<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
For the Fiscal Year Ended April 30, 1997
COMMISSION FILE NO. 0-21255
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 V6X 2W8, 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: CLASS A
COMMON STOCK
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. _____
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 24, 1997, computed by reference to the price at which the
stock was sold on that date: $4,875,000.
The number of shares outstanding of the registrant's Class A voting Common
Stock, no par value, as of July 24, 1997 was 8,602,500.
Documents incorporated by reference: None.
________________________________________________________________________
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IAS COMMUNICATIONS, INC.
FORM 10-KSB\A
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I Page
----
<S> <C> <C>
Item 1. Introduction....................................................................... 3
Item 2. Property........................................................................... 6
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........................... 7
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................................. 7
Item 7. Financial Statements............................................................... 10
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................................... 11
PART III
Item 9. Directors and Executive Officers of the Registrant: Compliance with
Section 16(a) of the Exchange Act.................................................. 13
Item 10. Executive Compensation............................................................. 14
Item 11. Security Ownership of Certain Beneficial Owners and Management..................... 15
Item 12. Certain Relationships and Related Transaction...................................... 17
Item 13. Exhibits and Reports on Form 8-K................................................... 11
</TABLE>
2
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PART I
ITEM 1. INTRODUCTION
- ------- ------------
THE COMPANY
The Company is a development stage company formed under the laws of the state of
Oregon and has not generated any revenues from operations to date. It is engaged
in the commercialisation of advanced antenna technology known as the Contrawound
Torroidal Helical Antenna, ("CTHA"), for wireless communications markets
including cellular, meter reading and global positioning services. The CTHA,
developed in conjunction with researchers at West Virginia University, is a
technologically advanced antenna design which can be incorporated into a wide
variety of telecommunications applications. The Company has been granted world-
wide sublicensing rights for commercial applications, excluding military and
governmental applications, for the antenna.
During fiscal 1997, the Company completed development contracts with Emergent
Technologies Corporation, ("ETC"), and continued funding the research work of
the Center for Industrial Research Applications at West Virginia University,
("CIRA"). CIRA reports tests of the CTHA have demonstrated it can communicate
via groundwave, skywave, near-incident vertical skywave, satellite, and line-of-
sight. This breadth of capability is unique to the industry and indicates that
the CTHA has the potential to support any current antenna application. CIRA and
ETC completed tests of the cellular phone, pager, global positioning services
and meter reading applications of the CTHA, ("Applications"). The tests provided
an advancement in the understanding of the CTHA and the report concludes the
CTHA to be a commercially viable product for the Applications. The tests
demonstrated enhanced reliability in the Applications while greatly reducing the
size requirements for antennas which will enable manufacturers to further
downsize product lines and assure a long term market for the CTHA.
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. 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.
On March 4, 1997, the sublicense agreement with ICI was amended to reduce
the amount of the royalty payable by the Company by 50% over the next 3 years
and to clarify that the Company's rights pertain to commercial applications,
excluding military and governmental applications, and enlarged the definition of
Technology to include all future enhancements to the THA technology developed by
ICI, ETC, or the Company.
The Company has entered into a fixed-price contract with Emergent
Technologies Corporation ("ETC") to fund the prototype development and testing
of specific applications of THA Technology. ETC is currently completing
additional research and development on the antenna and its commercial
applications for the Company.
3
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The Company entered into a joint venture agreement with ETC on March 4,
1997 to fund and develop a research and development laboratory and manufacturing
facility through a new corporation, The Eclipse Antenna Manufacturing
Corporation ("TEAM"). The Company and ETC jointly own TEAM and granted to TEAM
certain rights to sell and manufacture the antennas. All sales of antennas by
TEAM will be for the credit of either the Company or ETC, according to the end-
user. However, the Company and ETC retained the rights to sublicense certain
rights, including development and manufacturing rights to relating to the
Technology.
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 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 Jack Parsons of ETC. 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
4
<PAGE>
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 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.
5
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PRODUCTION
On February 27, 1997, the Company announced an initial order to buy
antennas. The Company and ETC announced on April 21, 1997 that their joint
venture company, TEAM, had received an order to include its antenna in a wrist
watch. On June 12, 1997, the Company and ETC announced that TEAM had received
its first order from a company in the automatic meter reading industry. There
is no assurance, however, that the Company will enter into an agreement with
additional companies to manufacture the THA. Accordingly, in the event that the
Company does not enter into other agreements to manufacture the THA, or in the
event that an existing manufacturer or manufacturers 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.
