<PAGE> 1
United States
Securities and Exchange Commission
Washington, DC 20549
Form 10-QSB
(Mark one)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: June 30, 2000
( ) TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT
For the transaction period from: __________________ to ___________________
Commission File number: 0-24031
Integrated Business Systems & Services, Inc.
--------------------------------------------
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0910139
-------------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
115 Atrium Way, Suite 228, Columbia, SC 29223
---------------------------------------------
(Address of principal executive offices)
(803) 736-5595
--------------
(Issuer's telephone number)
--------------------------------------------------------------------------------
(Former Name, address or fiscal year, if changed since last report)
Check whether the issuer (1) 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 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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
14,167,419 shares of no par common shares outstanding at June 30, 2000
--------------------------------------------------------------------------------
Transitional Small Business Disclosure Format (check one) ( ) Yes (X) No
Page 1
<PAGE> 2
Integrated Business Systems and Services, Inc.
Index
Page
Number
------
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets - June 30, 2000, and
December 31, 1999 3
Statements of Operations for the three
months and the six months ended June 30,
2000, and 1999, respectively 4
Statements of Cash Flows for the six months
ended June 30, 2000, and 1999, respectively 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of 7 - 12
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Items 1 - 6 13
SIGNATURES 14
Page 2
<PAGE> 3
Part 1 FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Integrated Business Systems and Services, Inc.
Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(unaudited) (audited)
------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,110,586 $ 82,996
Accounts receivable 608,573 91,638
Investments 50,000 0
Related party note receivable 0 183,680
Interest receivable 21,110 0
Unbilled revenue 28,885 28,885
Prepaid commissions 60,740 0
Other prepaid expenses 85,020 50,426
------------------------------
Total current assets 3,964,914 437,625
Capitalized software costs, net 683,866 768,001
Property and equipment, net 331,797 155,654
Related party receivable 80,485 82,944
Other assets 1,629 2,793
------------------------------
Total assets $ 5,062,691 $ 1,447,017
==============================
Liabilities and Shareholders' Equity (Deficiency)
Current liabilities:
Notes payable $ 0 $ 28,976
Accounts payable 23,110 129,223
Accrued liabilities
Accrued compensation and benefits 68,816 63,767
Accrued payroll taxes 6,138 305,402
Other 71,928 107,703
Deferred revenue 40,653 88,273
------------------------------
Total current liabilities 210,645 723,344
Long-term debt, net of current portion 1,250,000 1,250,000
Subordinated debt 0 180,000
------------------------------
Total liabilities 1,460,645 2,153,344
Commitments and contingencies -- --
Stockholders' equity (deficiency):
Common shares, voting, no par value, 100,000,000 shares
authorized, 14,167,419 and 10,537,635 shares outstanding at
June 30, 2000, and December 31, 1999, respectively 10,755,091 4,142,098
Notes receivable - stock (944,800) (190,800)
Accumulated deficit (6,208,245) (4,657,625)
------------------------------
Total shareholders' equity (deficiency) 3,602,046 (706,327)
------------------------------
Total liabilities and shareholders' equity (deficiency) $ 5,062,691 $ 1,447,017
==============================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE> 4
Integrated Business Systems and Services, Inc.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
ended June 30, ended June 30,
----------------------------- -----------------------------
2000 1999 2000 1999
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Revenues
Services and other income $ 100,661 $ 172,616 $ 133,021 $ 415,623
Hardware sales 0 45 0 1,551
Software licensing 533,600 2,779 533,600 5,558
Maintenance 22,089 39,738 44,177 83,817
----------------------------- -----------------------------
Total revenues 656,350 215,178 710,798 506,549
----------------------------- -----------------------------
Operating expenses
Cost of revenues 154,492 157,366 328,585 282,173
Research and development costs 84,451 61,123 126,730 66,135
General and administrative 736,240 305,355 1,390,067 547,121
Sales and marketing 336,973 76,622 546,291 109,265
----------------------------- -----------------------------
Total operating expenses 1,312,156 600,466 2,391,673 1,004,694
----------------------------- -----------------------------
Loss from operations (655,806) (385,288) (1,680,875) (498,145)
Other income (expense)
