UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
for the fiscal year ended September 30, 1999 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from __________ to ___________
Commission file number 0-14273
Integrated Spatial Information Solutions, Inc.
(Name of small business issuer)
Colorado 84-0868815
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1597 Cole Boulevard, Suite 300, Golden, CO 80401
(Address of principal executive offices) (Zip code)
Issuer's telephone number (303) 274-8708
Securities registered pursuant to Section 12(g) of the Exchange Act:
Title of each class
Common Stock, no par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities and Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant'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. [X]
The issuer's revenues for its most recent fiscal year were $7,990,808.
As of December 27, 1999, the aggregate market value of the shares of the
issuer's voting stock held by non-affiliates of the issuer based on the average
of closing bid and asked prices of the Common Stock as reported on the OTC
Bulletin Board, was approximately $2,862,513.
As of December 27, 1999, the issuer had outstanding 13,482,487 shares of Common
Stock.
Transitional Small Business Disclosure Format: Yes [ ] ; No [ X ]
<PAGE>
PART I
This annual report contains forward-looking statements that describe the
business and prospects of Integrated Spatial Information Solutions, Inc. (the
"Company") and the expectations of the Company and management. These statements
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those set forth. These risks and uncertainties include
but are not limited to: the timing of and expense associated with, expansion and
modification of the Company's operations in accordance with its business
strategy or in response to competitive pressures or other factors arising in the
future. All statements other than statements of historical fact included in this
annual report, including without limitation, expected growth of the domestic and
global geographical information systems markets, beliefs regarding the strength
of the Company's market position with respect to new or contemplated business
strategies and activities, expectations regarding availability and marketability
of new digital imaging products, anticipated growth in the Company's revenue and
profitability, cash operating costs and certain significant expenses, and
potential acquisitions of, or strategic partnering with, other geographic
information system providers, are forward-looking statements. Factors that could
cause actual results to differ materially include, among others, the entry of
new companies into the geographic information systems business, unanticipated
competition from new strategic alliances in the industry, increased price
competition from software manufacturers and affiliated vendors, decreased
reliance on custom design software services, shifts in governmental policy on
the availability of government-owned data and difficulties in hiring and
retaining sufficient numbers of professional and other skilled personnel. All
forward-looking statements included in this annual report are based on
information available to the Company on the date hereof and the Company assumes
no obligation to update such statements. Although the Company believes that the
assumptions and expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct or that the Company will take any actions that may presently be
planned.
Item 1 - DESCRIPTION OF BUSINESS
(a) Business Development.
Integrated Spatial Information Solutions, Inc. (the "Company") was incorporated
as DCX, Inc., a Colorado corporation, on December 8, 1981. At that time it
operated in the custom design and contract manufacture of aircraft related
electronic interconnect assemblies, principally under contracts for Department
of Defense acquisition programs or for military aircraft maintenance support.
The Company sought to expand and diversify its business and as a result, on
September 22, 1997 it acquired all the outstanding shares of PlanGraphics, Inc.
an information technology company focusing on spatial and data management in the
geographic information systems arena with headquarters in Frankfort, Kentucky.
Subsequently, on October 8, 1997 the Company completed the sale of its defense
electronics manufacturing assets, which was effective September 30, 1997. On
June 29, 1998, the Company's name changed to Integrated Spatial Information
Solutions, Inc. For the fiscal year in this report the Company's principal
business is carried out through its wholly owned subsidiary, PlanGraphics, Inc.
PlanGraphics' principal business is in information technology providing
solutions to spatial and data management through the design and implementation
of geographic information systems for local, state and foreign governments, gas,
electric and telephone utilities, and other commercial entities. PlanGraphics is
a Maryland corporation and was incorporated in 1979.
(b) Business of Issuer
Primary operations.
The Company operates in the information technology arena and focuses on spatial
data management and integration solutions for its customers. It does so by
specializing in the design and implementation of geographic information systems
("GIS") combining computer-based interactive map displays with database
management software for the management, analysis and visualization of spatial
and other data. The digital GIS files manipulated by software become powerful
information tools that enable organizations to improve operating efficiencies,
reduce costs and increase profitability. Spatial technology in the form of GIS
is being adopted for an increasing range of commercial applications as
information technology costs decline and the value of the spatial component of
information is realized. The Company is a fully integrated GIS implementor
providing its strategic business partners with total information technology
solutions. Its services are presently in three areas:
<PAGE>
- - Advisory services including strategic planning, feasibility studies,
implementation planning and technology evaluation.
- - Implementation services including the procurement, installation, training,
operation and development of GIS applications for clients.
- - Data integration services including quality control, custom database
construction and maintenance, and data dissemination to facilitate the use of
GIS data by technical and other users with a need for resulting information.
Spatial and data management GIS applications and services have become
information technology decision making tools for utilities, local and state
government agencies, and land and resource management organizations in a wide
range of applications, including land management, mineral exploration, crop
management and forecasting, environmental remediation, military planning and
surveillance, infrastructure development and construction, and business market
analysis. The domestic GIS market is presently estimated in excess of $2 billion
and the worldwide market exceeds $6 billion.
These applications and services are part of a much broader market, information
systems (IS) and the IS consulting market is expected to double in the next five
years from its present $150 billion to $300 billion. With the anticipated growth
in this market, the Company has determined it will expand the services it offers
to meet the growing information and systems integration needs of public and
private enterprises while maintaining its specialization in spatial information
systems.
The Company's operating subsidiary conducts its business development using a
Principal Selling model. In doing so it draws on its president and four vice
presidents who manage business units and have sales responsibility. Each of the
Practice Managers is supported by a Sales Administrator who has sales and sales
prospect tracking responsibilities. The Company also develops additional
business and follow-on assignments through its Executive Consultants and project
managers. In addition, the Company maintains business alliances with, among
others, Oracle and ESRI. The Company's subsidiary is an authorized reseller of
IKONOS high-resolution space imagery pursuant to an agreement with Space
Imaging, Thornton, CO.
The spatial information management and technology market includes GIS and is
divided into two broad categories--the government sector, which includes
agencies at all levels and is presently the larger of the two categories, and
the commercial sector. The GIS market is highly competitive and the Company
competes with a number of companies engaged in offering similar services.
Competition emanates from four principal sources: competing GIS services
companies with financial ties to software vendors, the internal consulting
practices of GIS software and data conversion vendors, engineering firms, and
small GIS specialty firms. Some of these competitors are better funded and some
of them are small companies with much lower indirect costs. The Company believes
it competes effectively on the basis of breadth and depth of expertise,
independence, and sensitivity to the client's requirement for responsiveness and
timeliness. However, there can be no assurance that the Company will be able to
compete successfully in the future on these terms.
The Company regards certain developed software applications and analyses it has
developed as proprietary and attempts to protect these with a combination of
copyright, trademark and trade secret laws, employee and third party
nondisclosure agreements, and other methods of protection. As in any attempt to
protect proprietary matters, despite precautions it may be possible for
unauthorized third parties to copy certain portions of the Company's products or
reverse engineer or obtain and use information the Company regards as
proprietary. There can be no assurance that the Company's intellectual property
rights can be successfully asserted in the future or will not be invalidated,
circumvented or challenged. In addition, the laws of some foreign countries do
not protect proprietary rights to the same extent as do the laws of the United
States. Any misappropriation of the Company's intellectual property could have
an adverse effect on the Company's business and results of operations. Further,
regardless of the degree of caution exercised by the Company, there can be no
assurance that third parties will not assert infringement claims against the
Company in the future with respect to current or future products. Such an
assertion could require the Company to enter into royalty arrangements or defend
its proprietary rights.
Historically PlanGraphics has had some concentration of revenue (and associated
accounts receivable balances) in certain customers. During the FY 1999
approximately 12.7 percent of its sales were concentrated in one customer as
compared to fiscal year 1998 when 11.6 percent of its sales were concentrated in
another customer. In addition, at September 30, 1999, one customer accounted for
11.4 percent of accounts receivable. The loss of such a key customer could have
an adverse impact on near term revenue.
<PAGE>
The Company has incurred only de minimis costs in complying with environmental
laws. No research and development costs were incurred.
Presently the Company employs a total of 56 full time employees and 40 part-time
employees.
Item 2 - DESCRIPTION OF PROPERTY
The Company leases commercial property suitable for its purposes in several
locations. The Company leases land and a building of approximately 20,500 square
feet in Frankfort, Kentucky under a triple net capital lease. It also leases
office space in Golden, Colorado of approximately 1,900 square feet and in
Silver Spring, Maryland, of approximately 3,854 square feet.
At the beginning of this reporting period, the Company owned rental property,
its former manufacturing facility, a 34,000 square foot facility located on a
9.45 acre site on State Highway 83, north of Franktown, Colorado, between Denver
and Colorado Springs. These facilities were leased to a third party who
exercised an option to buy the entire facility and that transaction was
completed in April 1999.
Item 3 - LEGAL MATTERS
Claim for Arbitration by Former CEO and Chairman. The Company was a defendant in
an arbitration action brought by its former Chairman and CEO, Stephen Carreker
alleging "constructive termination" of an employment agreement. Through a civil
claim filed in July, 1999 in Denver District Court, the Company asserted damages
incurred by the Company for actions taken and not taken by the former Chairman
and CEO (see Form 8-K, July 1, 1999). The matter was resolved through settlement
dated November 19, 1999. The settlement required the Company to pay a total of
$236,250 to Mr. Carreker and his counsel. All costs of the settlement have been
recorded as of September 30, 1999.
The Company is engaged in various other litigation matters from time to time in
the ordinary course of business. The Company will vigorously defend its
positions and believes the outcome of any litigation will not have a material
effect on the Company.
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 2, 1999 shareholders of the Company elected the Board of Directors
at the Annual Shareholders' Meeting. The results of the election were:
Director Nominee Votes for Votes Withheld
---------------- --------- --------------
Jeanne Anderson 7,991,415 1,879,470
John Antenucci 9,340,783 530,102
Fred Beisser 9,056,873 814,012
Gary Murray 9,784,303 86,582
Ray O'Mara 9,354,903 515,982
Gary Reed 9,355,903 514,982
PART II
Item 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) From June 10, 1989 through September 8, 1998, the Company's common stock was
traded on the National Association of Securities Dealers Automated Quotation
("NASDAQ") system on the NASDAQ Small Cap System(sm). As a result of not meeting
certain NASDAQ listing requirements, the Company's common stock ceased trading
on the NASDAQ Small Cap Market System and began trading on the Over-The-Counter
Bulletin Board system effective September 9, 1998. The trading symbol is ISSS.
Such quotations reflect inter-dealer prices without retail markup, markdown, or
commission, and may not necessarily represent actual transactions. The quarterly
ranges of high and low sales prices per share for the past two fiscal years have
been as follows:
<PAGE>
Sales Price
----------------------------
Quarters Ended High Low
-------------- ---- ---
December 31, 1997 $1.88 $ .81
March 31, 1998 2.13 .81
June 30, 1998 2.63 1.00
September 30, 1998 1.25 .31
December 31, 1998 .40 .38
March 31, 1999 .66 .38
June 30, 1999 .44 .25
September 30, 1999 .38 .27
As of November 30, 1999, the Company believes there are approximately 4,350
beneficial owners of the Company's common stock of which 2,212 are registered
with the transfer agent and the balance are held in street name. The Company has
never paid a cash dividend on its common stock. The Company currently intends to
retain any earnings for use in business development.
Item 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Financial Condition (Liquidity and Capital Resources)
The following discussion of liquidity and capital resources addresses the
combined requirements and sources of the Company and its subsidiary as of
September 30, 1999.
