IAS COMMUNICATIONS INC, 10KSB40, 1996-07-31

IAS COMMUNICATIONS INC
10KSB40, 1996-07-31
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------

FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
THE SECURITIES ACT OF 1934

For the Fiscal Year Ended April 30, 1996

COMMISSION FILE NO. 0-23920

IAS COMMUNICATIONS, INC.
(Name of small business issuer as specified in its charter)

OREGON 91-1063549
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

185 - 10751 SHELLBRIDGE WAY
RICHMOND, BRITISH COLUMBIA V6X2W8, CANADA
(Address, including postal code, of registrant's principal executive offices)

(604) 278-5996
(Telephone number including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act: NONE

Securities registered pursuant to Section 12(g) of the Exchange Act: NONE

Indicate by check mark whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months, and (2) has been subject to such filing requirements for the past 90
days. Yes X
-

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B is not contained herein and will not be contained, to
the best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this form 10-KSB or any amendment to
this Form 10-KSB. X
-

The registrant's revenues for its most recent fiscal year were: nil.

The Aggregate market value of the voting stock held by non-affiliates
of the registrant on July 25, 1996, computed by reference to the price at which
the stock was sold on that date: $3,606,000.

The number of shares outstanding of the registrant's Class A voting
Common Stock, no par value, as of July 3, 1996 was 7,803,000.

Documents incorporated by reference: none

- -------------------------------------------------------------------------
<PAGE> 2
IAS COMMUNICATIONS, INC.

FORM 10-KSB

TABLE OF CONTENTS

PART I Page
----

Item 1. Introduction......................................................3
Item 2. Property..........................................................7
Item 3. Legal Proceedings.................................................7
Item 4. Submission of Matters to a Vote of Security Holders...............7

PART II

Item 5. Market for Common Equity and Related Stockholder Matters .........8

Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................8

Item 7. Financial Statements.............................................11

Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.........................................12

PART III

Item 9. Directors and Executive Officers of the Registrant...............13
Item 10. Executive Compensation...........................................15
Item 11. Security Ownership of Certain Beneficial Owners and Management ..17

PART IV

Item 12. Exhibits and Reports on Form 8-K.................................19

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<PAGE> 3
ITEM 1. INTRODUCTION

THE COMPANY

The Company is a development stage corporation recently formed under
the laws of the State of Oregon and has not generated any revenues from the
operation of its proposed business. The proposed business of the Company is to
develop the toroidal helical antenna ("THA") and license the rights to
manufacture the THA to third parties in North America.

RESEARCH AND DEVELOPMENT

On February 14, 1995, the Company entered into an agreement with West
Virginia University Center for Industrial Research Applications ("WVUCIR") to
test and demonstrate the size and efficiency advantages that the THA possesses
over traditional monopole antennas by completing computer simulation and design,
fabrication and testing of commercially viable prototypes. By the terms of the
agreement, the Company will pay a total of $231,372.67 to WVUCIR. A total of
$155,590 has been expended through April 30, 1996. The Company believes that the
testing by WVUCIR will complete the research and development of the THA. WVUCIR
does not obtain any rights to the THA technology by virtue of its testing. The
Company entered into this agreement with WVUCIR before ICI granted the July 10,
1995 sublicense, in contemplation of and in the belief that the sublicense would
be granted to the Company in the near future.

On July 10, 1995 the Company and Integral Concepts Inc., hereinafter
called ICI, entered into an exclusive sublicense agreement that gives the
Company the same terms and conditions of the license agreement between West
Virginia University Research Center, hereinafter called WVURC, and ICI as
follows:

1. The Company will pay a minimum annual royalty starting December
31, 1995 of $3,000.00.

2. The Company will pay WVURC 10% of net revenue on earned royalties,
leases or sublicenses.

3. The Company will pay ICI a 3% royalty on all gross sales.

The Company has 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 THA Technology in the amount
of $111,271.00. A total of $60,000.00 has been paid to April 30, 1996.
A final report is expected by June 30, 1996.

Additional research and development of both a scientific and practical
nature is required to complete the commercialization of the THA.

THE PRODUCT

The THA is a low profile, resonant antenna. It has a toroidal
(donut-shaped) geometry about which has been wrapped helical windings (coils).
The THA Technology is a low profile, resonant antenna. It has a toroidal (donut
shaped) geometry about which has been wrapped helical windings (coils). Compared
to traditional dipole and monopole antennas, the THA Technology is

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<PAGE> 4
much shorter in height (about 1/60th of the other antennas), yet its toroidal
magnetic field is equivalent to the linear electric fields produced by other
antennas. The windings occur in pairs which are wrapped with opposite pitch to
each other (i.e. left handed windings versus right handed windings) and are
referred to as contra- windings. The small size of the THA results from both the
effect of taking long wires and wrapping them onto a small geometry and the
winding interactions which serve to slow the propagation of the electrical
current within the antenna (thus behaving as a larger, lower frequency antenna).

The whole unit is ground plane independent. Traditional antennas are
dependent on the conductive plane found at the surface of the earth to achieve
geographic coverage. For that reason the higher above the surrounding terrain
that an antenna is installed, the greater its range of coverage. The THA appears
from anecdotal data and observed practical experiments to achieve its range of
coverage without reference to or being dependent on the conductive ground plane.
The result of "ground plane independence" it that the THA does not need to be
mounted on a tall tower or at the top of a mountain. The THA' s coverage
apparently can be achieved with a ground level installation. The elimination of
such towers is a major cost advantage and reduces interference in the visual
environment as well as in the physical environment. Signals are fed to the
antenna through up to four networks which attach to the structure at
evenly-spaced locations. Resulting electromagnetic fields act as if they are
solely produced by a ring of pure magnetic currents; in other words, the
contributions due to electric currents are canceled. This planar ring of
magnetic current is electromagnetically equivalent to a linear electric current.
The THA has not been manufactured for commercial use at this time. Two
prototypes have been created and are currently being tested by the Department of
Defense. The two prototypes were developed by a West Virginia University
research team under the direction of Dr. Smith. While the Company's license for
the THA does not include military application, the Company believes that the
results from the testing by the Department of Defense will verify the practical
application of the THA for non-military uses.

Compared to traditional dipole and monopole antennas, the THA is much
shorter in height (about 1/60th of the other antennas), yet its toroidal
magnetic field is equivalent to the linear electric field produced by other
taller antennas. This makes THAs particularly excellent candidates for low
frequency broadcast transmission that otherwise require prohibitively tall
monopole structures above the earth ground plane. For higher frequency
applications, for example, the Company believes that the THA could replace a car
antenna with a structure that could be made part of the rear view mirror or
similarly sized object. There is no assurance, however, that such replacement
would in fact be practical or achievable.

The Company believes that the THA also outperforms monopole antennas by
over 300% in distances achieved. The basis for this statement is the United
States Department of Defense as reported by Mr. Jack Parsons of Wintec, Inc.
Wintec, Inc. ("Wintec") is paid $2,000.00 per month to advise the Company on the
progress of the tests by the Department of Defense. Wintec's agreement with the
Company is oral and there are no written documents to reflect the terms. While
the Company's license for the THA does not include military applications, the
Company believes that the results from the Department of Defense testing will
support the non-military application and use of the THA. In addition, the THA is
half the diameter of the ground plane structure necessary for quarterwave
monopole antennas. According to Mr. Parsons, the United States Department of
Defense tested the THA at distances of over 37 miles, which is much farther than
the typical 10 mile distances for monopole antennas over a period of several
weeks.

Due to the THA's ground plane independence, it, unlike other antennas,
is not affected by placement. Resonant operations of the THA provides improved
efficiency. In addition, THA's are

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lighter, cost substantially less than other antennas, are more aesthetic, and,
for commercial broadcast antennas, are less hazardous to aircraft because of the
elimination of a tower. The manufacture of one of the prototypes confirmed the
lower cost. The primary reason for the lower cost is the elimination of the
tower to raise the THA above the ground.

Potential uses of THAs include the military, ranging from infantry and
artillery to intelligence and signal units, and civilian uses. The Company,
however, has no right to the military application of the THAs. The civilian uses
include AM, FM and TV broadcasting and reception, as well as cellular phone and
other two-way communication. Also, the THAs could be used by law enforcement
agencies such as the FBI, ATF, immigration and naturalization units, and
intelligence units. The THA has not been used for any of the civilian uses
described above and accordingly there are no assurances that the THA could ever
operate as anticipated.

Possible future alterations may improve the THA even more. There are no
assurances that the future alterations discussed herein will be able to be made
or that such alterations will result in even greater cost reductions of the THA.
Future diameter reductions (a reduction as much as two orders of magnitude,
achieved by increasing the number of turns or by the use of ferrite cores) will
allow for upgrades and broad band applications. A longer distance of
communication is also possible. All of these improvements, in addition, will
contribute to even greater cost reduction of the THA.

ADVANTAGES/DISADVANTAGES

The principle advantages of this antenna are: (1) low physical profile;
(2) resonant operation providing improved efficiency; and, (3) low
susceptibility to electrostatic disturbances. The THA is well suited to long
distance communication applications which require vertical polarization for
improved efficiency. The low physical profile is conducive to flush mounted
applications for reducing aerodynamic drag on vehicles. For low frequency fixed
applications, the significantly shorter structures can be made lighter, more
economical, and more aesthetic, and less hazardous to aircraft, than the tall
antenna structures that are presently used. The THA can be constructed on
rectangular or polygonal frames which can be folded and stored for portable
applications. A specific configuration of the THA, the QuadContra antenna, has
been developed in an attempt to maximize performance. The Quad Contra Antenna
("QCA") is based entirely upon the technology of the THA. It involves winding
the THA with necessary lengths of insulated wire to create multiple antennas. No
QCAs have been manufactured and there is no assurance any QCAs will ever be
developed or manufactured. The Company is unaware at this time of any
disadvantages of the THA. The THA is still in the testing and development stage
and accordingly there is no assurance that the technology will operate as
anticipated.

