<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB-A1
First Amended Registration Statement on Form 10-SB-A1
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
COMPUTER AUTOMATION SYSTEMS, INC.
---------------------------------
(Name of Small Business Issuer as specified in its charter)
NEVADA 75-2749166
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(State or other jurisdiction of (I.R.S. incorporation or
organization) Employer I.D. No.)
1825 East Plano Parkway, Suite #200
Plano, TX 75074
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(Address of Principal Executive Office)
Issuer's Telephone Number, including Area Code: (972) 578-3128
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
$0.001 par value common stock
-----------------------------
Title of Class
DOCUMENTS INCORPORATED BY REFERENCE: None.
<PAGE>
PART I
Item 1. Description of Business.
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Business Development.
- ---------------------
Computer Automation Systems, Inc. ("CASI" or the "Company") was
organized under the laws of the State of Utah on July 16, 1981, under the name
"Intercontinental Strategic Minerals, Inc." The Company was formed to acquire
and invest in mining properties. The endeavors were unsuccessful, and the
Company ceased operations in 1983.
The Company was dormant until it changed its domicile to the State
of Nevada by merging with a newly formed Nevada subsidiary under the same
name, "Intercontinental Strategic Minerals, Inc.," in March, 1998. In
connection with this change of domicile, the Company effected a one for 20
reverse split of its outstanding securities, while retaining the authorized
capital and par value, with appropriate adjustments to the capital accounts of
the Company. This reverse split is reflected in all computations below,
unless indicated otherwise.
On July 24, 1998, the Articles of Incorporation were amended to
change the name of the Company to "Computer Automation Systems, Inc."
Effective July 28, 1998, the Company acquired all of the outstanding
common stock of Computer Automation Systems, Inc., a Texas corporation ("CASI
Texas"), pursuant to an Agreement and Plan of Reorganization (the "CASI Texas
Plan")in exchange for 6,400,000 shares of $0.001 par value "restricted
securities" (common stock)of the Company. This transaction may be described as
a reverse purchase acquisition. Michael E. Cherry, the Company's President
and one of its directors, was the principal stockholder and the President of
CASI Texas, owning approximately 67% of the outstanding pre-CASI Texas Plan
securities, and received 4,256,000 shares of the "restricted securities"
issued under the CASI Texas Plan. Mr. Cherry currently owns approximately 51%
of the Company's outstanding voting securities. Sylvia McCollum and Sandra
Cobb were the other two stockholders of CASI Texas, and each received 912,000
shares of the "restricted securities" issued under the CASI Texas Plan; each
presently owns approximately 11% of the Company's outstanding voting
securities. In addition, James T. Williams, James Twedt and Frank Neukomm
each received 106,667 "unregistered" and "restricted" shares of the Company's
common stock in consideration of services rendered to CASI Texas prior to and
during the acquisition process. Messrs. Williams and Twedt are former
directors and executive officers of the Company and Mr. Neukomm has been a
director since October 22, 1999. See Part I, Item 4.
CASI Texas was incorporated under the laws of the State of Texas on
February 13, 1998, for the purpose of designing and manufacturing custom rack
mount and industrial computer applications for the telecommunications and
other high technology industries. "Rack mount" literally means installation
or mounting in a rack or metal frame of standard dimension numerous pieces of
diverse equipment which are interconnected to make a systems perform any
variety of functions. The Company succeeded to these business operations,
which are described in detail under the heading "Business" of this Item, Part
I, Item 1.
Copies of the initial Articles of Incorporation of the Company filed
in the State of Utah; the Articles of Incorporation of the Nevada subsidiary
into which the Company merged to change its domicile to Nevada; the Articles
of Merger respecting the change of domicile; the Articles of Amendment to
change the name of the Company to "Computer Automated Systems, Inc."; the
Bylaws of the Company; and the CASI Texas Plan were attached as exhibits to
the Company's Registration Statement on Form 10-SB, filed with the Securities
and Exchange Commission on September 22, 1999, and are incorporated herein by
reference. See Part III, Item 1.
This Registration Statement is being filed on a voluntary basis in
an attempt to maintain the Company's quotations on the OTC Bulletin Board of
the National Association of Securities Dealers, Inc. (the "NASD"). See the
heading "Effects of Existing or Probable Governmental Regulations," Part I,
Item 1.
Business.
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General
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The Company designs and manufactures custom rack mount and
industrial computer applications for the telecommunications and other
industries. The Company has in-house engineering to provide quick, customized
and innovative responses to customer specifications and requirements.
CASI is first provided with a set of requirements for a custom
application by a customer. Its engineering staff then completes a design
specification which includes hardware configuration and software control
programming. In some cases, prototypes are assembled for customer approval.
Once customer approval is received, the design specifications and bill of
materials, together with a purchase order, are delivered to Control
Manufacturing Co., Inc.("Control Manufacturing"), a custom assembly and
manufacturing facility co-located with the Company at its Plano, Texas,
facilities; these facilities are leased from Control Manufacturing.
Control Manufacturing sources the materials, assembles the hardware
and delivers the product to CASI for software installation and testing prior
to delivery to the customer. Control Manufacturing bills CASI for its
services when the hardware is complete; the cost of the materials is borne by
Control Manufacturing until the product is delivered and billed to the
customer.
The principals of Control Manufacturing, Sylvia McCollum and Sandra
Cobb, are also principal stockholders of the Company and were former
stockholders of CASI Texas, and Ms. McCollum has been a director of the
Company since October 22, 1999; however, the Company believes the cost of
services performed by Control Manufacturing is equal to or less than could be
obtained from other sources. Reference to this arrangement can also be found
in the audited financial statements of the Company for the years ended
December 31, 1998 and 1997, specifically, in Notes 4 and 7. Information
regarding the share holdings of Ms. McCollum and Ms. Cobb can be found in Part
1, Item 4.
The Company specializes in the development of National Equipment
Building Standards("NEBS") certified, Sun microprocessor based, fault tolerant
systems for the telecommunications industry. NEBS is a set of
telecommunication industry standards to guide manufacturers of equipment
designed for use in telephone applications.
CASI offers a full line of rack mountable chassis and systems with
embedded Intel PC's. The Company also offers a line of ruggedized or notebook
computers manufactured for operation under harsh environmental conditions for
industrial, military and hazardous environment applications. The full line of
CASI's standard and customizable products may be viewed at www.casi1.com
("casi" followed by the numeral "1"), and include various sized rack mount
chassis, disk expansion chassis, integral monitor chassis, wall mount
enclosures, industrial table top enclosures, large and small industrial
towers, rack mount keyboards, monitor/keyboard/mouse switches, modular and
expansion rack cabinets and rack mount monitors. See the heading "Principal
Products and Services" of this Item, Part I, Item 1.
The Company also owns the manufacturing, design and intellectual
property rights to the "Naked Mini Computer" product line originally
manufactured by Computer Automation, Inc. Revenues from the Naked Mini
Computer are less than one percent of the Company's gross revenues. These
computers are durable, reliable and fault tolerant or capable of continuous
function through extreme conditions like electrical spikes (i.e., temporary
delivery of alternating current above 120 volts) and software "glitches."
They have the ability to "reboot" without interruption in functions, which is
very important in the processing industry, but operate with a proprietary
software architecture. Today, CASI is a source for repair and upgrades of the
installed base of Naked Mini Computer systems, which still number in the
thousands worldwide. It also owns and designs other intellectual property
related to the Naked Mini Computers. Michael E. Cherry was formerly employed
by Computer Automation, Inc., a now defunct entity which manufactured these
computers.
Systems Integration
-------------------
The Company is also a systems integrator specializing in creating
custom process control systems for unique customer applications. A systems
integrator is one who takes components from multiple, unrelated suppliers and
assembles (i.e., integrates) them into a new system that performs a function
or functions not possible from any individual component. CASI is currently
providing a database management system for Alcatel Network Systems, Inc.
("Alcatel") which interfaces with a network switch controller to change switch
functions, alter switch activities and report on the functioning and
environment of the switch system. A "switch" is a telephone or Internet
(voice or data or both) device which is central to the delivery of a call or
data packet by routing them from point of origin to point of termination; this
is "switching." All telecommunications traffic is routed through one or more
switches. Alcatel makes switch controllers which it sells to AT&T. CASI makes
a database management system for Alcatel which is the interface with the
switch controller. The system which CASI created for Alcatel is embedded in
systems being installed by AT&T.
CASI is a true integrator in that it will design hardware, software,
components, enclosures and even colors to match a customer's specifications.
There is a trend by large manufacturers to out source system engineering and
assembly. CASI is actively targeting the outsourcing market. For companies
wishing to out source, CASI takes total responsibility for systems, providing
"one stop shop" convenience. The system engineering and software design are
created by CASI to customer specifications. Manufacturing and assembly of
diverse parts from multiple suppliers are delivered as one piece in a custom
enclosure, with CASI providing the technical specification documents and
warranty. CASI also takes responsibility to inform its clients on
obsolescence, appropriate upgrades and trends which might effect the client's
custom application, and thereby it can effectively be the engineering
department for the customer.
CASI intends to retain the services of one or more manufacturers
representatives on an interim basis to penetrate the outsourcing market while
it develops an in house direct sales force.
