U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended OCTOBER 31, 2000
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-21255
-----------
IAS COMMUNICATIONS, INC.
(Exact 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 No.)
185-10751 SHELLBRIDGE WAY, RICHMOND, BC CANADA V6X 2W8
(Address of principal executive offices)
(604) 278-5996
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
YES [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: As of December 13, 2000 - 11,600,645
shares of common stock, no par value.
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X].
<PAGE>
INDEX
PART I - Financial Information Page
Item 1. Financial statements 2
-------- ---------------------
Balance Sheets as of October 31, 2000 (unaudited) and
April 30, 2000 (audited) 3
Statements of Operations for the six months ended
October 31, 2000 and 1999 (unaudited) 4
Statements of Cash Flows for the six months ended
October 31, 2000 and 1999 (unaudited) 5
Notes to the Financial Statements (unaudited) 6-8
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 7-10
------- -------------------------------------------------------
PART II - Other Information 11
Signatures 12
<PAGE>
PART I Financial Information
Item 1. Financial Statements (Unaudited)
-------- ----------------------------------
IAS Communications, Inc.
(A Development Stage Company)
Balance Sheets
October 31, April 30,
2000 2000
(unaudited) (audited)
$ $
Assets
Current Assets
Inventory 25,522 22,605
Prepaid expenses and other current assets 48,879 153,788
---------------------------
74,401 176,393
Property, Plant and Equipment (Note 3) 35,819 41,352
Licence and Patent Protection Costs (Note 4) 421,857 377,872
---------------------------
532,077 595,617
Liabilities and Stockholders' Equity
Current Liabilities
Cheques issued in excess of funds on deposit 27,188 18,446
Accounts payable 525,461 495,409
Accrued liabilities 65,551 128,928
Due to related companies (Note 7) 413,620 211,965
Convertible debentures (Note 5) 25,000 35,000
---------------------------
1,056,820 889,748
Stockholders' Equity (Deficit)
Preferred Stock 50,000,000 shares authorized;
none issued - -
Common Stock (Note 6)
Class "A" voting - 100,000,000 shares authorized
without par value; 11,433,597 shares and
11,321,239 shares issued and
outstanding respectively 4,867,724 4,738,949
paid for but unissued (310,700 shares) 155,350 -
Class "B" non-voting - 100,000,000
shares authorized without par value;
none issued - -
----------------------------
5,023,074 4,738,949
Deficit Accumulated During
The Development Stage (5,547,817) (5,033,080)
----------------------------
(524,743) (294,131)
----------------------------
532,077 595,617
Commitments and Contingencies (Notes 1 and 8)
Subsequent Event (Note 9)
<PAGE>
IAS Communications, Inc.
(A Development Stage Company)
Statements of Operations
Six months ended
October 31,
---------------------------
2000 1999
(unaudited) (unaudited)
$ $
Revenue 14,625 29,472
Cost of Sales 2,642 21,206
----------------------------
Gross Profit 11,983 8,266
Administration Expenses
Advertising - 12,400
Bank charges 1,187 784
Business plan - (1,700)
Depreciation 2,326 2,090
Foreign exchange 1,173 1,584
Interest on convertible debentures 1,202 7,924
Premium on cash redemption of convertible debentures - 29,790
Investor relations - consulting 163,201 10,000
Investor relations - publications 9,438 5,639
Management fees 15,000 15,000
Office, postage and courier 12,062 15,619
Professional fees 91,924 51,393
Rent and secretarial 41,102 53,810
Telephone 3,229 3,804
Transfer agent and regulatory 9,984 10,341
Travel and promotion 1,294 12,314
----------------------------
353,122 230,792
Research and Development Expenses
Royalty 1,500 1,500
Depreciation and amortization 17,993 15,214
Consulting 146,353 48,000
Subcontracts for prototype
construction and testing 7,752 8,721
Less engineering contribution by a third party - (83,000)
-----------------------------
173,598 (9,565)
-----------------------------
Net Loss (514,737) (212,961)
-----------------------------
Net Loss Per Share .05 .02
-----------------------------
Weighted Average Shares Outstanding 11,413,000 10,318,000
<PAGE>
IAS Communications, Inc.