APPLICATIONS

There are many applications which can exploit the advantages of the
THA. The small size and especially low profile make it well suited to both
commercial and military applications that would benefit from an inconspicuous
antenna package. These would include both land, air and sea vehicles. The low
profile and magnetic principle of operation enable the antenna to be concealed
in the fuselage of the body of an airplane, car, truck, train or boat so as to
reduce drag. The THA can also be applied in commercial applications, including
AM, FM and TV broadcasting and reception, and cellular phone communications. The
company's license does not include military applications.

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<PAGE> 6
PRODUCTION

The Company intends to contract with independent third parties to
manufacture the THA. The Company has not entered in to any negotiations with any
manufacturer as of the date hereof, but believes that there are a number of
manufacturers who are capable of manufacturing the THA. The Company has
contacted several such manufacturers. Two such manufacturers have advised the
Company that they are interested in manufacturing the THA. There is no assurance
that the Company will enter into an agreement with anyone to manufacture the
THA. Accordingly, in the event that the Company does not enter into an agreement
to manufacture the THA or in the event the Company locates a manufacturer that
subsequently ceases operations for any reason, serious financial consequences to
the Company could result.

LICENSING

The Company also intends to license the technology to manufacture the
THAs to third parties. The licenses will be limited to specific geographical
areas on an exclusive or nonexclusive basis, depending upon the terms of the
license. The Company has not entered into any negotiations with anyone to
license the THA technology as of the date thereof.

PATENTS

West Virginia University Research Corporation has received a patent for
the THA. The Company is not affiliated with West Virginia University ("WVU").
Dr. Smith is a tenured professor at WVU and conducts his research and
development regarding the THA at WVU's facilities. As a result thereof, the
WVURC owns the patent rights to the THA which it licensed to ICI. The license
between the WVURC and ICI provides that ICI can grant sublicenses to third
parties to the technology covered by the patent. On July 10, 1995, ICI issued
such a sublicense to the Company.

COMPETITION

The market for antennas is highly competitive. There are numerous
manufacturers of antennas in the United States with substantially greater
financial, technical, marketing and other resources than the Company. To the
Company's knowledge, no competitors are currently manufacturing any product
which is substantial similar to the THA and patent research does not reveal any
competing technology. The Company has not determined if it will compete with
satellite dishes.

SALES AND MARKETING

The Company intends to market the THA' s and licensing agreements
through independent sales representatives. As of the date hereof, the Company
has not retained any independent sales representatives.

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ITEM 2. PROPERTY

The Company's headquarters and executive offices are located at
#185-10751 Shellbridge Way, Richmond, British Columbia V6X2W8 and the telephone
number is (604)278-5996. The Company leases, on a month-to-month basis,
approximately 200 square feet of space at the aforementioned office from John
Robertson. The monthly rent fee is $500.00.

ITEM 3. LEGAL PROCEEDINGS

The Officers and Directors of the Company certify that to the best of
their knowledge, neither the Company nor any of its Officers and Directors are
parties to any legal proceeding or litigation other than as described below.
Further, the Officers and Directors know of no threatened or contemplated legal
proceedings or litigation other than as described below. None of the Officers
and Directors have been convicted of a felony or none have been convicted of any
criminal offense, felony and misdemeanor relating to securities or performance
in corporate office. To the best of the knowledge of the Officers and Directors,
no investigations of felonies, misfeasance in office or securities
investigations are either pending or threatened at the present time, other than
as described below:

John Robertson, the Company's President, Chief Executive Officer and a
member of the Board of Directors is a defendant in a lawsuit captioned Keltic
Bryce Enterprises Inc. v. Teryl Resources Corp., David Ian Hodge, D. Stafford
Johnston, Lydia Lowe, Gary Medford, John G. Robertson and Susanne M. Robertson,
Case No. C930366 pending in the Supreme Court of British Columbia wherein it is
alleged that on December 3, 1991, Teryl Resources Corp. ("Teryl") issued a
convertible debenture to Keltic Bryce Enterprises Inc. ("Keltic") in
consideration of $150,000. The debenture was convertible into common stock and
warrants at the election of Keltic. Keltic elected to convert the debenture, but
Teryl did not or could not convert the same pursuant to its agreement. It is
alleged that John Robertson was a director of Teryl at all times mentioned and
accordingly is liable for damages and punitive damages as a result thereof, all
in accordance with the laws of British Columbia. Keltic is seeking undisclosed
actual and punitive monetary damages to be determined by a jury. John Robertson
denies the allegations. The case is currently pending in the aforementioned
court.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote by the Company's security holders
during the fourth quarter of its fiscal year ended April 30, 1996.

7
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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

There is a limited public market for the Common Stock of the Company
which currently trades on the NASD OTC Bulletin Board under the symbol "IAS"
where it has been traded since April 16, 1996. The Company's Common Stock has
been traded at between $1.75 and $2.00 per share since April 16, 1996.

As of July 3, 1996, there were 7,803,000 shares of Common Stock
outstanding, held by 81 shareholders of record and by various broker/dealers on
behalf of 246 street name shareholders.

DIVIDEND POLICY

To date the Company has not paid any dividends on its Common Stock and
does not expect to declare or pay any dividends on such Common Stock in the
foreseeable future. Payment of any dividends will be dependent upon future
earnings, if any, the financial condition of the Company, and other factors as
deemed relevant by the Company's Board of Directors.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATIONS

RESULTS OF OPERATIONS - INCEPTION (DECEMBER 13, 1994) THROUGH APRIL 30, 1996.

The Company is a development stage start-up company with no operating
history and no revenues or earnings from operations. There is no assurance that
the Company will ever have material revenues or that its operations will be
profitable.

The Company has no commitments for lines or letters of credit.

The 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 doubt as to the Company's ability to
generate revenues and to continue as a going concern. 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 plans to
raise capital with private placements, public offerings and the exercise of
stock options.

From December 1994 to March 1995, the Company sold 1,300,000 shares of
its Class B Nonvoting Common Stock to residents of the United States of America
and Canada. In the United States, the Class B Nonvoting Shares of Common Stock
were sold to residents of Arizona, California, Florida, Georgia, Idaho,
Illinois, Michigan, Nevada, New Jersey, new York, North Carolina, Ohio, Oregon,
Pennsylvania, Texas, Washington and Wisconsin. None of the shares were
registered with any state or federal securities agencies. As a result, the
Company believes that the sales in Arizona, California, Florida, Georgia,
Illinois, Michigan, Nevada, New York, Pennsylvania, Texas and Washington
violated the respective state securities laws, which could result in the

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Company returning up to $197,749.75 plus interest to the purchasers in those
states. In addition, Class B Nonvoting Shares were sold in the Canadian
Provinces of Manitoba, Alberta and Saskatchewan without registration, which
could result in the Company returning an additional $10,125.00. The foregoing
could have an adverse effect upon the Company's operations. Currently, the
Company does not have adequate funds to pay all of the claims as a result of the
aforementioned violative sales. In the event all of the purchasers make claims,
the Company will have to raise additional funds through the sale of equity or
debt securities. There is no assurance, however, that the Company can obtain
sufficient funds to pay all of the claims and accordingly, it is conceivable
that the Company may have to cease operations.

During the year holders of 1,300,000 Class "B" non-voting shares agreed
to exchange these shares for 1,300,000 Class "A" voting shares. Of the 1,300,000
Class "A" shares issued and outstanding, 263,667 are redeemable Class "A"
shares.

Between December 14, 1994 and March 6, 1995 the Company received
subscriptions for 263,667 Class "B" shares and received $197,750 from investors
in states where they have the right to revoke their subscription and demand
their investment be returned to them within three years of subscription as to
$161,500 and within six years as to $36,250. The 263,667 redeemable Class "B"
shares were issued and then exchanged for 263,667 Class "A" shares, and are
outstanding. To date, holders of these shares have not revoked their
subscriptions.

Initial operations will include locating a proposed manufacture and
begin the promotion of the THA. Further, the Company intends to license the
technology to manufacture the THAs to third parties. The Company has not entered
into any negotiations to manufacture or license the THA technology. While the
license to military applications of the THA has not been granted to the Company,
the Company believes that such exclusion will not have any adverse effect on the
Company.

LIQUIDITY AND CAPITAL RESOURCES

The Company issued 6,000,000 shares of its Class A Voting Common Stock
for a total of $1.00 as partial consideration to acquire an option to acquire an
exclusive license to manufacture and/or license the rights to manufacture the
toroidal helical antenna. The option was acquired from a director and a company
controlled by a director by issuing 3,000,000 shares to each of the related
parties. The Company issued 100 shares of its Class A Voting Common Stock for
$10,00 in cash, which were donated back to the Company and canceled on July 12,
1995 and 1,300,000 shares of its Class B NonVoting Common Stock for $520,000 in
cash. The cash and property has been used for organizational matters and
preparation of the prospectus, for an exchange offer.

Pursuant to an agreement dated January 31, 1995, the Company agreed to
issue 75,000 shares of Class A Common Stock as compensation to a supplier of
services to be paid upon the effective date of a registration statement for the
exchange offer. Pursuant to an amended agreement on April 11, 1996, the parties
amended the above agreement as follows:

1. $10,000.00 paid on April 11, 1996 and $62,500.00 paid on April 22,
1996.

2. 25,000 Class A shares to be issued on April 22, 1996 and an option
to acquire 50,000 Class A shares @ $1.25. This option was
exercised on April 25, 1996.

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Pursuant to a private placement memorandum dated March 1, 1996 to
issue up to 400,000 Class A shares at $1.25 per share, investors have subscribed
for 283,000 shares for $353,750.00 and a total of $62,500.00 was received
pursuant to the exercise of stock options being exercised.

The Company issued 210,000 shares @ $0.25 per shares pursuant to
options exercised in April of 1996 to raise $52,500.00.