Any type of process control from automobile manufacturing to
agricultural processing is a potential user of a CASI designed system, but
because of the relative ease and minimal capital cost of addressing the
telecommunications market, this is market where CASI is concentrating its
efforts this year. Among companies to which CASI is promoting its services are
Telefon L.M.Ericsson, A.B., a Swedish telecommunications equipment
manufacturer ("Ericsson"); Intervoice, a telecommunications equipment
manufacturer; and Texas Instruments. Sun microprocessors are primarily
utilized in this line of business.
E-Commerce
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The Company is in the process of upgrading its web site,
www.casil.com, to provide for interactive e-commerce. A comprehensive, new
product line will be showcased and customers will be able to configure systems
and order online. The upgrade of the content and design of the web site was
completed in early October, 1999. To support the web e-commerce activity, the
Company will be hiring an inside sales and customer service person to provide
quick responses to inquiries for quotations and questions about CASI's
capabilities. The base product line to be available on the web site is an
inexpensive, rack mount computer line designed to sell for approximately
$1,500 or less and address customer "bread and butter applications. While the
Company has an appropriate mark up on these items, the primary benefit that
CASI will enjoy from this product line is the establishment of relationships
with new customers. CASI intends to assign an engineer/account manager to new
accounts to develop opportunities for custom development and CASI's value
added services.
Starting in November of 1999, CASI will be advertising in the
Thomas Register. The Thomas Register is a comprehensive catalog resource of
electronic manufacturers and suppliers. CASI will have a banner advertisement
on each page of the industrial computer section directing interested parties
to its web site. CASI will also be listed in its source book.
Risk Factors.
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In any business venture, there are substantial risks specific to the
particular enterprise which cannot be ascertained in total until the business
is underway. However, at a minimum, the Company's present and proposed
business operations will be highly speculative and be subject to the same
types of risks inherent in any new or unproven venture, and will include those
types of risk factors outlined below.
Limited Assets; No Immediate Source of Revenue.
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The Company's revenues may be insufficient to fund expansion of its
business operations; the Company can provide no assurance that its business
prospects will produce material revenues adequate for the Company to continue
its present or proposed operations; or that its current and intended business
operations will be profitable. See the heading "Plan of Operation"of the
caption "Management's Discussions and Analysis or Plan of Operation," Part I,
Item 2.
Limited Funds Available for Operating Expenses.
-----------------------------------------------
The Company currently has limited operating capital or cash
resources. Substantial funding necessary to meet the Company's anticipated
expansion may be needed, though during the next 12 months the Company
anticipates financing its current operations from present revenues and cash
flow. The Company's ability to raise debt or equity funding from
non-affiliated sources will be severely limited by reason of its lack of
historical operations, limited assets and the limited public market for its
common stock. See the heading "Plan of Operation" of the caption "Management's
Discussion and Analysis or Plan of Operation," Part I, Item 2, regarding the
Company's current and intended operations; and the caption "Market Price of
and Dividends on the Company's Common Equity and Other Stockholder Matters,"
Part II, Item 1, respecting the limited market for the Company's common stock.
No "Established Trading Market" for Common Stock.
-------------------------------------------------
The Company's common stock was quote on the OTC Bulletin Board of
the NASD until approximately October 7, 1999. The shares are currently quoted
on the "Pink Sheets" of the National Quotation Bureau, LLC. There is
currently no "established trading market" for its common stock and there can
be no assurance that any such market will ever develop or be maintained.
The Company's removal from the OTC Bulletin Board has impeded the
development of an "established trading market" in its common stock because the
"Pink Sheets" market is not as accepted by most brokers/dealers in securities
as the OTC Bulletin Board, and a broker/dealer must subscribe to this service
to use it. As a result, sales of such stock will be more difficult and
expensive.
Upon the effectiveness of this Registration Statement and the
clearance of all Securities and Exchange Commission comments, the Company
will, as soon as practicable, file for quotations on the OTC Bulletin Board.
However, no assurance can be given that the NASD will allow the quotations of
the Company's common stock to be reinstated on the OTC Bulletin Board.
Stock Market Volatility.
------------------------
Any market price for shares of common stock of the Company is likely
to be very volatile, and numerous factors beyond the control of the Company
may have a significant adverse effect. In addition, the stock markets
generally have experienced, and continue to experience, extreme price and
volume fluctuations which have affected the market price of many small capital
companies and which have often been unrelated to the operating performance of
these companies. These broad market fluctuations, as well as general economic
and political conditions, may adversely affect the market price of the
Company's common stock in any market that may develop. See the caption
"Market for Common Equity and Related Stockholder Matters," Part II, Item 1.
Sales of "restricted securities" under Rule 144 may also have an adverse
effect on any market that may develop in the Company's common stock. See the
caption "Recent Sales of Unregistered Securities," Part II, Item 4, for
information respecting the number of shares which may be available for sale
under Rule 144 by present stockholders of the Company.
Competition.
------------
The Company expects competition to persist, intensify and increase
in the future. Present competition includes almost every firm which designs
and manufactures custom computer applications, and the industry is growing
every day. Systems integration and e-commerce will result in even greater
competition.
Almost all of the Company's current and potential competitors have
longer operating histories, larger installed customer bases, longer
relationships with clients and significantly greater financial, technical,
marketing and public relation resources than the Company and could decide at
any time to increase their resource commitments to the Company's target
market. Competition from these competitors could materially adversely affect
the Company's business, results of operations, financial condition and
prospects.
In addition, the Company's ability to generate clients will depend
to a significant degree on the quality of its products and services and its
reputation among its clients and potential clients, compared with the quality
of its services provided by, and the reputations of, the Company's
competitors. To the extent the Company loses clients to its competitors
because of dissatisfaction with the Company's services or its reputation is
adversely affected for any other reason, the Company's business, result of
operations, financial condition and prospects could be materially adversely
affected.
Low Barriers to Entry.
----------------------
There are relatively low barriers to entry into the Company's
business. Because firms such as the Company rely on the skill of their
personnel and the quality of their client service, they have no patented
technology that would preclude or inhibit competitors from entering their
markets. The Company is likely to face additional competition from new
entrants into the market in the future. There can be no assurance that
existing or future competitors will not develop or offer services that provide
significant performance, price, creative or other advantages over those
offered by the Company, which could have a material adverse effect on its
business, financial condition, results of operations and prospects.
Rapid Technology Change.
------------------------
The market for computer products and services is characterized by
rapid technological change, changes in user and client requirements and
preferences, frequent new product and service introductions embodying new
processes and technologies and evolving industry standards and practices that
could render the Company's intended service practices and methodologies
obsolete. Failure to keep pace with these changes could result in the loss of
customers or the inability to attract and retain customers, either of which
developments could have a material adverse effect on the Company's business,
financial condition, results of operations and prospects.
Potential Liability to Clients.
-------------------------------
Many of the Company's intended operations involve the development,
implementation and maintenance of applications that are critical to the
operations of their clients' businesses. Our failure or inability to meet a
client's expectations in the performance of our products or services could
injure the Company's business reputation or result in a claim for substantial
damages, regardless of its responsibility for such failure. In addition, the
Company possesses technologies and content that may include confidential or
proprietary client information. Although the Company will implement policies
to prevent such client information from being disclosed to unauthorized
parties or used inappropriately, any such unauthorized disclosure or use could
result in a claim for substantial damages.
The Company will attempt to limit contractually its damages arising
from negligent acts, errors, mistakes or omissions in rendering professional
services; however, there can be no assurance that any contractual protections
will be enforceable in all instances or would otherwise protect the Company
from liability for damages. The successful assertion of one or more large
claims against the Company that are uninsured, exceed available insurance
coverage, if any, or result in changes to any insurance policies the Company
may obtain, including premium increases or the imposition of a large
deductible or co-insurance requirements, could adversely affect the Company's
business, results of operations and financial condition.
Future Capital Needs; Uncertainty of Additional Financing.
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The Company currently does have the available cash resources and
credit facilities sufficient to meet its presently anticipated working capital
and capital expenditure requirements for this year. However, the Company's
future liquidity and capital requirements will depend upon numerous factors,
including the success of its product and service offerings and competing
technological and market developments. The Company will be required to raise
additional funds through public or private financing, strategic relationships
or other arrangements, particularly as its acquisition strategy matures. There
can be no assurance that such additional funding, if needed, will be available
on terms acceptable to the Company, or at all. Furthermore, any additional
equity financing may be dilutive to stockholders, and debt financing, if
available, may involve restrictive covenants, which may limit the Company's
operating flexibility with respect to certain business matters. Strategic
arrangements, if necessary to raise additional funds, may require the Company
to relinquish its rights to certain of its products or selected business
opportunities.
If adequate funds are not available on acceptable terms, the Company
may be unable to develop or enhance its services and products, take advantage
of future opportunities or respond to competitive pressures, any of which
could have a material adverse effect on its business, financial condition,
results of operations and prospects.
Government Regulation and Legal Uncertainties.
----------------------------------------------
The Company is not currently subject to direct governmental
regulation, other than the securities laws and the regulations thereunder
applicable to all publicly owned companies, and laws and regulations
applicable to businesses generally, and there are currently few laws or
regulations directly applicable to access to or commerce on the Internet.
However, due to the increasing popularity and use of the Internet, it is
likely that a number of laws and regulations may be adopted at the local,
state, national and international levels with respect to the Internet covering
issues such as user privacy, freedom of expression, pricing of products and
services, taxation, advertising, intellectual property rights, information
security or the convergence of traditional communication services with
Internet communications. The adoption of any such laws or regulations may
decrease growth of the Internet, which could in turn decrease the demand for
the Company's products or services or increase the cost of doing business or
in some other manner have a material adverse effect on the Company's business,
financial conditions, results of operations or prospects.
