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 July 31, 2000
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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
---- ----
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: As of September 12, 2000 - 11,433,597
shares of common stock, no par value.
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X].
INDEX
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PART I - Financial Information Page
Item 1. Financial statements 2
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Balance Sheets as of July 31, 2000 (unaudited) and April 30, 2000 (audited) 3
Statements of Operations for the three months ended July 31, 2000 and 1999
(unaudited) 4
Statements of Cash Flows for the three months ended July 31, 2000 and 1999
(unaudited) 5
Notes to the Financial Statements for the three months ended July 31, 2000
(unaudited) and the year ended April 30, 2000 (audited) 6-10
Item 2. Management's Discussion and Analysis of Financial Conditions
- ------- ------------------------------------------------------------
and Results of Operations 11-13
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PART II - Other Information 14
Signatures 15
Page 2
PART I Financial Information
Item 1. Financial Statements
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Page 3
IAS Communications, Inc.
(A Development Stage Company)
Balance Sheets
July 31, April 30,
2000 2000
(unaudited) (audited)
$ $
Assets
Current Assets
Inventory 24,246 22,605
Prepaid expenses and other current assets 169,200 153,788
- --------------------------------------------------------------------------------
193,446 176,393
Capital Assets (Note 3) 39,830 41,352
Licence and Patent Protection Costs (Note 4) 385,860 377,872
- --------------------------------------------------------------------------------
619,136 595,617
================================================================================
Liabilities and Stockholders' Deficit
Current Liabilities
Cheques issued in excess of funds on deposit 14,580 18,446
Accounts payable 503,387 495,409
Accrued liabilities 61,234 128,928
Due to related parties (Note 7) 419,834 211,965
Convertible debentures (Note 5) 25,000 35,000
- --------------------------------------------------------------------------------
1,024,035 889,748
- --------------------------------------------------------------------------------
Stockholders' Deficit
Common Stock (Note 6)
Class "A" voting - 100,000,000 shares authorized
without par value; 11,433,597 shares and
11,321,239 shares issued and outstanding
respectively 4,867,724 4,738,949
Class "B" non-voting - 100,000,000 shares
authorized without par value;
none issued - -
- --------------------------------------------------------------------------------
4,867,724 4,738,949
Preferred Stock 50,000,000 shares authorized;
none issued - -
Deficit Accumulated During The Development Stage (5,272,623) (5,033,080)
- --------------------------------------------------------------------------------
(404,899) (294,131)
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619,136 595,617
================================================================================
Commitments and Contingencies (Notes 1 and 8)
(The accompanying notes are an integral part of these financial statements)
Page 4
IAS Communications, Inc.
(A Development Stage Company)
Statements of Operations
Three months ended July 31,
---------------------------
2000 2000
(unaudited) (audited)
$ $
Revenue 6,987 4,810
Cost of Sales 1,588 1,854
- --------------------------------------------------------------------------------
Gross Profit 5,399 2,956
- --------------------------------------------------------------------------------
Administration Expenses
Bank charges 615 355
Business plan - 1,700
Depreciation 1,163 1,020
Foreign exchange 1,625 296
Interest on convertible debentures 378 4,294
Investor relations - consulting 94,311 4,447
Investor relations - advertising 370 7,402
Management fees 7,500 8,632
Office, postage and courier 6,521 14,018
Professional fees 48,391 41,585
Rent and secretarial 22,903 23,713
Telephone and utilities 1,398 3,098
Transfer agent and regulatory 1,372 1,382
Travel and promotion 623 4,123
Less interest income (68) -
- --------------------------------------------------------------------------------
187,102 116,065
- --------------------------------------------------------------------------------
Research and Development Expenses
Royalty 750 750
Depreciation and amortization 8,726 7,585
Consulting 44,488 24,000
Subcontracts for prototype construction and testing 3,876 -
Less engineering contribution by a third party - (33,000)
- --------------------------------------------------------------------------------
57,840 (665)
- --------------------------------------------------------------------------------
Net Loss 239,543 112,444
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Net Loss Per Share (.02) (.01)
================================================================================
Weighted Average Shares Outstanding 11,391,000 10,307,000
================================================================================
(The accompanying notes are an integral part of these financial statements)
Page 5
IAS Communications, Inc.
