-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KH22lvGDZxcRs4Cu3G9CN05rgkku03BGEdsPINe5Bc4VIQDMTQTAU8Av3NNL/odt 75+DDnE8TwAz/SIINOHiIw== 0001000096-99-000102.txt : 19990217 0001000096-99-000102.hdr.sgml : 19990217 ACCESSION NUMBER: 0001000096-99-000102 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTEGRATED SPATIAL INFORMATION SOLUTIONS INC /CO/ CENTRAL INDEX KEY: 0000783284 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 840868815 STATE OF INCORPORATION: CO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14273 FILM NUMBER: 99540466 BUSINESS ADDRESS: STREET 1: 200 WEST FORSYTH STREET STREET 2: SUITE 800 CITY: JACKSONVILLE STATE: FL ZIP: 32202 BUSINESS PHONE: 9043461319 MAIL ADDRESS: STREET 1: 200 WEST FORSYTH ST. STE 800 STREET 2: PO BOX 569 CITY: JACKSONVILLE STATE: FL ZIP: 32202 FORMER COMPANY: FORMER CONFORMED NAME: INTEGRATED SPATIAL INFORMATION SYSTEMS INC DATE OF NAME CHANGE: 19980710 FORMER COMPANY: FORMER CONFORMED NAME: DCX INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DOUGLAS COUNTY INDUSTRIES INC DATE OF NAME CHANGE: 19860109 10QSB 1 FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1998. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . -------------- -------------- Commission file number 0-14273 INTEGRATED SPATIAL INFORMATION SOLUTIONS, INC. ---------------------------------------------- (Exact name of registrant as specified in its charter) COLORADO 84-0868815 - ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13119 Professional Drive, Jacksonville, FL 32225 ------------------------------------------------ (Address of principal executive offices) (Zip Code) (904) 220-4747 -------------------------------------------------- (Registrant's telephone number, including area code) --------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No 11,496,571 Common Shares were outstanding as of December 31, 1998. Number of pages in this report is 12. Table of Contents Part I, Financial 3 Consolidated Balance Sheet 3 Consolidated Statement of Operations 5 Consolidated Statements of Cash Flow 6 Notes to Consolidated Financial Statements 7 Management Discussion and Analysis 9 Part II Other Information 11 Signature Page 12 Part 1 Financial Statements Integrated Spatial Information Solutions, Inc., and Subsidiary Condensed and Consolidated Balance Sheets (Unaudited) December 31, 1998 - -------------------------------------------------------------------------------- Assets Current: Cash and Cash Equivalents $ 12,231 Accounts receivable (net of allowance) 2,095,909 Land and building, held for resale, net 1,076,371 Restricted cash 100,000 Prepaid expenses and other 168,388 - -------------------------------------------------------------------------------- Total current assets 3,452,899 - -------------------------------------------------------------------------------- Property and Equipment: Land and building under capital lease - related party 1,866,667 Equipment and furniture 469,904 Leased assets 289,234 - -------------------------------------------------------------------------------- 2,625,805 Less accumulated depreciation (456,893) - -------------------------------------------------------------------------------- Net property and equipment 2,168,912 - -------------------------------------------------------------------------------- Other Assets Goodwill, net of accumulated amortization 4,893,692 Other 82,795 - -------------------------------------------------------------------------------- Total other assets 4,976,487 - -------------------------------------------------------------------------------- $10,598,298 - -------------------------------------------------------------------------------- See accompanying notes to financial statements 3 Integrated Spatial Information Solutions, Inc., and Subsidiary Condensed and Consolidated Balance Sheets (Unaudited) December 31, 1998 - -------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Current: Notes payable - current portion $ 883,094 Obligations under capital leases - related party - current 156,724 Accounts payable 790,920 Accrued expenses 639,004 Deferred revenue 152,314 Accrued litigation settlement 478,165 - -------------------------------------------------------------------------------- Total current liabilities 3,100,221 - -------------------------------------------------------------------------------- Long-term Liabilities Notes payable, less current maturities 369,052 Obligations under capital leases - related party 1,919,935 - -------------------------------------------------------------------------------- Total long-term liabilities 2,288,987 - -------------------------------------------------------------------------------- Total liabilities 5,389,208 - -------------------------------------------------------------------------------- Commitments and Contingencies Stockholders' Equity Cumulative convertible preferred stock, $.001 par value, 20,000,000 shares authorized, 590 shares issued and outstanding 1 Common stock, no par value, 2,000,000,000 shares