(A Development Stage Company)
Statements of Cash Flows
Six months ended
October 31,
---------------------------
2000 1999
(unaudited) (unaudited)
$ $
Cash Flows to Operating Activities
Net loss (514,737) (212,961)
Adjustments to reconcile net loss to cash
Depreciation and amortization 20,319 17,304
Shares issued for services 56,952 -
Shares issued for convertible
debenture interest - 3,266
Change in non-cash working capital items
(Increase) in inventory (2,917) (8,444)
(Increase) decrease in prepaid expenses 104,909 (2,320)
Increase in accounts payable and
accrued liabilities 28,500 27,838
-----------------------------
Net Cash Used in Operating Activities (306,974) (175,317)
Cash Flows to Investing Activities
Increase in property, plant and equipment (3,073) (2,222)
Increase in patent protection costs (55,700) (11,553)
-----------------------------
Net Cash Used in Investing Activities (58,773) (13,775)
Cash Flows from Financing Activities
Redemption of convertible debentures - (140,000)
Increase in subscriptions for common shares 155,350 97,000
Increase in related company advances 201,655 256,408
-----------------------------
Net Cash Provided by Financing Activities 357,005 213,408
(Decrease) Increase in Cash (8,742) 24,316
Cash (Deficiency) - Beginning of Period (18,446) (26,095)
-----------------------------
Cash (Deficiency) - End of Period (27,188) (1,779)
Non-Cash Financing Activities
Shares issued to settle debt 117,900 -
Convertible debentures with a face
value of $10,000 (1999 - $35,000)
plus accrued interest of $875
(1999 - $3,266) were converted into
12,358 (1999 - 62,854) common shares 10,875 38,266
-----------------------------
128,775 38,266
Supplemental disclosures:
Interest paid 2,187 12,735
Income tax paid - -
<PAGE>
IAS Communications, Inc.
(A Development Stage Company)
Notes to the Financial Statements
1. Development Stage Company
IAS Communications, Inc., herein "the Company", was incorporated on December 13,
1994 pursuant to the Laws of the State of Oregon, USA.
The Company is a development stage company engaged in the commercialization of
advanced antenna technology known as the Contrawound Torroidal Helical Antenna,
herein "CTHA", for wireless communications markets including cellular, meter
reading and global positioning services. The CTHA, developed in conjunction with
researchers at West Virginia University, is a technologically advanced antenna
design which can be incorporated into a wide variety of telecommunications
applications. The Company has been granted worldwide sublicensing rights for
commercial applications, excluding military and governmental applications, for
the CTHA pursuant to an agreement with Integral Concepts Inc. and West Virginia
University Research Corporation. See Note 8(c) for legal proceedings regarding
underlying patents.
In a development stage company, management devotes most of its activities to
establishing a new business. Planned principal activities have not yet produced
significant revenues and the Company has suffered recurring losses from
inception, totalling $5,547,817 and has a working capital deficit of $982,419
which includes a negative cash balance of $27,188. The above factors raise
substantial doubt about the Company's ability to continue as a going concern.
The ability of the Company to emerge from the development stage with respect to
its planned principal business activity is dependent upon its successful efforts
to raise additional equity financing, develop additional markets for its
products, identify additional licensees and receive ongoing financial support
from the majority of its creditors and affiliates.
The Company plans to raise $450,000 ($155,350 raised to date) and issue 900,000
units at $0.50 per unit. The Company may also raise additional funds through the
exercise of warrants and stock options, if exercised. Warrants with respect to
1,616,502 shares may be exercised and options with respect to 993,000 shares may
be exercised. These warrants and options are currently not in-the-money and are
unlikely to be currently exercised.
The Company, after raising $450,000, will require significant additional capital
to provide sufficient working capital to carry out their business plan for the
next twelve months.
2. Summary of Significant Accounting Policies
(a) Adjustments
These interim unaudited financial statements have been prepared on the same
basis as the annual financial statements and in the opinion of management,
reflect all adjustments, which include only normal recurring adjustments,
necessary to present fairly the Company's financial position, results of
operations and cash flows for the periods shown. The results of operations for
such periods are not necessarily indicative of the results expected for a full
year or for any future period.
(b) Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the periods. Actual results
could differ from those estimates.
