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 March 31, 2000
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 Fort, Utah 84003
(Address of principal executive offices)
Registrant's telephone number including area code (801) 423-8132
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 March 31, 2000, 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 I - FINANCIAL STATEMENTS
The condensed financial statements included herein have been
prepared by International Automated Systems, Inc. (the "Company" or the
"Registrant"), without pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not misleading.
In the opinion of the Company, all adjustments, consisting of only
normal recurring adjustments, necessary to present fairly the financial
position of the Company as of March 31, 2000, and the results of its
operations and changes in its financial position from June 30, 1999, through
March 31, 2000, and from inception through March 31, 2000, have been made.
The results of its operations for such interim period is not necessarily
indicative of the results to be expected for the entire year.
Registrant is a development stage company. Historically its primary
activities have been research and development of technology which can be
applied to develop commercial products. Such development has significant risk.
<PAGE>
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
TABLE OF CONTENTS
Page
Condensed Balance Sheet - March 31, 2000 and June 30, 1999 F-1
Condensed Statements of Operations for the Three and Nine
Months Ended March 31, 2000 and 1999, and for the Period
From September 26, 1986 (Date of Inception) Through
March 31, 2000 F-3
Condensed Statements of Cash Flows for the Three and Nine
Months Ended March 31, 2000 and 1999, and for the Period
From September 26, 1986 (Date of Inception) Through
March 31, 2000 F-4
Notes to the Condensed Financial Statements F-5
<PAGE>
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS
ASSETS
March 31, June 30,
2000 1999
----------- ----------
(Unaudited)
Current Assets
Cash and cash equivalents $ 17,697 $ -
Net investment in direct financing leases -
related party - current portion 24,261 23,523
----------- ----------
Total Current Assets 41,958 23,523
----------- ----------
Property and Equipment
Computer and electronic equipment 151,978 148,864
Furniture and fixtures 20,982 20,982
Automobiles 22,051 21,657
Leasehold improvements 18,238 18,238
Mobile office 11,764 11,764
----------- ----------
Total Property and Equipment 225,013 221,505
Accumulated depreciation (174,389) (145,035)
----------- ----------
Net Property and Equipment 50,624 76,470
----------- ----------
Other Assets
Related party receivable 778,390 454,063
Net investment in direct financing
leases - related party 69,705 88,292
Patents, net of accumulated amortization 250,346 257,808
----------- ----------
Total Other Assets 1,098,441 800,163
----------- ----------
Total Assets $ 1,191,023 $ 900,156
=========== ==========
See the accompanying notes to the condensed financial statements.
<PAGE>
F-1
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS (CONTINUED)
March 31, June 30,
2000 1999
----------- ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Funds drawn in excess of cash in bank $ 5,414 $ 7,084
Accounts payable 120,344 65,279
Accrued liabilities 54,926 21,906
Note payable - current portion 5,790 7,131
Obligation under capital leases - current
portion 24,261 23,523
----------- ------------
Total Current Liabilities 210,735 124,923
----------- ------------
Long-Term Liabilities
Notes payable - 4,424
Obligation under capital leases 69,705 88,292
----------- ------------
Total Long-Term Liabilities 69,705 92,716
----------- ------------
Total Liabilities 280,440 217,639
----------- ------------
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 6,088,132 5,348,195
Deficit accumulated during the development
stage (5,470,335) (4,958,464)
----------- ------------
Total Stockholders' Equity 910,583 682,517
----------- ------------
Total Liabilities and Stockholders' Equity $ 1,191,023 $ 900,156
=========== ============
See the accompanying notes to the condensed financial statements.
<PAGE>
F-2
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION> For the Period
From Inception
(September 26, 1986)
For the Three Months For the Nine Months Through
Ended March 31, Ended March 31, March 31,
-------------------------- --------------------------
2000 1999 2000 1999 2000
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue
Sales $ - $ - $ - $ - $ 111,226
Equipment lease income
from related party - 1,078 - 13,510 32,348
----------- ----------- ----------- ----------- -----------
Total Revenue - 1,078 - 13,510 143,574
----------- ----------- ----------- ----------- -----------
Cost of Sales
Cost of sales - 62 - 62 81,927
Write down of carrying value
of inventories of $108,093
during 1998 and 1997 - - - - 216,186
----------- ----------- ----------- ----------- -----------
Total Cost of Sales - 62 - 62 298,113
----------- ----------- ----------- ----------- -----------
Gross Profit/(Loss) - 1,016 - 13,448 (154,539)
----------- ----------- ----------- ----------- -----------
Operating Expenses
General and administrative 98,242 119,394 219,532 343,937 2,406,767
Research and development
expense 87,928 129,396 83,911 448,668 2,682,064
Amortization expense 5,507 3,550 7,875 10,651 55,575
----------- ----------- ----------- ----------- ------------
Total Operating
Expenses 191,677 252,340 511,318 803,256 5,144,406
----------- ----------- ----------- ----------- ------------
Loss From Operations (191,677) (251,324) (511,318) (789,808) (5,298,945)
----------- ----------- ----------- ----------- ------------
Other Income and (Expense)
Interest income - 193 46 898 21,291
Interest expense (132) (172) (599) (1,713) (22,050)
Stockholder class action
settlement expense - (170,631) - (170,631) (170,631)
----------- ------------ ----------- ----------- ------------
Net Other Income
(Expense) (132) (170,610) (553) (171,446) (171,390)
----------- ----------- ----------- ----------- ------------
Net Loss $ (191,809) $ (421,934) $ (511,871) $ (961,254) $ (5,470,335)
=========== =========== =========== =========== ============
Basic and Diluted Loss
Per Share $ (0.01) $ (0.03) $ (0.03) $ (0.06) $ (0.37)
=========== =========== =========== =========== ============
Common and Preferred
Shares Used in Per Share
Calculation 16,546,361 16,546,361 16,546,361 16,546,361 14,856,556
=========== =========== =========== =========== ============
<FN>
See the accompanying notes to the condensed financial statements.