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ITEM 7. FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

Page

Report of Public Accountants...............................................F-1

Balance Sheet at April 30, 1995 and 1996...................................F-2

Statements of Operations for the years ended April 30, 1995 and 1996 ......F-3

Statements of Cash Flows Accumulated From December 13, 1994
(Inception) to April 30, 1996 and for the years ended April 30, 1995
and 1996 ................................................................F-4

Statements of Stockholder's Equity (Deficit) From December 13, 1994
(Inception) to April 30, 1996............................................F-5

Notes to the Financial Statements..........................................F-6

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[ETPA LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

Board of Directors
IAS Communications, Inc.
(A Development Stage Company)

We have audited the accompanying balance sheet of IAS Communications, Inc. (a
Development Stage Company) as of April 30, 1996 and 1995 and the related
statements of operations, stockholders' equity and cash flows for the period
from December 13, 1994 (inception) to April 30, 1996 and the periods ended April
30, 1996 and 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as at April 30, 1996 and 1995
and the results of its operations and its cash flows for the period from
December 13, 1994 (inception) to April 30, 1996 and the periods ended April 30,
1996 and 1995 in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has not generated any revenues or profitable operations
since inception. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also discussed in Note 2. The financial statements do not include
any adjustments which might result from the outcome of this uncertainty.

/s/ Elliot Tulk

/s/ Pryce Anderson

CHARTERED ACCOUNTANTS
Vancouver, B.C.
June 4, 1996

F-1
<PAGE> 13
IAS Communications, Inc.
(A Development Stage Company)

Balance Sheets

April 30, 1996 and 1995
(expressed in U.S. dollars)

<TABLE>
<CAPTION>
1996 1995
$ $
<S> <C> <C>
Assets
Current Assets

Cash 185,038 188,147
Prepaid expenses 9,758 4,000
-------- -------

194,796 192,147

Licence (Note 4) 250,001 250,001

Patents (Note 4) 15,488 --
-------- -------

460,285 442,148
======== =======

Liabilities and Stockholders' Equity (Deficit)

Current Liabilities

Accounts payable and accrued liabilities 35,447 5,752

Redeemable Class "A" Shares (Note 5) 197,750 197,750

Subscriptions Received (Note 5) 416,250 --
-------- -------

649,447 203,502
-------- -------

Stockholders' Equity (Deficit)

Common Stock (Note 5)

Class "A" voting 100,000,000 shares authorized without
par value; 7,510,000 and 6,000,100
shares issued and outstanding respectively 374,751 11

Class "B" non-voting 100,000,000 shares authorized without
par value; nil and 1,036,333 shares
issued and outstanding respectively -- 322,250
-------- -------

374,751 322,261
Preferred Stock

Authorized: 50,000,000

Deficit Accumulated During The Development Stage (563,913) (83,615)
-------- -------

(189,162) 238,646
-------- -------

460,285 442,148
======== =======
</TABLE>

Commitments and Contingent Liabilities (Note 7)

** see Notes to the Financial Statements **

F-2
<PAGE> 14
IAS Communications, Inc.
(A Development Stage Company)

Statement of Operations

Accumulated from December 13, 1994 (Inception)
To April 30, 1996 and the periods ended
April 30, 1996 and 1995
(expressed in U.S. dollars)

<TABLE>
<CAPTION>
Accumulated May 1, 1995 December 13, 1994
During the to (Inception)
Development April 30, to
Stage 1996 April 30, 1995
$ $ $
<S> <C> <C> <C>
Revenue -- -- --
---------- ---------- ----------

Administration Expenses

Bank charges 376 255 121
Consulting 24,000 24,000 --
Investor relations 16,496 14,496 2,000
Management fees (Note 6) 82,500 60,000 22,500
Office, postage and courier 12,064 11,472 592
Professional fees 144,346 108,590 35,756
Rent and secretarial (Note 6) 25,500 18,000 7,500
Telephone 11,133 252 10,881
Transfer agent and regulatory 4,698 3,048 1,650
Travel and promotion 11,623 6,005 5,618
Less interest (6,580) (3,577) (3,003)
---------- ---------- ----------

326,156 242,541 83,615
---------- ---------- ----------

Research and Development Expenses

Consulting 17,667 17,667 --
Prototype construction and testing
(Note 7) 217,090 217,090 --
Royalty (Note 4) 3,000 3,000 --
---------- ---------- ----------
237,757 237,757 --
---------- ---------- ----------

Net Loss 563,913 480,298 83,615
========== ========== ==========

Net Loss Per Share (.078) (.065) (.01)
========== ========== ==========

Weighted Average Shares Outstanding 7,258,767 7,310,000 7,149,408
========== ========== ==========
(including redeemable shares)
</TABLE>

** see Notes to the Financial Statements **

F-3
<PAGE> 15
IAS Communications, Inc.
(A Development Stage Company)

Statement of Cash Flows

Accumulated from December 13, 1994 (Inception)
to April 30, 1996 and the periods ended
April 30, 1996 and 1995
(expressed in U.S. dollars)

<TABLE>
<CAPTION>
Accumulated May 1, 1995 December 13, 1994
During the to (Inception)
Development April 30, to
Stage 1996 April 30, 1995
$ $ $
<S> <C> <C> <C>
Cash Flows to Operating Activities

Net loss (563,913) (480,298) (83,615)

Adjustment to reconcile net loss to cash
Gain on shares cancelled (10) (10) --

Change in non-cash working capital items

Increase in prepaid expenses (9,758) (5,758) (4,000)
Increase in accounts payable 35,447 29,695 5,752
-------- -------- --------

Net Cash Used in Operating Activities (538,234) (456,371) (81,863)
-------- -------- --------

Cash Flows to Investing Activities

Increase in licence (250,000) -- (250,000)
Increase in patent protection costs (15,488) (15,488) --
-------- -------- --------

Net Cash Used in Investing Activities (265,488) (15,488) (250,000)
-------- -------- --------

Cash Flows from Financing Activities

Increase in redeemable shares issued 197,750 -- 197,750
Increase in shares issued - cash 374,760 52,500 322,260
Increase in subscriptions for shares 416,250 416,250 --
-------- -------- --------

Net Cash Provided by Financing Activities 988,760 468,750 520,010
-------- -------- --------

Increase (Decrease) in Cash -- (3,109) 188,147

Cash - Beginning of Period 185,038 188,147 --
-------- -------- --------

Cash - End of Period 185,038 185,038 188,147
======== ======== ========

Non-Cash Financing Activity

The Company issued 6,000,000 Class "A"
common shares at a deemed value of $1
in total for property (see Note 4) 1 -- 1

Shares issued to an officer at
incorporation donated back to the
Company and cancelled (10) (10) --
-------- -------- --------

(9) (10) 1
======== ======== ========
</TABLE>

** see Notes to the Financial Statements **

F-4
<PAGE> 16
IAS Communications, Inc.
(A Development Stage Company)

Statement of Stockholders' Equity (Deficit)

Accumulated from December 13, 1994 (Inception)
to April 30, 1996
(expressed in U.S. dollars)

<TABLE>
<CAPTION>
Deficit
Accumulated
Common Common During the
Stock Stock Development
Shares Class "A" Class "B" Stage
# $ $ $
<S> <C> <C> <C> <C>
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 (Note 5) -- 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)
=========== ======= ======== ========
</TABLE>

(* not including redeemable shares)

** see Notes to the Financial Statements **

F-5
<PAGE> 17
IAS Communications, Inc.
(A Development Stage Company)
Notes to the Financial Statements
April 30, 1996 and 1995
(expressed in U.S. dollars)

1. Date of Incorporation

The Company is a development stage company which was incorporated under
the Laws of the State of Oregon on December 13, 1994.

2. 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 (See Note 7). Management expects the contracts to be completed
by June 30, 1996 at which time a limited number of applications may be
licensable without incurring any extra costs. The Company will then
research other applications of the antenna which will require funds to
be raised at that time. 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
private placements, public offerings and the exercise of stock options.

3. Summary of Significant Accounting Policies

(a) Year-End

The Company's fiscal year-end is April 30.

(b) Research and Development

Research and development is expensed in the period in which the
activities occurred.

Costs associated with patent protection and licences will be
amortized over 20 years upon licenceable product being
developed.

(d) Cash and Cash Equivalents

The Company considers all highly liquid instruments with a
maturity of three months or less at the time of issuance to be
cash equivalents.

(e) Tax Accounting

Potential benefits of income tax losses are not recognized in
the accounts until realization is more likely than not.
Research and development is deducted in the year incurred and
added to net operating loss.

F-6
<PAGE> 18
.. 2 ..

(e) Tax Accounting (continued)

The Company has adopted SFAS 109 as of its inception. The
Company has incurred net operating losses as scheduled below:

<TABLE>
<CAPTION>
Year of Loss Amount Expiration Date
$

<S> <C> <C>
April 30, 1995 83,615 2010

April 30, 1996 480,298 2011
</TABLE>

Pursuant to SFAS 109 the Company is required to compute tax
asset benefits for net operating loss carryforwards. Potential
benefit of net income losses have not been recognized in the
financial statements because the Company cannot be assured that
it is more likely than not that it will utilize the net
operating loss carryforwards in future years.

The components of the net deferred tax asset at the end of
April 30, 1996 and 1995, and the statutory tax rate, the
effective tax rate and the elected amount of the valuation
allowance are scheduled below:

<TABLE>
<CAPTION>
April 30, 1996 April 30, 1995
$ $
<S> <C> <C>
Net Operating Loss 480,298 83,615

Statutory Tax Rate 114,150 +39% 13,750 + 34%
in excess of in excess of
$335,000 75,000

Effective Tax Rate -- --

Deferred Tax Asset 163,550 16,679

Valuation Allowance (163,550) (16,679)
-------- -------

Net Deferred Tax Asset -- --
======== =======
</TABLE>

4. 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.

F-7
<PAGE> 19
.. 3..

