<PAGE>
U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the calendar year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File No. 0-27419
COMPUTER AUTOMATION SYSTEMS, INC.
---------------------------------
(Name of Small Business Issuer in its Charter)
NEVADA 75-2749166
------ ----------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
1825 East Plano Parkway, Suite #200
Plano, TX 75074
---------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (972) 578-3128
N/A
---
(Former Name or Former Address, if changed since last Report)
Securities Registered under Section 12(b) of the Exchange Act: None
Name of Each Exchange on Which Registered: None
Securities Registered under Section 12(g) of the Exchange Act: $0.001 par
value common stock
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Company was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
(1) Yes X No (2) Yes X No
--- --- --- ---
Check if there is no disclosure of delinquent files in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year: December 31, 1999 -
$3,642,948.
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date
within the past 60 days.
March 21, 2000 - $849,553.46. There are approximately 2,235,667 shares
of common voting stock of the Company held by non-affiliates. There is no
"established market" for the Company's securities; management has arbitrarily
valued these shares at the average bid price of the Company's common stock
during the quarterly period ended December 31, 1999.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Not Applicable.
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the Issuer's
classes of common equity, as of the latest practicable date:
March 27, 2000
8,393,334
DOCUMENTS INCORPORATED BY REFERENCE
A description of "Documents Incorporated by Reference" is contained
in Part III, Item 13.
Transitional Small Business Issuer Format Yes X No ___
<PAGE>
PART I
Item 1. Description of Business.
------------------------
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 acquisition. Michael E. Cherry, the Company's President/CEO 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 50%
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 II, Item 9 of this Report.
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.
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 13 of this Report.
The Company filed its Registration Statement on Form 10-SB, as
amended, 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 of this Report.
Business.
- ---------
General
-------
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, 1999 and 1998, specifically, in Notes 5 and 7. Information
regarding the share holdings of Ms. McCollum and Ms. Cobb can be found in Part
III, Item 9 of this Report.
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.
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.
Principal Products or Services and their Markets.
- -------------------------------------------------
For a discussion of the Company's principal products and services,
see the heading "General" of Part I, Item 1 of this Report.
Distribution Methods of the Products or Services.
- -------------------------------------------------
Presently, the Company contacts potential customers directly,
attends trade shows, uses its web site, utilizes customer referrals, and
advertises in the Thomas Register.
The Company's web site, www.casil.com, provides for interactive e-
commerce. The web site highlights all of the Company's products and allows
customers to configure systems and place orders on-line. To support the web
e-commerce activity, the Company has contracted with an inside sales and
customer service person to provide quick responses to inquiries for quotations
and questions about CASI's capabilities. CASI intends to contract with or
hire an engineer/account manager of new accounts to develop opportunities for
custom development and CASI's value added services on its web site.
Starting in November of 1999, CASI began advertising in the Thomas
Register. The Thomas Register is a comprehensive catalog resource of
electronic manufacturers and suppliers. CASI has a banner advertisement on
each page of the industrial computer section directing interested parties to
its web site. CASI will also be listed in the printed Thomas Register 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.
Status of any Publicly Announced New Product or Service.
- --------------------------------------------------------
New Products
------------
CASI is designing a compact rackmount (1U) 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 research is based on the Company's review of product specifications of
competitive products. The unit, which will support Windows NT (TM) Sun
Solaris (TM) for Intel, and LINUX, is available now without an operating
system.
CASI is also developing a new rackmount chassis line that will be
called the NEBS 400 series. CASI plans to spend between $150,000 and $190,000
for research, development, and testing the prototype for this "off-the-shelf"
product line. The NEBS-400 series will be quality tested and certified to
meet National Engineering Building Standards. CASI expects to develop several
models under this line over the coming 12 to 18 months. Research and
development costs for each new model in the NEBS-400 series is expected to
cost between $50,000 and $90,000. These products will be sold to Alcatel and
other telecommunications companies. The Company has filed for a trademark for
the NEBS-400 name.
Web Sales
---------
The upgrade of CASI's web site, www.casi1.com, has been completed in
two stages. The first stage, consisting of a complete listing of CASI product
offerings for commercial and telecommunications applications, was completed in
October, 1999. The second stage included the implementation of interactive e-
commerce features including automated sales inquiries, system configurations,
quotations, and order placement. This phase was completed in February 2000.
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 make the Company unable to
generate or maintain enough clients to make a profit.
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, it may be unable to produce
sufficient operating revenue to stay in business.
Sources and Availability of Raw Materials.
- ------------------------------------------
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 98% of CASI's 1999 revenues.
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," Part I, Item 1 of this Report.
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."