<PAGE>
3. Property, Plant and Equipment
October 31, April 30,
2000 2000
Accumulated Net Book Net Book
Cost Amortization Value Value
(unaudited) (audited)
$ $ $ $
Computer and office
equipment 20,775 9,818 10,957 13,035
Research and development
equipment 63,073 41,329 21,744 27,450
Vehicle 3,739 621 3,118 867
-----------------------------------------------------
87,587 51,768 35,819 41,352
=====================================================
Depreciation per class of capital asset:
Computer and office equipment 2,078 4,181
Research and development equipment 6,279 11,050
Vehicle 249 248
4. License and Patent Protection Costs
October 31, April 30,
2000 2000
Accumulated Net Book Net Book
Cost Amortization Value Value
(unaudited) (audited)
$ $ $ $
Licence 250,001 47,917 202,084 208,334
Patent protection
costs (Note 9(c)) 246,436 26,663 219,773 169,538
--------------------------------------------------------
496,437 74,580 421,857 377,872
========================================================
Amortization per class of intangible asset:
Licence 6,250 12,500
Patent protection costs 5,465 10,491
5. Convertible Debentures
The Company offered three year, 8 % interest, convertible debentures. Interest
is paid annually. The remaining $35,000 of such debentures were convertible into
Class "A" shares at $3.50 on June 15, 2000. In the event the shares are trading
below $4.00 per share over a ten-day average prior to exercising into shares of
the Company during November 16, 2000 to December 16, 2000, the convertible
debentures will be exercisable at 20% below the said ten-day average. The
maturity date was June 15, 2000 which has been extended to December 15, 2000. A
total of $10,000 was converted during the previous quarter by issuing 12,358
shares.
6. Common Stock
(a) Stock Option Plan
The Company has a Stock Option Plan to issue up to 2,500,000 Class "A" common
shares to certain key directors and employees, approved and registered October
2, 1996 and amended May 28, 1999. Pursuant to the Plan the Company has granted
stock options to certain directors and employees. On May 28, 1999 the Company
granted stock options to certain employees to acquire up to 205,000 shares
exercisable at $1.00 per share expiring May 28, 2004. On November 15, 1999 the
Company granted stock options to a certain employee to acquire up to 25,000
shares exercisable at $1.00 per share expiring December 15, 2004. On October 11,
2000 the Company granted stock options to a certain employee to acquire up to
25,000 shares exercisable at $0.50 per share expiring October 11, 2005.
<PAGE>
6. Common Stock (continued)
(a) Stock Option Plan (continued)
The options are granted for current services provided to the Company. Statement
of Financial Accounting Standards No. 123 ("SFAS 123") requires that an
enterprise recognize, or at its option, disclose the impact of the fair value of
stock options and other forms of stock based compensation in the determination
of income. The Company has elected under SFAS 123 to continue to measure
compensation costs on the intrinsic value basis set out in APB Opinion No. 25.
As stock options are granted at exercise prices based on the market price of the
Company's shares at the date of grant, no compensation cost is recognized.
However, under SFAS 123, the impact on net income and income per share of the
fair value of stock options must be measured and disclosed on a fair value based
method on a pro forma basis. As performance stock is issued for services
rendered the fair value of the shares issued is recorded as compensation expense
or capitalized, at the date the shares are issued, based on a discounted average
trading price of the Company's stock as quoted on the Over The Counter Bulletin
Board.
The fair value of the employee's purchase rights, pursuant to stock options,
under SFAS 123, was estimated using the Black-Scholes model.
The weighted average number of shares under option and option price for the six
months ended October 31, 2000 is as follows:
October 31, 2000
Weighted
Average
Shares Option
Under Option Price
# $
Beginning of period 1,133,000 1.19
Granted 50,000 .75
Exercised - -
Cancelled (150,000) 2.25
Lapsed (40,000) .25
------------------------
End of period 993,000 1.05
If compensation expense had been determined pursuant to SFAS 123, the Company's
net loss and net loss per share for the six months ended October 31, 2000 and
October 31, 1999 would have been as follows:
2000 1999
$ $
Net loss
As reported (514,737) (212,961)
Pro forma (541,787) (239,085)
Basic net loss per share
As reported (.05) (.02)
Pro forma (.05) (.02)
(b) Warrants outstanding
(i) 617,600 warrants are exercisable at $2.25 per share expiring
July 2000 (extended).
(ii) During fiscal 1999 the Company issued 200,000 units at $1.00
per unit for proceeds of $200,000. Each unit contained one share and one warrant
to acquire one additional share at $1.50 per share expiring April 8, 2000. A
total of 13,125 warrants were exercised during fiscal 2000 for proceeds of
$19,687. The remaining warrants expiry date was extended to October 8, 2000
(extended). The units offering was increased and the price reduced to $0.50 per
unit during the year. A total of 968,902 units were issued for proceeds of
$484,451. Each unit contained one share and one warrant to acquire one
additional share at $1.00 per share expiring March 1, 2001. These warrants are
currently unexercised.