(A Development Stage Company)
Statement of Cash Flows
Three months ended July 31,
---------------------------
2000 2000
(unaudited) (audited)
$ $
Cash Flows to Operating Activities
Net loss (239,543) (112,444)
Adjustments to reconcile net loss to cash
Depreciation 9,889 8,605
Shares issued for services 90,311 -
Change in non-cash working capital items
(Increase) in inventory (1,641) (8,356)
(Increase) decrease in prepaid expenses
and other current assets (74,362) 92
Increase in accounts payable and accrued
liabilities 27,698 18,700
- --------------------------------------------------------------------------------
Net Cash Used in Operating Activities (187,648) (93,403)
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Cash Flows to Investing Activities
Increase in capital assets (2,773) (1,217)
Increase in patent protection costs (13,582) (7,953)
- --------------------------------------------------------------------------------
Net Cash Used in Investing Activities (16,535) (9,170)
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Cash Flows from Financing Activities
Increase in common stock - 97,000
Increase in due to related companies 207,869 28,998
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Net Cash Provided by Financing Activities 207,869 125,998
- --------------------------------------------------------------------------------
Increase in Cash 3,866 23,425
Cash (Deficiency) - Beginning of Period (18,446) (26,095)
- --------------------------------------------------------------------------------
Cash (Deficiency) - End of Period (14,580) (2,670)
================================================================================
Non-Cash Financing Activities
Convertible debentures and accrued interest
converted into shares 10,875 -
Shares issued to settle debt 117,900 -
- --------------------------------------------------------------------------------
128,775 -
================================================================================
Supplemental disclosures:
Interest paid - 4,294
Income tax paid - -
================================================================================
(The accompanying notes are an integral part of these financial statements)
Page 6
IAS Communications, Inc.
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
1. Development Stage Company
IAS Communications, Inc., herein "the Company", was incorporated on
December 13, 1994 pursuant to the Laws of the State of Oregon, USA.
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 CTHA pursuant to
an agreement with Integral Concepts Inc. and West Virginia University
Research Corporation. See Note 8(c) for legal proceedings regarding
underlying patents.
In a development stage company, management devotes most of its activities
to establishing a new business. Planned principal activities have not yet
produced significant revenues and the Company has suffered recurring losses
from inception, totalling $5,275,623 and has a working capital deficit of
$808,589 which includes a negative cash balance of $14,580. A total of
$117,900 of debt was settled during the quarter by issuing 100,000 common
shares. The above factors raise doubt about the Company's ability to
continue as a going concern. The ability of the Company to emerge from the
development stage with respect to its planned principal business activity
is dependent upon its successful efforts to raise additional equity
financing, develop additional markets for its products, identify additional
licensees and receive ongoing support from the majority of its creditors.
The Company plans to raise net proceeds of approximately $425,000 through a
private placement. The offering will be a best efforts no minimum offering
consisting of 600,000 units at $0.75 per unit. Each unit consists of one
share and one warrant to purchase an additional share at a price of $1.00
for a period of one year from the date of issuance. The Company may also
raise additional funds through the exercise of warrants and stock options,
if exercised. Warrants with respect to 1,616,502 shares may be exercised
and options with respect to 1,133,000 shares may be exercised. These
warrants and options are currently not in-the-money and are unlikely to be
currently exercised. The Company has entered into an agreement and is
committed to pay an estimated $204,400 in time and materials for
professional services in testing and developing five antenna applications.
The Company, after raising $425,000, will require significant additional
capital to provide sufficient working capital to carry out their business
plan for the next twelve months.
2. Summary of Significant Accounting Policies
(a) Basis of Presentation
These financial statements include only the accounts of the Company.