authorized, 11,496,571 shares issued and outstanding 12,635,423 Additional paid-in capital 3,754,275 Accumulated deficit (11,180,609) - -------------------------------------------------------------------------------- Total stockholders' equity 5,209,090 - -------------------------------------------------------------------------------- $ 10,598,298 ================================================================================ See accompanying notes to financial statements 4 Integrated Spatial Information Solutions, Inc., and Subsidiary Condensed and Consolidated Statements of Operations (Unaudited) Three Months Ended December 31, 1998 1997 - -------------------------------------------------------------------------------- Revenues $ 2,043,168 $ 1,800,929 - -------------------------------------------------------------------------------- Costs and expenses: Salaries and employee benefits 1,303,375 1,271,394 Direct contract costs 348,700 325,051 Other operating costs 635,570 823,144 - -------------------------------------------------------------------------------- Total costs and expenses 2,287,645 2,419,589 - -------------------------------------------------------------------------------- Operating loss (244,477) (618,660) - -------------------------------------------------------------------------------- Other Income (expense): Interest expense (130,142) (94,706) Other income 595 59,657 Other expense -- (103,171) - -------------------------------------------------------------------------------- Total other income (expense) (129,547) (138,220) - -------------------------------------------------------------------------------- Net loss from continuing operations (374,024) (756,880) Loss from discontinued operations (109,959) - -------------------------------------------------------------------------------- Net loss (374,024) (866,839) - -------------------------------------------------------------------------------- Preferred stock dividends (12,241) (14,910) Deemed preferred stock dividends (83,333) - -------------------------------------------------------------------------------- Net loss attributable to common stockholders $ (388,265) $ (965,082) - -------------------------------------------------------------------------------- Basic and diluted loss per common share: Loss from continuing operations attributable to common stockholders $ (0.03) $ (0.09) Loss from discontinued operations (0.01) Loss attributable to common stockholders (0.03) (0.10) - -------------------------------------------------------------------------------- Weighted average number of shares of common stock outstanding 11,462,223 8,346,053 - -------------------------------------------------------------------------------- See accompanying notes to financial statements 5 Integrated Spatial Information Solutions, Inc., and Subsidiary Condensed and Consolidated Statements of Cash Flow (Unaudited) Three Months Ended December 31, 1998 1997 - -------------------------------------------------------------------------------- Operating Activities Net loss $ (374,024) $ (866,840) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 206,910 226,509 Stock options and warrants issued for services performed 15,236 65,451 Forgiveness of debt (16,207) Write off of accumulated depreciation due to discontinued operations (129,002) (Increase) decrease in accounts receivable 472,814 173,946 Decrease in accrued settlement liability (832) (42,003) (Increase) decrease in other assets 7,526 88,972 Increase (decrease) in accounts payable 108,954 (499,961) Decrease (increase) in accrued expenses (219,021) 81,093 Increase (decrease) in deferred revenue 39,268 (107,379) - -------------------------------------------------------------------------------- Net cash generated (used) by operating activities 237,751 (1,025,421) - -------------------------------------------------------------------------------- Investing Activities Purchase of equipment (23,543) Accumulated depreciation adjustment (3,286) Receipt from sale of assets 994,069 - -------------------------------------------------------------------------------- Net cash (used) provided by investing activities (26,829) 994,069 - -------------------------------------------------------------------------------- Financing Activities Payments on checks written against future deposits (207,650) (209,591) Proceeds from borrowing 60,000 Payments on debt (106,086) (450,256) Issuance of common stock 5,031 Issuance of convertible preferred stock 212,500 - -------------------------------------------------------------------------------- Net cash provided (used) by financing activities (253,736) (442,316) - -------------------------------------------------------------------------------- Net decrease in cash (42,814) (473,668) Cash and cash equivalents, beginning of period 55,045 582,326 - -------------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 12,231 $ 204,476 - -------------------------------------------------------------------------------- See accompanying notes to financial