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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 December 31, 1999
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _____________________
Commission File No. 001-14217
INDUSTRIAL DATA SYSTEMS CORPORATION
(Name of Small Business Issuer in its Charter)
NEVADA 88-0322261
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 Century Plaza Drive, Suite 140, Houston, Texas 77073-6013
Issuer's telephone number (281) 821-3200
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common American Stock Exchange
Securities registered pursuant to Section 12(g) of the Exchange Act:
Not applicable
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months or for such
shortened period that the issuer 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 in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of the 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 fiscal year ended December 31, 1999 were
$12,238,449.
The aggregate market value of the voting stock held by non-affiliates of the
registrant on March 24, 2000 was $8,014,355. The issuer has no authorized non-
voting stock.
The number of shares outstanding of each of the registrant's classes of stock
on March 24, 2000 is as follows:
$0.001 Par Value Common Stock........................12,964,918 shares
DOCUMENTS INCORPORATED BY REFERENCE
Responses to Items 9, 10, 11 and 12 of Part III of this report are incorporated
herein by reference to certain information contained in the Company's definitive
proxy statement for its 2000 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before April 30, 2000.
Transitional Small Business Disclosure Format: Yes No [X]
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INDUSTRIAL DATA SYSTEMS CORPORATION
1999 FORM 10-KSB
TABLE OF CONTENTS
PART I
Item 1. Description of Business........................................ 1
Item 2. Description of Property........................................ 13
Item 3. Legal Proceedings.............................................. 14
Item 4. Submission of Matters to a Vote of Security Holders............ 14
PART II
Item 5. Market for Common Equity and Related Stockholder Matters....... 15
Item 6. Management's Discussion and Analysis or Plan of Operation...... 16
Item 7. Financial Statements........................................... 22
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure........................................... 36
PART III
Item 9. Directors and Executive Officers; Promoters and Control Persons,
Compliance with Section 16(a) of the Exchange Act............... 36
Item 10. Executive Compensation.......................................... 36
Item 11. Security Ownership of Certain Beneficial Owners and Management.. 36
Item 12. Certain Relationships and Related Transactions.................. 36
PART IV
Item 13. Exhibits and Reports on Form 8-K................................ 37
Signatures................................................................ 43
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PART I
The following summary is qualified in its entirety by, and should be read
in connection with the more detailed information contained herein and in the
Company's Consolidated Financial Statements, and the Notes thereto, included
elsewhere in this Annual Report on Form 10-KSB. The discussion in this Annual
Report on Form 10-KSB contains forward-looking statements which involve risks
and other uncertainties. In particular, the Company's business and financial
affairs could be adversely effected by decreases in oil prices, by inability to
get parts from vendors and by its inability to renew its line of credit.
References to the "Company" or to "IDSC" refer to Industrial Data Systems
Corporation. References to "IDS" refer to the Company's wholly owned
subsidiary, Industrial Data Systems, Inc. References to "IED" refer to the
Company's wholly owned subsidiary, IDS Engineering, Inc. References to "Thermal"
refer to the Company's wholly owned subsidiary, Thermaire, Inc. dba Thermal
Corp. References to "CPM" refer to the Company's wholly owned subsidiary,
Constant Power Manufacturing, Inc. References to "IDS FAB" refer to the
Company's previously wholly owned subsidiary, IDS Fabricated Systems, Inc. dba
Marine and Industrial Fire and Safety and dba Marine and Industrial Supply
Company. The consolidated historical financial statements related to these
subsidiaries are included in this Annual Report on Form 10-KSB.
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Industrial Data Systems Corporation (IDSC) was incorporated in the State of
Nevada in June 1994. The Company's Common Stock trades on the American Stock
Exchange under the symbol "IDS." Prior to June 16, 1998, the Company's Common
Stock was traded on the NASDAQ Electronic Bulletin Board under the symbol
"IDDS."
The Company has never filed for protection under the bankruptcy protection
act, nor has the Company or any of its assets been in receivership or any other
similar proceedings.
The Company's revenue is derived from its four wholly owned operating
subsidiaries.
Industrial Data Systems, Inc. (IDS)
On October 15, 1997 the consulting engineering segment of the Company,
formerly known as Industrial Data Systems, Inc. doing business as IDS
Engineering, was split off from IDS, incorporated in the State of Texas, and
began operating as IDS Engineering, Inc. (IED). For additional information on
IED see following section of this Item 1 Description of Business.
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IDS Engineering, Inc. (IED)
On October 15, 1997 the consulting engineering segment of the Company,
formerly known as Industrial Data Systems, Inc. doing business as IDS
Engineering, was incorporated in the State of Texas and now operates as IDS
Engineering, Inc. (IED). The Company issued all of its 1,000 shares of Common
Stock to Industrial Data Systems Corporation. William A. Coskey was appointed
Chairman of the Board, President and Treasurer of IED and Hulda L. Coskey was
appointed the positions of Director, Vice President and Secretary of the newly
formed corporation. The Company believes that the restructuring of IED has
clearly distinguished it from the Company's other operating segments.
Thermaire, Inc. dba Thermal Corp (THERMAL)
The Company acquired Thermaire, Inc. dba Thermal Corp. (Thermal) on
February 14, 1997. The Company issued 600,000 shares of Common Stock which were
held in an escrow account pending completion of the acquisition by the Company
exercising its option to pay $600,000 and obtain a release of the shares. The
Company's option to acquire Thermal was later renegotiated and exercised on
February 14, 1997 with the exchange of 193,719 shares of Common Stock and
$212,563 in cash. Upon completion of the acquisition, the 600,000 shares of
Common Stock previously included in the original Escrow Agreement were canceled.
In connection with this transaction, Thermal purchased its previously leased
facilities on February 28, 1997 for a cash consideration of $500,000, subject to
the completion of the contingent purchase transaction. Bank financing in the
amount of $450,000 was obtained for the purpose of purchasing these facilities.
Constant Power Manufacturing, Inc. (CPM)
On February 19, 1998, the Company signed a letter of intent to acquire CPM,
a Texas corporation formed in June 1989. The acquisition was consummated on
March 25, 1998 with the exchange of $200,000 cash and 300,000 shares of the
Company's Common Stock for 100% of CPM's shares. CPM's previous owner, Jack
Ripley, has remained with CPM as Vice President of Sales and Marketing under an
employment contract. No other employment contracts exist between CPM and its
employees.
IDS Fabricated Systems, Inc. dba Marine and Industrial Fire and Safety and dba
Marine and Industrial Supply Company (IDS FAB)
In November 1998, the Company acquired MLC Enterprises, Inc. (MLC), a Texas
corporation formed in August 1995, doing business as Marine and Industrial Fire
& Safety (MIFS) and Marine and Industrial Supply Company (MISC). The Company
issued 50,000 shares of the Company's Common Stock for 100% of MLC's shares.
Cash consideration of $100,000 was paid to the previous principal as part of an
employment contract. Goodwill in the amount of $593,000 was generated as a
result of the acquisition. Subsequent to the acquisition, MLC's name was
changed to IDS Fabricated Systems, Inc. (IDS FAB). This transaction was
rescinded effective October 28, 1999 as the result of a final Settlement
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Agreement entered into by the Company and the former principal of MLC which is
incorporated by reference as Exhibit 10.31 on the Company's Form 10-QSB for the
quarter ended September 30, 1999. As a result of the Settlement Agreement, all
claims of the parties, including counter-claims and third-party claims made by
the Company, have been dismissed.
Terms of the settlement included rescission of the previously executed
Stock Acquisition Agreement of MLC Enterprises, Inc. and rescission of the
Company's Employment Agreement with the former principal. The settlement also
called for the return of all stock issued and exchanged pursuant to the Stock
Acquisition Agreement. As a result, MLC Enterprises, Inc. (which had been
renamed IDS Fabricated Systems, Inc.) is no longer a subsidiary of the Company.
The former principal has individually assumed all assets, inventory and
liabilities of MLC pursuant to the terms of the Settlement Agreement.
As a result of the settlement and due to the magnitude of previous write-offs
associated with the MLC acquisition, the Company has recorded a one-time gain
during the fourth quarter ended December 31, 1999, since liabilities exceeded
assets at the date the rescission occurred. These amounts have all been netted
and reflected as discontinued operations on the Company's Statement of
Operations for 1999. See additional details in the MD&A section of this Report
on Form 10-KSB.
PRODUCTS AND SERVICES
IDS
IDS is a provider of specialized microcomputer systems that are targeted to
be sold to the industrial market. IDS provides systems integration and resells
industrial microcomputers and peripheral products. The microcomputer and
peripheral products are designed to be used in industrial applications, which
include manufacturing, process control, discrete manufacturing, data
acquisition, telecommunications and man-machine interfaces. The systems that are
provided by the Company are different from conventional, commercial desktop
computers by their architecture, packaging, functionality, integration services
and value-added software. The systems provided by IDS are "open systems" that
support "off-the-shelf" software operated primarily under Windows.
IDS derives revenue from the systems integration and resale of industrial
computer products. IDS also seeks to add value by integrating and technically
supporting advanced microcomputer systems. These systems are typically designed
with enclosures that withstand tough environmental conditions or with enclosures
that have a special form factor which are based on the customer's specific
parameters. Industrial rackmount chassis are configured in several form factors
with a standard of 19 inches in width and a variation in height of 1.75 inches
to 12.5 inches to accommodate multiple drives and other various requirements.
These industrial rackmount chassis are then configured to meet the customer's
exact specifications with appropriate internal components such as hard drive,
processor, and memory. IDS also offers industrial rackmount solutions in
monitors and other peripherals such as industrial
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keyboards and mouse products that are specifically designed to withstand
demanding environments.
IED
IED offers engineering consulting services primarily to the pipeline and
process industries for the development, management and turnkey execution of
engineering projects. IED also performs the execution of capital projects for
its clients on a full service, turnkey basis. IED's staff has the capability of
developing a project from the initial planning stages through detailed design
and construction management.
IED has blanket service contracts in place with divisions of many energy-
related concerns. These blanket service agreements typically provide that IED
will furnish engineering, procurement and project management services for client
companies on a time and materials basis. The services provided include
conceptual studies, project definition, cost estimating, engineering design, and
material procurement, in addition to project and construction management. These
services are performed on facilities that include cross-country pipelines,
pipeline pump stations, gas compressor stations, metering systems, product
storage facilities, product loading terminals, gas processing facilities,
chemical plants and crude oil refineries.
IED offers its clients a wide range of services from a single source
provider. Typical engineering projects involve modifications to existing
facilities as well as new construction. IED develops new client business
relationships utilizing in-house personnel.
THERMAL
Thermal has manufactured quality air handling equipment since 1945.
Because Thermal stocks a large number of fans and manufactures coils, dampers,
curbs and most other accessories, the Company believes that it can achieve one
of the quickest deliveries available in the industry, usually six to eight
weeks, depending on order size and scope. Thermal also reserves production
capacity to accomplish premium, expedited deliveries of two to four weeks, when
necessary. Thermal is well known for its design and manufacturing expertise and
flexibility which is often required to meet the special needs for custom
installations. Thermal's product lines consist of a variety of cooling, heating
and ventilating equipment. The wide range of sizes and models in each product
line coupled with Thermal's manufacturing flexibility provides vast freedom in
air handling equipment choice. Thermal's quality air handling products include
central plant air conditioners, multizone air conditioners, high pressure air
conditioners, and air cooled condensers. Thermal also manufactures fan coil
units, cooling and heating coils, and roof top air handlers. Popular custom unit
features include special modular construction, custom cabinet dimensions,
special insulation type and thickness, gas and electric heaters, humidifiers,
all types of fans, non-standard arrangements, motor and unit controls, unique
customer requirements, exotic materials of construction and severe service
applications, etc.
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Thermal distributes its products exclusively through its United States and
international network of non-stocking sales representatives.
CPM
CPM is a thirteen-year-old company established in the industrial and
commercial backup and conditioned power systems marketplace. CPM designs,
manufactures and resells both standard and custom-designed products and systems
in a wide array of power ranges which include: battery chargers, battery
monitoring systems, DC power supplies, DC/AC inverters, uninterruptible power
systems (UPS), power conditioners, power distribution systems and solar photo-
voltaic systems.
CPM provides field service support for installation and maintenance of
these products. Most of the products manufactured by CPM are made pursuant to
specifications required for a particular order. In mid 1999, CPM introduced a
new product line of switch-mode battery chargers. These chargers have been
readily accepted where physical size constraints and heat are design factors.
Refineries, petrochemical plants, utilities, offshore platforms and other
commercial, industrial and governmental facilities utilize the products sold by
CPM. CPM sells to industrial and commercial accounts across the United States.
PRODUCT DEVELOPMENT
IDS
IDS is currently not developing any new proprietary product designs. Being
an integrator and re-seller of industrial microcomputer systems, IDS is
continuously evaluating products in its marketplace in order to increase its
range of offerings and enhance its ability to sell systems to its customers. In
this activity, IDS evaluates microcomputer enclosures, CPU boards, components
and peripheral products from a variety of manufacturers.
IED
IED continues to provide engineering services primarily to the energy
industry as its base of business. IED currently has 23 blanket service
contracts in place which provide that IED furnish clients with service on a time
and materials basis. In February 1999, the Company opened an office in Tulsa,
Oklahoma that has facilitated the expansion of its market area. IED plans to
increase its range of engineering capabilities and begin marketing its services
to new industries such as the refining, petrochemical and process industries.
During 1999, IED began the development of a standard meter skid package
with modular, interchangeable components which will help to reduce project cost
and execution times. It is expected that this new design will be ready for
sales implementation in the second quarter 2000.
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THERMAL
During 1999, Thermal concentrated its product development efforts toward
the development of a double wall fan coil unit which will be targeted for sales
to schools and hospitals. In addition, design of a triple deck multizone unit
is currently being completed for use in the replacement market. During 2000,
Thermal plans to add the in-house capability of manufacturing industry
certified, 5/8" plate-fin coils. Thermal believes the addition of this plate-fin
coil production line will improve its competitive position in the marketplace by
reducing product costs and production time. Thermal currently purchases all
plate-fin coils from outside sources.
CPM
CPM is in the final design phase of development of a proprietary battery
monitoring product, the BMR-280. This product will continuously monitor
parameters associated with battery systems, including current, voltage and
temperature. The BMR-280 will provide status and historical information about
the battery system to which it is connected, and will also have a feature to
optimize recharging. It is expected that this product design will be completed
and the new product introduced to the marketplace by the second quarter 2000.
Also, in mid-2000, CPM plans to introduce a new product line of
microprocessor controlled battery chargers which will bring to the marketplace
state-of-the-art flexibility and features for the end user. The new line of
chargers will give CPM substantial cost savings in the manufacturing process,
thus giving CPM the opportunity to enter new markets that have historically been
unavailable due to price competition.
COMPETITION
IDS
IDS competes against various companies across its different product lines.
IDS' industrial computer products which are mountable in a 19-inch equipment
rack compete with products from Advantek, Contec and Industrial Computer Source.
There is also competition from much larger suppliers of commercial grade
computers, such as Compaq, Dell and IBM. This commercial competition effectively
sets pricing for its product line, since IDS' customers are willing to pay a
premium for industrial grade computers which is usually limited to approximately
two times the equivalent of commercial grade products.
Management believes that its industrial computer products compete
effectively based on the Company's responsiveness to specific industrial market
engineering requirements, the resulting functional specialization of its
products, and its strategy of focusing on relatively "sheltered" market niches
where major competitors have difficulty tailoring their offerings to specific
application requirements. These strategies help offset the greater name
recognition and broader service and support resources of IDS' major competitors.
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IDS is engaged in business activities that are targeted to industrial
markets which are less competitive and typically generate greater profit
margins. Management believes that the principal competitive factors in the
business in which it operates are price and performance, product availability,
technical expertise, adherence to industry standards, financial stability,
service support and reputation. Pricing competition for IDS' products is from
large manufacturers of commercial grade computer products. IDS' pricing of its
computer product line is governed by pricing in the commercial market.
Some of the IDS' current and potential competitors have longer operating
histories and financial, sales, marketing, manufacturing, distribution,
technical and other competitive resources which are substantially greater than
those of IDS. As a result, IDS' competitors may be able to adapt more quickly
to changes in customer demands or to commit more resources to sales and service
of their products than IDS has available. Such competitors could also seek to
increase their presence in the markets where IDS is providing sales and services
by creating strategic alliances with other competitors, by offering new or
improved products and services to IDS' customers or by increasing their efforts
to gain and retain market share through competitive pricing.
IED
IED operates in a highly competitive environment with many other
organizations which are substantially larger and have greater financial and
other resources. IED competes with other consulting engineering companies on
the basis of price, performance, and its experience as a provider of quality
personnel to perform projects. The pricing competition of IED has intensified
as a result of an increase in temporary personnel contracting agencies who can
perform services at a higher volume level and lower profit margin. Because the
engineering business may require small amounts of capital, market entry can be
rather effortless for a potential new competitor possessing acceptable
professional qualifications. Therefore, IED competes with a wide array of both
national and regional specialty firms.
THERMAL
Thermal operates in a highly competitive environment with many other
organizations which are substantially larger and have greater financial
resources. Management believes that the principal competitive factors in its
market include delivery time, flexibility and product design, breadth of product
features, product quality, customer service, and price. Thermal competes with
other air handling equipment manufacturers on the basis of quality, quick
delivery and capability to provide custom applications. Thermal is cost
competitive with many well-established manufacturers, such as Temtrol,
Governaire, Mammoth and Pace, and others. Thermal has distinguished itself by
being responsive to customer requests for custom products and is able to
expedite delivery of units faster than many other commercial manufacturers due
to the flexibility of its engineering and manufacturing facility capabilities.
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CPM
CPM is engaged in a highly competitive business which is characterized by a
small number of larger companies that dominate the bulk of the market, and a
large number of similarly sized companies that compete for a limited share of
the market. In the opinion of management, the competitive position of CPM will
be greatly enhanced by the introduction of its new microprocessor controlled
battery charger product line. This additional product line, due to the cost
savings and the absence of a similarly priced product in the marketplace, should
enable CPM to better compete in the future against its competitors and thus
capture a larger market share. CPM has long been known for quality products and
on-time deliveries in the custom packaged system markets. It is the opinion of
management that CPM is now positioned to enter markets that are more
standardized in nature and volume oriented.
