UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 10QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1999Commission File Number: 0-24380
e-automate Corporation
------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 33-0601502
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
71 North 490 West
American Fork, Utah 84003
(Address of principal
executive offices) (Zip Code)
Registrant's telephone number, including Area Code: (801) 492-1705
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for 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 NO X
State the number of shares outstanding of each of the issuer's
classes of common equity as of the close of the period covered by
this report.
4,800,850 Shares of common stock, $.001 par value
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
e-automate, Corp.
Balance Sheets (unaudited)
March 31, June 30, September 30,
1999 1999 1999
---------- --------- -------------
ASSETS
Current Assets:
Cash $ - $ 89,615 $ 10,425
Prepaid expenses 4,700 4,700 4,700
Accounts receivable 62,986 58,718 116,742
Total current assets 67,686 153,033 131,867
Fixed Assets -
Equipment and fixtures 43,821 50,556 102,111
Accumulated depreciation (20,970) (25,570) (30,370)
Net equipment and fixtures 22,851 24,986 71,741
Other Assets: 1,760 1,760 1,760
Total assets $ 92,297 $ 179,779 $ 205,368
<PAGE>
e-automate, Corp.
Balance Sheets (unaudited)
March 31, June 30, September 30,
1999 1999 1999
--------- ------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Cash overdraft $ 2,696 - -
Accounts payable 53,624 108,113 44,934
Accrued liabilities 16,835 30,755 3,445
Unearned revenues 142,859 209,575 217,917
Shareholder notes payable 114,635 110,000 60,000
Lines of credit 11,703 282,528 278,498
Current portion of long-term debt 323,760 168,000 168,000
Total current liabilities 666,112 908,971 772,794
Long-Term Debt, less current portion:
Debenture bonds 183,000 - -
Total liabilities 849,112 908,971 772,794
Stockholders' Equity:
Common stock 159,000 627,000 1,376,729
Less: Stock subscription receivable (35,000) (50,000) (50,000)
Treasury stock (110,000) (110,000) (110,000)
14,000 467,000 1,216,729
Accumulated deficit (70,815) (1,196,192) (1,784,155)
Total stockholders' equity (756,815) (729,192) (567,426)
Total liabilities and $ 92,297 $ 179,779 $ 205,368
stockholders' equity
<PAGE>
e-automate, Corp.
Statements of Operations (unaudited)
3 MONTHS ENDED 6 MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
-------- -------- -------- --------
Revenues (net) $107,006 $109,963 $169,001 $162,150
Expenses:
Wages and benefits 499,866 56,213 872,725 73,447
Advertising and promotions 74,713 29,578 101,741 45,350
Other expense 95,034 46,621 148,558 41,345
Depreciation 4,800 2,000 9,400 3,500
Interest 20,556 0 49,917 38,776
Total expenses 694,969 134,412 1,182,341 202,418
Net Loss $(587,963) $(24,449 $(1,013,340) $(40,268)
EPS (.32) (.01)
Weighted-Average Shares
Outstanding 3,190,464 2,774,767
<PAGE>
E-AUTOMATE CORPORATION
STATEMENTS OF CASH FLOWS (unaudited)
For the six months ended September 30, 1999
Cash Flows from Operating Activities:
Net loss $(1,013,340)
cash provided by operating activities:
Depreciation 9,400
Change in assets and liabilities
Decrease in shareholder payable (54,635)
Increase in accounts receivable (53,756)
Decrease in accounts payable (8,690)
Decrease in accrued liabilities (13,390)
Inc in unearned revenues 75,058
Total adjustments (46,013)
Net cash used by operating activities (1,059,353)
Cash Flows from Investing Activities:
Purchase of equipment (58,290)
Cash Flows from Financing Activities:
Issuance of common stock 1,202,729
Convertible bond proceeds 90,000
Conversion of bonds to common stock (333,000)
Treasury stock purchase -
Proceeds from notes 171,035
Net cash provided by financing activities 1,130,764
Net Increase in Cash and Cash Equivalent 13,121
Beginning Cash and Cash Equivalents (2,696)
Ending Cash and Cash Equivalents $10,425
<PAGE>
e-automate, Corp.
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
This summary of significant accounting policies of E-automate, Corp.
(the Company) is presented to assist in understanding the Company's financial
statements. These accounting policies conform to generally accepted accounting
principles and have been consistently applied in the preparation of the
financial statements.