</FN>
</TABLE>
<PAGE>
F-3
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE> For the Period
<CAPTION> From Inception
Ended March 31, (September 26, 1986)
------------------------ March 31,
2000 1999 2000
--------- --------- -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net loss $(511,871) $(961,254) $(5,470,335)
Adjustments to reconcile net income to
net cash provided by operating activities:
Allowance for doubtful accounts - - -
Amortization 7,866 10,651 55,576
Depreciation 29,354 26,970 174,389
Stock based compensation - - 338,497
Change in assets and liabilities:
Prepaid expenses (400) 2,241 (400)
Accounts payable 55,465 48,650 120,744
Accrued liabilities 32,620 3,715 54,526
Accrual for stockholder class action
settlement expense - 170,631 -
--------- --------- ----------
Net Cash Used In Operating Activities (386,956) (698,396) (4,727,003)
--------- --------- ----------
Cash Flows From Investing Activities
Purchase of property and equipment (3,508) (1,180) (193,892)
Purchase of rights to technology (14) (30,528) (303,642)
Organization costs - - (1,880)
Prodeeds from capital lease receivable 17,849 - 40,217
Cash loaned to related party (330,091) (81,703) (837,408)
Repayment of cash loaned to related party - - 53,254
--------- --------- ----------
Net Cash Used In Investing Activities (315,764) (113,411) (1,243,351)
--------- --------- ----------
Cash Flows From Financing Activities
Proceeds from issuance of common stock - - 1,262,346
Cash from controlling shareholder 739,937 731,000 4,761,808
Payments for treasury stock - - (3,325)
Payments for stock offering costs - - (56,509)
Bank overdraft (1,670) - 5,414
Proceeds from net borrowings from related
party - - 78,101
Payments on note payable and capital lease
obligations, net (17,850) (2,919) (59,784)
---------- --------- ----------
Net Cash Provided By Financing Activities 720,417 728,081 5,988,051
---------- --------- ----------
Net Increase (Decrease) In Cash
and Cash Equivalents 17,697 (83,726) 17,697
Cash and Cash Equivalents at Beginning/
of Period - 92,030 -
---------- --------- ---------
Cash and Cash Equivalents at End of Period $ 17,697 $ 8,304 $ 17,697
========== ========= =========
<FN>
See the accompanying notes to the condensed financial statements.
</FN>
</TABLE>
<PAGE>
F-4
INTERNATIONAL AUTOMATED SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1--INTERIM FINANCIAL STATEMENTS
The accompanying financial statements have
been prepared by the Company, and are unaudited. In
the opinion of management, the accompanying unaudited
financial statements contain all necessary adjustments
for fair presentation, consisting of normal recurring
adjustments except as disclosed herein.
The accompanying unaudited interim financial
statements have been condensed pursuant to the rules
and regulations of the Securities and Exchange
Commission; therefore, certain information and
disclosures generally included in financial statements
have been condensed or omitted. These financial
statements should be read in connection with the
Company's annual financial statements included in the
Company's annual report on Form 10-KSB as of June 30,
1999. The financial position and results of operations
of the interim periods presented are not necessarily
indicative of the results to be expected for the year
ended June 30, 2000.
NOTE 2--RELATED PARTY TRANSACTIONS
For the nine months ending March 31, 2000 and
1999, the controlling shareholder, Neldon Johnson,
contributed $739,937 and $731,000 for research as
additional paid-in capital, respectively. No
additional preferred or common stock was issued.
As of June 30, 1999, the company advanced a
corporation controlled by the Company's majority
shareholder $454,063. For the nine months ended March
31, 2000, the Company has advanced this same
corporation an additional $330,091 and the corporation
paid Company debts totaling $5,764 for net
advancements of $324,327. Total advances are $778,390.
No terms for repayment have been established.
In June 1998, the Company entered into capital
lease obligations with a leasing company for various
equipment. Immediately after entering into the
obligations, the Company subleased the equipment to a
company related through common ownership under the
same terms as the original leases signed by the
Company. The Company has ultimate responsibility to
make all payments regarding the leases. A total of
$134,183 of equipment was acquired and subsequently
subleased under these capital leases. These leases
expire in May 2003. As of March 31, 2000 the Company's
total receivable and payable relating to these lease
obligations were $93,966.