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.
6
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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, 1997.
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 "IASCA where it
has been traded since April 16, 1996. The Company's Common Stock has been
traded at between $1.75 and $2.25 per share since April 16, 1996.
As of July 24, 1997, there were 8,602,500 shares of Common Stock
outstanding, held by 111 shareholders of record.
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
-------------
Management's Discussion
- -----------------------
The Company is a development stage company engaged in the commercialization of
advanced antenna technology known as the Contrawound Torroidal Helical Antenna,
("CTHA"), for wireless communications markets including cellular, meter reading
and global positioning services. The CTHA, developed in conjunction with
researchers at
7
<PAGE>
West Virginia University, is a technologically advanced antenna design which can
be incorporated into a wide variety of telecommunications applications. The
Company has been granted world-wide sublicensing rights for commercial
applications, excluding military and governmental applications, for the antenna.
During fiscal 1997, the Company completed development contracts with Emergent
Technologies Corporation, ("ETC"), and continued funding the research work of
the Center for Industrial Research Applications at West Virginia University,
("CIRA"). CIRA reports tests of the CTHA have demonstrated it can communicate
via groundwave, skywave, near-incident vertical skywave, satellite, and line-of-
sight. This breadth of capability is unique to the industry and indicates that
the CTHA has the potential to support any current antenna application. CIRA and
ETC completed tests of the cellular phone, pager, global positioning services
and meter reading applications of the CTHA, ("Applications"). The tests provided
an advancement in the understanding of the CTHA and the report concludes the
CTHA to be a commercially viable product for the Applications. The tests
demonstrated enhanced reliability in the Applications while greatly reducing the
size requirements for antennas which will enable manufacturers to further
downsize product lines and assure a long term market for the CTHA.
During fiscal 1997, the Company entered into a joint venture agreement, ("JVA"),
with ETC dated March 4, 1997. The JVA required a limited company to be
incorporated, The Eclipse Antenna Manufacturing Corporation, ("TEAM"), whereby
the Company will own 50% of the issued and outstanding common shares and ETC
will own the remaining 50%. Pursuant to a voting agreement the Company can vote
100% of the shares of TEAM. The control person of ETC will be the operator. TEAM
was organized on June 4, 1997 under the laws of the State of West Virginia. The
Company retains the world-wide commercial sublicense rights to the CTHA.
The purpose of the joint venture is to cooperate in the research and development
of certain applications for the CTHA and to assemble and manufacture certain
products relating thereto. IAS will buy product from TEAM at cost to manufacture
plus 30% for all commercial applications and ETC will buy product from TEAM at
cost to manufacture plus 30% for all military applications. ETC acquired the
world-wide sublicense from ICI for all military applications on January 2, 1997.
Subsequent to April 30, 1997, the Company and ETC have each contributed $150,000
to TEAM as required in the JVA. These funds will be spent on formation costs and
to equip a research and development facility to further the commercialization of
the applications and prototype construction. A further $100,000 each will be
required on an as needed basis.
During fiscal 1997, the Company received an initial purchase order for 10,000
units of its CTHA. The Company will fill this order once TEAM completes its
manufacturing processes and specifications have been approved. This initial
order will be filled by TEAM on a contracted-out basis.
Results of operations for fiscal 1997 compared to fiscal 1996
- -------------------------------------------------------------
There were no revenues from licensing the CTHA during the two years.
The net loss in 1997 increased by $564,218 to $1,044,516 compared to $480,298 in
1996. The increased net loss in 1997 was due to administrative expenses which
increased by $183,040 to $425,581 as compared to $242,541 in 1996. The major
components of this increase was due to an increase in investor relations costs
of $128,014 to $142,510 as compared to $14,496 in 1996; travel, promotion,
telephone and office increased by $60,293 to $78,022 as compared to $17,729 in
1996. During 1997, research and development costs increased by $381,178 to
$618,935 compared to $237,757 in 1996. The increase was due to two completed
contracts with ETC, totalling $206,135, and ongoing research conducted by CIRA,
with costs during the year totalling $245,462. A total of $117,000 has been
accrued as compensation to a consultant and is included in accrued liabilities
as at April 30, 1997. The amount accrued was paid on May 5, 1997 by the Company
issuing 100,000 Class "A" common shares at $1.17 per share.