Effects of Existing or Probable Governmental Regulations.
- ---------------------------------------------------------
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."
Cost and Effect of Compliance with Environmental Laws.
- ------------------------------------------------------
None; not applicable.
Research and Development Expenses.
- ----------------------------------
The Company expended $214,945 during the year ended December 31,
1998, on research and development. The majority of these funds were expended
to develop the system currently being sold to Alcatel, or software development
to drive this system. No research and development funding was required for
the year ended December 31, 1999 as the Company focused on selling products
developed during the previous year. The Company intends to incur between
$150,000 and $190,000 in research, development, and testing for the prototype
of its new NEBS-400 series which will be marketed to telecommunications
companies.
Number of Employees.
- --------------------
The Company contracts for most of its services. It had four
employees as of December 31, 1999.
Risk Factors.
- -------------
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 will 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 and Source of Revenue.
-------------------------------------
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 II,
Item 6 of this Report.
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 limited
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 II, Item 6 of this Report,
regarding the Company's current and intended operations; and the caption
"Market for Common Equity and Related Stockholder Matters," Part II, Item 5,
regarding the limited market for the Company's common stock.
No "Established Trading Market" for Common Stock.
-------------------------------------------------
The Company's common stock was quoted 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 clearance of all Securities and Exchange Commission
comments on its Registration Statement on Form 10-SB, as amended, 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 5 of
this Report.
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,
due to the possibility that the supply of these shares will significantly
exceed the demand for such shares in the market. See the heading "Recent
Sales of Unregistered Securities," Part II, Item 5, for information regarding
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 make the Company unable to
generate or maintain enough clients to make a profit.
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, it may be unable to produce
sufficient operating revenue to stay in business.
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 attract existing and potential customers
away from the Company and may make it unable to operate profitably.
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 make the Company unable to operate at a profit.
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 result in significant costs to
the Company and may make it unable to operate profitably.
Future Capital Needs; Uncertainty of Additional Financing.
----------------------------------------------------------
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.
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,
either of which may make it more difficult for the Company to operate at a
profit.
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.
Item 2. 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
during the calendar year ended December 31, 1999, was $18,060; total rent in
the calendar year ended December 31, 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. Ms. McCollum and Ms. Cobb
are the "affiliated" stockholders who own Control Manufacturing; see Part III,
Item 11, for information concerning their stock ownership in the Company.
Item 3. 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 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
No matter was submitted to a vote of the Company's security holders
during the fourth quarter of the calendar year ended December 31, 1999.
PART II
Item 5. Market for Common Equity and Related 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
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 5 of this Report.
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
July 1, 1999
through
September 30, 1999 $0.6875 $0.3125
October 1, 1999
through
December 31, 1999 $0.75 $0.01
* 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 Report is approximately 128.
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.
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) 106,666 common 7/28/98
Cicero Cinzano Ltd. 21,500 common 9/14/98
Camisado Ventures 46,480 common 9/14/98
Outback Capital Ltd. 59,760 common 9/14/98
New York New York Ltd. 59,760 common 9/14/98
29 Subscribers
under Rule 504 333,334 common(3) 4/06/99
offering 333,334 Warrants(4) 4/06/99
Frank Neukomm 24,000 common (5) 12/30/99
James Twedt 12,000 common (5) 12/30/99
(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 Report.
(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
Report.
(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, exercisable through
July 5, 2000; to issue the shares underlying these warrants under Rule 504,
the warrants would have to be exercised prior to the effective date of the
Company's Registration Statement on Form 10-SB, as amended, 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.
(5) These shares were issued as directors' compensation. See the
Summary Compensation Table of this Report.
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 6. 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, over the next year. The Company plans to expand both
its product line and customer base for similar and ancillary applications once
the details of systems assembly, delivery, and installation are at acceptable
levels.
The Company anticipates increased revenues for the next 12 months
from four areas: growth in sales to existing customers; growth in sales of new
products to existing and new customers; sales from its upgraded web site; and
advertising in the Thomas Register. Each of these items is discussed in more
detail below. Gross margins should remain at similar levels compared to the
year ended December 31, 1999 providing pricing remains at similar levels. See
the category heading "Dependence on One or a Few Major Customers" of Part I,
Item 1 of this Registration Statement.
CASI is designing a compact rackmount (1U) 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 research is based on the Company's review of product specifications of
competitive products. The unit, which will support Windows NT (TM) Sun Solaris
(TM) for Intel, and LINUX, is available now without an operating system.
