U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[ x ] Annual report under section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the fiscal year ended June 30, 1995.
or
[ ] Transition report under section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from
to
Commission file number
33-16531-D
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(Name of small business issuer in its charter)
Utah 87-0447580
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
512 South 860 East, American Fork, Utah 84003
(Address of principal executive offices)
Registrant's telephone number, including area code: (801) 763-9965
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, No Par Value N/A
Per Share
Securities to be registered under section 12(g) of the Act: Common Stock
$.001 par value
Check whether the registrant (1) 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 report(s)), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
Check if disclosure of delinquent filers in response to Item 405 of
Regulations S-B is not contained in this form, and no disclosure will be
contained, to the best of 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 ]
State the registrant's net revenue (loss) for its most recent fiscal
year: $(201,222)
The aggregate market value of voting stock held by non-affiliates of the
registrant on June 30, 1995, was approximately $4,125,000.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: as of June 30,
1995,9,006,600 shares of registrant's Common stock, no par value per
share, were outstanding. As of June 6, 1996, there were outstanding
9,186,100 shares of Registrant's common stock, no par value per share.
Documents incorporated by reference: Exhibits, Item 13.
Part I.
Item 1. Business
THE COMPANY
Exact corporate name: International Automated Systems, Inc.
State and date of incorporation: Utah- September 26, 1986
Street address of principal office: 512 South 860 East
American Fork, Utah 84003
Company telephone number: (801) 763-9965
Fiscal year: June 30
BUSINESS AND PROPERTIES
Overview.
International Automated Systems, Inc., a Utah corporation
(hereinafter "Registrant" or "Company") based in American Fork, Utah,
designs, produces and markets products based on technology. It has an
automated self-service checkout system. This allows customers in
different business establishments to check out the purchases themselves.
In addition, theCompany has an Automated Fingerprint Identification
Machine ("AFIM") which has the capability of verifying the identity of
individuals. AFIM applications may include time-keeping, security, and
access control. Registrant believes that its identity verification
system has a variety of uses and applications for both commercial and
governmental users.
Recent Developments.
Registrant intends to acquire technology from its president relating
to a different and more efficient method of transmitting information and
data using transmission waves, technology based on data compression on
compact disks, and other technology. To acquire the technology
Registrant will issue 6,000,0000 shares of common stock, and 1,000,000
shares of preferred stock. Each share of the common stock has one vote
and, it is anticipated, each share of the Series A preferred stock to
be issued will have ten votes per share and the preferred will vote with
the common stock on all matters. The technology is called digital wave
modulation, which if proven and implemented, would increase
significantly the amount of information which can be transmitted using
different mediums. The digital wave modulation technology is under
development and the commercial feasibility has not been demonstrated.
Registrant believes that it has many competitors in the communications,
information and data transfer industries which have greater capital
resources, more experienced personnel, and technology which is more
established and accepted in the market place.
Background.
The Company, was organized under the laws of the State of Utah on
September 26, 1986. In April 1988 the Company filed an offering under
the 1933 Act to sell a maximum of 1,074,000 units at a price of $.50 per
unit, each unit comprised of one share of common stock and one common
stock purchase warrant. The Company sold approximately 200,000 units at
the offering price of $.50 per unit realizing total proceeds of
approximately $100,000. All warrants expired without exercise.
The Company acquired the technology from its president, Neldon
Johnson, for the automated self-service check out system.
Automated Self-Service Check Out System.
Operation of the Self-Check System proceeds as follows. A customer
places the grocery cart at the head of the system, removes the products
from the grocery basket, and scans the bar codes on the products across
the bar code reader which reads price, code number and weight of the
product. This information is then relayed on an item-by-item basis to
the main computer which transmits the data in its memory to the checkout
terminal. The product information is displayed on the screen which
includes description, price, and weight. A running subtotal is also
shown. Once scanned, products are placed into the receiving basket.
This basket is on a sensitive scale and the precise weight of each
purchase is measured. The computer verifies the weight of the products
purchased with the weight coded in its memory based on the item scanned.
If the weights differ, an error code is displayed and an attendant is
summoned to assist the customer or to override the system. After all
the items are scanned, a final tally is made. Payment is then made to
the attendant who is supervising up to four checkout terminals. The
scale is accurate within .2 pounds.
The Self-Check System is interfaced with a computer "bus", a
connection which allows data transfer from the check out terminal to the
main computer. The bus is capable of interfacing with various scanners
and scales so the Self-Check System may be adaptable to equipment
already in use. One attendant handles three or four check out
stations.
In the summer or fall of 1996 the Company may resume operation of the
Self-Check System. Previously the System operated for approximately
seven years.
Management believes that the Self-Check System has several advantages
over conventional retail checkout systems. These advantages are: saving
of labor cost, more accurate inventory for each product, theft
reduction, faster service, and increased customer convenience and
privacy.
Management believes that the market for the Self-Check System includes
all varieties of retail establishments including establishments such as
grocery stores, drug stores, discount stores, and fast food restaurants.
Front-end labor costs may be reduced significantly. The Self-Check
System lessens the need of having too many checkers available. Because
customer traffic is difficult to predict retailers wanting to appease
the customer by having sufficient clerks available. The Self-Check
System improves a store's capability of handling the customer traffic
during peak hours. During peak times, it is anticipated, customers will
have to wait less time to check out and pay for their purchases. The
system verifies each bar code scanned with the data in the main computer
thereby reducing the likelihood of incorrect prices.
The Self-Check System uses proprietary software developed by the
Company. Price verification can be done by a hand-held unit connected
to the main computer. This hand-held unit also is used to take physical
counts or inventory. The software allows for the inventory on the shelf
to be added to the items of the product in storage. The system has a
check-in station at the loading docks. Items delivered are checked and
the prices verified against purchase orders. This reduces potential
fraud or theft when items are received at the loading dock.
Price verification can be done using the hand held unit while the
products are on the shelf. Under conventional systems. the product
must be taken to a checkout terminal to verify the price. This is time
consuming and labor intensive. Price changes can be made in the main
computer.
Management believes that customers will be satisfied with the
Self-Check system because more check out lanes will be open during
operating hours. Lines will be shorter and waiting reduced. More
customers can be checked out through the point of sale terminals using
the Self-Check System than through point of sale terminals using
conventional technology and labor.
For the system to operate efficiently at least 95% of the items must
be bar coded. In the past few years virtually all packaged goods have
bar codes. Other items purchased across the counter, such as bakery,
meat and deli products usually have bar codes. Supermarkets using this
System may have to install weight scales and labelers to place bar codes
on produce or other items purchased.
The Self-Check System may reduce theft. Because of the weight and
price verification one clerk cannot check out another clerk's or
friend's purchases at wrong prices. This is called "sweet hearting".
The System centralizes cashiers and reduces their number. Items are
tracked through the System from the loading docks to the point of sale
terminals.
If the weight of the item scanned does not match the weight of the
item placed in the receiving basket, the System signals an error code.
The attendant then corrects the error or helps the customer properly
scan the item being purchased.
to and operates with a pentium based personal computer. AFIM has unique
software, lens, and lighting. Management believes that the AFIM is
unique
and is superior to other fingerprint based identification systems.
To use the AFIM the person whose identity will be later verified first
has the fingerprint read by the AFIM by placing the finger on the lens.
AFIM digitizes the fingerprint and stores it on the magnetic strip.