Liquidity
At September 30, 1999, the Company had working capital of $251,800 and its
current ratio was 1.11:1; unrestricted cash balances available for immediate use
amounted to $373,825. This reflects changes from working capital in the prior
year of $653,180 and a current ratio 1.20:1; cash balances available for use
amounted to $55,045 at September 30, 1998. The decrease in working capital is
primarily related to reduction of notes payable amounting to $831,303 and
accounts payable by $199,357 offset by a decrease in accounts receivable of
$645,311. Changes in cash during fiscal year 1999 (FY 1999) resulted in a net
increase of $318,780 as compared to a decrease during fiscal year 1998 (FY 1998)
of $527,281. A significant cause for the increase in cash during FY 1999 was the
receipt of proceeds from the sale of a Company building.
<PAGE>
Cash of $141,388 was provided by operating activities during FY 1999 versus a
use of $2.4 million in FY 1998. Major causes for the $2.3 million change were: a
gain on the government litigation settlement of $414,312; a reduction in the
value of stock issued for services of $368,134; the absence of stock and warrant
expenses for acquisitions and related services of $494,143; a reduction in
accounts receivable this fiscal year versus an increase in the prior year for a
change of $537,645; and a reduction in the decrease to accounts payable of
$470,247.
The Company has, at the end of FY 1999, lease payment commitments through 2004
of $2,380,604, which will require total annual payments of approximately
$655,000 in fiscal year 2000 (FY Y2K). Of this required payment amount,
approximately $409,000 is for capital lease obligations and $246,000 relates to
operating leases. Management believes normal operating cash flows are adequate
to fund these payments. (See also Note 5 to the Financial Statements.) The
Company considers its facilities adequate to support anticipated sales and
operations for the next several years; accordingly, no major commitment for
additional facilities expansion have been entered into for the twelve months
ended September 30, 2000. Approximately $222,600 of principal payments on a note
are due during FY 2000; the reduction is structured in monthly payments and
management believes monthly cash flows will be adequate to meet these
obligations.
Cost reductions and other efficiencies associated with improved operational
performance at the operating subsidiary during FY 1999 have achieved enhanced
financial performance and positive cash flow on a consolidated basis. As
discussed at Note 3 in the accompanying financial statements, the Company has
secured through its subsidiary a letter of credit for up to $1.2 million based
upon accounts receivable; the line of credit provides for cash advances of up to
80 percent of eligible receivables thereby potentially resulting in enhanced
available cash resources and making cash available sooner from qualifying
outstanding accounts receivable. In addition, the Company has secured through
its subsidiary an extension to its equipment lease line of credit. Accordingly,
the Company believes it has adequate liquidity and capital resources to be able
to meet the known cash requirements of its operating subsidiary resulting from
current level of operations and considering presently projected cash inflows.
In order to carry out its expansion plans during FY 2000, the Company believes
it will need to raise additional funds through equity or debt placements in
order to meet its cash requirements for working capital and expansion efforts
until it can operate on internally generated cash flows in the expanded form. On
December 20, 1999, the Board of Directors approved a private placement offering
in an effort to raise up to $400,000 from accredited investors including its
Board of Directors and Executive Management. The offering is intended to
supplement the contributions from its subsidiary operation to cover the
settlement of the Carreker arbitration and ordinary operations through and
beyond the second quarter of 2000. While the Company has previously been
successful in raising funds through debt and equity, there is no guarantee the
Company will be successful in raising additional funds.
The Company does not believe that its business has been significantly impacted
during the past three years by general cost inflation; however, it has noted a
trend of increasing compensation required to retain key professional staff and
to fill its key professional staffing positions during the past year.
Capital Resources
The Company has taken actions to increase its exposure to the investment banking
community in carrying out its expansion plans. It has retained the services of
Quarterdeck Investment Partners (Washington, D.C. and Los Angeles CA) and
Lopata, Flegel & Co. (St. Louis, MO) to assist with the identification, analysis
and acquisition of targeted geographic information system (GIS) and information
technology (IT) companies. Quarterdeck Investment Partners, Washington D.C.,
which specializes in merger and acquisition activity within the
aerospace/defense and IT industries, and Lopata Flegal concentrate on the IT
sector. In addition the Company continues to apprise relevant principals in
other investment banking organizations of its diversification activities,
acquisition program and other business development endeavors designed to result
in new business. As a result the Company has historically secured needed
financing through the placement of equity. As discussed at Note 13_??__ in the
accompanying financial statements, the Company has also secured a letter of
commitment for a $1.2 million asset based line of credit for internal working
capital needs. An additional placement of equity or debt or the successful
negotiation of a credit facility will be needed to meet projected cash demands
for expansion programs and the Board of Directors has approved a private
placement offering for up to $400,000 as described in the previous section.
There can be no assurance the Company will be successful in these efforts.
<PAGE>
Results of Operations
The following discussion of Results of Operations addresses the Company's
operations. See also the forward looking statement disclaimer in Part I as it
pertains to nonfactual and non-historical statements appearing within this
section.
Continuing Operations--Fiscal Year 1999 compared to Fiscal Year 1998
Losses. The Company reported a reduced operating loss of $1,298,342 in FY 1999
versus $2,401,789 for FY 1998, a decrease of $1,103,447. The Company also
reported a net loss of $1,057,779 versus last year's loss of $3,000,864 for a
decrease of $1,943,085 over the prior year amount. The change in the loss from
continuing operations resulted from closer attention to cost controls, reduction
in parent company overhead and reduced consulting expenses.
Consolidated revenue for FY 1999 was $7,990,808 and is down slightly from FY1998
revenue $8,146,367. Management believes that many customers and potential
customers withheld the commencement of new work due to concerns about possible
Y2K effects. Accordingly, management believes that the industry will see
significant project awards and orders beginning with the new calendar year,
2000.
Total FY1999 costs and expenses amounted to $9,289,150 or 116.2% of revenue
which is down from $10,548,156, or 129.5% of revenue for the prior year.
Significant reductions in costs and expenses were primarily related to major
reductions in general and administrative expenses of approximately $1.3 million.
This reduction resulted from decrease in legal and consulting fees of about
$849,000; reduction in travel related expenses of $102,000; reduction of
occupancy and office operating costs of $175,000; and a decrease in expenses
related to the Company's Franktown facilities by $192,000. In addition,
marketing related expenses decreased by approximately $80,000 from closer cost
controls and temporary spending halts as the Company began the process of
repositioning itself for new directions in FY2000.
While salaries and benefits increased by approximately $115,000 due to
increasing competition for experienced high-tech employees, other operating
expenses decreased by $118,000 as depreciation and amortization was reduced,
along with a decrease of $113,000 from closer management of direct contract
costs.
Interest expense amounted to $434,268 during FY 1999, a decrease of $106,222
from the $540,490 of interest expense during the prior year. The decrease is
attributable to the liquidation of the $620,000 mortgage associated with land
sold by the Company in FY 1999, and an overall reduction of other debt.
Other income increased significantly over the prior year total as a result of
the Company recording a gain $414,000 from the settlement of the longstanding
government litigation and a gain on the sale of its Franktown property of
$173,000. FY 1998 expense included the write down of capitalized software for
$262,927, which did not reoccur during the current fiscal year.
The net loss attributable to common shareholders for the current fiscal year did
not include deemed dividends for convertible preferred stock that had been
reported in the prior year of $476,112. There were $36,723 of preferred stock
dividends in the current year.
Operations Outlook.
The Company has taken steps to reduce the operating overhead of the parent
corporation through the closing of its Jacksonville office, eliminating
corporate office staff and carefully monitoring other corporate costs. Corporate
cost savings included reduced costs of medical and other fringe benefits. In
addition the Company has consolidated the role of CEO and president and has
delegated the duties of the Chief Financial Officer to its subsidiary's CFO and
accounting staff. The Company intends to fill these roles as acquisitions and
expansion dictate.
<PAGE>
The consolidated results in this report are also adversely affected by the
overhead structure established at the parent company in anticipation of its
developing acquisition program and the costs of maintaining high levels of
compliance with SEC reporting needed to retain the Company's OTCBB listing and
to position itself for a return to trading status on the NASDAQ
The Company believes that information technology, which includes Geographic
Information Systems (GIS), is a global market that is rapidly evolving and
becoming the basis for a myriad of new applications and services to solve
customer problems and creating additional markets. The Company believes the
gross potential profit margins in information technology are much higher than
presently experienced and is working to grow the spatial data management and
integration solutions of its GIS business base according to forward looking
statements in its business plan, augmenting growth to be achieved through
acquisitions.
The Company has work backlog and assignments of approximately $5.4 million
comparing favorably to a total of $5.2 work backlog and assignments at September
30, 1998. In the prior year report, the Company had reported approximately $9.7
million in backlog and assignments as of early January 1999 that included awards
subsequent to the end of the 1998 reporting period. The difference in reporting
dates from last year must be considered in evaluating the lower amount in this
report. Management believes that awards of new work in the first quarter
subsequent to the end of the FY1999 reporting period will be less than
experienced in the first quarter of FY1998 and that the reduced awards activity
is temporary and coincident with industry wide lag in purchasing by
organizations preoccupied with Y2K issues.
Currently, the Company plans to grow internally and through acquisitions. As
noted previously, the Company has taken specific steps to position itself for
additional acquisitions including reorganizing its corporate governance and
management structure and the retention of third party advisors and investment
bankers.
Deferred Tax Valuation Allowance--FY 1999
As discussed in Note 4 in the accompanying financial statements, the Company has
net operating loss carry forwards for income tax purposes of approximately $8.4
million. The Company has established a 100 percent valuation allowance on the
net deferred tax asset arising from the loss carry forwards in excess of the
deferred tax liability. The valuation allowance has been recorded, as the
Company's management has not been able to determine that it is more likely than
not that the deferred tax assets of the Company will be realized.
Year 2000 Effect
The Company has completed its review of the extent to which its own computer
systems and hardware, and non-information technology equipment, are capable of
operating on and after January 1, 2000 without error or other deficiency ("Year
2000 Compliance"), and believes that the year 2000 will not have a material
impact upon its own software, hardware and non-information technology equipment.
Updates and upgrades, which are required, have been made; the Company completed
these prior to the end of its fiscal year 1999. To date, the Company has
incurred minimal capital expenditures to investigate and remediate Year 2000
Compliance problems.
Suppliers to the Company consist of database software developers and geographic
information system providers. The Company's review has also included an analysis
of its material suppliers and customers as to the Year 2000 compliance of their
systems and equipment, and the Company set in motion an effort to obtain written
assurances from these suppliers and customers regarding their Year 2000
Compliance status.
The Company's contingency plan in the event of any customer Year 2000 Compliance
problems is to offer direct consulting and programming services to offset the
demands placed on the clients' internal resources. The Company believes that its
customers would require database construction and development services to
continue during any period in which supplier products experience Year 2000
issues. The Company also believes that the various satellite, airborne and
ground-based sources of data provided to the Company are presently or will
timely be Year 2000 Compliant. The Company's contingency plan in the event
material suppliers are not Year 2000 Compliant is to assist customers in
developing alternate means of obtaining the decision-making guidance previously
provided by non-functioning or unavailable data or database products. There can
be no assurance that the failure of the Company and/or its material customers
and suppliers to timely attain Year 2000 Compliance will not materially reduce
Company revenues, or that these failures and/or the impacts of broader
compliance failures by telephone, mail, data transfer or other utility or
general service providers or government or private entities will not have a
material adverse effect upon the Company.