BUSINESS STRATEGY
IDS intends to increase market penetration by focusing on systems
integration and the resale of industrial microcomputer products that are
manufactured by outside sources. IDS believes that it does not have the
personnel or financial resources to broaden its line of proprietary industrial
computer products. In addition, the Company believes that an effort to develop a
broad line of proprietary industrial computer products cannot be financially
justified, given the rapid pace of change and resulting short product lifetimes
typical of the computer industry. IDS will seek to add value by integrating and
technically supporting advanced microcomputer systems primarily comprised of
components from outside sources. IDS has discontinued its efforts to develop
and expand its market presence in the eastern and mid-western portion of the
United States and has closed its remote sales office.
IED's strategy is to increase revenues per employee by developing and
marketing the capability of performing full service turnkey or EPC (Engineering,
Procurement and Construction) projects. IED has traditionally only been
responsible for the engineering portion of its projects, which is normally
between five to fifteen percent of the project's total installed cost. On the
majority of projects to date, IED has invoiced for its services on a time and
materials basis with billing rates that are specified in client generated
blanket services contracts.
In order to execute its strategy with respect to EPC projects, IED has
added staff during 1999 with expertise in project proposal and bidding. While
executing this EPC strategy, IED plans to expand its area of engineering
expertise beyond its traditional focus on the pipeline industry. IED plans to
market its services and submit proposals outside of the pipeline industry, which
over a period of time, will serve to diversify its client base.
Thermal continues to focus on establishing and supporting a qualified sales
representative network within the U.S., and exploiting its niche for custom
products. The addition of a plate-fin coil manufacturing line will help reduce
product costs and production time, and also generate additional revenues from
increased sales of replacement coils.
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CPM has expanded its marketing activities beyond the Texas-Gulf Coast
region. In February 1999, CPM signed contracts with three sales representative
firms outside of this region. Management anticipates that additional sales
representatives will be added in 2000. CPM has strategically placed advertising
for its batteries, battery chargers, and UPS systems in a well-known product
catalogue. The Company plans to continue these advertisements through the year
2002.
The Company intends to continue to pursue potential acquisitions of
complementary businesses. The success of this strategy depends not only upon the
Company's ability to acquire complementary businesses on a cost-effective basis,
but also upon its ability to integrate acquired operations into its organization
effectively, to retain and motivate key personnel and to retain customers of
acquired firms. There can be no assurance that the Company will be able to find
suitable acquisition candidates or be successful in acquiring or integrating
such businesses. Furthermore, there can be no assurance that financing required
for any such transactions will be available on satisfactory terms.
SALES AND MARKETING
The Company's various subsidiaries derive revenues from in-house direct
sales, sales representatives and catalog distributor sales. Sales
representatives are teamed with in-house sales managers and are assigned to
territories within the United States. Management believes that this method of
selling leads to increased account penetration, proper management of its
products, and enhanced customer service which creates and maintains the
foundation for long-term relationships with its customers. The Company's in-
house sales personnel are normally compensated utilizing incentive commissions
which are based on either a percentage of revenues or gross profitability which
can be attributed to their efforts. Management believes that its past and
future growth depends in large measure on its ability to attract and retain
qualified sales representatives and sales management personnel. Management is
of the opinion that its in-house marketing and selling of its products allows
for more freedom and control, thus increasing profitability.
The Company's subsidiaries promote their products and services through
general and trade advertising, participation in trade shows, through
telemarketing and most recently through on-line Internet communication via
IDSC's corporate home page which provides links to each of the subsidiaries'
webpages. The Company is currently in the process of updating each of its
subsidiaries' Internet web sites and expects to have updates completed by mid-
2000. It is the opinion of management that the Internet is a powerful marketing
tool, and with the increasing e-commerce activity becoming evident, each
subsidiary must be positioned to capitalize on this trend.
The Company's sales personnel focus on building long-term relationships
with customers and, through their product and industry expertise, providing
customers with product application, engineering and after-the-sale services.
Additionally, the sales personnel of IDSC subsidiaries seek to capitalize on
customer relationships that have been developed by each
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subsidiary through cross-selling of the various products and services offered by
each subsidiary. Sales leads developed by this synergy are then jointly pursued.
Much of the Company's business is repeat business, and the source of new
customers has been largely through word-of-mouth referrals from existing
customers and industry members, such as manufacturers representatives.
CUSTOMERS
IDSC's customer base consists primarily of Fortune 500 companies in
numerous industry segments within the United States.
The Company's largest ten customers (which varied from period to period)
accounted in the aggregate for approximately 63% and 65% of the Company's total
revenue during 1998 and 1999, respectively.
Currently, the Company's major customers include:
IED: EXXON Pipeline Co. Inc., Jacobs Engineering, Marathon Pipeline Co.,
Equistar Chemicals, LP, EGP Fuels Company
THERMAL: Hollingsworth Equipment, Inc., South Texas Equipment, Airmont, Inc.,
Conditioning Components Company
CPM: Brown and Root International
Based upon historical results and existing relationships with customers,
the Company believes that, although efforts are being made to diversify its
client base, a substantial portion of its total revenue and gross profit will
continue to be derived from sales to existing customers. There are no long-term
commitments by such customers to purchase products or services from the Company.
Sales of IDSC's subsidiaries products are typically made on a purchase order
basis. A significant reduction in orders from any of the Company's largest
customers could have a material adverse effect on the Company's financial
condition and results of operations. Similarly, the loss of any one of the
Company's largest customers or the failure of any one of such customers to pay
its accounts receivable on a timely basis could have a material adverse effect
on the Company's financial condition and results of operations. There can be no
assurance that the Company's largest customers will continue to place orders
with the Company or that orders by such customers will continue at their
previous levels. There can be no assurance that the Company's customers for its
engineering services will continue to enter into contracts with the Company for
such services or that existing contracts will not be terminated.
CUSTOMER SERVICE AND SUPPORT
The Company provides service and technical support to its customers in
varying degrees depending upon the product line and on customer contractual
arrangements. The Company's support staff provides initial telephone
troubleshooting services for end-user customers and distributors. These services
include isolating and verifying reported product
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failures, authorizing product returns and tracking completion of repaired goods
in support of customer requirements. Technical support also provides on-site
engineering support in the event that a technical issue can not be resolved over
the telephone. The Company provides limited warranty coverage for its products
for varying time periods depending on a variety of factors. On a routine basis,
IED provides start-up and commissioning services for projects in which it
provides engineering services.
DEPENDENCE UPON SUPPLIERS
The Company's businesses depend upon the ability to obtain an adequate
supply of products and parts at competitive prices and on reasonable terms. The
Company's suppliers are not obligated to have products on hand for timely
delivery to the Company nor can they guarantee product availability in
sufficient quantities to meet the Company's demands. There can be no assurance
that such products will be available as required by the Company at prices or on
terms acceptable to the Company. The Company procures a majority of its
components from distributors in order to obtain competitive pricing, maximize
product availability and maintain quality control.
IDS purchases from other manufacturers substantially all peripheral devices
and components used in its systems. A majority of the components and peripherals
are available from a number of different suppliers, although certain major items
are procured from single sources. Management believes that alternate sources
could be developed for such single source items, if necessary. However, if
peripheral or component shortages were to occur, it could have an adverse effect
on IDS' operations.
The business in which IDS competes is characterized by rapid technological
change and frequent introduction of new products and product enhancements. IDS'
success depends in large part on its ability to identify and obtain products
that meet the changing requirements of the marketplace. IDS could experience
delays in the receipt of these integral products. There can be no assurance that
IDS will be able to identify and offer products necessary to remain competitive
or avoid losses related to obsolete inventory and drastic price reductions. IDS
attempts to maintain a level of inventory required to meet its near term
delivery requirements by relying on the ready availability of products from its
principal suppliers. Accordingly, the failure of IDS' suppliers to maintain
adequate inventory levels of computer products demanded by its existing and
potential customers and to react effectively to new product introductions could
have a material adverse affect on the Company's financial condition and results
of operations. Failure of IDS to gain sufficient access to new products or
product enhancements could also have a material adverse affect on the Company's
financial condition and results of operations.
Thermal currently stocks key components due to long lead times. Specialty
items are purchased as required for each job. Thermal has increased its
stocking levels, because of the potential delays in manufacturing which would be
caused by its inability to procure critical components.
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All of CPM's products are manufactured using components and materials that
are available from numerous domestic suppliers. CPM has approximately 10
principal suppliers of components and each of those could be replaced with
several competitors; therefore, CPM anticipates little or no difficulty in
obtaining components in sufficient quantities and in a timely manner to support
its manufacturing and assembly operations.
There can be no assurance that IDSC's subsidiaries will be able to continue
to obtain the necessary components from any of its single sources on terms
acceptable to the Company, if at all. There can be no assurance that such
relationships will continue or that, in the event of a termination of any
relationship, it would be able to obtain alternative sources of supply without a
material disruption in the Company's ability to provide products to its
customers. Any material disruption in the Company's supply of products would
have a material adverse effect on the Company's financial condition and results
of operations. No one manufacturer or vendor provides products that account for
10% or more of the Company's revenues.
PATENTS, TRADEMARKS, LICENSES
The Company's success depends in part upon its proprietary technology, and
it relies primarily on trade secrecy and confidentiality agreements to establish
and protect its rights in its proprietary technology. The Company does not own
the rights to any U.S. or foreign patents. There can be no assurance that the
Company's present protective measures will be adequate to prevent unauthorized
use or disclosure of its technology or independent third party development of
the same or similar technology. Although the Company's competitive position
could be affected by its ability to protect its proprietary and trade secret
information, the Company believes other factors, such as the technical expertise
and knowledge of the Company's management and technical personnel, and the
timeliness and quality of support services provided by the Company, to be more
significant in maintaining the Company's competitive position.
The Company currently has no patents, trademarks, licenses or royalty
agreements.
GOVERNMENT REGULATIONS
Certain of the Company's subsidiaries are subject to various laws and
regulations relating to its business and operations, and various health and
safety regulations as established by the Occupational Safety and Health
Administration. The Company is not currently aware of any situation or
condition that it believes is likely to have a material adverse effect on its
results of operations or financial condition.
RESEARCH AND DEVELOPMENT
Research and development cost for 1999 was approximately $79,000.
Expenditures for research and development in 1998 were approximately $25,000.
As of December 31, 1999, IDSC's subsidiaries were involved in several active
research and development activities. These projects included: a standard meter
skid package with modular,
12
<PAGE>
interchangeable components predesigned by IED to reduce project cost and
execution times; Thermal's design of a double wall fan coil unit for hospitals
and schools and triple deck multizone units for the replacement market; and
CPM's development of its proprietary battery monitor product and its product
line of microprocessor controlled battery chargers.
EMPLOYEES
As of December 31, 1999, the Company employed approximately 116 individuals
within its four subsidiaries; approximately nine were employed in sales,
marketing and customer services; 56 were employed in engineering; 36 were
employed in technical production positions; and 15 were employed in
administration, finance and management information systems. The Company believes
that its ability to recruit and retain highly skilled and experienced technical,
sales and management personnel has been, and will continue to be, critical to
its ability to execute its business plan. None of the Company's employees are
represented by a labor union or are subject to a collective bargaining
agreement. The Company believes that relations with its employees are good.
ITEM 2. DESCRIPTION OF PROPERTY
FACILITIES
Except as noted below, the Company leases its principal executive offices
in Houston, Texas, which consist of approximately 32,836 square feet in two
adjoining offices. Approximately 12,000 square feet of this space is currently
utilized for production operations and warehouse space for the IDS and CPM
operations.
On February 10, 1999, IED signed a lease for its newly established office
in Tulsa, Oklahoma. This office space consists of 5,400 square feet in a one-
story office building. The lease is for a term of two years, ending on February
28, 2001. The base monthly rent is $2,925. with an additional common area fee
of $225 per month. Modifications are currently being made to the existing
office space at IED's Tulsa facility in order to more efficiently utilize its
engineering and design areas. Due to the recent successes of its business
development strategy, it is expected that an amended lease will be executed in
March 2000, to be commenced in August 2000, in order to secure an additional
2,700 square feet of abutting office space for the Tulsa operation.
As a result of the acquisition of Thermal, land and property previously
leased by Thermal was purchased by Thermal for $500,000, consisting of $50,000
cash advance from the Company and a note payable in the amount of $450,000. The
balance on this note at December 31, 1999 was $404,098. This property consists
of 4.5995 acres of land improved with a 37,725 square foot concrete tiltwall
office/manufacturing facility located in Houston, Texas, of which approximately
2,500 square feet is used for office space and 35,200 square feet for
manufacturing. Remodeling of 1,600 square feet of office and engineering space
was completed in February 2000 which allowed office personnel to vacate
temporary modular offices on the premises.
13
<PAGE>
The leased property associated with the previously acquired IDS FAB
subsidiary are no longer the responsibility of IDSC as a result of the
Settlement Agreement described in Item 1 - Description of Business and
incorporated by reference as Exhibit 10.31 on the Company's Form 10-QSB for the
quarter ended September 30, 1999.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in various legal proceedings
arising in the ordinary course of business. The Company is not currently
involved in any material legal proceedings and is not aware of any material
legal proceeding threatened against it.
ITEM 4. SUBMISSION OR MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders during
the fourth quarter of the fiscal year ended December 31, 1999.
14
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.001 par value per share, is quoted on the
American Stock Exchange effective June 16, 1998, under the symbol "IDS". Prior
to June 16, 1998, the Company's Common Stock was traded on the NASDAQ
Electronic Bulletin Board under the symbol "IDDS."
HIGH LOW
---- -----
YEAR ENDED DECEMBER 31, 1998
----------------------------
First Quarter................................... 6.750 3.125
Second Quarter.................................. 6.000 3.250
Third Quarter................................... 8.688 6.000
Fourth Quarter.................................. 9.375 5.875
YEAR ENDED DECEMBER 31, 1999
----------------------------
First Quarter................................... 9.250 7.250
Second Quarter.................................. 10.750 1.750
Third Quarter................................... 2.688 1.000
Fourth Quarter.................................. 1.188 0.750
The foregoing figures are based on information published by NASDAQ/AMEX, do
not reflect retail markups or markdowns and may not represent actual trades.
As of December 31, 1999, the Common Stock was held by approximately 181
stockholders of record.
DIVIDEND POLICY
The Company has never declared or paid a cash dividend on the Common Stock.
The payment of dividends in the future will depend on the Company's earnings,
capital requirements, operating and financial position and general business
conditions. The Company intends to retain any future earnings for reinvestment
in its business and does not intend to pay cash dividends in the foreseeable
future. The Company has not entered into any agreement which restricts its
ability to pay dividends on its Common Stock in the future. See "Management's
Discussion and Analysis or Plan of Operation."
15
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion is qualified in its entirety by, and should be
read in conjunction with, the Company's Consolidated Financial Statements
including the Notes thereto, included elsewhere in this Annual Report on Form
10-KSB. Footnote 12 to the Financial Statements contains segment information.
OVERVIEW
Since the Company's formation in 1985, its major source of revenues has
been the provision of engineering consulting services to the pipeline divisions
of major integrated oil and gas companies. The Engineering segment accounted
48.8% of total revenues for 1999. The Company has made a concentrated effort to
expand upon the engineering consulting services and has actively pursued more
turn-key projects which requires full service of jobs in the engineering,
procurement and construction phases. In spite of reduced sales revenues during
1999, the Air Handling segment has been able to maintain a stable gross margin
percentage by controlling labor and material costs. The Company believes that
tight market conditions prevalent during most of 1999 in the oil and gas related
markets contributed to the decline in sales revenues within its three production
segments.
The overall consolidated gross margin decreased in 1999. This is
attributable to the lower revenues reported during the year not being
accompanied by lower labor and material costs. The overall gross margin
decreased from 25.4% in 1998 to 23.3% in 1999.
The Company reclassified the activity pertaining to the Fabricating segment
as discontinued for the years ended December 31, 1998 and 1999. This resulted
in a loss from discontinued operations in 1998 of $221,457 and of $1,972 in
1999. The acquisition of IDS FAB was rescinded, effective October 28, 1999 and
as a result of the rescission, the Company recorded a one-time loss on the
disposal of discontinued operations of $481,085, net of tax of approximately
$146,000.
YEAR 2000 (Y2K) ISSUES AND CONSEQUENCES
The Company's program to address its Year 2000 issues was successful and
the Company experienced no down-time or stoppage of normal business activities
due to Y2K issues. The Company did not experience any adverse or detrimental
effects from Y2K issues effecting the ability to transact business with any of
its major suppliers or customers. All normal banking and business transactions
have been conducted without incident. The Company believes it experienced some
effects of the Y2K concerns, resulting in lower revenues due to the redirection
of capital expenditures toward the identification and remediation of Y2K issues.
The Company expects no adverse effects on its ability to conduct business from
Y2K issues in the future.
16
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain information contained in this Form 10-KSB Annual Report, the
Company's Annual Report to Shareholders, as well as other written and oral
statements made or incorporated by reference from time to time by the Company
and its representatives in other reports, filings with the Securities and
Exchange Commission, press releases, conferences, or otherwise, may be deemed to
be forward-looking statements with the meaning of Section 21E of the Securities
Exchange Act of 1934. This information includes, with limitation, statements
concerning the Company's future financial position, and results of operations;
planned capital expenditures; business strategy and other plans for future
operations; the future mix of revenues and business; commitments and contingent
liabilities; Year 2000 issues; and future demand and industry conditions.
Although the Company believes that the expectations reflected in such forward-
looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. When used in this report, the
words "anticipate," "believe," "estimate," "expect," "may," and similar
expressions, as they relate to the Company and its management, identify forward-
looking statements could differ materially from the results described in the
forward-looking statements due to the risks and uncertainties set forth with
this Annual Report on Form 10-KSB generally.
17
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
financial data derived from the Company's consolidated statements of operations
and indicates percentage of total revenue for each item.