(iii) 30,000 warrants are exercisable at $2.85 per share expiring
July 22, 2001.
(c) Other stock commitment
<PAGE>
The Company is committed, pursuant to two financial consulting contracts to
issue 75,000 restricted shares.
7. Due to Related Companies
The amounts due to related companies are non-interest bearing, unsecured and
without specific terms of repayment.
8. Commitments and Contingencies
(a) Contractual Commitments
(i) The Company is committed to issue up to 400,000 Class "A"
shares which shall be earned as to 100,000 shares for every 1,000,000 CTHA's
sold. No shares have been earned to date.
(ii) See Note 6 for commitments to issue shares upon the exercise of
stock options and warrants.
(b) Contingent liability - Development Stage Company (See Note 1).
(c) Legal Proceedings
(i) The Company was sued in April 1998 in a civil action filed in U.S.
District Court for the District of Oregon (the "Oregon Litigation"). The
Plaintiff, Kirk Vanvoorheis, ("Plaintiff") sought money damages and equitable
relief against the Company alleging patent infringement by the Company for the
CTHA. The Company notified West Virginia University ("WVU") of this claim and
contacted WVU to assist in the defence. WVU owns the patent rights to the CTHA
technology which were licensed to the Company. Two patents were granted for the
CTHA to WVU; one in August 1995, and another in August 1997. The Plaintiff's
patent was approved on March 31, 1998.
The Plaintiff in the Oregon Litigation is also a defendant in a pending civil
action in the U.S. District Court for the Northern District of West Virginia
brought by WVU (the "West Virginia Litigation") claiming that the CTHA invention
is owned by WVU. As alleged in the West Virginia Litigation, the Company
believes that the patent rights for the CTHA technology belongs to WVU and
therefore based on the license, the Company owns the world wide rights to the
CTHA commercial applications. Dr. James Smith, the former Chairman of the Board
of the Company, has been sued by Plaintiff in a third party complaint in the
West Virginia Litigation together with WVU and Integral Concepts, Inc.
A decision by the United States District Court for the Northern District of West
Virginia will, if upheld on appeal, signal the end to patent litigation brought
by VorteKx, Inc. against the Company.
VorteKx, Inc. brought a patent infringement action against IAS in the United
States District Court for the District of Oregon on a patent issued to a former
graduate student at WVU, Kurt L. VanVoorhies, and subsequently assigned to
VorteKx. On the Company's motion, the case was transferred to the Northern
District of West Virginia and consolidated with a previously_pending action
filed by WVU against VanVoorhies, discussed above. The Company and WVU both
claimed that the technology covered by the patent is actually owned by WVU. The
Company is the sublicensee of commercial applications of the CTHA technology.
In a Memorandum Opinion and Order entered February 17, 2000, the West Virginia
federal court granted summary judgment for WVU in its claims against
VanVoorhies. The Court also dismissed VanVoorhies' claims against WVU and
third_party defendants West Virginia University Research Corporation, Dr. James
E. Smith and Integral Concepts, Inc. Because the Court's holding establishes
that WVU owns the technology, it should bring an end to the litigation against
the Company, which was stayed pending resolution of the case against
VanVoorhies.
The dispute in the WVU action concerned inventions conceived during VanVoorhies'
time at WVU as a graduate student and later as a graduate research assistant,
particularly two inventions relating to the CTHA technology. The Court found
that VanVoorhies validly assigned all rights in the first invention to WVU,
including all future technology derived from the technology underlying that
invention. VanVoorhies subsequently declined to assign to WVU any interest in a
second invention. The Court found that the second invention constituted future
technology derived from the first invention. Therefore, VanVoorhies' assignment
of the first invention to WVU also effectively assigned the second invention to
WVU, and WVU is the rightful owner of the patent applications filed by
VanVoorhies on the CTHA technology.
Because one of these patent applications led to the issuance of the patent
underlying VorteKx's infringement suit against the Company, VorteKx no longer
has standing to pursue that infringement case. The case has been stayed pending
VanVoorhies' appeal from the Court's order.