<PAGE>
The Company has incurred de minimis costs insuring it is Year 2000 compliant.
Effect of Recent Accounting Pronouncements
The pronouncement required to be adopted in the subsequent fiscal years is:
In December 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 established
standards for recognizing all derivative instruments including those for hedging
activities as either assets or liabilities in the statement of financial
position and measuring those instruments at fair value. This Statement is
effective for fiscal years beginning after June 30, 2000. Management believes
the adoption of this statement will have no material impact on the Company's
consolidated financial statements.
Item 7 - FINANCIAL STATEMENTS
The financial statements required by this item are included at the end of this
Form 10-KSB. An index to such financial statements and applicable schedules is
contained in that separate section.
Item 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 9 - DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The current directors and executive officers of the Company are:
Name Age Position
---- --- --------
Jeanne M. Anderson 47 Director
John C. Antenucci 53 Vice Chairman, President, Acting CEO and
Director
Frederick G. Beisser 57 Vice President - Finance and Administration,
Secretary, Treasurer and Director
Raymund E. O'Mara 56 Director
Gary S. Murray 47 Chairman and Director
J. Gary Reed 50 Director and Chief Operating Officer,
PlanGraphics, Inc.
<PAGE>
Biographical sketch of current directors and executive officers of the Company
Ms. Jeanne M. Anderson, retired, is a former President and CEO of the Company.
She served as President and Chief Executive Officer from October 1, 1991 through
December 31, 1996. She was Chairman of the Board of Directors from January 1,
1997 through October 2, 1997 and has been a Director of the Company continuously
since 1987.
Mr. John C. Antenucci, President and Acting CEO, was appointed a director on
November 3, 1997. He is the founder of, and has been president and CEO of
PlanGraphics, Inc. since1979. He is a former president of AM/FM International,
(now GITA), a professional association for utility industry users of GIS. He is
also a member of the National Academy of Sciences Advisory Committee on the
Future of the U.S. Geological Survey and served in a similar capacity on the
Academy's Advisory Committee for Mapping Sciences. He serves as an advisor to
Ohio State University's Center for Mapping, has recently coauthored a chapter of
a to be published text book on GIS, Global Positioning Systems and Remote
Sensing and was editor and coauthor of a leading textbook on geographic
information systems. Mr. Antenucci holds an MS in Civil Engineering/Water
Resources from Catholic University of America in Washington, DC and a Bachelor
of Civil Engineering from the same institution.
Mr. Frederick G. Beisser, Vice President - Finance and Administration, joined
the Company as Chief Financial Officer in July 1990 and was promoted to his
present position on March 28, 1997. He was appointed to the Board of Directors
in March 1991, at which time he became Treasurer and was appointed Secretary on
October 1, 1991. Mr. Beisser is a Colorado Certified Public Accountant.
Previously he headed Budget & Cost Analysis for the Air Force Accounting &
Finance Center in Denver, Colorado, from 1985 to 1989. He held Air Force budget
management positions in Europe, and controller and accounting positions with the
Air Force in the United States and abroad. Retired with the rank of Major in
1989, he holds a Ph.D. from American International University in Canoga Park,
California, an MBA from Golden Gate University in San Francisco and a BS in
Business Administration from the University of Southern Colorado at Pueblo,
Colorado. In addition he has a diploma from the Air War College. Mr. Beisser is
also a member of the Board of Directors of Wastemasters, Inc. of El Reno,
Oklahoma.
Mr. Raymund E. O'Mara was appointed a director on November 3, 1997. He is a
principal with Booz Allen & Hamilton, consultants since 1996. Prior to joining
Booz Allen & Hamilton Mr. O' Mara was vice president of Mason and Hanger
Company, Lexington, Kentucky from 1994 to 1996. Mr. O'Mara retired from the
United States Air Force in 1994 with the rank of major general; from 1993 until
his retirement he was Director, Defense Mapping Agency, Bethesda, Maryland and
prior to that was Vice Commander in Chief, Atlantic Command, Norfolk, Virginia
for two years. Mr. O'Mara holds a Master of Arts from State University of New
York at Plattsburgh, NY and BS in Electrical Engineering from the New Jersey
Institute of Technology at Newark.
Mr. Gary S. Murray, Chairman, was appointed a director of the Company on June
26, 1998. He was appointed Chairman of the Board of Directors on July 6, 1999.
Mr. Murray is the founder and president of Human Vision LLC, Greenbelt, MD an
advisory and investment firm. He is also a founder and a principal of Timebridge
Technologies (Lanham, MD), an e'commerce firm specializing in database and
network services. Mr. Murray was founder, chairman and president of systems
integrator Sylvest Management Systems (Lanham, MD) until its acquisition by
Federal Data Corporation in June 1997. He holds a BBA from Howard University,
Washington, DC and is a Certified Public Accountant.
Mr. J. Gary Reed, Chief Operating Officer of PlanGraphics, Inc. was appointed a
director on November 3, 1997. He has been employed with PlanGraphics in several
capacities since 1995. Prior to joining them he held several executive positions
during a 21-year career with Geonex Corporation and was named President of the
corporation in 1994. Mr. Reed holds an MBA from the Keller Graduate School of
Management in Chicago and a BS in Biology from Virginia Polytechnic Institute
and State University in Blacksburg, Virginia.
All directors hold office until the next annual meeting of shareholders and
serve until their successors are duly elected and qualified or until their
earlier death, resignation or removal.
<PAGE>
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3, 4 and 5 submitted to the Company during
and with respect to its most recent fiscal year, the Company believes that all
directors, officers and any beneficial owner of more than 10 percent of its
registered shares timely filed all reports required by Section 16(a) of the
Exchange Act.
Item 10 - EXECUTIVE COMPENSATION
The following table sets forth information concerning the cash compensation paid
and accrued by the Company for services rendered during the fiscal years ending
September 30, 1999, 1998 and 1997 to the CEO and other executive officers of the
Company who had aggregate compensation exceeding $100,000. Ms. Anderson was
President and CEO through December 31, 1996 when Mr. Carreker became President
and CEO on January 1, 1997. On November 3, 1997, Mr. Antenucci assumed the
position of President while Mr. Carreker remained CEO and became Chairman of the
Board of Directors. Eight days of compensation was paid to Mr. Antenucci as an
employee of the Company during fiscal year 1997 subsequent to the acquisition of
PlanGraphics, Inc. although the table, below, reflects his entire compensation
during that year. . Mr. Carreker's service as Chairman and CEO ceased on July 1,
1999 and the Company has reached a settlement agreement with him . (see also
"Disputes with Former Executives", below). Mr. Antenucci became Acting CEO on
July 1, 1999.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards
------------------------------------ --------------------------
Name and Other Stock All Other
Principal Annual Comp- Options Compen-
Position Year Salary ($) ensation (#) sation ($)
-------- ---- ---------- -------- --- ----------
FORMER OFFICERS
Jeanne M. 1999 $ -- $ -- -- $ --
Anderson 1998 -- -- -- --
Former Pres- 1997 48,317 58,000# 111,000 --
ident & CEO
Stephen 1999 124,808 -- -- --
Carreker 1998 175,000 -- 327,655+ --
Former Chair- 1997 106,958 -- 660,622 --
man & CEO
CURRENT OFFICER
John C. 1999 159,374 -- --
Antenucci 1998 175,000 -- 260,853+ --
President & 1997 114,500 20,407* 531,851 --
Acting CEO
# Amount of $58,000 Other Annual Compensation represents severance payment in
connection with Ms. Anderson's resignation as President and CEO.
+ Quantity of Stock Options granted during fiscal year 1998 for Carreker and
Antenucci represents the quantity of antidilution stock options accrued during
the year pursuant to Employment Agreements (the Board of Directors and the
employees have since agreed to annul this provision for periods subsequent to
June 30, 1998) at prices ranging from $1.125 to $2.125 per share. These
antidilution options are prorated between immediately vesting options and
performance based options.
* Amount of Other Annual Compensation represents payment of certain deferred
compensation accrued in prior fiscal years for Mr. Antenucci.
<PAGE>
A total of 30,000 stock options were issued to officers of the Company under the
1991 Stock Option Plan during fiscal year 1997. None were granted in fiscal
years 1998 or in 1999. In addition, the Company granted incentive stock options
in connection with officers' employment agreements amounting to 1,490,000
options and 61,000 to a director during FY 1997. It also granted 360,000 stock
options to a new officer pursuant to his employment agreement in FY 1998. As a
result of antidilution provisions in employment agreements, 380,657 additional
options accrued to officers of the Company during FY 1997 and 877,543 during FY
1998, which were prorated between immediately vested options and performance
based options according to their employment agreements. No such antidilution
options accrued during FY 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no grants to the named officers during fiscal year 1999. The Company
did not make new grants of stock options to the named officers of the Company
during fiscal year 1998. However, during fiscal year 1998 the Company issued
antidilution options of 327,655 and 260,853 to Messrs. Carreker and Antenucci
related to employment agreement options and pursuant to their employment
agreements. Fiscal year 1997 grants to Messrs. Carreker and Antenucci in
connection with their employment agreements consisted of fully vested options of
200,000 and 300,000 shares, respectively, which are immediately exercisable, and
performance options of 180,000 and 225,000, respectively, for which attainment
of certain management goals vests 35%, 35%, and 30% for each of the ensuing
three fiscal years at which time they become exercisable. During FY 1997 they
accrued antidilution options of 280,622 and 6,851, respectively. Mr. Carreker's
486,279 unvested antidilution and performance options reported previously have
been relinquished.
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of Value of Unexercised
Unexercised In-The-Money
Stock Options Stock Options
at FY-End (#) at FY-End ($)
Shares acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
FORMER OFFICERS
Jeanne M.
Anderson
Former Presi-
dent & CEO -- -- 75,000/-0-(1) $ -/-
Stephen
Carreker
Chairman & CEO 526,998/-0- $ -/-
CURRENT OFFICER
John C.
Antenucci, Vice
Chairman & President -- -- 452,966/340,038 $ -0-/-0-
</TABLE>
1. Options for 75,000 shares were granted on April 19, 1995 under the 1991
Plan at $.71875. The grant was at fair market value; no options have been
exercised to date.
2. Mr. Carreker was granted options for 30,000 shares of common stock under
the Company's 1991 Stock Option plan on January 2, 1997 at a price of
$1.125 of which 5,000 have been exercised. In connection with execution of
his employment agreement he received fully vested stock options for 200,000
shares of the Company's common stock awarded effective January 7, 1997. In
addition Mr. Carreker is entitled to 301,998 antidilution options related
to vested stock options.
3. Mr. Antenucci received fully vested stock options for 300,000 of common
stock at a price of $1.75 in connection with his employment agreement on
September 22, 1997. In addition, Mr. Antenucci is entitled to 268,004
antidilution options related to his employment agreement.
The Company does not have a long term incentive plan or a defined benefit or
actuarial form of pension plan.
Employment Agreements.