8
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Liquidity - fiscal 1997
- -----------------------
During fiscal 1997, the Company financed its operations, in part, from proceeds
from two private placements. The Company raised $271,250 to complete a $625,000
private placement and issued 500,000 Class "A" common shares at $1.25 per share.
The Company also raised $499,500 and issued 222,000 Class "A" common shares at
$2.25 per share. The Company also received $78,000 pursuant to options
exercised and issued 139,500 Class "A" common shares at $.25 per share and
34,500 Class "A" common shares at $1.25 per share.
The Company's financial resources, including an opening cash balance as at April
30, 1996 of $185,038, totalled $1,033,788. Cash used, as a result of the net
loss for the year, totalled $823,252, after adjustments to reconcile net loss to
cash. During fiscal 1997, the Company spent $75,497 on computer equipment and
patents.
In addition to funds on hand as at April 30, 1997, of $135,039, the Company has
subsequently raised $35,000 in connection with a $500,000 convertible debenture
issue, has received a loan of $16,000 from a related party, and has raised
$15,750 pursuant to a private placement of 7,000 Class "A" common shares at
$2.25. Total cash resources as of April 30, 1997, including the above receipts,
totals $201,789.
The completion of the convertible debenture issue should provide adequate
additional funds to pay current liabilities of $123,860 (net of $117,000 paid by
issuing shares and to fund the TEAM joint venture required contribution of
$150,000, The Company is committed to spending an additional $113,294 to
complete the funding of the research and development program in conjunction with
CIRA, the total budget to July 31, 1997 is for $514,346 of which $401,052 has
been incurred to April 30, 1997. The balance of cash resources, totalling
approximately $280,000 should provide enough funds for administrative expenses
over the next twelve months and working capital. If TEAM decides to construct a
manufacturing facility in the future it will fund the costs through internally
generated cash flow from sales of product.
9
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ITEM 7. FINANCIAL STATEMENTS
- ------- --------------------
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Report of Public Accountants................................................................ F-1
Balance Sheet at April 30, 1996 and 1997.................................................... F-2
Statements of Operations for the years ended April 30, 1996 and 1996........................ F-3
Statements of Cash Flows Accumulated From December 13, 1994 (Inception) to
April 30, 1997 and for the years ended April 30, 1996 and 1997............................. F-4
Statements of Stockholder's Equity (Deficit) From December 13, 1994 (Inception) to
April 30, 1997............................................................................. F-5
Notes to the Financial Statements........................................................... F-6
</TABLE>
10
<PAGE>
[LETTERHEAD OF ELLIOTT TULK PRYCE ANDERSON]
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, 1997 and 1996 and the related
statements of operations, stockholders' equity and cash flows for the period
from December 13, 1994 (inception) to April 30, 1997 and the periods ended April
30, 1997 and 1996. 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, 1997 and 1996
and the results of its operations and its cash flows for the period from
December 13, 1994 (inception) to April 30, 1997 and the periods ended April 30,
1997 and 1996 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 3 to the financial
statements, the Company has not generated any revenues or profitable operations
since inception. These factors raise 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 3. The financial statements do not include any
adjustments which might result from the outcome of this uncertainty.
/s/ ELLIOTT TULK PRYCE ANDERSON
CHARTERED ACCOUNTANTS
Vancouver, B.C.
July 10, 1997
11
<PAGE>
IAS Communications, Inc.
(A Development Stage Company)
Balance Sheets
April 30, 1997 and 1996
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
1997 1996
$ $
Assets
<S> <C> <C>
Current Assets
Cash and short term investments 135,039 185,038
Prepaid expenses 11,950 9,758
146,989 194,796
Capital assets 45,381 --
Licence and patents (Note 4) 285,895 265,489
---------- --------
478,265 460,285
========== ========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued liabilities (Note 9(a)) 240,860 35,447
Redeemable Class "A" Shares (Note 6(c)) 197,750 197,750
---------- --------
438,610 233,197
---------- --------
Stockholders' Equity
Common Stock (Note 6)
Class "A" voting - 100,000,000 shares authorized
without par value; 8,481,000 and
7,510,100 shares issued and outstanding 1,648,084 374,751
respectively
- paid for but unissued -- 416,250
Class "B" non-voting - 100,000,000 shares authorized
without par value; none issued -- --
1,648,084 791,001
---------- --------
Preferred Stock 50,000,000 shares authorized;
none issued -- --
Deficit Accumulated During The Development Stage (1,608,429) (563,913)
---------- --------
39,655 227,088
---------- --------
478,265 460,285
========== ========
Commitments and Contingent Liabilities (Note 8)
</TABLE>
(The accompanying notes are an integral part of these financial statements)
12
<PAGE>
IAS Communications, Inc.