Years ended December 31,
------------------------
1998 1999
---- -----
Amount % Amount %
------ -- ------ --
Revenue:
Engineering....................... $ 4,406,585 34.8 $ 5,978,180 48.8
Air Handling...................... 3,707,672 29.3 3,151,295 25.7
Power Systems..................... 3,016,286 23.8 2,372,889 19.4
Products.......................... 1,535,915 12.1 736,084 6.1
----------- ----- ----------- =====
Total Revenue...................... $12,666,458 100.0 $12,238,449 100.0
Gross Profit:
Engineering........................ 1,263,454 28.7 1,599,722 26.8
Air Handling....................... 715,547 19.3 598,766 19.0
Power Systems...................... 926,760 30.7 478,905 20.2
Products........................... 309,637 20.2 171,048 23.2
----------- ----- ----------- -----
Total Gross Profit.................. $ 3,215,398 25.4 $ 2,848,440 23.3
Selling, general and administrative
expenses............................ 2,277,711 18.0 2,615,922 21.4
----------- ----- ----------- -----
Operating Income................ 937,687 7.4 232,518 1.9
Other income (expense)............... (11,022) (0.1) 78,436 0.6
Income from continuing operations
before provision for income
taxes........................... 926,665 7.6 310,954 2.5
Provision for income taxes........... 285,376 2.3 151,212 1.2
----------- ----- ----------- -----
Income from continuing operations.... 641,289 5.2 159,742 1.3
----------- ----- ----------- -----
Loss from discontinued operations.... (221,457) (1.8) (1,972) 0.0
----------- ----- ----------- -----
Loss on disposal of discontinued
operations, net of tax of
approximately $146,000 in 1999.. 0 0.0 (481,085) (3.9)
----------- ----- ----------- -----
Net Income (Loss).................... $ 419,832 3.4 $ (323,315) (2.6)
=========== ===== =========== =====
18
<PAGE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
In October 1999, the acquisition of IDS FAB, which took place in November
1998 was rescinded. As a result of this, the operating results of IDS FAB were
reclassified as discontinued operations for 1998 and 1999. The following
comparisons reflect these reclassifications.
TOTAL REVENUE. Total revenue decreased by $428,009 or 3.4% from $12,666,458
in 1998 to $12,238,449 in 1999. Revenue from the Engineering segment, which
comprised 34.8% and 48.8% of total revenue in 1998 and 1999, respectively,
increased by $1,571,595 or 35.7%. This increase was due to the segment adding
several sizable lump-sum projects to its existing revenue base and to additional
revenues generated by its Tulsa operation. Revenue from the Air Handling segment
comprised 29.3% and 25.7% of total revenue in 1998 and 1999, respectively,
decreased by $556,377 or 15.0%. The Power Systems segment contributed revenue in
nine months ended December 31,1998 of $3,016,286, which comprised 23.8% of total
revenues and for the year ended December 31,1999 it generated 19.4% of total
revenues. Revenue from the Products segment comprised 12.1% and 6.1% of total
revenues for 1998 and 1999, respectively. The Company believes the decrease in
revenues in the Air Handling, Power Systems and Products segments was
attributable to an overall decline in the market as a result of Y2K concerns and
the redirection of capital expenditure funds to identify and remedy Y2K issues.
GROSS PROFIT. Gross profit decreased by $366,958 or 11.4% from $3,215,398
in 1998 to $2,848,440 in 1999. The gross margin for the Engineering segment
increased by $336,268 or 26.6% from 1998 to 1999. This was attributable to the
increase in revenues in 1999. The gross margin for the Air Handling segment
decreased by $116,781 or 16.3% from 1998 to 1999. This decrease was due to the
decrease in 1999 revenues as explained above. The Power Systems segment gross
margin declined by an amount of $447,855 from 30.7% in 1998 to 20.2% in 1999 due
to a decrease in revenues not accompanied by offsetting reductions direct
material and labor costs. The Products segment gross margin decreased by
$138,589 or 44.8% from 1998 to 1999, which was attributable to lower revenues.
The gross margin generated in 1999, as a percentage of sales, was slightly
higher than what was generated in 1998 due to the reduction in direct material
and labor costs, which were brought about by management as a result of decreased
revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $338,211 or 14.8% from $2,277,711 in 1998
to $2,615,922 in 1999. As a percentage of total revenue, selling, general and
administrative expenses increased from 18.0% in 1998 to 21.4% in 1999. The
increase was attributable to additional expense related to the establishment of
the Tulsa office and related increases in personnel and benefit costs.
OPERATING PROFIT. Operating profit decreased by $705,169 or 75.2% from
$937,687 in 1998 to $232,518 in 1999. Operating profit decreased as a percentage
of total revenue from 7.4% in 1998 to 1.9% in 1999. This decrease was brought
about by the lower combined
19
<PAGE>
revenues, lower gross margins in the Air Handling, the Power Systems and
Products segment and to the increase in selling, general and administrative
expense.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations
decreased by $481,547 or 75.1% from $641,289 in 1998 to $159,742 in 1999. This
was attributable to the overall decline in revenues and gross margins
accompanied by an increase in selling, general and administrative costs. The
Company's attempt to maintain a stable workforce base for future growth and
additional expenses to maintain the Tulsa operations contributed to the
increased expenses.
DISCONTINUED OPERATIONS. Discontinued operations contributed a loss of
$221,457 in 1998. In 1999, discontinued operations generated a loss of $1,972.
The loss on disposal of discontinued operations, as a result of the rescission
of the IDS FAB acquisition generated a one-time loss of $481,085.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has satisfied its cash requirements principally
through operations and, as needed, by borrowings under its line of credit. As of
December 31, 1998, the Company's cash position, was in management's judgment,
sufficient to meet its working capital requirements. The Company had, as of
December 31, 1999, approximately $835,000 in additional advances available under
its line of credit with a bank. This line of credit provides for maximum
borrowings of $1,150,000, which bears interest at prime plus 1%, is for a term
of one year and matures on May 12, 2000. The Company expects the line of credit
will be renewed at that time. The line of credit is secured by accounts
receivable, inventory and the personal guarantees of certain stockholders and
officers of the Company. As of December 31, 1999, the Company had $315,660
outstanding against the line of credit note. Interest on the outstanding
balance of this note is paid on a monthly basis. At its maturity on May 12,
2000, the Company expects that the line of credit term note will be renewed.
The Company believes that it has sufficient working capital and does not
intend to sell shares of its Common Stock within the next 12 months.
The Company's working capital was $3,047,291 and $3,306,316 at December 31,
1998 and December 31, 1999, respectively.
CASH FLOW
Operating activities provided net cash totaling $773,432 and $93,703 during
1998 and 1999, respectively. The Company has not generated significant cash flow
from operating activities due to the working capital requirements resulting from
its rapid growth in the engineering segment.
20
<PAGE>
Investing activities generated cash totaling $208,515 and $114,020
respectively, during the years ended December 31, 1998 and 1999. In 1998, the
Company's investing activities that used cash were primarily related to the
acquisition of CPM and IDS FAB and capital expenditures. In 1999, the Company's
investing activities consisted primarily of capital expenditures.
Financing activities provided cash totaling $7,630 and used cash totaling
$196,514 during 1998 and 1999, respectively. The Company has additional
financing amounts available on its line of credit ($835,000 at December 31,
1999). The line of credit has been used principally to finance accounts
receivable and inventory purchases.
ASSET MANAGEMENT
The Company's cash flow from operations has been affected primarily by the
timing of its collection of trade accounts receivable. The Company typically
sells its products and services on short-term credit terms and seeks to minimize
its credit risk by performing credit checks and conducting its own collection
efforts. The Company had trade accounts receivable of $2,913,128 and $2,540,835
at December 31, 1998 and 1999, respectively. The number of days' sales
outstanding in trade accounts receivable was 70 days and 76 days, at December
31, 1998 and 1999, respectively. Bad debt expenses have been insignificant
(approximately .01%) for each of these periods.
21
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The audited consolidated financial statements for Industrial Data Systems
Corporation, as of December 31, 1999 and 1998 are attached hereto and made part
hereof.
INDEX
Page
----
INDEPENDENT AUDITOR'S REPORT.................................... 23
CONSOLIDATED BALANCE SHEET - December 31, 1999.................. 24
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1999 and 1998..................... 25
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1999 and 1998..................... 26
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999 and 1998..................... 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...................... 28
22
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Industrial Data Systems Corporation
We have audited the accompanying consolidated balance sheet of Industrial Data
Systems Corporation and Subsidiaries as of December 31, 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended December 31, 1998 and 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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
Industrial Data Systems Corporation and Subsidiaries as of December 31, 1999,
and the results of their operations and their cash flows for the years ended
December 31, 1998 and 1999, in conformity with generally accepted accounting
principles.
/s/Hein + Associates llp
Houston, Texas
March 17, 2000
23
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 663,972
Municipal bond, at cost 300,000
Accounts receivable - trade, less allowance for doubtful 2,540,835
accounts of approximately $6,500
Inventory 771,808
Notes receivable from stockholders 150,000
Federal income tax receivable 53,000
Prepaid and other 329,441
----------
Total current assets 4,809,056
PROPERTY AND EQUIPMENT, net 1,070,218
GOODWILL 34,650
----------
Total assets $5,913,924
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 342,010
Current maturities of long-term debt 39,259
Accounts payable 779,017
Deferred income taxes 45,000
Accrued expenses and other current liabilities 297,454
----------
Total current liabilities 1,502,740
LONG-TERM DEBT 384,658
DEFERRED INCOME TAXES 52,000
COMMITMENTS AND CONTINGENCIES (Notes 6, 7 and 16)
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 75,000,000 shares authorized;
12,964,918 shares issued and outstanding 12,965
Additional paid-in capital 2,640,154
Retained earnings 1,321,407
----------
Total stockholders' equity 3,974,526
----------
Total liabilities and stockholders' equity $5,913,924
==========
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
24
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1998 1999
----------------- -----------------
<S> <C> <C>
OPERATING REVENUES:
Engineering services $ 4,406,585 $ 5,978,180
Product sales 8,259,873 6,260,269
----------- -----------
12,666,458 12,238,449
OPERATING EXPENSES:
Cost of engineering services 3,143,131 4,378,459
Cost of product sales 6,307,929 5,011,550
Selling, general and administrative 2,277,711 2,615,922
----------- -----------
11,728,771 12,005,931
----------- -----------
Operating profit 937,687 232,518
OTHER INCOME (EXPENSE):
Realized gains on marketable securities, net 14,510 50,909
Net unrealized gains (losses) on marketable securities 3,772 -
Interest income 49,542 46,963
Interest expense (78,846) (68,067)
Other income - 48,631
----------- -----------
(11,022) 78,436
----------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAX (BENEFIT) EXPENSE 926,665 310,954
PROVISION FOR INCOME TAX (BENEFIT) EXPENSE:
Federal 412,810 141,632
State 24,900 14,580
Deferred (80,334) (5,000)
----------- -----------
357,376 151,212
----------- -----------
INCOME FROM CONTINUING OPERATIONS 569,289 159,742
LOSS FROM DISCONTINUED OPERATIONS, net of tax of
approximately $72,000 in 1998 (149,457) (1,972)
LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS, net of tax of
approximately $146,000 in 1999 - (481,085)
----------- -----------
NET INCOME (LOSS) $ 419,832 $ (323,315)
=========== ===========
BASIC AND DILUTED EARNINGS PER COMMON SHARE:
Continuing operations $0.05 $0.01
Discontinued operations $(0.02) $(0.03)
----------- -----------
Net income (loss) $0.03 $(0.02)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 12,947,280 13,055,535
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENT.
25
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
Common Stock Additional Total
--------------------- Paid-in Retained Treasury Stockholders'
Shares Amount Capital Earnings Stock Equity
---------- ------- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, December 31, 1997 12,723,718 $12,724 $2,176,713 $1,224,890 $(15,323) $3,399,004
Stock issuances in conjunction with acquisitions 350,000 350 589,450 - - 589,800
Net income - - - 419,832 - 419,832
---------- ------- ---------- ---------- --------- ------------
BALANCES, December 31, 1998 13,073,718 13,074 2,766,163 1,644,722 (15,323) 4,408,636
Treasury stock
Acquisition:
Received 50,000 shares in rescission agreement - - - - (43,750) (43,750)
Purchased 40,000 shares - - - - (67,045) (67,045)
Retirement (108,800) (109) (126,009) - 126,118 -
Net loss - - - (323,315) - (323,315)
---------- ------- ---------- ---------- --------- ------------
BALANCES, December 31, 1999 12,964,918 $12,965 $2,640,154 $1,321,407 $ - $3,974,526
========== ======= ========== ========== ========= ============
</TABLE>
See accompanying notes to these consolidated financial statements.
26
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1998 1999
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 419,832 $ (323,315)
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization 170,564 144,304
Deferred income tax expense from continuing operations (32,334) (5,000)
Gain on sale of trading securities (14,510) (50,909)
Loss from discontinued operations 221,457 483,057
Changes in operating assets and liabilities, net of assets acquired in
business combinations:
Accounts receivable - trade 660,162 (583,747)
Inventory 177,745 91,289
Trading securities (287,092) 427,556
Accounts payable (832,867) 436,699
Income taxes payable 77,302 (210,000)
Accrued expenses and other current liabilities 270,488 (214,905)
Other, net (57,315) (101,326)
---------- ----------
Net cash provided by operating activities 773,432 93,703
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (84,707) (208,923)
Purchase of IDS Fabricated Systems, Inc., net of cash received 125,387 -
Purchase of Constant Power Manufacturing, Inc., net of cash received 112,289 -
Payments (advances) on note receivable from stockholder 50,000 -
Repayments from affiliate 5,546 -
---------- ----------
Net cash provided by investing activities 208,515 (208,923)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term repayments (12,470) (146,014)
Long-term borrowings (repayments) 20,100 16,545
Purchases of treasury stock - (67,045)
---------- ----------
Net cash provided by (used in) financing activities 7,630 (196,514)
---------- ----------
NET CASH USED IN DISCONTINUED OPERATIONS $ (221,457) $ (250,115)
---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 768,120 (561,849)
CASH AND CASH EQUIVALENTS, at beginning of year 457,701 1,225,821
---------- ----------
CASH AND CASH EQUIVALENTS, at end of year $1,225,821 $ 663,972
========== ==========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 81,000 $ 68,709
Income taxes paid $ 232,632 $ 415,580
========== ==========
NON-CASH TRANSACTIONS:
Purchase price adjustment - adjustment to liabilities and goodwill $ - $ 121,649
Issuance of common stock in conjunction with purchase of IDS Fabricated
Systems, Inc. $ 289,800 $ -
Issuance of common stock in conjunction with purchase of Constant Power
Manufacturing, Inc. $ 300,000 $ -
Assumption of $200,000 note payable in conjunction with purchase of IDS
Fabricated Systems, Inc. $ 200,000 $ -
Treasury stock received in rescission transaction (See Note 15) $ - $ 43,750
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
27
<PAGE>
INDUSTRIAL DATA SYSTEMS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - The accompanying consolidated financial statements include
the accounts of Industrial Data Systems Corporation ("IDSC" or the
"Company"), a Nevada corporation, and its wholly owned subsidiaries
Industrial Data Systems, Inc., a Texas corporation, ("IDS"); Thermaire,
Inc., a Texas corporation, dba Thermal Corporation ("Thermal"); Constant
Power Manufacturing, Inc. ("CPM"), a Texas corporation, and IDS Engineering,
Inc. ("IED"), a Texas corporation. The 1998 amounts include the accounts of
IDS Fabricated Systems, Inc. ("IDS FAB"), a Texas corporation which was
disposed of in 1999 (see Note 15). All significant intercompany balances and
transactions have been eliminated in consolidation.
Cash and Cash Equivalents - Cash and cash equivalents include cash in bank
and investments in highly liquid money market mutual funds.
Inventory - Inventory is composed primarily of raw materials and component
parts (computer components, sheet metal, copper tubing, blower fans and fan
motors) and is carried at the lower of cost or market value, with cost
determined on the first-in, first-out ("FIFO") method of accounting.
Revenue Recognition - The Company's revenues are composed of product sales
and engineering service revenue. The Company recognizes service revenue when
such services are performed and product sales upon shipment to the customer.
Marketable Securities - Marketable securities to be held to maturity are
stated at amortized cost. Marketable securities classified as available-for-
sale are stated at market value, with unrealized gains and losses reported
as a separate component of stockholders' equity, net of deferred income
taxes. If a decline in market value is determined to be other than
temporary, any such loss is charged to earnings. Trading securities are
stated at fair value, with unrealized gains and losses recognized in
earnings. The Company records the purchases and sales of marketable
securities and records realized gains and losses on the trade date. Realized
gains or losses on the sale of securities are recognized on the specific
identification method.
Property and Equipment - All property and equipment is stated at cost,
adjusted for accumulated depreciation. Depreciation on all property and
equipment, other than land, building and improvements, is calculated using
an accelerated method over the estimated useful lives of the related assets,
which is five years. Depreciation on the building is calculated using a
straight-line method over the useful life, which is 40 years. Leasehold
improvements are amortized over the term of the related lease.
28
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Goodwill - The Company capitalizes the excess purchase price over the fair
value of net assets acquired ("goodwill") and amortizes this intangible
asset on a straight-line basis over 5-10 years.
Long-lived Assets - The Company reviews for the impairment of long-lived
assets and certain identifiable intangibles whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount. The Company has not identified
any such impairment losses.
Income Taxes - The Company accounts for deferred income taxes in accordance
with the asset and liability method, whereby deferred income taxes are
recognized for the tax consequences of temporary differences by applying
enacted statutory tax rates applicable to future years to differences
between the financial statement and tax bases of its existing assets and
liabilities. The provision for income taxes represents the current tax
payable or refundable for the period plus or minus the tax effect of the net
change in the deferred tax assets and liabilities during the period.
Earnings Per Share - Basic earnings per share was computed by dividing net
income by the weighted average common shares outstanding as of December 31,
1998 and 1999. The options outstanding at December 31, 1999 (see Note 8)
were not considered in the computation of diluted EPS for the year ended
December 31, 1999 since their effect would have been antidilutive.