The Eclipse Antenna Manufacturing Co., herein "TEAM", which is 50%
equity owned and 100% controlled through a voting agreement does not
have any assets or operations and the Company's contributions for joint
research and development has been paid directly to the other 50% owner
of TEAM and expensed as paid.
(b) Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the periods. Actual results could differ from those
estimates.
(c) Adjustments
These interim unaudited financial statements have been prepared on the
same basis as the annual financial statements and in the opinion of
management, reflect all adjustments, which include only normal
recurring adjustments, necessary to present fairly the Company's
financial position, results of operations and cash flows for the
periods shown. The results of operations for such periods are not
necessarily indicative of the results expected for a full year or for
any future period.
Page 7
3. Property, Plant and Equipment
July 31, April 30,
2000 2000
Accumulated Net Book Net Book
Cost Amortization Value Value
(unaudited) (audited)
$ $ $ $
Computer and office equipment 20,775 8,780 11,995 13,035
Research and development
equipment 62,774 38,182 24,592 27,450
Vehicle 3,739 496 3,243 867
------ ------ ------ ------
87,288 47,458 39,830 41,352
====== ====== ====== ======
Depreciation per class of
capital asset:
Computer and office equipment 1,040 4,181
Research and development
equipment 3,132 11,050
Vehicle 124 248
4. License and Patent Protection Costs
July 31, April 30,
2000 2000
Accumulated Net Book Net Book
Cost Amortization Value Value
(unaudited) (audited)
$ $ $ $
Licence 250,001 44,792 205,209 208,334
Patent protection costs
(Note 9(c)) 204,318 23,667 180,651 169,538
------- ------ ------- -------
454,319 68,459 385,860 377,872
======= ====== ======= =======
Amortization per class of
intangible asset:
Licence 3,125 12,500
Patent protection costs 2,469 10,491
5. Convertible Debentures
The Company offered three year, 8 % interest, convertible debentures.
Interest is paid annually. The remaining $35,000 of such debentures are
convertible into Class "A" shares at $3.50 on June 15, 2000. In the event
the shares are trading below $4.00 per share over a ten-day average prior
to exercising into shares of the Company during May 16, 2000 to June 16,
2000, the convertible debentures will be exercisable at 20% below the said
ten-day average. The maturity date is June 15, 2000. A total of $10,000 was
converted during the quarter by issuing 12,358 shares. The Company is
awaiting replies from the debenture holders to determine whether the
debentures will be settled by shares or cash.
6. Common Stock
(a) Stock Option Plan
The Company has a Stock Option Plan to issue up to 2,500,000 Class "A"
common shares to certain key directors and employees, approved and
registered October 2, 1996 and amended May 28, 1999. Pursuant to the
Plan the Company has granted stock options to certain directors and
employees. On May 28, 1999 the Company granted stock options to certain
employees to acquire up to 205,000 shares exercisable at $1.00 per share
expiring May 28, 2004.
Page 8
6. Common Stock (continued)
(a) Stock Option Plan (continued)
The options are granted for current services provided to the Company.
Statement of Financial Accounting Standards No. 123 ("SFAS 123")
requires that an enterprise recognize, or at its option, disclose the
impact of the fair value of stock options and other forms of stock
based compensation in the determination of income. The Company has
elected under SFAS 123 to continue to measure compensation costs on the
intrinsic value basis set out in APB Opinion No. 25. As stock options
are granted at exercise prices based on the market price of the
Company's shares at the date of grant, no compensation cost is
recognized. However, under SFAS 123, the impact on net income and
income per share of the fair value of stock options must be measured
and disclosed on a fair value based method on a pro forma basis. As
performance stock is issued for services rendered the fair value of the
shares issued is recorded as compensation expense or capitalized, at
the date the shares are issued, based on a discounted average trading
price of the Company's stock as quoted on the Over The Counter Bulletin
Board.
The fair value of the employee's purchase rights, pursuant to stock
options, under SFAS 123, was estimated using the Black-Scholes model.
