-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KVnmGbdFcGqL9UjFz8wRmQkbWheAml2kbF13i7DaQaTYjqs27KED3Q8MQLEg9Irx UDdi43xfWfbYCJHJTulwdQ== 0000820380-97-000006.txt : 19971118 0000820380-97-000006.hdr.sgml : 19971118 ACCESSION NUMBER: 0000820380-97-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971117 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL AUTOMATED SYSTEMS INC CENTRAL INDEX KEY: 0000820380 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 870447580 STATE OF INCORPORATION: UT FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 033-16531-D FILM NUMBER: 97722359 BUSINESS ADDRESS: STREET 1: 512 SOUTH 660 EAST CITY: AMERICAN FORK STATE: UT ZIP: 84003 BUSINESS PHONE: 801763996 MAIL ADDRESS: STREET 1: 512 SOUTH 860 EAST CITY: AMERICAN FORK STATE: UT ZIP: 84003 10QSB 1 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, 1997 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)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 November 10, 1997, Registrant had 15,255,361 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"), 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, the results of its operations and cash flows 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. The Company is a development stage company. Historically its primary activities have been research and development of high 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 (Unaudited) September 30, June 30, 1997 1997 ----------- ----------- ASSETS Current Assets Cash and cash equivalents $ 5,507 $ 7,758 Receivable from sales representatives, net of allowance for doubtful accounts of $40,783 - - Related party receivable 1,304 11,073 Prepaid expenses 9,740 14,813 Inventory 108,092 108,092 ----------- ----------- Total Current Assets 124,643 141,736 ----------- ----------- Property and Equipment Computer and electronic equipment 137,973 137,162 Furniture and fixtures 20,982 20,982 Automobiles 21,657 21,657 Leasehold improvements 18,238 18,238 ----------- ----------- Total Property and Equipment 198,850 198,039 Accumulated depreciation (82,906) (74,288) ----------- ----------- Net Property and Equipment 115,944 123,751 ----------- ----------- Other Assets Patents, net of accumulated amortization of $27,460 and $24,867, respectfully 212,762 211,500 Franchises 10,000 10,000 ----------- ----------- Total Other Assets 222,762 221,500 ----------- ----------- Total Assets $ 463,349 $ 486,987 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 24,179 $ 30,426 Current portion of long-term notes payable 4,045 4,045 Accrued liabilities 5,662 6,541 Advance from majority shareholder 8,000 - ----------- ---------- Total Current Liabilities 41,886 41,012 Notes Payable 5,238 6,221 ----------- ----------- Total Liabilities 47,124 47,233 ----------- ----------- 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, 15,255,361 shares issued and outstanding 3,072,412 2,839,727 Deficit accumulated during the development stage (2,948,973) (2,692,759) ----------- ----------- Total Stockholders' Equity 416,225 439,754 ----------- ----------- Total Liabilities and Stockholders' Equity $ 463,349 $ 486,987 =========== =========== The accompanying notes are an integral part of these financial statements. INTERNATIONAL AUTOMATED SYSTEMS, INC. (A Development Stage Company) CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Cumulative For the Period From Inception (September 26, 1986) For the Three Months Through Ended September 30, September 30, 1997 1996 1997 ---------- ---------- ----------- Revenue Sales $ 400 $ 9,885 $ 108,365 Equipment lease income from related party - - 20,000 ---------- ---------- ----------- Total Revenue 400 9,885 128,365 Cost of Sales 350 5,683 175,465 ---------- ---------- ----------- Gross Profit (Loss) 50 4,202 (47,100) ---------- ---------- ----------- Operating Expenses General and administrative expense 135,477 114,542 1,418,118 Research and development expense 118,106 205,408 1,454,107 Amortization expense 2,593 462 29,340 ---------- ---------- ----------- Total Operating Expenses 256,176 320,412 2,901,565 ---------- ---------- ----------- Loss From Operations (256,126) (316,210) (2,948,665) Other Income and (Expense) Interest income 180 5,492 18,526 Interest expense (268) (274) (18,834) ---------- ---------- ----------- Net Other Income (Expense) (88) 5,218 (308) ---------- ---------- ----------- Net Loss $ (256,214) $ (310,992) $(2,948,973) ========== ========== =========== Net Loss Per Share $ (0.02) $ (0.02) $ (0.18) ========== ========== =========== Common and Common Equivalent Shares Used in Per Share Calculation 16,255,361 16,186,100 16,186,100 ========== ========== =========== The accompanying notes are an integral part of these financial statements. INTERNATIONAL AUTOMATED