Later when the person's identity is verified the persons has his actual
fingerprint read by the AFIM, then the magnetic strip where the
fingerprint is stored is swiped. The AFIM then compares the actual
fingerprint which the fingerprint on the magnetic strip. A match
verifies the person's identity.
Different commercial applications of the AFIM are under development.
One application is a time clock. The digitized fingerprint stored on
the magnetic strip of a credit card must match the the person's
fingerprint logging on or off. Because the AFIM system validates the
identity of the person using the time clock, fellow workers can not make
entries for co-worker on the time clock by punching other employees in
or out. AFIM with
As another application the Company intends to develop a door security
system. To gain entry a person would place his finger on a reader and
then have the machine read his card where his fingerprint is encoded.
The person's fingerprint would have to match with the fingerprint
digitized and encoded on the card.
Competition.
The Company's identity verification machine competes with a broad
spectrum of products offered to verify identity. Some competitors have
fingerprint based systems. Other competitors use voice prints where the
speech pattern of a person is recorded and put into a data base which is
then used to verify the identity. Facial photographs, iris readings,
hand prints, and voice prints are used to verify identity. Any or all
of these competitors may significantly affect the Company's attempt to
commercialize AFIM.
The Company believes that the AFIM is quicker, reliable, and more
cost-effective than other identification systems. There is minimal cost
to operate the AFIM after the initial purchase of the machine. AFIM can
be used with a pentium PC already available. A customer may have to
purchase a pentium personal computer to operate the AFIM. Depending on
the application each verification point or station will need an AFIM.
Digital Wave Technology
In addition, the Company intends to acquire the technology referred to
as digital wave modulation ("DWM") from its President. In 1994 the
directors of the Company approved a resolution providing for the
acquisition of the digital wave technology for 12,000,000 shares of the
common stock. Mr. Johnson has informally agreed to accept 6,000,000
shares of common stock and 1,000,000 shares of preferred stock with
voting rights of ten votes per share for the transfer of the DWM
technology and other technology.
DWM represents a new way of transmitting data. Basically different
wave patterns are generated on the magnetic spectrum which increase
flows of transmission of information and data. In theory more data will
be able to be transmitted in a shorter time period. DWM is under
development and various applications are only theoretical.
The first application of the DWM technology is a high speed modem. A
modem allows for the transmission of electronic data from one computer
to another using telephone lines or other means of transmission. The
Company hopes to achieve 300,000 to 600,000 baud through POTS (Plain Old
Telephone System) and with the same type of receiving modem. Presently
existing modems transmit at the fastest rate of approximately 28,000 to
33,000 baud. The actual speed may vary depending on the equipment being
used. Management believes that over coaxial cable its modem can
transmit data at the rate of 6,000,000 baud. This level of transmission
is only theoretical and has not been proven and tested. Problems may
be encountered which may not be solved.
If the research and development of the modem proves to be successful,
the Company will consider various alternatives. It may seek a joint
venture partner or it may license the modem technology to another
company and
receive royalty payments. No plan has been developed regarding the
manufacturing, marketing, or distributing of the modem, when and if
completed. Because of the high tech nature of the product no assurance
can be given that the development of the modem will be successful or
that the Company will be able to effectively penetrate and capture a
share of the modem market.
The Company's business if its technological development is successful
will require the Company to enter new fields of endeavor and even new
industries. If the products are successfully developed so that
commercialization is achieved the Company will enter new industries and
new geographic markets. The Company has not adopted a definitive plan
establishing the order of product development or the priority it will
follow in attempting to enter additional geographic locations. Entry
into new markets will have risks and require significant capital
resources which, if available, may not be available to the Company on
acceptable terms. Success will be dependent on the judgment and skill of
management and the success of the development of any new products.
The Company's success depends, and is expected to continue to depend,
to a large extent, upon the efforts and abilities of managerial
employees, particularly Neldon Johnson, President of the Company. The
loss of Mr. Johnson would have a material adverse effect on the Company.
Presently the Company has no employment contract with Mr. Johnson.
The Company's products have inherent risks. The Company has no
insurance to cover these risks. In particular the Company has no
current plans to purchase product liability insurance. Thus, for these
risks the Company alone must bear risks. It is anticipated that the
Company will not be insured against all risks or potential losses which
may arise from the Company's activities because insurance for such risk
is unavailable or because insurance premiums, in the judgment of
management, would be too high in relation to the risk. If the Company
experiences an uninsured loss or suffers liabilities, the Company's
operating funds would be reduced and may even be depleted causing
financial difficulties for the Company.
Patents and Technology
The Company has one patent and in the transaction with its President
will acquire rights to one additional patent as well as the acquisition
of other technological rights. One patent granted in November 1988
deals with the self-service check out system. The patent pertains to an
apparatus attached to a computer which has in its data base the weights
and prices of all items sold. As the items are scanned checked the
computer keeps a tally of the total weight. This total is compared to
the weight as recorded from the scale under the receiving cart. The
total weight of items scanned and placed in the cart as determined by
the scale is compared to the computerized cumulative weight of the items
by the computer. An error message is signalled if there is a
discrepancy.
Mr. Johnson has in process four patents pending which he has agreed to
transfer and assign to the Company in the transaction previously
described, when and if the patents are granted. One patent pending is
for the AFIM and the others pertain to the digital wave modulation
technology. The Company has not sought or received an opinion from a
qualified patent attorney
regarding the strength of the patent or the patents pending and the
ability of the Company to withstand any challenge to the patent or any
future efforts by the Company to enforce the patent against others.
Competitors may violate the Company's patent rights. If the Company had
to defend its patent or patents, it may lack the funds to sustain and
support the patent litigation which may be costly and time consuming.
The Company believes that it has developed trade secrets and it has
made efforts to safeguard and to secure the trade secrets. But there
can be no assurance that these safeguards will enable the Company to
prevent competitors from gaining knowledge of these trade secrets and
using them to their advantage and to the detriment of the Company.
The Company relies heavily on its proprietary technology in the
development of its products. There can be no assurance that others may
not develop technology which competes with the Company's products and
technology. The Company intends to take certain steps to protect its
unpatented know-how. No assurance can be given that parties not
associated with the Company will not gain access to such information.
In addition, the Company has no trade marks for its products.
Registrant's principal executive offices are located at 512 South 860
East, American Fork, Utah 84003 and its telephone number is (801)
763-9965.
General.
The Company was founded in 1986 by Neldon Johnson to engage in the
automated self-service check out system business. Since its formation
the Company has under development other technology.
Products and Technology.
The Company is launching the marketing of the AFIM. As the marketing
commences other uses for AFIM have been discussed. The Company is
considering the development of a larger AFIM which would digitally
record all fingerprints without the need for ink and pads on stock
cards. Also, other possible use would be entry security for hotel
rooms. A smaller version of the AFIM would possibly be incorporated
into existing door security products. This system would require the
person attempting to gain access to have his fingerprint shown and this
print would be stored to provide a record for purposes of knowing who
entered the room and at what time. Generally AFIM must operate with a
pentium personal computer.
Warranty.
The Company's products will be warranted according to what is
competitive in the industry and where the products are marketed.
Typically for electronic based products warranties are limited. The
Company's warranty period will be ninety days for parts and labor.
Market.
The Company believes that its products, AFIM, the Self-Check System,
and the high speed modem, will be accepted in the market place. AFIM
provides a sophisticated system of identity verification which is not
time consuming and operates simply. Management also believes that for
the degree of security provided, AFIM's cost is reasonable and
competitive. The Self-Check
System has been marketed only a limited basis.