Interest expense (22,460) (22,215) (49,065) (41,570)
Interest income 63,269 1,318 88,843 1,318
Other income 215 6,582 90,480 6,582
----------------------------- -----------------------------
Total 41,024 (14,316) 130,258 (33,670)
----------------------------- -----------------------------
Net loss $ (614,782) $ (399,604) $(1,550,617) $ (531,815)
============================= =============================
Earnings (loss) per share: --
Basic and diluted $ (0.04) $ (0.04) $ (0.12) $ (0.06)
============================= =============================
----------------------------- -----------------------------
Weighted average common shares outstanding 13,882,911 9,459,089 12,726,968 9,081,544
============================= =============================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE> 5
Integrated Business Systems and Services, Inc.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months
ended June 30,
-----------------------------
2000 1999
-----------------------------
<S> <C> <C>
Operating activities
Net loss $(1,550,617) $ (531,815)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation/amortization 39,789 28,844
Amortization of software costs 84,136 53,003
Write-off of accounts payable (90,285) 0
Changes in assets and liabilities
Investments (50,000) 0
Accounts receivable (512,018) (40,191)
Interest receivable (21,110) 0
Unbilled revenue 0 (1,468)
Prepaid commissions (60,740) (25,000)
Prepaid expenses and other assets (34,594) 8,346
Refundable deposits 1,164 100
Accounts payable (15,828) (21,500)
Accrued expenses (329,990) (567,618)
Deferred revenue (47,620) (36,814)
-----------------------------
Cash used in operating activities (2,587,713) (1,134,113)
-----------------------------
Investing activities
Purchases of property and equipment, net (215,931) (11,831)
Capitalized internal software development costs 0 (52,144)
Related party note receivable 183,680 0
Related party receivable (2,459) 0
-----------------------------
Cash used in investing activities (34,710) (63,975)
-----------------------------
Financing activities
Payments on notes payable, net (28,976) 67,148
Payments on long-term debt 0 (18,000)
Sale of common shares 4,872,066 1,143,671
Proceeds from exercise of common stock options
and warrants 806,923 12,958
Payable to a related party, net 0 (15,300)
-----------------------------
Cash provided by financing activities 5,650,013 1,190,477
-----------------------------
Net increase in cash 3,027,590 (7,611)
Cash and cash equivalents at beginning of period 82,996 16,593
-----------------------------
Cash and cash equivalents at end of period $ 3,110,586 $ 8,982
=============================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION:
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310 of Regulation S-B
promulgated by the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete Financial Statements. In the opinion of
management, all adjustments (consisting only of those of a normal recurring
nature) considered necessary for a fair presentation have been included.
Operating results for the six month period ended June 30, 2000, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2000. For further information, refer to the audited
financial statements and footnotes thereto included in the Company's Form 10-KSB
for year ended December 31, 1999.
EARNINGS PER SHARE:
The computation of basic earnings (loss) per share and diluted earnings (loss)
per share is in conformity with the provisions of Statement of Financial
Accounting Standards No. 128.
Page 6
<PAGE> 7
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which the Company
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition. This discussion should be read in
conjunction with the financial statements and notes thereto.
Results of Operations
For the three months ended June 30, 2000, as compared to the three months ended
June 30, 1999
Revenues. Total revenues increased $441,172 to $656,350 in the three months
ended June 30, 2000, from $215,178 in the three months ended June 30,1999. This
increase was primarily attributable to an increase in License revenue due to an
increase in the Synapse based product sales which was partially offset by a
continued decrease in the sales of services, data collection equipment and
maintenance due to the increased emphasis on the completion and sales of the
Company's new core products, Synapse Manufacturing, Synapse EAI+, and Synapse
B2B. The Company's strategy during 1998 and 1999 was to focus substantially all
of the Company's efforts on completing and marketing it's core Synapse based
products while recognizing that the strategy would result in a substantial
reduction in the Company's service revenue during those periods. In addition to
the reduction of service based business, as the first install of Synapse
Manufacturing to a manufacturer of women's knitted hosiery neared completion,
revenue from this customer substantially decreased.
