FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1999
Commission File Number 33-16531-D
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
UTAH 87-0447580
------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
512 South 860 East
American Fork, Utah 84003
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(Address of principal executive offices)
Registrant's telephone number including area code (801)763-9965
Not Applicable Former Address, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the proceeding 12 months (or 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. Yes x No
As of September 30, 1999, Registrant had 15,546,361 shares of common stock,
no par value per share, issued and outstanding after deducting shares held
in the corporate treasury.
<PAGE>
PART I
ITEM 1 FINANCIAL STATEMENTS
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS
September 30, June 30,
1999 1999
----------- ----------
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 9,011 $ -
Net investment in direct financing leases -
related party - current portion 26,367 23,523
Prepaid expenses 400 -
---------- ----------
Total Current Assets 35,778 23,523
---------- ----------
Property and Equipment
Computer and electronic equipment 151,978 148,864
Furniture and fixtures 32,746 32,746
Automobiles 21,657 21,657
Leasehold improvements 18,238 18,238
---------- ----------
Total Property and Equipment 224,619 221,505
Accumulated depreciation (153,256) (145,035)
---------- ----------
Net Property and Equipment 71,363 76,470
Other Assets
Related party receivable 569,560 454,063
Net investment in direct financing leases
- related party 82,366 88,292
Patents, net of accumulated amortization 256,224 257,808
---------- ----------
Total Other Assets 908,150 800,163
---------- ----------
Total Assets $1,015,291 $ 900,156
========== ==========
See the accompanying notes to the condensed financial statements.
2
<PAGE>
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS (CONTINUED)
September 30, June 30,
1999 1999
---------- ----------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Funds drawn in excess of cash in bank $ - $ 7,084
Accounts payable 72,854 65,279
Current portion of long term debt 5,978 7,131
Accrued payroll expenses 63,814 21,906
Obligation under capital leases - current portion 26,367 23,523
---------- ----------
Total Current Liabilities 169,013 124,923
---------- ----------
Long Term Liabilities
Notes payable 3,122 4,424
Obligation under capital leases - long term 82,366 88,292
---------- ----------
Total Long Term Liabilities 85,488 92,716
---------- ----------
Total Liabilities 254,501 217,639
---------- ----------
Stockholders' Equity
Preferred stock, Class A, no par value,
5,000,000 shares authorized, 1,000,000
shares issued and outstanding 292,786 292,786
Common stock, no par value, 45,000,000 shares
authorized,15,546,361 shares issued and
outstanding 5,609,595 5,348,195
Deficit accumulated during the development stage (5,141,591) (4,958,464)
---------- ----------
Total Stockholders' Equity 760,790 682,517
---------- ----------
Total Liabilities and Stockholders' Equity $1,015,291 $ 900,156
========== ==========
See the accompanying notes to the condensed financial statements.
3
<PAGE>
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Period
From Inception
(September 26, 1986)
For the Three Months Through
Ended September 30, September 30,
----------------------- ------------
1999 1998 1999
----------- ---------- ------------
Revenue
Sales $ - $ - $ 111,226
Income from related party - 11,738 32,348
----------- ---------- ------------
Total Revenue - 11,738 143,574
----------- ---------- ------------
Cost of Sales
Cost of sales 5,740 - 87,667
Write down of carrying value of
inventories of $108,093 during
1998 and 1997 - - 216,186
----------- ---------- ------------
Total Cost of Sales 5,740 - 303,853
----------- ---------- ------------
Gross Profit (Loss) (5,740) 11,738 (160,279)
----------- ---------- ------------
Operating Expenses
General and administrative 51,635 151,233 2,238,871
Research and development expense 124,291 116,716 2,522,444
Amortization expense 1,184 3,550 48,883
Stockholder class action settlement
expense - - 170,634
----------- ----------- -----------
Total Operating Expenses 177,110 271,499 4,980,832
----------- ----------- -----------
Other Income and (Expense)
Interest income 46 494 21,291
Interest expense (323) (117) (21,771)
----------- ----------- -----------
Net Other Income (Expense) (277) 377 (480)
----------- ----------- -----------
Net Loss $ (183,127) $ (259,384) $(5,141,591)
=========== =========== ===========
Basic and Diluted Loss Per Share $ (0.01) $ (0.02) $ (0.35)
=========== =========== ===========
Common and Preferred Shares Used
in Per Share Calculation 16,546,361 16,546,361 14,791,482
=========== =========== ===========
See the accompanying notes to the condensed financial statements.