<PAGE>
8. Commitments and Contingencies (continued)
(c) Legal Proceedings (continued)
(ii) On May 16, 2000 the Company filed suit in the United States District
Court for Northern District of West Virginia against Integral Technologies,
Inc., Next Antennas.Com, Inc., Emergent Technologies Corporation and Jack
Parsons (collectively, "the Defendants"), alleging breach of contract,
misappropriation of trade secrets, interference with economic relations, and
breach of fiduciary duty.
This Company is the exclusive commercial sublicensee of certain proprietary
antenna technology developed by West Virginia University, including any
improvements, modifications or enhancements thereto ("the Technology"). The
Company established a joint venture (TEAM) with Emergent Technologies
Corporation, exclusive military sublicensee of the Technology, to develop
antennas based on the Technology. Emergent was subsequently acquired by Integral
Technologies, Inc., which recently announced it is selling antennas to the
commercial market through its wholly_owned subsidiary, Next Antennas.Com, Inc.
Jack Parsons has been the president of Emergent, and a director of Integral. The
Company believes that the defendants are selling antennas in contravention of
their obligations under the sublicense agreements and otherwise, and in
violation of the Company's exclusive rights.
The Company seeks injunctive and affirmative relief and punitive damages as
follows:
- An injunction prohibiting the Defendants from using or disclosing the
Company's trade secrets; or manufacturing, distributing or selling, any device
derived from the Technology for commercial applications;
- An order requiring the Defendants to account to the Company for all
profits obtained as a result of their alleged breach of contract, breach of duty
of good faith and fair dealing, misappropriation of trade secrets, interference
and/or breach of fiduciary duty; and to return all proprietary materials and
destroy all devices created in violation of the Company's rights;
(iii) A money judgment against the Defendants in an amount to be determined
at trial; additional exemplary or punitive damages calculated to deter such
conduct, and attorney fees and costs; and
(iv) An order requiring the Defendants to hold in trust for the Company all
profits the Defendants have made from commercial sales of antennas derived from
the Technology.
9. Subsequent Event
On November 30, 2000 the Company issued 167,048 common shares to a director at a
fair market value of $0.562 per share to settle debt of $93,881.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward Looking Statements
----------------------------
This report contains forward-looking statements. The words, "anticipate",
"believe", "expect", "plan", "intend", "estimate", "project", "could", "may",
"foresee", and similar expressions are intended to identify forward-looking
statements. The following discussion and analysis should be read in conjunction
with the Company's Financial Statements and other financial information included
elsewhere in this report which contains, in addition to historical information,
forward_looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from the results discussed in the
forward_looking statements. Factors that could cause or contribute to such
differences include those discussed below, as well as those discussed elsewhere
in this report.
Overview
--------
The following discussion and analysis should be read in conjunction with the
enclosed consolidated financial statements and notes thereto appearing elsewhere
in this report.
IAS Communications, Inc. was incorporated on December 13, 1994 pursuant to the
Laws of the State of Oregon, USA.
We are a development stage company engaged in the commercialization of advanced
antenna technology known as the Contrawound Toroidal Helical Antenna, herein
"CTHA", for wireless communications markets including cellular, meter reading
and global positioning services. The CTHA, developed in conjunction with
researchers at West Virginia University, is a technologically advanced antenna
design which can be incorporated into a wide variety of telecommunications
applications. We have been granted worldwide sublicensing rights for commercial
applications, excluding military and governmental applications, for the CTHA
pursuant to an agreement with Integral Concepts Inc. and West Virginia
University Research Corporation.
As a development stage company, we devote most of our activities to establishing
this new business. Planned principal activities have produced insignificant
revenues and we have suffered recurring losses from inception, totalling
$5,547,817, and we have a working capital deficit of $982,419 as at October 31,
2000 which includes a negative cash balance of $27,188. In the previous quarter
trade debt of $118,000 was settled by issuing 100,000 common shares at $1.18 per
share. On November 30, 2000 a total of $93,881 of debt was settled by issuing
167,048 common shares at $0.562 per share. The above factors raise substantial
doubt about our ability to continue as a going concern. Our ability to emerge
from the development stage with respect to our planned principal business
activity is dependent upon our successful efforts to raise additional equity
financing and develop additional markets for our products, identify additional
licensees, and receive ongoing financial support from the majority of our
creditors and affiliates.