CASI is also developing a new rackmount chassis line that will be
called the NEBS 400 series. CASI plans to spend between $150,000 and $190,000
for research, development, and testing the prototype for this "off-the-shelf"
product line. The NEBS-400 series will be quality tested and certified to
meet National Engineering Building Standards. CASI expects to develop several
models under this line over the coming 12 to 18 months. Research and
development costs for each new model in the NEBS-400 series is expected to
cost between $50,000 and $90,000. These products will be sold to Alcatel and
other telecommunications companies. The Company has filed for a trademark for
the NEBS-400 name.
The upgrade of CASI's web site, www.casi1.com, was completed in
February 2000. The web page includes a complete listing of product offerings
for commercial and telecommunications applications, as well as interactive e-
commerce features including automated sales inquiries, selectable system
configurations, and requests for quotations.
In November of 1999, CASI began advertising in the Thomas Register.
The Thomas Register is a comprehensive catalog resource of electronic
manufacturers and suppliers. CASI has a banner advertisement on each page of
the industrial computer section directing interested parties to its web site.
CASI will also be listed in the printed edition of the Thomas Register.
CASI expects revenues to increase from a variety of market actions
including sales to current customers, sales of new products to existing and
new customers, sales from e-commerce, and advertising. The Company has no
major acquisitions planned for the next 12 months, but it does expect to
increase its personnel levels in engineering, sales and sales support, and
administration as well as fund increased research and development costs. Cash
provided from operations is believed to be sufficient to fund these increases.
The Company has outstanding warrants with an exercise value 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.
The foregoing contains "forward-looking" statements and information,
all of which is modified by reference to the caption "Risk Factors."
Results of Operations.
- ----------------------
The Company had revenues of $3,642,948 during the calendar year
ended December 31, 1999, as compared to revenues of $922,708 during the period
February 13, 1998 (date of inception) through December 31, 1998; there were no
operations in fiscal 1997, as CASI Texas was organized on February 13, 1998.
During the calendar year ended December 31, 1999, 98% of the Company's
revenues, or $3,572,639, were attributed to operations with Alcatel, as
compared to 67% of revenues, or $619,000, during the prior period. The
balance of these revenues were generated from sales to a variety of small
customers and from the repair of existing Naked Mini Computers. In the 1999
calendar year, the Company's gross profit, before deduction of general and
administrative expenses of $699,082, was $1,435,513; gross profit in the
preceding period was $271,078, before deduction of general and administrative
expenses of $260,344. Principal general and administrative expenses included
payroll expenses ($257,202 and $106,901, respectively); contracted services
($245,925 and $84,711, respectively); and advertising ($20,931 and $15,115,
respectively).
The contracted services were for an outside engineer that helped
design the system being sold to Alcatel, and the advertising expenses were
paid to an outside product sales consultant. Both of these relationships have
terminated and the Company does not expect to incur significant consultant
expenses in the foreseeable future. Fees payable to the Thomas Register will
be approximately $20,000 per year, starting in calendar year 2000.
The Company also incurred research and development expenses of
$214,945 during the period from inception on February 13, 1998, through
December 31, 1998. The majority of these funds were spent for the system
currently being sold to Alcatel, or software development to drive this system.
This development has been completed and the Company did not incur any research
and development expenses in the calendar year ended December 31, 1999.
Management believes that its cash on hand will be sufficient to pay
its income tax liabilities for the year.
Liquidity and Capital Resources.
- --------------------------------
As of December 31, 1999, the Company had cash assets of $178,321,
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 5 of this Report.
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 7. Financial Statements.
---------------------
Audited Financial Statements for the Years Ended December 31, 1999
and 1998
Independent Auditors' Report
Consolidated Balance Sheet
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Financial Statements
<PAGE>
Report of Independent Certified Public Accountants
COMPUTER AUTOMATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Intercontinental Strategic Minerals, Inc.)
December 31, 1999 and 1998
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
Computer Automation Systems, Inc.
We have audited the accompanying consolidated balance sheet of Computer
Automation Systems, Inc., (a Nevada Corporation) (formerly Intercontinental
Strategic Minerals, Inc.) and subsidiary, as of December 31, 1999, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the year then ended. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Computer
Automation Systems, Inc. and subsidiary as of December 31, 1999, and the
consolidated results of their operations and their consolidated cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
KING GRIFFIN & ADAMSON P.C.
Dallas, Texas
March 5, 2000
<PAGE>
Mantyla McReynolds
5872 South 900 East, Suite 250 / Salt Lake City, Utah 84121 / Telephone
(801) 269-1818 / FACS (801) 266-3481
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Computer Automation Systems, Inc.