Use of Estimates - The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles
requires the Company's management to make estimates and assumptions that
affect the amounts reported in these financial statements and accompanying
results. Actual results could differ from these estimates.
Fair Value of Financial Instruments - The fair value of financial
instruments, primarily accounts receivable, notes receivable, bonds,
accounts payable and notes payable, closely approximate the carrying values
of the instruments due to the short-term maturities of such instruments.
Comprehensive Income - Comprehensive income is defined as all changes in
stockholders' equity, exclusive of transactions with owners, such as capital
investments. Comprehensive income includes net income or loss, changes in
certain assets and liabilities that are reported directly in equity, such as
translation adjustments on investments in foreign subsidiaries and certain
changes in minimum pension liabilities. The Company's comprehensive income
(loss) is equal to net income (loss) for all periods presented in these
financial statements.
Reclassifications - Amounts in prior years' financial statements are
reclassified as necessary to conform with the current year's presentation.
Such reclassifications had no effect on net income.
29
<PAGE>
2. AFFILIATE RECEIVABLES
The Company has several notes receivable due from officers of the Company
totaling $150,000 at December 31, 1999. The notes receivable are unsecured,
due on demand and bear interest at a rate of 9% per annum. Interest on the
notes is due annually. During the years ended December 31, 1998 and 1999,
the Company recognized interest income of approximately $18,000 and $13,500,
respectively, on these notes.
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1999:
Land $ 90,000
Furniture and fixtures 128,666
Computer equipment 364,073
Building 605,000
Shop equipment 161,169
Leasehold improvements 72,618
Building improvements 77,538
----------
1,499,064
Accumulated depreciation and amortization (428,846)
----------
$1,070,218
==========
4. NOTES PAYABLE
The Company entered into a Revolving Credit Note with a bank on May 12, 1999
in the amount of $1,150,000, bearing interest at prime + 1% (9.75% at
December 31, 1999) and maturing on May 12, 2000. The outstanding balance due
at December 31, 1999 was $315,660. This note is collateralized by the
accounts receivable and inventory of the Company. The agreement contains
certain covenants, the most restrictive of which requires the Company to
maintain consolidated tangible net worth, as defined, of at least
$3,600,000.
The Company is financing a portion of its insurance each year on a short-
term basis, with a balance of $26,350 at December 31, 1999.
5. LONG TERM DEBT
The Company has a term note payable with a bank of $450,000 at 8.88%. The
loan, which expires on February 28, 2002, is collateralized by land and
building. There was $404,098 outstanding under this note at December 31,
1999. Interest on the outstanding amount is due and payable monthly.
The Company is financing a portion of its insurance over 23 months bearing
interest at 7.95% with a remaining balance of $19,819 at December 31, 1999.
30
<PAGE>
5. LONG TERM DEBT (Continued)
Future maturities of long-term debt are as follows:
Years Ending December 31,
-------------------------
2000 $ 39,259
2001 21,238
2002 363,420
--------
Total 423,917
Less current portion (39,259)
--------
Long-term debt $384,658
========
6. LEASES
The Company leases office space under two non-cancelable operating leases.
Total rent expense for the years ended December 31, 1998 and 1999 was
approximately $109,000 and $275,000, respectively. Future minimum rentals
due under the non-cancelable operating leases with an original term of at
least one year are approximately as follows:
Years Ending December 31,
-------------------------
2000 $154,000
2001 246,000
2002 170,000
--------
$570,000
========
7. PROFIT SHARING PLAN
The Company has a 401(k) profit sharing plan (the "Plan") covering
substantially all employees. Under the terms of the Plan, the Company will
make matching contributions equal to 50% of employee contributions up to 6%
of employee compensation, as defined. Employees may make contributions up to
15% of their compensation, subject to certain maximum contribution
limitations. The employer's contributions vest on a schedule of 25% per year
for four years. The Company made contributions to the Plan of approximately
$93,000 and $120,000 for the years ended December 31, 1998 and 1999,
respectively.
8. STOCK OPTION PLAN
In June 1998, the Company created the Industrial Data Systems Corporation
1998 Incentive Plan (the "Option Plan"). The Option Plan provides for grants
of nonstatutory options, incentive stock options, restricted stock awards
and stock appreciation rights. The Company has adopted the disclosure-only
provisions of the Statement of Financial Accounting Standards ("SFAS") No.
123, Accounting for Stock-Based Compensation. The Company elected to
continue following Accounting Principles Board Opinion No. 25 and recognize
compensation expense, if any, based on the intrinsic value method of the
equity instrument at the measurement date. Accordingly, no compensation cost
has been recognized for grants under the Option Plan because the exercise
price of the options equals the market price of the stock on the date of the
grants. Had compensation cost of the Option Plan been determined based on
the fair
31
<PAGE>
8. STOCK OPTION PLAN (Continued)
value at the grant date for awards in 1998 and 1999 consistent with the
provisions of SFAS No. 123, the Company's pre-tax income in 1998 and 1999
would not have changed.
The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in 1999 dividend yield of 0%, expected
volatility of 94%, risk-free interest rates of 6%, and expected lives of two
years.
Under the Option Plan, the total number of shares of common stock that may
be granted is 1,200,000. Each option granted in 1999 has an exercise price
of $1.25 per share and vests over 48 months. The maximum term of the options
is ten years.
The following table summarizes stock option activity:
Outstanding, January 1, 1999 -
Granted 200,000
Canceled or expired -
Exercised -
---------
Outstanding, December 31, 1999 200,000
=========
Exercisable at December 31, 1999 5,000
=========
Available for grant at December 31, 1999 1,000,000
=========
Weighted-average fair value of options,
granted during the year $ .42
=========
Weighted-average fair value of options at
December 31, 1999 $ .42
=========
9. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
The Company manufactures and distributes industrial and portable computers
and computer monitors, power systems and battery chargers, and air handling
equipment for air conditioning and heating systems to commercial companies
primarily in the southern states and provides pipeline engineering and
fabricated systems and services primarily to major integrated oil and gas
companies. The Company performs ongoing credit evaluations of its customers
and generally does not require collateral. The Company assesses its credit
risk and provides an allowance for doubtful accounts for any accounts which
it deems doubtful for collection.
The Company maintains deposits in banks which may exceed the amount of
federal deposit insurance available. Management periodically assesses the
financial condition of the institutions and believes that any possible
deposit loss is minimal.
For the years ended December 31, 1998 and 1999, the Company had sales to one
major customer in the Engineering segment totaling approximately $2,533,000
and $3,460,000, respectively, which represent 19% and 24%, respectively, of
total revenues. At December 31, 1999, amounts due from two customers who
individually had amounts due in excess of 10% of trade receivables totaled
$793,000.
32
<PAGE>
10. STOCKHOLDERS' EQUITY
In 1998, the Company issued 300,000 shares of common stock as part of the
CPM acquisition and 50,000 shares as part of the IDS FAB acquisition (see
Note 14).
In 1999, the Company purchased 40,000 shares of its own stock for $67,045
under a program approved by the Board of Directors to repurchase up to
400,000 shares of Company common stock at no more than $5 per share. Also in
1999, as part of a rescission agreement, the Company received back 50,000
shares of the Company common stock that had been issued during 1998 in the
acquisition of IDS FAB (see Note 15). All treasury shares were retired in
1999.
11. FEDERAL INCOME TAXES
The following is a reconciliation of expected to actual income tax expense
from continuing operations:
YEARS ENDED DECEMBER 31,
-------------------------
1998 1999
--------- ---------
Federal income tax expense
(benefit) at 34% $315,066 $105,724
State and foreign taxes 16,434 9,622
Nondeductible expenses 16,775 3,400
Other 9,101 32,466
-------- --------
$357,376 $151,212
======== ========
The components of the Company's deferred tax liability consisted of the
following at December 31, 1999:
Deferred tax asset:
Allowance for doubtful accounts $ 2,500
Deferred tax liabilities:
Tax accounting change from cash basis
to accrual basis - CPM Acquisition (95,000)
Depreciation (4,500)
---------
Deferred tax liability, net $(97,000)
=========
12. SEGMENT INFORMATION
The Company operates in four business segments: (1) the manufacture and
distribution of industrial computer systems to industrial and commercial
companies; (2) engineering consulting services primarily to major integrated
oil and gas companies; (3) the manufacture and distribution of air handling
equipment for HVAC systems to commercial companies; and (4) the manufacture
and distribution of uninterruptible power systems and battery chargers.
Sales, operating income, interest income and expense, identifiable assets,
capital expenditures and depreciation set forth in the following table are
the results of the four segments. The amount in corporate and eliminations
includes amounts to eliminate intercompany items, including notes receivable
and notes payable.
33
<PAGE>
12. SEGMENT INFORMATION (CONTINUED)
Segment information for the years 1998 and 1999 was as follows:
<TABLE>
<CAPTION>
(Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
1998
- ------------------------------------------------------------------------------------------------------------------------------------
Disposed
Air Power Segment
Products Engineering Handling Systems Corporate Assets Total
-------- ----------- -------- ------ --------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales from external customers $ 1,535 $ 4,407 $ 3,708 $ 3,016 $ - $ - $ 12,666
Operating earnings (363) 603 60 638 - - 938
Interest income - - - - 50 - 50
Interest expense - - - - 79 - 79
Depreciation and amortization 29 47 79 - 16 - 171
Total assets 536 2,100 1,755 1,677 215 1,646 7,929
Capital expenditures $ 25 $ 19 $ 32 $ - $ 9 $ - $ 85
- ------------------------------------------------------------------------------------------------------------------------------------
1999
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales from external customers $ 736 $ 5,978 $ 3,151 $ 2,373 $ - - $ 12,238
Operating earnings (36) 428 (38) (121) - 233
Interest income - - - - 47 - 47
Interest expense - - - - 68 - 68
Depreciation and amortization 36 50 58 - - - 144
Total assets 1,342 1,735 1,719 1,067 51 - 5,914
Capital expenditures $ - $ 121 $ 88 $ - $ - $ - $ 209
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13. TRANSACTION WITH AFFILIATE
In July 1997, the Company entered into a management contract with BHC
Management Corporation ("BHC"), a Texas corporation. As compensation for
services provided hereunder, IDS agreed to pay BHC the sum of $4,000 per
month plus expenses not to exceed $500 per month. The principals of BHC are
stockholders of IDS. The total payments made to BHC during 1998 and 1999
were approximately $48,000 and $8,000, respectively.
14. ACQUISITIONS
In April 1998, the Company acquired CPM in a stock purchase. The Company
paid $500,000, consisting of $200,000 in cash and 300,000 shares of the
Company's common stock, which may be put back to the Company for $1 per
share at the option of the holder. This acquisition has been accounted for
on the purchase method of accounting. No goodwill was generated in this
transaction. The operating results of CPM have been included in the
Company's consolidated financial statements since the date of acquisition.
34
<PAGE>
In November 1998, the Company acquired IDS FAB in a stock purchase. The
Company paid $389,800, consisting of $100,000 in cash and 50,000 shares of
the Company's common stock, whose fair market value at the date of exchange
was $289,800. This acquisition has been accounted for on the purchase method
of accounting. The purchase price exceeded the fair value of the net assets
acquired by approximately $593,000. The operating results of IDS FAB have
been included in the Company's consolidated financial statements since the
date of acquisition (see Note 15 for discussion regarding rescission of this
agreement in 1999).
The following unaudited proforma consolidated results of operations of the
year ended December 31, 1998 assumes the CPM and IDS FAB acquisitions
occurred as of January 1, 1998.
(thousands, except per share data) 1998
-----------------------------------------------------------------------
Net sales $19,488
Net earnings 306
Basic earnings per share .02
-----------------------------------------------------------------------
In management's opinion, the unaudited proforma combined results of
operations are not indicative of the actual results that would have occurred
had the acquisitions been consummated at the beginning of fiscal 1998 or of
future operations of the combined companies under the ownership and
management of the Company.
15. DISCONTINUED OPERATIONS
On October 28, 1999, the Company entered into a settlement agreement with
the former owner of IDS FAB to rescind the original acquisition agreement
dated November 1, 1998. As a result of the settlement agreement, the Company
received the originally issued 50,000 shares of its common stock, valued at
$43,750 at the date of the rescission, back from the former owner of IDS FAB
and transferred the stock of IDS FAB to the former owner. All assets and
liabilities of IDS FAB were transferred back to and assumed by the former
owner of IDS FAB.
In the first two fiscal quarters of the year ended December 31, 1999, prior
to determination to dispose of the segment, the Company had recognized a
loss of approximately $765,000 related to impairment of assets of IDS FAB.
In the fourth quarter, this impairment charge was reclassified to be
included in the loss on disposal of discontinued operations.
The discontinued segment recognized sales revenues of approximately $750,000
in 1998 and none in 1999. Additionally, included in the loss on disposal of
discontinued operations is approximately $85,000 of legal fees related to
the disposition.
16. CONTINGENCIES
The Company is subject to legal proceedings and claims which have arisen in
the ordinary course of its business. These actions when ultimately concluded
and determined will not, in the opinion of management, have a material
effect on results of operations or the financial condition of the Company.
35
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There are no changes in and disagreements with the Company's accountants on
accounting and financial disclosure.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
Incorporated herein by reference in the Company's definitive proxy
statement for its 2000 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before April 30, 2000.
ITEM 10. EXECUTIVE COMPENSATION
Incorporated herein by reference in the Company's definitive proxy
statement for its 2000 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before April 30, 2000.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference in the Company's definitive proxy
statement for its 2000 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before April 30, 2000.
ITEM 12. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
Incorporated herein by reference in the Company's definitive proxy
statement for its 2000 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before April 30, 2000.
36
<PAGE>
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
A. FINANCIAL STATEMENTS
The consolidated financial statements are contained herein as listed on the
"Index" on page 22 hereof.
B. REPORTS ON FORM 8-K
There were no Current Reports on Form 8-K filed by the Company during the
quarter ended December 31, 1999 that have not been previously reported in the
Company's Quarterly Reports on Form 10-QSB.
C. DESCRIPTION AND INDEX OF EXHIBITS
Number Description
- ------ -----------
2 Agreement and Plan of Reorganization for the Purchase of Industrial
Data Systems, Incorporated, dated August 1, 1994 (1)
2.1 Action by Written Consent of the Board of Directors for the Purchase
of Industrial Data Systems, Incorporated, a Texas corporation, dated
August 1, 1994 (1)
2.2 Action by Written Consent of the Stockholders for the Purchase of
Industrial Data Systems, Incorporated, a Texas corporation, dated
August 1, 1994 (1)
2.3 Stock Acquisition Agreement for the Purchase of Thermaire
Incorporated, dba Thermal Corp., dated August 15, 1995 (1)
2.4 Escrow Agreement for the Purchase of Thermaire Incorporated, dba
Thermal Corp., dated August 15, 1995 (1)
2.5 Earnest Money Contract for the Purchase of Thermaire Incorporated, dba
Thermal Corp.'s Manufacturing Facility, dated August 15, 1995 (1)
2.6 Offering Memorandum, 504D Offering of 500,000 Shares of Common Stock
in the State of Nevada, dated July 26, 1994 (1)
2.7 Action by the Board of Directors regarding the 504D Stock Offering of
2,499,999 Shares of Common Stock, dated July 10,1996 (1)
2.8 Agreement for Amendment and Substitution of Subscription Agreement and
Notes, dated July 10, 1996 (1)
37
<PAGE>
2.9 Deleted
2.10 Deleted
2.11 Deleted
2.13 Deleted
2.14 Deleted
2.15 Stock Acquisition Agreement, dated March 25, 1998, by and among
Industrial Data Systems Corporation, John L. "Jack" Ripley, and
Constant Power Manufacturing Incorporated. Previously filed as
Exhibit 2.1 on (8).
2.16 Deleted
2.17 Deleted
2.18 Deleted
2.19 Deleted
2.20 Deleted
2.21 Deleted
2.21.a Deleted
2.22 Deleted
3 Articles of Incorporation, Industrial Data Systems Corporation, dated
June 20, 1994 (1)
3.1 Corporate Charter, Industrial Data Systems Corporation, dated June 22,
1994 (1)
3.2 Corporate Bylaws, Industrial Data Systems Corporation, dated June 22,
1994 (1)
3.3 Articles of Incorporation, IDS Engineering, Inc., dated October 15,
1997. Previously filed as Exhibit 3 on (7)
3.4 Corporate Charter, IDS Engineering, Inc., dated October 15, 1997.
Previously filed as Exhibit 3.1 on (7)
3.5 Corporate Bylaws, IDS Engineering, Inc., dated October 15, 1997.
Previously filed as Exhibit 3.2 on (7)
3.6 Deleted
3.7 Deleted
3.8 Deleted
38
<PAGE>
3.9 Deleted
4.1 Revolving Credit Line with Texas Commerce Bank, N.A., dated June 11,
1996 (1)
4.2 Deleted
4.3 Deleted
4.4 Deleted
4.5 Deleted
4.6 Deleted
4.7 Deleted
4.8 Deleted
10 Deleted
10.1 Deleted
10.2 Deleted
10.3 Deleted
10.4 Deleted
10.5 Adoption Agreement for Nonstandardized Code 401(k) Profit Sharing
Plan, dated January 1, 1993 (1)
10.6 Blanket Service Contract - Exxon Pipeline Company (3)
10.7 Blanket Service Contract - Marathon Oil Company (3)
10.8 Deleted
10.9 Deleted
10.10 Deleted
10.11 Blanket Service Contract - ARCO Pipe Line Company (3)
10.12 Deleted
10.13 Deleted
10.14 Deleted
39
<PAGE>
10.15 Deleted
10.16 Deleted
10.17 Lease between Industrial Data Systems, Incorporated, a Texas corporation,
and 319 Century Plaza Associates, Ltd., dated August 18, 1997. Previously
filed as Exhibit 10 on (7)
10.18 First Amendment to Lease Agreement between Industrial Data Systems,
Incorporated, a Texas corporation, and 319 Century Plaza Associates,
dated September 19, 1997. Previously filed as Exhibit 10.1 on (7)
10.19 Second Amendment to Lease Agreement between Industrial Data Systems,
Incorporated, a Texas corporation, and 319 Century Plaza Associates,
dated November 19, 1997. Previously filed as Exhibit 10.2 on (7)
10.20 Employment Agreement, dated March 25, 1998, by and between Constant Power
Manufacturing Incorporated and Jack Ripley. Previously filed as Exhibit
10.19 on (8)
10.21 First Amendment to Employment Agreement, dated April 3, 1998, by and
between Jack Ripley and Constant Power Manufacturing Incorporated.
