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 December 31, 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
(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 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.
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 audit, 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 December 31, 1999, and the results of its
operations and changes in its financial position from June 30, 1999,
through December 31, 1999, and from inception through December 31, 1999,
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
risks.
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS
ASSETS
1999 1999
----------- --------
Current Assets (Unaudited)
Cash and cash equivalents $ 6,443 $ -
Net investment in direct
financing leases -
related party - current portion 23,223 23,523
Prepaid expenses 400 -
----------- ---------
Total Current Assets 30,066 23,523
----------- ---------
Property and Equipment
Computer and electronic equipment 151,978 148,864
Furniture and fixtures 20,982 20,982
Automobiles 22,052 21,657
Leasehold improvements 18,238 18,238
Mobile office 11,764 11,764
----------- ---------
Total Property and Equipment 225,014 221,505
Accumulated depreciation (164,561) (145,035)
------------ ---------
Net Property and Equipment 60,453 76,470
Other Assets
Related party receivable 680,622 454,063
Net investment in direct financing
leases - related party 76,173 88,292
Patents, net of accumulated amortization 255,337 257,808
----------- ----------
Total Other Assets 1,012,132 800,163
----------- ----------
Total Assets $ 1,102,651 $ 900,156
=========== ==========
See accompanying notes to the condensed financial statements.
<PAGE>
-3-
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS (CONTINUED)
December 31, June 30,
1999 1999
----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Funds drawn in excess of cash in bank $ - $ 7,084
Accounts payable 70,815 65,279
Accrued liabilities 71,146 21,906
Note payable - current portion 5,537 7,131
Obligation under capital leases -
current portion 23,223 23,523
----------- ---------
Total Current Liabilities 170,721 124,923
Long Term Liabilities
Notes payable 1,586 4,424
Obligation under capital leases 76,173 88,292
----------- ---------
Total Long Term Liabilities 77,759 92,716
Total Liabilities 248,480 217,639
----------- ----------
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 5,839,911 5,348,195
----------- ----------
Deficit accumulated during the development
stage (5,278,526) (4,958,464)
----------- ----------
Total Stockholders' Equity 54,171 682,517
----------- ----------
Total Liabilities and Stockholders' Equity $ 1,102,651 $ 900,156
=========== ==========
See accompanying notes to the condensed financial statements.
<PAGE>
-4-
<TABLE>
<CAPTION>
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 FOR THE SIX MONTHS THROUGH
------------------------ ------------------------- DECEMBER 31,
1999 1998 1999 1998 1999
---------- ---------- ---------- ----------- ------------
<S>
<C> <C> <C> <C> <C>
Revenue
Sales $ - $ - $ - $ - $ 111,226
Equipment lease income
from related party - 694 - 12,432 32,348
---------- --------- ---------- ----------- -----------
Total Revenue - 694 - 12,432 143,574
Cost of Sales
Cost of sales - - - - 81,927
Write down of carrying
value of inventories - - - - 216,186
---------- -------- ---------- ----------- ----------
Total Cost of Sales - - - - 298,113
---------- -------- ---------- ----------- ----------
Gross Profit/(Loss) - 694 - 12,432 (154,539)
---------- -------- ---------- ----------- ----------
Operating Expenses
General and
administrative 69,655 73,310 121,290 224,543 2,308,526
Research and development
expense 65,952 202,556 195,983 319,272 2,594,135
Amortization expense 1,184 3,551 2,368 7,101 50,068
Stockholder class action
settlement expense - - - - 170,634
---------- -------- ---------- ----------- -----------
Total Operating
Expenses 136,791 279,417 319,641 550,916 5,123,363
---------- -------- ---------- ----------- -----------
Loss From Operations (136,791) (278,723) (319,641) (538,484) (5,277,902)
Other Income and (Expense)
Interest income - 211 46 705 21,291
Interest expense (144) (1,424) (467) (1,541) (21,915)
---------- -------- ---------- ----------- -----------
Net Other Income
(Expense) (144) (1,213) (421) (836) (624)
---------- ---------- ---------- ----------- -----------
$ (136,935) $ (279,936) $ (320,062) $ (539,320) $ 5,278,526
========== ========== ========== =========== ===========
Basic and Diluted Loss
Per Share $ (0.01) $ (0.02) $ (0.02) $ (0.03) $ (0.36)
========== ========== ========== =========== ===========
Common and Preferred
Shares Used in Per
Share Calculation 16,546,361 16,546,361 16,546,361 16,546,361 14,791,482
========== ========== ========== ========== ==========
<FN>
See accompanying notes to the condensed financial statements.
