final approval by the NYS Comptroller, to additional
copies of this contract which conform exactly to the complete original copy
approved simultaneously herewith.
VENDOR/CONTRACTOR THE PEOPLE OF THE STATE OF NEW YORK
By: /s/ J. Gary Reed By: /s/ Suzanne C. Nelson
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Name: J. Gary Reed OGS Procurement Services Group
Title: Senior Vice President
Vendor Firm Name: PlanGraphics, Inc.
Federal Tax Identification #: 61-0954403
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APPROVED AS TO FORM APPROVED
DENNIS C. VACCO H. CARL MCCALL
New York State Attorney General New York State Comptroller
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CORPORATE ACKNOWLEDGMENT
STATE OF Kentucky )
) SS.:
COUNTY OF Franklin )
On the 6th day of May in the year 1999 before me personally came J.
Gary Reed, to me known, who, being by me duly sworn did depose and say that he
is resident of Lexington, Kentucky; that he is the Senior Vice President of
PlanGraphics, Inc., the corporation described in and which executed the above
instrument; and that he signed his/her name thereto by order of the Board of
Directors of said corporation.
/s/ Brenda J. Pelfrey
Notary Public
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- --------------------------------------------------------------------------------
PARTNERSHIP ACKNOWLEDGMENT
STATE OF )
) SS.:
COUNTY OF )
On this ___ day of _____________ in the year 19__ before me personally
came _____________________, to me known and known to me to be the person who
executed the above instrument, who, being duly sworn by me, did for
himself/herself depose and say that ____ he is a member of the firm of
________________________ consisting of himself/herself and
____________________________, and that ____ he executed the foregoing instrument
in the firm name of _____________________, and that ___ he had authority to sign
same, and ___ he did duly acknowledge to me that ___ he executed the same as the
act and deed of said firm of __________________________ for uses and purposes
mentioned therein.
Notary Public
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INDIVIDUAL ACKNOWLEDGEMENT
STATE OF )
) SS.:
COUNTY OF )
On the ___ day of ____________ in the year 19__ before me personally
came ______________________, presently residing in the county of
______________________, to me known to be the same person described in and who
executed the within instrument and he/she duly acknowledged to me that he/she
executed the same.
Notary Public
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Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Integrated Spatial Information Solutions, Inc.
Frankfort, Kentucky
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated February 12, 2001, relating to the
consolidated financial statements of Integrated Spatial Information Solutions,
Inc, which is contained in that Prospectus and appearing in the Company's Annual
Report on Form 10-K for the year ended September 30, 2000. Our report contains
an explanatory paragraph regarding the Company's ability to continue as a going
concern.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
BDO SEIDMAN, LLP
Denver, Colorado
August 20, 2001