We have audited the accompanying consolidated statements of operations,
stockholders' equity/(deficit), and cash flows for the period from inception
(February 13, 1998) through December 31, 1998 of Computer Automation Systems,
Inc., formerly Computer Automation Systems, Inc., a Texas corporation. 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 results of operations and cash flows for the period
from inception (February 13, 1998) through December 31, 1998, of Computer
Automation Systems, Inc., 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.)
CONSOLIDATED BALANCE SHEET
December 31, 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 178,321
Accounts receivable (net of allowance for uncollectible
accounts of $9,082) 908,693
Other receivables 25,602
Deferred tax asset 8,903
Inventory 168,168
Total current assets 1,289,687
Property and equipment at cost, less accumulated depreciation 36,930
Total assets $ 1,326,617
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable (includes $318,233 to a related party) $ 437,705
Accrued liabilities 11,322
Warranty reserve 15,000
Income taxes payable 232,871
Total current liabilities 696,898
COMMITMENTS AND CONTINGENCIES (Note 7)
Shareholders' equity
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; 8,369,334 shares issued and outstanding 8,370
Additional paid-in capital 313,097
Retained earnings 308,252
Total shareholders' equity 629,719
Total liabilities and shareholders' equity $ 1,326,617
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
(Formerly Intercontinental Strategic Minerals, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended December 31, 1999 and the
period February 13, 1998 (date of inception) to December 31, 1998
<TABLE>
<CAPTION>
Year ended Period ended
December 31, 1999 December 31, 1998
<S> <C> <C>
Revenues $ 3,642,948 $ 922,708
Cost of sales 2,207,435 651,630
Gross profit 1,435,513 271,078
General and administrative expenses 699,082 260,344
Research and development expense - 214,945
Earnings (loss) from operations before
income taxes 736,431 (204,211)
Income tax expense (benefit)
Current 232,871 -
Deferred 57,231 (66,134)
290,102 (66,134)
Net earnings (loss) $ 446,329 $ (138,077)
Earnings (loss) per common share - basic
and diluted $ .05 $ (.02)
Weighted average shares outstanding -
basic and diluted 8,224,854 7,180,124
</TABLE>
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
(Formerly Intercontinental Strategic Minerals, Inc.)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
For the year ended December 31, 1999 and the period
February 13, 1998 (date of inception) to December 31, 1998
<TABLE>
<CAPTION>
Retained
Additional Earnings/
Common Stock Paid-in (Accumulated
Shares Amount Capital Deficit) Total
<S> <C> <C> <C> <C> <C>
Balances at February
13, 1998 1,412,500 $ 1,412 $ 106,738 $(108,150)$ -
Issuance of common stock
and recapitalization in
reverse acquisition
transaction 6,400,000 6,400 (113,550) 108,150 1,000
Common stock issued for
cash 187,500 188 99,812 - 100,000
Net loss for the period - - - (138,077) (138,077)
Balances at December 31,
1998 8,000,000 8,000 93,000 (138,077) (37,077)
Common stock issued for 333,334 334 214,133 - 214,467
cash
Stock issued for services 36,000 36 5,964 - 6,000
Net earnings for the year - - - 446,329 446,329
Balances at December 31,
1999 8,369,334 $ 8,370 $ 313,097 $ 308,252 $629,719
</TABLE>
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
(Formerly Intercontinental Strategic Minerals, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended December 31, 1999 and the period
February 13, 1998 (date of inception) to December 31, 1998
<TABLE>
<CAPTION>
Year ended Period ended
December 31, 1999 December 31, 1998
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ 446,329 $ (138,077)
Adjustments to reconcile net earnings (loss)
to net cash used in operating activities:
Depreciation and amortization 19,814 9,219
Deferred taxes 57,231 (66,134)
Bad debt expense 4,599 11,997
Stock issued for services 6,000 -
Changes in operating assets and
liabilities:
Accounts receivable (701,245) (224,044)
Inventory (159,320) (8,848)
Other receivables (21,409) (4,193)
Other assets 2,944 (2,944)
Accounts payable 114,044 323,661
Other liabilities (18,313) 29,635
Warranty reserve 15,000 -
Income taxes payable 232,871 -
Net cash used in operating activities (1,455) (69,728)
Cash flows used in investing activities
Capital expenditures (9,640) (56,323)
Net cash used in investing activities (9,640) (56,323)
Cash flows provided by financing activities
Proceeds from issuance of stock 214,467 101,000
Payments on loan from shareholder (41,130) (40,354)
Proceeds on loan from shareholder - 81,484
Net cash provided by financing
activities 173,337 142,130
Net increase in cash 162,242 16,079
Cash, beginning of period 16,079 -
Cash, end of period $ 178,321 $ 16,079
Supplemental disclosures for cash flow information:
Cash paid for interest $ 28 $ -
Cash paid for income taxes $ - $ -
</TABLE>
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
(Formerly Intercontinental Strategic Minerals, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
- ------------
Intercontinental Strategic Minerals, Inc. ("ISM" "CASI" 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-Texas"),
pursuant to an Agreement and Plan of Reorganization. CASI-Texas 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 of ISM common stock to CASI-Texas' shareholders for all of the
outstanding common stock of CASI-Texas. At the time of said issuance, ISM had
1,600,000 shares outstanding. Immediately after this issuance, CASI-Texas'
shareholders owned 6,400,000 of the total outstanding of 8,000,000 shares, or
80%. For accounting purposes, the acquisition of CASI-Texas by ISM was
accounted for as a recapitalization of CASI-Texas with CASI-Texas as the
acquirer (a reverse acquisition) whereby CASI-Texas is considered to have
issued 1,600,000 common shares for the net monetary assets of ISM.