Previously filed as Exhibit 10.20 on (8)
10.22 Deleted
10.23 Pledge Agreement, dated March 25, 1998, by and between Industrial Data
Systems Corporation and John L. "Jack" Ripley. Previously filed as
Exhibit 10.22 on (8)
10.24 Fourth Amendment to Lease between Industrial Data Systems, Inc., a Texas
corporation and 600 C.C. Business Park Ltd., dated September 1, 1998 (10)
10.25 Lease Agreement between IDS Engineering, Inc. and d/b/a Wilshire Square,
dated February 8, 1999 (10)
10.26 Deleted
10.27 Deleted
10.28 Deleted
10.29 Deleted
10.30 Blanket Service Contract with Texaco Pipeline Company. Previously filed
as Exhibit 10.18 on (4)
10.31 Settlement Agreement between the Company and Michael L. Moore (14)
10.32 Blanket Service Contract with Caspian Consortium-R (15)
40
<PAGE>
10.33 Blanket Service Contract with Caspian Consortium-K (15)
11 Statement Regarding Computation of Per Share Earnings (4) (5)
21 Subsidiary of the Registrant (11)
23 Deleted
24 Power of Attorney (2)
27 Financial Data Schedule (11) (12)
99 Deleted
99.1 Deleted
(1) Exhibits incorporated by reference on the Company's Registration
Statement on Form 10-SB filed with the Securities and Exchange
Commission on January 27, 1997.
(2) Exhibits incorporated by reference on the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996 filed with the
Securities and Exchange Commission on April 14, 1997.
(3) Exhibits incorporated by reference on the Company's Annual Report on Form
10-KSB/A for the year ended December 31, 1996 filed with the
Securities and Exchange Commission on May 14, 1997
(4) Exhibits incorporated by reference on the Company's Quarterly Report on
Form 10-QSB for the quarter ended June 30, 1997 filed with the
Securities and Exchange Commission on August 14, 1997
(5) Exhibits incorporated by reference on the Company's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1997 filed with the
Securities and Exchange Commission on November 14, 1997
(6) Deleted
(7) Exhibits incorporated by reference on the Company's Annual Report on
Form 10-KSB/A for the year ended December 31, 1997 filed with the
Securities and Exchange Commission on April 10, 1998
(8) Exhibits incorporated by reference on the Company's Form 8-K filed April
10, 1998 and Form 8-K/A filed April 29, 1998
(9) Deleted
(10) Exhibits incorporated by reference on the Company's Annual Report on Form
10-KSB/A for the year ended December 31, 1998
(11) Exhibit incorporated by reference on the Company's Annual Reports on Form
10-KSB.
(12) Exhibit incorporated by reference on the Company's Annual Reports on Form
10-QSB.
(13) Exhibit incorporated by reference on the Company's Quarterly Report on Form
10-QSB for the quarter ended March 31, 1999 filed with the Securities
and Exchange commission on May 17, 1999
41
<PAGE>
(14) Exhibit incorporated by reference on the Company's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1999 filed with the
Securities and Exchange commission on November 15, 1999
(15) Exhibits incorporated by reference on this Annual Report on Form 10-KSB for
the year ended December 31, 1999
42
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange act of 1934, the
Registrant has caused this Annual Report on Form 10 KSB to be signed on its
behalf by the undersigned, thereunto duly authorized.
INDUSTRIAL DATA SYSTEMS CORPORATION
Dated: March 28, 2000
By: /s/ William A. Coskey
----------------------------
William A. Coskey, P.E., Chairman of the Board,
President and Chief Executive Officer
By: /s/ Hulda L. Coskey
----------------------------
Hulda L. Coskey, Chief Financial Officer,
Secretary, Treasurer, Director
By: /s/ David W. Gent
----------------------------
David W. Gent, P.E., Director
By: /s/ Gordon R. Wingate
----------------------------
Gordon R. Wingate, Director
By: /s/ Ken J. Hedrick
----------------------------
Ken J. Hedrick, Controller, Director
43
<PAGE>
EXHIBIT 10.32
CONTRACT AND SERVICES
THIS AGREEMENT, between Caspian Consortium-R whose mailing address is: *
(hereinafter called COMPANY) and IDS Engineering, Inc. (hereinafter called
CONTRACTOR) whose address is 600 Century Plaza Drive Building 140, Houston, TX
77073 USA, provides for the performance CONTRACTOR of the work and services
stipulated below on the terms and conditions set forth. Unless otherwise
provided herein, all notices shall be given writing to the addresses stated
above or addresses given in writing to the other party from time to time.
1. WORK TO BE PERFORMED:
1.1. CONTRACTOR shall perform the work services which are described in Exhibit A
attached hereto, and made a part hereof, or by supplement or amendment by
written Work Order issued pursuant hereto (whether or not any Exhibit A be
attached), at the price or rates and on the terms described in either Exhibit A
or in such Work Orders. Work Orders (distinguished from oral or written field
work orders) may be issued only by COMPANY management personnel. Such work and
services shall be done in accordance with the plan specifications, instructions,
and other provisions which are either attached hereto and made a part hereof, or
are separately identified by signatures and incorporated herein by reference and
consistent with COMPANY standards. If such standards are not provided,
acceptable industry practice, local codes, or CONTRACTOR'S standards may be
employed, each with COMPANY prior written approval.
2. ENVIRONMENT:
2.1. CONTRACTOR shall exercise due diligence prevent pollution and any other
type of environmental damage during performance under this Contract. At all
times CONTRACTOR shall exercise great care and due caution regarding
CONTRACTOR'S engagement in ultrahazardous activities or use of ultrahazardous
materials during performance under this Contract, including but not limited to
activities involving the use of radioactive sources or explosive substances or
corrosive substances.
2.2. CONTRACTOR shall observe and comply with all applicable laws, rules,
orders, decrees and regulations concerning environmental protection as well as
COMPANY'S requirements regarding environmental protection. Further, in those
cases where has provided CONTRACTOR with a copy of an environmental protection
policy and/or made reference to a set of environmental guidelines, CONTRACTOR
shall comply with, or cause its employees, agents, servants, and subcontractors
to comply with said environmental protection policy and/or Guidelines.
3. CHANGES:
3.1. COMPANY reserves the right during the progress of the work to make any
changes, additions, or deletions in the original plans and specifications. All
changes shall be made in writing and accepted by both parties before CONTRACTOR
proceeds with the work thereon. Provisions permitting such alterations without
specific consent of the insurer shall be included in the terms of any
performance bond required hereunder, so that the validity of such bond shall not
be affected thereby. No bills for extras will be allowed unless ordered and
authorized by COMPANY, irrespective of any terms which may be contained in any
published price list, field work order, delivery ticket, or other paper (other
than Work Order) which may be issued in connection with the performance of the
work hereunder (whether specific reference is made to this contract or not), the
terms and conditions of this contract shall apply in determining the rights and
liabilities of the parties.
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WTIH THE COMMISSION.
Page 1
<PAGE>
EXHIBIT 10.32
4. COMMENCEMENT AND TERM:
4.1. CONTRACTOR shall commence performance of the work and services contemplated
by this contract and thereafter prosecute the same diligently to completion
consistent with good industry practices and within the period of time prescribed
by COMPANY hereunder, or if none are specifically set forth, within a reasonable
time under the circumstances. Any Work Order issued hereunder may be canceled
by either party by written notice given at least fifteen (15) days previous to
the date provided for commencement of work and services thereunder. If no
specific term is stated in Exhibit A, this Contract and Services Agreement shall
continue in effect until terminated by written notice by either party given at
any time when there is no outstanding work in progress or under order.
5. SUPERVISION, INSPECTION AND DIRECTION:
5.1. COMPANY shall have no power or authority to direct, supervise or control
CONTRACTOR with respect to the means, manner or method of performance of the
work or services performed or rendered hereunder, and CONTRACTOR in the exercise
of his independent employment and as an independent contractor, shall select the
means, manner and method of performance thereof CONTRACTOR is responsible to
COMPANY only for the results to be obtained, but the work and services performed
or rendered hereunder shall meet with the approval of COMPANY or its designated
representative who shall be entitled to inspection to the extent necessary to
assure such results. At all times when work is in progress, there shall be a
foreman or head workman on the grounds as representative of the CONTRACTOR, and
also copies of the plans and specifications if such are part of the agreement.
Instructions given to such foreman or head workman shall be considered as having
been given to the CONTRACTOR. COMPANY'S failure to make inspection or test, or
to discover defective workmanship, material or equipment, shall not relieve
CONTRACTOR from any responsibility. Payment of any funds by COMPANY shall not
constitute a waiver or acceptance of defects.
6. RECORDS AND AUDIT:
6.1. CONTRACTOR agrees to keep accurate records on a daily basis of the names of
the employees, starting and ending time for each length of lunch period, travel
time, the type of work performed by each, the materials used and other relevant
information COMPANY expressly requests, and to preserve same for at least two
years after the completion of each separate job under this Contract. COMPANY
shall have the right and from time to during reasonable business hours to
inspect and audit all of CONTRACTOR'S books and records bearing directly or
indirectly on the work and services performed hereunder and the prices and rates
charged therefore.
7. MATERIALS AND PERSONNEL:
7.1. CONTRACTOR shall furnish at its own expense any labor, superintendence,
bonds, permits, machinery equipment, tools, fuel, supplies, facilities
materials, transportation and all other things necessary for the performance and
completion of any work services hereunder, except such items as COMPANY
specifically agrees to furnish. Unless otherwise specified, all materials shall
be new and of a grade and quality deemed by COMPANY to be adequate for the
required use.
7.2. To the extent possible, in providing services hereunder, CONTRACTOR shall
utilize National personnel, suppliers and service contractors whose price,
quality, availability, and times of delivery are comparable to International
price, quality, availability, and times of delivery.
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WTIH THE COMMISSION.
Page 2
<PAGE>
EXHIBIT 10.32
8. RISK OF LOSS:
8.1. CONTRACTOR: CONTRACTOR shall assume liability at all times for damage to
or destruction of CONTRACTOR'S equipment including, but not limited to, all
tools, machinery, and appliances regardless of when or how such damage or
destruction occurs. COMPANY shall be under no liability to CONTRACTOR for any
such loss.
8.2. COMPANY: Until written acceptance by COMPANY of construction or
installation work, or work and other services, all risk of loss, damage or
destruction by any cause of such work or of such materials or equipment of
CONTRACTOR used in such work shall be borne by CONTRACTOR.
9. INSURANCE:
9.1. CONTRACTOR and sub-contractors shall provide insurance specified on
Exhibit B attached hereto, covering all operations hereunder, with companies
forms and amounts acceptable to COMPANY, and shall furnish such evidence thereof
as may be required by COMPANY.
10. INDEMNITY:
10.1. CONTRACTOR agrees to release COMPANY from all liability for, and shall
protect, defend, indemnify and hold free and harmless COMPANY, its shareholders,
and their officers, directors, and employees from and against any and all
claims, demands and causes of action of every kind and character arising out of,
incident to, or in connection with this Contract or performance of work or
services hereunder, regardless of whether the liability therefore is based upon
some alleged act or omission of COMPANY or of some third or other party, whether
negligent or not, and including without limitation by enumeration all taxes,
claims, debts, fines, penalties, forfeitures, patent infringements, loss of use,
death, injury and damages to all CONTRACTOR personnel and property, together
with the amount of judgments, penalties, interest, court costs, legal and other
fees and expenses in connection therewith.
10.2. COMPANY agrees to release CONTRACTOR from all liability for, and shall
protect, defend, indemnify and hold free and harmless CONTRACTOR and the
officers, directors, and employees of CONTRACTOR from and against any and all
claims, demands and causes of action of every kind and character arising out of,
incident to, or in connection with this Contract or performance of work or
services hereunder, regardless of whether the liability therefore is based upon
some alleged act or omission of COMPANY or CONTRACTOR or of some third or other
party, whether negligent or not, and including without limitation by enumeration
all taxes, claims, debts, fines, penalties, forfeitures, patent infringements,
loss of use, death, injury and damages to all COMPANY personnel and property,
together with the amount of judgments, penalties, interest, court costs, legal
and other fees and expenses in connection therewith.
11. FAILURE TO PROSECUTE WORK:
11.1. Time and quality of work shall be of the essence of this Contract. In
case CONTRACTOR at any time shall fail in any way to prosecute the work herein
provided for with reasonable diligence and in a good, workmanlike and safe
mariner, COMPANY at its option upon three days written notice delivered to
CONTRACTOR, or its representative, or deposited in a registered mail or courier
service for which receipt is returned, terminate the work hereunder and
thereafter proceed with action for damages, or in the alternative, by its own
employees, or by separate independent contract, take control of this work for
the purpose of completing the same, furnishing all additional; labor, materials
and equipment required except for that equipment or materials which were
previously furnished by or bought by COMPANY for CONTRACTOR'S performance of
work and services hereunder. In the latter event, CONTRACTOR
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Page 3
<PAGE>
EXHIBIT 10.32
shall be entitled, upon completion of the work, to the difference between the
Contract price and the reasonable cost and expense incurred by COMPANY in
finishing said work. If such cost of completion should exceed the Contract
price, CONTRACTOR agrees to pay the excess to COMPANY as liquidated damages
agreed upon by the parties hereto in consideration of the difficulty of
ascertaining the actual damages by other means. If Contractor contends that its
performance is being delayed by COMPANY in any way, it shall notify COMPANY in
writing immediately of the exact nature of such claim or be held to have waived
same.
12. COMPLIANCE:
12.1. CONTRACTOR agrees to comply with COMPANY'S safety rules and procedures
while working on or near COMPANY'S premises and with all valid applicable
federal, republic, state and local laws, decrees, orders rules and regulations.
Identification of specific laws, orders, rules and regulations, which may be
made in an Exhibit C attached hereto, shall not limit the general applicability
of this compliance provision. If CONTRACTOR is a licensed contractor, the
provisions of this Contract shall not apply to the extent that services of the
CONTRACTOR performed hereunder are subject to conflicting requirements under its
license issued by the appropriate governmental regulatory body. Such services
shall be governed by the CONTRACTOR'S license and any published regulatory
requirements referred to therein. This Contract shall be construed under and in
accordance with the laws of the state of Texas, U.S.A., with jurisdiction in
Harris County. CONTRACTOR waives its right to claim COMPANY has no
jurisdictional right of access to such court system in the event that COMPANY
seeks adjudication of a claim, controversy or dispute between the Parties hereto
(including the enforcement of a subsequent award); and COMPANY waives its right
to claim lack of jurisdiction as a defense in such court system in the event
CONTRACTOR files such an action. Titles to the provisions herein shall not be
interpretive of the Contract terms.
12.2. CONTRACTOR shall observe and comply with all applicable laws, rules,
orders, decrees regulations and orders concerning health and safety, including
but not limited to those of the Russian Federation and any political subdivision
thereof, as well as the COMPANY'S requirements, if any. Further, in those cases
where COMPANY has provided CONTRACTOR with a copy of the health and safety
policy and/or made reference to a set of health and safety guidelines,
CONTRACTOR shall comply with, and cause its employees, servants, agents, and
subcontractors to comply with said health and safety policy and/or health and
safety guidelines.
13. SETTLEMENT AND PAYMENT:
13.1. CONTRACTOR agrees to perform the work hereunder for not to exceed sum of *
excluding Value Added Tax (VAT). Before final settlement, CONTRACTOR shall show
payment and release of all debts, taxes, liens, claims, charges and obligations
arising by operation of law or otherwise out of its performance of the work
hereunder. COMPANY may withhold funds due CONTRACTOR hereunder or otherwise,
without interest, to assure itself of all such obligations, or the obligations
of CONTRACTOR to COMPANY in connection with any other between COMPANY or any of
its affiliated companies and CONTRACTOR, or to satisfy any provisions of
relating to claims against CONTRACTOR.
CONTRACTOR shall invoice COMPANY monthly for the services performed. Upon
completion of the work in accordance with the terms hereof and in accordance
with Exhibit A, and after final acceptance thereof by COMPANY'S authorized
representatives, COMPANY agrees to pay CONTRACTOR the final invoice. All
payments shall be made to CONTRACTOR's bank by wire transfer:
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WTIH THE COMMISSION.
Page 4
<PAGE>
EXHIBIT 10.32
Payment will be made within thirty days of invoice. Payment is deemed to be
made when COMPANY instructs its bank to wire transfer the funds to the
CONTRACTOR. Each party pays its own banking costs.
13.2. Except as otherwise provided in the contract or a supplemental Contract,
all income and other applicable taxes, levies or assessments now or hereafter
imposed upon or with respect to, or measured by, the compensation paid to
CONTRACTOR, or the materials, equipment, work or services furnished or performed
hereunder by CONTRACTOR, shall be for the account of, and promptly paid by
CONTRACTOR to the appropriate governmental authority. To the extent that the
COMPANY is required to withhold taxes from payments due CONTRACTOR under this
Contract, COMPANY is authorized to do so and shall promptly notify Contractor of
such withholding.
14. CONFIDENTIALITY
Except as to information provided to COMPANY's contractor Valmet, CONTRACTOR
hereby agrees to keep confidential and not to disclose or make any use of any
confidential or proprietary information, knowledge, data or other information of
the COMPANY relating to any business of the COMPANY or any of its clients,
except as the COMPANY may otherwise consent in writing. Such written consent by
COMPANY must be given prior to any disclosure by CONTRACTOR. This restriction
pertains not only to documents and information generated by the CONTRACTOR
itself, but also to all documents and information provided to him by others in
the COMPANY or otherwise acquired during, the course of this Contract. The
CONTRACTOR further agrees not to deliver, reproduce, or in any way allow such
information, or any documentation relating thereto, to be delivered or to be
used by any third parties without the specific prior decision or consent of a
duly authorized representative of the COMPANY. It is understood by CONTRACTOR
that the economic information regarding the Work and Services to be Performed is
sensitive information and disclosure of same could cause significant damage to
the COMPANY.