We plan to raise net proceeds of approximately $450,000 ($155,350 raised to
date) through a private placement. The offering will be a best efforts no
minimum offering consisting of 900,000 units at $0.50 per unit. Each unit
consists of one share and one warrant to purchase an additional share at a price
of $1.00 for a period of one year from the date of issuance. The common stock
offered will not be registered under the Securities Act of 1933 and may not be
offered or sold in the United States absent registration or an applicable
exemption from registration requirements. This disclosure is not offer to sell
securities and is not a solicitation of an offer to buy securities. We
anticipate that sales will be made only to accredited investors or to persons
that are not U.S. residents. No money or other consideration is being solicited
or will be accepted by way of this disclosure. The common stock offered has not
been registered with or approved by any state securities agency or the U.S.
Securities and Exchange Commission and will be offered and sold pursuant to
exemptions from registration.
We may also raise additional funds through the exercise of warrants and stock
options, if exercised. Warrants with respect to 1,616,502 shares may be
exercised and options with respect to 993,000 shares may be exercised. These
warrants and options are currently not-in-the-money and are unlikely to be
currently exercised.
After completing the $450,000 offering, we will require significant additional
capital to provide sufficient working capital to carry out our business plan for
the next twelve months.
Progress Report from August 1, 2000 to October 31, 2000 and to the Date of this
Report
On August 9, 2000 we announced the test report on our low profile CTHA LEO
Satellite antenna has been received from Cadence Design Group (NYSE: CDN). This
antenna is optimized to operate with any earth-based standard with 16.5 feet of
RG-58/U coaxial cable. The cable is of sufficient length to allow the antenna to
be mounted physically far from the RF transceiver front end. The cable length
can be adjusted to fit any system installation with minimal to no
<PAGE>
degradation in antenna performance. We have been testing this antenna for a
practical system application. This system application is intended for use in the
transportation tracking industry. The system can be installed in any semi
freight trailer and shipping containers and can be utilized to prevent their
theft and loss.
The system is designed to monitor the location and prevent theft of any semi
freight trailer. A plastic equipment chassis is installed to the front inner
wall of a semi freight trailer. A Panasonic Orbcomm Transceiver with integrated
GPS Receiver is mounted inside the plastic equipment chassis.
When rear doors of the semi freight trailer are opened, a signal is sent from
the switch unit mounted near the doors of the trailer to the microcomputer
mounted inside the plastic chassis. The microcomputer activates the GPS
receiver. The GPS receiver uses an active antenna that is mounted inside the
housing of the LEO Satellite Antenna and connected via a length of 50-ohm
coaxial cable. When the GPS receiver gets a location fix, it notifies the
microcomputer. At this point, the microcomputer activates the Orbcomm
Transceiver and sends a message via a satellite link to the Orbcomm ground
station located in Dulles, Virginia. The message is then routed from the ground
station to the end user's tracking station. The trailer's monitoring facility is
then notified of the location of the trailer, and the time at which the
trailer's doors were opened. The system can also monitor the time at which the
doors are closed via the same satellite link.
Other data communication devices can be interfaced to the microcomputer that can
send data via the Orbcomm Satellite network. In turn, the tracking station can
send messages via the Orbcomm satellite network to the trailer that can control
the trailer door locking mechanisms and other devices interfaced to the
microcomputer.
We have been conducting field tests on the LEO Satellite antenna for the last
two years. Recently, we have acquired a semi freight trailer for system testing.
We use a satellite-logging program to determine the approximate next time a
communication link can be established with the Orbcomm Satellite system. Due to
gaps in satellite coverage, the system will queue message data until a satellite
is available.
Based on two years of testing and data collection, the IAS LEO Satellite Antenna
has an overall Communications Efficiency between 95% and 98%. The majority of
communications failures of the satellite loop back tests are attributed to
atmospheric conditions. Tests were performed in two-week intervals and a
percentage of successful loop back tests were derived. This test data will be
available on our web site for review at www.iascom.com.
Our agreement with Cadence is to complete a comprehensive wireless development
engineering service for the CTHA technology for the cellular phone; warlike
talkie; two-way pagers; cordless phone and several Bluetooth applications.
Cadence is the largest supplier of electronic design automation products,
methodology services, and design services used to accelerate and manage the
design of semiconductors, computer systems, networking and telecommunications
equipment, consumer electronics, and a variety of other electronics based
products. With approximately 5,000 employees and 1999 annual revenue of $1.1
billion, Cadence has sales offices, design centers, and research facilities
around the world. Cadence is headquartered in San Jose, Calif., and trades on
the New York Stock Exchange under the symbol CDN. More information about
Cadence, its products and services may be obtained from www.cadence.com.