Because the high speed modem is still in development, the Company has
not determined the marketing approach it will use. The Company may seek
joint venture partners, may license the product to others, or may seek
to establish quality distribution channels. Management believes that
the Company's products will not be well received at first, but that with
the passage of time, the products may become more acceptable.
Competition.
Because the Company has products that are distinct, each product will
face different competitive forces. AFIM competes with all forms and
systems of identity verification. Also, the Company is aware of other
manufacturers which offer fingerprint based identification systems.
Further, other applications for fingerprint based identification
compete with other forms of identity verification. End users have
different demands which include cost, sophistication, degree of
security, operational requirements, time for individual verification and
convenience. No firm dominates the identity verification market.
In the modem market, once development is completed and the technology
transfer is completed, the Company faces competition from large well
established firms. These firms offer products with immediate name
recognition. The Company believes because of the speed at which its
modem will operate it will have a competitive advantage. Nevertheless
the Company has not done any marketing studies or market research to
determine the acceptance of the modem in the market place or the best
marketing method to follow.
No market share data is available for the Company and its competitors
other than the Company has virtually no market share at this time
because it is commencing its marketing efforts for the AFIM. No
assurances can be given that the Company's marketing efforts will be
successful or that the marketing approach is the best one under all the
circumstances. If the Company successfully markets the AFIM, other
competitors may develop similar products which would compete with the
AFIM.
In the point of sale terminal market the Company faces competition
from major companies with established systems. Further, the concept of
the customers themselves checking out and paying for their purchases is
a relatively novel concept. Overcoming the reluctance to change will be
difficult. In addition the System may not be compatible with all types
of retail establishments. The Self Check System presents a different
method of operating the front end of a retail establishment. The
Company has done only a limited amount of marketing.
Manufacturing.
For production of the initial AFIM units the Company has done the
manufacturing. As of June 1, 1996, the Company manufactured
approximately 250 AFIMs. If the demand were to increase, the Company
may be unable to meet the demand and may have to use contract
manufacturers. The AFIM uses off the shelf components with proprietary
components developed by the Company. The Company's proprietary software
controls the operation of the AFIM. The Company has no agreements with
any contract manufacturers.
Management believes that its sources for parts and supplies are
sufficient as most parts and components are readily available and can be
acquired from alternative sources. The Company has not determined the
number of units of the AFIM it will seek to maintain in inventory.
Presently the Company has limited inventory and backlog.
The Self-Check System uses products manufactured by other companies.
The Company makes the individual components compatible with one another
and then assembles them into a system. The proprietary software ties
the components together. Scanner, video display terminals, and
computers will be available from several sources. The software and
computer "bus" are proprietary components of the Company. The bus was
specifically developed to interact with the various peripherals, the
main computers and the check out terminals. The bus will be
manufactured by the Company from off the shelf components and parts
which the Company believes are readily available from a variety of
sources. Only one prototype system has been manufactured and it has been
in storage for two years.
Research and Development.
The Company operates in industries subject to rapid and significant
technological change. Future growth for the Company may be dependent on
its ability to innovate and adapt its technologies to the changing needs
of the marketplace. In the past, the Company's activities have
primarily consisted of its efforts in research and development. During
fiscal years ended June 30, 1995 and 1994, research and development
expenses were $39,429 and $2,068 respectively. Although no precise
dollar amount has been determined, the Company will continue to allocate
resources to product development. The Company expenses development
costs as they occur. The Company intends to work closely with its
customers and prospective customers to determine design enhancements and
modifications to meet demand.
The Company has one patent and will receive the rights to other
technology from Mr. Johnson. In addition, the Company believes that its
proprietary technology and know-how will provide competitive advantage.
Item 2. Description of the Property and Facilities
The Company leases offices, warehouse and manufacturing space
comprised of approximately 10,000 square feet in American Fork, Utah.
The lease is on a month-to-month basis and the monthly lease is $1,000.
Item 3. Legal Proceedings
The Company is not a party to any material litigation and is not aware
of any pending or threatened litigation that could have a material
adverse effect on it or its business.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders.
PART II.
Item 5. Market for Common Equity and Related Stockholder Matter
Presently Registrant's common stock is traded on the NASD Electronic
Bulletin Board under the symbol "IAUS". The table below sets forth the
closing high and low bid and ask prices at which the Company's shares
of common stock were quoted for the quarter identified. The prices
shown in U.S. Dollars do not reflect actual trades that may have
occurred in the quarter ended as identified.
High Low
1996
March 31 43.00 16.00
1995
December 31 20.00 4.00
September 30 5.00 2.00
June 30 5.00 1.50
March 31 2.50 .50
1994
December 31 .75 .25
The Company's shares are volatile and subject to broad movements. The
Company has no knowledge regarding the price movements. Based on the
foregoing, the Company's shares are subject to price fluctuations. On
May 1, 1996, the Company had approximately 980 shareholders of record.
As of June 1, 1996, Registrant had 9,186,100 shares of common stock
issued and outstanding. Of these shares 1,601,500 shares were free
trading shares. There were approximately 2,200,000 shares which are
held by non-affiliates and at different times will become available for
resale pursuant to the provisions of Rule 144 promulgated under the Act.
Shareholders holding 1,000 restricted shares or more number at least
285. Shareholders owing 10,000 or more restricted shares number at
least forty. Many of these shares have been held or will soon be held
for sufficient time to satisfy the required two year holding period
under Rule 144. Approximately 700,000 shares currently or on or before
September 10, 1996, will be held for sufficient time to satisfy the
three year holding period under Rule 144(k) which allows for removal of
the restricted legend and relief from other provisions of the Rule. The
Company has no knowledge regarding any sales or planned sales by any
shareholders or any shareholders acting in concert to sell their shares.
From time to time the Company receives from shareholders general
inquiries about resales under the Rule. Nevertheless, sales pursuant to
the provisions of Rule 144 could adversely affect the market price of
the shares. Auction markets typically are in part based on supply and
demand. If more shares are available for sale into the market by
holders of restricted shares who satisfy the conditions of Rule 144, the
market price of the stock will be adversely affected.
DIVIDENDS
Registrant has not declared or paid any dividends to holders of its
common stock. In the future it is unlikely that the Company will pay
any dividends.
Item 6.
Management's Discussion and and Analysis of Results of Operations and
Financial Condition.
General.
Historically, the Company's activities have been dominated by its
research and development. As a result there have not been revenues and
costs associated with operations. Recently the Company has commenced
marketing efforts for the AFIM, but these activities are not reflected
in the financial statements as of June 30, 1995. The Company has no
experience regarding profit margins or the costs associated with
operating a business. Management anticipates that the break-even point
will be approximately between forty to sixty units per month subject to
changes in working capital needs and this may vary because of other
activities the Company undertakes or pursues which will incur additional
research and development expenses. As of June 30, 1995 total assets
exceeded total liabilities.
Results of Operations.
Fiscal year ended June 30, 1995
Operations for the year ended June 30, 1995, involved primarily
research and development and other activities. Research and development
expenses were $39,429 increasing by $37,361 (or 18 times). The increase
was attributable to additional development regarding AFIM. General and
administrative expenses increased from $17,612 to $165,078 during fiscal
1995. This increase was a result of additional development:
(i) the addition of consulting agreement in the amount of $100,000, to
assist the Company in identifying opportunities and formulating plans
pertaining to manufacturing, technological support and capital
formation, and
(ii) an increase in employee costs.
