U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1997
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[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-21255
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IAS COMMUNICATIONS, INC.
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(Exact name of small business issuer as specified in its charter)
Oregon 91-1063549
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
185-10751 Shellbridge Way, Richmond, BC Canada V6X 2W8
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(Address of principal executive offices)
(604) 278-5996
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(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 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
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State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: As of December 12, 1997 - 9,024,600
shares of common stock, no par value.
INDEX
PART I -- Financial Information Page
Item 1. Financial statements.............................................. 2
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Consolidated Balance Sheets as of October 31, 1997 and 1996 (unaudited)... 3
Consolidated Statements of Operations for the six months ended
October 31, 1997 and 1996 (unaudited)................................... 4
Consolidated Statements of Cash Flows for the six months ended
October 31, 1997 and 1996 (unaudited)................................... 5
Consolidated Statement of Stockholders' Equity from April 30, 1997
to October 31, 1997 and to December 12, 1997 (unaudited)................ 6
Notes to the Consolidated Financial Statements (unaudited)................ 7 and 8
Item 2. Management Discussion and Analysis of Financial Conditions
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and Results of Operations......................................... 9 and 10
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PART II -- Other Information.............................................. 11
Signatures................................................................ 12
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PART I Financial Information
Item 1. Financial statements (Unaudited)
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IAS Communications, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
October 31, 1997 and 1996
(Unaudited)
1997 1996
$ $
Assets
Current Assets
Cash 128,624 139,943
Prepaid expenses 14,550 2,950
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143,174 142,893
Capital Assets 43,567 48,000
Licence and Patents 285,889 279,482
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472,630 470,375
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 86,730 181,750
Accrued liabilities 4,000 -
Due to related companies 11,697 -
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102,427 181,750
Convertible Debenture 40,000 -
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Total Liabilities 142,427 181,750
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Minority Interest 1,893 -
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Redeemable Class "A" Shares - 197,750
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Commitments and Contingencies (Notes 4 and 5)
Stockholders' Equity
Common Stock (Note 3)
Class "A" voting - 100,000,000 shares authorized without
par value; 8,733,500 shares and
7,919,333 shares issued and
outstanding respectively 2,194,959 1,127,084
- paid for but unissued - 278,600
shares 487,550 56,250
Class "B" non-voting - 100,000,000 shares authorized without
par value; none issued - -
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2,682,509 1,183,334
Preferred Stock 50,000,000 shares authorized; none
issued - -
Deficit Accumulated During The Development Stage (2,354,199) (1,092,459)
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328,310 90,875
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472,630 470,375
========== ==========
(The accompanying notes are an integral
part of the financial statements)
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IAS Communications, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
For the six months ended October 31, 1997 and 1996
(Unaudited)
May 1, 1997 May 1, 1996
to to
October 31, October 31,
1997 1996
$ $
Revenue - -
--------- ---------
Administration Expenses
Advertising stock 104,078 -
Bank charges 611 865
Depreciation 400 -
Interest on convertible debentures 970 -
Investor relations 100,484 47,855
Management fees 30,000 30,000
Office, postage and courier 20,730 8,807
Professional fees 15,862 47,261
Rent and secretarial 22,358 17,000
Telephone 12,180 10,800
Transfer agent and regulatory 8,424 2,973
Travel and promotion 3,455 23,246
Less interest (946) (1,696)
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318,606 187,111
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Research and Development Expenses
Consulting 20,000 13,333
Depreciation 12,066 -
Market awareness and development 60,000 -
Prototype construction and testing 631,705 328,102
Royalty 1,500 -
Less: government assistance (50,000) -
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675,271 341,435
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Net loss before minority interest adjustment 993,877 528,546
Minority interest adjustment (248,107) -
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Net Loss 745,770 528,546
========= =========
Net Loss Per Share (.09) (.07)
========= =========
Weighted Average Shares Outstanding 8,605,500 7,829,722
========= =========
(The accompanying notes are an integral
part of the financial statements)
