================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of
The Securities Exchange Act of 1934
FOR THE QUARTER ENDED COMMISSION FILE NO.
OCTOBER 31, 1996 N/A
---------------- ---
IAS COMMUNICATIONS, INC.
-------------------------------
(Exact name of registrant as specified in its charter)
OREGON 91-1063549
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
185-10751 SHELLBRIDGE WAY, RICHMOND, B.C. CANADA V6X 2W8
- ------------------------------------------------ -------
(Address of principal executive offices) (Postal Code)
Registrant's telephone number, including area code: (604) 278-5996
Last Fiscal Year Ended April 30, 1996
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 preceding 12 months (or for 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
----- -----
Number of shares outstanding of each class of the registrant's Common Stock as
of October 31, 1996.
Common Stock, no par value: 7,919,333
================================================================================
INDEX
- --------------------------------------------------------------------------------
PART I -- Financial Information Page
Item 1. Financial statements.................................................... 2
- ------- --------------------
Balance Sheets at October 31, 1996 and 1995 (unaudited).......................... 3
Statements of Operations Accumulated from
December 13, 1994 (Inception) to October 31, 1996 and the
six months ended October 31, 1996 and 1995 (unaudited)...................... 4
Statement of Stockholders' Equity Accumulated from
December 13, 1994 (Inception) to October 31, 1996 (unaudited)............... 5
Statements of Cash Flows Accumulated from
December 13, 1994 (Inception) to October 31, 1996 and the
six months ended October 31, 1996 and 1995 (unaudited)...................... 6
Notes to the Financial Statements, October 31, 1996 (unaudited)..........7, 8 and 9
Item 2. Management's Discussion and Analysis of Results of
- ------- --------------------------------------------------
Operations and Financial Condition......................................10
----------------------------------
PART II -- Other Information.....................................................11
Signatures.......................................................................12
-1-
PART I Financial Information
Item 1. Financial statements (Unaudited)
- ------- --------------------------------
-2-
IAS Communications, Inc.
(A Development Stage Company)
Balance Sheets
October 31, 1996 and 1995
(unaudited)
1996 1995
$ $
Assets
Current Assets
Cash 139,943 57,642
Prepaid expenses 2,950 4,667
---------- --------
142,893 62,309
Computer equipment 48,000 -
Licence (Note 2) 250,001 250,001
Patents (Note 2) 29,481 14,912
---------- --------
470,375 327,222
========== ========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued liabilities 181,750 77,626
Redeemable Class "A" Shares 197,750 197,750
---------- --------
379,500 275,376
---------- --------
Stockholders' Equity
Common Stock (Note 3), 100,000,000 Class "A" voting
shares authorized without par value; 7,919,333
shares and 7,036,333 shares issued
and outstanding respectively. 1,127,084 322,251
Paid for but unissued - 25,000 shares 56,250 -
100,000,000 Class "B" non-voting shares authorized,
no par value, none issued. - -
Preferred Stock, 50,000,000 shares authorized, no par value. - -
Deficit Accumulated During The Development Stage (1,092,459) (270,405)
---------- --------
90,875 51,846
---------- --------
470,375 327,222
========== ========
Contingency and Commitments (Notes 1 and 5)
-3-
IAS Communications, Inc.