statements 6 Integrated Spatial Information Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Condensed Consolidated Financial Statements The condensed consolidated financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's consolidated financial position as of December 31, 1998, the consolidated results of its operations for the three-month periods ended December 31, 1998, and 1997 and statements of cash flows for the three-month periods then ended. The accounting policies followed by the Company are set forth in the annual report of September 30, 1998, filed on Form 10-KSB, as amended, and the audited consolidated financial statements therein with the accompanying notes thereto. While management believes the procedures followed in preparing these consolidated financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year. The consolidated results of operations for the three-month period ended December 31, 1998, are not necessarily indicative of the results to be expected for the full year ending September 30, 1999. (2) Accounts Receivable Accounts receivable contain amounts computed under the cost-to-cost method to determine percentage of completion as described in the Form 10-KSB for September 30, 1998. (3) Provision for Income Taxes At the beginning of the fiscal year the Company had net operating loss carryforwards of $6.0 million with expirations through 2018. At December 31, 1998, the amount of the net operating loss carryforward balance is estimated at $6.4 million. The Company expects to incur a minimal amount of alternative minimum tax for the fiscal year. Since the Company is unable to determine that deferred tax assets exceeding tax liabilities are more likely than not to be realized, it will record a valuation allowance equal to the excess deferred tax assets at fiscal year end. (4) Litigation The Company previously filed with the Armed Services Board of Appeals an appeal of certain reprocurement costs related to the difference between the Company's contract price and the price incurred by DLA from the next lowest vendor as provided for in the Federal Acquisition Regulations. A hearing date was eventually set for February of 1999 and has recently been rescheduled to late March to allow execution of a settlement agreement. The Company had also recorded a reserve of $521,000 for the loss in June, 1996 and believed that amount to be sufficient for the possible reprocurement costs. Subsequent to this quarter, counsel for DLA has verbally agreed to a de minimis settlement of the appeal. (See also Item 3, Legal Matters, and Note 5, Litigation, to the financial statements in Form 10-KSB, as amended, for September 30, 1998.) 7 (5) Lease Obligations The Company leases various equipment as well as facilities under capital leases that expire through the year 2003 as noted in Note 7 to the Financial Statements in Form 10-KSB, as amedned, September 30, 1998. (6) Subsequent Events Convertible Preferred Stock. In January, 1999, the holders of Series A, 6% Cumulative Convertible Redeemable Preferred Stock converted 100 shares into common stock in accordance with the issue agreement. Accordingly, the Company issued 461,552 shares of its common stock in exchange. Litigation Settlement. See also, Note 4, Litigation, above regarding the pending verbal settlement with the Government. Line of Credit Commitment Letter. On February 9, 1999 the Company was verbally advised by a representative of the lending institution the institution was withdrawing the commitment letter for the line of credit and refunding the origination fee. The Company is in discussions with two other institutions for alternative sources of working capital. 7. Accounting for Preferred Stock Convertible at a Discount to the Market. The statement of operations gives effect for a discount of 25% of the common stock which would result and be deemed to be additional dividend to the holders of the Company's 6% convertible preferred stock sold on October 14, 1997. That convertible preferred stock was convertible into common stock at a 25% discount to the five day average market price of the common stock immediately preceding the conversion date which was lower than the five day average market price at the date of placement. This difference, $83,333 for the prior year first quarter, on the first possible date of conversion is an imputed discount and is deemed to be additional dividend available to the holders of the preferred stock which reduced prior year first quarter income available to common stock shareholders. Accordingly, it was reduced from cumulative net income to arrive at net income attributable to common shareholders. 