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 JANUARY 31, 1998
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
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 March 6, 1998 - 9,248,100 shares
of common stock, no par value.
INDEX
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Page
PART I - Financial Information
Item 1. Financial statements............................................................................................ 2
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Consolidated Balance Sheets as of January 31, 1998 and 1997 (unaudited).................................................. 3
Consolidated Statements of Operations for the nine months ended January 31, 1998 and 1997 (unaudited).................... 4
Consolidated Statements of Cash Flows for the nine months ended January 31, 1998 and 1997 (unaudited).................... 5
Consolidated Statement of Stockholders' Equity from April 30, 1997 to January 31, 1998 (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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-2-
IAS Communications, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
January 31, 1998 and 1997
(Unaudited)
1998 1997
$ $
Assets
Current Assets
Cash 6,637 274,921
Prepaid expenses 1,341 6,950
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7,978 281,871
Retainer for patent registrations 76,920 -
Capital Assets 43,095 46,827
Licence and Patents 309,789 286,913
---------- ----------
437,782 615,611
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 217,251 70,022
Accrued liabilities 19,345 -
Due to related companies 16,762 -
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253,358 70,022
Convertible Debenture 40,000 -
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Total Liabilities 293,358 70,022
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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;
9,120,600 shares and 8,408,000 shares issued
and outstanding respectively 2,819,634 1,565,834
- paid for but unissued - 20,000 shares (1996: 25,000 shares) 35,000 56,250
Class "B" non-voting
- 100,000,000 shares authorized without par value; none issued - -
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2,854,634 1,622,084
Preferred Stock
- 50,000,000 shares authorized; none issued - -
Deficit Accumulated During The Development Stage (2,710,210) (1,274,245)
---------- ----------
144,424 347,839
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437,782 615,611
========== ==========
(The accompanying notes are an integral part
of these consolidated financial statements)
-3-
IAS Communications, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
For the nine months ended January 31, 1998 and 1997
(Unaudited)
May 1, 1997 May 1, 1996
to to
January 31, January 31,
1998 1997
$ $
Revenue - -
---------- ----------
Administration Expenses
Bank charges 675 601
Depreciation 772 -
Foreign exchange 1,177 -
Interest on convertible debentures 1,845 -
Investor relations - advertising 116,499 -
Investor relations - consulting 105,256 99,289
Management fees 45,000 50,000
Office, postage and courier 44,763 13,089
Professional fees 35,785 78,028
Rent and secretarial 30,412 14,000
Telephone 19,552 28,800
Transfer agent and regulatory 11,982 3,515
Travel and promotion 6,769 27,985
Less interest (1,216) (3,475)
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419,271 311,832
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Research and Development Expenses
Consulting 26,000 20,552
Depreciation 18,501 2,603
Market awareness and development 60,000 -
Prototype construction and testing 933,009 372,345
Royalty 3,000 3,000
Less: government assistance (50,000) -
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990,510 398,500
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Net loss before minority interest adjustment 1,409,781 710,332
Minority interest adjustment (308,000) -
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Net Loss 1,101,781 710,332
========== ==========
Net Loss Per Share .13 .09
========== ==========
Weighted Average Shares Outstanding 8,722,000 7,981,400
========== ==========
(The accompanying notes are an integral part
of these consolidated financial statements)
-4-
IAS Communications, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
For the nine months ended January 31, 1998 and 1997
(Unaudited)
May 1, 1997 May 1, 1996
to to
January 31, 1998 January 31, 1997
$ $
Cash Flows to Operating Activities
Net loss (1,101,781) (710,332)
Adjustment to reconcile net loss to cash
Minority interest adjustment (308,000) -
Depreciation 19,273 2,603
Common stock issued for services 120,000 -
Change in non-cash working capital items
Decrease (increase) in prepaid expenses 10,609 2,808
Increase (decrease) in accounts payable and accrued liabilities 112,736 42,908
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Net Cash Used in Operating Activities (1,147,163) (662,013)
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Cash Flows to Investing Activities
Increase in capital assets (5,686) (49,430)
Increase in patent protection costs (35,195) (21,424)
Retainer for patent registrations (76,920) -
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Net Cash Used in Investing Activities (117,801) (70,854)
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Cash Flows from Financing Activities
Contribution by minority shareholder of TEAM 308,000 -
Increase in convertible debenture 40,000 -
Increase in common stock 736,800 822,750
Increase (decrease) in subscriptions 35,000 -
Increase in due to related companies 16,762 -
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Net Cash Provided by Financing Activities 1,136,562 822,750
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Increase (Decrease) in Cash During the Period (128,402) 89,883
Cash - Beginning of Period 135,039 185,038
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Cash - End of Period 6,637 274,921
========== ========
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 -
25,000 shares were issued at $0.333 per share to
settle debt of $8,333 - 8,333
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237,000 8,333
========== ========
(The accompanying notes are integral part
of these consolidated financial statements)
-5-
IAS Communications, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
From April 30, 1997 to January 31, 1998
(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 70,000 17,500 -
options exercised at $1.50 per share 4,000 6,000
a units offering at $1.75 per share 398,600 697,550 -
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 - - (1,101,781)
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Balance - January 31, 1998 9,120,600 2,819,634 (2,710,210)
========= ========= ==========
(The accompanying notes are integral part
of these consolidated financial statements)
-6-
IAS Communications, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
For the nine months ended January 31, 1998 and 1997
(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.