Further, the applicability to the Internet of existing laws
governing issues such as property ownership, copyrights and other intellectual
property issues, taxation, libel and personal property is uncertain. The vast
majority of such laws were adopted prior to the advent of the Internet and
related technologies and, as a result, do not contemplate or address the
unique issues of the Internet and related technologies. Changes to such laws
intended to address these issues, including some recently proposed changes,
could create uncertainty in the marketplace which could reduce demand for the
Company's products or services or increase the cost of doing business as a
result of litigation expenses or increased service delivery costs, or could in
some other manner have a material adverse effect on the Company's business,
financial condition, results of operations and prospects.
Year 2000
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Nearly all primary computer products and components utilized by the
Company are purchased from Sun or Intel. The Company has sent "Year 2000"
compliance questionnaires to these suppliers and to its other suppliers, such
as sheet metal and circuitboard manufacturers and disk drive and power supply
manufacturers and has received confirmation from all that their products are
Year 2000 compliant. In addition, the Company has conducted tests on its
internal personal computers and has determined that all of its computer
systems and applications are Year 2000 compliant.
The Company can give no assurance that third parties with whom it
does business, such as banks and utilities, will ensure Year 2000 compliance
in a timely manner or that, if they do not, their computer systems will not
have an adverse effect on the Company. However, the Company does not believe
that Year 2000 compliance issues of such third parties will result in a
material adverse effect on its financial condition or results of operations.
Status of any Publicly Announced New Product or Service.
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New Products
------------
"U" or "Unit," is an industry standard measurement of the vertical
space in a rack, equaling 1 3/4 inches. A rack mountable PC 1 3/4 inches high
is said to be "1U." Space in racks is at a premium, and smaller is more
desirable than larger.
CASI is designing a "1UPC" chassis which will provide an inexpensive
gateway for Internet service providers ("ISP"). CASI's research has
determined that it can deliver more features in a smaller space (1U) than any
currently available product being delivered for this purpose. CASI
anticipates delivery of this product by the fall of 1999. Currently, AT&T and
Ericsson are requesting to be Beta test sites for this product.
Web Sales
---------
The upgrade of CASI's web site, www.casi1.com, will consist of two
stages. The first stage consisted of a complete listing of product offerings
for commercial and telecommunications applications, and was completed in
October, 1999. Stage two will follow with the implementation of interactive
e-commerce features which will automate sales inquiries, system
configurations, quotations and order placement. The Company is presently
working on stage two.
Principal Products and Services.
- --------------------------------
For a discussion of the Company's principal products and services,
see the heading "General" of Part I, Item 1 of this Registration Statement.
Distribution Methods of the Products or Services.
- -------------------------------------------------
Presently, the Company contacts potential customers directly,
attends trade shows and utilizes customer referrals.
The Company is in the process of upgrading its web site,
www.casil.com to provide for interactive e-commerce. A comprehensive, new
product line will be showcased and customers will be able to configure systems
and order online. To support the web e-commerce activity, the Company will be
hiring an inside sales and customer service person to provide quick responses
to inquiries for quotations and questions about CASI's capabilities. CASI also
intends to assign an engineer/account manager to new accounts to develop
opportunities for custom development and CASI's value added services to its
web site.
Starting in November of 1999, CASI will be advertising in the Thomas
Register. The Thomas Register is a comprehensive catalog resource of
electronic manufacturers and suppliers. CASI will have a banner advertisement
on each page of the industrial computer section directing interested parties
to its web site. CASI will also be listed in its source book.
With respect to its Systems Integration, CASI intends to retain the
services of one or more manufacturers representatives on an interim basis to
penetrate the outsourcing market while it develops an in house direct sales
force.
Competitive Business Conditions.
- --------------------------------
There are numerous manufacturers and vendors of industrial rack mount
computers, but the Company manufactures custom applications for customers
specific needs. See the heading "Risk Factors" of the heading "Business,"
Part I, Item 1, specifically, the risk factor "Competition; Low Barriers to
Entry."
Sources and Availability of Raw Materials and Names of Principal
Suppliers.
- ----------
There is ample supply of all products, components and related
materials necessary for the conduct of the Company's present and proposed
business operations, and no shortfalls of supplies are anticipated which would
have any adverse effect on the present or intended business operations of the
Company. Most products and components are purchased directly from Sun or
Intel or their distributors.
Dependence on One or a Few Major Customers.
- -------------------------------------------
The Company's largest single account is Alcatel, a subsidiary of a
diversified French telecommunications manufacturer, Alcatel, S.A. CASI is
currently providing a database management system for Alcatel which interfaces
with a network switch controller to change switch functions, alter switch
activities and report on the functioning and environment of the switch system.
A "switch" is a telephone or Internet (voice or data or both) device
which is central to the delivery of a call or data packet by routing them from
point of origin to point of termination; this is "switching." All
telecommunications traffic is routed through one or more switches. Alcatel
makes switch controllers and CASI makes a database management system for
Alcatel which is the interface with the switch controller.
The Company and Alcatel have entered into a Purchase Agreement,
dated July 1, 1999, which provides for the Company to supply Alcatel's
manufacturing requirements with respect to its database management system.
Alcatel places orders under the Purchase Agreement based on its projected
needs. The Purchase Agreement runs through December 31, 2002.
Alcatel has represented approximately 90% of CASI's 1999 revenues,
and it anticipates a projects increase of approximately 25% from current
levels over the next 12 months. This is based on a manufacturing forecast
delivered to the Company by Alcatel. This forecast is Alcatel's method of
keeping its suppliers prepared for Alcatel's requirements. The Company
generated approximately $619,000 or 67% of its revenues from business done
with Alcatel during the year ended December 31, 1998.
The loss of revenues associated with the services provided to
Alcatel would have a substantial adverse effect on the Company and its present
and future prospects.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements or Labor Contracts.
- ------------------------------
The Company owns the intellectual property rights to the "Naked Mini
Computer," which are of an undetermined value and duration, because the
Company does not know how many of these computers are still in existence, nor
how long they will continue in existence. The Company has valued these
intellectual property rights at $0 due to their age and the Company's lack of
a cost basis in them. For a discussion of the Naked Mini Computer, see the
heading "General" under the caption "Business" of this Registration Statement.
Need for any Governmental Approval of Principal Products or
Services.
- ---------
None presently; however, see the heading "Risk Factors" of the
heading "Business," Part I, Item 1, specifically, the risk factor "Government
Regulation and Legal Uncertainties."
Effect of Existing or Probable Governmental Regulations on
Business.
- ---------
The integrated disclosure system for small business issuers
adopted by the Securities and Exchange Commission in Release No. 34-30968 and
effective as of August 13, 1992, substantially modified the information and
financial requirements of a "Small Business Issuer," defined to be an issuer
that has revenues of less than $25 million; is a U.S. or Canadian issuer; is
not an investment company; and if a majority-owned subsidiary, the parent is
also a small business issuer; provided, however, an entity is not a small
business issuer if it has a public float (the aggregate market value of the
issuer's outstanding securities held by non-affiliates) of $25 million or
more.
The Securities and Exchange Commission, state securities commissions
and the North American Securities Administrators Association, Inc. ("NASAA")
have expressed an interest in adopting policies that will streamline the
registration process and make it easier for a small business issuer to have
access to the public capital markets.
Also, see the heading "Risk Factors" of the heading "Business," Part
I, Item 1, specifically, the risk factor "Government Regulation and Legal
Uncertainties."
Research and Development.
- -------------------------
The Company expended $214,945 during the year ended December 31,
1998, on research and development. The majority of these funds were expended
for the system currently being sold to Alcatel, or software development to
drive this system.
Cost and Effects of Compliance with Environmental Laws.
- -------------------------------------------------------
None; not applicable.
Number of Employees.
- --------------------
The Company has four employees.
Item 2. Management's Discussion and Analysis or Plan of Operation.
- --------------------------------------------------------------------
Plan of Operation.
- ------------------
The Company intends to concentrate on satisfying the demands of its
major customer, Alcatel, during the next 12 months. Once the details of
systems assembly, delivery and installation are at acceptable levels, the
Company will expand both its product line and customer base for similar and
ancillary applications.
The Company anticipates increased revenues for the next 12 months
from four areas: growth in sales to existing customers; new product
introductions; sales over the Internet; and from its upgraded web site and
advertising in the Thomas Register. Each of these items is discussed in more
detail below.
Research , development and design costs of the product currently
being delivered to Alcatel have been fully amortized, and CASI expects a
better gross profit margin on this account going forward than it has
experienced in the past. See the heading "Dependence on One or a Few Major
Customers" of Part I, Item 1 of this Registration Statement.
CASI is designing a "1UPC" chassis which will provide an inexpensive
gateway for Internet service providers ("ISP"). CASI's research has
determined that it can deliver more features in a smaller space (1U) than any
currently available product being delivered for this purpose. This is based
on the Company's review of product specifications of competitive products.
CASI anticipates delivery of this product by the fall of 1999. Currently,
AT&T and Ericsson are requesting to be Beta test sites for this product.
The upgrade of CASI's web site, www.casi1.com, will be completed in
September-October, 1999. The first stage will consist of a complete listing
of product offerings for commercial and telecommunications applications.
Stage two will follow with the implementation of interactive e-commerce
features which will automate sales inquiries, system configurations,
quotations and order placement.