8. Net Loss Per Common Share. During the quarter ended December 31, 1997, the Company adopted Statement of Financial Accounting Standard ("SFAS") No. 128 issued by the Financial Accounting Standards Board. SFAS No. 128 provides for the calculation of "Basic" and "Diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of an entity, to fully diluted earnings per share. Because the Company incurred net losses in both three month periods ending December 31, none of its outstanding options or warrants were included in the computation of diluted earnings per share as their effect would be anti-dilutive. The total of warrants and options outstanding at December 31, 1998 and December 31, 1997 were 6,499,727 and 6,967,850, respectively. PART 1, ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OPERATIONS Forward-Looking Statements. This quarterly report contains certain forward-looking statements that describe the future business, prospects, actions and possible results of Integrated Spatial Information Solutions, Inc. (the "Company") and the expectations of the Company and its management which are not historical facts and therefore constitute forward-looking statements as contemplated in the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and 8 uncertainties that could cause actual results to differ materially from those set forth. As a result, there also can be no assurance that the forward-looking statements included herein will prove to be accurate or that the objectives and plans of the Company will be achieved. Financial Condition: Liquidity. Cash decreased $42,814 to a total of $12,231 from $55,045 at September 30, 1998. The decrease was primarily due to the reductions in current liabilities as well as the net operating loss for the quarter. Presently, the Company has working capital of approximately $352,678 versus negative working capital of $957,000 a year prior. The primary reason for this improvement is the reclassification of $1,076,,371 to current assets representing the Company's real property in Franktown, Colorado in light of the lessee's action to exercise his purchase option. The Company and the lessor are negotiating a final purchase price and expect to complete the transaction in the near future. The Company's current ratio of total current assets to current liabilities increased to 1.11:1 from .71:1 a year ago while it decreased slightly from 1.20:1 at September 30, 1998. Should the sale of the real property not be timely completed, the Company's liquidity could be adversely affected by the balloon payment of $680,000 required on March 3, 1999 if management's attempts at extending the due date of the note or finding a replacement lender were to not be successful. As a result of losses from operations, the forthcoming required balloon payment related to the mortgage note, and limited working capital, the Company's ability to timely meet payment due dates could be in question. Management's plan to continue the operation of the Company includes: raising funds through additional debt or equity instruments, of which there can be no assurance; the negotiation of a credit facility for additional acquisition and operating capital needs; expected increased cashflows from new contracts awards on which revenue producing work has begun; and constraining the cost of operations coupled with an additional contingency plan to generate further cost reductions and improved cash flows. Capital Resources. During the fourth quarter of the prior fiscal year the Company sold a total of 700 shares of convertible preferred stock in a private offshore transaction which resulted in net funding of approximately $463,000. The Company has established strong relations with investment banking entities. Accordingly, management believes it may be able to secure a credit facility large enough to support its near term acquisition program and required working capital. In addition, the Company is in discussions with two financial institutions with the intent of arranging an asset-based line of credit. The Company's long-term liquidity requirements may be significant in order to implement its plans. There can be no guarantee such funds can be secured. Results of Operations: First Quarter of Fiscal Year 1999 Revenue for the first quarter of FY 1999 reached $2,043,168 and was generated entirely by the Company's operating subsidiary, PlanGraphics, Inc. from geographic information systems activities. This level of current quarter revenue reflects an increase of 11.8% over the same period of the prior year. The increase over the prior year level of operations for the same quarter resulted from the expansion of contract activity. The Company's total costs and expenses reached $2,287,645 or 119.6% of revenue, an improvement of $131,944 over the prior year. This amount reflects approximately $187,574 in reductions to other operating costs and is offset by slight increases in salaries and employee benefits and from increased direct contract costs. 