SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): July, 29 1999
E-AUTOMATE CORPORATION
(Exact name of registrant as specified in this Charter)
AUREUS CORPORATION
(Former Name)
WOODLAKE VILLAGE ASSOCIATES, INC.
(Former Name)
Delaware 0-24380 33-0601502
---------------------------- ----------------------- -------------------
(State or other jurisdiction (Commission File Number (IRS Employer
Identification No.)
83 North 490 West, American Fork, Utah 84003
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (801) 492-1705
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to an Agreement And Plan of Merger dated June 14, 1999
(the "Agreement") and subject to the closing of the offering, a
wholly owned subsidiary of the Registrant, Aureus Acquisition Corp. merged
into Aureus, Corporation, a Utah Corporation ("Aureus") effective July 29,
1999, which was reported on Form 8-K filed by the Registrant on November 17,
1999. Furthermore, the shareholders of Aureus exchanged Each of their shares
of common stock for 1.88 shares of Woodlake common stock, resulting in Woodlake
issuing 3,505,941 shares of its common stock to Aureus shareholders. The
transaction has been accounted for as a recaptialization of the Company
with a related 1.88-for-1 stock split and the issuance of 1,000,000
shares of common stock to the Woodlake shareholders with no ascribed value.
Subsequent to the reorganization, Woodlake changed its name to Aureus
corporation, and then to e-automate Corporation. Financial statements
of e-automate are filed herewith as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
See Exhibit Index, Exhibit 99.1
(b) Since Woodlake had no operating activity and substantially
no net assets, the transaction is considered a reorganization
of e-automate Corporation, not a purchase business combination.
Accordingly, no pro forma financial information is required.
(c) Exhibits. The following exhibits are incorporated herein by this
reference:
Exhibit No. Description of Exhibit
----------- -------------------------------------------------
2.1* Agreement and Plan of Reorganization, dated June
14, 1999 between the Registrant and Auerues.
3.3* Amendment to Certificate of Incorporation changing
name to Aureus Corporation.
3.4* Amendment to Certificate of Incorporation changing
name to e-automate Corporation.
99.1** Financial statements.
____________________________
* Incorporated by reference to the same numbered Exhibits to the
Report on Form 8-K, as filed on November 17, 1999.
** Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
E-AUTOMATE CORPORATION.
(Registrant)
Date: June 28, 2000 By: /s/ Lon Price
-----------------------------
Lon Price, President and
Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- -------------------------------------------------
2.1* Agreement and Plan of Reorganization, dated June
14, 1999 between the Registrant and Aureus.
3.3* Amendment to certificate of Incorporation
changing name to Aureus Corporation.
3.4* Amendment to Certificate of Incorporation
changing name to e-automate Corporation.
99.1** Financial statements.
____________________________
* Incorporated by reference to the same numbered Exhibits
to the Report on Form 8-K, as filed on November 19, 1999.
** Filed herewith
<PAGE>
E-AUTOMATE CORPORATION
(Formerly Aureus Corporation)
(A Development Stage Company)
FINANCIAL STATEMENTS
Years Ended March 31, 1999 and 1998, and
for the Period from Inception (November 22, 1995)
through March 31, 1999
<PAGE>
TABLE OF CONTENTS
---------------------------------------------------------
Page
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS:
Balance Sheet 2
Statements of Operations 4
Statements of Changes in Stockholders' Deficit 5
Statements of Cash Flows 6
Notes to Financial Statements 7
<PAGE>
Squire & Company, PC
Certified Public Accountants and Business Consultants
1329 SOUTH 800 EAST * OREM, UTAH 84097-7700 *
(801)225-6900 * FAX (801)226-7739
--------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
of e-automate Corporation
We have audited the accompanying balance sheet of
e-automate Corporation (a development stage company)
(formerly Aureus Corporation) as of March 31, 1999, and the
related statements of operations, stockholders deficit, and
cash flows for the years ended March 31, 1999 and 1998
and for the period from inception (November 22, 1995)
through March 31, 1999. These financial statements are
the responsibility of the management of e-automate
Corporation. Our responsibility is to express an
opinion on these 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 financial statements referred to
above present fairly, in all material respects, the
financial position of e-automate Corporation as of
March 31, 1999, and the results of its operations and
its cash flows for the years ended March 31, 1999 and
1998 and for the period from inception (November 22,
1995) through March 31, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been
prepared assuming that the Company will continue as a
going concern. The Company is a development stage
enterprise engaged in developing business productivity
improvement software for small businesses. As discussed
in Note 1 to the financial statements, the Company's
operating loss and negative operating cash flow for
the year ended March 31, 1999 raise substantial doubt
about its ability to continue as a going concern.