(A Development Stage Company)
Statements of Operations
Accumulated from December 13, 1994 (Inception)
to October 31, 1996 and the six months ended
October 31, 1996 and 1995
(unaudited)
May 1, 1996 May 1, 1995
to to
October 31, October 31,
Accumulated 1996 1995
$ $ $
Revenue - - -
--------- --------- ---------
Administration Expenses
Bank charges 1,241 865 108
Consulting 24,000 - -
Investor relations 64,351 47,855 -
Management fees 112,500 30,000 30,000
Office, postage and courier 20,871 8,807 1,827
Professional fees 191,607 47,261 59,192
Rent and secretarial 42,500 17,000 9,000
Telephone 21,933 10,800 -
Transfer agent and regulatory 7,671 2,973 1,653
Travel and promotion 34,869 23,246 1,790
Less interest (8,276) (1,696) (2,817)
--------- --------- ---------
513,267 187,111 100,753
--------- --------- ---------
Research and Development Expenses
Consulting 31,000 13,333 6,333
Prototype construction and testing 545,192 328,102 79,704
Royalty 3,000 - -
--------- --------- ---------
579,192 341,435 86,037
--------- --------- ---------
Net Loss 1,092,459 528,546 186,790
========= ========= =========
Net Loss Per Share (.07) (.03)
========= =========
Weighted Average Shares Outstanding 7,829,772 7,300,000
(including redeemable shares) ========= =========
-4-
IAS Communications, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
Accumulated from December 13, 1994 (Inception)
to October 31, 1996
(unaudited)
Deficit
Accumulated
Common Common During the
Stock Stock Development
Shares Class "A" Class "B" Stage
# $ $ $
Balance - December 13, 1994 (Inception) - - - -
Shares issued to an officer at incorporation
for cash at $0.10 per share 100 10 - -
Shares issued on December 13, 1994 for
property at a nominal value of $1
in total or $.00000017 per share 6,000,000 1 - -
Shares issued from December 20, 1994 to
January 31, 1995 pursuant to a private
placement at $0.10 per share 700,000 - 70,000 -
Shares issued from December 14, 1994 to
March 6, 1995 pursuant to an offering
memorandum at $0.75 per share 336,333 - 252,250 -
Net loss for the period - - - (83,615)
--------- --------- -------- ----------
Balance - April 30, 1995 7,036,433 11 322,250 (83,615)
Shares issued to an officer at
incorporation donated back to
the Company and cancelled on
July 12, 1995 (100) (10) - -
Share exchange - 322,250 (322,250) -
Shares issued pursuant to options
exercised in April, 1996 at
$0.25 per share 210,000 52,500 - -
Net loss for the year - - - (480,298)
--------- --------- -------- ----------
Balance - April 30, 1996 7,246,333 374,751 - (563,913)
Shares issued from May 1 to
October 31, 1996 pursuant to a
private placement at $1.25 per share 500,000 625,000 - -
Shares issued for services at $.33 per share 25,000 8,333 - -
Shares issued pursuant to options
exercised in June and July, 1996
at $0.25 per share 66,000 16,500 - -
Shares issued pursuant to options
exercised in August, 1996 at $1.25
per share 82,000 102,500 - -
Net loss for the period - - - (528,546)
--------- --------- -------- ----------
Balance - October 31, 1996 7,919,333 1,127,084 - (1,092,459)
========= ========= ======== ==========
-5-
IAS Communications, Inc.
(A Development Stage Company)
Statements of Cash Flows
Accumulated from December 13, 1994 (Inception)
to October 31, 1996 and the six months ended
October 31, 1996 and 1995
(unaudited)
May 1, 1996 May 1, 1995
to to
October 31, October 31,
Accumulated 1996 1995
$ $ $
Cash Flows to Operating Activities
Net loss (1,092,459) (528,546) (186,790)
Adjustment to reconcile net loss to cash
Gain on shares cancelled (10) - (10)
Decrease (increase) in prepaid expenses (2,950) 6,808 (667)
Increase in accounts payable 181,750 146,303 71,874
---------- -------- --------
Net Cash Used in Operating Activities (913,669) (375,435) (115,593)
---------- -------- --------
Cash Flows to Investing Activities
Increase in computer equipment (48,000) (48,000) -
Increase in licence (250,000) - -
Increase in patent protection costs (29,481) (13,993) (14,912)
---------- -------- --------
Net Cash Used in Investing Activities (327,481) (61,993) (14,912)
---------- -------- --------
Cash Flows from Financing Activities
Increase in redeemable shares 197,750 - -
Increase in common stock 1,127,093 752,333 -
Increase (decrease) in subscriptions 56,250 (360,000) -
---------- -------- --------
Net Cash Provided by Financing Activities 1,381,093 392,333 -
---------- -------- --------
Decrease in Cash - (45,095) (130,505)
Cash - Beginning of Period 139,943 185,038 188,147
---------- -------- --------
Cash - End of Period 139,943 139,943 57,642
========== ======== ========
Non-Cash Financing Activity
The Company issued 6,000,000 Class "A"
common shares at a deemed value of $1
in total for property 1 - -
Shares issued to an officer at
incorporation donated back to the
Company and cancelled (10) - (10)
---------- -------- --------
(9) - (10)
========== ======== ========
-6-
IAS Communications, Inc.