9 The operating loss decreased by $373,523 to $244,477 from last fiscal year's first quarter total of $618,660, reflecting management's efforts to improve operations. Interest expense increased over that of the prior year by $35,436 as a result of two factors, the payment of a line of credit origination fee and increased rate of interest connected with the new mortgage on the Company's former manufacturing facility, increased interest attributable to lease financing at the operating subsidiary. Other expense decreased $103,171 from the prior year amount primarily due the absence of certain consulting fees and acquisition expenses. Other income also decreased from prior year totals because $16,207 reflecting nonrecurring forgiveness of debt in the 1997 first quarter. First Quarter of Fiscal Year 1998 Revenue for the first quarter of FY 1998 amounted to $1,800,929 and was generated entirely by the Company's operating subsidiary, PlanGraphics, Inc., from geographic information systems activities and was not comparable with restated revenue of nil for the first quarter of the prior fiscal year. This level of first quarter revenue reflected a decline of 28.1% from the subsidiary's revenue for the same period of the prior year. The decline from the subsidiary's prior year level of operations for the same quarter resulted from the winding down of a significant long-term contract and a delay in the commencement of work on replacement contract activity. It was, however, an increase over the subsidiary's FY 1997 fourth quarter revenue reflecting growing backlog increased sales over that period. The Company's total costs and expenses reached $2,419,589 or 134.4% of revenue. Approximately $381,176 was related to parent company general and administrative costs and was not comparable to reported costs for the prior year that resulted from discontinued operations of the Company. Of this amount, approximately $125,000 was related to actions resulting from merger and acquisition activities; and another $98,000 of acquisition amortization expenses were recorded also. The balance, $1,940,413, was related to GIS operations and reflected a decrease from the costs for the same period, a year prior which were not publicly reported. The decline in GIS related costs resulted from management actions to reduce staffing and operating costs in response to the impending temporary decline in revenue. Interest expense for FY 1998 first quarter increased over that of the prior year by $60,757 as a result of the interest costs added from the GIS subsidiary acquired late in the fourth quarter of FY 1997. However, trend analysis of both parent company interest ($6,452) and subsidiary interest ($88,254) for the FY 1998 first quarter compared to interest expenses for the same period of FY 1997 revealed a decrease of 78% for the parent company due to certain leased equipment costs no longer occurring because of the divestiture of manufacturing assets and due to the retirement of an SBA-held note and a decrease of 15% in subsidiary generated interest expenses resulting from retirement of certain debt. Other expense increased over prior year expense primarily due to acquisition expenses ($75,475) which were not reported in prior year totals. Other income increased over prior year totals as a result of forgiveness of debt from restructuring ($16,207) and the balance from inclusion of the subsidiary results. Loss from discontinued operations is a result of certain first quarter expenses related to the Company's manufacturing operations which were not accrued during the same period of the prior year. Contract Backlog The Company's has reported a backlog of GIS contracts and work assignments amounting to approximately $9.0 million. The year prior there was $8.0 million of uncompleted work in the backlog. 10 PART II- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Note 4. ITEM 2. CHANGES IN SECURITIES During the current quarter, a holder of convertible preferred stock submitted 10 shares of Series A 6% Convertible Redeemable Preferred Stock for conversion into common stock. The Company issued 40,000 shares of its common stock in exchange. Subsequent to the end of the quarter, the holders submitted100 shares of preferred stock for which the Company issued 461,552 shares of common stock in exchange. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. ITEM 5. OTHER INFORMATION. Not Applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8K. Exhibits filed since the beginning of the current quarter: Exhibit 10.6 Executive Employment Agreement between the Company and Robert S. Vail, filed as part of Form 10-KSB on January 13, 1999. Reports on Form 8-K filed since the beginning of the current quarter: Not applicable. 11 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Integrated Spatial Information Solutions, Inc . Dated: February 15, 1999 /S/ Fred Beisser ------------------------------------------- Frederick G. Beisser Vice President-Finance & Administration, Secretary & Treasurer and Principal Financial Accounting Officer 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTIANS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS SEP-30-1999 DEC-31-1998 12,231 0 2,095,909 0 0 3,452,899 2,625,805 (456,893) 10,598,298 3,100,221 0 1 0 12,635,423 (7,426,334) 10,598,298 0 2,043,168 0 2,287,645 0 0 130,142 0 0 (374,024) 0 0 0 (388,265) (0.03) (0.03)
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