Management's plans concerning these matters are also
described in Note 1. The financial statements do not
include any adjustments that might result from the
outcome of this uncertainty.
/s/ Squire & Company, PC
-------------------------
SQUIRE & COMPANY, PC
Orem, Utah
June 18, 1999
<PAGE>
E-AUTOMATE CORPORATION
(A Development Stage Company)
BALANCE SHEET
March 31, 1999
-------------------------------------------------------------
ASSETS
Current Assets:
Prepaid expenses $ 4,700
Accounts receivable 62,986
-------
Total current assets 67,686
Property and Equipment -
net of accumulated depreciation
of $20,970 22,851
Other Assets 1,760
--------
Total assets $ 92,297
========
The accompanying notes are an integral part of these statements.
<PAGE>
-2-
E-AUTOMATE CORPORATION
(A Development Stage Company)
BALANCE SHEET (Continued)
March 31, 1999
------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Cash overdraft $ 2,696
Accounts payable 16,051
Accrued liabilities 16,835
Defered revenues 159,289
Stockholder notes payable 129,635
Line of credit 107,463
Current portion of long-term debt 225,875
------------
Total current liabilities 657,844
Long-Term Liabilities, less current portion 183,000
------------
Total liabilities 840,844
Stockholders' Deficit:
Preferred stock, $0.001 par value, 1,000,000
shares authorized, no shares issued or
outstanding -
Capital stock, 20,000,000 shares authorized,
2,797,181 shares issued and outstanding,
no par value 2,797
Addition paid-in capital 467,578
Deficit accumulated during the development
stage (1,218,922)
------------
Total stockholders' deficit (748,547)
------------
Total liabilities and stockholders'
deficit $ 92,297
============
The accompanying notes are an integral part of these statements.
<PAGE>
-2-
E-AUTOMATE CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
----------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
from Inception
Years Ended (November 22,
March 31, 1995) through
------------------------- March 31,
1999 1998 1999
------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Revenue $ 244,801 $ 61,473 $ 537,339
Costs and Expenses:
Implementation cost 57,484 28,001 136,098
Post contract support services 33,491 12,982 69,939
Selling and marketing 216,070 73,682 422,935
Research and development 156,615 186,118 679,148
General and administrative 262,003 7,438 282,883
---------- --------- -----------
Total costs and expenses 725,663 308,221 1,591,003
---------- --------- -----------
Loss from Operations (480,862) (246,748) (1,053,664)
Other Expenses - Interest expense (99,842) (62,916) (165,258)
---------- --------- -----------
Net Loss $ (580,704) $(309,664) $(1,218,922)
========== ========= ===========
Basic and Diluted Loss per Common
Share $ (0.23) $ (0.15) $ (0.55)
========== ========= ===========
Weighted Average Number of Shares
Used in per Share Calculation 2,570,511 2,098,199 2,222,892
========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
-4-
E-AUTOMATE CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Years Ended March 31, 1999, 1998 and for the Period
from Inception (November 22, 1995) through March 31, 1999
---------------------------------------------------------------
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Shares Additional during the Total
------------------------ Paid-in Developoment Stockholders'
Shares Amount Capital Stage Equity
----------- --------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance, at Inception
November 22, 1995 - $ - $ - $ - $ -
Shares issued to founders for
services February 1996 -
$0.13 per share 1,534,080 1,534 202,466 - 204,000
Shares issued for assumption
of debt February 1996 -
$0.13 per share 270,720 271 35,729 - 36,000
Shares issued for services
February 1996 - $0.13 per share 200,429 201 26,452 - 26,653
November 1996 - $0.13 per share 39,619 40 5,229 - 5,269
March 1997 - $0.13 per share 3,760 4 496 - 500
Shares issued for services
April 1997 - $0.13 per share 75,200 75 9,925 - 10,000
December 1997 - $0.18 per share 51,281 51 6,768 - 6,819
March 1998 - $0.13 per share 45,120 45 5,955 - 6,000
Net Loss for the period from
November 22, 1995 (date of
inception) through March 31,
1997 - - - (328,554) (328,554)
---------- --------- --------- ------------ ----------
Balance, March 31, 1997 2,220,209 2,221 293,020 (328,554) (33,313)