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IAS Communications, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
For the six months ended October 31, 1997 and 1996
(Unaudited)
May 1, 1997 May 1, 1996
to to
October 31, October 31,
1997 1996
$ $
Cash Flows to Operating Activities
Net loss (745,770) (528,546)
Adjustment to reconcile net loss to cash
Minority interest adjustment (248,107) -
Depreciation 12,466 -
Common stock issued for services 120,000 -
Change in non-cash working capital items
Decrease (increase) in prepaid expenses (2,600) 6,808
Increase (decrease) in accounts payable and
accrued liabilities (33,130) 146,303
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Net Cash Used in Operating Activities (897,141) (375,435)
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Cash Flows to Investing Activities
Increase in capital assets (3,386) (48,000)
Increase in patent protection costs (7,260) (13,993)
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Net Cash Used in Investing Activities (10,646) (61,993)
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Cash Flows from Financing Activities
Contribution by minority shareholder of TEAM 250,000 -
Increase in convertible debenture 40,000 -
Increase in common stock 112,300 752,333
Increase (decrease) in subscriptions 487,375 (360,000)
Increase in due to related companies 11,697 -
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Net Cash Provided by Financing Activities 901,372 392,333
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Decrease in Cash During the Period (6,415) (45,095)
Cash - Beginning of Period 135,039 185,038
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Cash - End of Period 128,624 139,943
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Non-Cash Financing Activities
60,000 shares were issued for investor
relations, marketing and advertising services
pursuant to a performance stock plan at a
deemed value of $2.00 per share 120,000 -
100,000 shares were issued for consulting
services rendered in fiscal 1997 pursuant
to a performance stock plan at a deemed
value of $1.17 per share 117,000 -
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237,000 -
======== ========
(The accompanying notes are an integral
part of the financial statements)
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IAS Communications, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
From April 30, 1997 to October 31, 1997 and to December 12, 1997
(Unaudited)
Deficit
Accumulated
Common Stock Class "A" During the
Shares Amount Development Stage
# $ $
Balance - April 30, 1997 8,217,333 1,648,084 (1,608,429)
Stock issued for cash pursuant to
options exercised at $0.25 per share 35,500 8,875 -
a units offering at $1.75 per share 50,000 87,500 -
a private placement at $2.25 per share 7,000 15,750 -
Stock issued for consulting services pursuant
to a performance stock plan issued at a
deemed value of $1.17 per share 100,000 117,000 -
Stock issued for investor relations, marketing
and advertising services pursuant to a
performance stock plan issued at a deemed
value of $2.00 per share 60,000 120,000 -
Release of shares from redeemable status 263,667 197,750 -
Net loss for the period - - (745,770)
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Balance - October 31, 1997 8,733,500 2,194,954 (2,354,199)
Stock issued for cash pursuant to a
units offering at $1.75 per share 278,600 487,550 -
Stock issued for cash pursuant to options
exercised at $0.25 per share 12,500 3,125 -
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Balance - December 12, 1997 9,024,600 2,685,634 (2,354,199)
========== ========== ===========
(The accompanying notes are an integral
part of the financial statements)
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IAS Communications, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Unaudited)
1. Development Stage Company
The Company is a development stage company engaged in the
commercialization of advanced antenna technology known as the
Contrawound Torroidal Helical Antenna, herein "CTHA", for wireless
communications markets including cellular, meter reading and global
positioning services. The CTHA, developed in conjunction with
researchers at West Virginia University, is a technologically
advanced antenna design which can be incorporated into a wide variety
of telecommunications applications. The Company has been granted
worldwide sublicensing rights for commercial applications, excluding
military and governmental applications, for the antenna.
In a development stage company, management devotes most of its
activities to establishing a new business. Planned principle
activities have not yet produced significant revenue. The ability of
the Company to emerge from the development stage with respect to its
planned principle business activity is dependent upon its successful
efforts to raise additional equity financing and develop the market
for its products.
2. Joint Venture Agreement
The Company entered into a joint venture agreement ("JVA") with
Emergent Technologies Corporation (ETC) dated March 4, 1997. The JVA
required a limited company to be incorporated (The Eclipse Antenna
Manufacturing Corporation) ("TEAM") whereby the Company will own 50%
of the issued and outstanding common shares and ETC will own the
remaining 50%. Pursuant to a voting agreement the Company can vote
100% of the shares of TEAM. The control person of ETC will be the
operator. TEAM was organized on June 4, 1997 under the laws of the
State of West Virginia. The Company retains the worldwide commercial
sublicence rights to the CTHA.