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.
<PAGE>
F-5
NOTE 4--BUSINESS CONDITION
The accompanying financial statements have
been prepared on a going concern basis, which
contemplates the realization of assets and the
satisfaction of liabilities in the normal course of
business. During the three month periods ended March
31, 2000 and 1999, the Company incurred net losses of
$191,809 and $421,934, respectively. During the nine
month periods ended March 31, 2000 and 1999, the
Company incurred net losses of $511,871 and $961,254,
respectively. As of March 31, 2000, the Company's
losses accumulated from inception totaled $5,470,335.
These factors, among others, indicate that the Company
may be unable to continue as a going concern for a
reasonable period of time. The 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. 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.
<PAGE>
F-6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources. As of March 31 , 2000, Registrant had
cash of $17,697 compared to cash of $0 as of June 30, 1999. Cash increased
because of contributions by the majority shareholder. As of March 31, 2000,
total current assets were $41,958 and total assets were $1,191,023 compared
to total current assets $23,523 and total assets $900,156 as of June 30,
1999.
As of March 31, 2000, Registrant had total liabilities of $280,440 and
shareholders' equity of $910,583 as 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 $5,470,335 as of March
31, 2000, compared to $4,958,464 as of June 30, 1999. For the near term the
Company's ability to continue its 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 continuing operating losses. These activities have significant risks
involving the development of technology and the development of products that
may be commercially acceptable and profitable. As of March 31, 2000, the
ratio of current assets to current liabilities was approximately .20 to one.
Results of Operation. For the quarter ended March 31, 2000, Registrant
had total revenues of $0 compared to total revenues of $1,078 for the same
period a year earlier. For the quarter ended March 31, 2000, Registrant had
total operating expenses of $191,677 compared to expenses of $252,340 during
the same quarter a year earlier. As of March 31, 2000, cost of sales was $0
as compared to cost of sales of $62 during the same quarter a year earlier.
For the quarter Registrant had a net loss of $191,809 compared to a net loss
of $421,934 for the same quarter a year earlier. The decrease in net loss
is attributable to the decrease in general and administrative expenses and
a decrease in research and development expenses due to downsizing to meet
the Company's current financial position. For the quarter, the net loss per
share was $(0.01) compared to $(.03) for the same quarter a year earlier.
For the quarter ended March 31, 2000, general and administrative expenses
were $98,242 compared to $119,394 and research and development expenses
were $87,928 compared to $129,396 a year earlier.
For the nine months ended March 31, 2000, Registrant had total revenues
of $0 compared to total revenues of $13,510 for the same period a year
earlier. For the nine months ended March 31, 2000, Registrant had total
operating expenses of $511,318 compared to total operating expenses of
$803,256 during the same period a year earlier. For the nine months ending
March 31, 2000, cost of sales was $0 as compared to cost of sales of $62
during the same period a year earlier. For the nine months ended March 31,
2000, Registrant had a net loss of $511,871 compared to a net loss of
$961,254 for the same period a year earlier. The decrease in net loss is
attributable to the decrease in general and administrative expenses and
research and development expenses due to downsizing to meet the Company's
current financial position. For the nine months ended March 31, 2000 the
net loss per share was $(0.03) compared to $(0.06) for the same quarter a
year earlier. For the nine month period ended March 31, 2000, general and
administrative expenses were $219,532 compared to $343,937 and research and
development expense were $283,911 compared to $448,668 a year earlier.
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. PART 88.
<PAGE>
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.
The Company has filed a civil action complaint in the United States
District Court for the District of Utah Central Division against Optimal
Robotics Corp. and PSC, Inc. alleging patent infringement arising under the
patent laws of the United States, and more specifically, under Title 35,
U.S.C. Sections 271, 281, 283, 284 and 285. The Company has filed a civil
action complaint in the United States District Court for the district of
Utah Central division against The Kroger Company alleging patent
infringement arising under the patent infringement arising under the patent
laws of the United States, and more specifically, under Title 35, U.S.C.,
section 271, 281, 283, 284, and 285.
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
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 5-10-00
International Automated Systems, Inc.
By /S/ Neldon Johnson
- - - - - - - - -------------------------------------------
Neldon Johnson
President and Chief Executive Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 2000, AND STATEMENTS OF OPERATIONS FOR THE NINE MONTHS
ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUN-30-1999
<PERIOD-END> MAR-31-2000
<CASH> 17,697
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41,958
<PP&E> 225,013
<DEPRECIATION> (174,389)
<TOTAL-ASSETS> 1,191,023
<CURRENT-LIABILITIES> 210,735
<BONDS> 0
0
292,786
<COMMON> 6,088,132
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,191,023
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 511,318
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (599)
<INCOME-PRETAX> (511,871)
<INCOME-TAX> (511,871)
<INCOME-CONTINUING> (511,318)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (511,871)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