15. ASSIGNMENT:
15.1. This Contract may not be assigned by CONTRACTOR without the express
written permission of the COMPANY. Any Assignment made without prior written
approval of the COMPANY is null and void.
16. MISCELLANEOUS CONTRACT
PROVISIONS:
16.1. CONTRACTOR agrees that it will comply with all valid, applicable laws,
orders, decrees, rules and regulations presently in force, or which may be
enacted in the future if they regulate the work and services performed
hereunder.
16.2. CONTRACTOR agrees that neither it nor any subcontractor, employee, agent
or other entity shall, directly or indirectly, in connection with the
performance of services for COMPANY: (A) Make any payment to any officer or
employee of any government, or to any political party or official thereof, where
such payment either (1) is unlawful under laws applicable thereto, or (2) would
be unlawful under the Foreign Corrupt Practices Act of 1977 as amended (the
"Act"), of the United States of America, if CONTRACTOR were a "domestic concern"
within the meaning of such Act, (B) Make any payment to any person, if such
payment constitutes an illegal bribe, illegal kickback or other illegal payment
under
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WTIH THE COMMISSION.
Page 5
<PAGE>
EXHIBIT 10.32
laws applicable thereto; or (C ) commit, directly or indirectly, any other act
or omission having the same effect under the law.
16.3. This Contract, including all Exhibits, Work Orders, oral orders, plans,
specifications, instructions, and other provisions which are issued pursuant
hereto and attached hereto or incorporated herein by reference, constitutes the
entire agreement between the parties. No other representations, bids,
memoranda, or other matter shall vary, alter or interpret the terms hereof. In
the event there is a conflict between the terms of this Contract and the
provisions of Exhibit A, Work Order, oral orders, plans, specifications,
instructions, and other provisions, the terms of this Contract shall prevail.
Failure of the COMPANY to exercise by option, right, or privilege hereunder, or
to demand compliance as to any obligation or covenant shall not constitute a
waiver of the same, or any such succeeding right, privilege, or option, or of
strict performance of the same or any succeeding obligation or covenant.
EXECUTED in duplicate Russian and English originals on this 24 day of January,
2000.
CONTRACTOR
IDS Engineering, Inc.
By: /s/ William A. Coskey
Title: President
Name: William A. Coskey
COMPANY
Caspian Pipeline Consortium-R
By: * By: *
Title: * Title: *
Name: * Name: *
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WTIH THE COMMISSION.
Page 6
<PAGE>
EXHIBIT 10.32
EXHIBIT "B"
CONTRACTOR INSURANCE
REQUIREMENTS
CONSULTING AND GENERAL
CONTRACTOR shall, at its expense, maintain or cause to be maintained the
insurance coverages set forth below with insurance companies acceptable to
COMPANY. Prior to commencement of work and services hereunder, CONTRACTOR shall
deliver to certificates (a) evidencing the issuance of insurance containing the
coverages required herein and (b) providing that the insurance shall not be
canceled or materially changed without thirty (30) days prior written notice to
COMPANY. Commencement or performance of services without delivering the
certificate(s) of insurance shall not constitute a waiver of CONTRACTOR'S
obligation to provide the required coverages. Failure to obtain such insurance
shall be a breach of the Contract.
1. Comprehensive General Liability Insurance, including coverage for Contractual
liability for this Contract, and Cross-liability, in the amount of $1,000,000
combined single limit each occurrence for body injury and property damage. If
CONTRACTOR'S General Liability Insurance is written on a "claims-made" form it
must provide for (i) a retroactive date prior to, or coincident with, the
commencement of work and services under this Contract and (ii) a minimum
extended claims reporting period of one (1) year.
2. If automobiles are to be furnished by CONTRACTOR in performance of work and
services under this Contract, Comprehensive Automobile Liability Insurance,
covering all vehicles owned, non-owned, or hired, in the amount of $500,000
combined single limit occurrence for bodily injury and property damage.
3. I aircraft, including helicopters, are to be furnished by CONTRACTOR in
performance of work and services under this Contract, CONTRACTOR must obtain
Aircraft Liability Insurance, with contractual liability provisions, covering
bodily injury including passenger liability and property damage, hangerkeepers
liability and ground liability including products and completed operations in
the amount of at least $10,000,000 combined single limit each occurrence.
4. If watercraft is to be furnished by CONTRACTOR in performance of the work and
services under this Contract, then a supplement this Exhibit shall be executed
by the parties.
GENERAL CONDITIONS FOR INSURANCE
A. CONTRACTOR hereby waives its right of subrogation against the COMPANY to the
extent of liabilities assumed under this Contract and shall cause its insurers
to waive any rights of subrogation against COMPANY. With regard to insurance to
be taken out by CONTRACTOR hereunder, all insurance under polices taken out by
CONTRACTOR shall be primary insurance because such insurance applies to the
obligations assumed hereunder.
B. With respect to insurance maintained hereunder by CONTRACTOR, all insurance
coverages afforded by policies of insurance maintained by CONTRACTOR shall be
primary insurance as such coverages apply the liabilities assumed under this
Contract.
C. Where use of subcontractors has been approved by the COMPANY, CONTRACTOR
shall require all such contractors to obtain, maintain, and keep in force during
the time which they are engaged, adequate
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WTIH THE COMMISSION.
Page 7
<PAGE>
EXHIBIT 10.32
insurance coverage and shall furnish COMPANY acceptable evidence of such
insurance upon request. Any deficiencies in such coverage shall be the sole
responsibility of CONTRACTOR.
D. No form of CONTRACTOR liability self-insurance, including but not limited to
insuring with a parent, subsidiary, or affiliate organization, is acceptable or
allowable under the terms of this Contract, unless AGREED TO BY COMPANY PRIOR TO
COMMENCEMENT OF WORK AND SERVICES HEREUNDER.
CONTRACTOR
IDS Engineering, Inc.
By: /s/ William A. Coskey
Title: President
Name: William A. Coskey
COMPANY
Caspian Pipeline Consortium-R
By: *
Title: *
Name: *
By: *
Title: *
Name: *
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WTIH THE COMMISSION.
Page 8
<PAGE>
Client Name: Caspian Pipeline Consortium-R January, 2000
Proj. Name: * Exhibit A
Project Number: * Programming Services
A. Scope of Work:
Part 1: Work
Caspian Pipeline Consortium-R (CPC-R) and Caspian Pipeline Consortium-K
(CPC-K) are together building, a unitary crude oil pipeline from Tengiz,
Kazakhstan to the Black Sea. Initial design will include five pump
stations, a tank farm, a marine terminal and SPM. The design of the
pipeline will include a SCADA system for the control and monitoring of the
pipeline system from Tengiz pump station to the Black Sea Marine Terminal
Facility. SCADA will maintain overall surveillance and control
responsibilities of the pipeline, inclusive of the Pump Stations, Pipeline
Block Valves, Marine Terminal, Tank Farm and SPM. The pipeline will be
controlled and monitored from an Operations Control Center located at the
Marine Terminal. Primary, real time local control of the pump stations and
Marine Terminal Facilities will be accomplished by using Programmable Logic
Controllers (PLCs). The PLCs will be monitored and controlled by the
Primary SCADA system and by a Human Machine Interface (HMI) in the local
control rooms.
A single scope of work has been written herein to provide for the uniform
and homogenous working of this single computer control system. Work to be
performed by the Contractor for the system in Russia shall be performed
under contract with CPC-R; and work to be performed for the system in
Kazakhstan shall be performed under contract with CPC-K. All programming
work by Contractor shall be performed in the United States. Any additional
work to be performed later by Contractor in either Russia or Kazakhstan
shall be governed by separate service contracts with CPC-R or CPC-K,
respectively, at the rates set forth herein in Part 2 of this Scope of
Work.
Contractor is to provide the assembly and programming of the PLC systems
for five (5) pump stations in Russia and Kazakhstan. There will be five
(5) ESD PLCs and approximately a total of thirty (30) General Purpose PLCs
for five (5) pump stations. Contractor will assemble the PLC hardware that
will be supplied by the Company's contractor, Valmet. The Contractor will
pro-ram the systems as per Company's requirement and specifications. The
five (5) pump stations are Tengiz, Atyrau (in Kazakhstan), and Astrakhan,
Komsomolsk and Kropotkin (in Russia). General Purpose PLCs and specialty
systems will be Allen Bradley ControlLogix and ESD PLC will be Hima. PLC
hardware will be provided by the Company's contractor, Valmet, to the
Contractor.
1. Contractor to pro-ram PLCs as per the following listed documents provided by
Company.
. P&ID
. Control Narrative
. Cause & Effect
. Flow Chart
. Project Standard
. Location of system (cabinet/HMI/etc.)
. I/0 loading (for each PLC)
. "Package Vendor" interface data
. Wiring/Communication architecture
. CPC Standard for PLC Controllogix Program Data File Structure
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WTIH THE COMMISSION.
Page 9
<PAGE>
Client Name: Caspian Pipeline Consortium-R January, 2000
Project Name: *
Project Number: *
2. Hardware to be supplied by Company's contractor, Valmet, directly to
Contractor.
. Cabinets (as per size and quantity recommended by Contractor)
. ESD PLC modules, processors, communication, I/Os, Power Supplies, Hima
Cables, etc.
. General Purpose PLC modules, processors, communication, I/Os, Power
Supplies, Allen Bradley cables, etc.
. Remote I/0 modules
. Remote I/0 cabinets
3. Contractor shall layout the cabinets as per industry common practice and
from the following information from the Company:
3.1 Bill of material for each PLC
3.2 Brand, style, color, finish, maximum depth (preference, 600 mm) of
Cabinet. Company will specify height of cabinet (2 meters). Cable entry
into the cabinet shall be through the top, 200 mm top clearance, use
compression type terminals.
3.3 Limits of space at job site.
4. Contractor to determine if multiple PLCs of like functions (for example:
mainline motor driven pumps) could be mounted in one cabinet.
5. Contractor will select the size of cabinets (width and depth only).
Contractor will inform the Company of the cabinet sizes. Company will
instruct Valmet to purchase and deliver the cabinets directly to the
Contractor. Note that all cabinets are to be of the same depth.
6. Contractor to provide the wiring drawing, and cabinet layout drawings to
Company as early as possible. Company will use drawings to complete loop
drawings and other design documents.
7. Contractor will provide the temporary communication cables (company supplied
specification) to connect the systems in their shop. Communication cables
(supplied by others) external to cabinets will be available only at the job
site.
8. For required hardware missed by Company the Contractor is responsible to
inform Company to provide or cause to provide such in an expeditious manner.
If the missed items are minor and the Contractor can provide them in a more
expeditious manner, Contractor shall provide and charge the Company as long
as Company has given prior approval for the purchase.
9. Contractor shall verify that system hardware is complete.
10. Contractor shall be responsible for assembling the hardware and ensuring
all assemblies are complete and work as a system.
11. Contractor to interface the PLC system with SCADA.
12. Contractor to supply to Company the following documents as a minimum;
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WTIH THE COMMISSION.
Page 10
<PAGE>
Client Name: Caspian Pipeline Consortium-R January, 2000
Proj. Name: *
Project Number: *
12.1 Assembly drawings
12.2 Logic diagrams of software
12.3 Functional description of software
12.4 Original copies of all software Generated by Contractor
13. All software developed under this contract is and shall remain the sole
property of the Company. Contractor may not use such software for any
other applications.
14. Contractor to provide five (5) lap top PLC based computers for interface
and programming the PLC systems. One lap top computer per pump station
with the following minimum configuration; Pentium 111, 64 Meg RAM, 6
Gicabyte Hard Drive, Window 98 operating system.
15. A functional test to ensure proper operation of all devices and components
shall be performed prior to shipment. Company reserves the right to
witness and approve the functional test.**
15.1 Contractor to submit Factory Acceptance Procedure for Company's
approval.
15.2 FAT to include coordinated test with SCADA supplier.
15.3 Company to be given two weeks notice before test.
15.4 Contractor to supply simulated input/outputs used in testing.
16. Contractor to inform Company of the location where hardware is to be
delivered and assembled. Delivery of system to job site will be by Valmet.
Coordination between Contractor and Valmet is required.*
17. Contractor to inform Company of the location where programming will be
performed.**
**Note: Contractor is advised that it may be necessary to ship PLCs to schedule-
critical locations prior to completion of logic coding and testing. Contractor
shall assure that he has enough available PLC and support hardware at his
premises to complete all programming and testing without interruption should the
object hardware require shipment prior to software completion.
18. Schedule:
18.1 System for Tengiz and Astrakhan pump stations should be at job site
by *
18.2 System for the other Pump Stations should be at job site by at a
later "supplied dates".
18.3 Loop Checking
18.3.1 Tengiz - *
18.3.2 18.3.2 Astrakhan - *
18.3.3 Atyrau - *
18.3.4 Komsomolsk - *
18.3.5 Kropotkin - *
18.4 Start-up
18.4.1 Tengiz -*
18.4.2 Astrakhan - *
18.4.3 Atyrau - *
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WTIH THE COMMISSION.
Page 11
<PAGE>
Client Name: Caspian Pipeline Consortium-R January, 2000
Proj. Name: *
Project Number: *
18.4.4 Komsomolsk - *
18.4.5 Kropotkin - *
19. Contractor to provide a complete and detailed design, manufacturing,
delivery schedule.
20. All software and PLC pro-rams shall be Y2K compliant.
21. Cabinets will be located at an environmentally-controlled room at job site.
Remote I/0 units will not be necessarily in a controlled environment.
22. ESD and General Purpose PLC system shall be assembled, wired, and tested,
within respective cabinets.
23. Contractor is to ensure all assembles are in compliance with applicable
Russian and Kazakhstan regulations.
24. Preparation for shipment:
24.1 Contractor shall submit procedures for the cleaning, preservation,
packing, handling, lifting, shipping and storage of the material and
equipment under this order.
24.2 Contractor shall ensure all equipment is adequately packed, crated,
boxed skidded or otherwise protected and prepared for shipment in such
a manner as to prevent loss and damage during handling, transportation
and storage.
25. Hardware count: (Preliminary)
25.1 Tenciz (Kazakhstan)
. 18 Analoc, Input modules
. 1 Analog Output module
. 83 Discrete Input modules
. 55 Discrete Output modules
. 10 Control Net Boards
. Ethernet boards
. 20 Processors
. 16 Chassis
. 19 Power supplies
. 10 General Purpose PLC cabinets (number will change depending on Vendor
recommendation)
. 5 Remote I/0 cabinets
. 1 ESD PLC system, with a cabinet
25.2 Astrakhan (Russia)
. 15 Analog Input modules
. 1 Analog Output module
. 53 Discrete Input modules
. 35 Discrete Output modules
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WTIH THE COMMISSION.
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Client Name: Caspian Pipeline Consortium-R January, 2000
Proj. Name: *
Project Number: *
. 4 Control Net Boards
. 20 Ethernet boards
. 18 Processors
. 11 Chassis
. 15 Power supplies
. 9 General Purpose PLC cabinets (number will change depending on Vendor
recommendation)
. 5 Remote I/0 cabinets
. 1 ESD PLC system, with a cabinet
25.3 Atyrau (Kazakhstan) - estimate same as Astrakhan pump station
25.4 Komsomolsk (Russia) - estimate same as Astrakhan pump station
25.5 Kropotkin (Russia) - estimate same as Astrakhan pump station
Part 2: Rates for Work Performed
All Rates for work (programming services) performed outside Russia under this
contract shall be at the Standard or Overtime Rates shown below.
Contractor is expected to provide site support during installation,
commissioning and startup. In the event that Contractor is requested to perform
any of the following work in Russia, a separate services contract will be
entered into by the parties for such work at the Overseas Rates contained below.
VAT will be added to each invoice as a separate line item for work performed
inside Russia (Overseas Rate) under the separate contract. Contractor will
interface as required with the desion institutes (GTP/GIPVN) to facilitate
programming and hardware activities. GTP is in Moscow and GIPVN is in Samara,
Russia.
Rates for Engineering Services:
These rates include all Contractor's charges for insurance, taxes, overhead and
profit. These rates also include Contractor's overhead costs of Computer work
stations and software for normal engineering, and drafting projects.
CLASSIFICATION
- -------------- Std. Rate O.T. Rate Overseas Rate
- -------------- --------- --------- -------------
Sr. Project Engineer * * *
Project Engineer * * *
Sr. Engr/Programming Spec. * * *
Engineer * * *
Project Control Engineer * *
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WTIH THE COMMISSION.
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Client Name: Caspian Pipeline Consortium-R January, 2000
Proj. Name: *
Project Number: *
Designer * *
Operator/Draftsperson * *
Project Clerk/Translator * *
Senior Clerk * *
Clerk/Secretary * *
NOTE: 20% VAT will be added to each invoice as a separate line item.
Company written approval will be required before authorizing overtime hours.
Contractor shall not work over 16 hours in a 24-hour day. The overtime rate
shall apply to all hours worked over 40 hours per week, or on Contractor
holidays, or on weekends if worked at client request.
Travel and Expenses
Contractor project-related travel expenses will only be incurred when required
and authorized in advance by Company, and will be billed at cost plus * percent.
For prolonged assignments performed outside the Houston office area, a
reasonable per them allowance will be agreed upon by the parties in lieu of
certain expenses and charges for applicable personnel.
Reproduction
All third party reproduction costs will be billed at cost plus * percent. Plots
issued to Company whether preliminary or final will be billed at * per 22" x 34"
sheet. Laser print drawings or copies (11" x 27", letter or legal size) issued
to Company will be billed at * inch sheet. Binders (including tabs) issued to
Company will be billed at * each.
Subcontracts/Miscellaneous Costs
All miscellaneous and third party costs will be billed at cost plus * percent.
Reimbursable Equipment
In the event that Contractor procures hardware and equipment under Item 8,
Part 1, Contractor shall be reimbursed by Company at cost.