SYSTEMS, INC. (A Development Stage Company) CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Cumulative For the Period From Inception (September 26,1986) For the Three Month Through Ended September 30, September 30, 1997 1996 1997 ---------- ---------- ----------- Cash Flows From Operating Activities Net loss $ (256,214) $ (310,992) $(2,948,973) Adjustments to reconcile net income to net cash provided by operating activities: Allowance for doubtful accounts - - 40,783 Amortization 2,593 462 29,340 Depreciation 8,618 7,797 82,906 Stock based compensation - - 331,747 Change in assets and liabilities: Inventory - (4,430) (108,092) Sales representatives receivable - (3,501) (40,783) Prepaid expenses 5,073 (5,618) (9,740) Accounts payable (6,247) (7,527) 24,179 Accrued liabilities (879) (274) 5,662 ---------- ---------- ----------- Net Cash Used By Operating Activities (247,056) (324,083) (2,592,971) ---------- ---------- ----------- Cash Flows From Investing Activities Purchase of property and equipment (811) (15,316) (179,493) Purchase of rights to technology (3,855) (18,940) (240,222) Organization costs - - (1,880) Purchase of franchise rights - - (10,000) Proceeds to (payments from) related party 9,769 - (1,304) ---------- ---------- ----------- Net Cash Provided By (Used By) Investing Activities 5,103 (34,256) (432,899) ---------- ---------- ----------- Cash Flows From Financing Activities Proceeds from issuance of common stock - - 912,346 Proceeds from advance from controlling shareholder 232,685 - 2,102,838 Payments for treasury stock - - (3,325) Payments for stock offering costs - - (56,509) Proceeds from net borrowings from related party 8,000 - 86,101 Payments on note payable (983) (906) (10,074) ---------- ---------- ----------- Net Cash Provided By (Used By) Financing Activities 239,702 (906) 3,031,377 ---------- ---------- ----------- Net Increase (Decrease) In Cash and Cash Equivalents (2,251) (359,245) 5,507 Cash and Cash Equivalents at Beginning of Period 7,758 545,847 - ---------- ---------- ----------- Cash and Cash Equivalents at End of Period $ 5,507 $ 186,602 $ 5,507 ========== ========== =========== The accompanying notes are an integral part of these financial statements. 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 results of operations of the interim periods presented are not necessarily indicative of the results to be expected for the entire year. 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, 1997. NOTE 2--LOSS PER SHARE The Company has computed loss per share based on the number of common and preferred shares outstanding as of September 30, 1997 and 1996 under the treasury stock method. NOTE 3--RELATED PARTY TRANSACTIONS During the year ended June 30, 1997, the company advanced a corporation controlled by the Company's majority shareholder $11,073; this advance was paid off in August 1997. Subsequently, the Company has advanced this same corporation an additional $1,304, no terms for repayment have been established. For quarter ending September 30, 1997 $232,684 was advanced by Neldon Johnson for research as additional paid-in-capital. In addition to these advances from Mr. Johnson, he has also loaned the Company $8,000, no terms for repayment have been established. NOTE 4--CONTINGENCIES On July 2, 1996, the Company had a class action law suit filed against it by shareholders for securities violations. The class action has been brought on behalf of all persons and entities who purchased shares of common stock from May 13, 1996 to June 27, 1996. The suit is seeking damages incurred based on the decrease in the Company's stock price because of alleged material misrepresentations by the Company regarding new technology developed by the Company. The ultimate outcome of the litigation cannot presently be determined. Accordingly, no provision for any liability that may result upon adjudication has been made in the accompanying financial statements and the possible effect it will have on future financial statements is unknown. On August 13, 1996 the Company was served a formal order of private investigation by the U.S. Securities and Exchange Commission (SEC). To date, the SEC has issued a subpoena requiring the production of certain documents. The SEC staff has advised that its inquiry should not be construed as an indication by the SEC or its staff that any violations of law have occurred. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources. As of September 30, 1997, Registrant had cash of $5,507 compared to cash of $7,758 as of June 30, 1997. Cash decreased because of the continuing losses from research and development and other activities. Inventory did not change from June 30, 1997. As of September 30, 1997, total current assets were $124,643 and total assets were $463,349 compared to total current assets $141,736 and total assets $486,987 as of June 30, 1997. As of September 30, 1997, Registrant had total liabilities of $47,124 and shareholders' equity of $416,225 compared to total current liabilities of $47,233 and shareholders' equity of $439,754. The deficit accumulated during the development stage was $2,948,973 as of September 30, 1997, compared to $2,692,759 as of June 30, 1997. 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, 1997, the ratio of current assets to current liabilities was approximately 2.98 to one. Results of Operation. For the quarter ended September 30, 1997, Registrant had total revenues of $400 compared to total revenues of $9,885 for the same period a year earlier. For the quarter ended September 30, 1997, Registrant had total operating expenses of $256,176 compared to expenses of $320,412 during the same quarter a year earlier. The decrease in income reflects a lack of sales and increased operating expenses. As of September 30, 1997, cost of sales was $350 compared to $5,683 a year earlier and gross profit was $50 compared to $4,202 a year earlier. For the current quarter Registrant had a net loss of $256,214 compared to a net loss of $310,992 for the same quarter a year earlier. The decrease in net loss is attributable to the decrease in research and development expenses due to downsizing to meet the Company's current financial position. For the current quarter the net loss per share was $(0.02) compared to $(0.02) for the same quarter a year earlier. For the quarter ended September 30, 1997, general and administrative expenses were $135,477 compared to $114,542 and research and development expenses were $118,106 compared to $205,408 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. Part II. Item 1. Legal Proceedings. On July 2, 1996, the Company and its president were named as defendants in a proposed class action lawsuit filed on behalf of certain shareholders seeking damages for violations of the federal securities laws. The Complaint was claims to be brought on behalf of all persons and entities who purchased shares of common stock of the Company during the period of May 13, 1996, to June 27, 1996. The suit seeks damages based on the decrease in the Company's stock price in the trading market because the Company made allegedly material misrepresentations concerning new technology being developed. On August 8, 1996, an amended complaint was filed which increased the number of plaintiffs, added and modified certain allegations, and changed the proposed period from April 3, 1996, to June 27, 1996. At this time the final outcome of the litigation cannot be determined. The Company intends to defend vigorously the litigation. No provision for any liability that may result from any adverse adjudication has been made in the accompanying financial statements and any effect on future financial statements is unknown. The lawsuit is captioned Edouard Serfaty, David D. Baker, Michael Berry, Margaret Moskes, Craig Swapp, Linda M. Baker, Robert H. Baker, Kourosh Khalili and Ariel Tzadik, v. International Automated Systems, Inc., and Neldon P. Johnson, Civil No. 2:96 CV 0583 C, filed in the United States District Court for the District of Utah, Central Division. In August 1996, the Company learned that the U.S. Securities and Exchange Commission issued a formal order of private investigation on or about August 13, 1996, to investigate whether violations of the federal securities laws have occurred. The SEC staff subpoenaed documents from entities and individuals including the Company. Also, the Company is aware that the SEC issued subpoenas to take the testimony under oath and on the records of individuals including persons associated with the Company. Routinely the Staff advised that its inquiry should not be construed as any indication that any violations of law have occurred. In April 1997 a complaint was filed against the Company for breach of contract seeking damages of $60,000 plus interest and attorney's fees. The litigation was filed in the state court in Utah and is captioned Alarm Control Company v. International Automated Systems, Incorporated. The Company believes the suit lacks merit and intends to defend it vigorously. 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 11-14-97 International Automated Systems, Inc. By /S/ Neldon Johnson President and Chief Executive Officer By /S/ Neldon Johnson Chief Financial Officer EX-27 2
5 3-MOS JUN-30-1998 SEP-30-1997 5,507 0 1,304 0 108,092 124,643 198,850 82,906 463,349 41,886 0 0 292,786 3,072,412 0 463,349 400 400 (350) (256,176) 0 (256,126) (88) (256,214) 0 (256,214) 0 0 0 (256,214) (0.02) (0.02)
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