Transfer of shares by
founding stockholder
as employee bonuses and
other services 75,200
shares - May 1997 - - 10,000 - 10,000
150,400 shares - May 1997 - - 20,000 - 20,000
39,619 shares - August 1997 - - 5,269 - 5,269
16,399 shares - December
1997 - - 2,181 - 2,181
Transfer of shares by founding
stockholder in connection
with debt financing 56,400
shares - October 1997 - - 7,500 - 7,500
18,800 shares - November 1997 - - 2,500 - 2,500
Shares issued in connection
with debt financing
January 1998 - $0.13 per share 75,200 75 9,925 - 10,000
February 1998 - $0.13 per share 62,040 62 8,188 - 8,250
Net Loss for the year ended
March 31, 1998 - - - (309,664) (309,664)
---------- --------- --------- ------------ ---------
Balance, March 31, 1998 2,357,449 2,358 358,583 (638,218) (277,277)
Shares issued in connection
with debt financing
April 1998 - $0.13 per share 119,380 119 15,756 - 15,875
Shares issued for services
April 1998 through August
1998 $0.13 per share 23,500 23 3,102 - 3,125
November 1998 through
February 1999 $0.21 per share 79,900 80 16,495 - 16,575
Shares issued in lieu of
interest payments
May 1998 - $0.13 per share 45,120 45 5,955 - 6,000
September 1998 - $0.21
per share 45,120 45 9,315 - 9,360
Shares redeemed for cash
November 1998 - $0.04
per share (188,000) (188) (7,812) - (8,000)
Shares redeemed for promissory
note
December 1998 - $0.21 per share (531,288) (531) (109,469) - (110,000)
Shares issued to director for:
Cash 479,320 479 99,521 - 100,000
Services 366,680 367 76,132 - 76,499
December 1999 - $0.21 per share
Net Loss March 31, 1999 - - - (580,704) (580,704)
---------- --------- --------- ----------- ----------
Balance, March 31, 1999 2,797,181 $ 2,797 $ 467,578 $(1,218,922) $ (748,547)
========== ========= ========= =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
-5-
E-AUTOMATE CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
from Inception
Years Ended (November 22,
March 31, 1995) through
--------------------------- March 31,
1999 1998 1999
----------- ------------ ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (580,704) $ (309,664) $(1,218,922)
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation 10,601 6,069 20,971
Shares issued for interest expense 31,235 28,250 65,254
Shares issued as compensation 96,200 51,269 378,122
Compensation from stock options
granted - 9,000 9,000
Change in assets and liabilities:
Increase in accounts receivable (62,988) - (62,988)
Increase in prepaid expenses 3,064 (7,763) (4,700)
Increase in other assets (1,760) - (1,760)
Increase (decrease) in accounts
payable 16,051 (5,976) 16,051
Increase (decrease) in accrued
liabilities (9,884) 11,807 16,836
Change in debt discount (2,125) - (2,125)
Increase (decrease) in unearned
revenues 159,289 - 159,289
----------- ----------- -----------
Total adjustments 239,683 92,656 593,950
----------- ----------- -----------
Net cash used in operating activities (341,021) (217,008) (624,972)
Cash Flows from Investing Activities:
Purchase of equipment (13,097) (677) (35,797)
---------- ----------- -----------
Net cash used by investing
activities (13,097) (677) (35,797)
Cash Flows from Financing Activities:
Net change in lines of credit 78,299 (67) 56,463
Change in cash overdraft 2,696 - 2,696
Proceeds from issuance of common stock 100,000 - 136,000
Payments on stockholder note payable - (27,624) (35,649)
Net changes in stockholder receivable (10,158) (48,811) (31,345)
Payments to redeem common stock for
cash (8,000) - (8,000)
Proceeds on related party line of
credit 78,604 - 114,604
Proceeds from bond issuance 38,000 185,000 243,000
Proceeds from notes 70,000 113,000 183,000
---------- ----------- -----------
Net cash provided by financing
activities 349,441 221,498 660,769
Net Increase (Decrease) in Cash (4,677) 3,813 -
Beginning Cash 4,677 864 -
---------- ----------- -----------
Ending Cash $ - $ 4,677 $ -
========== =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
-6-
E-AUTOMATE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Note 1. Nature of Businesses and Summary of Significant Accounting Policies
-------------------------------------------------------------------
Basis for Presentation and Reorganization - Subsequent to March 31,
1999, on July 2, 1999, the Company entered into a reorganization