Accordingly, the financial statements prior to the reverse acquisition date
included herein are those of CASI-Texas. ISM had a book value equal to its
cash value, $100,000, at the date of the reverse acquisition.
Principles of Consolidation
- ---------------------------
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
- -------------------------
For purposes of the statements of cash flows, the Company considers all highly
liquid investments purchased with an original maturity date of three months or
less to be cash equivalents.
Inventory
- ---------
Inventory consists of component parts and finished goods valued at the lower
of cost or market (net realizable value) using the first-in, first-out (FIFO)
method.
Property and Equipment
- ----------------------
Property and equipment are stated at cost. Depreciation is provided using the
double-declining balance method over the useful lives of the related assets.
Expenditures for maintenance and repairs are charged to expense as incurred.
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
(Formerly Intercontinental Strategic Minerals, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Income Taxes
- ------------
The Company recognizes deferred tax assets or liabilities computed based on
the difference between the financial statements and income tax basis of assets
and liabilities using the enacted marginal tax rate. Deferred income tax
expenses or credits are based on the changes in the asset or liability from
period to period.
Revenue Recognition
- -------------------
Revenue is recognized when earned. For products which the Company designs and
engineers or manufactures, revenue is recognized when products are shipped.
Revenue is recognized for services such as custom design, configuration, and
programming, when provided to customers.
Warranty Reserve
- ----------------
The Company provides a reserve for warranty expense for estimated costs to be
incurred on items sold.
Earnings (Loss) Per Common Share
- --------------------------------
Basic earnings (loss) per common share is computed by dividing the net
earnings (loss) by the weighted average number of common shares outstanding
during each period presented. Diluted earnings (loss) per share is computed
based on the weighted average number of common shares outstanding plus the
number of additional common shares that would have been outstanding if
dilutive potential common shares, consisting of stock options and warrants,
had been issued. Common stock equivalents were not included in the computation
of diluted earnings per share for 1999 because their inclusion is
antidilutive. There were no outstanding common stock equivalents in 1998.
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.
Fair Value of Financial Instruments
- -----------------------------------
The fair values of the Company's financial instruments, consisting of cash and
cash equivalents, accounts receivable and accounts payable, approximate their
carrying values.
Stock-based Compensation
- ------------------------
The Company has chosen to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No.
25 (APB 25), Accounting for Stock Issued to Employees, and related
interpretations and to apply Statement of Financial Accounting Standards No.
123 (SFAS 123), Accounting for Stock- Based Compensation, on a disclosure
basis only.
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
(Formerly Intercontinental Strategic Minerals, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 199 and 1998
NOTE 2 - INVENTORY
Principal components of inventory at December 31, 1999 are as follows:
Component parts $ 121,963
Completed units 46,205
$ 168,168
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1999 is summarized as follows:
December 31, Depreciable
1999 Life (years)
Testing & Manufacturing Equipment $ 51,572 5 to 7
Office Equipment 14,391 5 to 7
65,963
Less accumulated depreciation (29,033)
$ 36,930
Depreciation expense was $19,814 and $9,219 for the years ended December 31,
1999 and 1998, respectively.