The purpose of the joint venture is to cooperate in the research and
development of certain applications for the CTHA and to assemble and
manufacture certain products relating thereto. IAS will buy product
from TEAM at cost to manufacture plus 30% for all commercial
applications and ETC will buy product from TEAM at cost to
manufacture plus 30% for all military applications. ETC acquired the
worldwide sublicense from ICI for all military applications on
January 2, 1997.
IAS has funded TEAM $250,000 as required in the JVA.
3. Common Stock
(a) Stock option activity
April 30, Price Exercised October 31, Expiry
1997 $ # 1997 Date
# #
173,000 0.25 35,500 137,500 December 29, 1999
37,500 0.25 - 37,500 February 4, 2000
3,000 1.25 - 3,000 March 4, 2001
25,000 1.50 - 25,000 August 21, 2001
530,000 2.25 - 530,000 December 19, 2001
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768,500 35,500 733,000
======= ====== =======
-7-
3. Common Stock (continued)
(b) Units offering
A total of $575,000 was received pursuant to a units offering of
328,600 units at $1.75 per unit. Each unit contained one share
and one warrant to acquire one additional share at $1.75 in year
one and $2.25 in year two.
4. Commitments and Contingent Liabilities
(a) Contractual Commitments
(i) The Company entered into an agreement on October 21, 1997
with WVURC to fund ongoing research and development of The
Technology in the amount of $339,358. The budget ending
date is October 20, 1998.
(ii) See Note 5 for ongoing compensation commitments.
(iii) See Note 3 for commitments to issue shares upon the
exercise of stock options and warrants.
(b) Contingent liability - Development Stage Company (See Note 1).
5. Compensation Agreements
(a) Pursuant to a performance stock agreement dated March 5, 1997
and executed May 5, 1997 the Company is committed to issue up to
500,000 shares to the control person of Emergent Technologies
Corporation. A total of 100,000 shares were issued on May 5,
1997 at a deemed value of $1.17 per share for compensation of
$117,000. The amount of $117,000 was accrued as at April 30,
1997 and charged to research and development consulting expense.
The remaining 400,000 shares shall be earned as to 100,000
shares for every 1,000,000 antennas sold up to a maximum of
400,000 shares.
(b) During the period the Company issued 60,000 shares for investor
relations and market awareness services pursuant to a
performance stock plan. The deemed value assigned to the shares
was $2.00 per share.
(c) The Company is committed to pay compensation of $30,000 to each
of Access Information Systems and Dr. Smith for fiscal 1998.
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Item 2. Management Discussion and Analysis of Financial Condition and
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Results of Operations
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May 1, 1997 - December 12, 1997
-------------------------------
The Company is a development stage company engaged in the
commercialization of advanced antenna technology known as the Contrawound
Torroidal Helical Antenna, herein "CTHA", for wireless communications
markets including cellular, meter reading and global positioning services.
The CTHA, developed in conjunction with researchers at West Virginia
University, is a technologically advanced antenna design which can be
incorporated into a wide variety of telecommunications applications. The
Company has been granted worldwide sublicensing rights for commercial
applications, excluding military and governmental applications, for the
antenna.
During fiscal 1997, the Company entered into a joint venture agreement,
herein "JVA", with Emergent Technologies, Corp., herein "ETC" dated March
4, 1997. The JVA required a limited company to be incorporated, The
Eclipse Antenna Manufacturing Corporation, herein "TEAM", whereby the
Company will own 50% of the issued and outstanding common shares and ETC
will own the remaining 50%. Pursuant to a voting agreement the Company can
vote 100% of the shares of TEAM. The control person of ETC will be the
operator. TEAM was organized on June 4, 1997 under the laws of the State
of West Virginia. The Company retains the worldwide commercial sublicense
rights to the CTHA.
The purpose of the joint venture is to cooperate in the research and
development of certain applications for the CTHA and to assemble and
manufacture certain products relating thereto. IAS will buy products from
TEAM at cost to manufacture plus 30% for all commercial applications and
ETC will buy product from TEAM at cost to manufacture plus 30% for all
military applications. ETC acquired the worldwide sublicense from Integral
Concepts, Inc. for all military applications on January 2, 1997.