Starting in November of 1999, CASI will be advertising in the Thomas
Register. The Thomas Register is a comprehensive catalog resource of
electronic manufacturers and suppliers. CASI will have a banner advertisement
on each page of the industrial computer section directing interested parties
to its web site. CASI will also be listed in its source book
CASI expects revenues to increase from a variety of market actions
with current customers, from new product introductions to e-commerce to
advertising. The new product research and development costs have been paid
from current cash flow and charged as an expense against current income;
accordingly, CASI anticipates generating solid profits from its ongoing
activities.
The Company has no major purchases planned for the next 12 months,
but it does expect to increase its personnel levels in engineering, sales and
sales support and administration. Cash provided from operations is believed
to be sufficient to fund these increases.
The Company has outstanding warrants with an exercise price of
$750,000 which may provide the Company with additional working capital, but
these warrants are presently "out of the market." See the heading "Warrants"
of the caption "Description of Securities," Part 1, Item 8.
Further, manufacturing costs of components are borne by the
Company's subcontractors until products are delivered to CASI for testing and
delivery to customers; as a result, any increased sales volume does not result
in a corresponding increase in working capital.
Results of Operations.
- ---------------------
The Company had revenues of $922,708 during the year ended December
31, 1998; there were no operations in fiscal 1997, and CASI Texas, which was
organized on February 13, 1998, was acquired by the Company on July 28, 1998.
67%, or $619,000 of these revenues were attributable to operations with
Alcatel. The Company experienced a gross profit of $271,078 on these
revenues, before deduction of general and administrative expenses of $268,656.
Principal general and administrative expenses included payroll expenses
($106,901.83); contracted services ($84,711.22); and advertising ($15,115).
The Company experienced a net loss of ($146,389) or $0.03 per share.
During the six months ended June 30, 1999, revenues were $1,168,103,
resulting in a gross profit of $513,613, before deduction of general and
administrative expenses of $320,787. Principal general and administrative
expenses during this period were payroll expenses ($132,425.26) and contract
services ($70,644.03). This resulted in a net income of $129,193 or $0.02 per
share.
During the six months ended June 30, 1998, revenues were $60,432,
resulting in gross profit of $37,152 before deduction of general and
administrative expenses of $64,311. Contracted services of $57,763.07 were
the majority of these expenses. During the six months ended June 30, 1998,
the Company incurred a net loss of ($27,159).
Liquidity.
- ---------
As of June 30, 1999, the Company had cash assets of $93,866,
compared with $16,079 at December 31, 1998. During the first six months of
fiscal 1999, the Company raised $215,000 from the sale of Units consisting of
common stock and warrants pursuant to Regulation D, Rule 504 of the Securities
and Exchange Commission. See the caption "Recent Sales of Unregistered
Securities," Part II, Item 4.
During the calendar year ended December 31, 1998, the Company had a
net increase in cash in the amount of $16,079. This resulted principally from
sales of common stock for $101,000 cash and a $41,130 loan from a stockholder.
During the six months ended June 30, 1999, the Company had a net increase in
cash of $77,787, which resulted principally from sales of securities totaling
$214,466.
Management does not believe that SFAS No's 131 and 133 regarding
segment reporting and derivatives, respectively, will have any impact on the
Company's financial condition and operations.
Item 3. Description of Property.
- ---------------------------------
The Company leases 2,000 square feet of office and light industrial
space at 1825 East Plano Parkway, Suite #200, Plano, TX 75074, on a month to
month basis, at a monthly rent of $1,505; total rent for these facilities in
1998 was $6,020, which was accrued at December 31, 1998, and paid in May,
1999. These facilities are leased from Control Manufacturing, the owners of
which are stockholders of the Company; however, management believes the lease
terms for these facilities are fair and reasonable, and are at rates
comparable to similar facilities in the areas where the Company conducts its
business operations. Messrs. McCollum and Cobb are the "affiliated"
stockholders who own Control Manufacturing; see Part I, Item 4, for
information concerning their stock ownership in the Company.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
- ------------------------------------------------------------------------
Security Ownership of Certain Beneficial Owners.
- ------------------------------------------------
The following table sets forth the share holdings of those persons
who own more than five percent of the Company's common stock as of the date of
this Registration Statement, assuming 8,333,334 shares are outstanding:
<TABLE>
<CAPTION>
Number of Shares Percentage
Name and Address Beneficially Owned of Class
- ---------------- ------------------ --------
<S> <C> <C>
Michael E. Cherry 4,256,000 51.0%
1825 E. Plano Parkway
Suite 200
Plano, Texas 75074
Sandra Cobb 912,000 10.9%
1825 E. Plano Parkway
Suite 200
Plano, Texas 75074
Sylvia McCollum 912,000 10.9%
1825 E. Plano Parkway
Suite 200
Plano, Texas 75074
TOTAL 6,080,000 72.8%
</TABLE>
Security Ownership of Management.
- ---------------------------------
The following table sets forth the share holdings of the Company's
directors and executive officers as of the date of this Registration
Statement, assuming 8,333,334 shares are outstanding:
Number of Shares Percentage of
Name and Address Beneficially Owned of Class
- ---------------- ------------------ -------------
[S] [C] [C]
Michael E. Cherry 4,256,000 51.0%
1825 E. Plano Parkway
Suite 200
Plano, Texas 75074
William T. Criswell -0- -0-
2756 Fairwood Avenue
Carrollton, Texas 75006
Connie Cherry -0- (1) -0-
815 Autumn Ridge Drive
McKinney, Texas 75070
Chris Poinsatte -0- -0-
3924 Peter Pan
Dallas, Texas 75229
Sylvia McCollum 912,000 10.9%
1825 E. Plano Parkway
Suite 200
Plano, Texas 75074
Frank Neukomm 121,401 1.5%
6601 Kirby Drive
Suite 600
Houston, Texas 77005
TOTALS 5,289,401 63.4%
(1) Michael E. Cherry and Connie Cherry are husband and wife. As a
result, all shares beneficially owned by Mr. Cherry may also be deemed to be
beneficially owned by Ms. Cherry.
Changes in Control.
- -------------------
There are no present arrangements or pledges of the Company's
securities which may result in a change in control of the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
- -------- -------------------------------------------------------------
Identification of Directors and Executive Officers.
- ---------------------------------------------------
The following table sets forth the names of all current directors
and executive officers of the Company. These persons will serve until the
next annual meeting of the stockholders or until their successors are elected
or appointed and qualified, or their prior resignation or termination.
<TABLE>
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
- ---- ---- ----------- --------------
<S> <C> <C> <C>
Michael E. Cherry President 7/28/98 10/22/99
Director 7/28/98 10/22/99
CEO 10/22/99 *
William T. Criswell Chairman 10/22/99 *
of the
Board
Connie Cherry Secretary 10/22/99 *
Director 10/22/99 *
Chris Poinsatte CFO 10/22/99 *
Director 10/22/99 *
Sylvia McCollum Director 10/22/99 *
Frank Neukomm Director 10/22/99 *
James R. Twedt Secretary 7/28/98 10/22/99
Treasurer 7/28/98 10/22/99
Director 7/28/98 10/22/99
James T. Williams Director 7/28/98 10/22/99
</TABLE>
* These persons presently serve in the capacities indicated.
Business Experience.
- --------------------
Michael E. Cherry, Chief Executive Officer. Mr. Cherry is 43 years
of age. During the previous five years, Mr. Cherry was Vice President of
Cytec Corporation where he was responsible for introducing Cytec Corporation
into the industrial computer marketplace. He was also responsible for sales
and marketing, administration and operations. He was the President and a
Director of CASI Texas from February, 1998, prior to its acquisition by the
Company pursuant to the CASI Texas Plan.
William T. Criswell, Chairman of the Board. Mr. Criswell, age 78, is
a graduate of the University of Miami. Starting in Brazil in 1946, he was
manager of Northern Brazil for the Winthrop Company. He later worked for IBM
and AM Corporations in Brazil and Venezuela. In 1953, Mr. Criswell entered
the insurance field as founder of the first health insurance program in Latin
America. He entered the development business in 1960 and for the next 18
years developed and constructed numerous projects in Central America. In
1978, Mr. Criswell came to Dallas to form the Criswell Development Company
with his son. He retired from the Criswell Development Company and did not
return to the development business until 1992. At that time, he formed
Dorchester International, Inc., a company devoted to pursuing resort
developments in Mexico and the Caribbean. Mr. Criswell is currently Director
of Development and Senior Vice President of Golfcraft Corporation, where he is
primarily responsible for identifying municipality development opportunities
and supervision of golf center developments. Mr. Criswell also serves on the
Dallas Area Rapid Transit Board of Directors.
Connie Cherry, Secretary and Director. Ms. Cherry, age 45, received
a B.S. Degree in Health and Physical Education from Penn State. After her
graduation, she worked for approximately five years as a surgical periodontal
assistant in Dallas, Texas. She then worked as an insurance salesperson form
MONY - Mutual of New York for three years. From 1981 to 1986, Ms. Cherry was
sales manager for Cosmopolitan Lady Health Clubs in Dallas, Texas. She spent
the next three years working in sales for Multi Market Media, which pioneered
the "1-800 Dentist" national dental referral program. From 1989 through 1992,
Ms. Cherry worked for Professional TV Productions, where she wrote, produced
and sold TV commercials for clients such as attorneys, chiropractors,
veterinarians and jewelers. From 1992 to 1995, she wrote, produced and sold
TV commercials for TM Century Productions. Since then, she has been employed
as Advertising Sales & Sales Manager for Power Media Group, dba "Texas
Technology Magazine."