NOTE 4 - INCOME TAXES
Deferred taxes are provided for the temporary differences between the
financial reporting basis and the tax basis of the
Company's assets and liabilities. The temporary differences that give rise to
the deferred tax assets or liabilities at
December 31, 1999 are as follows:
Deferred tax assets
Accounts receivable $ 3,358
Warranty reserve 5,545
Deferred tax asset $ 8,903
Deferred tax assets are included in the balance sheet at December 31, 1999 as
follows:
Current deferred tax asset $ 8,903
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
(Formerly Intercontinental Strategic Minerals, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 4 - INCOME TAXES (Continued)
The provision for income taxes consists of the following:
Year ended Period ended
December 31, 1999 December 31, 1998
Federal
Current $ 204,526 $ -
Deferred 50,265 (66,134)
State
Current 28,345 -
Deferred 6,966 -
$ 290,102 $ 66,134
A reconciliation of income tax expense (benefit) using the statutory federal
income tax rate of 34% to the actual income tax expense is as follows:
Year ended Period ended
December 31, 1999 December 31, 1998
Federal tax expense (benefit)
at statutory rate $ 250,387 $ (69,432)
State tax net of federal benefit 18,708 (6,065)
Adjustment of prior year deferred
tax estimates 19,347 -
Other 1,660 9,363
$ 290,102 $ (66,134)
NOTE 5 - RELATED-PARTY TRANSACTIONS
The Company has a Cooperation Agreement with an entity controlled by a
director and shareholder of the Company. The agreement provides for sharing
complimentary resources in the engineering, manufacturing, and support of
industrial computers. Substantially all product production is provided for
under this agreement. Pricing is negotiated with each order as submitted.
The related party payable as of December 31, 1999 was $318,233. The Company
also leases its facilities from this entity on a month-to-month basis at
$1,505 per month. Total rent expense for 1999 and 1998 was $18,060 and
$6,020, respectively.
In 1998, a shareholder advanced funds totaling $81,484 to the Company during
the year for the purchase of testing equipment and for payment of certain
operating expenses. Advanced funds were repaid by the Company periodically
during 1998 and 1999. The balance due to this shareholder was paid in full as
of December 31, 1999.
In 1999, the Company advanced funds to the Company's president. The balance
due from this individual as of December 31, 1999 was $9,032. This amount is
included with other receivables on the balance sheet.
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
(Formerly Intercontinental Strategic Minerals, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 6 - CAPITAL
The Company's capital structure consists of 15,000,000 shares of authorized
common voting stock having a par value of $.001 per share, and 5,000,000
authorized preferred shares having a par value of $.001 per share. Prior to
reorganization, ISM had 1,412,500 shares of common stock issued and
outstanding. Immediately preceding the reorganization, ISM issued 187,500
unregistered shares to four consultants for $100,000 cash, resulting in
1,600,000 shares of common stock outstanding in ISM at the time of
reorganization. Pursuant to the reorganization, 6,400,000 common shares were
issued to officers and directors of CASI-Texas for 100% of the previously
outstanding securities of CASI-Texas (See Note 1), bringing total issued and
outstanding common stock to 8,000,000 shares as of December 31, 1998.
During 1999 the Company issued 333,334 shares of common stock for
approximately $215,000, pursuant to a Regulation 504D offering. The Company
also issued to the purchasers of the common stock, warrants to acquire an
aggregate of 750,000 shares of common stock at an exercise price of $1.00 per
share. These warrants vest immediately and expire one year from the date of
issuance. As of December 31, 1999 no warrants had been exercised.
NOTE 7 - OFFICE LEASE
In 1998 the Company entered into an operating lease with a related party for
its facilities. The lease agreement provides for rent of $1,505 to be paid on
a month-to-month basis. Total rent expense for 1999 and 1998 on this facility
was $18,060 and $6,020, respectively.
Additionally, the Company leases certain equipment under noncancelable
operating leases. The future minimum rental commitments under the leases are
as follows:
Year ending December 31,
2000 $ 18,155
2001 11,155
2002 10,995
2003 and thereafter -
Total $ 40,305
Total rent expense incurred for 1999 and 1998 was $23,660 and $6,020,
respectively.
NOTE 8 - SIGNIFICANT CONCENTRATION OF BUSINESS RISK
Approximately 98% and 67% of revenues in 1999 and 1998, respectively, was from
a single customer. Accounts receivable related to this customer was
approximately $895,000 at December 31, 1999. Accordingly, in the event that
this customer decreases or ceases its activities with the Company, the
Company's results of operations and financial condition would be significantly
affected.
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
(Formerly Intercontinental Strategic Minerals, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 8 - SIGNIFICANT CONCENTRATION OF BUSINESS RISK (Continued)
Substantially all of the Company's production is provided by an entity
controlled by a director and shareholder under a Cooperation Agreement.
Accordingly, in the event that this entity cannot provide this production or
cannot meet the capacity needs of the Company, the Company's ability to meet
its customers' delivery needs may be affected and this effect could be
significant.
The Company maintains cash balances at high credit quality banks which may, at
times, exceed federally insured limits.
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- ---------------------
There were no changes in the Company's principal independent
accountants during the two fiscal years ended December 31, 1999, and 1998.