B. Payment Schedule
The compensation paid to Contractor for Programming Services shall be based upon
the rates above and shall be based upon the labor hours necessary to complete
the Scope of Work. Contractor shall submit invoices on a monthly basis,
indicating the hours worked, for these services.
Compensation to be paid to Contractor for hardware and equipment supplied by
Contractor, if any, shall be invoiced by Contractor not more than ninety days
before delivery of the SCADA system to the Company.
All invoices should be sent to the Company at the following address:
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WTIH THE COMMISSION.
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Client Name: Caspian Pipeline Consortium-R January, 2000
Proj. Name: *
Project Number: *
Caspian Pipeline Consortium-R
Project Accountant
*
*
*
*
**
All payments shall be made thirty days after receipt of invoice. VAT shall be
shown separately and will be paid by Company directly to the appropriate
governmental authorities.
C. Cost Estimate of Work
This Contract is a "not to exceed contract" for the value of *which estimate is
set forth on the Attached Cost Estimate, A- 1. Because the cost of services has
been estimated, it is imperative that when Contractor reaches eighty-percent of
the value of the contract *, Contractor shall notify Company of the status of
the work.
END OF EXHIBIT A
*CONFIDENTIAL TREATMENT REQUEST.
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WTIH THE COMMISSION.
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EXHIBIT 10.33
CONTRACT AND SERVICES
THIS AGREEMENT, between Caspian Consortium-K whose mailing address is, *
(hereinafter called COMPANY) and IDS Engineering, Inc. (hereinafter called
CONTRACTOR) whose address is 600 Century Plaza Drive Building 140, Houston, TX
77073 USA, provides for the performance CONTRACTOR of the work and services
stipulated below on the terms and conditions set forth. Unless otherwise
provided herein, all notices shall be given writing to the addresses stated
above or addresses given in writing to the other party from time to time.
1. WORK TO BE PERFORMED:
1.1. CONTRACTOR shall perform the work services which are described in Exhibit A
attached hereto, and made a part hereof, or by supplement or amendment by
written Work Order issued pursuant hereto (whether or not any Exhibit A be
attached), at the price or rates and on the terms described in either Exhibit A
or in such Work Orders. Work Orders (distinguished from oral or written field
work orders) may be issued only by COMPANY management personnel. Such work and
services shall be done in accordance with the plan specifications, instructions,
and other provisions which are either attached hereto and made a part hereof, or
are separately identified by signatures and incorporated herein by reference and
consistent with COMPANY standards. If such standards are not provided,
acceptable industry practice, local codes, or CONTRACTOR'S standards may be
employed, each with COMPANY prior written approval
2. ENVIRONMENT
2.1. CONTRACTOR shall exercise due diligence prevent pollution and any other
type of environmental damage during performance under this Contract. At all
times CONTRACTOR shall exercise great care and due caution regarding
CONTRACTOR'S engagement in ultrahazardous activities or use of ultrahazardous
materials during performance under this Contract, including but not limited to
activities involving the use of radioactive sources or explosive substances or
corrosive substances.
2.2. CONTRACTOR shall observe and comply with all applicable laws, rules,
orders, decrees and regulations concerning environmental protection as well as
COMPANY'S requirements regarding environmental protection. Further, in those
cases where has provided CONTRACTOR with a copy of an environmental protection
policy and/or made reference to a set of environmental guidelines, CONTRACTOR
shall comply with, or cause its employees, agents, servants, and subcontractors
to comply with said environmental protection policy and/or Guidelines.
3. CHANGES:
3.1. COMPANY reserves the right during the progress of the work to make any
changes, additions, or deletions in the original plans and specifications. All
changes shall be made in writing and accepted by both parties before CONTRACTOR
proceeds with the work thereon. Provisions permitting such alterations without
specific consent of the insurer shall be included in the terms of any
performance bond required hereunder, so that the validity of such bond shall not
be affected thereby. No bills for extras will be allowed unless ordered and
authorized by COMPANY, irrespective of any terms which may be contained in any
published price list, field work order, delivery ticket, or other paper (other
than Work Order) which may be issued in connection with the performance of the
work hereunder (whether specific reference is made to this contract or not), the
terms and conditions of this contract shall apply in determining the rights and
liabilities of the parties.
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
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EXHIBIT 10.33
4. COMMENCEMENT AND TERM:
4.1. CONTRACTOR shall commence performance of the work and services contemplated
by this contract and thereafter prosecute the same diligently to completion
consistent with good industry practices and within the period of time prescribed
by COMPANY hereunder, or if none are specifically set forth, within a reasonable
time under the circumstances. Any Work Order issued hereunder may be canceled
by either party by written notice given at least fifteen (15) days previous to
the date provided for commencement of work and services thereunder. If no
specific term is stated in Exhibit A, this Contract and Services Agreement shall
continue in effect until terminated by written notice by either party given at
any time when there is no outstanding work in progress or under order.
5. SUPERVISION, INSPECTION AND DIRECTION:
5.1. COMPANY shall have no power or authority to direct, supervise or control
CONTRACTOR with respect to the means, manner or method of performance of the
work or services performed or rendered hereunder, and CONTRACTOR in the exercise
of his independent employment and as an independent contractor, shall select the
means, manner and method of performance thereof CONTRACTOR is responsible to
COMPANY only for the results to be obtained, but the work and services performed
or rendered hereunder shall meet with the approval of COMPANY or its designated
representative who shall be entitled to inspection to the extent necessary to
assure such results. At all times when work is in progress, there shall be a
foreman or head workman on the grounds as representative of the CONTRACTOR, and
also copies of the plans and specifications if such are part of the agreement.
Instructions given to such foreman or head workman shall be considered as having
been given to the CONTRACTOR. COMPANY'S failure to make inspection or test, or
to discover defective workmanship, material or equipment, shall not relieve
CONTRACTOR from any responsibility. Payment of any funds by COMPANY shall not
constitute a waiver or acceptance of defects.
6. RECORDS AND AUDIT:
6.1. CONTRACTOR agrees to keep accurate records on a daily basis of the names of
the employees, starting and ending time for each length of lunch period, travel
time, the type of work performed by each, the materials used and other relevant
information COMPANY expressly requests, and to preserve same for at least two
years after the completion of each separate job under this Contract. COMPANY
shall have the right and from time to during reasonable business hours to
inspect and audit all of CONTRACTOR'S books and records bearing directly or
indirectly on the work and services performed hereunder and the prices and rates
charged therefore.
7. MATERIALS AND PERSONNEL:
7.1 CONTRACTOR shall furnish at its own expense any labor, superintendence,
bonds, permits, machinery equipment, tools, fuel, supplies, facilities
materials, transportation and all other things necessary for the performance and
completion of any work services hereunder, except such items as COMPANY
specifically agrees to furnish. Unless otherwise specified, all materials shall
be new and of a grade and quality deemed by COMPANY to be adequate for the
required use.
7.2. To the extent possible, in providing services hereunder, CONTRACTOR shall
utilize National personnel, suppliers and service contractors whose price,
quality, availability, and times of delivery are comparable to International
price, quality, availability, and times of delivery.
8. RISK OF LOSS:
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
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EXHIBIT 10.33
8.1. CONTRACTOR: CONTRACTOR shall assume liability at all times for damage to or
destruction of CONTRACTOR'S equipment including, but not limited to, all tools,
machinery, and appliances regardless of when or how such damage or destruction
occurs. COMPANY shall be under no liability to CONTRACTOR for any such loss.
8.2. COMPANY: Until written acceptance by COMPANY of construction or
installation work, or work and other services, all risk of loss, damage or
destruction by any cause of such work or of such materials or equipment of
CONTRACTOR used in such work shall be borne by CONTRACTOR.
9. INSURANCE:
9.1. CONTRACTOR and sub-contractors shall provide insurance specified on
Exhibit B attached hereto, covering all operations hereunder, with companies
forms and amounts acceptable to COMPANY, and shall furnish such evidence thereof
as may be required by COMPANY.
10. INDEMNITY:
10.1. CONTRACTOR agrees to release COMPANY from all liability for, and shall
protect, defend, indemnify and hold free and harmless COMPANY, its shareholders,
and their officers, directors, and employees from and against any and all
claims, demands and causes of action of every kind and character arising out of,
incident to, or in connection with this Contract or performance of work or
services hereunder, regardless of whether the liability therefore is based upon
some alleged act or omission of COMPANY or of some third or other party, whether
negligent or not, and including without limitation by enumeration all taxes,
claims, debts, fines, penalties, forfeitures, patent infringements, loss of use,
death, injury and damages to all CONTRACTOR personnel and property, together
with the amount of judgments, penalties, interest, court costs, legal and other
fees and expenses in connection therewith.
10.2. COMPANY agrees to release CONTRACTOR from all liability for, and shall
protect, defend, indemnify and hold free and harmless CONTRACTOR and the
officers, directors, and employees of CONTRACTOR from and against any and all
claims, demands and causes of action of every kind and character arising out of,
incident to, or in connection with this Contract or performance of work or
services hereunder, regardless of whether the liability therefore is based upon
some alleged act or omission of COMPANY or CONTRACTOR or of some third or other
party, whether negligent or not, and including without limitation by enumeration
all taxes, claims, debts, fines, penalties, forfeitures, patent infringements,
loss of use, death, injury and damages to all COMPANY personnel and property,
together with the amount of judgments, penalties, interest, court costs, legal
and other fees and expenses in connection therewith.
11. FAILURE TO PROSECUTE WORK:
11.1. Time and quality of work shall be of the essence of this Contract. In
case CONTRACTOR at any time shall fail in any way to prosecute the work herein
provided for with reasonable diligence and in a good, workmanlike and safe
mariner, COMPANY at its option upon three days written notice delivered to
CONTRACTOR, or its representative, or deposited in a registered mail or courier
service for which receipt is returned, terminate the work hereunder and
thereafter proceed with action for damages, or in the alternative, by its own
employees, or by separate independent contract, take control of this work for
the purpose of completing the same, furnishing all additional; labor, materials
and equipment required except for that equipment or materials which were
previously furnished by or bought by COMPANY for CONTRACTOR'S performance of
work and services hereunder. In the latter event, CONTRACTOR
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
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EXHIBIT 10.33
shall be entitled, upon completion of the work, to the difference between the
Contract price and the reasonable cost and expense incurred by COMPANY in
finishing said work. If such cost of completion should exceed the Contract
price, CONTRACTOR agrees to pay the excess to COMPANY as liquidated damages
agreed upon by the parties hereto in consideration of the difficulty of
ascertaining the actual damages by other means. If Contractor contends that its
performance is being delayed by COMPANY in any way, it shall notify COMPANY in
writing immediately of the exact nature of such claim or be held to have waived
same.
12. COMPLIANCE:
12.1 CONTRACTOR agrees to comply with COMPANY'S safety rules and procedures
while working on or near COMPANY'S premises and with all valid applicable
federal, republic, state and local laws, decrees, orders rules and regulations.
Identification of specific laws, orders, rules and regulations, which may be
made in an Exhibit C attached hereto, shall not limit the general applicability
of this compliance provision. If CONTRACTOR is a licensed contractor, the
provisions of this Contract shall not apply to the extent that services of the
CONTRACTOR performed hereunder are subject to conflicting requirements under its
license issued by the appropriate governmental regulatory body. Such services
shall be governed by the CONTRACTOR'S license and any published regulatory
requirements referred to therein. This Contract shall be construed under and in
accordance with the laws of the state of Texas, U.S.A., with jurisdiction in
Harris County. CONTRACTOR waives its right to claim COMPANY has no
jurisdictional right of access to such court system in the event that COMPANY
seeks adjudication of a claim, controversy or dispute between the Parties hereto
(including the enforcement of a subsequent award); and COMPANY waives its right
to claim lack of jurisdiction as a defense in such court system in the event
CONTRACTOR files such an action. Titles to the provisions herein shall not be
interpretive of the Contract terms.
12.2 CONTRACTOR shall observe and comply with all applicable laws, rules,
orders, decrees regulations and orders concerning health and safety, including
but not limited to those of the Russian Federation and any political subdivision
thereof, as well as the COMPANY'S requirements, if any. Further, in those cases
where COMPANY has provided CONTRACTOR with a copy of the health and safety
policy and/or made reference to a set of health and safety guidelines,
CONTRACTOR shall comply with, and cause its employees, servants, agents, and
subcontractors to comply with said health and safety policy and/or health and
safety guidelines.
13. SETTLEMENT AND PAYMENT:
13.1 CONTRACTOR agrees to perform the work hereunder for not to exceed sum of, *
excluding Value Added Tax (VAT). Before final settlement, CONTRACTOR shall show
payment and release of all debts, taxes, liens, claims, charges and obligations
arising by operation of law or otherwise out of its performance of the work
hereunder. COMPANY may withhold funds due CONTRACTOR hereunder or otherwise,
without interest, to assure itself of all such obligations, or the obligations
of CONTRACTOR to COMPANY in connection with any other between COMPANY or any of
its affiliated companies and CONTRACTOR, or to satisfy any provisions of
relating to claims against CONTRACTOR.
CONTRACTOR shall invoice COMPANY monthly for the services performed. Upon
completion of the work in accordance with the terms hereof and in accordance
with Exhibit A, and after final acceptance thereof by COMPANY'S authorized
representatives, COMPANY agrees to pay CONTRACTOR the final invoice. All
payments shall be made to CONTRACTOR's bank by wire transfer:
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
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EXHIBIT 10.33
*
*
*
*
*
*
Payment will be made within thirty days of invoice. Payment is deemed to be
made when COMPANY instructs its bank to wire transfer the funds to the
CONTRACTOR. Each party pays its own banking costs.
13.2 Except as otherwise provided in the contract or a supplemental Contract,
all income and other applicable taxes, levies or assessments now or hereafter
imposed upon or with respect to, or measured by, the compensation paid to
CONTRACTOR, or the materials, equipment, work or services furnished or performed
hereunder by CONTRACTOR, shall be for the account of, and promptly paid by
CONTRACTOR to the appropriate governmental authority. To the extent that the
COMPANY is required to withhold taxes from payments due CONTRACTOR under this
Contract, COMPANY is authorized to do so and shall promptly notify Contractor of
such withholding.
14. CONFIDENTIALITY
Except as to information provided to COMPANY's contractor Valmet, CONTRACTOR
hereby agrees to keep confidential and not to disclose or make any use of any
confidential or proprietary information, knowledge, data or other information of
the COMPANY relating to any business of the COMPANY or any of its clients,
except as the COMPANY may otherwise consent in writing. Such written consent by
COMPANY must be given prior to any disclosure by CONTRACTOR. This restriction
pertains not only to documents and information generated by the CONTRACTOR
itself, but also to all documents and information provided to him by others in
the COMPANY or otherwise acquired during, the course of this Contract. The
CONTRACTOR further agrees not to deliver, reproduce, or in any way allow such
information, or any documentation relating thereto, to be delivered or to be
used by any third parties without the specific prior decision or consent of a
duly authorized representative of the COMPANY. It is understood by CONTRACTOR
that the economic information regarding the Work and Services to be Performed is
sensitive information and disclosure of same could cause significant damage to
the COMPANY.
15. ASSIGNMENT:
15.1. This Contract may not be assigned by CONTRACTOR without the express
written permission of the COMPANY. Any Assignment made without prior written
approval of the COMPANY is null and void.
16. MISCELLANEOUS CONTRACT
PROVISIONS:
16.1. CONTRACTOR agrees that it will comply with all valid, applicable laws,
orders, decrees, rules and regulations presently in force, or which may be
enacted in the future if they regulate the work and services performed
hereunder.
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
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EXHIBIT 10.33
16.2. CONTRACTOR agrees that neither it nor any subcontractor, employee, agent
or other entity shall, directly or indirectly, in connection with the
performance of services for COMPANY: (A) Make any payment to any officer or
employee of any government, or to any political party or official thereof, where
such payment either (1) is unlawful under laws applicable thereto, or (2) would
be unlawful under the Foreign Corrupt Practices Act of 1977 as amended (the
"Act"), of the United States of America, if CONTRACTOR were a "domestic concern"
within the meaning of such Act, (B) Make any payment to any person, if such
payment constitutes an illegal bribe, illegal kickback or other illegal payment
under laws applicable thereto; or (C) commit, directly or indirectly, any other
act or omission having the same effect under the law.
16.3 This Contract, including all Exhibits, Work Orders, oral orders, plans,
specifications, instructions, and other provisions which are issued pursuant
hereto and attached hereto or incorporated herein by reference, constitutes the
entire agreement between the parties. No other representations, bids,
memoranda, or other matter shall vary, alter or interpret the terms hereof. In
the event there is a conflict between the terms of this Contract and the
provisions of Exhibit A, Work Order, oral orders, plans, specifications,
instructions, and other provisions, the terms of this Contract shall prevail.
Failure of the COMPANY to exercise by option, right, or privilege hereunder, or
to demand compliance as to any obligation or covenant shall not constitute a
waiver of the same, or any such succeeding right, privilege, or option, or of
strict performance of the same or any succeeding obligation or covenant.
EXECUTED in duplicate Russian and English originals on this 24 day of January,
2000.
CONTRACTOR
IDS Engineering, Inc.
By: /s/ William A. Coskey
Title: President
Name: William A. Coskey
COMPANY
Caspian Pipeline Consortium-K
By: * By: *
Title: * Title: *
Name: * Name: *
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
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EXHIBIT 10.33
EXHIBIT "B"
CONTRACTOR INSURANCE
REQUIREMENTS
CONSULTING AND GENERAL
CONTRACTOR shall, at its expense, maintain or cause to be maintained the
insurance coverages set forth below with insurance companies acceptable to
COMPANY. Prior to commencement of work and services hereunder, CONTRACTOR shall
deliver to certificates (a) evidencing the issuance of insurance containing the
coverages required herein and (b) providing that the insurance shall not be
canceled or materially changed without thirty (30) days prior written notice to
COMPANY. Commencement or performance of services without delivering the
certificate(s) of insurance shall not constitute a waiver of CONTRACTOR'S
obligation to provide the required coverages. Failure to obtain such insurance
shall be a breach of the Contract.