Chris Poinsatte, Chief Financial Officer and Director. Mr.
Poinsatte, age 42, is the Chief Financial Officer of Dallas Area Rapid Transit
("DART"), a $2 billion transportation agency in Dallas, Texas. Mr. Poinsatte
has been at DART since 1987, and is currently responsible for the accounting,
investment, debt issuance, budgeting, financial planning, strategic planning,
information systems, total quality management and business process
reengineering functions. Before his employment at DART, Mr. Poinsatte was
Chief Financial Officer at Home Financing Specialists, Inc.; Vice President of
Operations of Associates Financial Express, Inc.; Controller at Associates
Corporation Diversified Services, Inc.; and Senior Auditor at Arthur Andersen,
LLP. He graduated from the University of Notre Dame with a B.A. in accounting
and is a Certified Public Accountant in Texas. Mr. Poinsatte also serves as
the Chair of the American Public Transit Association's Financial Management
Committee and is a founding member and Chair of the Transit Finance Learning
Exchange.
Sylvia McCollum, Director. Ms. McCollum is 58 years of age. She has
been the President of Control Manufacturing Co., Inc., of Plano, Texas, since
1977. Control Manufacturing is an electronics subcontractor that assembles
and delivers product for the Company. Prior to her involvement with Control
Manufacturing, Ms. McCollum was Director of Materials for International
Computer Products, Inc., a company specializing in peripherals for the
computer industry.
Frank Neukomm, Director. Mr. Neukomm, age 50, has been President of
FirstChoice Communications, Inc., since 1994. FirstChoice provides investment
banking services to the telecommunications and high-tech industries. Mr.
Neukomm has been in the telecommunications business for over 20 years and is a
former marketing executive of Southwestern Bell.
Significant Employees.
- ----------------------
The Company has no significant employees who are not executive
officers.
Family Relationships.
- ---------------------
Michael Cherry and Connie Cherry are husband and wife. Other
than this relationship, there are no family relationships among the directors
or executive officers of the Company.
Involvement in Certain Legal Proceedings.
- -----------------------------------------
During the past five years, no present or former director,
executive officer or person nominated to become a director or an executive
officer of the Company:
(1) was a general partner or executive officer of any business
against which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction (in a civil
action), the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended or vacated.
Item 6. Executive Compensation.
- --------------------------------
The following table sets forth the aggregate compensation paid
by the Company for services rendered during the periods indicated:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Secur-
ities All
Name and Year or Other Rest- Under- LTIP Other
Principal Period Salary Bonus Annual rictedlying Pay- Comp-
Position Ended ($) ($) Compen-Stock Optionsouts ensat'n
- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael E.
Cherry, 12/31/98 $44,000 0 0 0 0 0 0
CEO 6/30/99 $22,000 0 0 0 0 0 0
William T. 12/31/98 0 0 0 0 0 0 0
Criswell, 6/30/99 0 0 0 0 0 0 0
Chairman
Connie 12/31/98 0 0 0 0 0 0 0
Cherry, 6/30/99 0 0 0 0 0 0 0
Secretary
and Director
Chris 12/31/98 0 0 0 0 0 0 0
Poinsatte, 6/30/99 0 0 0 0 0 0 0
CFO and
Director
Sylvia 12/31/98 0 0 0 0 0 0 0
McCollum, 6/30/99 0 0 0 0 0 0 0
Director
Frank 12/31/98 0 0 0 0 0 0 0
Neukomm, 6/30/99 0 0 0 0 0 0 0
Director
James R.
Twedt, 12/31/98 0 0 0 0 0 0 $6,941
Former 6/30/99 0 0 0 0 0 0 0
Sec/Treas/
Director
James T.
Williams 12/31/98 0 0 0 0 0 0 0
Former 6/30/99 0 0 0 0 0 0 0
Director
</TABLE>
No cash compensation, deferred compensation or long-term incentive
plan awards were issued or granted to the Company's management during the
calendar years ended December 31, 1998, or the period ended June 30, 1999.
Further, no member of the Company's management has been granted any
option or stock appreciation rights; accordingly, no tables relating to such
items have been included within this Item.
Compensation of Directors.
- --------------------------
There are no standard arrangements pursuant to which the Company's
directors are compensated for any services provided as director. No
additional amounts are payable to the Company's directors for committee
participation or special assignments.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements.
- -------------
There are no employment contracts, compensatory plans or
arrangements, including payments to be received from the Company, with respect
to any director or executive officer of the Company which would in any way
result in payments to any such person because of his or her resignation,
retirement or other termination of employment with the Company, any change in
control of the Company, or a change in the person's responsibilities following
a change in control of the Company.
Item 7. Certain Relationships and Related Transactions.
- --------------------------------------------------------
There have been no material transactions, series of similar
transactions, currently proposed transactions, or series of similar
transactions, to which the Company and any director, executive officer, five
percent stockholder or associate of any of these persons, except the CASI
Texas Plan (see Part I, Item 1, and Part II, Item 4) and the lease of the
Company's principal executive offices (see Part I, Item 3).
Item 8. Description of Securities.
- -----------------------------------
Common Stock
- ------------
The Company has 15,000,000 shares of $0.001 par value common voting
stock authorized; 8,333,334 shares of common stock are presently outstanding.
The holders of common stock are entitled to one vote per share on each matter
submitted to a vote at a meeting of stockholders. The shares of common stock
do not carry cumulative voting rights in the election of directors.
Stockholders of the Company have no pre-emptive rights to acquire
additional shares of common stock or other securities. The common stock is
not subject to redemption rights and carries no subscription or conversion
rights. In the event of liquidation of the Company, the shares of common
stock are entitled to share equally in corporate assets after satisfaction of
all liabilities. All shares of the common stock now outstanding are fully
paid and non-assessable.
There are no outstanding options or calls to purchase authorized
securities of the Company; however, there are 333,334 outstanding warrants
entitling the holders, for a period of twelve months, to purchase 2.25
additional shares of the Company's common stock at a purchase price of $1.00
per share.
There is no provision in the Company's Articles of Incorporation,
as amended, or By-Laws, that would delay, defer, or prevent a change in
control of the Company.
Preferred Stock
- ---------------
The Company is authorized to issue 5,000,000 shares of preferred
stock, having a par value of $0.001 per share. The Board of Directors, by
resolution and without the vote of the stockholders, may amend the Articles of
Incorporation of the Company to prescribe classes, series and the number of
each class or series of such preferred stock and the voting powers,
designations, preferences, limitations, restrictions and the relative rights
of each such class or series. No shares of preferred stock are outstanding;
and the Board of Directors has not authorized the amendment of the Company's
Articles of Incorporation to designate any class or series of this preferred
stock.
Warrants
--------
Each warrant grants the holder the right to purchase 2.25 additional
shares of common stock at a price of $1.00; to issue the shares underlying
these warrants under Rule 504, the warrants would have to be exercised prior
to the effective date of this Registration Statement, and the Company would
have to comply with the post April 6, 1999, amendments to Rule 504 of
Regulation D; otherwise, the underlying securities would have to be issued as
"restricted securities" under an available exemption from the registration
provisions of the Securities Act of 1933, as amended, or pursuant to a
registration statement filed with the Securities and Exchange Commission.
Warrants are not entitled to voting, liquidation or other rights attributable
to common stock holders.
PART II
Item 1. Market Price of and Dividends on the Company's Common Equity and
Other Stockholder Matters.
- --------------------------
Market Information.
- -------------------
There has never been any "established trading market" for shares of
common stock of the Company. Quotation of its common stock on the OTC
Bulletin Board of the NASD under the symbol "CASI" commenced December 24,
1997, as $0.01 to $0.05, and were terminated on or about October 7, 1999. The
Company's shares are currently quoted on the "Pink Sheets" of the National
Quotation Bureau, LLC. No assurance can be given that any market for the
Company's common stock will develop or be maintained. For any market that
develops for the Company's common stock, the sale of "restricted securities"
(common stock) pursuant to Rule 144 of the Securities and Exchange Commission
by members of management or any other person to whom any "restricted
securities" may be issued in the future may have a substantial adverse impact
on any public market for the Company's common stock. A minimum holding period
of one year is required for resales under Rule 144, along with compliance with
other pertinent provisions of the Rule, including publicly available
information concerning the Company (this requirement will be satisfied by the
filing and effectiveness of this Registration Statement, the passage of 90
days and the continued timely filing by the Company of all reports required to
be filed by it with the Securities and Exchange Commission; limitations on the
volume of "restricted securities" which can be sold in any 90 day period; the
requirement of unsolicited broker's transactions; and the filing of a Notice
of Sale of Form 144. For information regarding "restricted securities" issued
by the Company during the past three years and the commencement date of the
holding period of these securities, see the caption "Recent Sales of
Unregistered Securities," Part II, Item 4.
The following quotations were provided by the National Quotation
Bureau, LLC. They represent inter-dealer prices and do not represent actual
transactions; these quotations do not reflect dealer markups, markdowns or
commissions.