For 1995 total income was $6,000, total expenses were $207,222 resulting
in a net loss of $(201,222). The loss increased from $15,528 to
$201,222 because of the increased research and development expense and
general and administrative expenses.
Fiscal year ended June 30, 1994
Operations for the year ended June 30, 1994, were minimal. The
Company had total income of $6,000 and total expenses of $21,528
resulting in a loss of $(15,528). Most of the loss was caused by
general and administrative expenses in the amount of $17,612. In 1993
the Company had total expenses of $11,733 and a loss of $(11,733).
Liquidity and Capital Resources
The Company's working capital is provided from loans from its
president and equity placements. In January 1996 the Company completed
a private
placement of its securities involving the sales of 176,500 shares of
common stock at a purchase price of $4.00 per share. The Company
realized gross proceeds of approximately $706,000 and net proceeds of
approximately $670,000. In addition, the Company's president
historically has loaned money to the Company to fund its operations. As
of June 30, 1995, the Company owed Mr. Johnson approximately $ 134,029.
Mr. Johnson has not required the Company to execute any promissory notes
or other loan documents and the loan is carried on the financial records
of the Company. The loans do not bear interest. Mr. Johnson and the
Company have no formal agreement as to future loans. The Company has
not established a line or credit with any financial institution. The
Company believes that until it has operations and revenues consistently,
it will be unable to establish a conventional line of credit.
The liquidity provided by these sources has been adequate to support
the Company's activities. More liquidity may be required to support
ongoing product development, finance marketing programs, and establish
distribution networks.
The Company believes that governmental entities at all levels will
have a need for identity verification. Law enforcement agencies are
potential users of the fingerprint system. Agencies providing benefits
have a need to verify the identity of persons receiving benefits. Other
agencies have access needs and security protocols. The Company believes
that its products will have application in the private sector as well.
There is only a limited amount of experience on which the Company can
base any future projections.
Item 7. Financial Statements
The financial statements are filed as part of this Annual Report on
Form
10-KSB.
<PAGE>
Item 8. Changes and Disagreements with Accountants.
None. The Company has not had any disagreements regarding the
presentation of its financial statements or the application of any
Generally Accepted Accounting Principles. Hansen Barnett was engaged to
perform an examination of the financial statements.
PART III.
Item 9. Directors and Officers
The executive officers and directors of the Company are as follows:
Name Age Position with the Company
Neldon Johnson 50 Chairman of the Board of Directors
and President
Ina Johnson 48 Treasurer and Director
Donnel Johnson 31 Director and Vice-President
Christopher Taylor 27 Director
Stacy Curtis Snow 30 Director
Douglas H. Lloyd 45 Vice-President
Randale Johnson 27 Vice-President
All Directors hold office until the next annual meeting of
shareholders
of the Company or until their successors have been elected. All
officers
are appointed annually by the Board of Directors and serve at the
discretion of the Board.
Directors will be reimbursed by the Company for any expenses incurred
in
attending Directors' meetings. The Company also intends to obtain
Officers
and Directors liability insurance, although no assurance can be given
that
it will be able to do so.
Background of Executive Officers and Directors
Neldon Johnson is the co-founder of the Company and the primary
inventor of the Self-Check system, AFIM, and the digital wave
technology. Mr. Johnson directs the Company's research and development
program. Mr. Johnson studied physics and mathematics at Brigham Young
University in Provo, Utah, and graduated from Utah Technical College's
Electronics Technology Program in 1964. He has taken training course
and has taught courses in electronics programming, microwave and wave
switch programs. From 1965 to
1968 he worked for American Telephone and Telegraph, Inc., as an
engineer.
From 1983 to the present, Mr. Johnson has been developing the
Self-Check System. Also, from 1975 to 1990 he worked at a Ream's
grocery store and had management responsibilities for operations.
Ina Johnson is the wife of Neldon Johnson. She has been a bookkeeper
for the past 25 years. She has been the secretary and treasurer of the
Company since 1988. Recently she resigned as secretary of the Company,
but remains the treasurer.
Donnel Johnson is the son of Neldon Johnson and Ina Johnson. He has
been a director of the Company since May 1996. He received a Bachelor's
Degree in Electrical Engineering from Brigham Young University in 1992.
Christopher Taylor received an Associates of Science Degree from Utah
Valley State College in 1992. From 1986 to 1988 he was in in the U. S.
Army and reached the rank of sergeant. Since 1992 Mr. Taylor has worked
on projects relating to Registrant's products and technology. Presently
Mr. Taylor supervises production and product inventory control and
debugs software.
Stacy Curtis Snow graduated from Brigham Young University in 1991
receiving a Bachelor's Degree in design engineering. Since 1991 Mr.
Snow has worked on several projects relating to the Self-Check System
and AFIM.
Douglas H. Lloyd became a Vice-President of the Company in June 1996.
Prior to his joining the Company he was a consultant to Pinnacle. During
1995 he was president of Fonix and from 1993 to 1995 he was president of
Sensar. From 1983 to 1993 he executive director of WorkPerfect
Corporation.
Randale P. Johnson, age 27, is the son of Neldon Johnson and Ina
Johnson. He has been an officer since June 1996. His responsibilities
include marketing. Mr. Johnson who will hold an associate degree in
Computer Science and has four years of experience in the computer
industry. He joined the Company in 1996.
None of the officers or directors of the Company has, during the past
five years, been involved in any events such as petitions in bankruptcy,
receivership or insolvency, criminal proceedings or proceedings relating
to securities violations.
Significant Employees and Managers
Monte Hamilton, age 56, is an employee having responsibilities for
marketing. Mr. Hamilton received a Master of Business Administration
and a B.S. degree in Banking and Finance from the University of Utah in
1966 and 1964 respectively. He joined the Company in 1996. From 1987 to
1995 Mr. Hamilton was an account executive with Wilson-Davis & Company,
Inc., a securities broker-dealer.
Ralph Thomson, age 58, is an employee of the Company. Dr. Thomson
joined the Company in May 1996. From 1998 to the present Dr. Thomson
has been the president of International Business Catalyst a firm
consulting on mergers and acquisitions. For the past twenty years Dr.
Thomas has been involved at state/local and national levels with
technology, technology transfers,
international trade and finance. Dr. Thomas received in 1968 a PhD.
Degree in International Politics and Economics from Fletcher School of
Law and Diplomacy (a consortium of Harvard, M.I.T. and Tufts
Universities) in 1964 in received a Masters Degree in International Law
and Diplomacy from Fletcher and in 1963 received a Masters Degree in
International Affairs from Fletcher. In 1962 he received a Bachelor of
Arts Degree in Political Science and Economics from the University of
Utah.
Item 10. Executive Compensation
Currently the Company has no written employment agreement with any
of its officers, directors or employees. Mr. Neldon Johnson has not
received any compensation for services performed. Other employees are
presently receiving salaries and will be entitled to bonus and other
forms of compensation which will accrue or be paid during fiscal 1996.
The Board of Directors intends to establish a compensation committee to
review compensation matters and any new employment contracts.
The following table sets forth the cash compensation paid by the
Company to its executive officers for the four fiscal years ended on
June 30, 1995.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h)
(i)
Name and Other Restricted All
Principal Annual Stock LTIP
Other
Position Year Salary Bonus Compen. Awards Options Payouts
Comp
Neldon Johnson1995 $ 0 $ 0 $ 0 0 0 0
0
CEO and 1994 $ 0 $ 0 $ 0 0 0 0
0
President 1993 $ 0 $ 0 $ 0 0 0 0
0
1992 $ 0 $0 $ 0 0 0 0
0
The Company has no employment agreements with any of its
employees. Each employee has signed a non-disclosure agreement
with the Company.