Mr. Antenucci and the Company's former chief financial officer, Robert S. Vail
(see "Disputes with former executives" below), entered into three-year
employment agreements effective September 22, 1997, and March 18, 1998,
respectively, at salaries of $175,000 (Antenucci) and $120,000 (Vail) per year
with provisions for bonuses of up to 21% of base salary if certain goals are
achieved. The executives received fully vested stock options for 300,000 shares
of the Company's common stock for Mr. Antenucci, and 200,000 for Mr. Vail with
performance options for 225,000, and 160,000 shares respectively, which vest
upon attainment of certain performance goals. In addition, Mr. Antenucci
received a one-time advance payment of $50,000 of his FY 1998 salary for
entering into the agreement. The employment agreements renew automatically for a
term of three years if the Company does not terminate the agreements by June 30,
2000 (Antenucci) or December 31, 2000 (Vail), unless earlier terminated under
the terms of the Agreement. Messrs. Antenucci and Vail are entitled to continued
base compensation for three years following date of termination if not for
death, disability, cause, voluntary resignation other than constructive
termination or the expiration of the agreement's term; if termination is for one
of these reasons then all benefits including salary are continued for 18 months
for Mr. Antenucci and no benefits for Vail. Mr. Antenucci is entitled to a three
year consulting period at one half of average annual salary for the immediately
preceding 36 month period should he exercise his option to terminate his
employment voluntarily after June 30, 2000.
<PAGE>
On June 26, 1998, the Compensation Committee of the Board of Directors reduced
the annual compensation of Mr. Antenucci by 10 percent to a revised annual
amount of $157,500. In addition, the Committee also reduced by 10 percent the
annual compensation of Mr. Vail and another Company employee, both whose
employment agreements had provided for annual compensation in excess of
$100,000. These reductions became effective October 1, 1998. In July 1999 the
Company notified Mr. Vail that it elected not to continue his employment
agreement beyond December 31, 1999. In August 1999 Mr. Vail notified the Company
he viewed certain actions as constructive termination; based on that assertion,
he has demanded arbitration of his claim as provided for in his employment
agreement. (See also "Disputes with former executives," below).
Agreement with Mr. Murray. Effective July 6, 1999 the Company entered into an
Agreement for Services with Mr. Murray, a director of the Company, wherein he is
retained as the Chairman of the Board of Directors. The term of the Agreement
begins July 1, 1999 and ends the earlier of June 30, 2001 or the date upon which
he is not elected as a Director or is removed as a Director. Annual base
compensation for Mr. Murray is set at $50,000, payable in equal monthly
installments of the Company's common stock priced at the average price for the
five business days preceding the date of the Agreement, or $0.2906, and options
to purchase 175,000 shares per annum of the Company's common stock at $0.31 per
share vesting in quarterly installments and exercisable for three years from the
date of the Agreement. In addition, Mr. Murray received incentive options to
acquire 688,235 shares of the Company's common stock fully vested and
immediately exercisable at an exercise price of $0.2906 per share. The Company
has agreed to file a registration statement with the Securities and Exchange
Commission as soon as practicable to register the public sale of the common
stock underlying the options granted under the Agreement. The rights and duties
under the Agreement are not assignable, except that Mr. Murray may assign any
options issuable under the agreement to an entity of which he owns more than 50%
of the voting power and such entity which has received the options may assign
them to Mr. Murray.
Disputes with Former Executives
The Company is the respondent in an arbitration claim by its former chief
financial officer, Mr. Robert S. Vail, who claims that he was constructively
discharged and seeks severance compensation equal to three year's compensation.
The Company asserts that Mr. Vail resigned and was not constructively
discharged; therefore he is entitled to no severance compensation. The case will
be arbitrated in February 2000.
The Company reported on Form 8-K, dated July 1, 1999 the termination of Mr.
Stephen Carreker as Chairman and Chief Executive Officer. The Company and Mr.
Carreker have reached a mutually acceptable agreement concerning the terms of
his departure from the Company. The Company is also withdrawing its civil action
against Mr. Carreker. (See also "Claim for Arbitration by Former CEO and
Chairman" in Item 3, Legal Matters, above)
Director Compensation
Directors who are employees of the Company do not receive any additional
compensation above their full time employment compensation. Nonemployee
directors receive reimbursement of expenses incurred in carrying out their
duties. During the prior fiscal year the Company instituted a standardized
compensation program for nonemployee directors whereby the nonemployee director
receives stock options on the date of election to the Board of Directors to
purchase 10,000 shares of the Company's common stock at the market price on that
date. Such options vest quarterly provided that the grantee has attended 75
percent or more of the scheduled board meetings. In addition each director is
entitled to reimbursement of expenses incurred on behalf of the Company and
nonemployee directors receive $1,000 for each scheduled Board meeting attended
in person and $250 for each scheduled board meeting attended via conference
call. Meetings of committees of the Board of Directors are compensated at $250
per meeting attended in person or via conference call. One nonemployee director,
Ms. Anderson, is compensated at a rate of $850 per month pursuant to previous
practice. During fiscal year 1999 Ms. Anderson received $10,421 in fees and
expenses for her services as a director. During the current fiscal year the
Company paid Mr. O'Mara $7,008 and Mr. Murray $4,882 in fees and expenses for
duties as outside directors. Mr. O'Mara was awarded options to purchase 10,000
shares each of the Company's common stock at a price of $.3125 per share, the
closing price on September 2, 1999, the date of grant.
<PAGE>
Item 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Percentages of shares held by officers and directors of the Company, as well as
those parties owning more than five (5) percent of the Company's no par value
common stock as of the date of this report, are as follows:
Security ownership of certain beneficial owners:
Based on Rule 13d-1 filings under the Exchange Act, the Company believes there
is only one party other than management owning more than five percent of the
common stock of the Company.
Security ownership of certain beneficial owners:
Title of Name of Beneficial Amount & Nature of Percent
Class Owner Beneficial Ownership
- --------------------------------------------------------------------------------
Common Ausost Anstalt Schaan 1,318,792 Sole 10.4
Landstrasse 163 dispositive power
7440 Fuerstentum Liechtenstein
Ausost Anstalt Schaan ("Ausost") is the beneficial owner of 300 shares of
the Company's convertible preferred stock and is required under Rule 13d-1
to report the quantity of the underlying common stock into which the
convertible preferred stock would convert were Ausost to take such action.
Ausost has verbally advised the Company that common stock actually in its
possession is less than 9.9 percent of the outstanding shares of the
Company's common stock.
Security ownership of management:
Title of Name of Beneficial Amount & Nature of Percent
Class Owner 1 Beneficial Ownership 2
- --------------------------------------------------------------------------------
Common Jeanne M. Anderson 114,000 1.3
Director
Common John C. Antenucci, President, 1,555,841 10.3
Acting CEO and Director
Common Frederick G. Beisser 261,743 1.9
Chief Financial Officer, Secretary
Treasurer and Director
Common J. Gary Reed 302,877 2.2
Director
Common Raymund E. O'Mara 17,261 @
Director
Common Gary S. Murray 838,708* 6.0
Chairman and Director
All Directors and Officers
as a group (6 persons) 3,167,929 19.0
NOTES: @ The number of shares constitutes less than one percent of
outstanding shares.
<PAGE>
* The shares reported for Mr. Murray include those held by
HumanVision LLC. of which he is a control person and thereby
controls those shares indirectly.
1. The address for each of the directors of the company is In Care Of
Integrated Spatial Information Solutions, Inc., 1597 Cole Boulevard, Suite
300, Golden, CO 80401.
2. The number of shares beneficially owned includes 1,135,492 shares that
may be acquired within 60 days of this report date under Non Qualified
Stock Options and other Options held by Officers and Directors of the
Company. Such shares and management personnel holding them are: Ms.
Anderson, 75,000; Mr. Antenucci, 452,996 shares; Mr. Beisser, 231,843
shares; Mr. O'Mara, 12,500 shares; Mr. Murray, 58,750 shares and Mr. Reed,
301,934 shares.
Possible Change in Control. The conversion of presently outstanding Series A
Preferred Stock will result in the issuance of Common Stock at discounts from
future market prices, which could result in substantial dilution to existing
holders of Common Stock. Holders of the Preferred Shares are prohibited from
converting their shares into common stock in a number that would cause any
individual holder to hold more than 9.99% of the then outstanding shares of
Common Stock. However, the conversion of all of the Preferred Stock over time,
and following successive conversions of Preferred Stock, and associated sales of
Common Stock, could nonetheless result in the issuance of a number of shares
exceeding 20% of the outstanding Common Stock as of the end of FY 1999, and
could conceivably result in a change of control in the Company.
Item 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related party transaction. Mr. Antenucci is a minority partner in the
organization that owns the facilities leased by PlanGraphics, Inc. in Frankfort,
Kentucky, at an annual lease cost to PlanGraphics of approximately $320,000. As
of September 30, 1999, the Company owes the related party approximately
$1,882,000 under the capital lease obligation. (See also Note 5 to the Financial
Statements.)
Related party agreement. Mr. Murray is the principal owner and executive officer
of HumanVision LLC, an organization that entered into a consulting agreement
with the Company on July 6, 1999. The agreement ends upon the earlier of June
30, 2001; the date upon which Mr. Murray is not elected as a Director or is
removed as a Director; and the date upon which he does not own more than 50% of
the voting power of HumanVision. Under the agreement, HumanVision will provide
certain services related to developing and implementing actions to increase
shareholder value through articulation of a vision for the Company, identifying
and reviewing merger and acquisition candidates, obtaining capital (debt or
equity) to finance mergers and acquisitions, and recruiting and evaluating
candidates for senior executive and director position. Compensation for these
services consists of performance options in two quantities of 322,581 each to
acquire common stock of the Company at an exercise fee of $0.31 per share if the
market capitalization of the Company exceeds $30 million for the first quantity
and $60 million for the second quantity for 20 of 30 consecutive business days
at any time prior to June 30, 2002. The Company will issue each performance
option granted within 30 days of the date the respective performance goal is
achieved and the option will be exercisable for a period of three years from the
date of issue. The Company is obligated to register the public sale of the
underlying common stock as soon as practicable after the options become
exercisable. The agreement also provides for a success fee of 1.5% of the
transaction value in the event the Company successfully completes a merger with
or into another entity or completes any acquisition of stock or assets during
the term of the agreement. The fee, which applies only to those activities
outside the normal course of business and only to entities other than existing
subsidiaries of the Company, is to be paid in the currency of the applicable
transaction for which it is earned.
<PAGE>
PART IV
Item 13 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following financial statements, schedules and exhibits are filed as a
part of this report:
Financial Statements
2. Exhibit Index
The following exhibits are filed as part of this Report:
Exhibit
Number Exhibit Page
- ------ ------- ----
2.1a Acquisition Agreement between DCX, Inc. and
PlanGraphics, Inc. Note 7
2.1b Asset Purchase Agreement between DCX, Inc.
DCX-CHOL Enterprises, Inc. Note 8
3.1 Bylaws of DCX, Inc. Note 1
3.2a Amended and Restated Articles of Incorpor-
ation of DCX, Inc., dated July 8, 1991 Note 2
3.2b Articles of Amendment to the Articles of
Incorporation of DCX, Inc., dated November 6,
1996 Note 4
3.2c Articles of Amendment to the Articles of
Incorporation of DCX, Inc., dated July 30,
1997 Note 9
3.2d Articles of Amendment to the Articles of
Incorporation of Integrated Spatial
Information Solutions, Inc., dated September
15, 1999 and effective 15 October 1999
4.1 Specimen Stock Certificate Note 1
4.2 DCX 1991 Stock Option Plan Note 5
4.3 DCX 1995 Stock Incentive Plan Note 5
4.4 DCX, Inc. Equity Incentive Plan Note 12
4.4 Warrant, dated January 15, 1997 issued to
Transition Partners Limited. Note 3
4.5 Warrant, dated October 15, 1997, issued to
Transition Partners Limited. Note 3
4.6 Warrant, dated January 15, 1997, issued to
Copeland Consulting Group, Inc. Note 3
4.7 Warrant, dated October 15, 1997, issued to
Copeland Consulting Group, Inc. Note 3
4.9 Warrant, dated November 8, 1996, issued to
Coretech, Ltd. Note 3
4.10 Warrants, dated August 19, 1998, issued to
Libra Finance and to The Ridgefield Group. Note 13
4.11 Warrant, dated October 24, 1997, issued to
Gerald Alexander. Note 3
<PAGE>
4.14 Equity Compensation Plan Note 16
10.1 Executive Employment Agreement dated March
28, 1997 between the Company and G. Stephen
Carreker. Note 11
10.2 Executive Employment Agreement dated March
28, 1997 between the Company and Frederick G.