(A Development Stage Company)
Statement of Operations
Accumulated from December 13, 1994 (Inception)
to April 30, 1997 and the periods ended
April 30, 1997 and 1996
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Accumulated from Twelve months ended April 30,
December 13, 1994 -----------------------------
to April 30, 1997 1997 1996
$ $ $
<S> <C> <C> <C>
Revenue -- -- --
--------- --------- ---------
Administration Expenses
Bank charges 1,195 819 255
Business plan 18,600 18,600 --
Consulting 24,000 -- 24,000
Depreciation 124 124 --
Investor relations 159,006 142,510 14,496
Management fees 147,500 65,000 60,000
Office, postage and courier 27,352 15,288 11,472
Professional fees 244,950 100,604 108,590
Rent and secretarial 44,000 18,500 18,000
Telephone 46,720 35,587 252
Transfer agent and regulatory 11,345 6,647 3,048
Travel and promotion 38,770 27,147 6,005
Less interest (11,825) (5,245) (3,577)
--------- --------- ---------
751,737 425,581 242,541
--------- --------- ---------
Research and Development Expenses
Consulting 170,419 152,752 17,667
Depreciation 9,586 9,586 --
Prototype construction and testing 670,687 453,597 217,090
Royalty 6,000 3,000 3,000
--------- --------- ---------
856,692 618,935 237,757
--------- --------- ---------
Net Loss 1,608,429 1,044,516 480,298
========= ========= =========
Net Loss Per Share (.13) (.065)
========= =========
Weighted Average Shares Outstanding 8,054,850 7,310,000
(including redeemable shares) ========= =========
</TABLE>
(The accompanying notes are an integral part of these financial statements)
13
<PAGE>
IAS Communications, Inc.
(A Development Stage Company)
Statement of Cash Flows
Accumulated from December 13, 1994 (Inception)
to April 30, 1997 and the periods ended
April 30, 1997 and 1996
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Accumulated from Twelve months ended April 30,
December 13, 1994 -----------------------------
to April 30, 1997 1997 1996
$ $ $
<S> <C> <C> <C>
Cash Flows to Operating Activities
Net loss (1,608,429) (1,044,516) (480,298)
Adjustment to reconcile net loss to cash
Gain on shares cancelled (10) - (10)
Depreciation 9,710 9,710 -
Change in non-cash working capital items
Increase in prepaid expenses (11,950) (2,192) (5,758)
Increase in accounts payable 249,193 213,746 29,695
---------- ---------- --------
Net Cash Used in Operating Activities (1,361,486) (823,252) (456,371)
---------- ---------- --------
Cash Flows to Investing Activities
Increase in capital assets (50,305) (50,305) -
Increase in licence (250,000) - -
Increase in patent protection costs (40,680) (25,192) (15,488)
---------- ---------- --------
Net Cash Used in Investing Activities (340,985) (75,497) (15,488)
---------- ---------- --------
Cash Flows from Financing Activities
Increase in redeemable shares issued 197,750 - -
Increase in common stock 1,639,760 848,750 468,750
---------- ---------- --------
Net Cash Provided by Financing Activities 1,837,510 848,750 468,750
---------- ---------- --------
Increase (Decrease) in Cash 135,039 (49,999) (3,109)
Cash - Beginning of Period - 185,038 188,147
---------- ---------- --------
Cash - End of Period 135,039 135,039 185,038
========== ========== ========
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 - -
Shares issued to an officer at
inception donated back to the
Company and cancelled (10) - (10)
Shares issued for services 8,333 8,333 -
---------- ---------- --------
8,324 8,333 (10)
========== ========== ========
</TABLE>
(The accompanying notes are an integral part of these financial statements)
14
<PAGE>
IAS Communications, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
Accumulated from December 13, 1994 (Inception)
to April 30, 1997
(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 inception
for cash, at $0.10 per share 100 10 - -
Shares issued at inception, for property,
at a nominal value of $1 in total
or $.00000017 per share 6,000,000 1 - -
Shares issued, pursuant to a private
placement, at $0.10 per share 700,000 - 70,000 -
Shares issued, pursuant to a public
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 inception
donated back and cancelled (100) (10) - -
Share exchange - 322,250 (322,250) -
Shares issued, pursuant to options
exercised, at $0.25 per share 210,000 52,500 - -
Net loss for the year - - - (480,298)
---------- --------- -------- ----------
Balance - April 30, 1996 7,246,333 374,751 - (563,913)
Shares issued, pursuant to a private
placement, at $1.25 per share 500,000 625,000 - -
Shares issued, for services, at $0.33
per share 25,000 8,333 - -
Shares issued, pursuant to options
exercised, at $0.25 per share 139,500 34,875 - -
Shares issued, pursuant to options
exercised, at $1.25 per share 84,500 105,625 - -
Shares issued, pursuant to a private
placement, at $2.25 per share 222,000 499,500 - -
Net loss for the year - - - (1,044,516)
---------- --------- -------- ----------
Balance - April 30, 1997 *8,217,333 1,648,084 - (1,608,429)
========== ========= ======== ==========
</TABLE>
* Not including Redeemable Class "A" shares (Note 6(c))
(The accompanying notes are an integral part of these financial statements)
15
<PAGE>
IAS Communications, Inc.