The Company has no stock option plan for all employees. Mr.
Lloyd will receive stock based on his salary and bonus earned
during the year.
Item. 11. Security Ownership of certain Beneficial Owners and
Management
The following table sets forth certain information known to
the Company regarding beneficial ownership of the Company's
Common Stock as of June 1, 1996, by (i) each person known by the
Company to own, directly or beneficially, more than 5% of the
Company's Common Stock, (ii) each of the Company's directors, and
(iii) all officers and directors of the Company as a group.
Except as otherwise indicated, the Company believes that the
beneficial owners of the Common Stock listed below, based on
information furnished by such owners, have sole investment and
voting power with respect to such shares, subject to community
property laws, where applicable.
Name and Address of Number of Percent
Beneficial Owner Shares Owned
Neldon Johnson
512 South 860 East
American Fork, Utah 4,558,433 50
Donnel Johnson
512 South 860 East
American Fork, Utah 547,400 6
Christopher Taylor
512 South 860 East
American Fork, Utah 700
Stacy Curtis Snow
512 South 860 East
American Fork, Utah 6,000
Directors and
Officers as a Group
(5 persons) 5,107,133 56
(1) Based on 9,186,100 shares issued and outstanding, but does
not include the additional shares of 6,000,000 shares of common
stock and 1,000,000 shares of Series A Preferred Stock to be
issued to Mr. Johnson in the technology transfer.
Item 12. Certain Relationships and Related Transactions
The Company has borrowed money from Mr. Johnson as funds
were needed. As of June 30, 1995 the Company owed Mr. Johnson
$134,029. There is no promissory note executed by the Company in
favor of Mr. Johnson nor is the obligation secured. The
obligation does not bear interest. Previously Mr. Johnson
advanced funds to the Company as needed.
In addition, upon the technology transfer Mr. Johnson will
receive 6,000,000 shares of common stock and 1,000,000 shares of
preferred stock. After the transfer total issued and outstanding
shares will be 15,186,100 shares of common stock and 1,000,000
shares of Series A preferred stock.
PART IV Exhibits and Reports on From 8-K
a. Exhibits
INDEX TO EXHIBITS
3.(i) *Restated Articles of Incorporation
3.(ii) *By-laws.
3.(iii) Articles of Amendment to Articles of Incorporation
10.(i) Consulting Agreement with Wilson-Davis
10.(ii) Assignment of Patent.
27. Financial Data Summary
*This document was previously filed with the Commission and is
incorporated in this report by reference.
b. Reports on Form 8-K.
In June 1996, Registrant filed one report on Form 8-K.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
NELDON JOHNSON
Title: President, and
Chief Executive Officer
(Principal Executive Officer)
Date:
INA JOHNSON
Title: Chief Financial Officer
(Principal Financial Officer)
Date:
DIRECTORS
NELDON JOHNSON
Title: Director
Date:
INA JOHNSON
Title: Director
Date:
DONNELL R. JOHNSON
Title: Director
Date:
CHRISTOPHER J. TAYLOR
Title: Director
Date:
S. CURTIS SNOW
Title: Director
Date:
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEPENDENT AUDITORS' REPORT
AND
FINANCIAL STATEMENTS
June 30, 1995
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
TABLE OF CONTENTS
Page
Report of Independent Auditors
1
Balance Sheet - June 30, 1995
2
Statements of Operations for the Years Ended
June 30, 1995 and 1994 and for the Period From
September 26, 1986 (Date of Inception) Through
June 30, 1995
3
Statements of Stockholders' Deficit for the Period
From September 26, 1986 (Date of Inception)
Through June 30, 1993, and for the Years Ended
June 30, 1994 and 1995
4
Statements of Cash Flows for the Years Ended June 30,
1995 and 1994 and for the Period From September 26,
1986 (Date of Inception) Through June 30, 1995
5
Notes to the Financial Statements
6
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
(801) 532-2200
Member of AICPA Division of Firms Fax (801) 532-7944
Member of SECPS 345 East 300 South, Suite 200
Member of Summit International Associates Salt Lake City, Utah
84111-2693
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
International Automated Systems, Inc.
We have audited the accompanying balance sheet of International
Automated Systems, Inc. (a development stage company) as of June 30,
1995, and the related statements of operations, stockholders' deficit,
and cash flows for the years ended June 30, 1995 and 1994, and for the
period September 26, 1986 (date of inception) through June 30, 1995.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits. The financial statements of
the Company from September 26, 1986 through June 30, 1990 were audited
by other auditors whose reports, dated October 21, 1988 and April 30,
1991 , were qualified subject to the effects of such adjustments, if
any, as might have been required had the outcome of the uncertainties
referred to in Note 1 been known. Our opinion, in so far as it relates
to the period from September 26, 1986 through June 30, 1990, is based
solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
and the reports of the other auditors provides a reasonable basis for
our opinion.
In our opinion, based on our audits and the reports of the other
auditors, the financial statements referred to above present fairly, in
all material respects, the financial position of International Automated
Systems, Inc. as of June 30, 1995, and the results of its operations and
its cash flows for the years ended June 30, 1995 and 1994, and for the
period September 26, 1986 through June 30, 1995, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company is a
development stage enterprise engaged in developing technology related to
production of electronic security and communication equipment. As
discussed in Note 1 to the financial statements, the Company's operating
losses since inception and the deficit accumulated during the
development stage raise substantial doubt about its ability to continue
as a going concern. Management's plans concerning these matters are also
described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
June 6, 1996<PAGE>
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
BALANCE SHEET
JUNE 30, 1995
ASSETS
Current Assets
Cash
$ 10,049
Total Current Assets
10,049
Property and Equipment
Computer and electronic equipment
51,302
Furniture and fixtures
3,591
Automobiles
21,657
Total Property and Equipment
76,550
Accumulated depreciation
(18,373)
Net Property and Equipment
58,177
Other Assets
Rights to technology
31,416
Accumulated amortization
(13,177)
Other Assets, Net
18,239
Total Assets
$ 86,465
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable
$ 8,482
Deferred revenue
8,000
Note payable to related parties
134,029
Current portion of long-term debt
3,453
Total Current Liabilities
153,964
Notes Payable
14,013
Total Liabilities
167,977
Stockholders' Deficit
Preferred stock, Class A, no par value,
5,000,000 shares authorized, no shares
issued or outstanding
-
Common stock, no par value, 45,000,000 shares
authorized, 9,013,456 shares issued and outstanding
372,599
Deficit accumulated during the development stage
(450,786)
Less: Treasury stock, 6,856 shares, at cost
(3,325)
Total Stockholders' Deficit
(81,512)
Total Liabilities and Stockholders' Deficit
$ 86,465
The accompanying notes are an integral part of these financial
statements.