4
<PAGE>
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Period
From Inception
(September 26, 1986)
For the Three Months Through
Ended September 30, September 30,
----------------------- ------------
1999 1998 1999
----------- ---------- ------------
Cash Flows From Operating Activities
Net loss $ (183,127) $ (259,384) $(5,141,591)
Adjustments to reconcile net
income to net cash provided by
operating activities:
Amortization 1,184 3,550 48,884
Depreciation 8,221 9,236 153,256
Stock based compensation - - 338,497
Change in assets and liabilities:
Prepaid expenses (400) 2,241 (400)
Accounts payable 7,575 25,450 72,854
Accrued liabilities 41,908 (308) 63,814
----------- ----------- -----------
Net Cash Used By Operating
Activities (124,639) (219,215) (4,464,686)
----------- ----------- -----------
Cash Flows From Investing Activities
Purchase of property and equipment (3,114) - (193,498)
Purchase of rights to technology 400 (6,070) (303,228)
Organization costs - - (1,880)
Net cash loaned to related party (115,497) (55,104) (622,814)
Proceeds from capital lease
receivable 3,082 - 25,450
Repayment of cash loaned to
related party - - 53,254
----------- ----------- -----------
Net Cash Used By Investing
Activities (115,129) (61,174) (1,042,716)
----------- ----------- -----------
Cash Flows From Financing Activities
Proceeds from issuance of
common stock - - 1,262,346
Cash from controlling shareholder 261,400 205,000 4,283,271
Payments for treasury stock - - (3,325)
Payments for stock offering costs - - (56,509)
Increase (decrease) in bank overdraft (7,084) - -
Proceeds from net borrowings from
related party - - 78,101
Payments on note payable and obligations
under capital lease (5,537) (1,064) (47,471)
----------- ----------- -----------
Net Cash Provided By Financing
Activities 248,779 203,936 5,516,413
----------- ----------- -----------
Net Increase (Decrease) In Cash and
Cash Equivalents 9,011 (76,453) 9,011
Cash and Cash Equivalents at
Beginning of Period - 92,030 -
----------- ----------- -----------
Cash and Cash Equivalents at
End of Period $ 9,011 $ 15,577 $ 9,011
=========== =========== ===========
See the accompanying notes to the condensed financial statements.
5
<PAGE>
INTERNATIONAL AUTOMATED SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1--INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements are condensed and,
therefore, do not include all disclosures normally required by
generally accepted accounting principles. These statements should be
read in conjunction with International Automated Systems' most recent
annual financial statements included in the Company's report on Form
10-KSB for the year ended June 30, 1999. In particular, International
Automated systems' significant accounting principles were presented as
Note 1 to the financial statements in that report. In the opinion of
management, all adjustments necessary for a fair presentation have
been included in the accompanying condensed financial statements and
consist of only normal recurring adjustments. The results of
operations presented in the accompanying condensed financial
statements are not necessarily indicative of the results that may be
expected for the full year ending June 30, 2000.
NOTE 2--RELATED PARTY TRANSACTIONS
During the years ended June 30, 1998 and 1999, the Company advanced a
corporation controlled by the Company's majority shareholder $454,063.
The Company has advanced this same corporation an additional $115,497
for the period ended September 30, 1999. Total advances are $569,560.
No terms for repayment have been established.
For the three months ending September 30, 1999, the controlling
shareholder, Neldon Johnson, contributed $241,600 for research as
additional paid-in capital. No additional preferred or common stock
was issued.
NOTE 3--CONTINGENCIES
On September 23, 1998, the Company was notified by the U.S. Securities
and Exchange Commission (SEC) of formal action against the Company,
its president, and members of his family for possible securities
violations. The action stems from alleged material misrepresentations
by the Company regarding new technology developed by the Company. The
SEC is seeking disgorgement of the proceeds from the sale of stock by
the Company and its principles that occurred between June 1995 and
June 1996. This figure is believed to be in excess of $3,000,000. The
SEC is also seeking the imposition of fines and attorney's fees. The
ultimate outcome of the action cannot presently be determined.
Accordingly, no provision for any liability that may result has been
made in the accompanying financial statements, and the possible effect
that action will have on future financial statements is unknown.