Beisser. Note 11
10.4 Executive Employment Agreement dated
September 22, 1997 between the Company and
John C. Antenucci. Note 12
10.5 Executive Employment Agreement dated
September 22, 1997 between the Company and J.
Gary Reed. Note 12
10.6 Executive Employment Agreement dated March
18, 1998 between the Company and Robert S.
Vail. Note 14
10.7 Agreement for Services dated July 6, 1999
between the Company and Gary S. Murray Note 15
10.8 Consulting Services Agreement dated July 6,
1999 between the Company and HumanVision
LLC. Note 15
21.1 List of Subsidiaries
27.1 Financial Data Schedules
NOTE: 1. Incorporated by Reference from Registration Statements on Form
S-18, file no. 33-1484.
2. Incorporated by Reference from the definitive Proxy Statement,
dated May 3, 1991
3. Incorporated by Reference from the Company's Registration
Statement on Form S-3 (Registration No. 333-39775) filed with the
Commission on November 7, 1997.
4. Incorporated by Reference from Form 8K, dated November 12, 1996.
5. Incorporated by Reference from Form S-8, dated September 29, 1996
6. Incorporated by Reference from Form 10-Q for June 30, 1996, dated
August 1, 1996. The agreement was terminated prior to completion.
7. Incorporated by Reference from Form 8-K, dated September 22,
1997.
8. Incorporated by Reference from Form 8-K, dated October 8, 1997.
9. Incorporated by Reference from Form 8-K, dated July 31, 1997.
10. Incorporated by Reference from Form S-8 (Registration No.
333-35293) dated September 5, 1997.
11. Incorporated by Reference from Form 10-QSB for the Quarter ended
March 31, 1997.
12. Incorporated by Reference from Form 10-KSB for the fiscal year
ended September 30, 1997.
<PAGE>
13. Incorporated by Reference from Form 8-K, dated August 13, 1998.
14. Incorporated by Reference from Form 10-KSB for the fiscal year
ended September 30, 1998.
15. Incorporated by Reference from Form 10-QSB for the quarter ended
June 30, 1999.
16. Incorporated by Reference from Form S-8 (Registration No.
333-86747) dated September 7, 1999.
(b) Reports on Form 8-K.
Following reports were filed on Form 8-K by the Company during fourth quarter of
the fiscal year covered by this annual report.
Current Report on Form 8-K, dated July 1, 1999 reporting the Company had
established a record date of July 30, 1999 for shareholders eligible to vote at
the annual shareholders' meeting on September 2, 1999; the appointment of a new
chairman; and a civil action taken against a former officer of the Company.
No reports were filed on Form 8-K subsequent to the end of the fiscal year:
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Contents
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets as of F-3 - F-4
September 30, 1999 and 1998
Consolidated Statements of Operations F-5
For the Years Ended September 30,
1999 and 1998
Consolidated Statements of Stockholders' F-6 - F-7
Equity for the Years Ended
September 30, 1999 and 1998
Consolidated Statements of Cash Flows F-8
For the Years Ended September 30,
1999 and 1998
Summary of Accounting Policies F-9 - F-14
Notes to Consolidated Financial Statements F-15 - F-32
F-1
<PAGE>
Report of Independent Certified Public Accountants
The Board of Directors and Stockholders
Integrated Spatial Information Solutions, Inc.
Frankfort, Kentucky
We have audited the accompanying consolidated balance sheets of Integrated
Spatial Information Solutions, Inc. and subsidiary as of September 30, 1999 and
1998 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Integrated Spatial Information Solutions, Inc. and subsidiary as of September
30, 1999 and 1998 and the consolidated results of their operations and their
cash flows for each of the years then ended, in conformity with generally
accepted accounting principles.
/S/ BDO Seidman, LLP
December 3, 1999, except for Note 12,
which is as of December 20, 1999
Denver, Colorado
F-2
<PAGE>
<TABLE>
<CAPTION>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Balance Sheets
- -------------------------------------------------------------------------------------
September 30, 1999 1998
- -------------------------------------------------------------------------------------
Assets (Note 2)
Current:
<S> <C> <C>
Cash and cash equivalents $ 373,825 $ 55,045
Accounts receivable, less allowance for doubtful
accounts of $51,577 and $161,109 (Notes 1 and 2) 1,923,412 2,568,723
Land and building held for sale, net (Note 3) -- 1,083,522
Restricted cash 25,000 100,000
Prepaid expenses and other 122,500 177,251
----------- -----------
Total current assets 2,444,737 3,984,541
----------- -----------
Property and equipment (Note 2):
Land and building under capital lease -
related party (Note 5) 1,866,667 1,866,667
Equipment and furniture 574,292 456,366
Other leased assets 255,600 279,227
----------- -----------
2,696,559 2,602,260
Less accumulated depreciation and amortization 735,728 361,706
----------- -----------
Net property and equipment 1,960,831 2,240,554
----------- -----------
Other assets:
Goodwill, net of accumulated amortization of $782,599
and $459,891 4,676,192 4,994,976
Other 74,844 81,458
----------- -----------
Total other assets 4,751,036 5,076,434
----------- -----------
$ 9,156,604 $11,301,529
=========== ===========
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Balance Sheets
- ---------------------------------------------------------------------------------------
September 30, 1999 1998
- ---------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
<S> <C> <C>
Notes payable - current maturities (Note 2) $ 222,584 $ 801,602
Notes payable - related party,
current maturities (Note 2) -- 29,819
Obligations under capital leases - related party,
current (Note 5) 144,868 160,043
Checks written against future deposits -- 207,650
Accounts payable 480,024 681,880
Accrued payroll costs and vacation 643,423 345,396
Accrued expenses (Note 8) 593,448 512,928
Deferred revenue 108,588 113,046
Accrued litigation settlement (Note 10) -- 478,997
------------ ------------
Total current liabilities 2,192,935 3,331,361
------------ ------------
Long-term liabilities:
Notes payable, less current maturities (Note 2) 200,496 422,962
Obligations under capital leases - related
party, less current maturities (Note 5) 1,815,594 1,960,462
------------ ------------
Total long-term liabilities 2,016,090 2,383,424
------------ ------------
Total liabilities 4,209,025 5,714,785
------------ ------------
Commitments and Contingencies (Notes 5, 7, 8, 9, and 10)
Stockholders' equity (Note 6):
Cumulative convertible preferred stock,
$.001 par value, 20,000,000 shares authorized,
590 and 700 shares issued or outstanding 1 1
Common stock, no par value, 2,000,000,000
shares authorized, 13,242,112 and 11,456,571
shares issued and outstanding 13,065,330 12,635,423
Common stock to be issued 31,500 --
Additional paid-in capital 3,737,594 3,743,664
Accumulated deficit (11,886,846) (10,792,344)
------------ ------------
Total stockholders' equity 4,947,579 5,586,744
------------ ------------
$ 9,156,604 $ 11,301,529
============ ============
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-4
</TABLE>
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Statements of Operations
- --------------------------------------------------------------------------------
Years Ended September 30, 1999 1998
- --------------------------------------------------------------------------------
Revenues (Note 1) $ 7,990,808 $ 8,146,367
------------ ------------
Cost and expenses:
Direct contract costs 4,365,360 4,251,874
Salaries and employee benefits 2,347,751 2,233,054
General and administrative expenses 1,623,960 2,912,495
Marketing expenses 244,133 324,611
Other operating expenses 707,946 826,122
------------ ------------
Total costs and expenses 9,289,150 10,548,156
------------ ------------
Operating loss (1,298,342) (2,401,789)
------------ ------------
Other income (expense):
Other income 82,775 204,342
Gain on sale of assets (Note 3) 177,744 --
Gain on litigation settlement (Note 10) 414,312 --
Interest expense (434,268) (540,490)
Writeoff of capitalized software -- (262,927)
------------ ------------
Total other income (expense) 240,563 (599,075)
------------ ------------
Net loss (1,057,779) (3,000,864)
------------ ------------
Preferred stock dividends (Note 6) (36,723) --
Deemed dividends on preferred stock (Note 6) -- (476,112)
------------ ------------
Net loss available to common stockholders $ (1,094,502) $ (3,476,976)
============ ============
Basic and diluted loss per common share $ (.09) $ (.34)
------------ ------------
Weighted average number of shares
of common stock outstanding 11,982,785 10,124,347
============ ============
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Series A Preferred Stock Common Stock Additional Paid-in Capital
------------------------ ------------ --------------------------
Years Ended
September 30, Accumulated
1998 and 1999 Shares Amount Shares Amount Common Preferred Deficit Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
October 1, 1997 1,650 $ 2 7,736,380 $ 9,741,501 $ 2,162,871 $ 1,387,998 $ (7,315,368) $ 5,977,004
Sale of stock
for cash on
options and
warrants
exercised -- -- 131,700 124,191 -- -- -- 124,191
Stock issued
for services
on options
and warrant
exercised -- -- 132,871 191,969 -- -- -- 191,969
Issuance of
preferred
stock (net
of offering
costs of
$292,100) 950 1 -- -- -- 657,900 -- 657,901
Conversion of
preferred
stock into
common stock (1,900) (2) 2,609,970 1,600,500 -- (1,600,498) -- --
Stock issued
for services -- -- 203,776 298,484 -- -- -- 298,484
Stock issued
for cash
(net of
offering
costs of
$47,538) -- -- 662,142 630,462 -- -- -- 630,462
Stock issued
in connection
with
conversion
of debt -- -- 170,531 289,902 -- -- -- 289,902
Stock
repossession -- -- (190,799) (241,586) -- -- -- (241,586)
Deemed dividend
on preferred
stock -- -- -- -- 476,112 -- (476,112) --
Stock warrants
issued for
offering costs -- -- -- -- 165,138 -- -- 165,138
Stock warrants
issued for
consulting
services -- -- -- -- 465,470 -- -- 465,470
Stock options
issued for
services -- -- -- -- 28,673 -- -- 28,673
Net loss -- -- -- -- -- -- (3,000,864) (3,000,864)
------ --------- ------------ ------------ ------------ ------------ ------------ ------------
Balance,
September 30,
1998 700 $ 1 11,456,571 $ 12,635,423 $ 3,298,264 $ 445,400 $(10,792,344) $ 5,586,744
------ --------- ------------ ------------ ------------ ------------ ------------ ------------
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-6
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
(Continued)
- ------------------------------------------------------------------------------------------------------------------------------
Series A Preferred Stock Common Stock Additional Paid-in Capital
------------------------ ------------ --------------------------
Common
Years Ended Stock to be
September 30, 1998 Shares Amount Shares Amount Issued Common Preferred
- ------------------------------------------------------------------------------------------------------------------------------
Balance,
September 30, 1998 700 $ 1 11,456,571 $ 12,635,423 $ -- $ 3,298,264 $ 445,400
Sale of stock
for cash
on options
exercised -- -- 688,235 200,000 -- -- --
Stock issued
for services -- -- 455,754 122,319 -- -- --
Conversion of
preferred
stock into
common stock (110) -- 501,552 71,188 -- -- (71,188)
Preferred stock
dividends -- -- -- -- -- -- --
Stock options
and warrants
issued for
consulting
services -- -- -- -- -- 35,718 --
Settlement of
legal
disputes
through
issuance of
stock and
warrants -- -- 140,000 36,400 31,500 29,400 --
Net loss -- -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance,
September 30, 1999 590 $ 1 13,242,112 $ 13,065,330 $ 31,500 $ 3,363,382 $ 374,212
============ ============ ============ ============ ============ ============ ============
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-7
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
(Continued)
- ------------------------------------------------------------
Years Ended Accumulated
September 30, 1998 Deficit Total
- ------------------------------------------------------------
Balance,
September 30, 1998 $(10,792,344) $ 5,586,744
Sale of stock
for cash
on options
exercised -- 200,000
Stock issued
for services -- 122,319
Conversion of
preferred
stock into
common stock -- --
Preferred stock
dividends (36,723) (36,723)
Stock options
and warrants
issued for
consulting
services -- 35,718
Settlement of
legal
disputes
through
issuance of
stock and
warrants -- 97,300
Net loss (1,057,779) (1,057,779)
------------ ------------
Balance,
September 30, 1999 $(11,886,846) $ 4,947,579
============ ============
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-7a
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Statements of Cash Flows
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in Cash and Cash Equivalents
Years Ended September 30, 1999 1998