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
For the Period
September 26,
For
the Years Ended 1986 (Inception)
June 30, Through
1995 1994 June 30, 1995
Income
Equipment lease income $6,000
$6,000 $ 12,000
Total Income 6,000
6,000 12,000
Expenses
General and administrative expense 165,078
17,612 235,457
Research and development expense 39,430
2,068 198,443
Amortization expense 1,848
1,848 15,057
Total Expenses 206,356
21,528 448,957
Other Income and Expense
Interest income
- - - - - - 1,912
Interest expense (866)
- (15,741)
Net Other Income and Expense (866)
- (13,829)
Net Loss $ (201,222)
$ (15,528) $ (450,786)
Net Loss per Common Share $ (0.02) $
(0.00) $ (0.06)
Weighted Average Shares Outstanding 8,955,093 8,754,938
7,039,604
The accompanying notes are an integral part of these financial
statements.<PAGE>
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIT
Deficit
Accumulated Treasury Stock
During Number
Common Stock
Development of
Shares
Amount Stage Shares Amount
Balance - September 26, 1986 - $ -
$ - - $ -
Stock issued for cash
September 1986 -$0.02 per share 5,100,000 11,546
- -
September 1988 (Net $38,702 of
offering costs) - $.32 per share 213,065 67,964
December 1988 (Net $6,059 of
offering costs) - $.32 per share 33,358 10,641
March 1989 (Net $4,944 of
offering costs) - $.32 per share 27,216 8,681
June 1989 (Net $6,804 of offering
costs) $.32 per share 37,461 11,950
Stock issued for services
September 1986 - $.002 per share 300,000 679
June 1989 - $.32 per share 5,000 1,595
April 1991 - $.10 per share 300,000 30,000
Stock issued to satisfy related party liabilities
June 1991 - $.03 per share 2,700,000 78,101
Purchase of treasury stock
December 1991 - $.49 per share
(5,000) (2,425)
December 1992 - $.49 per share
(1,856) (900)
Net loss for the period from September 26,
1986 through June 30, 1993
(234,036)
Balance - June 30, 1993 8,716,100 221,157
(234,036) (6,856) (3,325)
Stock issued for cash
January 1994 - $.40 per share 59,856 23,942
May 1994 - $.20 per share 137,500 27,500
Net loss
(15,528)
Balance - June 30, 1994 8,913,456 272,599
(249,564) (6,856) (3,325)
Stock issued for services
January 1995 - $1.00 per share 100,000 100,000
Net Loss
(201,222)
Balance - June 30, 1995 9,013,456 372,599
450,786 (6,856) (3,325)
The accompanying notes are an integral part of these financial
statements.
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Cumulative
For the Period
September 26,
For the Years Ended 1986 (Inception)
June 30, Through
1995 1994 June 30, 1995
Cash Flows From Operating Activities
Net loss $
(201,222) $ (15,528) $ (450,786)
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization
1,848 1,848 15,057
Depreciation
7,452 3,773 18,373
Stock based compensation 100,000
- 132,274
Change in assets and liabilities:
Accounts payable
482 8,000 8,482
Deferred revenue
(6,0000) 14,000 8,000
Accrued liabilities
(4,428) -
Net Cash Provided (Used) By
Operating Activities
(97,440) 7,665 (268,600)
Cash Flows From Investing Activities
Purchase of property and equipment (20,446)
(17,223) (57,193)
Purchase of rights to technology -
- (31,416)
Organization costs
- (1,880)
Net Cash Used By Investing Activities (20,446)
(17,223) (90,489)
Cash Flows From Financing Activities
Proceeds from issuance of common stock -
51,442 218,733
Payments for treasury stock
- - - - - - (3,325)
Payments for deferred offering costs -
- (56,509)
Proceeds from net borrowings from related 98,6888
(10,836) 212,130
party
Payments on note payable (1,891)
- (1,891)
Net Cash Provided By Financing
Activities
96,797 40,606 369,138
Net Increase (Decrease) In Cash (21,089)
31,048 10,049
Cash and Cash Equivalents at
Beginning of Period
31,138 90 -
Cash and Cash Equivalents at End of Period $10,049
$ 31,138 $ 10,049
The accompanying notes are an integral part of these financial
statements.
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
June 30, 1995 and 1994
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
PRINCIPLES
Organization International Automated Systems, Inc. (the
"Company") was incorporated in the State of Utah on September 26, 1986.
The principals of the Company have been involved in the research and
development of the "Self-Check System" for the past nine years. The
Company is deemed to be in a development stage and its activities to
date, consist of obtaining the rights to certain technology involved
with an automated self check-out system for retail stores, developing
other electronic security and communication equipment and developing a
business plan.
Basis of Presentation The accompanying financial
statements have ben prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, during the years ended June 30, 1995 and 1994, the Company
incurred net losses of $201,222 and $15,528, respectively, and as of
June 30, 1995, the Company's losses accumulated from inception totaled
$450,786. These factors, among others, may indicate that the Company
will be unable to continue as a going concern for a reasonable period of
time. The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of
recorded asset amounts or the amount and classification of liabilities
that might be necessary should the Company be unable to continue as a
going concern. The Company's ability to continue as a going concern is
dependent upon its ability to generate sufficient cash flow to meet its
obligations on a timely basis, to obtain additional financing as may be
required, and ultimately to attain successful operations. Subsequent to
June 30, 1995, the Company raised approximately $706,000 in a private
placement of its common stock. Management is in the process of
negotiating various sales agreements and is hopeful these sales will
generate sufficient cash flow for the Company to continue as a going
concern.
Rights to Technology Rights to technology are carried at
cost and are being amortized on a straight-line basis over a 17-year
life.
Property and Equipment Property and equipment are recorded
at cost and are depreciated using the straight-line method based on the
expected useful lives of the assets which range from five to seven
years. Depreciation expense for the years ended June 30, 1995 and 1994
was $7,452 and $3,773, respectively.
Loss Per Share The company computes loss per share based
upon the weighted average number of common shares outstanding during the
period.
Statements of Cash Flows For purposes of the statements of
cash flows, the Company considers highly-liquid investments purchased
with a maturity of three months or less to be cash
equivalents.
NOTE 1--(CONTINUED)
Use of Estimates The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2--RELATED PARTY TRANSACTIONS
During the years ended June 30, 1995 and 1994, the Company
received short-term cash advances from a shareholder that resulted in a
balance at June 30, 1995 of $134,029. These short-term borrowings are
non-interest bearing and are due upon demand.
During the years ended June 30, 1995 and 1994, the Company leased
electronic equipment to a majority shareholder for use in his store on
a test basis. At June 30, 1995, $8,000 had been prepaid under the lease
agreement and will be recognized over the remaining 14 months of the
lease.
NOTE 3--RIGHTS TO TECHNOLOGY
The asset rights to technology represents the costs related to
legal fees incurred in transferring the rights from the two stockholders
who developed the technology and the cost of obtaining patents in the
United States and other countries. The rights to technology includes the
use of the prototype, the technology, and certain test equipment. Costs
incurred by the stockholders to develop the technology were recognized
as expense when incurred and were not recorded by the Company when the
technology was transferred.
NOTE 4--NOTE PAYABLE
At June 30, 1995 the Company had a note payable to a bank,
secured by a vehicle with monthly payments of $394, including interest
at 8%, through November 1999 in the amount of $17,466.
Annual maturities of this note payable for the next five years
are as
follows:
Year Ending June 30, Amount
1996 $
3,453
1997
3,739
1998
4,050
1999
4,386
2000
1,838
$
17,466
NOTE 5--INCOME TAXES
Effective July 1, 1993, the Company adopted Statement of
Financial mAccounting Standards No. 109, Accounting for Income Taxes.
The adoption of the new accounting standard had no effect on prior
periods. Statement No. 109 requires the recognition of a liability or
asset, net of valuation allowance for the deferred tax consequences of
temporary differences and operating loss carryforwards.