On October 10, 2000 we announced Tandy Corporation had completed a report on the
relative testing and findings of the RadioShack Personal FM Transceivers with
the internal IAS CTHA antenna.
The tests were performed on a pair of commercially available Personal FM
Transceivers. The tests were performed in an urban environment to achieve real
world representative results.
One of the transceivers remained unmodified during all test configurations. The
other transceiver in the pair was tested for range and signal quality
degradation in the following configurations:
1. Standard RadioShack monopole antenna installed
2. No antenna installed
3. IAS CTHA antenna installed (inside the plastic housing of the
transceiver)
4. Small connector wire (no IAS antenna) installed
The RF matching circuitry in the RadioShack Transceiver front end was not
modified during the tests. No internal components were altered or tuned and no
RF shielding was removed during transceiver testing. This relative testing
provided a baseline for IAS 1.2 CTHA antenna performance evaluation when
compared to other antenna configurations in the same equipment and environment.
<PAGE>
When the CTHA antenna was mounted internal to the RadioShack transceiver, the
antenna was sitting within 1cm of the transceiver RF shield can. The transceiver
was also being operated with the human hand surrounding it. These factors added
to the transmission path loss between the two transceivers.
The following table shows testing results for the RadioShack Personal FM
Transceiver and the IAS 1.2 CTHA antenna. This table shows data relative to each
test case.
<TABLE>
<CAPTION>
TABLE OF TEST RESULTS
MAXIMUM RANGE
average of two successive test runs
(TRANSMIT / RECEIVE RADIUS
AROUND FIXED UNMODIFIED SIGNAL VOICE
TRANSCEIVER) QUALITY RECOGNITION
<S> <C> <C> <C>
Transceiver with Monopole antenna installed . . 4,200 foot radius Good Clear
Transceiver with IAS 1.2 CTHA antenna installed 3,960 foot radius Good Clear
Transceiver with no antenna installed . . . . . 300 foot radius Poor Noisy
Transceiver with wire only installed. . . . . . 450 foot radius Poor Noisy
----------------------------------------------- ------------------------------------ ------- -----------
</TABLE>
The IAS 1.2 CTHA antenna mounted internal to the RadioShack transceiver
performed almost as well as the standard RadioShack Personal FM Transceiver
antenna. It is expected that with some minor mechanical and electrical changes
to the RadioShack Transceiver the IAS 1.2 CTHA would perform equal too if not
greater than the external monopole antenna that is mounted standard on the
transceiver.
X The RadioShack Personal FM Transceiver with the IAS 1.2 CTHA antenna
performed to within 5.71% of what the externally mounted monopole antenna
achieved
X The IAS 1.2 CTHA Antenna was not electrically matched to the RF circuitry
in the RadioShack Personal FM Transceiver. It is expected that the performance
of the antenna in the RadioShack Transceiver could be further improved if it
were electronically matched appropriately.
Tandy Corporation has been retained under contract to perform independent
testing and evaluation of the IAS CTHA antenna product line. Tandy performs such
services for its customers from time to time. We contracted Tandy to better
understand the CTHA antenna technology and document the test results for the
Wireless marketplace. All test data was extracted from tests that Tandy
personnel performed either at the Tandy Labs in Beaverton Oregon, or in the
field. The test report details the relative testing and findings of the
RadioShack Personal FM Transceiver with internal IAS 1.2 CTHA antenna. Tandy,
formerly the Electronic Design Services group of Cadence Design Systems, Inc.,
was recently launched as a separate company.
On November 28, 2000 we announced successful high-speed wireless Internet tests
were demonstrated on a 2.4 GHz frequency band using the CTH Antenna for a
Kokomo, Indiana wireless Internet service provider.
Larry Hawks, our Chief Engineer, has designed a low profile box that is only
of an inch in height that contains the IAS CTHA and a connector for the laptop
or desktop computer to provide a high-speed connection for wireless Internet
service.
The wireless Internet user can access the World Wide Web from any location
within a two-mile radius from the local ISP's base station. We have also
completed tests for the wireless Internet service to co-locations five-miles
away from the main ISP's base station. This will allow the ISP wireless access
to a larger area for its Internet services.
Larry Hawks states, "Wireless Internet users can download information from the
World Wide Web two-hundred times faster than an ordinary dial-up connection and
can receive information as far away as two-miles from the ISP base station or
co-location facilities."