6
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES. As of September 30, 1999, Registrant had
cash of $9,011 compared to cash of ($7,084) of June 30, 1999. Cash
increased because of the contributions by the majority shareholder. As of
September 30, 1999, total current assets were $35,778 and total assets were
$1,015,291 compared to total current assets of $23,523 and total assets of
$900,156 as of June 30, 1999.
As of September 30, 1999, Registrant had total liabilities of $254,101
and shareholders' equity of $760,790 compared to total liabilities of
$217,639 and shareholders' equity of $682,517 as of June 30, 1999. The
deficit accumulated during the development stage was $5,141,591 as of
September 30, 1999, compared to $4,958,464 as of June 30, 1999. For the
near term the Company's ability to continue it operations and activities is
dependent upon the Company's major shareholder providing funds to the
Company. At this time the Company is not generating sufficient funds to
sustain its operations. The decrease in shareholders' equity is
attributable primarily to the continued research and development
activities. These activities have significant risks involving the
development of technology and the development of products that may be
commercially acceptable and profitable. As of September 30, 1999, the
ratio of current assets to current liabilities was approximately .21 to
one.
RESULTS OF OPERATION. For the quarter ended September 30, 1999,
Registrant had total revenues of $0 compared to total revenues of $11,738
for the same period a year earlier. For the quarter ended September 30,
1999, Registrant had total operating expenses of $177,980 compared to
expenses of $271,499 during the same quarter a year earlier. The decrease
in income reflects a lack of sales. As of September 30, 1999, cost of
sales was $5,740 compared to $0 a year earlier and gross loss was
$5,740 compared to gross profit of $11,738 a year earlier. For the quarter
Registrant had a net loss of $183,127 compared to a net loss of $259,384
for the same quarter a year earlier. The decrease in net loss is
attributable to the decrease in general and administrative expenses.
For the quarter the net loss per share was $(0.01) compared to $(0.02).
For the quarter ended September 30, 1999, general and administrative
expenses were $51,635 compared to $151,235 and research and development
expenses were $124,291 compared to $116,716 a year earlier. The Company
has only minimal revenues, but its level of operations requires additional
funds.
The Company's ability to continue its activities is dependent on it
receiving funds either as loans, advances or sales of equity. Previously
the major shareholder has provided funds, but there is no formal agreement
between the Company and the majority shareholder to continue providing
funds in the future. If the Company had to seek funds from another source
there is no assurance that funds would be available at all or on terms
acceptable to the Company.
7
<PAGE>
PART II.
Item 1. Legal Proceedings.
On September 23, 1998, the Company was notified by the U.S. Securities
and Exchange Commission (SEC) of formal action against the Company,
its president, and members of his family for possible securities
violations. The action stems from alleged material misrepresentations
by the Company regarding new technology developed by the Company. The
SEC is seeking disgorgement of the proceeds from the sale of stock by
the Company and its principles that occurred between June 1995 and
June 1996. This figure is believed to be in excess of $3,000,000. The
SEC is also seeking the imposition of fines and attorney's fees. The
ultimate outcome of the action cannot presently be determined.
Accordingly, no provision for any liability that may result has been
made in the accompanying financial statements, and the possible effect
that action will have on future financial statements is unknown.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Matters Submitted to a Vote of the Company's Shareholders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
A. Exhibits.
Ex.27 Financial Data Summary.
B. Reports on Form 8-K.
None.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date 11-06-98
International Automated Systems, Inc.
By /S/ Neldon Johnson
_______________________________
Neldon Johnson
President and Chief Executive Officer
By /S/ Neldon Johnson
_______________________________
Neldon Johnson
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet as of September 30, 1999, and statements of operations for the three
months ended September 30, 1999, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 9,011
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35,778
<PP&E> 224,619
<DEPRECIATION> (153,256)
<TOTAL-ASSETS> 1,015,291
<CURRENT-LIABILITIES> 169,013
<BONDS> 0
0
292,786
<COMMON> 5,609,595
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,015,291
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 5,740
<TOTAL-COSTS> 5,740
<OTHER-EXPENSES> 177,110
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 323
<INCOME-PRETAX> (183,127)
<INCOME-TAX> 0
<INCOME-CONTINUING> (183,127)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (183,127)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