(A Development Stage Company)
Notes to the Financial Statements
April 30, 1997 and 1996
(expressed in U.S. dollars)
1. Date of Incorporation
IAS Communications Inc., herein "the Company", is a development stage
company which was incorporated under the Laws of the State of Oregon on
December 13, 1994.
2. 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.
(c) Patents and Licence
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.
The Company has adopted SFAS 109 as of its inception. The Company has
incurred net operating losses as scheduled below:
<TABLE>
<CAPTION>
Amount Year of
Year of Loss $ Expiration
<S> <C> <C>
April 30, 1995 89,809 2010
April 30, 1996 497,288 2011
April 30, 1997 1,056,537 2012
</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.
16
<PAGE>
2. Summary of Significant Accounting Policies
(e) Tax Accounting (continued)
The components of the net deferred tax asset at the end of April 30,
1997 and 1996, and the statutory tax rate, the effective tax rate and
the elected amount of the valuation allowance are scheduled below:
<TABLE>
<CAPTION>
1997 1996
$ $
<S> <C> <C>
Net Operating Loss 1,056,537 497,288
Statutory Tax Rate 113,900 + 34% 113,900 + 34%
in excess of in excess of
$335,000 $335,000
Effective Tax Rate - -
Deferred Tax Asset 359,222 169,077
Valuation Allowance (359,222) (169,077)
-------------- -------------
Net Deferred Tax Asset - -
============== =============
</TABLE>
3. Development Stage Company
The Company is a development stage company engaged in the commercialization
of advanced antenna technology known as the Contrawound Torroidal Helical
Antenna, herein "CTHA", for wireless communications markets including
cellular, meter reading and global positioning services. The CTHA,
developed in conjunction with researchers at West Virginia University, is a
technologically advanced antenna design which can be incorporated into a
wide variety of telecommunications applications. The Company has been
granted worldwide sublicensing rights for commercial applications,
excluding military and governmental applications, for the antenna.
In a development stage company, management devotes most of its activities
to establishing a new business. Planned principle activities have not yet
produced significant revenue. The ability of the Company to emerge from the
development stage with respect to its planned principle business activity
is dependent upon its successful efforts to raise additional equity
financing and develop the market for its products.
The Company plans to raise additional funds through a $500,000 convertible
debenture issue (See Note 10(a)).
4. Licence and Patents
Licence and patents are recorded at cost less accumulated amortization as
follows:
<TABLE>
<CAPTION>
1997 1996
Accumulated Net Book Net Book
Cost Amortization Value Value
$ $ $ $
<S> <C> <C> <C> <C>
Licence 250,001 4,167 245,834 250,001
Patents 40,680 619 40,061 15,488
------- ----- ------- -------
290,681 4,786 285,895 265,489
======= ===== ======= =======
</TABLE>
17
<PAGE>
4. Licence and Patents (continued)
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 a sublicence to the CTHA, subject
to entering into a formal sublicence agreement. Pursuant to the terms of
the option agreement, the Company paid $250,000 to ICI, which owns the
exclusive licence obtained from West Virginia University Research
Corporation ("WVURC") in an agreement dated April 12, 1994. SMR, ICI and
WVURC are not related to each other. Pursuant to the assignment agreement,
the Company issued 3,000,000 shares to each of Access Information Systems
Inc. (A company controlled by SMR) and a director of the Company (principal
of ICI) for a total deemed value of $1 for all 6,000,000 shares issued.