agreement with Woodlake Village Associates, Inc. (Woodlake) a
publicly held Delaware corporation, whereby a newly formed
wholly-owned subsidiary of Woodlake was merged into the Company.
The stockholders of the Company exchanged each of their shares of
common stock for 1.88 shares of Woodlake common stock in connection
with the reorganization agreement, which resulted in Woodlake
issuing 3,505,941 shares of common stock to the Company's
stockholders. Subsequent to the reorganization, Woodlake changed its
name to Aureus Corporation, and then to e-automate Corporation.
The transaction has been accounted for as a recapitalization of the
Company with a related 1.88 for 1 stock split and the issuance of
1,000,000 shares of common stock to the Woodlake stockholders for
nothing. The accompanying financial statements have been restated
for the effects of the stock split for all periods presented.
Nature of Business - e-Automate Corporation, ("e-automate," or the
"Company") is primarily engaged in developing and providing business
productivity improvement software and services to small businesses.
The Company uses the Internet, and other innovative technologies, to
enable small businesses to more easily purchase and implement its
software, to receive consulting services and to automate business
activities. The founders began operation November 22, 1995, and
originally incorporated the business in Utah February 27, 1996 as
Aureus Corporation ("Aureus").
Use of 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.
Business Condition - The Company has suffered losses from operations
and has had negative cash flows from operating activities. The
Company's continued existence is dependent upon its ability to
achieve profitable operations. Management believes future
operations will provide sufficient cash flows for the Company to
continue as a going concern, although achievement of profitable or
sustainable operations cannot be assured.
<PAGE>
-7-
E-AUTOMATE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
------------------------------------------------------------------------
NOTE 1.NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
-------------------------------------------------------------------------
Development Stage Company - Since inception, the Company has spent
most of its efforts raising capital and developing and marketing its
business productivity improvement software; however, it has not yet
had sales sufficient to sustain operations and has relied upon cash
flows from financing activities (primarily debt and equity
issuances) to sustain operations. Therefore, the Company is
considered to be in the development stage.
Financial Instruments - The amounts as cash, accounts
payable, unearned revenue, and accrued liabilities are considered to
be reasonable approximations of their fair values. The fair value
estimates presented herein were based on market information
available to management at the time of preparation of the financial
statements. For the purpose of the statement of cash flows, cash
and cash equivalents are defined as demand deposits as well as other
funds with a maturity of three months or less.
Research and Development - Research and development costs include
expenditures incurred in development of software products or
enhancements to existing products. Research and development costs
are charged to expense as incurred. Differences between
capitalizable software development costs, together with appropriate
amortization of capitalized costs and actual expenditures to date
have been immaterial and as a result the Company has elected to
expense these costs as incurred.
Depreciation - Property and equipment as of March 31, 1999 consist
of the following equipment and are recorded at cost:
1999
--------
Furniture and fixtures $ 1,371
Computer equipment 42,450
--------
Total property and equipment 43,821
Accumulated depreciation (20,970)
--------
Net property and equipment $ 22,851
========
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:
Estimated
Useful Lives
------------
Office equipment 3 to 7 Years
Computer equipment 5 Years
<PAGE>
-8-
E-AUTOMATE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-----------------------------------------------------------------------
NOTE 1.NATURE OF BUSINESS AND 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.