4. Licence and Patents

(a) Licence (continued)

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.

(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 $15,488 to register and protect patents.

5. Common Stock

(a) Stock options

The Company granted certain directors and employees stock
options to acquire 600,000 Class "A" shares exercisable as to
510,000 at $0.25, expiring December 29, 1999, as to 50,000 at
$0.25, expiring February 24, 2000 and as to 40,000 at $1.25,
expiring March 4, 2000. These options are currently exercisable.
Stock options to acquire 50,000 shares at $0.25 per share were
cancelled on September 7, 1995. During the year options with
respect to 210,000 shares exercisable at $0.25, expiring
December 29, 1999 were exercised and $52,500 received.

(b) Commitment

Pursuant to an agreement dated January 31, 1995, the Company
committed 75,000 shares as compensation to a supplier of
services to be paid upon the effective date of a registration
statement. The value to be assigned to the 75,000 shares was to
be $25,000.

F-8
<PAGE> 20
.. 4 ..

5. Common Stock

b) Commitment (continued)

Pursuant to an amendment agreement on April 11, 1996 the parties
agreed to amend the above agreement as follows:

(i) $10,000 (paid).
(ii) $62,500 (paid on April 22, 1996).

(iii) 25,000 Class "A" shares to be issued on April 22,
1996 (not issued; the deemed value of $8,333 has
been accrued).

(iv) An option to acquire 50,000 Class "A" shares at
$1.25 per share. This option was exercised on April
25, 1996. These shares have not been issued.

c) Exchange of 1,300,000 Class "B" non-voting shares to 1,300,000
Class "A" voting shares

During the year holders of 1,300,000 Class "B" non-voting shares
agreed to exchange these shares for 1,300,000 Class "A" voting
shares. Of the 1,300,000 Class "A" shares issued and
outstanding, 263,667 are redeemable Class "A" shares as
discussed in (d) below.

d) Redeemable Class "A" shares

Between December 14, 1994 and March 6, 1995 the Company received
subscriptions for 263,667 Class "B" shares and received $197,750
from investors in states where they have the right to revoke
their subscription and demand their investment be returned to
them within three years of subscription as to $161,500 and
within six years as to $36,250. The 263,667 redeemable Class "B"
shares were issued and then exchanged for 263,667 Class "A"
shares, and are outstanding. To date, holders of these shares
have not revoked their subscriptions.

e) Subscriptions received

(i) Pursuant to a private placement dated March 1, 1996,
to issue up to 400,000 Class "A" shares at $1.25 per
share, investors have subscribed for 283,000 shares
and deposited $353,750 into the Company's treasury.
These shares have not been issued.

(ii) A total of $62,500 was received pursuant to stock
options being exercised. The 50,000 shares have not
been issued.

6. Related Party Transactions

(a) See Note 4 - the option to acquire the exclusive licence to The
Technology was assigned by SMR and ICI, controlled by directors
of the Company, John Robertson and James E. Smith, respectively.

(b) 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).

F-9
<PAGE> 21
.. 5 ..

7. Commitments and Contingent Liabilities

(a) Commitments

(i) See Notes 4 and 5 for ongoing royalty commitments.

(ii) The Company has entered into an agreement with WVURC to
fund the computer modeling portion of the development
of The Technology in the amount of $231,373. A total of
$155,590 has been expended to April 30, 1996.

(iii) The Company has 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. A total of $60,000 has been
paid to April 30, 1996. A final report is expected by
June 30, 1996.

(iv) See Note 5 for commitments to issue shares upon the
exercise of stock options.

(b) Contingent liability - Continuance of Business (See Note 2).

F-10
<PAGE> 22
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

12
<PAGE> 23
PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the name, age and position of each Officer and
Director of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION

<S> <C> <C>
James Earl Smith, Ph.D. 46 Chairman of the Board of Directors

John G. Robertson 55 President, Principal Executive Officer and a member of
the Board of Directors

Jennifer Lorette 23 Secretary/Treasurer, Principal Accounting Officer and
Chief Financial Officer

Patrick Badgley 53 Member of the Board of Directors

Paul E. Lamarche 54 Member of the Board of Directors
</TABLE>

All Directors of the Company have served since December 13, 1994, the Officers
were elected on February 4, 1995, and will serve for one year or until their
respective successors are elected and qualified. No compensation has been paid
or accrued to any Officer or Director to date. All officers currently devote
part-time to the operation of the Company.

OFFICERS AND DIRECTORS OF THE COMPANY:

JAMES EARL SMITH PH.D - CHAIRMAN OF THE BOARD OF DIRECTORS

Dr. Smith is a founder and Chairman of the Board of Directors. Since 1989, Dr.
Smith has been an Associate Professor in the Mechanical and Aerospace
Engineering Department, West Virginia University, Morgantown, West Virginia.
Since September 1990, Dr. Smith has been a Director of the Center for Industrial
Research Applications, West Virginia University. Since February 1994, Dr. Smith
has been President and a Director of Integral Visions Systems, Inc. a West
Virginia corporation engaged in the business of 3-D machine vision calorimetry.
Since September 1992, Dr. Smith has been President and a Director of Integral
Concepts, Inc., a West Virginia corporation engaged in the business of
technology transfer from the research to the commercial sector. From April 1992
to March 1994, Dr. Smith was a consultant to CK Engineering, Inc., located in
Montreal, Canada, which is engaged in the business of mechanism analysis and
development. From January 1992 to March 1993, Dr. Smith was a consultant to Reg
Technologies, Inc. located in Richmond, British Columbia which is engaged in the
business of mechanism analysis and development. Dr. Smith holds the degree of
Doctor of Philosophy in Mechanical Engineering from West Virginia University.

13
<PAGE> 24
JOHN G. ROBERTSON - PRESIDENT, PRINCIPAL EXECUTIVE OFFICER AND A MEMBER OF THE
BOARD OF DIRECTORS

Mr. Robertson is a founder, President, Principal Executive Officer and a member
of the Board of Directors of the Company. Since May 1977, Mr. Robertson has been
President and a member of the Board of Directors of SMR Investments Ltd., a
British Columbia corporation engaged in the business of management and
investment consulting. Since October 1984, Mr. Robertson has been President and
a Director of Reg Technologies, Inc., a British Columbia corporation engaged in
the business of developing a rotary engine. Since June 1994, Mr. Robertson has
been President of REGI U.S., Inc. ("REGI U.S."), an Oregon corporation which is
engaged the business of developing a rotary engine. REGI U.S. is controlled by
Rand Energy Group, Inc., a British Columbia corporation of which Reg
Technologies, Inc. is the majority shareholder. Both REGI U.S. and Reg
Technologies, Inc. are engaged in the business of developing a rotary engine and
other devices utilizing Rand Cam(TM) Technology. REGI U.S. owns the U.S. rights
to the Rand Cam(TM) technology and Rand Energy Group, Inc. owns the worldwide
rights exclusive of the U.S. Since May 1980, Mr. Robertson has been President
and a Director of Teryl Resources Corp., a British Columbia corporation, engaged
in exploring and developing gold properties. Since February 1979, Mr. Robertson
has been President and Director of Flame Petro-Minerals Exploration Co., a
British Columbia corporation engaged in exploration of oil, gas and gold
properties.

JENNIFER LORETTE - SECRETARY/TREASURER, PRINCIPAL FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER

Ms. Lorette is a founder, Secretary/Treasurer, Principal Financial Officer and
Principal Accounting Officer of the Company. Since April 1994, Ms. Lorette has
been Vice President of Administration of Reg Technologies Inc. Since June 1994,
Ms. Lorette has been a Vice President of REGI U.S. and Chief Financial Officer
and Vice President of Flame Petro Minerals Corp. From February 1994 to April
1994, Ms. Lorette was an executive assistant and from December 1992 to February
1994, she was a receptionist at Reg Technologies, Inc. From October 1990 to July
1992, Ms. Lorette was a receptionist for Nickels Custom Cabinets, Richmond,
British Columbia.

PATRICK BADGLEY - A MEMBER OF THE BOARD OF DIRECTORS

Mr. Badgley is a founder and a member of the Board of Directors of the Company.
Since February 1994, Mr. Badgley has been a Vice President of REGI U.S., and
since July 1993 has been a Director of Reg Technologies, Inc. From November 1986
to February 1994, Mr. Badgley was the Director of Research and Development for
Adiabatics, Inc., an Indiana corporation, which was engaged in the business of
advanced engine concepts. Prior to this he worked for Cummins Engine Company,
Curtiss Wright Corporation and Deere and Company. Mr. Badgley holds a Bachelor
of Mechanical Engineering degree from the Ohio State University, Columbus, Ohio.

PAUL E. LAMARCHE - A MEMBER OF THE BOARD OF DIRECTORS

Mr. Lamarche is a founder and member of the Board of Directors. Since October
1991, Mr. Lamarche has been President of Troy Design Manufacturing, driveline
division, which is engaged in the business of automotive power train engines.
Since 1990, Mr. Lamarche has been a Director of Pioneer Automotive, driveline
division, and President to Neotech Industries, Inc., which is engaged in the
business of engineering services (automotive). Since 1994, Mr. Lamarche has been
a director for the driveline dynamics group for Aerotek Engine Services, a
Michigan corporation.

14
<PAGE> 25
Mr. Lamarche holds a Bachelor of Science degree from the University of Waterloo,
Ontario, Canada.

ITEM 10. EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS AND OFFICERS

A management fee of $2,500.00 per month is paid to Access Information
Services, Inc., a corporation controlled by John Robertson, the Company's
President and a member of the Board of Directors. Further, the sum of $1,500.00
is paid to Access Information Services, Inc. for rent and secretarial services.

Dr. Smith receives a fee of $2,500.00 per month in his capacity as a
director and as Chairman of the Board of Directors.

The Company may in the future create retirement, pension, profit
sharing, insurance and medical reimbursement plans covering its Officers and
Directors. At the present time, no such plans exist. No advances have been made
or are contemplated by the Company to any of its Officers or Directors.