Business Description - The Company was incorporated in the state of
Utah on February 27, 1996 as Aureus Corporation for the purpose of,
but not limited to, developing and selling information systems software.
The Company is a provider of enterprise-wide information systems designed
to fit small businesses. The Company's software is
designed to Streamline processes and reduce costs, making organizations more
profitable. On July 1, 1999, the Company merged with Woodlake Village
Associates, Inc., which resulted in the conversion of outstanding convertible
debentures into common stock. Shares of the Aureus Corporation were exchanged
for 1.88 shares of Woodlake Village Associates, inc. Simultaneously with the
merger, Woodlake Village Associates, Inc. changed its name to Aureus
Corporation. Subsequently the name was changed again to e-automate
Corporation.
Revenue Recognition - Revenue from the sale and installation of
systems is recognized upon completion of the installation. Payments
received in advance of the installment completion are classified as
unearned revenues.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
Depreciation - Provision for depreciation of office and computer
equipment is computed on the straight-line method for financial reporting
purposes. Depreciation is based upon estimated useful lives as follows:
Office equipment 3 to 7 Years
Computer equipment 5 Years
E-AUTOMATE, CORP.
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
Maintenance, repairs, and renewals which neither materially add to
the value of the equipment nor appreciably prolong its life are charged
to expense as incurred. Gains and losses on dispositions of equipment are
included as income.
Cash and Cash Equivalents - For the purpose of the statement of cash
flows, cash and cash equivalents are defined as demand deposits at banks and
money market funds at other financial institutions with a maturity of three
months or less.
Research and Development - Expenditures for software development
costs and research are expensed as incurred. Such costs are required to be
expensed until the point that technological feasibility is established. The
period between achieving technological feasibility and the general
availability of such software has been short. Consequently, costs
otherwise capitalizable after technological feasibility is achieved
are generally expensed because they are insignificant to both total assets
and pre-tax results of operations.
Research and development costs have been expensed through wages and
benefits costs on the statement of income.
Note 2. Income Taxes
The Company, with the consent of its shareholders, had elected under
the Internal Revenue to be an S Corporation. In lieu of corporation
income taxes, the shareholders of an S corporation are taxed on their
proportionate share of the Company's taxable income.
Therefore, no provision or liability for federal and state income
taxes has been included in these financial statements through June 30, 1999.
On July 1, 1999, the Company revoked it's S Corporation election.
Thereafter, the Company is subject to corporate income taxes as a C
Corporation.
Note 3. Additional Cash Flow Statement Disclosures
The Company paid $49,917 of interest and $0 of income taxes during
the six months ended September 30, 1999. In May 1999, The Company
issued 129,720 shares of stock in consideration for board of directors
fees and employee compensation. The Company has not recognized any expense
on issuance of the stock.
Note 4. Related Party Transactions
The Company has made and received shareholder advances that are
non-interest bearing (see note 6). In addition, the Company received
contributions of certain computer equipment from a shareholder. In
the opinion of management, the equipment was credited at fair market value.
<PAGE>
Note 5. Concentrations of Credit Risk
The Company's carrying amount of cash deposits at September 30, 1999
is $10,425. All amounts are covered by federal depository insurance.
Note 6. Shareholder Notes Payable and Receivable
Note payable or (receivable) -
Richard Stout $51,031 $110,000 $110,000
Note payable - James Phillips 63,604 0 0
Total $114,635 $110,000 $110,000
The note payable (receivable) to Richard Stout has no stated
interest and is deemed to be all current.
The note payable to James Phillips mirrors a personal line of credit
obligation Jim has with a local bank. The Company has committed to pay the
note according to the terms set up personally. The interest rate is 9.75
percent and has a credit limit of $100,000.
Note 7. Lines of Credit
The Company has credit lines with Zions Bank. The amount available
under the credit agreements is based on eligible accounts receivable as
defined in the agreement. The line bears a variable interest rate at March
31, 1999 the interest rate was 10.25%.
Item 2. Management's Discussion and Analysis of Plan of Operations
Management's Discussion and Analysis of Plan of Operations
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the unaudited condensed consolidated
financial statements, as of September 30, 1999, together with the audited
Financial Statements as of March 31, 1999. Whenever in this discussion the
term "Company" is used, it should be understood to refer to e-automate
Corporation ("e-automate") and its subsidiary on a consolidated basis,
except where the context clearly indicates otherwise.