</FN>
</TABLE>
<PAGE>
-5-
INTERNATIONAL AUTOMATED SYSTEMS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
1999 1998 1999
----------- ---------- -----------
<S>
<C> <C> <C>
Cash Flows From Operating Activities
Net loss $ (320,062) $ (539,320) $(5,278,526)
Adjustments to reconcile net income to
net cash provided by operating
activities:
Amortization 2,368 7,101 50,068
Depreciation 19,526 18,473 164,561
Stock based compensation - - 338,497
Change in assets and liabilities:
Prepaid expenses (400) 2,241 (400)
Accounts payable 5,536 24,118 70,815
Accrued liabilities 49,240 6,045 71,146
----------- ---------- -----------
Net Cash Used In Operating Activities (243,792) (481,342) (4,583,839)
Cash Flows From Investing Activities
Purchase of property and equipment (3,509) - (193,893)
Purchase of rights to technology 103 (15,187) (303,525)
Organization costs - - (1,880)
Proceeds from capital lease receivable 12,419 - 34,787
Net cash advanced to related party (226,559) (75,660) (733,876)
Repayment of cash loaned to related party - - 53,254
----------- ---------- -----------
Net Cash Used In Investing Activities (217,546) (90,847) (1,145,133)
Cash Flows From Financing Activities
Proceeds from issuance of common stock - - 1,262,346
Cash from controlling shareholder 491,716 496,000 4,513,587
Payments for treasury stock - - (3,325)
Payments for stock offering costs - - (56,509)
Decrease in bank overdraft (7,084) - -
Proceeds from net borrowings from
related party - - 78,101
Payments on note payable and obligation
under capital leases (16,851) (2,148) (58,785)
----------- ---------- -----------
Net Cash Provided By Financing
Activities 467,781 493,852 5,735,415
Net Increase (Decrease) In Cash and
Cash Equivalents 6,443 (78,337) 6,443
Cash and Cash Equivalents at
Beginning of Period - 92,030 -
---------- ---------- -----------
Cash and Cash Equivalents at End of Period $ 6,443 $ 13,693 $ 6,443
========== ========== ===========
<FN>
See accompanying notes to the condensed financial statements.
<FN/>
</TABLE>
<PAGE> -6-
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 six months ending December 31, 1999 and 1998, the
controlling shareholder, Neldon Johnson, contributed $491,720
and $496,000 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. The
company has advanced this same corporation an additional
$226,276 for the six months ended December 31, 1999. Total
advances are $680,339. 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 December 31, 1999, the
Company's total receivable and payable relating to these lease
obligations were $99,396 and $99,396, respectively.
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.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources. As of December 31, 1999, Registrant
had cash of $6,443 compared to cash of $0 as of June 30, 1999. Cash
increased because of contributions by the majority shareholder. As of
December 31, 1999, total current assets were $30,066 and total assets were
$1,102,651 compared to total current assets $23,523 and total assets
$900,156 as of June 30, 1999.
As of December 31, 1999, Registrant had total liabilities of $248,480
and shareholders' equity of $854,171 as of June 30, 1999. The deficit
accumulated during the development stage was $5,278,526 as of December 31,
1999, 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 December 31,
1999, the ratio of current assets to current liabilities was approximately
.18 to one.
Results of Operation. For the quarter ended December 31, 1999,
Registrant had total revenues of $0 compared to total revenues of $694 for
the same period a year earlier. For the quarter ended December 31, 1999,
Registrant had total operating expenses of $136,791 compared to expenses of
$279,417 during the same quarter a year earlier. As of December 31, 1999
and 1998, cost of sales was $0 for both quarters respectively. For the
quarter Registrant had a net loss of $136,935 compared to a net loss of
$279,936 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 $(.02) for the same quarter a year earlier.
For the quarter ended December 31, 1999, general and administrative
expenses were $69,655 compared to $73,310 and research and development
expenses were $65,952 compared to $202,556 a year earlier.
For the six months ended December 31, 1999, Registrant had total
revenues of $0 compared to total revenues of $12,432 for the same period a
year earlier. For the six months ended December 31, 1999, Registrant had
total operating expenses of $319,641 compared to total operating expenses
of $550,916 during the same period a year earlier. As of December 31, 1999
and 1998, cost of sales was $0 for both periods respectively. For the six
months ended December 31, 1999, Registrant had a net loss of $320,062
compared to a net loss of $539,320 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 six
months ended December 31, 1999 the net loss per share was $(0.02) compared
to $(0.03) for the same quarter a year earlier. For the six month period
ended December 31, 1999, general and administrative expenses were $121,290
compared to $224,543 and research and development expense were $195,983
compared to $319,272 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.
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 2-14-99
International Automated Systems, Inc.
By /S/ Neldon Johnson
------------------------------------
Neldon Johnson
President and Chief Executive Officer
------------------------------------
By /S/ Neldon Johnson
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet as of December 31, 1999, and statements of operations for the six months
ended December 31, 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> DEC-31-1999
<CASH> 6,443
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,066
<PP&E> 225,014
<DEPRECIATION> (164,561)
<TOTAL-ASSETS> 1,102,651
<CURRENT-LIABILITIES> 170,721
<BONDS> 0
0
292,786
<COMMON> 5,839,911
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,102,651
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 319,641
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 421
<INCOME-PRETAX> (320,062)
<INCOME-TAX> 0
<INCOME-CONTINUING> (320,062)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (320,062)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