Cost of Revenues. Total cost of revenues decreased $2,874 to $154,492 in the
three months ended June 30, 2000, from $157,366 in the three months ended June
30, 1999. This decrease was attributable to decreases in direct travel costs
associated with the service based business, network and communications costs and
software amortization costs partially offset by increases in direct labor costs.
The cost of revenues as a percentage of total revenues was 24% and 73% in the
three months ended June 30, 2000, and 1999, respectively. Accordingly, the gross
margin was 76% and 27% in the three months ended June 30, 2000, and 1999,
respectively.
Research and Development. Research and development costs increased $23,328 to
$84,451 in the three months ended June 30, 2000, from $61,123 in the three
months ended June 30, 1999. The Company released Version 2.0 of the Synapse
Manufacturing System for general product availability at the end of the first
quarter of 1999; therefore, additional development costs were expensed rather
than capitalized. Research and development costs represented approximately 13%
and 28% of total revenues for the three months ended June 30, 2000, and 1999,
respectively.
General and Administrative. General and administrative expenses, including
interest expense, increased $431,130 to $758,700 in the three months ended June
30, 2000, from $327,570 in the three months ended June 30, 1999. General and
administrative expenses increased due to the addition of a Vice President of
Sales and three clerical employees, general salary increases, related benefit
costs, legal and accounting fees, consultant fees, and an increase in rent
expense due to the increased office space leased in Columbia and for the lease
of office space in Detroit, Michigan. General and administrative expenses,
including interest expense, represented approximately 116% and 152% of total
revenue in the three months ended June 30, 2000, and 1999, respectively.
Sales and Marketing. Sales and marketing expenses increased $260,351 to $336,973
in the three months ended June 30, 2000, from $76,622 in the three months ended
June 30, 1999. This increase was attributable to increases in marketing salaries
due to the addition of three sales representatives, depreciation expense for
marketing equipment purchased, public relations and investor public relations
awareness expenses, marketing travel and entertainment expenses as well as sales
commissions earned. Sales and marketing expenses represented approximately 51%
and 36% of total revenues in the three months ended June 30, 2000, and 1999,
respectively.
Corporate and Other Related Non-Operating Items.
Interest income increased $61,951 in the quarter ended June 30, 2000, as a
result of cash management on cash balances of the Company. The average interest
rate earned by the Company was approximately 5.85%.
Page 7
<PAGE> 8
For the six months ended June 30, 2000, as compared to the six months ended June
30, 1999
Revenues. Total revenues increased $204,249 to $710,798 in the six months ended
June 30, 2000, from $506,549 in the six months ended June 30,1999. This increase
was primarily attributable to an increase in License revenue due to an increase
in the Synapse based product sales which was partially offset by a continued
decrease in the sales of services, data collection equipment and maintenance due
to the increased emphasis on the completion and sales of the Company's new core
products, Synapse Manufacturing, Synapse EAI+, and Synapse B2B. The Company's
strategy during 1998 and 1999 was to focus substantially all of the Company's
efforts on completing and marketing it's core Synapse based products while
recognizing that the strategy would result in a substantial reduction in the
Company's service revenue during these periods. In addition to the reduction of
service based business, as the first install of Synapse Manufacturing to a
manufacturer of women's knitted hosiery neared completion, revenue from this
customer substantially decreased.
Cost of Revenues. Total cost of revenues increased $46,412 to $328,585 in the
six months ended June 30, 2000, from $282,173 in the six months ended June 30,
1999. This increase was attributable to an increase in labor costs as well as an
increase in the amortization of software costs due to the completion of Synapse
Manufacturing 2.0 at the end of the first quarter of 1999.
The cost of revenues as a percentage of total revenues was 46% and 56% in the
six months ended June 30, 2000, and 1999, respectively. Accordingly, the gross
margin was 54% and 44% in the six months ended June 30, 2000, and 1999,
respectively.