<TABLE>
<CAPTION>
STOCK QUOTATIONS*
CLOSING BID
Quarter ended: High Low
- -------------- ---- ---
<S> <C> <C>
December 31, 1997 $0.01 $0.01
January 2, 1998
through
March 18, 1998 $0.01 $0.01
March 19, 1998*
through
March 31, 1998 $0.1875 $0.1875
April 1, 1998
through
June 30, 1998 $0.1875 $0.125
July 1, 1998
through
September 30, 1998 $0.125 $0.03125
October 1, 1998
through
December 31, 1998 $0.125 $0.125
January 4, 1999
through
March 31, 1999 $1.50 $0.0625
April 1, 1999
through
June 30, 1999 $2.00 $0.125
* Takes into account a one for 20 reverse split of the
Company's common stock effected at the time of the Company's
change of domicile from Utah to Nevada. See Part I, Item 1.
</TABLE>
Also, see the heading "Risk Factors" of the heading "Business," Part
1, Item 1, specifically the risk factor "No 'Established Trading Market' for
Common Stock."
Holders.
- --------
The number of record holders of the Company's securities as of the
date of this Registration Statement is approximately 127.
Dividends.
- ----------
The Company has not declared any cash dividends with respect to
its common stock, and does not intend to declare dividends in the foreseeable
future. The future dividend policy of the Company cannot be ascertained with
any certainty, and if and until the Company completes any acquisition,
reorganization or merger, no such policy will be formulated. There are no
material restrictions limiting, or that are likely to limit, the Company's
ability to pay dividends on its securities.
Item 2. Legal Proceedings.
- ---------------------------
The Company is not a party to any pending legal proceeding and, to
the knowledge of management, no federal, state or local governmental agency is
presently contemplating any proceeding against the Company. No director,
executive officer or affiliate of the Company or owner of record or
beneficially of more than five percent of the Company's common stock is a
party adverse to the Company or has a material interest adverse to the Company
in any proceeding.
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- ---------------------
There have been no changes in the Company's principal independent
accountants during the past two fiscal years ended December 31, 1998, or to
the date of this Registration Statement.
Item 4. Recent Sales of Unregistered Securities.
- -------------------------------------------------
Michael Cherry (1) 4,256,000 common 7/28/98
Sylvia McCollum (1) 912,000 common 7/28/98
Sandra Cobb (1) 912,000 common 7/28/98
James T. Williams (2) 106,667 common 7/28/98
James Twedt (2) 106,667 common 7/28/98
Frank Neukomm (2) 106,667 common 7/28/98
Cicero Cinzano Ltd. 21,500 common 9/14/98
Camisado Ventures 46,480 common 9/14/98
Outback Capital Ltd. 59,759 common 9/14/98
New York New York Ltd. 59,759 common 9/14/98
29 Subscribers
under Rule 504 333,334 common(3) 4/06/99
offering 333,334 Warrants(4) 4/06/99
(1) These securities were issued to each of the former stockholders
of CASI Texas pursuant to the CASI Texas Plan. See the heading "Business
Development" of Part I, Item 1 of this Registration Statement.
(2) Each of these persons received the share indicated in
consideration of services rendered to CASI Texas prior to and during the CASI
Texas Plan. See the heading "Business Development" of Part I, Item 1 of this
Registration Statement.
(3) These securities are freely tradeable securities under Rule 502
of Regulation D.
(4) Each warrant grants the holder the right to purchase 2.25
additional shares of common stock at a price of $1.00; to issue the shares
underlying these warrants under Rule 504, the warrants would have to be
exercised prior to the effective date of this Registration Statement, and the
Company would have to comply with the post April 6, 1999, amendments to Rule
504 of Regulation D; otherwise, the underlying securities would have to be
issued as "restricted securities" under an available exemption from the
registration provisions of the Securities Act of 1933, as amended, or pursuant
to a registration statement filed with the Securities and Exchange Commission.
Management believes each of the foregoing persons or entities was
either an "accredited investor," or "sophisticated investor" as defined in
Rule 506 of Regulation D of the Securities and Exchange Commission. Each had
access to all material information regarding the Company prior to the offer,
sale or issuance of these "restricted securities." The Company believes these
shares were exempt from the registration requirements of the Securities Act of
1933, as amended (the "1933 Act"), pursuant to Section 4(2) (with respect to
all issuances other than issuances as part the Company's offering under Rule
504) or 3(b) thereof (with respect to the issuances under the Rule 504
offering).
Item 5. Indemnification of Directors and Officers.
- ---------------------------------------------------
Section 78.751(1) of the Nevada Revised Statutes ("NRS")
authorizes a Nevada corporation to indemnify any director, officer, employee,
or corporate agent "who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, except an action by or
in the right of the corporation" due to his or her corporate role. Section
78.751(1) extends this protection "against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with the action, suit or proceeding if he
or she acted in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful."
Section 78.751(2) of the NRS also authorizes indemnification of
the reasonable defense or settlement expenses of a corporate director,
officer, employee or agent who is sued, or is threatened with a suit, by or in
the right of the corporation. The party must have been acting in good faith
and with the reasonable belief that his or her actions were not opposed to the
corporation's best interests. Unless the court rules that the party is
reasonably entitled to indemnification, the party seeking indemnification must
not have been found liable to the corporation.
To the extent that a corporate director, officer, employee, or
agent is successful on the merits or otherwise in defending any action or
proceeding referred to in Section 78.751(1) or 78.751(2), Section 78.751(3) of
the NRS requires that he be indemnified "against expenses, including
attorneys' fees, actually and reasonably incurred by him or her in connection
with the defense."
Section 78.751 (4) of the NRS limits indemnification under
Sections 78.751 (1) and 78.751(2) to situations in which either (1) the
stockholders, (2)the majority of a disinterested quorum of directors, or (3)
independent legal counsel determine that indemnification is proper under the
circumstances.
Pursuant to Section 78.751(5) of the NRS, the corporation may
advance an officer's or director's expenses incurred in defending any action
or proceeding upon receipt of an undertaking. Section 78.751(6)(a) provides
that the rights to indemnification and advancement of expenses shall not be
deemed exclusive of any other rights under any bylaw, agreement, stockholder
vote or vote of disinterested directors. Section 78.751(6)(b) extends the
rights to indemnification and advancement of expenses to former directors,
officers, employees and agents, as well as their heirs, executors, and
administrators.
Regardless of whether a director, officer, employee or agent has
the right to indemnity, Section 78.752 allows the corporation to purchase and
maintain insurance on his behalf against liability resulting from his or her
corporate role.
PART F/S
Index to Financial Statements
Report of Certified Public Accountants
Financial Statements
- --------------------
Independent Auditor's Report
Balance Sheet-December 31, 1998
Statement of Operations for the Years Ended December 31, 1998
and 1997
Statement of Stockholder's Equity for the Years Ended December
31, 1998 and 1997
Statement of Cash Flows for the Years Ended December 31, 1998
and 1997
Notes to Financial Statements
Unaudited Balance Sheet-June 30, 1999
Unaudited Condensed Statement of Operations-June 30, 1999
Unaudited Condensed Statement of Cash Flows-June 30, 1999
Notes to Condensed Financial Statements
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
Formerly
Intercontinental Strategic Minerals, Inc.
Financial Statements
and
Independent Auditors' Report
December 31, 1998
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
Formerly
Intercontinental Strategic Minerals, Inc.
TABLE OF CONTENTS
Page
Independent Auditors' Report 1
Balance Sheet -- December 31, 1998 2
Statement of Operations for the Period from Inception
(February 13, 1998) through December 31, 1998 3
Statement of Stockholders' Equity/(Deficit) for the
Period from Inception (February 13, 1998) through
December 31, 1998 4
Statement of Cash Flows for the Period from Inception
(February 13, 1998) through December 31, 1998 5
Notes to Financial Statements 6 -- 11
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Computer Automation Systems, Inc.
We have audited the accompanying balance sheet of Computer Automation Systems,
Inc., formerly Intercontinental Strategic Minerals, Inc., as of December 31,
1998, and the related statements of operations, stockholders' equity, and cash
flows for the period from inception (February 13, 1998) through December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Computer Automation Systems,
Inc. as of December 31, 1998, and the results of operations and cash flows for
the period from inception (February 13, 1998) through December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ Mantyla McReynolds
----------------------------------
Mantyla McReynolds
Salt Lake City, Utah
July 10, 1999
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
Formerly
Intercontinental Strategic Minerals, Inc.
Balance Sheet
December 31, 1998
ASSETS
<TABLE>
<CAPTION>
Current Assets:
<S> <C>
Cash $ 16,079
Accounts receivable (net of allowance of $11,997) 212,047
Other receivable 4,193
Deferred tax asset - Note 3 66,134
Inventory 8,848
Total Current Assets 307,301
Property and Equipment - Note 6 56,323
Less: Accumulated depreciation (9,219)
Net Property and Equipment 47,104
Other Assets:
Other assets - Note 10 2,944
Total Assets $ 357,349
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
Liabilities:
Current Liabilities:
Accounts payable $ 323,661
Accrued liabilities 29,635
Shareholder loan - Note 4 41,130
Total Current Liabilities 394,426
Total Liabilities 394,426
Stockholders' Equity/(Deficit): - Note 5
Preferred stock -- 5,000,000 shares authorized, $.001
par value; no shares issued or outstanding
Common stock -- 15,000,000 shares authorized,
$.001 par value; 8,000,000 shares issued and
outstanding 8,000
Additional paid-in capital 101,312
Accumulated deficit (146,389)
Total Stockholders' Equity/(Deficit) (37,077)
Total Liabilities and Stockholders' Equity/(Deficit) $ 357,349
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
Formerly
Intercontinental Strategic Minerals, Inc.