On February 28, 2000, which is subsequent to the period covered by
this Report, the Company's Board of Directors unanimously resolved to dismiss
Mantyla McReynolds, Certified Public Accountants, of Salt Lake City, Utah,
which had audited its financial statements for the calendar years ended
December 31, 1998, and 1997, and to engage King Griffin & Adamson P.C.,
Certified Public Accountants, of Dallas, Texas, to audit its financial
statements for the calendar year ended December 31, 1999. This change in
accountants was disclosed in a Current Report on Form 8-K, dated February 28,
2000, which was filed with the Securities and Exchange Commission on March 2,
2000, and which is incorporated herein by reference. See the Exhibit Index,
Part III, Item 13 of this Report.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
- --------------------------------------------------
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 *
Director 7/28/98 *
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, President and Director.
Mr. Cherry is 44 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.
Compliance with Section 16(a) of the Exchange Act.
- --------------------------------------------------
Each of the Company's directors and executive officers filed a Form
3 Initial Statement of Beneficial Ownership of Securities with the Securities
and Exchange Commission on or about April 13, 2000. To the best knowledge of
management, all reports required to be filed by members of management under
Section 16(a) of the 1934 Act have been filed.
Item 10. Executive Compensation.
-----------------------
Cash 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, Pres. 12/31/99 $104,000 0 0 (2) 0 0 0
Director (1)
William T. 12/31/98 0 0 0 0 0 0 0
Criswell, 12/31/99 (1) 0 0 (2) 0 0 0
Chairman
Connie 12/31/98 0 0 0 0 0 0 0
Cherry, 12/31/99 0 0 0 (2) 0 0 0
Secretary
and Director
Chris 12/31/98 0 0 0 0 0 0 0
Poinsatte, 12/31/99 0 0 0 (2)(3) 0 0 0
CFO and
Director
Sylvia 12/31/98 0 0 0 0 0 0 0
McCollum, 12/31/99 0 0 0 (2) 0 0 0
Director
Frank 12/31/98 0 0 0 0 0 0 0
Neukomm, 12/31/99 0 0 0 24,000 0 0 0
Director (2) (4)
James R.
Twedt, 12/31/98 0 0 0 0 0 0 $6,941
Former 12/31/99 0 0 0 12,000 0 0 0
Sec/Treas/
Director
James T.
Williams 12/31/98 0 0 0 0 0 0 0
Former 12/31/99 0 0 0 0 0 0 0
Director
</TABLE>
(1) On October 22, 1999, the Company's Board of Directors resolved
to increase Mr. Cherry's salary to $100,000 per year and to pay Mr. Criswell a
salary of $36,000 per year.
(2) On October 22, the Company's Board of Directors resolved to
issue each director 12,000 "unregistered" and "restricted" shares of the
Company's common stock for each year of service to the Company, commencing on
the date of the resolution. The stock may be issued to a director at anytime
during the year at the directors request. As of December 31, 1999, only Frank
Neukomm and James Twedt had elected to have their 12,000 shares issued. See
the heading "Compensation of Directors," below.
(3) On March 6, 2000, the Company's Board of Directors resolved to
create an audit committee, on which Mr. Poinsatte and Mr. Neukomm will serve
in consideration of the payment of 1,000 "unregistered" and "restricted"
shares of the Company's common stock to each member for each audit committee
meeting attended. See the heading "Compensation of Directors," below.
(4) On December 30, 1999, Mr. Frank Neukomm was issued 12,000
"unregistered" and "restricted" shares of the Company's common stock as
compensation for performing consulting services related to the Company's 1998
audit and Form 10-SB filing for the Company during 1999. See the heading
"Compensation of Directors," below.
Except as set forth above, 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, 1999, and
1998. 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.
- --------------------------
On October 22, the Company's Board of Directors resolved to issue
each director 12,000 "unregistered" and "restricted" shares of the Company's
common stock for each year of service to the Company, commencing on the date
of the resolution. The stock may be issued to each director at anytime during
the year at the director's request. As of December 31, 1999, only Frank
Neukomm and James Twedt had elected to have their 12,000 shares issued.
On March 6, 2000, the Company's Board of Directors resolved to
create an audit committee with Mr. Poinsatte as the chair. It was also moved
that Frank Neukomm would serve on the committee and that Mr. Derek Wirgau
would serve as the outside independent audit committee member. The Board
further resolved to issue 1,000 "unregistered" and "restricted" shares of the
Company's common stock to each member for each audit committee meeting
attended.