The Company did not have a current or deferred provision for
income taxes for the years ended June 30, 1995 and 1994. The following
presents the components of the net deferred tax asset at June 30, 1995:
Benefit of operating loss carryforwards
$ 140,169 Total deferred
tax assets 140,169
Less: Valuation Allowance
(140,169)
Net Deferred Tax Asset
$ -
The valuation allowance increased $68,415 and $5,280 during the
years ended June 30, 1995 and 1994, respectively. The Company has net
operating loss carryforwards of $412,263 that expire, if unused, in
years 2002 through 2011.
The following is a reconciliation of the income tax benefit
computed at the federal statutory tax rate with the provision for income
taxes for the years ended June 30, 1995 and 1994:
June 30,
1995 1994
Income tax benefit at statutory rate (34%) $
(140,169) $ (71,754)
Current operating loss not recognized
68,415 5,280
Prior years' operating losses not recognized
71,754 66,474
Provision for Income Taxes
$ - $ -
NOTE 6--RESEARCH AND DEVELOPMENT EXPENSE
Research and development has been the principal function of the
Company. Expenses in the accompanying financial statements include
certain costs which are directly associated with the Company's research
and development. These costs, which consist primarily of fees paid to
individuals, materials and supplies amounted to $39,430 and $2,068 for
the fiscal years ended June 30, 1995 and 1994.
NOTE 7--OPERATING LEASES
The Company occupies facilities under a lease agreement on a
month-to-month basis.
Rental expense relating to this operating lease was $11,060 and
$429 for the years ended June 30, 1995 and 1994, respectively. The
Company also operates an office out of the majority shareholder's home
at no cost to the Company.
NOTE 8--SUPPLEMENTAL CASH FLOW INFORMATION
During the year ended June 30, 1995, the Company purchased an
automobile with a note for
$19,357. The Company also issued 100,000 shares of common stock valued
at $1.00 per share for management and consulting services.
Since inception, the Company has issued 705,000 shares of common
stock valued at an average of $0.19 per share for services.
During June of 1991, the Company issued 2,700,000 shares of
common stock to satisfy amounts owed to a majority shareholder in the
amount of $78,101.
ARTICLES OF AMENDMENT FOR
INTERNATIONAL AUTOMATED SYSTEMS, INC.
I
NAME OF CORPORATION
The name of the corporation for which the articles of amendment
are being filed is International Automated Systems, Inc. (also
the "Corporation"). These articles of amendment are filed
pursuant to the Utah Code, Revised Business Corporation Act,
Section 16-10a-1006.
II
AMENDMENTS
At the Meeting of Shareholders the following amendments to the
Corporation's Articles of Incorporation were duly adopted:
Article III, section (e) shall read as follows:
(e) to purchase, take, receive or
otherwise acquire, hold, own pledge, transfer
or otherwise dispose of its own shares of
capital stock; provided, however, that said
purchase of its own shares, whether direct or
indirect, shall be me made only to the
extent of unreserved and un restricted earned
surplus available therefor, and only with the
affirmative vote of the holders of at least
(a majority of all of the shares entitled to
vote thereon).
Article V, section 4 shall read as follows:
At all elections of the directors,
cumulative voting shall no longer be
allowed. The holders of the Common Stock of
the corporation, and , unless otherwise
provided in these Articles of Incorporation
or in any resolution adopted by the Board of
Directors pursuant to authority contained in
these Articles of Incorporation, the holders
of any other class of stock issued or to be
issued by the corporation and entitled to
vote at a meeting of stockholders, shall be
entitled to one vote for each share of stock
held by them. The entire Board of Directors
or any individual director may be removed
from office without assignment of cause by
vote of the holders of a majority of the
outstanding shares of stock then entitled to
vote at an election of directors.
Article IX, sections 1 and 2 shall read as follows:
ARTICLE IX
1. Effective as of the initial annual
meeting of stockholders, there shall be at
least three (3) directors of the corporation,
notwithstanding any other provision of these
Articles of Incorporation or Bylaws.
2. The directors, except those herein
before named as initial directors and those
chosen to fill a vacancy for an unexpired
term, must be elected by the stockholders at
the regular annual stockholders meeting, or
if not held, at any special meeting of the
stockholders called for that purpose.
Notwithstanding any other provision of these
Articles of Incorporation or of the Bylaws,
any director or directors, including the
entire Board of Directors, may be removed at
any time, without cause and by the
affirmative vote of at least a majority of
the issued and outstanding stock of the
corporation that is entitled to vote for the
election of directors and no qualification
for the office of director that may be
provided for in the Articles of Incorporation
or the Bylaws shall apply to director in
office at the time such qualification was
adopted or to any successor appointed by the
remaining directors to fill the unexpired
portion of the terms of such director.
Article X shall read as follows:
ARTICLE X
The Corporation reserves the right to
amend, alter, change or repeal any provisions
contained in the Articles of Incorporation in
the manner now or hereafter prescribed by
statute, and all rights conferred upon
stockholders herein are granted subject to
this reservation. Nevertheless, and in
addition to any other provision of these
Articles of Incorporation, the Bylaws or
statues, the affirmative vote of fifty-one
per cent of the issued and outstanding
capital stock of the corporation that is
entitled to vote for the deletion of language
in or any amendment to Articles of
Incorporation or to the Bylaws (unless such
amendment to the Bylaws is approved by the
Board of Directors in accordance with the
Bylaws) that would restrict or limit the
power or authority of the Board of Directors
or any other officer or agent of the
corporation; that would vest any powers of
the corporation in any other officer or agent
other than the Board of Directors or officers
and agents appointed by or under the
authority of the Board of Directors; that
would require the approval of any
stockholders in order for the Board of
Directors or any officer or agent to take any
action; or that would change the quorum
requirement for any meeting of the Board of
Directors, the vote by which it must act in
connection with any matter, the manner of
calling or conducting meetings of the Board
of Directors, or the place of such meetings.
Article XII, Section 1 shall read as follows:
Section 1. The affirmative vote of
the holders of not less than fifty-one per
cent of the outstanding shares of capital
stock of the corporation entitled to vote
shall be required for the approval or
authorization of any "Business Combination"
(as hereinafter defined) involving a "Related
Person" (as hereinafter defined);
Article XII, Section 6 shall read as follows:
Section 6. Notwithstanding any other
provisions of these Articles of Incorporation
or the Bylaws of the corporation, the
affirmative vote of the holders of not less
than fifty-one per cent of the outstanding
shares of capital stock shall be required to
amend, alter, change or repeal or adopt any
provisions inconsistent with this Article
XII.
III
DATE OF ADOPTION AND RESULTS OF SHAREHOLDER VOTING
The amendments in Paragraph II were adopted at the Meeting of
Shareholders held on or about October 25, 1990, a quorum of the
shares being represented at the meeting. On that date 5,716,100
shares of common stock of the Corporation were issued and
outstanding and were entitled to vote. At the meeting,
approximately 5,516,100 shares were present and voting. The
resolutions approving the Amendments to the Articles of
Incorporation had the following vote: approximately 5,516,100
shares for, no shares against and no shares abstaining.
DATED this _____ day of December, 1995.
INTERNATIONAL AUTOMATED SYSTEMS, INC.
s/
Neldon Johnson, President
s/
Ina Johnson, Secretary
STATE OF UTAH )
) ss.