STOCK OPTIONS GRANTED

The Company issued options on December 29, 1994 to the Company's
Officers and Directors, exercisable at twenty-five cents ($0.25) per share, to
acquire "restricted" shares of the Class A Voting Common Stock as follows:

James Smith, Ph.D. 150,000
John Robertson 150,000
Jennifer Lorette 50,000
Patrick R. Badgley 50,000
Paul Lamarche 50,000

The options have an expiration of December 29, 1999 and do not expire
upon termination of employment.

The following table sets forth certain information concerning exercises
of stock options pursuant to stock option plans by the named executive officers
during the year ended April 30, 1996 and stock options held at year end.

15
<PAGE> 26
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES

<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercised Options at
Options at Year End Year End
----------------------------- -----------------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------

<S> <C> <C> <C> <C> <C> <C>
John G. Robertson 150,000 $225,000 -0- -0- -0- -0-

Jennifer Lorette 50,000 $ 75,000 -0- -0- -0- -0-

Patrick Badgley 10,000 $ 15,000 40,000 -0- $60,000 -0-
</TABLE>

(1) On April 30, 1996, the closing price of Common Stock was $1.75. For
purposes of the foregoing table, stock options with an exercise price
less than that amount are considered to be "in-the-money" and are
considered to have a value equal to the difference between this amount
and the exercise price of the stock option multiplied by the number of
shares covered by the stock option.

TRANSACTIONS WITH DIRECTORS

Dr. Smith, a tenured professor at West Virginia University ("WVU") and
the Company's Chairman of the Board of Directors, organized the development of
the concept of the toroidal helical antenna ("THA") at WVU. Pursuant to the
terms of this employment at WVU, WVU and West Virginia University Research
Corporation ("WVURC") own world wide rights to any invention made or developed
by WVU personnel. Accordingly the ownership rights to the THA belong to WVU and
WVURC.

On April 12, 1994, WVURC granted an exclusive license to Integral
Concepts, Inc. ("ICI") which is owned by Dr. Smith: (1) to manufacture THAs and
to license others to do so; and (2) to sublicense others to manufacture, market,
sell copies of, license and distribute THAs. The consideration for the license
was: (1) $1.00 and (2) a royalty of $3,000.00 per year or 10% of the net
revenues received by ICI which ever is greater.

ICI entered into an option agreement with SMR Investments Ltd. ("SMR"),
a corporation owned by Sue Robertson, the wife of John Robertson, dated November
18, 1994 and amended December 16, 1994. The option agreement provided that ICI
would issue a sublicense to SMR for the THA subject to the payment of $250,000;
a 3% royalty from gross sales; and a subsequent public entity to be established.
The Company was organized by SMR and John Robertson as a result thereof. ICI
retained all military applications and resulting procurement interests. The
contract period relating to the three percent royalty to be paid to ICI
commences when sales are made by SMR/the Company and continue during the life of
the agreement between ICI and SMR. The term of the foregoing agreement is
perpetual as is the agreement between WVURC and ICI.

16
<PAGE> 27
On December 13, 1994, SMR assigned the rights to the foregoing
agreement with ICI to the Company in consideration of $50,000 advanced by Access
Information Services, Inc. (the "Option Assignment"). Access Information
Services, Inc. is a corporation owned and controlled by Robinson.

On December 14, 1994, the Company issued 3,000,000 Class A Shares to
James E. Smith, Ph.D., the Company's Chairman of the Board of Directors and
3,000,000 Class A Shares to Access Information Services, Inc., pursuant to the
Option Assignment. The value assigned to the 3,000,000 Class A common shares
issued to Dr. Smith was a total of $0.50 and the value assigned to the 3,000,000
Class A common shares issued to Access Information Services Inc. was $0.50. The
valuation of the 3,000,000 shares issued to Dr. Smith and Access Information
Services, Inc. was arbitrarily determined by the Company's Board of Directors.
The $250,000 has been paid to ICI and was a one time payment.

On July 10, 1995, ICI entered into a sublicense with the Company,
wherein ICI granted to the Company the exclusive worldwide right to manufacture,
sell copies of, sublicense and distribute the process and equipment related to
the design, construction and operation of the THA and to further sublicense
others the rights to manufacture, sell copies of, license and distribute the
same, excluding all military applications and procurement interests. The July
10, 1995 sublicense agreement was the culmination of the agreement between ICI
and SMR, and SMR and the Company. On December 27, 1995, SMR assigned all of its
rights and duties in the THA technology to the Company. The purpose of this
assignment was to assign any and all rights or duties which may have been held
by SMR as a result of the Option Agreement, it being understood that the Option
Agreement was nothing more than an agreement in principle. The term of the
license granted by ICI is perpetual and requires the payment of a minimum annual
royalty of $3,000. Further, the Company will pay a royalty of 10% of the net
revenues derived from sales, licenses or sublicenses of the THA technology with
a credit for the minimum royalty. In addition the Company shall pay a royalty of
3% of the gross revenues derived from the sales, licenses or sublicenses of the
THA technology.

To date, there have not been any other transactions between the Company
and its Officers, Directors, principal shareholders or affiliates other than as
set forth above. The Company believes that the transactions described here were
on terms more favorable to the Company's officers and directors than otherwise
could be obtained if such transactions were with non-related parties.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL SHAREHOLDERS

The following table sets forth, as of July 3, 1996, the outstanding
Class A Common Stock of the Company owned of record or beneficially by each
person who owned of record, or was know by the Company to own beneficially, more
than 5% of the Company's Common Stock, and the name and shareholdings of each
Officer and Director and all Officers and Directors as a group.

All of the Shares of Common Stock presently issued and outstanding are
"Restricted Securities" as that term is defined under the Securities Act of
1933, as amended, and, as such, may

17
<PAGE> 28
not be sold in the absence of registration under the Securities Act of 1933, as
amended, or the availability of an exception therefrom.

<TABLE>
<CAPTION>
PERCENTAGE OF CLASS A
CLASS A SHARES OWNED
SHARES OWNED
NAME ------------ ---------------------

<S> <C> <C>
James Earl Smith[1]
Chairman of the Board of Directors 3,150,000 38%

John G. Robertson[1][2] President and member of the Board of
Directors 3,600,834 44%

Jennifer Lorette[1]
Secretary/Treasurer, Chief Financial Officer and Principal 63,000 .8%
Accounting Officer

Patrick Badgley[1] 46,000 .6%

Paul E. Lamarche[1] 50,000 .6%

ALL OFFICERS & DIRECTORS AS A GROUP (FIVE INDIVIDUALS) 6,909,834 88.38%
</TABLE>

All shares are held beneficially and of record and each record shareholder has
sole voting and investment power.

[1] These individuals are the Officers and Directors of the Company and may
be deemed to be "parents or founders" of the Company as that term is
defined in the Rules and Regulations promulgated under the Securities
Act of 1933, as amended. Includes options to purchase shares of Class A
Voting Common Stock at an exercise price of $0.25 per share.

[2] 3,000,000 shares are registered in the name of Access Information
Services, Inc., a corporation controlled by Mr. Robertson.

18
<PAGE> 29
PART IV

ITEM 12. EXHIBITS AND REPORTS ON FORM 8-K.

(A) INDEX TO AND DESCRIPTION OF EXHIBITS

<TABLE>
<CAPTION>
Number Description Page No.
- ------ ----------- --------
<S> <C> <C>
3 ARTICLES OF INCORPORATION AND BY-LAWS

3.1 Articles of Incorporation..................................................................... (1)
3.2 Article of Amendment.......................................................................... (1)
3.3 By-Laws....................................................................................... (1)

4 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS

4.1 Specimen Share Certificate for Class A Shares................................................. (1)
4.2 Specimen Share Certificate for Class B Shares................................................. (1)

10 MATERIAL CONTRACTS

10.1 Agreement between West Virginia University Research Corporation and
Integral Concepts, Inc...................................................................... (1)
10.2 Agreement between Integral Concepts, Inc. and
SMR Investments, Inc........................................................................ (1)
10.3 Agreement between SMR Investments, Inc. and
the Company................................................................................. (1)
10.4 Agreement with Greg Ruff...................................................................... (1)
10.5 British Columbia Confidential Offering Memorandum............................................. (1)
10.6 Sublicense Agreement between Integral Concepts, Inc. and
the Company................................................................................. (1)
10.7 Project Agreement between the Company and West Virginia
Center for Industrial Research Applications................................................. (1)
10.8 Assignment Agreement between SMR Investments, Inc. and
the Company................................................................................. (1)

23 CONSENT OF EXPERTS AND COUNSEL

23.1 Consent of Elliott Tulk Pryce Anderson........................................................ (1)
23.2 Consent of Jack Parsons....................................................................... (1)

27 FINANCIAL DATA SCHEDULE................................................................................

99 PROXY STATEMENT........................................................................................

</TABLE>
- ---------------
(1) Incorporated by reference from Form S-1 Registration Statement
(33-92592).

(B) REPORTS ON FORM 8-K: NONE

19
<PAGE> 30
SIGNATURES

Pursuant to the requirements Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report or amendment to be signed on
its behalf by the undersigned, thereunto duly authorized.

IAS COMMUNICATIONS, INC.

By: /s/ John G. Robertson
---------------------------------
John G. Robertson, President
Chief Executive Officer and Director

Dated: July 29, 1996

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in-the in the capacities
indicated as of July 29, 1996.