Pursuant to the original licence agreement between WVURC and ICI, ICI was
granted the exclusive licence to manufacture the CTHA or sublicence others
to manufacture, market, sell copies of, licence and distribute the CTHA. On
July 10, 1995, the Company and ICI entered into a 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. The December 31, 1995 and 1996 royalty
payments have been made.
(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. No revenues have been earned to
date.
(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.
See Note 5 - Joint Venture Agreement.
5. Joint Venture Agreement
The Company entered into a joint venture agreement ("JVA") with Emergent
Technologies Corporation (ETC) dated March 4, 1997. The JVA required a
limited company to be incorporated (The Eclipse Antenna Manufacturing
Corporation) ("TEAM") whereby the Company will own 50% of the issued and
outstanding common shares and ETC will own the remaining 50%. Pursuant to a
voting agreement the Company can vote 100% of the shares of TEAM. The
control person of ETC will be the operator. TEAM was organized on June 4,
1997 under the laws of the State of West Virginia. The Company retains the
worldwide commercial sublicence rights to the CTHA.
The purpose of the joint venture is to cooperate in the research and
development of certain applications for the CTHA and to assemble and
manufacture certain products relating thereto. IAS will buy product from
TEAM at cost to manufacture plus 30% for all commercial applications and
ETC will buy product from TEAM at cost to manufacture plus 30% for all
military applications. ETC acquired the worldwide sublicense from ICI for
all military applications on January 2, 1997.
Subsequent to April 30, 1997, IAS and ETC have each funded TEAM $150,000 as
required in the JVA. A further $100,000 each will be required on an as
needed basis.
18
<PAGE>
6. Common Stock
(a) Stock option activity
<TABLE>
<CAPTION>
1996 Price Granted Exercised 1997 Expiry
# $ # # # Date
<S> <C> <C> <C> <C> <C>
300,000 0.25 - 127,000 173,000 December 29, 1999
50,000 0.25 - 12,500 37,500 February 4, 2000
37,500 1.25 - 34,500 3,000 March 4, 2001
- 1.50 25,000 - 25,000 August 21, 2001
- 2.25 530,000 - 530,000 December 19, 2001
------- ------- ------- -------
387,500 555,000 174,000 768,500
======= ======= ======= =======
</TABLE>
(b) Exchange of 1,300,000 Class "B" non-voting shares to 1,300,000 Class
"A" voting shares
During fiscal 1996 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 (c) below.
(c) 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.
7. Related Party Transactions
(a) A management fee of $32,500 (1996 - $30,000) and rent and secretarial
fees of $18,500 (1996 - $18,000) has been paid to Access (controlled
by a director, John Robertson) and $32,500 (1996 - $30,000) has been
paid to a director and Chairman of the Board, James E. Smith
(principal of ICI).
(b) See Note 4 - a 3% royalty on gross sales will be paid to ICI.
8. Commitments and Contingent Liabilities
(a) Contractual Commitments
(i) See Note 4 for ongoing royalty commitments.
(ii) The Company entered into an agreement on August 16, 1995 with
WVURC to fund ongoing research and development of The Technology
in the amount of $514,346. A total of $401,052 has been expended
to April 30, 1997. The budget ending date is July 31, 1997.
(iii) See Note 9(c) for ongoing compensation commitments.
(iv) See Note 6 for commitments to issue shares upon the exercise of
stock options.
(v) See Note 5 for joint venture funding commitments.
(b) Contingent liability - Development Stage Company (See Note 3).
19
<PAGE>
9. Compensation Agreements
(a) Pursuant to a performance stock agreement dated March 5, 1997 and
executed May 5, 1997 the Company is committed to issue up to 500,000
shares to the control person of Emergent Technologies Corporation. A
total of 100,000 shares were issued on May 5, 1997 at a deemed value
of $1.17 per share for compensation of $117,000. The amount of
$117,000 has been accrued as at April 30, 1997 and charged to research
and development consulting expense. The remaining 400,000 shares shall
be earned as to 100,000 shares for every 1,000,000 antennas sold up to
a maximum of 400,000 shares.
(b) During the year the Company issued 25,000 shares as compensation to a
supplier of services. The deemed value assigned to the shares of
$8,333 was accrued in fiscal 1996.