Depreciation charged to operations was $10,601, $6,069 and
$20,970, respectively for the years ended March 31, 1999 and 1998
and for the period from inception (November 22, 1995) through March
31, 1999.
Revenue Recognition - Revenue from the sale of software products is
recognized once a formal sales contract is agreed upon and delivery
is complete, when no significant obligations remain unfulfilled, and
collection of the resulting receivable is probable. In instances
where a significant obligation exists, revenue recognition is
delayed until the obligation has been satisfied. Generally, sales
of the e-automate system provide for return up through an
implementation and data conversion phase, typically 60 days; an
allowance for return is provided until customer return privileges
expire. Revenue from services, including training and consulting
and data conversion, are recognized as the services are performed
during the implementation phase and are non-refundable. Service
revenues from post contract customer support and software upgrades
are recognized ratably over the period of the related maintenance
contract.
NOTE 2.INCOME TAXES
The Company, with the consent of its stockholders, has elected under
the Internal Revenue to be an S Corporation. In lieu of corporation
income taxes, the stockholders 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.
NOTE 3.ADDITIONAL CASH FLOW STATEMENT DISCLOSURES
The Company paid $54,262, $34,908 and $91,427 of interest
during the years ended March 31, 1999 and 1998 and for the period
from inception (November 22, 1995) through March 31, 1999,
respectively.
Non-cash Investing and Financing Activities - On January 15, 1996 a
founder of the Company contributed computer equipment valued at
$8,024 to the Company in exchange for related party notes payable.
During 1996, one of the founders of the Company paid off the
Company's line of credit, at a bank, in the amount of $36,000 for
which he received 270,720 common shares.
<PAGE>
-9-
E-AUTOMATE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-----------------------------------------------------------------------
NOTE 3.ADDITIONAL CASH FLOW STATEMENT DISCLOSURES (Continued)
The Company issued 626,040 common shares upon conversion of
convertible debentures in the amount of $333,000.
On December 1, 1998 e-automate redeemed 531,288 shares of common
stock for a $110,000 note payable.
NOTE 4. RELATED PARTY TRANSACTIONS
The Company has made and received stockholder advances that
are non-interest bearing (see note 6). In addition, the Company
received contributions of certain computer equipment from a
stockholder. In the opinion of management, the equipment was
credited at fair market value.
NOTE 5. STOCKHOLDER NOTES PAYABLE
Stockholder notes payable are as follows:
1999
--------
Note payable - no stated interest rate,
deemed all current $ 51,031
Note payable - mirrors a personal line of
credit with a bank, interest at 9.75 percent,
with a limit of $100,000 63,604
--------
Total $114,635
========
NOTE 6. LINE OF CREDIT
The Company has a credit line with U.S. Bank. The credit
limit is $35,000. The line bears a variable interest rate. At
March 31, 1999 the interest rate was 10.25 percent. The line of
credit balance was $11,703 as of March 31, 1999.
Additionally, the Company has a second line of credit to a bank that
bears interest at prime plus 2.25 percentage points, matures
February 28, 2000 and has minimum monthly payments of accrued
interest. The line of credit balance was $95,760 as of March 31, 1999.
<PAGE>
-10-
E-AUTOMATE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
---------------------------------------------------------------------------
NOTE 7.NOTES PAYABLE
Notes payable, less current portion are as follows:
1999
-----------
Notes payable, 18 percent interest,
due at various dates during the fiscal
year March 31, 2000, secured by the
assets of the corporation, including all
software code $ 168,000
Convertible debentures, 10 percent
and 18 percent interest, various maturities,
convertible into common stock, of the
Company at the conversion price of $1.00
(net of debt discount $2,125) 240,875
-----------
408,875
Less current portion 225,875
-----------
Total $ 183,000
===========
NOTE 8.STOCKHOLDERS' EQUITY
During February 1996, the Company issued 1,534,080 common shares for
services valued at $204,000, or $0.13 per share, as determined to be
fair value by the Company. Additionally, the Company issued 270,720
common shares, valued at $0.13 per share, to a founder of the
Company in exchange for a $36,000 cash payment the founder made to
pay down a bank line of credit incurred while the Company was
information.