(A Development Stage Company)
Notes to the Financial Statements
October 31, 1996
(unaudited)
1. Nature and Continuance of Business
The Company's business purpose is to manufacture and/or licence the rights
to manufacture certain proprietary Torroidal Helical Antenna Technology
("The Technology") excluding military applications and resulting procurement
interests.
These financial statements have been prepared on the basis of a going
concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company has not
generated any revenues or profitable operations since inception. The
Company's activities are in the development stage and additional costs for
the further improvement of The Technology must be incurred. There is
substantial doubt as to the Company's ability to generate revenues and to
continue as a going concern, as the continuation of the Company as a going
concern is dependent on its ability to obtain financing and/or the
attainment of revenues and profitable operations. Management will raise
additional capital through completion of a private placement of shares to
issue 400,000 shares at $2.25 per share to net the treasury $900,000. As at
December 11, 1996, the Company received subscriptions totalling $281,250.
2. Licence and Patents
(a) Licence
Pursuant to the terms of an option agreement dated November 18, 1994
and amended December 16, 1994 between SMR Investments Ltd. ("SMR") and
Integral Concepts Inc. ("ICI") and an assignment of this option
agreement dated December 13, 1994, the Company acquired an exclusive
sublicence to The Technology, subject to entering into a formal
sublicence agreement. Pursuant to the terms of the option agreement,
the Company paid $250,000 to ICI, which owns the exclusive licence
obtained from West Virginia University Research Corporation ("WVURC")
in an agreement dated April 12, 1994. SMR, ICI and WVURC are not
related to each other. Pursuant to the assignment agreement, the
Company issued 3,000,000 shares to each of Access Information Systems
Inc. (A company controlled by SMR) and a director of the Company
(principal of ICI) for a total deemed value of $1 for all 6,000,000
shares issued.
Pursuant to the original licence agreement between WVURC and ICI, ICI
was granted the exclusive licence to manufacture The Technology or
sublicence others to manufacture, market, sell copies of, licence and
distribute The Technology. On July 10, 1995, the Company and ICI
entered into an exclusive sublicence agreement, which incorporates the
terms and conditions of the original licence agreement between WVURC
and ICI. The sublicence will be exclusive, covering any and all
international markets but will exclude all military applications and
resulting procurement interests which will be retained by ICI and WVURC
for development purposes. All improvements and embodiments that are
created as a result of these military applications and additional
research and development efforts by ICI and WVURC will be transferred
directly to the Company. The terms of the sublicence agreement, which
incorporates the financial obligations that ICI owes WVURC pursuant to
the original licence agreement, are as follows:
(i) The Company will pay WVURC a minimum annual royalty starting
December 31, 1995 of $3,000.
(ii) The Company will pay WVURC an earned royalty on sales, leases
or sublicences of The Technology of 10% of net revenues less a
credit for the minimum annual royalty.
-7-
2. Licence and Patents (continued)
(a) Licence (continued)
(iii) The Company will pay ICI a 3% royalty on all gross sales.
All royalties are payable within 30 days of each calendar quarter. The
agreement will be renewed for one year periods after December 31, 1996.
The term of the original licence agreement and the sublicence
agreement, subject to compliance with the terms thereof, is perpetual.
(b) Patents
The Company has paid $29,481 to register and protect patents to October
31, 1996.
3. Common Stock
(a) Stock option activity
Granted
April 30 during the October 31
1996 Price period Exercised 1996
# $ # # # Expiry Date
260,000 0.25 - 66,000 194,000 December 29, 1999
50,000 0.25 - - 50,000 February 24, 2000
37,500 1.25 - 32,000 5,500 March 4, 2001
- 1.50 25,000 - 25,000 August 21, 2001
------- ------ ------ -------
347,500 25,000 98,000 274,500
======= ====== ====== =======
(b) Subscriptions received
Pursuant to a private placement to issue up to 400,000 shares at $2.25
per hare, investors have subscribed for 25,000 shares and deposited
$56,250 into the Company's treasury.