Research and Development. Research and development costs increased $60,595 to
$126,730 in the six months ended June 30, 2000, from $66,135 in the six months
ended June 30, 1999. The Company released Version 2.0 of the Synapse
Manufacturing System for general product availability at the end of the first
quarter of 1999; therefore, additional development costs were expensed rather
than capitalized. Research and development costs represented approximately 18%
and 13% of total revenues for the six months ended June 30, 2000, and 1999,
respectively.
General and Administrative. General and administrative expenses, including
interest expense, increased $850,441 to $1,439,132 in the six months ended June
30, 2000, from $588,691 in the six months ended June 30, 1999. General and
administrative expenses increased due to the addition of a Vice President of
Sales and three clerical employees, general salary increases, related benefit
costs, legal and accounting fees, consultant fees, NASDAQ application fee and an
increase in rent expense due to the increased office space leased in Columbia
and for the lease of office space in Detroit, Michigan. General and
administrative expenses, including interest expense, represented approximately
202% and 116% of total revenues in the six months ended June 30, 2000, and
1999, respectively.
Sales and Marketing. Sales and marketing expenses increased $437,026 to $546,291
in the six months ended June 30, 2000, from $109,265 in the six months ended
June 30, 1999. This increase was attributable to increases in marketing salaries
due to the addition of three sales representatives, depreciation expense for
marketing equipment purchased, public relations and investor public relations
awareness expenses , marketing travel and entertainment expenses as well as
sales commissions earned. Sales and marketing expenses represented approximately
77% and 22% of total revenues in the six months ended June 30, 2000, and 1999,
respectively.
Corporate and Other Related Non-Operating Items. Interest expense, increased
$7,495 to $49,065 in the six months ended June 30, 2000, from $41,570 in the six
months ended June 30, 1999. This increase was due to the net effect of the
$1,250,000 convertible debenture in the third quarter of 1999, and the
repayments of various other notes in 1999. Interest income increased $87,525 in
the six months ended June 30, 2000, as a result of cash management on cash
balances of the Company. The average interest rate earned by the Company was
approximately 5.75%. Other income of $90,265 in the six months ended June 30,
2000, was the result of a gain related to the write-off of payable balances to
vendors included in accounts payable. Management determined that accounts
payable balances totaling $90,265 were no longer valid claims against the
Company, and accordingly, reduced the payables balance.
Page 8
<PAGE> 9
Financial Condition at June 30, 2000
Cash and cash equivalents increased by $3,027,590 during the six months ended
June 30, 2000.
Accounts receivable increased by $516,935 during the six months ended June 30,
2000, primarily reflecting an increase in Synapse based product license sales.
The $512,699 decrease in current liabilities during the six months ended June
30, 2000, is due to the partial use of funds from private placements on February
15, 2000, and March 8, 2000 and is due to the write off of certain accounts
payables.
The Company's current assets exceeded its current liabilities at June 30, 2000,
by $3,754,269.
Liquidity and Capital Resources
Prior to 1997, the Company primarily financed its operations through revenues
from operations, including funded research and development revenues, and
occasional short term loans from the Company's principals or their
acquaintances. Since the middle of 1997, the Company has financed its operations
primarily through private and public offerings of Common Stock and convertible
debt, and to a lesser extent through borrowings from third-party lenders and
from revenues from operations.
In December, 1995, the Company entered into a factoring arrangement that was
being administered as a short term borrowing arrangement collateralized by
accounts receivable, which generally permitted borrowing of up to 75% of
accounts receivable. This arrangement was terminated by the Company in March,
1999. In February, 1996, the Company entered into a loan for $180,000
collateralized by substantially all of the assets of the Company. This loan was
retired in July of 1999.
During 1997, the Company received approximately $1,540,000 in net proceeds
(after deduction of commissions and offering costs) from the sale of 3,800,000
shares of its Common Stock, of which approximately $1,220,000 was received
through the Company's initial public offering in November, 1997, and
approximately $320,000 was received from a private offering in June of 1997. The
Company used a portion of these proceeds to repay debt of approximately
$320,000. In addition, in November, 1997, convertible debt issued by the Company
in March, 1997, in the principal amount of $116,700 was converted into shares of
Common Stock.