Each of ETC and IAS has funded TEAM $308,000 which has been spent entirely
on research and prototype development.
3. Common Stock
(a) Stock option activity
April 30, Price Exercised January 31, Expiry
1997 $ # 1998 Date
# #
173,000 0.25 70,000 103,000 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 4,000 21,000 August 21, 2001
530,000 2.25 - 530,000 December 19, 2001
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768,500 74,000 694,500
======== ====== =======
-7-
3. Common Stock (continued)
(b) Units offering
A total of $898,800 has been received to March 6, 1998 pursuant to a
units offering of 513,600 units at $1.75 per unit. Each unit contains
one share and one warrant to acquire one additional share at $1.75 per
share in year one and $2.25 per share in year two. The unit offering
has been increased from 500,000 units to 800,000 units and the date of
closing has been extended to July 1, 1998.
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. A total of $179,578 of this budget has
been spent to January 31, 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.
-8-
Item 2. Management Discussion and Analysis of Financial Condition and Results
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of Operations
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May 1, 1997 - March 6, 1998
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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.
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 the
Company should be prepared to produce large quantities of antennas for multiple
applications over the next two years.
The Company has entered into a joint venture agreement with Emergent
Technologies, Corp., herein "ETC" whereby a limited company was incorporated,
The Eclipse Antenna Manufacturing Corporation, herein "TEAM". The Company owns
50% of the issued and outstanding common shares and ETC owns the remaining 50%.
Pursuant to a voting agreement the Company can vote 100% of the shares of TEAM.
The control person of ETC is the operator. 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 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.
On January 22, 1998, the Company announced that Circuit Systems, Inc. has agreed
to commence production on the CTHA. Circuit Systems is located in Elk Grove
Village, Illinois and is an underwriters laboratory recognized manufacturer of
single-sided, double-sided and multi-layer printed circuit boards. Circuit
Systems is reputed for producing high volume quality printed circuit boards and
special orders with short lead time. Several new CTHA's are currently being
built and tested for various potential customers by TEAM, including meter
reading, wireless automotive keyless devices, cellular communications, global
positioning, satellites, low earth orbiting satellites, personal communication
systems, local area networks, wide area networks and personal digital
assistants.
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.
-9-
Results of operations for the nine months ended January 31, 1998 compared to the
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nine months ended January 31, 1997
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There were no revenues from licensing the CTHA during the two periods.
The net loss in 1998 increased by $392,000 to $1,102,000 compared to $710,000 in
1997. Administrative expenses increased by $108,000 to $419,000 compared to
$312,000 in 1997. The major reason for the increase was $60,000 worth of shares
issued for investor relations, marketing and advertising during September and
October, 1997. Research and development activity increased by $642,000, net of
research income received. This increase was due to $616,000 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 nine months ended January 31, 1998, 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 shares at $2.25 per share
pursuant to a private placement. The Company raised $697,550 and issued 398,600
shares at $1.75 per share pursuant to a units offering. The Company also
received $523,500 pursuant to options exercised and issued 74,000 shares. The
Company has also raised $40,000 pursuant to a convertible debenture and has
received $17,000 pursuant to related company loans.
The Company and ETC each funded TEAM $308,000 during the period which was spent
on research and prototype development.
The Company's financial resources, including an opening cash balance as at April
30, 1997 of $135,000, totalled $1,322,000. Cash used, as a result of the net
loss for the year, totalled $1,197,000, after adjustments to reconcile net loss
to cash and the Company spent $118,000 on computer equipment and patent
protection costs.
The Company is committed to spending $160,000 by October 20, 1998 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
- ------- ---------------------
None
Item 3. Defaults upon Senior Securities
- ------- -------------------------------
None
Item 4. Submissions of Matters to a Vote of Security Holders
- ------- ----------------------------------------------------
None
Item 5. Other Information
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None
Item 6. Exhibits and Reports on Form 8-K
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None
-11-
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: March 6, 1998 IAS COMMUNICATIONS, INC.
By: /s/ John G. Robertson
---------------------------------
John G. Robertson, President
(Principal Executive Officer)
By: /s/ Jennifer Lorette
---------------------------------
Jennifer Lorette, Chief Financial
Officer (Principal Financial Officer)
-12-