<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
President, Chief Executive
/s/ John G. Robertson Officer and Director
John G. Robertson

/s/ James E. Smith Chairman of the
- ----------------------------- Board of Directors
James E. Smith

/s/ Patrick Badgley Director
- -----------------------------
Patrick Badgley

/s/ Paul Lamarche Director
- -----------------------------
Paul Lamarche

/s/ Jennifer Lorette Chief Financial Officer
- ----------------------------- and Principal Accounting
Jennifer Lorette Officer

</TABLE>

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<CASH> 185,038
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 194,796
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 460,285
<CURRENT-LIABILITIES> 35,447
<BONDS> 0
0
0
<COMMON> 374,751
<OTHER-SE> (563,913)
<TOTAL-LIABILITY-AND-EQUITY> 460,285
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 480,298
<LOSS-PROVISION> (480,298)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (480,298)
<INCOME-TAX> 0
<INCOME-CONTINUING> (480,298)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (480,298)
<EPS-PRIMARY> (065)
<EPS-DILUTED> 0

</TABLE>

<PAGE> 1
EXHIBIT 99

IAS COMMUNICATIONS, INC.
#185-10751 SHELLBRIDGE WAY
RICHMOND, BRITISH COLUMBIA V6X 2W8
CANADA

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 21, 1996

To the Shareholders of IAS Communications, Inc.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of IAS
Communications, Inc. (the "Company") will be held at the offices of Graham &
Dunn, 1420 Fifth Avenue, 33rd Floor, Seattle, Washington, on Wednesday, August
21, 1996, at 11:00 a.m. for the purpose of considering and voting upon the
following matters:

1. ELECTION OF DIRECTORS. To elect four (4) Directors for a term of
one year or until their successors have been elected and
qualified.

2. STOCK OPTION PLAN. To adopt a Stock Option Plan.

3. APPROVAL OF AUDITORS. Approval of Elliott Tulk Pryce Anderson as
auditors until the close of the next Annual Meeting.

4. COMPENSATION OF AUDITORS. Authorize the Directors to fix the
remuneration to be paid to the auditors of the Company.

5. WHATEVER OTHER BUSINESS may properly come before the Annual
Meeting or any adjournments thereof.

Only those shareholders of record at the close of business on July 3,
1996, shall be entitled to notice of, and to vote at, the Annual Meeting or any
adjournments thereof.

Further information regarding voting rights and the business to be
transacted at the Annual Meeting is given in the accompanying Proxy Statement.
Your continued interest as a shareholder in the affairs of the Company, its
growth and development, is genuinely appreciated by the directors, officers and
personnel who serve you.

July 12, 1996 BY ORDER OF THE BOARD OF DIRECTORS

Jennifer Lorette, Secretary

================================================================================

YOUR VOTE IS IMPORTANT

Whether or not you plan to attend the Annual Meeting, please sign and date your
Proxy card and return it in the enclosed postage prepaid envelope.

================================================================================
<PAGE> 2
IAS COMMUNICATIONS, INC.
#185-10751 SHELLBRIDGE WAY
RICHMOND, BRITISH COLUMBIA V6X 2W8
CANADA

PROXY STATEMENT

This Proxy Statement and the accompanying Proxy are being sent to
shareholders on or about July 12, 1996, for use in connection with the Annual
Meeting of Shareholders of IAS Communications, Inc. (the "Company") to be held
on Wednesday, August 21, 1996. Only those shareholders of record at the close of
business on July 3, 1996, shall be entitled to vote. The number of shares of the
Company's Class A no par value common stock (the "Common Stock"), outstanding
and entitled to vote at the Annual Shareholders' Meeting is 7,803,000.

The enclosed Proxy is solicited by and on behalf of the Board of
Directors of the Company, with the cost of solicitation borne by the Company.
Solicitation may be made by directors and officers of the Company. Solicitation
may be made by use of the mails, by telephone, facsimile and personal interview.
The Company does not expect to pay any compensation for the solicitation of
proxies, except to brokers, nominees and similar recordholders for reasonable
expenses in mailing proxy materials to beneficial owners.

If the enclosed Proxy is duly executed and received in time for the
meeting, it is the intention of the persons named in the Proxy to vote the
shares represented by the Proxy FOR the four nominees listed in this Proxy
Statement and FOR the other items listed in the Proxy, unless otherwise
directed. Any proxy given by a shareholder may be revoked before its exercise by
notice to the Company in writing, by a subsequently dated
proxy, or at the Meeting prior to the taking of the shareholder vote. The shares
represented by properly executed, unrevoked proxies will be voted in accordance
with the specifications in the Proxy. Shareholders have one vote for each share
of Common Stock held, including the election of directors. Shareholders are not
entitled to cumulate their votes in the election of directors.

BUSINESS OF THE MEETING

There are four matters being presented for consideration by the
shareholders at the Annual Meeting.

1
<PAGE> 3
PROPOSAL NO. 1 - ELECTION OF DIRECTORS

GENERAL

The Company's Bylaws ("Bylaws") provide that the number of directors
must fall within a range of 2 to 9, the exact number to be determined by the
shareholders. Directors are elected for a term of one year and until their
successors have been elected and qualified. There are currently four (4)
directors of the Company.

INFORMATION WITH RESPECT TO NOMINEES

The following tables set forth certain information with respect to the
nominees for director. The table includes their ages and their principal
occupations. All nominees have been directors since the Company was founded. The
table also indicates the number of shares of Common Stock beneficially owned by
each individual on July 3, 1996 (including exercisable options) and the
percentage of Common Stock outstanding on that date that the individual's
holdings represented.

<TABLE>
<CAPTION>
SHARES AND
PERCENTAGE
OF COMMON STOCK
NAME, AGE AND PRINCIPAL OCCUPATION BENEFICIALLY OWNED
TENURE AS DIRECTOR OF DIRECTOR AS OF JULY 3, 1996
------------------ ----------- ------------------

<S> <C> <C>
James E. Smith, Ph.D. Chairman of the Board of 3,150,000 shares
Directors and Associate Pro- 38%
fessor, Mechanical and Aero-
space Engineering Department,
West Virginia University

John G. Robertson President and Chief Executive 3,600,834 shares
Officer 44%

Patrick Badgley Vice President, REGI U.S., Inc. 46,000 shares
.6%

Paul E. Lamarche President of Troy Design Manu- 50,000 shares
facturing Driveline Division .6%
</TABLE>

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE NOMINEES TO BE
ELECTED AS DIRECTORS.

2
<PAGE> 4
INFORMATION REGARDING THE BOARD OF DIRECTORS AND MANAGEMENT

The following sets forth information concerning the Board of Directors
and management of the Company during the fiscal year ended 1996.

BOARD OF DIRECTORS

The Company held six (6) Board meetings in 1996. Each director attended
all of the meetings of the Board of Directors.

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

The following table sets forth information with respect to the
executive officer who is not a director of the Company. All executive officers
are elected annually by the Board of Directors and serve at the discretion of
the Board of Directors.

<TABLE>
<CAPTION>
Age as of
Name April 30, 1996 Position
---- -------------- --------

<S> <C> <C>
Jennifer Lorette 23 Secretary, Treasurer, Principal
Accounting Officer and Chief
Financial Officer
</TABLE>

COMPENSATION OF DIRECTORS AND OFFICERS

Dr. Smith receives a fee of $2,500.00 per month in his capacity as a
director and as Chairman of the Board of Directors.

STOCK OPTIONS GRANTED

3
<PAGE> 5
<TABLE>
<S> <C>
James Smith, Ph.D 150,000
John Robertson 150,000
Jennifer Lorette 50,000
Patrick R. Badgley 50,000
Paul Lamarche 50,000
</TABLE>

The options have an expiration of December 29, 1999 and do not expire
upon termination of employment.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Number of Value of
Unexercised Unexercised Options at
Options at Year End Year End
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John G. Robertson 150,000 $225,000 -0- -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------
Jennifer Lorette 50,000 $75,000 -0- -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------
Patrick Badgley 10,000 $15,000 40,000 -0- $60,000 -0-
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

TRANSACTIONS WITH DIRECTORS

4
<PAGE> 6
On April 12, 1994, WVURC granted an exclusive license to Integral
Concepts, Inc. ("ICI") which is owned by Dr. Smith: (1) to manufacture THAs and
to license others to do so; and (2) to sublicense others to manufacture, market,
sell copies of, license and distribute THAs. The consideration for the license
was: (1) $1.00 and (2) a royalty of $3,000.00 per year or 10% of the net
revenues received by ICI which ever is greater.

On December 13, 1994, SMR assigned the rights to the foregoing
agreement with ICI to the Company in consideration of $50,000 advanced by Access
Information Services, Inc.; 3,000,000 shares of Common Stock to be issued by the
Company to Dr. Smith; and, 3,000,000 shares of Common Stock issued to Access
Information Services, Inc.

On December 13, 1994, the Company issued 3,000,000 Class A Shares to
James E. Smith, Ph.D., the Company's Chairman of the Board of Directors and
3,000,000 Class A Shares to Access Information Services, Inc., pursuant to the
foregoing agreement dated December 13, 1994. The value assigned to the 3,000,000
Class A common shares issued to Dr. Smith was a total of $0.50 and the value
assigned to the 3,000,000 Class A common shares issued to Access Information
Services Inc. was $0.50. The valuation of the 3,000,000 shares issued to Dr.
Smith and Access Information Services, Inc. was arbitrarily determined by the
Company's Board of Directors. The $250,000 has been paid to ICI and was a one
time payment.

On July 10, 1995, ICI entered into a sublicense with the Company,
wherein ICI granted to the Company the exclusive worldwide right to manufacture,
sell copies of, sublicense and distribute the process and equipment related to
the design, construction and operation of the THA and to further sublicense
others the rights to manufacture, sell copies of, license and distribute the
same, excluding all military applications and procurement interests. The July
10, 1995 sublicense agreement was the culmination of the agreement between ICI
and SMR, and SMR and the Company. On December 27, 1995, SMR assigned all of its
rights and duties in the THA technology to the Company. The purpose of this
assignment was to assign any and all rights or duties which may have been held
by SMR as a result of the option agreement dated November 18, 1994, as amended
on December 16, 1994, it being understood that the foregoing option agreement
was nothing more than an agreement in principle.