4. Related Party Transactions
(a) A management fee of $2,500 per month and rent and secretarial fees of
$1,500 per month has been paid to Access (controlled by a director,
John Robertson) and $2,500 per month has been paid to a director and
Chairman of the Board, James E. Smith (principal of ICI).
(b) See Note 2 - a 3% royalty on gross sales will be paid to ICI.
-8-
5. Commitments and Contingent Liabilities
(a) Commitments
(i) See Note 2 for ongoing royalty commitments.
(ii) The Company entered into a Phase I agreement with WVURC to fund
the computer modelling portion of the development of The
Technology in the amount of $231,373. The project started
February 15, 1995 and was completed August 15, 1996. A total of
$224,600 has been expended to August 15, 1996.
The Company has entered into a Phase II agreement with WVURC to
further fund the development of The Technology into specific
applications in the amount of $282,975. The project started
August 16, 1996 and is to be completed July 31, 1997. A total of
$50,007 has been spent to October 31, 1996.
(iii) The Company entered into a fixed-price contract with Emergent
Technologies Corporation of Morgantown, West Virginia to fund the
prototype development and testing of specific applications of The
Technology in the amount of $111,271. The contract was completed
and paid in full during the quarter ended July 31, 1996.
The Company has completed a Phase 2 fixed-price contract with
Emergent to develop cellular and personal communications systems
in the amount of $154,864.
(iv) See Note 3 for commitments to issue shares upon the exercise of
stock options.
(b) Contingent liability - Continuance of Business (see Note 1).
-9-
Item 2. Management's Discussion and Analysis of Results of Operations and
- ------- -----------------------------------------------------------------
Financial Condition
-------------------
During the six months ended October 31, 1996 the Company raised $271,250
pursuant to completion of a private placement of 500,000 shares at $1.25 per
share. Additional cash sources was from stock options exercised to net the
treasury $56,500. The Company also raised a further $56,250 to October 31, 1996
pursuant to a private placement of 400,000 shares at $2.25 per share for total
expected proceeds of $900,000. The Company's cash position was $185,000 at the
beginning of the period and together with proceeds from the issuance of shares
totalling $384,000 gave the Company approximately $569,000 of cash resources for
the period. These cash resources were spent on paying accounts payable at April
30, 1996 totalling $35,000 and on general and administrative expenses totalling
$187,000 and research and development of the Technology totalling $341,000 and
patent protection costs totalling $14,000 and computer plotting equipment
totalling $48,000. Of the $625,000 of expenditures a total of $182,000 were not
paid for and are included in accounts payable.
As at October 31, 1996 the Company had $140,000 in cash resources and has
subsequently received $225,000 to December 11, 1996 towards the private
placement of 400,000 shares at $2.25 per share. The Company will have sufficient
working capital to complete the development work contracted by West Virginia
University Research Corporation to July 31, 1997 and for the payment of general
and administrative expenses for the same time period.
-10-
PART II Other Information
Item 1. Legal Proceedings
- ------- -----------------
None
Item 2. Changes in Securities
- ------- ---------------------
None
Item 3. Defaults upon Senior Securities
- ------- -------------------------------
None
Item 4. Submission of Matters to Vote of Securities Holders
- ------- ---------------------------------------------------
a. The Annual Meeting of Shareholders of the Company was held August
21, 1996.
b. At the Annual Meeting, John G. Robertson, James E. Smith, Patrick
Badgley and Paul LaMarche were elected directors of the Company.
Each director received at least 7,200,000 votes out of 7,565,042
shares represented at the meeting.
c. Also at the meeting, a Stock Option Plan of the Company was
approved. At least 7,200,000 shares were voted in favour of the
approval of the Stock Option Plan.
Item 5. Other Information
- ------- -----------------
None
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
None
-11-
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-Q to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: December 12, 1996 IAS COMMUNICATIONS, INC.
Per: /s/ John Robertson
---------------------------------
John Robertson, President and CEO
-12-