The weighted average number of shares under option and option price for
the quarter ended July 31, 2000 is as follows:
July 31, 2000
----------------------------
Weighted
Average
Shares Option
Under Option Price
# $
Beginning of period 1,133,000 1.19
Granted - -
Exercised - -
Cancelled - -
Lapsed - -
--------- ----
End of period 1,133,000 1.19
========= ====
If compensation expense had been determined pursuant to SFAS 123, the
Company's net loss and net loss per share for the three months ended
July 31, 2000 and July 31, 1999 would have been as follows:
2000 1999
$ $
Net loss
As reported (239,543) (112,444)
Pro forma (252,605) (136,281)
Basic net loss per share
As reported (.02) (.01)
Pro forma (.02) (.01)
(b) Private placements/warrants
(i) A total of $1,173,550 was received between November, 1997 and
July 9, 1998 (date of closing) pursuant to a private placement
and foreign offering of 670,600 units at $1.75 per unit. Each unit
contained one share and one warrant to acquire one additional
share at $1.75 per share expiring between November, 1998 and July,
1999 being one year after receipt of funds, of which 48,000
warrants were exercised during the prior year for proceeds of
$84,000, and 5,000 warrants were exercised during the year for
proceeds of $11,250 and the remaining 617,600 warrants are
currently exercisable at $2.25 per share expiring July 2000
(extended).
Page 9
6. Common Stock (continued)
(b) Private placements/warrants (continued)
(ii) During fiscal 1999 the Company issued 200,000 units at $1.00 per
unit for proceeds of $200,000. Each unit contained one share and
one warrant to acquire one additional share at $1.50 per share
expiring April 8, 2000. A total of 13,125 warrants were exercised
during fiscal 2000 for proceeds of $19,687. The remaining
warrants expiry date was extended to October 8, 2000. The units
offering was increased and the price reduced to $0.50 per unit
during the year. A total of 968,902 units were issued for
proceeds of $484,451. Each unit contained one share and one
warrant to acquire one additional share at $1.00 per share
expiring March 1, 2001. These warrants are currently unexercised.
(iii) A total of 30,000 shares are reserved for the exercise of
warrants at $2.85 per share expiring July 22, 2001.
(c) Other stock commitment
The Company is committed, pursuant to a financial consulting contract,
to issuing 10,000 restricted shares monthly for the next two months and
to issue 30,000 shares for a 30,000 share commitment during the
quarter.
7. Due to Related Parties
The amounts due to related parties are non-interest bearing, unsecured and
without specific terms of repayment.
8. Commitments and Contingencies
(a) Contractual Commitments
(i) The Company is committed to issue up to 400,000 Class "A" shares
which shall be earned as to 100,000 shares for every 1,000,000
CTHA's sold.
(ii) See Note 6 for commitments to issue shares upon the exercise of
stock options and warrants.
(b) Contingent liability - Development Stage Company (See Note 1).
(c) Legal Proceedings
(i) The Company was sued in April 1998 in a civil action filed in U.S.
District Court for the District of Oregon (the "Oregon
Litigation"). The Plaintiff, Kirk Vanvoorheis, ("Plaintiff")
sought money damages and equitable relief against the Company
alleging patent infringement by the Company for the CTHA. The
Company notified West Virginia University ("WVU") of this claim
and contacted WVU to assist in the defence. WVU owns the patent
rights to the CTHA technology which were licensed to the Company.
Two patents were granted for the CTHA to WVU; one in August 1995,
and another in August 1997. The Plaintiff's patent was approved on
March 31, 1998.
The Plaintiff in the Oregon Litigation is also a defendant in a
pending civil action in the U.S. District Court for the Northern
District of West Virginia brought by WVU (the "West Virginia
Litigation") claiming that the CTHA invention is owned by WVU. As
alleged in the West Virginia Litigation, the Company believes that
the patent rights for the CTHA technology belongs to WVU and
therefore based on the license, the Company owns the world wide
rights to the CTHA commercial applications. Dr. James Smith, the
former Chairman of the Board of the Company, has been sued by
Plaintiff in a third party complaint in the West Virginia
Litigation together with WVU and Integral Concepts, Inc.