<PAGE>
Overview
The Company has been in a development stage, and since inception has
incurred losses from operations. As of September 30, 1999 the Company has
had cumulative net losses totaling $1,013,340. The Company is primarily
engaged in developing and providing business productivity improvement
software and services for small businesses. The Company uses the
Internet, and innovative technologies, to enable small businesses to more
easily purchase and implement its software, to receive business-consulting
services, and to automate activities suggested by consulting services.
These technologies also enable customers eventually to receive
business-improvement benefits at a greatly reduced total cost. The
customer need for this software derives from the fact that most small
businesses have many activities
that need to be done on a continuing basis, but few small businesses can
afford to accomplish those activities through hiring more people;
electronic automation of company-specific activities is the solution.
Unlike competitors' organizations, the Company's entire organization is
designed to deliver company-specific automations in an affordable manner.
The Company did a limited amount of direct selling and implementation of
its software for its first 3 years, and is now using strategic partners and
trademark technologies to leverage its sales and implementations.
Financial Position
The Company had $10,425 in cash as of September 30, 1999. This
represented a decrease of $79,190 from $89,615 at June 30, 1999. Working
capital as of September 30, 1999, increased to $82,233 as compared to a
working capital of $40,220 at June 30, 1999. This increase was largely due
to a funding from a private placement of securities by the Company, as more
fully described elsewhere in this document.
Results of Operations
e-automate is transitioning from direct sales to sales generated by
strategic partners and trademarked technologies. This transition process
has so far mostly been made up of hiring, training, and tool-creation
activities. Direct sales activities have been almost entirely eliminated
in order for e-automate sales people to begin focusing on this transition.
Operating revenues history to date are $169,001. First quarter (April
through June 1999) revenues were $61,995. Second quarter (July through
September 1999) revenues were $107,006.
General and administrative expenses were $195,000 in the quarter ending
September 30, 1999. The increases in these expenses were due to the
Company's growth from a 5-man operation one year ago, to a 50-man operation
today. These expenses are mainly fixed, and are expected to remain
relatively level until e-automate has increased its base of productive
strategic partners. Development expense is expected to grow only minimally
in the coming months.
e-automate has financed its operations principally through founder loans,
debenture bonds (that have all been converted), notes, and private
placements of equity securities and product sales. The Company generated
$1,130,764 in net proceeds through financing from inception through
September 1999. The Company used net cash in operating activities of
($1,059,353) during the six months ended September 1999. As of September
30, 1999, the Company's liabilities totaled $772,794.
<PAGE>
The Company's working capital requirements and other capital requirements
for the foreseeable future could vary based upon a number of factors, but
are expected to remain fairly constant until after the strategic partner
channel begins generating several hundred thousand per month in revenues;
after this point, e-automate will likely increase expenditures so as to
accelerate its revenue and profitability growth. e-automate's believes
that projected funding shown in its private placement memorandum will
enable it to ultimately establish profitable operations and positive cash
flows from operations. If sales do not develop as quickly as anticipated,
e-automate will require additional equity funding. There is no assurance
that any funding will be available, or that, if available, the terms of
such offering or funding will be favorable to the Company.
e-automate does not anticipate being greatly affected by problems relating
to the "Y2K Bug." It is possible, however, that e-automate, its customers
and vendors, as well as other e-automate associates could experience
related problems that could cause significant impact upon e-automate
operations or profitability.
When used in this Form 10-QSB in other filings by the Company with the SEC,
in the Company's press releases or other public or stockholder
communications, or in oral statements made with the approval of an
authorized executive officer of the Company, the words or phrases "would
be," "will allow," "intends to," "will likely result," "are expected to,"
"will continue," "is anticipated," "estimate," "project," or similar
expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
The Company cautions readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made, are based
on certain assumptions and expectations which may or may not be valid or
actually occur, and which involve various risks and uncertainties,
including but not limited to risk of product demand, market acceptance,
economic conditions, competitive products and pricing, difficulties in
product development, commercialization, and technology, and other risks.
In addition, sales and other revenues may not commence and/or continue as
anticipated due to delays or otherwise. As a result, the Company's actual
results for future periods could differ materially from those anticipated
or projected.
Unless otherwise required by applicable law, the Company does not
undertake, and specifically
disclaims any obligation, to update any forward-looking statements to
reflect occurrences, developments, unanticipated events or circumstances
after the date of such statement.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings. The company is not currently involved in any
legal proceedings.