5
<PAGE> 7
To date, there have not been any other transactions between the Company
and its Officers, Directors, principal shareholders or affiliates other than as
set forth above. The Company believes that the transactions described here were
on terms more favorable to the Company's officers and directors than otherwise
could be obtained if such transactions were with non-related parties.

PROPOSAL NO. 2 - ADOPTION OF STOCK OPTION PLAN

The Board believes that a stock option plan for directors and employees
is desirable to help attract and retain the best available persons to serve as
directors of the Company. Accordingly, a Stock Option Plan (the "Plan") was
adopted by the Board of Directors on June 14, 1996, subject to shareholder
approval. The Plan authorizes the Board to grant stock options to directors and
employees of the Company.

Stock option plans have been in place in numerous companies for years.
Given the time and effort directors and employees need to invest to be effective
in today's environment (not even considering the potential personal liability
risks involved), the Board believes that an economic incentive tied to the
long-term performance of the Company is appropriate. The Board feels this is a
fair means of incenting and rewarding directors for their performance and the
success of the Company. The Board feels that the concept of relating a
significant portion of directors and employees compensation to the Company's
long-term performance is in the best interest of the Company and its
shareholders.

The following briefly summarizes certain key features of the Plan, a
copy of which is attached as Exhibit A to this Proxy Statement.

GENERAL

The Plan authorizes the Board of Directors to administer the Plan and
to grant either "incentive stock options" or non-qualified stock options to
directors and employees of the Company. All options granted under the Plan will
expire not more than ten years from the date of grant. Up to 1,000,000 shares of
the Company's Common Stock may be optioned and issued under the Plan, subject to
appropriate adjustments for any stock splits, stock dividends, or other changes
in the capitalization of the Company.

TERMINATION/AMENDMENT OF PLAN

The Board of Directors has the authority to terminate the Plan at any
time. The Plan may subsequently be amended by the Board of Directors without
shareholder approval, except that no such amendment may increase the number of
shares of Common Stock that may be issued pursuant to the Plan.

6
<PAGE> 8
FEDERAL TAX TREATMENT

While no taxable income is recognized upon the grant of a nonqualified
stock option, recipients may generally recognize ordinary income equal to the
fair market value of the shares on the exercise date over the exercise price.
That income would be a deductible compensation expense for the Company.

IN ORDER FOR THE PLAN TO BE ADOPTED, THE PROPOSAL MUST BE APPROVED BY
SHAREHOLDERS OWNING AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF THE
COMPANY'S COMMON STOCK. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE PROPOSED PLAN.

PROPOSAL NO. 3 - APPROVAL OF AUDITORS

Elliott Tulk Pryce Anderson, independent Chartered Accountants,
performed the audit of the consolidated financial statements for the Company,
for the year ended April 30, 1996. Representatives of Elliott Tulk Pryce
Anderson will be present at the Annual Meeting, and will have the opportunity to
make a statement if they so desire. They also will be available to respond to
appropriate questions

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 3.

PROPOSAL NO. 4 - COMPENSATION OF AUDITORS

The Board has in the past and requests shareholder authority to set the
compensation of the auditors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 4.

OTHER BUSINESS

The Board of Directors knows of no other matters to be brought before
the shareholders at the Annual Meeting. In the event other matters are presented
for a vote at the Meeting, the proxy holders will vote shares represented by
properly executed proxies in their discretion in accordance with their judgment
on such matters.

At the Meeting, management will report on the Company's business and
shareholders will have the opportunity to ask questions.

July 12, 1996 BY ORDER OF THE BOARD OF DIRECTORS

John G. Robertson, President

7
<PAGE> 9
EXHIBIT A

IAS COMMUNICATIONS, INC.
STOCK OPTION PLAN

1. Purpose of the Plan. The purpose of this Plan is to provide
additional incentives to key employees, officers and Directors of IAS
Communications, Inc., and any of its future Subsidiaries, thereby helping to
attract and retain the best available personnel for positions of responsibility
with those corporations and otherwise promoting the success of the business
activities of such corporations. It is intended that Options issued pursuant to
this Plan constitute either "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code or nonqualified stock options.

2. Definitions. As used herein, the following definitions apply:

(a) "Board" means the Board of Directors of the Employer.

(b) "Common Stock" means the Employer's Class A common stock.

(d) "Continuous Status as an Employee" means the absence of
any interruption or termination of service as an Employee. Continuous
Status as an Employee will not be considered interrupted in the case of
sick leave, military leave, or any other approved leave of absence.

(e) "Employee" means any person employed by or serving as an
officer or Director of the Employer or any Parent or Subsidiary of the
Employer which is hereafter organized or is acquired by the Employer.

(f) "Employer" means IAS Communications, Inc., an Oregon
corporation.

(g) "Option" means a stock option granted pursuant to the
Plan. Options include both Incentive Stock Options under Section 422 of
the Internal Revenue Code and Nonqualified Stock Options.

(h) "Optioned Stock" means the Common Stock subject to an
Option.

(i) "Optionee" means an Employee who receives an Option.

(j) "Plan" means this Employee Stock Option Plan.

(k) "Parent" means any corporation having a relationship with
the Employer as described in Section 424 of the Internal Revenue Code.

(l) "Shareholder-Employee" means an Employee who owns stock
representing more than ten percent (10%) of the total combined voting
power of all classes of stock

1
<PAGE> 10
of the Employer or of any Parent or Subsidiary. For this purpose, the
attribution of stock ownership rules provided in Section 424 of the
Internal Revenue Code apply.

(m) "Subsidiary" means any bank or other corporation of which
not less than 50% of the voting shares are held by the Employer or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Employer or a Subsidiary.

3. Stock Subject to Options.

(a) Number of Shares Reserved. The maximum number of shares
which may be optioned and sold pursuant to the Plan is one million
shares of the Common Stock of the Employer (subject to adjustment as
provided in subparagraph 6(i) of the Plan). During the term of this
Plan, the Employer will at all times reserve and keep available a
sufficient number of shares of its Common Stock to satisfy the
requirements of the Plan.

(b) Expired Options. If any outstanding Option expires or
becomes unexercisable for any reason without having been exercised in
full, the shares of Common Stock allocable to the unexercised portion
of such Option will again become available for other Options.

4. Administration of the Plan.

(a) The Committee. The Plan is administered by the Board
directly, acting as a Committee of the whole, or if the Board elects,
by a separate Committee appointed by the Board for that purpose and
consisting of at least three Board members. All references in the Plan
to the "Committee" are to such separate Committee, if any is
established, or if none is then in existence, then to the Board as a
whole. Once appointed, any such Committee must continue to serve until
otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause), appoint new members in
substitution therefor, and fill vacancies however caused. The Committee
must select one of its members as chairman, and shall hold meetings at
such times and places as the chairman or a majority of the Committee
may determine.

At least annually, the Committee must present a written report
to the Board indicating the Employees to whom Options have been granted
since the date of the last such report, and in each case the date or
dates of Options granted, the number of shares optioned, and the Option
price per share.

At all times, the Board has the power to remove all members of
the Committee and thereafter to directly administer the Plan as a
Committee of the whole.

(b) Powers of the Committee. Subject to all provisions and
limitations of the Plan, the Committee has the authority and
discretion:

2
<PAGE> 11
(1) to determine the Employees to whom Options are to
be granted, the times of grant, and the number of shares to be
represented by each Option;

(2) to determine the Option price for the shares of
Common Stock to be issued pursuant to each Option, subject to
the provisions of subparagraph 6(b) of the Plan in the case of
Incentive Stock Options;

(3) to determine all other terms and conditions of
each Option granted under the Plan (including specifying the
dates upon which Options become exercisable), which need not
be identical;

(4) to modify or amend the terms of any Option
previously granted, or to grant substitute Options, subject to
the provisions of subparagraphs 6(l) and 6(m) of the Plan;

(5) to interpret the Plan;

(6) to authorize any person or persons to execute and
deliver Option agreements or to take any other actions deemed
by the Committee to be necessary or appropriate to effectuate
the grant of Options by the Committee;

(7) to make all other determinations and take all
other actions which the Committee deems necessary or
appropriate to administer the Plan in accordance with its
terms and conditions.

All actions of the Committee must be either by (i) a majority vote of
the members of the full Committee at a meeting of the Committee, or (ii) by
unanimous written consent of all members of the full Committee without a meeting
thereof.

All decisions, determinations and interpretations of the Committee are
final and binding upon all persons, including all Optionees and any other
holders or persons interested in any Options, unless otherwise expressly
determined by a vote of the majority of the entire Board. No member of the
Committee or of the Board may be held liable for any action or determination
made in good faith with respect to the Plan or any Option.

5. Eligibility. Options may be granted only to Employees whom the
Committee, in its discretion, determines to be key Employees.

Granting of Options pursuant to the Plan is entirely discretionary with
the Committee, and the adoption of this Plan does not confer upon any Employee
any right to receive any Option or Options pursuant to the Plan unless and until
said Options are granted by the Committee, in its sole discretion. Neither the
adoption of the Plan nor the granting of any Options pursuant to the Plan
confers on any Employee or Optionee any right with respect to continuation of
employment, nor shall the same interfere in any way with his right or with the
right of the Employer or any Subsidiary to terminate his employment at any time.

3
<PAGE> 12
6. Terms and Conditions of Options. All Options granted pursuant to the
Plan must be authorized by the Committee, and must be documented in written
agreements in such form as the Committee approves from time to time, which
agreements must comply with and be subject to all of the following terms and
conditions:

(a) Number of Shares; Annual Limitation. Each Option agreement
must state whether the Option is an Incentive Stock Option or a
Nonqualified Stock Option and the number of shares subject to Option.
Any number of Options may be granted to a single eligible Employee at
any time and from time to time, except that, in the case of Incentive
Stock Options, the aggregate fair market value (determined as of the
time each Option is granted) of all shares of Common Stock with respect
to which Incentive Stock Options become exercisable for the first time
by such Employee in any one calendar year (under all incentive stock
option plans of the Employer, its Parent and all of its Subsidiaries
taken together) may not exceed $100,000.