A decision by the United States District Court for the Northern
District of West Virginia will, if upheld on appeal, signal the
end to patent litigation brought by VorteKx, Inc. against the
Company.
VorteKx, Inc. brought a patent infringement action against IAS in
the United States District Court for the District of Oregon on a
patent issued to a former graduate student at WVU, Kurt L.
VanVoorhies, and subsequently assigned to VorteKx. On the
Company's motion, the case was transferred to the Northern
District of West Virginia and consolidated with a previously-
pending action filed by WVU against VanVoorhies, discussed above.
The Company and WVU both claimed that the technology covered by
the patent is actually owned by WVU. The Company is the
sublicensee of commercial applications of the CTHA technology.
Page 10
8. Commitments and Contingencies (continued)
(c) Legal Proceedings (continued)
In a Memorandum Opinion and Order entered February 17, 2000, the
West Virginia federal court granted summary judgment for WVU in
its claims against VanVoorhies. The Court also dismissed
VanVoorhies' claims against WVU and third-party defendants West
Virginia University Research Corporation, Dr. James E. Smith and
Integral Concepts, Inc. Because the Court's holding establishes
that WVU owns the technology, it should bring an end to the
litigation against the Company, which was stayed pending
resolution of the case against VanVoorhies.
The dispute in the WVU action concerned inventions conceived
during VanVoorhies' time at WVU as a graduate student and later as
a graduate research assistant, particularly two inventions
relating to the CTHA technology. The Court found that VanVoorhies
validly assigned all rights in the first invention to WVU,
including all future technology derived from the technology
underlying that invention. VanVoorhies subsequently declined to
assign to WVU any interest in a second invention. The Court found
that the second invention constituted future technology derived
from the first invention. Therefore, VanVoorhies' assignment of
the first invention to WVU also effectively assigned the second
invention to WVU, and WVU is the rightful owner of the patent
applications filed by VanVoorhies on the CTHA technology.
Because one of these patent applications led to the issuance of
the patent underlying VorteKx's infringement suit against the
Company, VorteKx no longer has standing to pursue that
infringement case. The case has been stayed pending VanVoorhies'
appeal from the Court's order.
(ii) On May 16, 2000 the Company filed suit in the United States
District Court for Northern District of West Virginia against
Integral Technologies, Inc., Next Antennas.Com, Inc., Emergent
Technologies Corporation and Jack Parsons (collectively, "the
Defendants"), alleging breach of contract, misappropriation of
trade secrets, interference with economic relations, and breach of
fiduciary duty.
This Company is the exclusive commercial sublicensee of certain
proprietary antenna technology developed by West Virginia
University, including any improvements, modifications or
enhancements thereto ("the Technology"). The Company established a
joint venture (TEAM) with Emergent Technologies Corporation,
exclusive military sublicensee of the Technology, to develop
antennas based on the Technology. Emergent was subsequently
acquired by Integral Technologies, Inc., which recently
announced it is selling antennas to the commercial market through
its wholly-owned subsidiary, Next Antennas.Com, Inc. Jack Parsons
has been the president of Emergent, and a director of Integral.
The Company believes that the defendants are selling antennas in
contravention of their obligations under the sublicense agreements
and otherwise, and in violation of the Company's exclusive rights.
The Company seeks injunctive and affirmative relief and punitive
damages as follows:
- An injunction prohibiting the Defendants from using or
disclosing the Company's trade secrets; or manufacturing,
distributing or selling, any device derived from the Technology
for commercial applications;
- An order requiring the Defendants to account to the Company for
all profits obtained as a result of their alleged breach of
contract, breach of duty of good faith and fair dealing,
misappropriation of trade secrets, interference and/or breach of
fiduciary duty; and to return all proprietary materials and
destroy all devices created in violation of the Company's
rights;
(iii) A money judgment against the Defendants in an amount to be
determined at trial; additional exemplary or punitive damages
calculated to deter such conduct, and attorney fees and costs;
and
(iv) An order requiring the Defendants to hold in trust for the
Company all profits the Defendants have made from commercial
sales of antennas derived from the Technology.