(c) The Company is committed to pay compensation of $30,000 to each of
Access Information Systems and Dr. Smith for fiscal 1998.
10. Subsequent Events
Subsequent to April 30, 1997 the Company has:
(a) offered a three year, 8 3/4%interest, convertible debenture to raise
$500,000, of which $35,000 has been raised to date. The 8 3/4%
interest is paid annually and the debenture is convertible into Class
"A" common shares at $2.50, $3.00 and $3.50 in years one, two and
three, respectively. In the event the shares are trading below $4.00
per share over a ten-day average prior to exercising into shares of
the Company during the last month of the third year, the convertible
debenture will be exercisable at 20% below the said ten-day average.
The maturity date is June 15, 2000.
(b) issued 7,000 common shares at $2.25 per share and received $15,750
pursuant to a private placement.
(c) issued 13,500 common shares at $.25 per share and received $3,375
pursuant to stock options exercised.
20
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE None.
--------------------
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
- ------- -------------------------------------------------------------
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
--------------------------------------------------
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. 47 Chairman of the Board of Directors
John G. Robertson 56 President, Principal Executive Officer and a member
of the Board of Directors
Jennifer Lorette 24 Secretary/Treasurer, Principal Accounting Officer
and Chief Financial Officer
Patrick Badgley 54 Member of the Board of Directors
Paul E. Lamarche 55 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.
21
<PAGE>
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. Mr. Lamarche holds a Bachelor of Science degree from the
University of Waterloo, Ontario, Canada.
22
<PAGE>
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 19, 1996 to the Company's Officers
and Directors, exercisable at $2.25 per share, to acquire shares of Class A
Voting Common Stock as follows:
<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 19, 2001 and do not expire upon
termination of employment.
23
<PAGE>
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, 1997 and stock options held at year end.
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. -0- -0- 150,000 -0- $ 37,500 -0-
Robertson
Jennifer -0- -0- 50,000 -0- $ 12,500 -0-
Lorette
Patrick Badgley -0- -0- 50.000 -0- $ 12,500 -0-
Dr. James Smith 60,000 $145,000 240,000 -0- $240,000 -0-
Paul Lamarche 7,000 $ 13,230 93,000 -0- $109,250 -0-
</TABLE>
(1) On April 30, 1997, the closing price of Common Stock was $2.50. 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.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of April 30, 1997, 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. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within 60
days from such date upon the exercise of options. Each beneficial owner's
percentage ownership is determined by assuming that options that are held by
such person and which are exercisable within 60 days from the date are
exercised.
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 not be sold in the
24
<PAGE>
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 3,240,000 35%
John G. Robertson[1][2] President and member of the
Board of Directors 3,562,734 39%
Jennifer Lorette[1]
Secretary/Treasurer, Chief Financial Officer and 106,000 1.1%
Principal Accounting Officer
Patrick Badgley[1] 46,000 .5%
Paul E. Lamarche[1] 50,000 .5%
ALL OFFICERS & DIRECTORS AS A GROUP
(FIVE INDIVIDUALS) 7,004,734 75.8%
</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.
[2] 3,000,000 shares are registered in the name of Access Information
Services, Inc., a corporation controlled by Mr. Robertson.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
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.
25
<PAGE>
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.
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.
26
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
- -------- --------------------------------
(A) INDEX TO AND DESCRIPTION OF EXHIBITS
<TABLE>
<CAPTION>
Number Description Page No.
- ------ ----------- --------
<C> <S> <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)
10.9 Amendment Agreement, effective March 4, 1997, between Integral Concepts, Inc.
and the Company....................................................................
10.10 Joint Venture Agreement between Emergent Technologies Corporation
and the Company....................................................................
23 CONSENT OF EXPERTS AND COUNSEL
23.1 Consent of Elliott Tulk Pryce Anderson.............................................. (2)
23.2 Consent of Jack Parsons............................................................. (1)
27 FINANCIAL DATA SCHEDULE.................................................................... (2)
</TABLE>
____________________
(1) Incorporated by reference from Form S-1 Registration Statement (33-92592).
(2) Incorporated by reference from Form 10-KSB filed July 30, 1997.
(B) REPORTS ON FORM 8-K:
None
27
<PAGE>
SIGNATURES
Pursuant to the requirements Section 13 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: Sept. 9, 1997
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 Sept. 9, 1997.
<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>
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