From February 1996 through August 1998 the Company issued shares of
its common stock to employees and directors for services or as
performance based bonuses. During this time the Company issued a
total of 333,108 shares to employees for services valued at $44,296,
or $0.13 per share, and 105,801 common shares to directors for
services valued at $16,250, or $0.13 per share. In as much as the
Company's common shares are not publicly traded, the Board of
Directors has determined the fair value of the Company's common
shares to be $0.13 per share from inception through September 1998.
During April and May, 1997 a principal stockholder of the Company
contributed 356,818 common shares back to the Company and the
Company reissued the shares to employees and to directors for
services and in connection with debt financing. The shares were
valued at $46,386 or $0.13 per share.
<PAGE>
-11-
E-AUTOMATE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
---------------------------------------------------------------------
NOTE 8.STOCKHOLDERS' EQUITY (Continued)
From October 1997 through April 1998, the Company issued 331,820
common shares and notes payable in the amount of $176,500 for cash
proceeds of $176,500. The proceeds were allocated to the common
shares and to the notes based upon their relative fair values, with
$44,125, or $0.13 per share, allocated to the common shares and the
balance allocated to the notes. The resulting discount to the notes
payable of $44,125 was charged to interest expense over the term of
the notes, which was one year.
During May 1998, 45,120 common shares, were issued for interest on
notes. The common shares and the related interest expense were
valued at $6,000, or $0.13 per share.
During September 1998 the Company completed the development of their
product and therefore considered the fair value of the Company to
have increased to $0.21 per share. From September 1998 through May
1999 the Company issued 79,990 common shares to employees for
services valued at $16,575, or $0.21 per share.
During September 1998, 45,120 common shares were issued for interest
on notes. The common shares and the related interest expense were
valued at $9,360, or $0.21 per share.
At the dates certain employees were hired, common stock was issued
to the employee, as described above. At the dates of their
employment those employees entered into agreements with the Company
that upon the termination of their employment, the Company would
redeem common shares which had been issued to the employees at the
book value of the stock. At the time of the employees' termination,
due to the negative book value, the employees and the Company agreed
the stock would be redeemed at $0.04 per share. During November
1998, the Company redeemed 188,000 common shares from terminated
employees for $8,000, which was paid in cash. There were no
unstated rights or privileges granted or received in connection with
the redemption.
On December 1, 1998, 531,288 common shares were redeemed from one of
the Company's founders in exchange for a $110,000 promissory note,
or $0.21 per share, which was considered the fair value on the date
redeemed. The redemption was recorded at cost and there were no
unstated rights or privileges granted or received in connection with
the redemption.
On December 17, 1998, 846,000 common shares were issued to a
director in exchange for services and for $100,000 cash. The fair
value of the common shares issued was $0.21 per share; accordingly,
compensation for services valued at $76,500 was charged to
operations and included in capital.
<PAGE>
-12-
E-AUTOMATE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-----------------------------------------------------------------------
NOTE 9.STOCK OPTIONS AND WARRANTS
Between January 1998 and March 31, 1999 the Company issued 227,474
non-qualifying employee stock options with a weighted average
exercise price of $0.53 per share, and which expire 10 years from
the grant date. The options vest 25% after one year and then 6.25%
per quarter of the employees' service. Since the exercise price was
in excess of the fair value of the underlying shares on the grant
date, no compensation was recognized in connection with these options.
A summary of the status of the Company's employee stock options and
warrants as of March 31, 1999 are presented below:
March 31, 1999
--------------------------
Weighted-Average
Shares Exercise Price
---------- ----------------
Outstanding at beginning of period $ - $ -
Granted 227,484 0.53
Exercised - -
----------
Outstanding at end of period 227,484 0.53
==========
Options exercisable at the
end of the period - -
==========
Weighted-average fair value of
options granted during the
period $ -
==========
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