Page 11
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations
---------------------
Management's Discussion
- -----------------------
This report contains forward-looking statements. The words, "anticipate",
"believe", expect", "plan", "intend", "estimate", "project", "could", "may",
"foresee", and similar expressions are intended to identify forward-looking
statements. The following discussion and analysis should be read in conjunction
with the Company's Financial Statements and other financial information included
elsewhere in this report which contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below, as well as those discussed elsewhere
in this report.
Overview
- --------
IAS Communications, Inc. was incorporated on December 13, 1994 pursuant to the
Laws of the State of Oregon, USA.
We are a development stage company engaged in the commercialization of advanced
antenna technology known as the Contrawound Toroidal 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. We have been granted worldwide sublicensing rights for commercial
applications, excluding military and governmental applications, for the CTHA
pursuant to an agreement with Integral Concepts Inc. and West Virginia
University Research Corporation.
As a development stage company, we devote most of our activities to establishing
this new business. Planned principal activities have produced insignificant
revenues and we have suffered recurring losses from inception, totalling
$5,273,000, and we have a working capital deficit of $806,000 as at July 31,
2000 which includes a negative cash balance of $15,000. A total of $118,000 of
trade debt was settled by issuing 100,000 common shares at $1.18 per share. The
above factors raise doubt about our ability to continue as a going concern. Our
ability to emerge from the development stage with respect to our planned
principal business activity is dependent upon our successful efforts to raise
additional equity financing and develop additional markets for our products,
identify additional licensees, and receive ongoing support from the majority of
our creditors.
We plan to raise net proceeds of approximately $425,000 through a private
placement. The offering will be a best efforts no minimum offering consisting of
600,000 units at $0.75 per unit. Each unit consists of one share and one warrant
to purchase an additional share at a price of $1.00 for a period of one year
from the date of issuance. The common stock offered will not be registered under
the Securities Act of 1933 and may not be offered or sold in the United States
absent registration or an applicable exemption from registration requirements.
This disclosure is an not offer to sell securities and is not a solicitation of
an offer to buy securities. We anticipate that sales will be made only to
accredited investors or to persons that are not U.S. residents. No money or
other consideration is being solicited or will be accepted by way of this
disclosure. The common stock offered has not been registered with or approved by
any state securities agency or the U.S. Securities and Exchange Commission and
will be offered and sold pursuant to exemptions from registration.
We may also raise additional funds through the exercise of warrants and stock
options, if exercised. Warrants with respect to 1,616,502 shares may be
exercised and options with respect to 1,133,000 shares may be exercised. These
warrants and options are currently not-in-the-money and are unlikely to be
currently exercised.
We have entered into an agreement and are committed to pay an estimated $204,400
in time and materials for professional services for testing and developing five
antenna applications.
After raising $425,000, we will require significant additional capital to
provide sufficient working capital to carry out our business plan for the next
twelve months.
Legal Proceedings
- -----------------
There is no change to legal proceedings during the quarter and to the date of
this report.
Please see Note 8(c) to the financial statements and our April 30, 2000 Form
10KSB for details on legal proceedings.
We announced on May 16, 2000 we filed suit in the United States District Court
for the Northern District of West Virginia against Integral Technologies, Inc.,
NextAntennas.Com, Inc., Emergent Technologies Corporation and Jack Parsons
Page 12
(collectively, "the Defendants"), alleging breach of contract, misappropriation
of trade secrets, interference with economic relations, and breach of fiduciary
duty.
We are the exclusive commercial sublicensee of certain proprietary antenna
technology developed by West Virginia University, including any improvements,
modifications or enhancements thereto ("the Technology"). We established a joint
venture with Emergent Technologies Corporation, exclusive military sublicensee
of the Technology, to develop antennas based on the Technology. Emergent was
subsequently acquired by Integral Technologies, Inc., which recently announced
it is selling antennas to the commercial market through its wholly-owned
subsidiary, NextAntennas.Com, Inc. Jack Parsons has been the president of
Emergent, and a director of Integral. We believe that the Defendants are selling
antennas in contravention of their obligations under the sublicense agreements
and otherwise, and in violation of our exclusive rights.