Statement of Operations
For the Period from Inception (February 13, 1998) through December 31, 1998
<TABLE>
<CAPTION>
1998
<S> <C>
Revenues $ 922,708
Cost of Sales 651,630
Gross Profit 271,078
General and Administrative Expenses 268,656
Research and Development Expense 214,945
Loss from Operations (212,523)
Other Income/Expense -0-
Loss Before Income Taxes (212,523)
Current Year Income Taxes Provision/(Benefit) (66,134)
Net Loss $ (146,389)
Loss Per Share $ (.04)
Weighted Average Shares Outstanding 3,888,364
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
Formerly
Intercontinental Strategic Minerals, Inc.
Statement of Stockholders' Equity/(Deficit)
For the Period from Inception (February 13, 1998) through December 31, 1998
<TABLE>
<CAPTION>
Additional Total
Number of Common Paid-in Accumulated Stockholders'
Shares Stock Capital Deficit Equity/(Deficit)
<S> <C> <C> <C> <C> <C>
Initial
capital
investment
February
13, 1998 1,000 1,000 1,000
Plan of
Reorganization
with ISM,
July 28, 1998 7,999,000 7,000 101,312 108,312
Net loss for
the year ended
December 31,
1998 (146,389) (146,389)
Balance,
December 31,
1998 8,000,000 $ 8,000 $ 101,312 $ (146,389) $ (37,077)
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
Formerly
Intercontinental Strategic Minerals, Inc.
Statement of Cash Flows
For the Period from Inception (February 13, 1998) through December 31, 1998
<TABLE>
<CAPTION>
Cash Flows Provided by/(Used for) Operating Activities 1998
<S> <C>
Net Loss $ (146,389)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 9,808
Issued stock for services 8,312
Organization costs (3,533)
Increase in accounts and other receivables (216,241)
Increase in inventory (8,848)
Increase in deferred taxes (66,134)
Increase in accounts payable 323,660
Increase in current liabilities 29,637
Net Cash Provided by/(Used for) Operating Activities (69,728)
Cash Flows Used for Investing Activities
Purchases of property and equipment (56,323)
Net Cash Used for Investing Activities (56,323)
Cash Flows Provided by Financing Activities
Issuance of stock for cash 101,000
Principal loan from shareholder 41,130
Net Cash Provided by Financing Activities 142,130
Net Increase in Cash 16,079
Beginning Cash Balance -0-
Ending Cash Balance $ 16,079
Supplemental Disclosure Information:
Cash paid during the year for interest $ -0-
Cash paid during the year for income taxes 100
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
Formerly
Intercontinental Strategic Minerals, Inc.
Notes to Financial Statements
December 31, 1998
NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
Intercontinental Strategic Minerals, Inc. ("ISM" or the "Company")
was incorporated in the State of Utah on July 16, 1981. The Company was
formed for the primary purpose of acquiring and investing in mining
properties. The Company was not successful in its endeavors and ceased
operations in or before 1983 when all assets and liabilities were liquidated.
The Company was then dormant until it merged with and became Intercontinental
Strategic Minerals, Inc., a Nevada corporation formed for the purpose of
changing the domicile to Nevada, in March, 1998. On July 28, 1998 the Company
acquired all of the outstanding common stock of Computer Automation Systems,
Inc. ("CASI"), pursuant to an Agreement and Plan of Reorganization. Computer
Automation Systems, Inc. is a Texas corporation incorporated on February 13,
1998 for the purpose of designing and manufacturing custom rack mount and
industrial computer applications for the telecom and other high tech
industries. Subsequent to the Agreement and Plan of Reorganization, the name
of Intercontinental Strategic Minerals, Inc. was changed to Computer
Automation Systems, Inc..
Pursuant to The Agreement and Plan of Reorganization, ISM issued
6,400,000 shares to CASI's shareholders. At the time of said issuance, ISM
had 1,600,000 shares outstanding. Immediately after this issuance, CASI's
shareholders owned 6,400,000 of the total outstanding of 8,000,000 shares, or
80%.
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles. The following
summarizes the more significant of such policies:
(b) Income Taxes
Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109 [the Statement],
Accounting for Income Taxes. The Statement requires an asset and liability
approach for financial accounting and reporting for income taxes, and the
recognition of deferred tax assets and liabilities for the temporary
differences between the financial reporting bases and tax bases of the
Company's assets and liabilities at enacted tax rates expected to be in effect
when such amounts are realized or settled.
NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[continued]
(c) Net Loss Per Common Share
In accordance with Financial Accounting Standards No. 128, "Earnings
Per Share," basic loss per common share is computed using the weighted average
number of common shares outstanding. Diluted earnings per share is computed
using weighted average number of common shares plus dilutive common share
equivalents outstanding during the period using the treasury stock method.
Common stock equivalents were not included in the computation of loss per
share for the periods presented because there were none issued until April,
1999 and their inclusion is antidilutive.
(d) Statement of Cash Flows
For purposes of the statements of cash flows, the Company considers
cash and cash equivalents as deposits in commercial banks. The Company had
$16,079 cash at December 31, 1998.
(e) Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(f) Property and Equipment
Property and equipment are stated at cost. Depreciation is provided
using the straight-line basis over the useful lives of the related assets.
Expenditures for maintenance and repairs are charged to expense as incurred.
(g) Inventory
Inventory consists of component parts and supplies valued at the
lower of cost or market (net realizable value) using the first-in, first-out
(FIFO) method.
(h) Revenue Recognition
Revenue is recognized when earned, as products are shipped, or
services are provided to customers.
NOTE 2 RECAPITALIZATION
On July 28, 1998, CASI entered into an agreement and plan of
reorganization with ISM, wherein CASI exchanged all of its common stock
outstanding for 6,400,000 shares of ISM. Immediately subsequent to the
exchange, CASI's shareholders held approximately 80% of the outstanding shares
of ISM. The Company continues its operations in the ISM structure but has
changed the name of Intercontinental Strategic Minerals, Inc. to Computer
Automation Systems, Inc. The transaction was a "reverse" acquisition on a
purchase basis.
NOTE 3 INCOME TAXES
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 109 [the Statement], Accounting for Income Taxes, as
of January 1, 1993. The tax effects of temporary differences that give rise
to significant portions of the deferred tax asset at December 31, 1998 are
summarized below.
Deferred tax assets Balance Tax Rate
Allowance for bad debt $ 11,997 $ 3,719 31%
Loss carryforward(expires 2014) 200,525 62,415 31%
Valuation allowance -0-
Deferred tax asset $66,134
A valuation allowance is required if it is more likely than not that
some or all of the deferred tax assets will be realized. The Company has
established a valuation allowance of $0 based on unaudited, positive operating
results through June 1999 and anticipated additional contracts currently
being negotiated.
NOTE 4 RELATED-PARTY TRANSACTIONS
The Company has a Cooperation Agreement with an entity controlled by
former directors and shareholders of the Company. The agreement provides for
sharing complimentary resources in the engineering, manufacturing, and support
of industrial computers. Pricing is negotiated with each order as submitted.
The related party balance due as of December 31, 1998 was $6,020 for rent.
NOTE 4 RELATED-PARTY TRANSACTIONS [continued]
A shareholder advanced funds to the Company for the purchase of
testing equipment and for operating expenses throughout the year. The balance
due to this shareholder as of December 31, 1998 is $41,048, is non-interest
bearing, and is payable on demand.
NOTE 5 COMMON STOCK
On February 13, 1998 the Company incorporated and recorded an
initial investment of $1,000 for 1,000 shares of $0.00 par, common stock.
As a result of the recapitalization with ISM, the surviving entity's
capital structure consists of 15,000,000 shares of authorized common voting
stock having a par value of one mill ($.001) per share. Preferred shares
authorized are 5,000,000 having a par value of one mill ($.001) per share.
Prior to recapitalization, ISM had 1,412,500 shares of common stock
issued and outstanding. As part of the recapitalization, the Company issued
187,500 unregistered shares to four consultants for $100,000 cash and services
and 6,400,000 common shares to officers and directors of CASI for 100% of the
previously outstanding securities of CASI(See Note 2), thus bringing total
issued and outstanding common stock to 8,000,000 shares. The book value of
net assets of CASI on 7/28/99 was approximately $282,000.
NOTE 6 PROPERTY AND EQUIPMENT
The major classes of assets as of the balance sheet date are as
follows:
Accumulated
Asset Class Cost Depreciation Method/Life
Testing & Manufacturing
Equip $ 51,372 $ (8,446) SL/5 or 7
Office Equipment 4,951 (773) SL/5 or 7
Total $ 56,323 ($9,219)
Current year depreciation expense was $9,219.
NOTE 7 OFFICE LEASE\SUBSEQUENT EVENT
In 1998 the Company entered into an operating lease with a related
party for its facilities. The lease agreement provides for rents of $1,505 to
be paid on a month-to-month basis.. Total rent expense for 1998 on this
facility was $6,020 and was accrued as of December 31, 1998, but was not paid
until May 1999. The Company is in the process of negotiating an operating
lease for additional storage and office space. Anticipated monthly rental is
$700 for a twelve month contract.