1. Comprehensive General Liability Insurance, including coverage for Contractual
liability for this Contract, and Cross-liability, in the amount of $1,000,000
combined single limit each occurrence for body injury and property damage. If
CONTRACTOR'S General Liability Insurance is written on a "claims-made" form it
must provide for (i) a retroactive date prior to, or coincident with, the
commencement of work and services under this Contract and (ii) a minimum
extended claims reporting period of one (1) year.
2. If automobiles are to be furnished by CONTRACTOR in performance of work and
services under this Contract, Comprehensive Automobile Liability Insurance,
covering all vehicles owned, non-owned, or hired, in the amount of $500,000
combined single limit occurrence for bodily injury and property damage.
3. If aircraft, including helicopters, are to be furnished by CONTRACTOR in
performance of work and services under this Contract, CONTRACTOR must obtain
Aircraft Liability Insurance, with contractual liability provisions, covering
bodily injury including passenger liability and property damage, hangerkeepers
liability and ground liability including products and completed operations in
the amount of at least $10,000,000 combined single limit each occurrence.
4. If watercraft is to be furnished by CONTRACTOR in performance of the work and
services under this Contract, then a supplement this Exhibit shall be executed
by the parties.
GENERAL CONDITIONS FOR INSURANCE
A. CONTRACTOR hereby waives its right of subrogation against the COMPANY to the
extent of liabilities assumed under this Contract and shall cause its insurers
to waive any rights of subrogation against COMPANY. With regard to insurance to
be taken out by CONTRACTOR hereunder, all insurance under polices taken out by
CONTRACTOR shall be primary insurance because such insurance applies to the
obligations assumed hereunder.
B. With respect to insurance maintained hereunder by CONTRACTOR, all insurance
coverages afforded by policies of insurance maintained by CONTRACTOR shall be
primary insurance as such coverages apply the liabilities assumed under this
Contract.
C. Where use of subcontractors has been approved by the COMPANY, CONTRACTOR
shall require all such contractors to obtain, maintain, and keep in force during
the time which they are engaged, adequate
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
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EXHIBIT 10.33
insurance coverage and shall furnish COMPANY acceptable evidence of such
insurance upon request. Any deficiencies in such coverage shall be the sole
responsibility of CONTRACTOR.
D. No form of CONTRACTOR liability self-insurance, including but not limited to
insuring with a parent, subsidiary, or affiliate organization, is acceptable or
allowable under the terms of this Contract, unless AGREED TO BY COMPANY PRIOR TO
COMMENCEMENT OF WORK AND SERVICES HEREUNDER.
CONTRACTOR
IDS Engineering, Inc.
By: /s/ William A. Coskey
Title: President
Name: William A. Coskey
COMPANY
Caspian Pipeline Consortium-K
By: *
Title: *
Name: *
By: *
Title: *
Name: *
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
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Client Name: Caspian Pipeline Consortium-K January, 2000
Proj. Name: *
Project Number: *
Exhibit A
Programming Services
A. Scope of Work:
Part 1: Work
Caspian Pipeline Consortium-R (CPC-R) and Caspian Pipeline Consortium-K
(CPC-K) are together building a unitary crude oil pipeline from Tengiz,
Kazakhstan to the Black Sea. Initial design will include five pump
stations, a tank farm, a marine terminal and SPM. The design of the
pipeline will include a SCADA system for the control and monitoring of the
pipeline system from Tengiz pump station to the Black Sea Marine Terminal
Facility. SCADA will maintain overall surveillance and control
responsibilities of the pipeline, inclusive of the Pump Stations, Pipeline
Block Valves, Marine Terminal, Tank Farm and SPM. The pipeline will be
controlled and monitored from an Operations Control Center located at the
Marine Terminal, Primary, real time local control of the pump stations and
Marine Terminal Facilities will be accomplished by using Programmable Logic
Controllers (PLCs). The PLCs will be monitored and controlled by the
Primary SCADA system and by a Human Machine Interface (HMI) in the local
control rooms.
A single scope of work has been written herein to provide for the uniform
and homogenous working of this single computer control system. Work to be
performed by the Contractor for the system in Russia shall be performed
under contract with CPC-R; and work to be performed for the system in
Kazakhstan shall be performed under contract with CPC-K. All programming
work by Contractor shall be performed in the United States. Any additional
work to be performed later by Contractor in either Russia or Kazakhstan
shall be governed by separate service contracts with CPC-R or CPC-K,
respectively, at the rates set forth herein in Part 2 of this Scope of
Work.
Contractor is to provide the assembly and programming of the PLC systems
for five (5) pump stations in Russia and Kazakhstan. There will be five (5) ESD
PLCs and approximately a total of thirty (30) General Purpose PLCs for five (5)
pump stations. Contractor will assemble the PLC hardware that will be supplied
by the Company's contractor, Valmet. The Contractor will program the systems as
per Company's requirement and specifications. The five (5) pump stations are
Tengiz, Atyrau (in Kazakhstan), and Astrakhan, Komsomolsk and Kropotkin (in
Russia). General Purpose PLCs and specialty systems will be Allen Bradley
ControlLogix and ESD PLC will be Hima. PLC hardware be provided by the Company's
contractor, Valmet, to the Contractor.
1. Contractor to program PLCs as per the following listed documents provided by
Company.
. P&ID
. Control Narrative
. Cause & Effect
. Flow Chart
. Project Standard
. Location of system (cabinet/HMI/etc.)
. I/0 loading (for each PLC)
. "Package Vendor" interface data
. Wiring/Communication architecture
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
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Client Name: Caspian Pipeline Consortium-K January, 2000
Proj. Name: *
Project Number: *
. CPC Standard for PLC Controllogix Program and Data File Structure
2. Hardware to be supplied by Company's contractor, Valmet, directly to
Contractor:
. Cabinets (as per size and quantity recommended by Contractor)
. ESD PLC modules, processors, communication, I/Os, Power Supplies, Hima
Cables, etc.
. General Purpose PLC modules, processors, communication, I/Os, Power
Supplies, Allen Bradley cables, etc.
. Remote I/0 modules
. Remote I/0 cabinets
3. Contractor shall layout the cabinets as per industry common practice and
from the following information from the Company:
3.1 Bill of material for each PLC
3.2 Brand, style, color, finish, maximum depth (preference, 600 mm) of
Cabinet. Company will specify height of cabinet (2 meters). Cable entry
into the cabinet shall be through the top, 200 mm top clearance, use
compression type terminals.
3.3 Limits of space at job site.
4. Contractor to determine if multiple PLCs of like functions (for example:
mainline motor driven pumps) could be mounted in one cabinet.
5. Contractor will select the size of cabinets (width and depth only).
Contractor will inform the Company of the cabinet sizes. Company will
instruct Valmet to purchase and deliver the cabinets directly to the
Contractor. Note that all cabinets are to be of the same depth.
6. Contractor to provide the wiring drawing and cabinet layout drawings to
Company as early as possible. Company will use drawings to complete loop
drawings and other design documents.
7. Contractor will provide the temporary communication cables (company supplied
specification) to connect the systems in their shop. Communication cables
(supplied by others) external to cabinets will be available only at the job
site.
8. For required hardware missed by Company the Contractor is responsible to
inform Company to provide or cause to provide such in an expeditious manner.
If the missed items are minor and the Contractor can provide them in a more
expeditious manner, Contractor shall provide and charge the Company as long
as Company has given prior approval for the purchase.
9. Contractor shall verify that system hardware is complete.
10. Contractor shall be responsible for assembling the hardware and ensuring
all assemblies are complete and work as a system.
11. Contractor to interface the PLC system with SCADA.
12. Contractor to supply to Company the following documents as a minimum;
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Page 10
<PAGE>
Client Name: Caspian Pipeline Consortium-K January, 2000
Proj. Name: *
Project Number: *
12.1 Assembly drawings
12.2 Logic diagrams of software
12.3 Functional description of software
12.4 Original copies of all software generated by Contractor
13. All software developed under this contract is and shall remain the sole
property of the Company. Contractor may not use such software for any
other applications.
14. Contractor to provide five (5) lap top PLC based computers for interface
and programming the PLC systems. One lap top computer per pump station
with the following minimum configuration; Pentium 111, 64 Meg RAM,
6 Gigabyte Hard Drive, Window 98 operating system.
15. A functional test to ensure proper operation of all devices and components
shall be performed prior to shipment. Company reserves the right to
witness and approve the functional test.**
15.1 Contractor to submit Factory Acceptance Procedure for Company's
approval.
15.2 FAT to include coordinated test with SCADA supplier.
15.3 Company to be given two weeks notice before test.
15.4 Contractor to supply simulated input/outputs used in testing.
16. Contractor to inform Company of the location where hardware is to be
delivered and assembled. Delivery of system to job site will be by Valmet.
Coordination between Contractor and Valmet is required.*
17. Contractor to inform Company of the location where programming will be
performed.**
**Note: Contractor is advised that it may be necessary to ship PLCs to schedule-
- ------ critical locations prior to completion of logic coding and testing.
Contractor shall assure that he has enough available PLC and support
hardware at his premises to complete all programming and testing without
interruption should the object hardware require shipment prior to
software completion.
18. Schedule:
18.1 System for Tengiz and Astrakhan pump stations should be at job
site by*
18.2 System for the other Pump Stations should be at job site by at a
later "supplied dates".
18.3 Loop Checking
18.3.1 Tengiz - *
18.3.2 Astrakhan - *
18.3.3 Atyrau - *
18.3.4 Komsomolsk - *
18.3.5 Kropotkin - *
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Page 11
<PAGE>
Client Name: Caspian Pipeline Consortium-K January, 2000
Proj. Name: *
Project Number: *
18.4 Start-up
18.4.1 Tengiz - *
18.4.2 Astrakhan - *
18.4.3 Atyrau - *
18.4.4 Komsomolsk - *
18.4.5 Kropotkin - *
19. Contractor to provide a complete and detailed design, manufacturing,
delivery schedule
20. All software and PLC programs shall be Y2K compliant.
21. Cabinets will be located at an environmentally-controlled room at job site.
Remote I/0 units will not be necessarily in a controlled environment.
22. ESD and General Purpose PLC system shall be assembled, wired, and tested,
within respective cabinets.
23. Contractor is to ensure all assemblies are in compliance with applicable
Russian and Kazakhstan regulations.
24. Preparation for shipment:
24.1 Contractor shall submit procedures for the cleaning, preservation,
packing, handling, lifting, shipping and storage of the material and
equipment under this order.
24.2 Contractor shall ensure all equipment is adequately packed, crated,
boxed skidded or otherwise protected and prepared for shipment in such
a manner as to prevent loss and damage during handling, transportation
and storage.
25. Hardware count: (Preliminary)
25.1 Tengiz (Kazakhstan)
. Analog Input modules
. Analog Output module
. Discrete Input modules
. Discrete Output modules
. Control Net Boards
. Ethernet boards
. Processors
. Chassis
. Power supplies
. General Purpose PLC cabinets (number will change depending on Vendor
recommendation)
. Remote 1/0 cabinets
. ESD PLC system, with a cabinet
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Page 12
<PAGE>
Client Name: Caspian Pipeline Consortium-K January, 2000
Proj. Name: *
Project Number: *
25.2 Astrakhan (Russia)
. Analog Input modules
. Analog Output module
. Discrete Input modules
. Discrete Output modules
. Control Net Boards
. Ethernet boards
. Processors
. Chassis
. Power supplies
. General Purpose PLC cabinets (number will change depending on Vendor
recommendation)
. Remote 1/0 cabinets
. ESD PLC system, with a cabinet
25.3 Atyrau (Kazakhstan) - estimate same as Astrakhan pump station
25.4 Komsomolsk (Russia) - estimate same as Astrakhan pump station
25.5 Kropotkin (Russia) - estimate same as Astrakhan pump station
Part 2: Rates for Work Performed
All Rates for work (programming services) performed outside Kazakhstan under
this contract shall be at the Standard or Overtime Rates shown below.
Contractor is expected to provide site support during installation,
commissioning and startup. In the event that Contractor is requested to perform
any of the following work inside Kazakhstan, a separate services contract will
be entered into by the parties for such work at the Overseas Rates contained
below. VAT will be added to each invoice as a separate line item for work
performed inside Kazakhstan (Overseas Rate) under the separate contract
Rates for Engineering, Services:
These rates include all Contractor's charges for insurance, taxes, overhead and
profit. These rates also include Contractor's overhead costs of Computer work
stations and software for normal engineering and drafting projects.
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Page 13
<PAGE>
Client Name: Caspian Pipeline Consortium-K January, 2000
Proj. Name: *
Project Number: *
CLASSIFICATION Std. Rate O.T. Rate Overseas Rate
Sr. Project Engineer * * *
Project Engineer * * *
Sr. Engr/Programming Spec. * * *
Engineer * * *
Project Control Engineer * *
Designer * *
Operator/Draftsperson * *
Project, Clerk/Translator * *
Senior Clerk * *
Clerk/Secretary * *
Company written approval will be required before authorizing overtime hours.
Contractor shall not work over 16 hours in a 24-hour day. The overtime rate
shall apply to all hours worked over 40 hours per week, or on Contractor
holidays, or on weekends if worked at Company's request.
Travel and Expenses
Contractor project-related travel expenses will only be incurred when required
and authorized in advance by Company, and will be billed at cost plus * percent.
For prolonged assignments performed outside the Houston office area, a
reasonable per them allowance will be agreed upon by the parties in lieu of
certain expenses and charges for applicable personnel.
Reproduction
All third party reproduction costs will be billed at cost plus * percent. Plots
issued to Company whether preliminary or final will be billed at * per 22" x 34"
sheet. Laser print drawings or copies (11" x 17", letter or legal size) issued
to Company will be billed at * each sheet. Binders (including tabs) issued to
Company will be billed at * each .
Subcontracts/Miscellaneous Costs
All miscellaneous and third party costs will be billed at cost plus *
percent.
Reimbursable Equipment
In the event that Contractor procures hardware and equipment under Item 8,
Part 1, Contractor shall be reimbursed by Company at cost.
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Page 14
<PAGE>
Client Name: Caspian Pipeline Consortium-K January, 2000
Proj. Name: *
Project Number: *
B. Payment Schedule
The compensation paid to Contractor for Programming Services shall be based upon
the rates above and shall be based upon the labor hours necessary to complete
the Scope of Work. Contractor shall submit invoices on a monthly basis,
indicating the hours worked, for these services.
Compensation to be paid to Contractor for hardware and equipment supplied by
Contractor, if any, shall be invoiced by Contractor not more than ninety days
before delivery of the SCADA system to the Company.
All invoices should be sent to the Company in care of-.
Caspian Pipeline Consortium-Kc/o Caspian Pipeline
Consortium-R
*
*
*
*
*
*
*
All payments shall be made thirty days after receipt of invoice. Contractor's
invoices are subject to withholding tax payable by Company to the Republic of
Kazakhstan.
C. Cost Estimate of W
This contract is a "not-to-exceed contract' for the value of * which estimate is
set forth on the attached Cost Estimate, A-1. Because the cost of the services
has been estimated, it is imperative that when the Contractor's costs reach
eighty-percent of the value of the contract * Contractor shall notify the
Company of the status of the work.
END OF EXHIBIT A
*CONFIDENTIAL TREATMENT REQUEST
THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Page 15
<PAGE>
A-1
COST ESTIMATE - CPC-R
<TABLE>
<CAPTION>
ACCOUNT DESCRIPTION MATERIALS IDS LABOR IDS EXPENSES Sub-total-RUSSIA Sub-total-KAZAKHSTAN TOTALS
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
1-0 Project Management * * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
2-0 General PLC * * * * * * *
Program/Doc/QA-QC
- ------------------------------------------------------------------------------------------------------------------------------------
3-0 Pump PLC Programming (2 * * * * * * *
sta. Only)
- ------------------------------------------------------------------------------------------------------------------------------------
4-0 ESD PLC Programming & Doc * * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
5-0 Hardware Design & Specs. * * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
6-0 Control Rack Fabrications * * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
7-0 Miscellaneous * * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
8-0 Taxes * *
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS WITHOUT CONTINGENCY * * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS INCLUDING CONTINGENCY * * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Contingency is * on materials and expenses and nearly * on IDS labor.
Key Points and Assumptions:
. Completed drawings for the Tengiz and Astrakhan will be delivered to IDS
Engr. By *.
. Similarities between the three grassroots pump stations will help to make a
streamless approach to some of the programming duties.
. No significant delays in hardware deliveries.
. Includes five (5) lap-top computers as specific in your scope document with
the Allan Bradley and HIMA software packages loaded.
. Includes FAT at Valmet-Houston as stated in your scope of work document.
. Includes all items listed as deliverables in your scope of work item #13,
plus required control cabinets.
. Includes one project manager (native Russian) and also one lead programmer,
to insure good communications and programming efficiency.
Items that may reduce the job costs:
. Although it is expected to incur some similarities in the stations, more
similarities could reduce the project costs
. Time spent on documentation efforts of programs could be reduced on specific
requirements for each station
Page 16
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Industrial Data Systems, Inc. Incorporated in the State of Texas
IDS Engineering, Inc. Incorporated in the State of Texas
Thermaire, Inc. dba Thermal Corp. Incorporated in the State of Texas
Constant Power Manufacturing, Inc. Incorporated in the State of Texas
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 663,972
<SECURITIES> 300,000
<RECEIVABLES> 2,697,363
<ALLOWANCES> (6,528)
<INVENTORY> 771,808
<CURRENT-ASSETS> 4,809,056
<PP&E> 1,499,065
<DEPRECIATION> (428,847)
<TOTAL-ASSETS> 5,913,924
<CURRENT-LIABILITIES> 1,502,740
<BONDS> 384,658
0
0
<COMMON> 12,965
<OTHER-SE> 3,961,561
<TOTAL-LIABILITY-AND-EQUITY> 5,913,924
<SALES> 6,260,269
<TOTAL-REVENUES> 12,238,449
<CGS> 5,011,550
<TOTAL-COSTS> 12,005,931
<OTHER-EXPENSES> (78,436)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,067
<INCOME-PRETAX> 310,954
<INCOME-TAX> 151,212
<INCOME-CONTINUING> 159,742
<DISCONTINUED> (483,057)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (323,315)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