Several wireless Internet providers have approached us to partner with them
which will expand our CTHA technology to other areas in Canada and the US.
On December 5, 2000 we announced 160 CTH PCS antennas were delivered to World
Tracking Technologies for production testing. An additional 5,000 CTH Antennas
are to be delivered this month.
<PAGE>
The CTH Antenna will be incorporated into World Tracking's patented wrist-worn
location device, which will enable customers to locate lost children and
Alzheimer's patients. Future applications include E911 compliance, asset
tracking, law enforcement and pet location.
Pursuant to our license agreement, World Tracking will pay to us a minimum of
$2,700,000 in royalties in the first five years.
World Tracking Technologies' nationwide location system will be deployed by a
national service provider and will be launched in the second quarter of 2001.
Results of Operations
-----------------------
Six months ended October 31, 2000 ("2000") compared to the six months ended
October 31, 1999 ("1999")
During the latter part of 1999 we through our agreement with
Information-Highway.com, Inc., started selling ham radio antennas and TV
antennas over the Internet. Sales revenue amounted to $15,000 for 2000 as
compared to $29,000 for 1999.
The net loss for 2000 was $515,000 compared to $213,000 for 1999. The increase
of $302,000 was due to the increase in research and development expenses to
$174,000 as compared to $Nil during 1999, an increase of $174,000. The increase
was due to our receiving a $83,000 engineering contribution during 1999 and our
incurring $98,000 of additional consulting expense during 2000 relating to the
aforementioned testing and developing of five new antennae applications.
Administrative expenses increased by $122,000 to $353,000 as compared to
$251,000 in 1999. Investor relations activity increased by $157,000 to $173,000
from $16,000 in 1999 as a result of our financial services contract with Capital
Research Inc. whereby we have issued shares for financial services valued at
$143,000.
Our net loss per share increased by $0.03 to $0.05 per share from $0.02 in 1999
as a result of the higher net loss and the increase in outstanding shares.
Liquidity
---------
During 2000 we financed our operations by receiving financial support from
companies affiliated with our President in the amount of $202,000. These amounts
are unsecured, non-interest bearing and due on demand. Also we received $155,000
in stock subscriptions through a private placement currently in progress.
During 2000 we invested these funds as follows:
(i) $3,000 of these funds were spent on acquiring capital assets.
(ii) $56,000 of these funds were spent on patent protection costs in
various jurisdictions.
(iii) $307,000 of these funds were spent on operating activities as
discussed above under Results of Operations.
Our cash position has decreased by $9,000 to negative $27,000 and our working
capital deficit, as at October 31, 2000, is $982,000.
We plan to raise $450,000 ($155,000 raised to date) and issue 900,000 units at
$0.50 per unit. We may also raise additional funds through the exercise of
warrants and stock options, if exercised. Warrants with respect to 1,616,502
shares may be exercised and options with respect to 993,000 shares may be
exercised. These warrants and options are currently not-in-the-money and are
unlikely to be currently exercised. After completing our $450,000 offering, we
will require significant additional capital to provide sufficient working
capital to carry out our business plan for the next twelve months.
<PAGE>
PART II Other Information
Item 1. Legal Proceedings
-------- ------------------
There is no material change to legal proceedings during the quarter and to the
date of this report. Please see our April 30, 2000 Form 10KSB and October 31,
2000 10-QSB for details on legal proceedings.
Item 2. Changes in Securities
-------- -----------------------
As of November 30, 2000, a total of 167,048 shares of Class A common stock was
issued to James Vandeberg, a director, as payment of outstanding legal fees in
the amount of $93,881. The debt was settled by issuing the 167,048 common shares
at $0.562 per share.
Item 3. Defaults upon Senior Securities
-------- ----------------------------------
None
Item 4. Submissions of Matters to a Vote of Security Holders
-------- ------------------------------------------------------------
None
Item 5. Other Information
-------- ------------------
None
Item 6. Exhibits and Reports on Form 8-K
-------- -------------------------------------
(a) 27.1 - Financial Data Schedule
(b) There were no form 8-K's filed during the period.
<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: December 19, 2000 IAS COMMUNICATIONS, INC.
By: /s/ John G. Robertson
------------------------
John G. Robertson, President
(Principal Executive Officer)
By: /s/ James Vandeberg
---------------------
James Vandeberg, Chief Financial Officer
(Principal Financial Officer)