- ---------------------------------------------------------------------------------------------------
Operating activities:
<S> <C> <C>
Net loss $(1,057,779) $(3,000,864)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 707,946 705,838
Asset writedowns -- 262,927
Provision for losses on accounts receivable 110,809 (27,052)
Recovery of debt -- (16,207)
Provision for litigation -- (42,003)
Gain on litigation settlement (414,312)
Stock issued for services 158,719 490,453
Stock to be issued for litigation settlement 31,500 --
Stock options and warrants issued for acquisitions/services 65,118 494,143
Gain on sale of assets (177,744) (7,894)
Changes in operating assets and liabilities:
Accounts receivable 537,645 (305,103)
Prepaid expenses and other 41,671 24,681
Other assets 21,305 109,146
Accounts payable (199,357) (669,604)
Accrued expenses 320,284 (299,089)
Deferred revenue (4,417) (76,308)
----------- -----------
Net cash provided by (used in) operating activities 141,388 (2,356,936)
----------- -----------
Investing activities:
Purchase of equipment (97,968) (143,930)
Proceeds from sale of assets 1,245,000 1,104,825
Additions to capitalized software -- (4,072)
Restricted cash 75,000 (100,000)
----------- -----------
Net cash provided by investing activities 1,222,032 856,823
----------- -----------
Financing activities:
Payments on checks written against future deposits (207,650) (61,937)
Proceeds from debt -- 1,516,317
Payments on debt (831,303) (1,911,563)
Payments on obligations under capital lease (160,044) (147,676)
Payments on stock purchase liability (45,643) --
Proceeds from exercise of stock options 200,000 --
Proceeds from the issuance of common stock -- 802,191
Proceeds from issuance of preferred stock
net of cash offering costs -- 775,500
----------- -----------
Net cash provided by (used in) financing activities (1,044,640) 972,832
Net increase (decrease) in cash 318,780 (527,281)
Cash and cash equivalents, beginning of year 55,045 582,326
----------- -----------
Cash and cash equivalents, end of year $ 373,825 $ 55,045
=========== ===========
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-8
</TABLE>
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Summary of Accounting Policies
- --------------------------------------------------------------------------------
Organization and Business
- -------------------------
These consolidated financial statements include the accounts of Integrated
Spatial Information Solutions, Inc. and those of its wholly-owned subsidiary
PlanGraphics, Inc. (collectively the "Company"). PlanGraphics, Inc. is an
independent consulting firm specializing in the design and implementation of
Geographic Information Systems ("GIS") as well as advisory services in the
United States and foreign markets. The customer base consists primarily of
utilities, government agencies, and land and resource management organizations.
All intercompany balances and transactions have been eliminated in
consolidation.
Cash Equivalents
- ----------------
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Revenue and Cost Recognition
- ----------------------------
Revenues from fixed fee projects are recognized on the percent complete method
and as services are provided for time and material projects. Revisions in cost
and profit estimates during the course of the work are reflected in the
accounting period in which they become known.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as supplies, tools, repairs and
depreciation costs. General and administrative costs are charged to expense as
incurred.
Deferred Revenue
- ----------------
Deferred revenue represents amounts received under certain contracts in excess
of revenue recognized.
Goodwill
- --------
Goodwill represents the excess of the cost over the fair value of its net assets
acquired at the date of acquisition and is being amortized on the straight-line
method over fifteen years.
F-9
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Summary of Accounting Policies
- --------------------------------------------------------------------------------
Long-Term Assets
- ----------------
Long-lived assets, identifiable intangibles, and associated goodwill are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. If the expected future cash
flow from the use of the assets and its eventual disposition is less than the
carrying amount of the assets, an impairment loss is recognized and measured
using the asset's fair value.
Property, Equipment and Depreciation and Amortization
- -----------------------------------------------------
Property and equipment are recorded at cost. Depreciation is provided primarily
using accelerated methods over the estimated useful lives ranging from 5 to 31
years. Depreciation and amortization expense on property and equipment was
$385,239 and $431,075 for the years ended September 30, 1999 and 1998.
Maintenance and repairs are charged to expense as incurred and expenditures for
major improvements are capitalized. When assets are retired or otherwise
disposed of, of costs and accumulated depreciation and any resulting gain or
loss is credited or charged to operations.
Taxes on Income
- ---------------
The Company accounts for income taxes under Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes." Deferred income taxes
result from temporary differences. Temporary differences are differences between
the tax basis of assets and liabilities and their reported amounts in the
financial statements that will result in taxable or deductible amounts in future
years.
F-10
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Summary of Accounting Policies
- --------------------------------------------------------------------------------
Net Loss Per Share
- ------------------
The Company provides for the calculation of "Basic" and "Diluted" earnings per
share in accordance with SFAS No. 128, "Earnings Per Share". Basic earnings per
share includes no dilution and is computed by dividing income (loss) available
to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution of securities that could share in the earnings of an entity, similar to
full
For the years ended September 30, 1999 and 1998, total stock options and stock
warrants of 6,961,439 and 6,337,880 were not included in the computation of
diluted loss per share because their effect was anti-dilutive.
Concentrations of Credit Risk
- -----------------------------
The Company's financial instruments that are exposed to concentrations of credit
risk consist of cash and cash equivalent balances in excess of the insurance
provided by governmental insurance authorities. The Company's cash and cash
equivalents are placed with financial institutions and are primarily in demand
deposit accounts.
Concentrations of credit risk with respect to accounts receivable are associated
with a few customers dispersed across geographic areas. The Company reviews a
customer's credit history before extending credit and establishes an allowance
for doubtful accounts based upon the credit risk of specific customers,
historical trends and other information. Generally, the Company does not require
collateral from its customers, as a significant number of the customers are
governmental entities.
F-11
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Summary of Accounting Policies
- --------------------------------------------------------------------------------
Fair Value of Financial Instruments
- -----------------------------------
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Accounts Receivable, Accounts Payable and Accrued Liabilities
Fair values of accounts receivable, accounts payable, and accrued liabilities
are assumed to approximate carrying values for these financial instruments since
they are short term in nature and their carrying amounts approximate fair value
or they are receivable or payable on demand.
Notes Payable and Obligations Under Capital Lease
Substantially all of these notes bear interest at a floating rate of interest
based upon current lending rates of interest or the interest rates charged are
consistent with current lending rates. Accordingly, the fair value of these
notes approximate their carrying value.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements, and the reported revenues and expenses during the reporting periods.
The Company's operations require it to make significant assumptions concerning
cost estimates for labor and expenses on contracts in process. Due to the
uncertainties inherent in the estimation process of costs to complete for
contracts in process. Due to the uncertainties inherent in the estimation
process of costs to complete for contracts in process, it is possible that
completion costs for some contracts may have to be revised in future periods.
F-12
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Summary of Accounting Policies
- --------------------------------------------------------------------------------
Capitalized Software Costs
- --------------------------
Costs incurred internally in creating software products for resale are charged
to expense until technological feasibility has been established upon completion
of a detail program design. Thereafter, all software development costs are
capitalized until the point that the product is ready for sale and subsequently
reported at the lower of amortized cost or net realizable value.
During fiscal year ended September 30, 1998, the Company decided that it would
no longer actively market its internally developed software for resale. As such,
the value of the software was expensed in 1998.
Stock Option Plans
- ------------------
The Company applies Accounting Principles Board Opinion 25, "Accounting for
Stock Issued to Employees" ("APB Opinion 25"), and the related Interpretation in
accounting for all stock option plans. Under APB Opinion 25, compensation cost
is recognized for stock options issued to employees when the exercise price of
the Company's stock options granted is less than the market price of the
underlying common stock on the date of grant.
SFAS No. 123, "Accounting for Stock-Based Compensation", requires the Company to
provide pro forma information regarding net income (loss) as if compensation
cost for the Company's stock options plans had been determined in accordance
with the fair value based method prescribed in SFAS No. 123. To provide the
required pro forma information, the Company estimates the fair value of each
stock option at the grant date by using the Black-Scholes option-pricing model.
F-13
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Summary of Accounting Policies
- --------------------------------------------------------------------------------
Comprehensive Income
- --------------------
Effective October 1, 1998, the Company has adopted the provisions of SFAS No.
130, "Reporting comprehensive Income." Comprehensive income includes all changes
in equity except those resulting from investments by owners and distribution to
owners. For the fiscal years ended September 30, 1999 and 1998, the Company had
no items of comprehensive income (loss) other than net losses; therefore, a
separate statement of comprehensive income (loss) has not been presented for
these periods.
Recent Accounting Pronouncements
- --------------------------------
In December 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
established standards for recognizing all derivative instruments including those
for hedging activities as either assets or liabilities in the statement of
financial position and measuring those instruments at fair value. This Statement
is effective for fiscal years beginning after June 30, 2000. Management believe
will have no material impact on the Company's consolidated financial statements.
Reclassifications
- -----------------
Certain reclassifications have been made to the 1998 financial statements to
conform with the 1999 financial statement presentation. Such reclassifications
had no effect on the net loss as previously reported.
F-14
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. Accounts Receivable
-------------------
The components of accounts receivable are as follows:
September 30, 1999 1998
----------------------------------------------------------------------
Contract receivables:
Billed $1,654,877 $2,463,758
Unbilled 320,112 266,074
---------- ----------
1,974,989 2,729,832
Less allowance for doubtful accounts 51,577 161,109
---------- ----------
Accounts receivable, net $1,923,412 $2,568,723
========== ==========
PlanGraphics has historically received greater than 10% of its annual
revenues from one customer. One customer accounted for 12.7% of revenues
for the year ended September 30, 1999, compared to 11.6% of revenue for the
Company's largest customer for the year ended September 30, 1998. At
September 30, 1999, one other customer accounted for 11.4% of accounts
receivable, and at September 30, 1998, two other customers accounted for
14.3% and 11.1% of accounts receivable.