During 1998, the Company received approximately $288,400 in gross proceeds from
the exercise by Wolverton Securities, Ltd of warrants for the purchase of
430,000 shares of the Company's Common Stock. During 1999, the Company received
approximately $43,500 in gross proceeds from the exercise by Wolverton
Securities, Ltd, of warrants for the purchase of 56,000 shares of the Company's
Common Stock.
In June 1998, the Company completed a private placement of five-year convertible
notes in the amount of $500,000 and non-transferable share purchase warrants
entitling the holders to purchase an aggregate of 541,000 common shares of the
Company. The notes, which bear interest at 12% per year, may be converted into
common shares of the Company at a conversion price of $0.923 per share during
the first year and during each of the remaining four years of the term of the
notes; a conversion price that is higher than the conversion price in the
previous year by $0.175 per share. In June, 1999, $320,000 of the $500,000
convertible note was converted into 346,692 common shares at a conversion price
of $0.923 per share. In November and December 1999, 259,680 shares were issued
due to the exercise of non-transferable share purchase warrants at $1.061 per
share. Additional non-transferable warrants were issued entitling the holders to
purchase an aggregate of 259,680 common shares of the Company at $1.07 per share
during the first year. In February, 2000, the balance of the $500,000
convertible note, $180,000, was converted into common shares at a conversion
price of $1.098 per share. Also in February, 2000, 259,680 shares were issued
due to the exercise of non-transferable share purchase warrants at $1.07 per
share. Additional non-transferable warrants were issued entitling the holders to
purchase an aggregate of 259,680 shares of the Company at $5.94 per share during
the first year, $6.83 per share during the second year, $7.85 per share during
the third year, $9.03 per share during the fourth year and $10.38 per share
during the fifth year. In May and June, 2000, 281,320 shares were issued due to
the exercise of non-transferable share purchase warrants at $1.061 per share.
Page 9
<PAGE> 10
In the first quarter of 1999, the Company completed a private placement of
800,000 shares of Common Stock and two-year warrants for the purchase of 80,000
shares of Common Stock, pursuant to which the Company received gross proceeds of
$800,000. The warrants are exercisable at $1.00 per share during the first year
following their issuance and at $1.25 per share during the second year following
their issuance. In February, 2000, the Company received gross proceeds of
$80,000 for 80,000 warrants exercised at $1.00 per share.
In the first quarter of 1999, the Company completed a private placement of
60,000 shares of Common Stock and two-year warrants for the purchase of 6,000
shares of Common Stock, pursuant to which the Company received gross proceeds of
$60,000. Under the terms of this private placement, the Company also issued
1,800 shares of Common Stock as finder's fees. The warrants are exercisable at
$1.00 per share during the first year following their issuance and at $1.25 per
share during the second year following their issuance.
In the second quarter of 1999, the Company issued Common Stock Purchase Warrants
with accredited investors for the purchase of 1,000,000 shares of Common Stock,
pursuant to which the Company received gross proceeds of $200,000.00. The
warrants are exercisable at $1.00 per share during the term of this Agreement.
In the fourth quarter of 1999, the Company received $200,000 in gross proceeds
from the exercise of 200,000 of these warrants. A new Common Stock Warrant
Agreement was issued for the purchase of the balance of 800,000 shares of Common
Stock at $1.00 per share during the term of this Agreement or $0.75 per share if
exercised prior to November 1, 2000. In the first quarter of 2000, the Company
received a secured promissory note in the principal amount of $600,000 for the
exercise of warrants for the purchase of 800,000 shares of the Company's Common
Stock at $0.75 per share. The note matures March 2, 2002, and has an interest
rate of 5% per annum.