We are seeking injunctive and affirmative relief and punitive damages as
follows:
1. An injunction prohibiting the Defendants from using or disclosing our
trade secrets; or manufacturing, distributing or selling any device derived
from the Technology for commercial applications;
2. An order requiring the Defendants to account to us for all profits
obtained as a result of their alleged breach of contract, breach of duty of
good faith and fair dealing, misappropriation of trade secrets,
interference and/or breach of fiduciary duty; and to return all proprietary
materials and destroy all devices created in violation of our rights;
3. A money judgment against the Defendants in an amount to be determined at
trial, additional exemplary or punitive damages calculated to deter such
conduct, and attorney fees and costs; and
4. An order requiring the Defendants to hold in trust for us all profits the
Defendants have made from commercial sales of antennas derived from the
Technology.
Progress Report from May 1, 2000 to July 31, 2000 and to date of this report
- ----------------------------------------------------------------------------
On May 22, 2000, we announced that a professional service agreement was
completed with Cadence Design Systems, Inc. to provide us with a comprehensive
wireless development engineering service for the CTHA. The agreement with
Cadence will enable us to complete an independent analysis of our CTHA
technology for several wireless applications as follows:
- The LEO / GPS CTHA for the Orbcomm Satellite used for tracking trucks,
trailers and valuable merchandise
- cellular phone
- walkie talkie
- two way pagers
- PC's
- PCMCIA
- cordless phone
- several Bluetooth applications.
Cadence is a supplier of electronic design automation products, methodology
services, and design services used to accelerate and manage the design of
semiconductors, computer systems, networking and telecommunications equipment,
consumer electronics, and a variety of other electronics-based products. With
approximately 5,000 employees and 1999 annual revenue of $1.1 billion, Cadence
has sales offices, design centers, and research facilities around the world.
Cadence is headquartered in San Jose, Calif., and trades on the New York Stock
Exchange under the symbol CDN. More information about Cadence, its products and
services may be obtained from the World Wide Web at www.cadence.com.
Y2K Issue
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The Year 2000 risk for information systems, computers, equipment and products
using date sensitive software has passed without any problems whatsoever.
We will continue to monitor the Year 2000 issue but does not anticipate any
problems.
It is not expected that any additional material costs will be incurred in
addressing our Year 2000 compliance.
Results of operations for the three months ended July 31, 2000 ("2000") compared
- --------------------------------------------------------------------------------
to the three months ended July 31, 1999 ("1999")
- ------------------------------------------------
During the latter part of 1999 the Company, through its agreement with
Information-Highway.com, Inc., started selling ham radio antennas and TV
antennas over the Internet. Sales revenue amounted to $7,000 for 2000 as
compared to $5,000 for 1999.
Page 13
The net loss for 2000 was $240,000 compared to $112,000 for 1999. The increase
in net loss, of $128,000 was due to the increase in research and development
expenses to $58,000 as compared to $Nil during 1999, an increase of $58,000. The
increase was due to the Company receiving a $33,000 engineering contribution
during 1999 and the Company incurring $21,000 of additional consulting expense
during 2000 relating to the aforementioned testing and developing of five new
antennae applications. Administrative expenses increased by $71,000 to $187,000
as compared to $116,000 in 1999. Investor relations activity increased by
$83,000 to $95,000 from $12,000 in 1999 as a result of our financial services
contract with Capital Research Inc. whereby we have issued shares for financial
services valued at $90,000.
The Company's net loss per share increased by $0.01 to $0.02 per share from
$0.01 in 1999 as a result of the higher net loss and the increase in outstanding
shares.
Liquidity
- ---------
During 2000 the Company financed its operations by receiving financial support
from companies affiliated with the President of the Company in the amount of
$208,000. These amounts are unsecured, non-interest bearing and due on demand.