F-15
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
2. Notes Payable
-------------
Notes payable at September 30 are as follows:
September 30, 1999 1998
--------------------------------------------------------------------------
Note payable to bank in variable monthly
payments from $15,000 to $20,832,
interest at 8.5%, collateralized by
equipment and accounts receivable,
maturing on July 24, 2001. $ 423,080 $ 604,564
Note payable, interest of 15%, with
Monthly interest only payments,
collateralized by a first lien on land
and building held for rental and
improvements. The note was repaid in
full during fiscal 1999. (Note 3) -- 620,000
Note payable to related party (1) -- 29,819
----------- -----------
423,080 1,254,383
Less current maturities 222,584 831,421
----------- -----------
Long-term notes payable $ 200,496 $ 422,962
=========== ===========
(1) Notes Payable - Related Party
Total amounts under related party notes to a minority stockholder were
$29,819 at September 30, 1998. The note required monthly principal and
interest payments of $14,000 through October 15, 1998. The remaining
balance was paid in full on November 15, 1998.
F-16
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Principal payments on all notes payable due subsequent to September 30,
1999 are as follows:
Years Ending September 30, Amount
-------------------------------------------------------------------
2000 $ 222,584
2001 200,496
-----------
$ 423,080
===========
3. Sale of Assets
--------------
On April 8, 1999, the Company completed the sale of land and a building
located in Franktown, Colorado. The sale generated gross cash proceeds of
$1,245,000, which were used to pay off the corresponding note payable of
$620,000, plus interest (see Note 2) as well as legal fees and
miscellaneous expenses. The Company reported a gain on the sale of the
building of approximately $177,700 during the fiscal year ended September
30, 1999.
F-17
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
4. Taxes on Income
---------------
The provision for income taxes consisted of the following:
Years Ended September 30, 1999 1998
---------------------------------------------------------------------
Deferred (provision) benefit:
Federal $ 100,000 $ 867,000
State 10,000 84,000
--------- ---------
110,000 951,000
(Increase) decrease in valuation
allowance (110,000) (951,000)
--------- ---------
$ -- $ --
========= =========
A reconciliation of the effective tax rates and the statutory U.S. federal
income tax rates is as follows:
1999 1998
------------------------------------------------------------------------
U.S. federal statutory rates (34.0)% (34.0)%
State income tax benefit, net
of federal tax amount (3.3) (3.3)
Increase in deferred tax asset
valuation allowance 37.3 37.3
-------- --------
Effective tax rate -- % -- %
======== ========
F-18
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Temporary differences that give rise to a significant portion of the
deferred tax asset are as follows:
Years Ended September 30, 1999 1998
---------------------------------------------------------------------
Net operating loss carryforwards $ 3,024,000 $ 2,258,000
Capital loss carryover 114,000 587,000
Expense for stock options and
warrants 237,000 296,000
Provision for losses on accounts
receivable 19,000 60,000
Accrued litigation 11,000 179,000
Accrued wages and vacation 136,000 51,000
----------- -----------
Total gross deferred tax asset 3,541,000 3,431,000
Valuation allowance (3,541,000) (3,431,000)
----------- -----------
Net deferred tax asset $ -- $ --
=========== ===========
A valuation allowance equal to the gross deferred tax asset has been
recorded, as management of the Company has not been able to determine that
it is more likely than not that the deferred tax assets will be realized.
At September 30, 1999, the Company had net operating loss carryforwards of
approximately $8,413,000 with expirations through 2019 and a $305,000
capital loss carryover which expires through 2002. The utilization of the
loss carry forwards may be limited under Internal Revenue Service Code
Section 382 regulations related to transfers of ownership.
F-19
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
5. Leases
------
Obligations Under Capital Leases - Related Party
The Company leases an office facility from Capitol View Development, LLC, a
partnership which includes a related party, under a triple net commercial
lease. An officer/shareholder owns approximately ten percent of Capitol
View Development. The lease includes an annual base rent increasing over
the term of the lease plus an adjustment based on Capitol View
Development's rate of interest on its loan. The initial lease term is for a
period of fifteen years with five ren each. Annual payments approximate
$320,000 per year.
The Company also leases certain equipment under capital leases from a
related party. Original lease terms are for three to five years.
The following is a schedule, by years, of future noncancellable minimum
payments required under these leases, together with their present value as
of September 30, 1999.
F-20
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Related Party
Years Ending Land and
September 30, Building Equipment Total
---------------------------------------------------------------------------
2000 $ 335,636 $ 73,285 $ 408,921
2001 337,089 14,529 351,618
2002 338,133 -- 338,133
2003 337,441 -- 337,441
2004 334,891 -- 334,891
Thereafter 1,828,137 -- 1,828,137
---------- ---------- ----------
3,511,327 87,814 3,599,141
Less: amounts representing
interest 1,629,652 9,027 1,638,679
---------- ---------- ----------
Present value of minimum lease
payments $1,881,675 $ 78,787 1,960,462
========== ==========
Less: current maturities 144,868
----------
Obligations under capital leases
less current maturities $1,815,594
==========
As of September 30, 1999 and 1998, accumulated amortization for the
building and equipment under capital lease obligations was $995,617 and
$764,987.
F-21
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Operating Lease Commitments
The Company leases certain office facilities and certain furniture and
equipment under various operating leases. The remaining lease terms range
from one to three years.
Minimum annual operating lease commitments at September 30, 1999 are as
follows:
September 30,
----------------------------------------------------------------------
2000 $ 246,200
2001 206,900
2002 156,500
----------
$ 609,600
==========
-----------------------------------------------------------------------
Rental expense for the years ending September 30, 1999 and 1998 totaled
approximately $186,800 and $134,600.
6. Equity Transactions
-------------------
Preferred Stock
In November 1996, the Company amended its articles of incorporation to
provide for a Series A 6% Cumulative Convertible Redeemable Preferred
Stock, $.001 par value (Series A). The Company designated 1,000,000 shares
of Series A as part of the authorized class of preferred shares. The Series
A preferred stock and any accumulated and unpaid dividends are convertible
at the option of the holder at the lesser of 105% of the average of the
closing bid price per share of th five trading days prior to issuance or
80% of the average of the closing bid price per share of the Company's
common stock for three of the ten trading days preceding the date of
conversion.
F-22
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The holders of 1,650 shares of the Company's Series A converted the
preferred into common stock at various times during fiscal 1998 in exchange
for 2,224,508 shares of common stock.
In October 1997, the Company sold 250 shares of its Series A with net
proceeds of $212,500. The holders of these 250 shares of Series A converted
the preferred into common stock at various times during fiscal 1998 in
exchange for 385,462 shares of common stock.
In August 1998, the Company sold 700 shares of its Series A with net
proceeds of $445,400, of which $25,000 is held as restricted cash as
specified in the subscription agreements. The Series A preferred stock and
any accumulated and unpaid dividends are convertible at the option of the
holder within two years of the issue date at the lesser of 105% of the
average of the closing bid price per share of the Company's common stock
for the five days prior to issuance or 20% bid price per share of the
Company's common stock for the three days preceding the date of conversion.
During the fiscal year ended September 30, 1999, the holders of the 700
shares of Series A converted 110 shares of the preferred into common stock
at various times during the year in exchange for 501,552 shares of common
stock.
The Series A Preferred is subject to mandatory conversion two years after
the date of issue.
Warrants were issued to purchase 245,000 shares of common stock in
connection with the placement of the Series A. The warrants can be
exercised at various prices from $0.75 to $0.788 and expire in August 2001.
The Company recognized deemed dividends of $117,600 in 1998 in connection
with issuing these warrants in conjunction with offering costs under the
accounting provisions of SFAS 123. The Company also recognized $476,112 of
deemed dividends in 1998 due to the dis convertibility of the preferred
stock.
F-23
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
As of September 30, 1999 and 1998, dividends in arrears associated with the
Series A amounted to $69,024 and $30,875.
Common Stock
During fiscal year 1998, the Company exchanged $298,484 in services for the
equivalent value of 203,776 shares of common stock. The Company also issued
662,142 shares of common stock for cash with net proceeds totaling
$630,462, which include 28,571 shares issued to a related party for $25,000
in cash. Individuals exercised options and warrants to purchase 264,571
common shares with the Company recognizing proceeds of $124,191 and
services of $191,969.
The Company issued options and warrants to purchase 1,127,415 shares of
common stock to outside consultants, brokers and directors during fiscal
1998 with a total value of $659,281, of which $165,138 relates to offering
costs. Of the 1,127,415 options and warrants granted in fiscal year 1998,
the Company granted 5,000 warrants to a related party for $4,650 in
services. The warrants are exercisable at $0.98 per share through August
17, 2001. The options and warrants a model in accordance with SFAS 123.
On October 10, 1997, the Company issued 170,531 shares of common stock
worth $289,902 in payment of a note payable to a related party.
During fiscal year 1999, the Company exchanged $122,319 in services for the
equivalent value of 455,754 shares of common stock. The Company also issued
140,000 shares of common stock worth $36,400 in connection with a
settlement of a lawsuit with a former employee.
F-24
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Effective July 1999, the Company entered into an Agreement for Services
with a director of the Company. As part of the agreement, the director's
annual base compensation consists of $50,000, payable in equal monthly
installments in the Company's common stock, and options to purchase 175,000
shares of the Company's common stock at an exercise price of $0.31 per
share each year for three years. As of September 30, 1999, none of the
stock had been issued as compensation at September 30, 1999. In addition,
the director received incentive options to acquire 688,235 shares of common
stock at $0.2906 per share, which he exercised on July 13, 1999 for
$200,000 in cash.
As part of a settlement agreement to settle all outstanding amounts owed to
a certain consulting firm, the Company issued warrants to purchase 117,623
shares of common stock in January 1999 with a total value of $10,586. The
warrants are exercisable at $0.894 per share through August 18, 2001. The
warrants were valued using the Black Scholes model in accordance with SFAS
123.
On September 22, 1999, the Company settled an arbitration proceeding with
an outside consultant whereby the Company agreed to issue 150,000 shares of
common stock worth $31,500, a warrant to purchase 30,000 shares of common
stock at $1.00 per share and a warrant to purchase 20,000 shares of common
stock at $1.50 per share. The stock was subsequently issued in October 1999
and is reported as common stock to be issued at September 30, 1999. The
warrants were valued at $ and was recorded as consulting expense.
During fiscal year 1999, the Company issued additional options and warrants
to purchase the Company's common stock in connection with the settlement of
certain legal disputes previously discussed and for consulting services
with a total value of $41,932. The options and warrants were valued using
the Black Scholes model in accordance with SFAS 123.
F-25
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Anti-dilution Provisions
Prior to fiscal year 1999, the Company had granted certain officers and
consultants anti-dilution rights in employment and service agreements. The
provision called for the issuance of options at fixed prices at each date
more stock is issued to enable the parties to retain their ownership
percentage. Under the accounting provisions of SFAS 123 and APB 25, the
Company realized costs of approximately $163,160 for the 492,615 options
and 192,086 warrants issued during 19 fiscal 1998, the directors of ISIS
voted to rescind all anti-dilution provisions.
Stock Options
The Company's Board of Directors has reserved 300,000, 1,150,000 and
4,000,000 shares under three stock option plans (1991, 1995, and 1997,
respectively). The Company grants options under the Plan in accordance with
the determinations made by the Option Committee. The Option Committee will,
at its discretion, determine the individuals to be granted options, the
time or times at which options shall be granted, the number of shares
subject to each option and the manner The option price shall be the fair
market value on the date of the grant and expire five years subsequent to
the date of grant.