In December, 1999, Mr. Frank Neukomm was issued 12,000
"unregistered" and "restricted" shares of the Company's common stock as
compensation for performing consulting services related to the Company's 1998
audit and Form 10-B filing for the Company during 1999.
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.
Bonuses and Deferred Compensation
- ---------------------------------
None.
Compensation Pursuant to Plans
- ------------------------------
None.
Pension Table
- -------------
None; not applicable.
Other Compensation
- ------------------
None.
Termination of Employment and Change of Control Arrangements
- ------------------------------------------------------------
None.
Item 11. 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 Report, assuming 8,393,334 shares are outstanding:
<TABLE>
<CAPTION>
Number of Shares Percentage
Name and Address Beneficially Owned of Class
- ---------------- ------------------ --------
<S> <C> <C>
Michael E. Cherry 4,203,000 (1) 50.1%
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 6,027,000 71.8%
</TABLE>
(1) A total of 60,000 of these shares are held in the names of
Mr. Cherry's minor children.
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 Report, assuming
8,393,334 shares are outstanding:
Number of Shares Percentage of
Name and Address Beneficially Owned of Class
- ---------------- ------------------ -------------
[S] [C] [C]
Michael E. Cherry 4,203,000 (1) 50.1%
1825 E. Plano Parkway
Suite 200
Plano, Texas 75074
William T. Criswell -0- -0-
2756 Fairwood Avenue
Carrollton, Texas 75006
Connie Cherry -0- (2) -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 145,401 1.7%
6601 Kirby Drive
Suite 600
Houston, Texas 77005
TOTALS 5,260,401 62.7%
(1) A total of 60,000 of these shares are held in the names of
Mr. Cherry's minor children.
(2) 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 12. 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 of this Report) and the lease of the
Company's principal executive offices (see Part I, Item 2).
Parents of the Issuer.
- ----------------------
The Company has no parents, except to the extent that directors and
executive officers may be deemed to be parents by virtue of collective
ownership of a majority of issued and outstanding shares.
Item 13. Exhibits and Reports on Form 8-K.
---------------------------------
Reports on Form 8-K.
- --------------------
Current Report on Form 8-K, dated February 28, 2000, previously
filed with the Securities and Exchange Commission.
Exhibits*
(i)
Registration Statement on Form 10-SB, as amended, previously filed
with the Securities and Exchange Commission**.
Initial Articles of Incorporation filed in the State of Utah.**
Initial Articles of Incorporation filed in the State of Nevada.**
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.**
Certificate of Amendment changing the name of the Company to
"Computer Automation Systems, Inc." in the State of Nevada.**
By-Laws**
Agreement and Plan of Reorganization with CASI Texas, with
exhibits.**
Purchase Agreement with Alcatel Network Systems, Inc., with
attachments**
Calculation of Weighted Average Shares**
Subsidiaries**
Financial Data Schedule.**
(ii)
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
* Summaries of all exhibits contained within this
Report 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
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
COMPUTER AUTOMATION SYSTEMS, INC.
Date: 4-11-00 By /s/ Michael E. Cherry
----------- -------------------------
Michael E. Cherry, Chief
Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this Report has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates indicated:
Date: 4-11-00 By /s/ Michael E. Cherry
----------- -------------------------
Michael E. Cherry, Chief
Executive Officer and Director
Date: 4/11/00 By /s/ William T. Criswell
------------ ------------------------
William T. Criswell, Director
Date: 4/11/00 By /s/ Chris Poinsatte
------------ ------------------------
Chris Poinsatte, Director and
Chief Financial Officer
Date: 11 Apr. 00 By /s/ Frank Neukomm
------------ ------------------------
Frank Neukomm, Director
Date: 4-11-00 By /s/ Sylvia McCollum
------------ ------------------------
Sylvia McCollum, Director
Date: 4-11-00 By /s/ Connie Cherry
------------ ------------------------
Connie Cherry, Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 178321
<SECURITIES> 0
<RECEIVABLES> 934295
<ALLOWANCES> 0
<INVENTORY> 168168
<CURRENT-ASSETS> 1289687
<PP&E> 65963
<DEPRECIATION> 29033
<TOTAL-ASSETS> 1326617
<CURRENT-LIABILITIES> 696898
<BONDS> 0
0
0
<COMMON> 8370
<OTHER-SE> 621349
<TOTAL-LIABILITY-AND-EQUITY> 1326617
<SALES> 3642948
<TOTAL-REVENUES> 3642948
<CGS> 2207435
<TOTAL-COSTS> 2207435
<OTHER-EXPENSES> 699082
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 736431
<INCOME-TAX> 290102
<INCOME-CONTINUING> 446329
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 446329
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.05
</TABLE>