During 2000 the Company invested these funds as follows:
(i) $3,000 of these funds were spent on acquiring capital assets.
(ii) $4,000 of these funds were spent on patent protections costs in various
jurisdictions.
(iii) $188,000 of these funds were spent on operating activities as
discussed above under Results of Operations.
Our cash position has increased by $4,000 to negative $15,000 and our working
capital deficit, as at July 31, 2000, is $806,000.
We plan to raise $425,000 and issue 600,000 units at $0.75 per unit. We may also
raise additional funds through the exercise of warrants and stock options, if
exercised. Warrants with respect to 1,616,502 shares may be exercised and
options with respect to 1,133,000 shares may be exercised. These warrants and
options are currently not-in-the-money and are unlikely to be currently
exercised. We have entered into an agreement and are committed to pay an
estimated $204,400 in time and materials for professional services for testing
and developing five antenna applications. After raising $425,000, we will
require significant additional capital to provide sufficient working capital to
carry out our business plan for the next twelve months.
Page 14
PART II Other Information
Item 1. Legal Proceedings
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We announced on May 16, 2000 we filed suit in the United States
District Court for the Northern District of West Virginia against
Integral Technologies, Inc., NextAntennas.Com, Inc., Emergent
Technologies Corporation and Jack Parsons (collectively, "the
Defendants"), alleging breach of contract, misappropriation of
trade secrets, interference with economic relations, and breach of
fiduciary duty.
We are the exclusive commercial sublicensee of certain proprietary
antenna technology developed by West Virginia University, including
any improvements, modifications or enhancements thereto ("the
Technology"). We established a joint venture with Emergent
Technologies Corporation, exclusive military sublicensee of the
Technology, to develop antennas based on the Technology. Emergent was
subsequently acquired by Integral Technologies, Inc., which recently
announced it is selling antennas to the commercial market through its
wholly-owned subsidiary, NextAntennas.Com, Inc. Jack Parsons has been
the president of Emergent, and a director of Integral. We believe that
the Defendants are selling antennas in contravention of their
obligations under the sublicense agreements and otherwise, and in
violation of our exclusive rights. We are seeking injunctive and
affirmative relief and punitive damages as follows:
1. An injunction prohibiting the Defendants from using or disclosing
our trade secrets; or manufacturing, distributing or selling any
device derived from the Technology for commercial applications;
2. An order requiring the Defendants to account to us for all
profits obtained as a result of their alleged breach of contract,
breach of duty of good faith and fair dealing, misappropriation
of trade secrets, interference and/or breach of fiduciary duty;
and to return all proprietary materials and destroy all devices
created in violation of our rights;
3. A money judgment against the Defendants in an amount to be
determined at trial, additional exemplary or punitive damages
calculated to deter such conduct, and attorney fees and costs;
and
4. An order requiring the Defendants to hold in trust for us all
profits the Defendants have made from commercial sales of
antennas derived from the Technology.
Item 2. Changes in Securities
- ------- ---------------------
As of June 15, 2000, a total of 12,358 shares were issued to a
debentureholder with respect to the conversion of his debenture for
$10,000, together with outstanding interest in the sum of $875. The
principal and interest in the sum of $10,875 were converted into
12,358 Class A common stock of the Company at a price of $0.88 per
share, being 80% of the average closing bid during the 10 trading days
prior to the conversion.
On May 29, 2000 a total of 100,000 Class A common stock were issued to
a third party to replace the 100,000 shares that were transferred from
the third party to Capital Research Corporation in consideration for
the investor relations services provided by Capital Research.
Item 3. Defaults upon Senior Securities
- ------- -------------------------------
None
Item 4. Submissions of Matters to a Vote of Security Holders
- ------- ----------------------------------------------------
None
Item 5. Other Information
- ------- -----------------
None
Item 6. Exhibits and Reports on Form 8-K
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27.1 - Financial Data Schedule
Page 15
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: September 12, 2000 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)