COUNTY OF UTAH )
The undersigned, a Notary Public, hereby certifies that on the
12th day of December 1995, personally appeared before me Neldon
Johnson and Ina Johnson who are known to be the president and
secretary, respectively, International Automated Systems, Inc.,
and that they signed this document as officers with full
authority to execute this document and that the statements
contained here are true. As witness, I have set my hand and seal
this 12th day of December 1995.
s/ Lana K. Evans
NOTARY PUBLIC
Residing at: Am Fork
My Commission Expires: Notary Seal of Lana K. Evans
6-10-99
DRAFT/INCOMPLETE
AGREEMENT
This agreement by and between International Automated Systems, Inc.
("IAS"), a Utah corporation located in America Fork, Utah, and the
strategic services group of Wilson-Davis & Co., Inc. ("Consultant"),
located at 46 West 300 South, Salt Lake City, Utah 34101, is as follows:
IAS has limited executive personnel with technical and management
experience and training in specific technological and management
disciplines, but does not have the resources to hire employees to
provide the full range of expertise that it needs from time to time or
regularly on a part-time basis. Therefore, IAS desires to engage
Consultant to obtain required special assistance in specific areas as
provided below in lieu of hiring employees to provide such services.
Upon the foregoing premises, which are incorporated herein by
reference, we agree as follows:
1. Services to be provided to client:
a. Consultant shall advise and assist IAS in identifying
product, service, and technology markets and the
management,
manufacturing capabilities, technological support and
capital required to address those markers.
b. Consultant shall advise and assist IAS in valuation of
proposals and due diligence of companies and technologies
considered for strategic partnering.
c. Consultant shall advise and assist IAS in acquisition
strategy and negotiations.
d. Consultant stall ineet with IAS at least monthly to
update IAS on progress and status of above progress
2. IAS shall compensate Consultant for services to be provided as
follows:
a. A consulting fee for six months shall he paid in advance.
The fee payable in 100,000 shares of IAS common stock.
b. Expenses such as travel, telephone, fax, copying,
postage,printing, etc., incurred by Consultant shall be
included in
the fee in paragraph 2(a) above.
Consultant and IAS agree that the above shares are being acquired in
reliance on the exemption from registration provided in rule 701
promulgated under the Securities Act of 1933 (the "Securities Act") and
that they constitute "restricted securities" as that term is defined in
rule 144(a)(3) under the Securities Act. If such shares do not qualify
for resale under the provisions of rule 701(c) IAS agrees to register
the resale of such shares at Consultant's request and at IAS' expense at
any time after 90 days following the date that IAS becomes subject to
the reporting requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934.
Stamp and Signature of LYLE W. DAVIS
s/ Neldon Johnson, President International Automated Sys. Inc.
PATENT
IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
In re Application of:
:
:
NELDON P. JOHNSON, : Group Art Unit: 2614
:
Serial No.: 08/285,030 :
:
Filing Date: 08/02/94 :
: Examiner: T. Ghebretinsae
For: MODULATION METHOD AND :
APPARATUS FOR DIGITAL :
COMMUNICATIONS :
ASSIGNMENT COVER SHEET
Box Assignments
Honorable Commissioner of Patents and Trademarks
Washington, DC 20231
Sir:
The following information is submitted as required for the
accompanying
Patent Assignment:
1. Name of Party Conveying the Interest: Neldon P. Johnson
2. Name and Address of Party Receiving the Interest:
International Automated Systems, Inc.
321 East 300 North,
American Fork, Utah 84003
3. A description of-the Interest Conveyed: Invention and Patent
Rights
4. Patent Application No.: 08/285,030
5. Name and Address of party to whom correspondence should be
mailed:
J. David Nelson
10885 5. State Street
Sandy, Utah 84070
6. The Number of Applications: One
Total Assignment Recording Fee: $55.00
7. Date Document Executed: February 1, 1996.
I, J. David Nelson, do hereby state and affirm that, to the best of
my knowledge and belief, the information contained on this cover sheet
is true and correct and that the document submitted is the original
document of assignment.
Dated: February 5, 1996. s/ J. David Nelson
I hereby certify that the foregoing Assignment Cover Sheet is being
deposited with the United States Postal Service with sufficient postage
as first class mail in an envelope addressed to: Box Assignments,
Commissioner of Patents and Trademarks, Washington, D.C. 20231, on
February 3, 1996.
Signed:
s/ J. David Nelson
Registration No. 31,046
10885 South State Street
Sandy, UT 84070
Phone: (801) 576-1400
Fax: (801) 576-l960
Serial No. 08/285,030
Filing Date: 08/02/94
Examiner: Ghebretinsae, T.
Art Unit: 2614
ASSIGNMENT
WHEREAS, I Neldon P. Johnson, a citizen of the United States of
America and residing at 512 South 860 East, American Fork, Utah, have
made an invention in a MODULATION METHOD AND APPARATUS FOR DIGITAL
COMMUNICATIONS, Serial No. 08/285,030 for which I have executed an
application for United States Letters Patent on July 29, 1994, and which
was filed on August 2, 1994;
WHEREAS, I represent and warrant that I am the sole owner of said
invention and application for Letters Patent;
WHEREAS, International Automated Systems, Inc., 321 East 300 North,
American Fork, Utah 84003, hereinafter referred to as "IAS", is desirous
of acquiring said invention and application;
NOW, THEREFORE, for and in consideration of One Dollar ($1.00) and
for other good and valuable consideration, the receipt and sufficiency
of which I hereby acknowledge, I have assigned, sold, transferred and
set over and by these presents do assign, sell, transfer and set over
until IAS the entire right, title, and interest in and to (a) said
invention and world-wide rights therein, (b) said patent application,
including all divisions, continuations, continuations-in-part and
substitutions thereof, and all United States and foreign patents which
shall issue on said invention, including all reissues, renewals, and
extensions thereof, for
the United States, its territories and possessions and all foreign
countries, including the right to file applications for Letters Patent
on said invention in any and all foreign countries, the same to be held
and enjoyed by IAS, its assigns and successors, as fully and entirely as
the same would have been held and enjoyed by me, had this assignment and
sale not been made.
I covenant and agree that I will, at any time upon the request and
at the expense of IAS, execute and deliver any and all papers and do all
lawful acts that may be necessary or desirable, in the opinion of IAS,
to enable and assist IAS to (a) obtain Letters Patent, both domestic and
foreign, on said invention, (b) establish, maintain, and secure title in
IAS, its successors and assigns, to said invention, application, and
Letters Patent, including making such title of lawful public record, and
defend, establish, or otherwise preserve the validity of said Letters
Patent against any and all infringers, and perform such other acts as
are necessary to give full force and effect to this Assignment.
I hereby authorize and request the Commissioner of Patents and
Trademarks of the United States of America to issue all Letters Patent
based on said application and all said divisions, continuations,
continuations-in-part, reissues, renewals, and extensions to IAS, its
successors and assigns.
IN TESTIMONY WHEREOF, I have duly executed this Assignment this 1st
day of February, 1996.
s/ NELDON P. JOHNSON
STATE OF. UTAH )
: ss.
COUNTY OF SALT LAKE )
BEFORE ME, the undersigned authority, on this day personally
appeared Neldon P. Johnson, known to me to be the person whose name is
subscribed to the foregoing instrument, and acknowledged to me that he
executed the same for the purposes and consideration therein expressed.
GIVEN under my hand and seal of office this 1st day of February,
1996.
NOTARY PUBLIC
Seal and Signature of Alanna Warnick, Notary Public
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