Item 2. Changes in Securities.
In July 1999, the Company initiated a private placement (the "Private
Placement") wherein it anticipates raising gross proceeds of $3,000,000
through the sale of 1,000,000 shares of common stock to qualified investors
for $3.00 per share. As of September 30, 1999, $885,000 had been raised
and 294,909 shares of common stock has been issued under Rule 506 of
Regulation D and Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act"). The Company did not use an underwriter in
connection with the Private Placement.
On July 2, 1999, the Company, then known as Aureus Corporation (Aureus),
entered into a
reorganization agreement with Woodlake Village Associates (Woodlake
Village) whereby Aureus would become a wholly owned subsidiary of Woodlake
Village. Under the terms of the agreement, a newly formed wholly owned
subsidiary of Woodlake Village was merged into Aureus. The shareholders of
Aureus exchanged each of their shares of common stock for 1.88 shares of
Woodlake Village common stock in connection with the reorganization
agreement, which resulted in Woodlake Village issuing 3,500,000 shares of
its common stock to the Aureus shareholders. As a result of the
reorganization, the Aureus shareholders became shareholders of the Company
in a transaction intended to qualify as a tax-free reorganization.
Subsequent to the reorganization, Aureus changed its name to e-automate
Corporation.
In contemplation of the reorganization, the Company received a pre-merger
advance in the amount of $100,000 on June 7, 1999 and $35,000 on June 28,
1999, in order to meet short term operating expenses. The advance from an
investor was converted into common stock at the date of the reorganization.
The merger has been considered the reorganization of Aureus and the
acquisition of Woodlake Village in a purchase business combination. There
was no market for Woodlake Village's common stock, which corporation had
minimal assets; therefore, the 1,000,000 shares of common stock outstanding
at the date of the reorganization will be recorded at $0. The merger has
been accounted for as the reorganization of Aureus with a related 1.88 for
1 stock split. The accompanying financial statements have been restated
for the effects of the stock split for all periods presented.
Item 5: Other Information
Directors and Executive Officers
On July 2, 1999 the stockholders of the Company elected new directors. The
members of the Board of Directors of the Company serve until the next
annual meeting of stockholders, or until their successors have been
elected. The officers serve at the pleasure of the Board of Directors.
The following are the directors and executive officers of the Company:
<PAGE>
Name, Position:
James K. Phillips, Chairman/CEO
Richard F. Stout, President/COO/Director
Raymond Meservy, Director
Todd Hardman; Co-founder/Chief Technology Officer
Justin McHood; General Manager, Vice President of Sales
Tyler Woodhouse; Director of Marketing
Kim Green; Director of Finance
Brad Sorensen; Vice President of Software Engineering
Dan Turner; Vice President of Business Consulting
James K. Phillips, age 50; Chairman/CEO. Mr. Phillips is a founder of
several successful companies, and a major investor in e-automate. He is
experienced with helping small companies become successful public
companies. For the last 6 years, Jim has personally coached hundreds of
Fortune 500 executives on how to improve their performance. Jim's role is
to coach the senior managers and help the company transition into a strong
public company culture.
Richard F. Stout, age 37; Co-founder/President. Mr. Stout received an MBA
from Brigham Young University. For fifteen years Rick has done small
business consulting and management activities. As a student Rick
distinguished himself academically, served on the curriculum redesign
committee where he helped to write a book on quantitative decision-making
methods and modeling. For nearly 10 years Rick has worked with small and
mid-sized businesses helping them improve business performance. It was
while engaged in these activities that he identified common problems that
information systems should, but were not solving for small businesses.
Along with Todd Hardman, Rick co-founded e-automate Corporation to develop
business-improvement software. Rick's role is to be the leader of the
vision and strategy, including The Way to e-automate Your Business TM.
Raymond Meservy, age 50; Director. Dr. Meservy received a PhD in
Accounting from University of Michigan. For the past 9 years he has been a
university professor; he has served as an Associate Professor at Carnegie
Mellon University. He now teaches accounting and information systems
studies at Brigham Young University.
Todd Hardman, age 37; Co-founder/Chief Technology Officer. Mr. Hardman is a
graduate in computer science from Brigham Young University. For the past 11
years has done software development. He was one of a few people at Hewlett
Packard who wrote the firmware to make HP LaserJet printers communicate
with networks. Later he became a chief software architect for Open Market
(Folio Corporation) an e-commerce company, which holds the only US patents
on Internet shopping-cart technology. At Ancestry.com, Todd is
architecting one of the world's fastest growing Internet sites. Todd's
role is to insure that the software that is developed uses technologies
that are the right ones for the present and future.