On June 12, 1997, the Company and ETC announced that TEAM had received its
first order from a company that is a leader in the automatic meter reading
industry.
Currently, the Company is conducting negotiations with four other
potential customers; the new range and manufacturing capability are
expected to hasten the completion of these contracts. Each of these
customers represents a different application for the CTHA, thus providing
an increasing number of CTHA applications and increasing customer base.
The Company and TEAM are negotiating and working with several other large
corporations in the Wireless Communications Business to complete
additional orders for the CTHA.
On July 29, 1997, the Company announced that the second US patent had been
granted on the CTHA. This patent broadens the protection we already have
for the CTHA by encompassing several different geometries not specifically
covered by the first patent of August 15, 1995.
The CTHA is an antenna that is shaped like a donut and is 1/60 the size of
a standard monopole antenna. It can be placed on the ground, the deck of a
boat, or embedded into a cellular phone, pager, or meter reading devices.
It is a low-profile, lightweight antenna, the size of a postage stamp and
can be mass produced inexpensively for numerous wireless applications
giving it an impressive advantage over the conventional monopole and
dipole antennas.
The Company is currently building and testing the CTHA for several
applications including wireless automobile applications and meter reading
applications. The computer program developed by the West Virginia
University originally used to model the CTHA has been successfully
modified, which enables the computer model design to be shortened from
weeks/months to days.
Current interests from several potential customers of the CTHA indicate
that IAS Communications should be prepared to produce large quantities of
antennas for multiple applications over the next two years.
Results of operations for the six months ended October 31, 1997 compared
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to the six months ended October 31, 1996
----------------------------------------
There were no revenues from licensing the CTHA during the two periods.
The net loss in 1997 increased by $217,000 to $746,000 compared to
$529,000 in 1996. Administrative expenses increased by $132,000 to
$319,000 compared to $187,000 in 1996. The major reason for the increase
-9-
was $60,000 worth of shares issued for investor relations, marketing and
advertising during September and October, 1997. Research and development
activity increased by $250,000, net of research income received. This
increase was due to $494,000 spent by the Company's 50% owned TEAM which
has conducted tests for several applications of the CTHA including the
building of prototypes.
Liquidity
---------
During the six months ended October 31, 1997, the Company financed its
operations, in part, from proceeds from a private placement and a units
offering. The Company raised $15,750 and issued 7,000 Class "A" common
shares at $2.25 per share pursuant to a private placement. The Company
raised $575,050 and issued 328,600 shares at $1.75 per share pursuant to a
units offering. The Company also received $8,875 pursuant to options
exercised and issued 35,500 Class "A" common shares at $.25. The Company
has also raised $40,000 pursuant to a convertible debenture and has
received $11,697 pursuant to related company loans.
The Company funded TEAM $250,000 during the period. The $550,000 was spent
on research and development, as to $544,324, and on administration, as to
$1,889. A total of $3,787 in cash remains at October 31, 1997.
The Company's financial resources, including an opening cash balance as at
April 30, 1997 of $135,039, totalled $1,036,411. Cash used, as a result of
the net loss for the year, totalled $861,411, after adjustments to
reconcile net loss to cash and the Company spent $10,646 on computer
equipment and patent protection costs and $35,730 to prepay expenses and
pay down accounts payable.
The Company is committed to spending $339,358 to complete the funding of
the research and development program in conjunction with CIRA.
-10-
PART II Other Information
Item 1. Legal Proceedings
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None
Item 2. Changes in Securities
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None
Item 3. Defaults upon Senior Securities
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None
Item 4. Submissions of Matters to a Vote of Security Holders
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None
Item 5. Other Information
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None
Item 6. Exhibits and Reports on Form 8-K
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None
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Signatures
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: December 12, 1997 IAS COMMUNICATIONS, INC.
By: /s/ John G. Robertson
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John G. Robertson, President
(Principal Executive Officer)
By: /s/ Jennifer Lorette
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Jennifer Lorette, Chief Financial Officer
(Principal Financial Officer)
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