NOTE 8 SUBSEQUENT EVENT
The Board of Directors, effective April 6, 1999, resolved to offer
333,334 Units pursuant to Rule 504 of the Securities and Exchange Commission
at a price of $0.75 per Unit. Each Unit being comprised of one share of the
Company's common stock, $0.001 par value per share, and one common share
purchase warrant entitling the holder thereof, for a period of twelve months,
to purchase 2.25 additional shares of common stock at a purchase price of
$1.00 per share. Through June, 1999, the Company has collected approximately
$215,000 from this offering. None of the warrants have been exercised.
NOTE 9 ACCOUNTS RECEIVABLE
The Company has sold customer accounts receivable of approximately
$580,000 to a financing institution with recourse. Activity has been limited
to one customer and one buyer within the Dallas/Fort Worth metropolitan area.
The buyer retains portions of the amounts for which contracts were sold as
reserves, which are released to the Company as the customer makes payment. In
the event of default, the Company has granted a first priority interest in all
accounts receivable and inventory proceeds. The balance outstanding under
recourse contracts was approximately $38,714, at December 31, 1998.
NOTE 10 OTHER ASSETS
Other assets consist of organization costs incurred. Total
expenditures were $3,533 and are being amortized over 60 months on a
straight-line basis. Amortization for the 1998 was $589. Statement of
Position 98-5, Reporting on the Costs of Start-Up Activities, requires
start-up costs to be expensed as incurred and is applicable for fiscal years
beginning after December 15, 1998. The Company will adopt this SOP for 1999
and will report any adjustments as the cumulative effect of a change in
accounting principle as appropriate.
NOTE 11 SIGNIFICANT CONCENTRATION OF BUSINESS VOLUME RISK
Of the total revenue for 1998 of $922,708, approximately $619,000 or
67% was from a single customer. Accordingly, in the event that this customer
decreases or ceases its activities with the Company, the Company's business
volume would be significantly affected.
<PAGE>
Computer Automation Systems, Inc.
Formerly
Intercontinental Strategic Minerals, Inc.
Condensed Financial Statements
June 30, 1999
<PAGE>
Computer Automation Systems, Inc.
Formerly
Intercontinental Strategic Minerals, Inc.
Condensed Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
June 30, 1999
<S> <C>
Current Assets
Cash $ 93,866
Accounts receivable, net 112,259
Other receivables 82,804
Deferred tax asset 2,501
Inventory 109,077
Total Current Assets 400,507
Equipment, net 89,812
Other Assets 3,090
TOTAL ASSETS $ 493,409
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 155,574
Accrued liabilities 31,253
Total Current Liabilities 186,827
Stockholders' Equity
Common stock 8,286
Additional paid in capital 315,492
Accumulated deficit (17,196)
Total Stockholders' Equity 306,582
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 493,409
</TABLE>
<PAGE>
Computer Automation Systems, Inc.
Formerly
Intercontinental Strategic Minerals, Inc.
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1999 June 30, 1998
<S> <C> <C>
Revenues, net $ 1,168,10 $ 60,432
Cost of sales 654,490 23,280
Gross Profit 513,613 37,152
Sales, general and
administrative expense 320,787 64,311
Income (Loss) From Operations 192,826 (27,159)
Provision for Income Taxes: 63,633 -0-
Net Income (Loss) $ 129,193 $ (27,159)
Net Income per Share $ 0.02 $ (27.16)
Weighted Average Number of
Shares Outstanding 8,143,477 1,000
</TABLE>
<PAGE>
Computer Automation Systems, Inc.
Formerly
Intercontinental Strategic Minerals, Inc.
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1999 June 30, 1998
<S> <C> <C>
Cash Flows Used for Operating Activities:
Net Income (Loss) $ 129,193 $ (27,159)
Adjustments to reconcile net loss to
net cash used for operating activities:
Depreciation and amortization 15,195
Increase in current assets other than cash (15,919) (40,035)
Increase (decrease) in current liabilities (207,598) 7,694
Net Cash Flows Used for Operating Activities (79,129) (59,500)
Cash Flows Used for Investing Activities:
Purchase of equipment (57,550) (281,025)
Net Cash Flows Used for Investing Activities (57,550) (281,025)
Cash Flows Provided by (Used for) Financing
Increase in loans 340,150
Proceeds from sale of securities 214,466 1,000
Net Cash Flows Provided by Financing Activities 214,466 341,150
Net Increase in Cash 77,787 625
Beginning Cash Balance 16,079 -0-
Ending Cash Balance $ 93,866 $ 625
</TABLE>
<PAGE>
Computer Automation Systems, Inc.
Formerly
Intercontinental Strategic Minerals, Inc.
Notes to Condensed Financial Statements
June 30, 1999
PRELIMINARY NOTE
The accompanying condensed consolidated financial statements have been
prepared without audit, but include all adjustments which, in the opinion of
management, are necessary in order to make the financial statements not
misleading. Certain information and disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 1998 included in
the Company's report on Form 10-SB.
ORGANIZATION AND MERGER
Intercontinental Strategic Minerals, Inc. ("ISM" or the "Company") was
incorporated in the State of Utah on July 16, 1981. The Company was formed
for the primary purpose of acquiring and investing in mining properties. The
Company was not successful in its endeavors and ceased operations in or before
1983 when all assets and liabilities were liquidated. The Company was then
dormant until it merged with and became Intercontinental Strategic Minerals,
Inc., a Nevada corporation formed for the purpose of changing the domicile to
Nevada, in February, 1998. On July 28, 1998 the Company acquired all of the
outstanding common stock of Computer Automation Systems, Inc. ("CASI"),
pursuant to an Agreement and Plan of Reorganization. Computer Automation
Systems, Inc. is a Texas corporation incorporated on February 13, 1998 for the
purpose of designing and manufacturing custom rack mount and industrial
computer applications for the telecom and other high tech industries.
Subsequent to the Agreement and Plan of Reorganization, the name of Strategic
Minerals, Inc. was changed to Computer Automation Systems, Inc.
Pursuant to The Agreement and Plan of Reorganization, ISM issued
6,400,000 shares to CASI's shareholders. At the time of said issuance, ISM
had 1,600,000 shares outstanding. Immediately after this issuance, CASI's
shareholders owned 6,400,000 of the total outstanding of 8,000,000 shares, or
80%.
Effective April 6, 1999, the Company offered 333,334 Units pursuant to
Rule 504 of the Securities and Exchange Commission at a price of $0.75 per
Unit. Each Unit being comprised of one share of the Company's common stock,
$0.001 par value per share, and one common share purchase warrant entitling
the holder thereof, for a period of twelve months, to purchase 2.25 additional
shares of common stock at a purchase price of $1.00 per share. Through June,
1999, the Company collected approximately $215,000 from this offering. None
of the warrants have been exercised.
<PAGE>
PART III
Item 1. Index to Exhibits.
- ---------------------------
The following exhibits are filed as a part of this Registration
Statement:
<TABLE>
<CAPTION>
Item 2. Description of Exhibits.
- --------------------------------
Exhibit
Number Description*
- ------ ------------
<S> <C>
3.1 Initial Articles of Incorporation filed in the State of Utah.**
3.2 Initial Articles of Incorporation filed in the State of Nevada.**
3.3 Articles of Merger to change the Company's domicile filed in the
State of Utah and Nevada and effecting a one for 20 reverse split
of the outstanding securities of the Company.**
3.4 Certificate of Amendment changing the name of the Company to
"Computer Automation Systems, Inc." in the State of Nevada.**
3.5 By-Laws**
10.1 Agreement and Plan of Reorganization with CASI Texas.**
Exhibit A- Stockholders of CASI Texas
Exhibit B- The Company's financial statements for the years
ended December 31, 1997 and 1996
Exhibit C- The Company's Exceptions.
Exhibit D- CASI Texas's balance sheet as of June 29, 1998
Exhibit E- CASI Texas's Exceptions.
Exhibit F- Investment Letter.
Exhibit G- The Company's Compliance Certificate.
Exhibit H- CASI Texas's Compliance Certificate.
11 Calculation of Weighted Average Shares
21 Subsidiaries**
27 Financial Data Schedule.**
</TABLE>
* Summaries of all exhibits contained within this
Registration Statement are modified in their
entirety by reference to these Exhibits.
** These documents and related exhibits have been
previously filed with the Securities and Exchange
Commission and are incorporated herein by reference.
SIGNATURES
In accordance with Section 12 of the Securities
Exchange Act of 1934, the Registrant has caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized.
COMPUTER AUTOMATION SYSTEMS, INC.
Date: 11-17-99 By /s/ Michael E. Cherry
----------- --------------------------
Michael E. Cherry, Chief
Executive Officer
Date: 11/17/99 By /s/ William T. Criswell
------------ ------------------------
William T. Criswell, Director
Date: 11/19/99 By /s/ Chris Poinsatte
------------ ------------------------
Chris Poinsatte, Director and
Chief Financial Officer
Date: 11/18/99 By /s/ Frank Neukomm
------------ ------------------------
Frank Neukomm, Director
Date: 11-17-99 By /s/ Sylvia McCollum
------------ ------------------------
Sylvia McCollum, Director
Date: 11/17/99 By /s/ Connie Cherry
------------ ------------------------
Connie Cherry, Director
Computer Automation Systems, Inc.
Calculation of Weighted Average Shares
December 31, 1998
CASI as accounting acquirer
Outstanding Weighted Weighted
Days Shares Factor Average
(A) (B) (C)=(A)x(B) Total(C)/Total(A)
2/13/98
7/28/98 165 1,000 165,000
12/31/98 156 8,000,000 1,248,000,000
--- -------------
321 1,248,000,000 3,888,364