In the third quarter of 1999, the Company completed a Private Placement Offering
for an aggregate principal amount of $1,250,000 through a Convertible Debenture
with an interest rate of 7% through July 1, 2000; 10% thereafter with a maturity
date of January 1, 2002. In conjunction with the Convertible Debenture, the
Company also entered into a Common Stock Purchase Warrant Agreement for the
purchase of 1,850,000 shares of Common Stock. In the first quarter of 2000, the
Company received a secured promissory note in the principal amount of $154,000
for the exercise of warrants for the purchase of 110,000 shares of the Company's
Common Stock at $1.40 per share. The note matures March 2, 2002, and has an
interest rate of 5% per annum.
In the first quarter of 2000, the Company completed a private placement to two
private investors of an aggregate of 125,000 units each for $8.00 per unit for
aggregate proceeds of $2,000,000. Each unit consisted of two shares of Common
Stock and a detachable three-year warrant for the purchase of one share of
Common Stock. The warrants are exercisable at $5.00 per share during the first
year following their issuance, $6.00 per share during the second year following
their issuance, and at $6.50 per share during the third year following their
issuance
In the first quarter of 2000, the Company completed a private placement to eight
private investors of an aggregate of 300,000 units for $10.00 per unit for
aggregate proceeds of $3,000,000. Each unit consisted of four shares of Common
Stock, and a detachable Class A five-year warrant for the purchase of one share
of Common Stock and a detachable Class B five-year warrant for the purchase of
one share of Common Stock. The Class A and Class B warrants are exercisable at
$2.50 and $3.50 per share, respectively.
The Company expects that the proceeds from its capital raising activities along
with revenues generated from operations along with its current cash equivalents
will be adequate to meet the Company's projected working capital and other cash
requirements for at least the next twelve months.
The Company leased its principal facilities under a noncancellable operating
lease through October 31, 1999, which had a five-year renewable term at market
rates. The lease was subject to annual adjustments for facility operating costs
in excess of an established base year. On December 31, 1998, the Company reduced
the size of the facilities by approximately 38%. The minimum annual commitment
for rent under this lease was approximately $82,700. The rent expense under this
lease in 1999 and 1998 was approximately $82,700 and $133,200, respectively.
Page 10
<PAGE> 11
The Company entered into a lease agreement dated October 1,1999, with the Atrium
Northeast Limited Partnership effective November 1, 1999, for a 5 year period
with an option to renew for one 5-year period at market rates. The lease is for
18,124 square feet of office space at a base rent of $276,391 for the first
year. The second year base rent increases to $280,922. The third through fifth
year base rent increases to $285,453. The Company entered into a lease addendum
dated March 1, 2000, with the Atrium Northeast Limited Partnership effective
March 1, 2000, and continuing in effect through the existing Lease term of
October 31, 2004. This addendum is for 1,350 square feet of office space making
the office space 19,474 square feet at a base rate of $296,978 for the first
year. The second year base increases to $301,847. The third through fifth year
base rent increases to $306,716.
Net cash used in operating activities was approximately $2,587,700 during the
six months ended June 30, 2000, as compared to approximately $1,134,100 during
the six months ended June 30, 1999. The increase in cash used in operating
activities was mainly due to an increase in the net loss, an increase in
customer accounts receivable, an increase in prepaid expenses and a decrease in
current liabilities
Net cash used by investing activities was approximately $34,700 during the six
months ended June 30, 2000, as compared to net cash used of approximately
$64,000 during the six months ended June 30, 1999. The net cash used was due to
the purchase of equipment and software offset by the payoff of a related party
note receivable.
Net cash provided by financing activities was approximately $5,650,000 during
the six months ended June 30, 2000, as compared to approximately $1,190,500
during the six months ended June 30, 1999. The net cash provided by financing
activities resulted primarily from the completion of private placements of
approximately $4,872,000, the receipt of approximately $806,900 from the
exercise of Common Stock options and warrants offset by payments on the
Company's short-term debt.