Justin McHood, age 28; General Manager, Sales Vice President. He received
an MBA from Brigham Young University. For the past 5 years he has worked
at Novell, Western Wats Center, Oracle, and completed his college
education. He has an undergraduate degree in finance and has experience
selling and delivering custom enterprise software to small business. His
role is to see that each team is held accountable for achieving the
critical success factors relative to The Way to e-automate Your Business TM.
<PAGE>
Tyler Woodhouse, age 28; Director of Marketing. Mr. Woodhouse joined
e-automate in June, 1999. He received an MBA from Brigham Young
University. While working toward his MBA, he was employed at Novell
conducting market research for Novell's International Strategy Team. Prior
to his MBA, Tyler worked for the V.P. of Sales & Marketing at Gentner
Communications. While working toward his Bachelor of Arts degree in
Broadcast Communications, he spent a semester in New York City working as
an intern for former editor of Fortune Magazine, James B. Hayes. He has
experience managing branding activities, including PR and advertising, as
well as the creation of sales/training materials. Tyler's role is to
enhance General Awareness of e-automate in the market place, branding
e-automate, and generating sales leads.
Kim Green, age 46; Director of Finance. Mr. Green joined e-automate
Corporation in January of 1999. He received a Mechanical Engineering degree
from Brigham Young University and an MBA from the University of Utah. For
the past 15 years Kim has worked as an engineer and project manager at
various organizations. The seven years prior to e-automate, he worked for
Novell, participating in various levels of software product and project
management development activities. Prior to Novell he was employed at
ARINC Research for seven years. His role is to perform Project Management
activities, and to train strategic partners on how to do the same.
Brad Sorensen, age 33; Vice President of Software Engineering. Brad has a
Masters in Electrical
Engineering from Brigham Young University. For the past 6 years he has
served as a senior developer at Corel/WordPerfect, where he managed key
web-based development projects, and at Merisoft. Brad oversees all
Software Engineering Activities, including customization-programming
activities. He has recruited a strong team of people including those
formerly of Intel, Novell, Corel/WordPerfect, and 10-Fold.
Dan Turner, age 43; Vice President of Business Consulting. Mr. Turner
began working as an e-automate associate in December of 1997. Dan received
a Masters of Organizational Behavior from Brigham Young University. Before
joining e-automate, Dan spent three years as VP of Operation/Controller at
Tai-Pan Trading, Inc., one of the first companies to implement the
e-automate enterprise system. In addition, Dan has provided business
consulting services to a number of Fortune 500 companies. His role is to
manage the Business Consulting products and services provided to e-automate
clients.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following Exhibits are filed herewith pursuant to Rule 601 of
Regulation S-B or are incorporated by reference to previous filings.
<PAGE>
Exhibit # Description
3.4 Amendment to Certificate of Incorporation, change name to
e-automate Corporation
27 Financial Data Schedule*
-------------------------
* Filed herewith.
<PAGE>
(b) Reports on Form 8-K
On July 29, 1999, the Company filed a report on Form 8-K regarding the
reorganization of the Company.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
REGISTRANT
e-automate Corporation
Registrant
DATED: November 23 , 1999
By: /s/ Richard F. Stout
Richard F. Stout, President
DATED: November 23, 1999
By: /s/ James K. Phillips
James K. Phillips, CEO
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE CONDENSED BALANCE
SHEET AS OF SEPTEMBER 30, 1999, AND THE CONDENSED STATEMENT OF OPERATIONS FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 10,425
<SECURITIES> 0
<RECEIVABLES> 116,742
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 131,867
<PP&E> 102,111
<DEPRECIATION> (30,370)
<TOTAL-ASSETS> 205,368
<CURRENT-LIABILITIES> 772,794
<BONDS> 0
0
0
<COMMON> 1,216,729
<OTHER-SE> (1,784,155)
<TOTAL-LIABILITY-AND-EQUITY> 205,368
<SALES> 169,001
<TOTAL-REVENUES> 169,001
<CGS> 0
<TOTAL-COSTS> 1,182,341
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<EPS-BASIC> (0.32)
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</TABLE>