(b) Option Price and Consideration. The Option price for the
shares of Common Stock to be issued pursuant to the Option will be the
price determined by the Committee, except that, in the case of
Incentive Stock Options, the price may not be less than the fair market
value of the Common Stock on the date of grant of the Incentive Stock
Option.

In the case of an Incentive Stock Option granted to an
Employee who, immediately before the grant of such Incentive Stock
Option, is a Shareholder-Employee, the Incentive Stock Option price
must be at least 110% of the fair market value of the Common Stock on
the date of grant of the Incentive Stock Option.

The fair market value is determined by the Committee in its
discretion; provided, however, that in the event that there is a public
market for the Common Stock, the fair market value is the closing price
of the Common Stock as of the date of grant as reported on the National
Association of Securities Dealers Automatic Quotation System (NASDAQ),
or, in the event the Common Stock is listed on a stock exchange, the
fair market value is the closing price on the exchange as of the date
of grant of the Option.

The Option price is payable either (i) in United States
dollars upon exercise of the Option, or (ii) if approved by the Board,
other consideration including without limitation Common Stock of the
Employer, services, or other property.

(c) Term of Option. Under no circumstances may an Option
granted under the Plan be exercisable after the expiration of ten (10)
years from the date such Option is granted. Further, the term of an
Incentive Stock Option granted to an Employee who, immediately before
such Incentive Stock Option is granted, is a Shareholder-Employee may
not exceed five (5) years from the date of grant of such Option.
Subject to the foregoing and other applicable provisions of the Plan
including but not limited to Section 6(e) herein, the term of each
Option must be determined by the Committee in its discretion.

(d) Manner of Exercise; Rights as Shareholder. An Option is
deemed to be exercised when written notice of exercise has been given
to the Employer in accordance

4
<PAGE> 13
with the terms of the Option by the person entitled to exercise the
Option, together with full payment for the shares of Common Stock
subject to said notice.

(e) Death of Optionee. In the event of the death of an
Optionee who at the time of his death was an Employee and who had been
in Continuous Status as an Employee since the date of grant of the
Option, the Option terminates on the earlier of (i) one year after the
date of death of the Optionee, or (ii) the expiration date otherwise
provided in the Option agreement except that if the expiration date of
a Nonqualified Stock Option should occur during the 90-day period
immediately following the Optionee's death, such Option terminates at
the end of such 90-day period. Under these circumstances, the Option
will be exercisable at any time prior to such termination by the
Optionee's estate, or by such person or persons who have acquired the
right to exercise the Option by bequest or by inheritance or by reason
of the death of the Optionee.

(f) Disability of Optionee. If an Optionee's status as an
Employee is terminated at any time during the Option period by reason
of a disability (within the meaning of Section 22(e)(3) of the Internal
Revenue Code) and if said Optionee had been in Continuous Status as an
Employee at all times between the date of grant of the Option and the
termination of his status as an Employee, his Incentive Stock Option
terminates on the earlier of (i) one year after the date of termination
of his status as an Employee, or (ii) the expiration date otherwise
provided in his Option agreement.

(g) Termination of Status as an Employee.

(1) If an Optionee's status as an Employee is
terminated at any time after the grant of his Option for any
reason other than death or disability, as provided in
subparagraphs (e) and (f) above, and not by reason of fraud or
willful misconduct, as provided in (2) below, his Option
terminates on the earlier of (i) the same day of the third
month after the date of termination of his status as an
Employee, or (ii) the expiration date otherwise provided in
his Option agreement.

(2) If an Optionee's status as an Employee is
terminated at any time after the grant of his Option by reason
of fraud or willful misconduct, then his Option terminates on
the date of termination of his status as an Employee.

(h) Non-transferability of Options. No Option granted pursuant
to the Plan may be sold, pledged, assigned, hypothecated, transferred,
or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of
the Optionee, only by the Optionee.

(i) Adjustments Upon Changes in Capitalization. Subject to any
required action by the shareholders of the Employer, the number of
shares of Common Stock covered by each outstanding Option, the number
of shares of Common Stock available for grant of additional Options,
and the price per share of Common Stock specified in each outstanding
Option, must be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from any stock
split or other

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subdivision or consolidation of shares, the payment of any stock
dividend (but only on the Common Stock) or any other increase or
decrease in the number of such shares of Common Stock effected without
receipt of consideration by the Employer; provided, however, that
conversion of any convertible securities of the Employer shall not be
deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Committee, whose determination in that
respect shall be final, binding and conclusive.

No Incentive Stock Option shall be adjusted by the Committee
pursuant to this subparagraph 6(i) in a manner which causes the Option
to fail to continue to qualify as an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code.

Except as otherwise expressly provided in this subparagraph
6(i), no Optionee shall have any rights by reason of any stock split or
the payment of any stock dividend or any other increase or decrease in
the number of shares of Common Stock. Except as otherwise expressly
provided in this subparagraph 6(i), any issue by the Employer of shares
of stock of any class, or securities convertible into shares of stock
of any class, shall not affect the number of shares or price of Common
Stock subject to any Options, and no adjustments in Options shall be
made by reason thereof. The grant of an Option pursuant to the Plan
shall not affect in any way the right or power of the Employer to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure.

(j) Date of Grant of Option. The date of grant of an Option
must, for all purposes, be the date on which the Committee makes the
determination granting such Option. Said date of grant must be
specified in the Option agreement.

(k) Conditions Upon Issuance of Shares. Shares of Common Stock
may not be issued with respect to an Option granted under the Plan
unless the exercise of such Option and the issuance and delivery of
such shares pursuant thereto complies with all applicable provisions of
law, including, applicable federal and state securities laws.

As a condition to the exercise of an Option, the Employer may
require the person exercising such Option to represent and warrant at
the time of exercise that the shares of Common Stock are being
purchased only for investment and without any present intention to sell
or distribute such Common Stock if, in the opinion of counsel for the
Employer, such a representation is required by any of the
aforementioned relevant provisions of law.

(l) Merger, Sale of Assets, Etc. In the event of the merger or
reorganization of the Employer with or into any other corporation, or
in the event of a proposed sale of substantially all of the assets of
the Employer, or in the event of a proposed dissolution or liquidation
of the Employer (collectively, "sale transaction"): (1) all outstanding
Options that are not then fully exercisable becomes exercisable
immediately before the date of closing of any sale transaction or such
earlier date as the Committee may fix; and (2) the Committee may, in
the exercise of its sole discretion, terminate all outstanding Options
as of a date fixed by the Committee. In the event of such termination,
however,

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the Committee must notify each Optionee of such action in writing not
less than sixty (60) days prior to the termination date fixed by the
Committee, and each Optionee has the right to exercise his Option prior
to said termination date.

(m) Substitute Stock Options. In connection with the
acquisition or proposed acquisition by the Employer or any Subsidiary,
whether by merger, acquisition of stock or assets, or other
reorganization transaction, of a business any employees of which have
been granted incentive stock options, the Committee is authorized to
issue, in substitution of any such unexercised stock option, a new
Option under this Plan which confers upon the Optionee substantially
the same benefits as the old option; provided, however, that the
issuance of any new Option for an old incentive stock option must
satisfy the requirements of Section 424(a) of the Internal Revenue
Code.

(n) Tax Compliance. The Employer, in its sole discretion, may
take any actions reasonably believed by it to be required to comply
with any local, state, or federal tax laws relating to the reporting or
withholding of taxes attributable to the grant or exercise of any
Option or the disposition of any shares of Common Stock issued upon
exercise of an Option, including, but not limited to, (i) withholding
from any Optionee exercising an Option a number of shares of Common
Stock having a fair market value equal to the amount required to be
withheld by Employer under applicable tax laws, and (ii) withholding
from any form of compensation or other amount due an Optionee or holder
of shares of Common Stock issued upon exercise of an Option any amount
required to be withheld by Employer under applicable tax laws.
Withholding or reporting is considered required for purposes of this
subparagraph if any tax deduction or other favorable tax treatment
available to Employer is conditioned upon such reporting or
withholding.

(o) Other Provisions. Option agreements executed pursuant to
the Plan may contain such other provisions as the Committee deems
advisable, provided in the case of Incentive Stock Options that the
provisions are not inconsistent with the provisions of Section 422 of
the Internal Revenue Code or with any of the other terms and conditions
of this Plan.

7. Term of the Plan. The Plan is effective on the earlier of (a) the
date of adoption of the Plan by the Board; or (b) the date of shareholder
approval of the Plan as provided in paragraph 9 of the Plan. Unless sooner
terminated as provided in subparagraph 8(a) of the Plan, the Plan shall
terminate on the tenth (10th) anniversary of its effective date. Options may be
granted at any time after the effective date and prior to the date of
termination of the Plan.

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8. Amendment or Early Termination of the Plan.

(a) Amendment or Early Termination. The Board may terminate
the Plan at any time. The Board may amend the Plan at any time and from
time to time in such respects as the Board may deem advisable, except
that, without approval of the holders of a majority of the outstanding
shares of the Common Stock, no such revision or amendment may:

(1) increase the number of shares of Common Stock
subject to the Plan other than in connection with an
adjustment under subparagraph 6(i) of the Plan; or

(2) change the designation of the class of Employees
eligible to be granted Options, as provided in paragraph 5 of
the Plan.

(b) Effect of Amendment or Termination. No amendment or
termination of the Plan shall affect Options granted prior to such
amendment or termination, and all such Options remain in full force and
effect notwithstanding such amendment or termination.

9. Shareholder Approval. Continuance of the Plan is subject to approval
of the Plan by affirmative vote of the holders of a majority of the outstanding
shares of Common Stock of the Employer at a duly convened meeting of the
shareholders of the Employer, which approval must occur within twelve (12)
months before or after the date of adoption of the Plan by the Board.