SFAS No. 123, "Accounting for Stock-Based Compensation" requires the
Company to provide pro forma information regarding net income and net
income per share as if compensation costs for the Company's stock option
plans and other stock awards had been determined in accordance with the
fair value based method prescribed in SFAS No. 123. The Company estimated
the fair value of each stock award at the grant date by using the
Black-Scholes option-pricing model with the follo used for grants in the
years ended September 30, 1999 and 1998: dividend yield of 0 percent,
expected volatility of 95 to 105 percent, risk-free interest rates between
4 and 6 percent, and expected option lives of three to five years for all
years.
F-26
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Under the accounting provisions for SFAS No. 123, the Company's net loss
and net loss per share would have been adjusted to the following pro forma
amounts:
Years Ended September 30, 1999 1998
---------------------------------------------------------------------
Net loss
As reported $ (1,057,779) $ (3,000,864)
Pro forma (1,199,155) (3,983,943)
Net loss per share
As reported $ (.09) $ (.34)
Pro forma (.10) (.39)
---------------------------------------------------------------------
F-27
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
A summary of the status of the Company's stock option plans and outstanding
options and warrants as of September 30, 1999 and 1998 and changes during
the years ending on those dates is presented below:
1999 1998
--------------------- -------------------
Weighted Weighted
Average Average
Range of Exercise Range of Exercise
Shares Price Shares Price
------ ----- ------ -----
Outstanding,
beginning of year 6,337,880 $ 1.53 3,465,894 $ 1.36
Granted 2,441,939 0.40 3,403,467 1.74
Cancelled (534,391) 1.76 (266,910) 1.43
Exercised (1,283,989) 0.28 (264,571) 1.19
---------- ------ ---------- ------
Outstanding,
end of year 6,961,439 $ 1.34 6,337,880 $ 1.53
========== ====== ========== ======
Options and warrants
exercisable, end of year 5,189,428 $ 1.43 4,792,388 $ 1.51
========== ====== ========== ======
Weighted average fair
value of options and
warrants granted
during the year $ 0.14 $ 0.79
====== ======
F-28
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The following table summarizes information about stock options and warrants
outstanding and exercisable at September 30, 1999:
Outstanding Exercisable
------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Shares at 9/30/99 Life (years) Price at 9/30/99 Price
------------------------------------------------------------------------
$ 0.31-1.00 2,133,615 1.98 $ 0.64 1,438,158 $ 0.79
1.03-1.75 3,197,383 2.55 1.42 2,450,809 1.43
1.81-2.50 1,630,441 1.40 2.12 1,300,461 2.16
------------------------------------------------------------------------
$ 0.31-2.50 6,961,439 2.09 $ 1.34 5,189,428 $ 1.43
========================================================================
7. Employee Benefit Plans
----------------------
401 (k) Plan
PlanGraphics, Inc. ("PlanGraphics") has a Section 401(k) deferred
compensation provision covering substantially all employees. The plan
allows participating employees to defer up to 20% of their annual salary
with a tiered matching contribution by PlanGraphics up to 1.75%. Additional
contributions may be made at the PlanGraphics' discretion based upon the
PlanGraphics' performance. The expense charged to operations for the plan
was $50,900 and $54,300 for the years e includes no discretionary match.
F-29
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
8. Contingency
-----------
Self Insurance
The Company is partially self-insured for employee medical liabilities,
which covers risk up to $20,000 per individual covered under the plan. The
Company has purchased excess medical liability coverage (from a national
medical insurance carrier) for individual claims in excess of $20,000 and
approximately $250,000 in the aggregate. Premiums and claim expenses
associated with the medical self-insurance program are included in the
accompanying statement of operations.
Employment Agreements
The Company has entered into employment agreements with two directors that
extend from June 30, 2000 through June 30, 2001. The employment agreements
set forth annual compensation to the two directors of between $50,000 and
$157,500 each.
9. Related Party Transactions
--------------------------
A Director of the Company is the principal owner and executive officer of
an organization that entered into a consulting agreement with the Company
on July 6, 1999. The agreement ends upon the earlier of June 30, 2001; the
date upon which the Director is not elected as a Director or is removed as
a Director; and the date upon which he does not own more than 50% of the
voting power of the organization. Under the agreement, the organization
will provide certain services implementing actions to increase shareholder
value through articulation of a vision for the Company, identifying and
reviewing merger and acquisition candidates, obtaining capital (debt or
equity) to finance mergers and acquisitions, and recruiting and evaluating
candidates for senior executive and director position. Compensation for
these services consists of performance options in two quantities of 322,581
each to acquire common stock of the Company at an exercise pri
capitalization of the Company exceeds $30 million for the first quantity
and $60 million for the second quantity for 20 of 30 consecutive business
days at any time prior to June 30, 2002. As of September 30, 1999, the
Company had not achieved the market capitalization levels which would
require the additional compensation.
F-30
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
10. Litigation
----------
In 1998, the Company had appealed the Government's assessment of excessive
reprocurement costs against the Company on a manufacturing contract
terminated for default. The appeal of the default termination was
unsuccessful. As such, the Company had recorded a reserve for $479,000 as
of September 30, 1998 for potential losses. In March 1999, the assessment
against the Company was settled with the Government for approximately
$65,000, resulting in a recovery of approxim 30, 1998 estimated loss
reserve.
The Company was a defendant in an arbitration action brought by its former
Chairman and CEO, alleging "constructive termination" of an employment
agreement. Through a civil claim filed in July, 1999 in Denver District
Court, the Company asserted damages incurred by the Company for actions
taken and not taken by the former Chairman and CEO. The matter was resolved
through settlement dated November 19, 1999. The settlement required the
Company to pay a total of $236,25 his counsel. All costs of the settlement
have been recorded as of September 30, 1999.
The Company is engaged in various litigation matters from time to time in
the ordinary course of business. In the opinion of management, the outcome
of any such litigation will not materially affect the financial position or
results of operations of the Company.
F-31
<PAGE>
Integrated Spatial Information
Solutions, Inc. and Subsidiary
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
11. Supplemental Data to Statement of Cash Flows
--------------------------------------------
Years Ended September 30, 1999 1998
----------------------------------------------------------------------
Cash paid for interest $ 438,101 $ 540,490
Stock issued in connection with
conversion of debt -- 289,902
Resolution of stock repossession -- 241,586
Stock warrants issued for offering
costs -- 165,138
Preferred stock dividend accrued 36,723 --
Conversion of preferred stock into
common stock 71,188 1,600,500
======================================================================
12. Private Placement
-----------------
On December 20, 1999, the Board of Directors approved a $400,000 private
offering of common stock to a limited number of investors consisting of
Company directors and officers, certain accredited managers within the
Company, and a limited number of accredited shareholders of the Company.
13. Bank Line-of-Credit Agreement
-----------------------------
On November 5, 1999, the Company obtained a $1.2 million line of credit
from a bank, secured by accounts receivable. Cash advances under the line
of credit agreement will be limited to 80% of eligible accounts receivable.
The line of credit will expire on October 31, 2000.
F-32
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Integrated Spatial Information Solutions, Inc.
Date: 12/29/99 By: /S/ John C. Antenucci
- -------------- -------------------------
John C. Antenucci
President and
Acting Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated. The signatures below also constitute power of attorney for the
Principal Accounting Officer of the Company with the advice of legal and
accounting advisors to file amendments as required to insure full and complete
disclosure of this form 10-KSB.
Signature Title Date
--------- ----- ----
Director
- -------------------
Jeanne M. Anderson
/S/ Fred Beisser Vice President--Finance and 12/29/99
- -------------------- Administration, Secretary, Treasur-
Frederick G. Beisser er, and Director and Principal
Financial and Accounting Officer
/S/ John C. Antenucci Acting CEO, President 12/29/99
- -------------------- and Director
John C. Antenucci
/S/ J. Gary Reed Director 12/29/99
- --------------------
J. Gary Reed
Director
- --------------------
Raymund E. O'Mara
/S/ Gary S. Murray Chairman and Director 12/29/99
- --------------------
Gary S. Murray
Exhibit 3.2d
ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF INTEGRATED SPATIAL INFORMATION SOLUTIONS, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Integrated Spatial Information
Solutions, Inc.
SECOND: The following amendment to the Articles of Incorporation was duly
adopted by the shareholders entitled to vote thereon, and the number of votes
cast for the amendment by each voting group entitled to vote separately on the
amendment was sufficient for approval by that voting group.
Article V, Section 6.4 of the Articles of Incorporation is amended to add the
following Section 6.4(b)(1):
(b) (1) Modified Conversion Price. Austost Anstalt Schaan shall have the
right to apply the following Modified Conversion Price with respect to a maximum
of 50 shares of Series A Preferred Stock registered in the name of Austost
Anstalt Schaan. Balmore Funds S. A. shall have the right to apply the following
Modified Conversion Price with respect to a maximum of 50 shares of Series A
Preferred Stock registered in the name of Balmore Funds S. A. The number of
shares of Common Stock issuable upon conversion of a share of Series A Preferred
Stock shall equal (i) the sum of (A) the Stated Value per share and (B) accrued
and unpaid dividends on such share, divided by (ii) the Modified Conversion
Price. The Modified Conversion Price shall be equal to the lesser of: (i) $.40;
or (ii) 20% below the average of the three lowest Closing Bid Prices (as
hereinafter defined) for the ten trading days immediately preceding the
conversion of the respective shares of Series A Preferred Stock (referred to as
the "Look-Back Period"). After 150 days following the issuance of shares of
Series A Preferred, the Look-Back Period for such respective share will be
increased by two days per month for up to a total of twenty days trading prices
to be used in the calculation of the Modified Conversion Price. The Closing Bid
Price shall mean the closing bid price of the Corporation's Common Stock as
reported by NASDAQ or the principal exchange or market where traded. Any shares
of Series A Preferred Stock not converted into shares of common stock at the
Modified Conversion Price may be converted at the Conversion Price and on the
conversion terms specified in Article V Section 6.4(b).
Article V, Section 6.5(a) of the Articles of Incorporation is amended to read as
follows:
5. Mandatory Conversion.
(a) The shares of Series A Preferred Stock not previously converted into
shares of Common Stock shall be converted into shares of Common Stock without
further action of the Holder on the date that is three years from the date of
issuance thereof. The shares subject to mandatory conversion shall be converted
into shares of Common Stock as follows: (1) the balance of the amount of shares,
if any, not previously converted at the Modified Conversion Price as permitted
under Section 4(b)(1) shall be converted at the Modified Conversion Price; and
(2) the remaining amount of shares shall be converted at the Conversion Price
and on the conversion terms specified in paragraph 4(b).
THIRD: The amendment does not effect any exchange, reclassification, or
cancellation of issued shares.
FOURTH: The amendment does not effect a change in the amount of stated
capital.
Integrated Spatial Information Solutions, Inc.
Dated September 27, 1999
By: /s/ John C. Antenucci
John Antenucci, President
List of Active Subsidiaries
Registered Name State of Incorporation
- --------------- ----------------------
PlanGraphics, Inc. Maryland
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 373,825
<SECURITIES> 0
<RECEIVABLES> 1,974,989
<ALLOWANCES> 51,577
<INVENTORY> 0
<CURRENT-ASSETS> 2,444,737
<PP&E> 2,696,559
<DEPRECIATION> 735,728
<TOTAL-ASSETS> 9,156,604
<CURRENT-LIABILITIES> 2,192,935
<BONDS> 0
1
0
<COMMON> 13,065,330
<OTHER-SE> (8,117,750)
<TOTAL-LIABILITY-AND-EQUITY> 9,156,604
<SALES> 0
<TOTAL-REVENUES> 7,990,808
<CGS> 0
<TOTAL-COSTS> 9,289,150
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 434,268
<INCOME-PRETAX> (1,057,779)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,057,779)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,094,502)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