The Year 2000
The Company did not experience any significant malfunctions or errors in its
operations or business systems as a result of the Year 2000. Based on operations
since January 1, 2000, the Company does not expect any significant impact to its
ongoing business as a result of the year 2000. It is possible the full impact of
the date change has not been fully recognized. However, the Company believes any
such problems are likely to be minor and correctable. In addition, the Company
could still be negatively affected if its customers or suppliers are adversely
affected by the Year 2000 or similar issues. The Company currently is not aware
of any significant year 2000 or similar problems that have arisen for its
customers and suppliers.
As of June 30, 2000, the Company has not, nor does it expect to, incur any
material costs associated with the year 2000.
Page 11
<PAGE> 12
Advisory Note Requiring Forward-looking Statements
This form 10-QSB contains forward-looking statements subject to the safe harbor
created by the Private Securities Litigation Reform Act of 1995. The Company
cautions readers of this Form 10-QSB that such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company to be materially
different from those expressed or implied by such forward-looking statements.
Although the Company's management believes that their expectations of future
performance are based on reasonable assumptions within the bounds of their
knowledge of their business and operations, there can be no assurance that
actual results will not differ materially from their expectations. Factors which
could cause actual results to differ from expectations included, among other
things, the risk associated with start-up companies, including start-up losses,
liquidity problems, uncertainty of revenues, markets, profitability and the need
for additional funding; the risks that the Company may be unable to raise
additional capital through private financings, debt or equity offerings or
collaborative arrangements with others on acceptable terms; intense competition
from a variety of competitors with greater resources and market acceptance; the
Company's limited experience in assembling a sales and marketing team and
strategy; the potential need to make continuing significant investments in
software development in response to rapidly evolving technologies and
technological shifts; the risks associated with the potential loss of one or
more key customers of the Company; the Company's dependence upon key personnel;
the challenges and uncertainties in the implementation of the Company's
expansion and development strategies; and other factors described in other
reports filed by the Company with the Securities and Exchange Commission.
Page 12
<PAGE> 13
PART II
OTHER INFORMATION
Item 1 Legal Proceedings
The Company is not party to any pending litigation.
Item 2 Changes in Securities
During the three months ended June 30, 2000, the securities identified below
were issued by the Company without registration under the Securities Act of
1933, as amended (the "1933 Act"). In each case, all of the securities were
issued pursuant to the exemption from registration contained in Section 4(2) and
Rule 506 of Regulation D of the 1933 Act as a transaction, not involving a
general solicitation, in which the purchaser was purchasing for investment. The
Company believes that each purchaser was given or had access to detailed
financial and other information with respect to the Company and possessed
requisite financial sophistication.
In the second quarter of 2000, the Company received $298,480 in gross proceeds
from two private investors from the exercise of warrants for the purchase of
281,320 shares of the Company's Common Stock at $1.061 per share.
Item 3 Defaults Upon Senior Securities
This item is not applicable.
Item 4 Submission of Matters to Vote of Security Holders
(a) The Company's annual meeting of the shareholders was held on April
28, 2000.
(b) Matters approved at the meeting:
(i) Election of Directors:
Number of Shares
----------------
Nominees For Abstain Against
--- ------- -------
Stuart E. Massey 8,121,594 1,725 0
Russell C. King, Jr. 8,121,594 1,725 0
R. Michael Campbell 8,118,594 4,725 0
(ii) Proposal to ratify amendment to the Company's stock option plan:
For Abstain Against
--- ------- -------
8,106,494 0 16,825
(iii) Proposal to ratify the appointment of Scott McElveen, LLP, as
the Company's independent auditors for the fiscal year ending
December 31, 2000.
For Abstain Against
--- ------- -------
8,113,694 9,625 0
Item 5 Other Information
This item is not applicable.
Item 6 Exhibits and Reports on Form 8-K
There were no Form 8-K filings during the period.
The Financial Data Schedule is included herein as Exhibit 27.
Page 13
<PAGE> 14
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto, duly authorized.
Integrated Business Systems and Services, Inc.
(Registrant)
/s/Harry P. Langley
-------------------------------------
Harry P. Langley
President, Treasurer, Chief Executive
Officer, Chief Financial Officer and
Chairman of the Board
Date: July 25, 2000
Page 14
