<PAGE>
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
Of the SECURITIES EXCHANGE ACT OF 1934
For the month of May, 2000.
Sideware Systems Inc.
Suite 102, 930 West First Street, North Vancouver, British Columbia,
Canada V7Y 3N4
[Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.]
Form 20-F X . Form 40-F .
------------- -------------
[Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to RULE 12g3-2(b) under the Securities Exchange Act of
1934.]
Yes . No X .
------------------------- ------------------------
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with RULE 12g3-2(b): 82 - .
--------------
<PAGE>
BCSC BRITISH COLUMBIA QUARTERLY REPORT
SECURITIES COMMISSION FORM 61
--------------------------------------------------------------------------------
INSTRUCTIONS
This report is to be filed by Exchange Issuers within 60 days of the end of
their first, second and third fiscal quarters and within 140 days of the end of
their fourth fiscal quarter. Three schedules (typed) are to be attached to this
report as follows:
SCHEDULE A: FINANCIAL INFORMATION
Financial information prepared in accordance with general accepted accounting
principles for the fiscal year-to-date, with comparative information for the
corresponding period of the preceding fiscal year. This financial information
should consist of the following:
FOR THE FIRST, SECOND AND THIRD FISCAL QUARTERS:
An interim financial report presented in accordance with Section 1750 of the
C.I.C.A. Handbook. This should include a summary income statement (or a
statement of deferred costs) and a statement of changes in financial position. A
summary balance sheet is also to be provided.
FOR THE FOURTH FISCAL QUARTER (YEAR END):
Annual audited financial statements.
SCHEDULE B: SUPPLEMENTARY INFORMATION
The supplementary information set out below is to be provided when not included
in Schedule A.
1. FOR THE CURRENT FISCAL YEAR-TO-DATE:
Breakdown, by major category, of those expenditures and costs which are
included in the deferred costs, exploration and development expenses, cost
of sales, and general and administrative expenses set out in Schedule A.
State the aggregate amount of expenditures made to parties not at arm's
length from the issuer.
2. FOR THE QUARTER UNDER REVIEW:
(a) Summary of securities issued during the period, including date of
issue, type of security (common shares, convertible debentures, etc.),
type of issue (private placement, public offering, exercise of
warrants, etc.) number, price total proceeds, type of consideration
(cash, property, etc.) and commission paid.
(b) Summary of options granted, including date, number, name of optionee,
exercise price and expiry date.
3. AS AT THE END OF THE QUARTER:
(a) Particulars of authorized capital and summary of shares issued and
outstanding.
(b) Summary of options, warrants and convertible securities outstanding,
including number or amount, exercise or conversion price and expiry
date.
(c) Total number of shares in escrow or subject to a pooling agreement.
(d) List of directors.
SCHEDULE C: MANAGEMENT DISCUSSION
Review of operations in the quarter under review and up to the date of this
report, including brief details of any significant event or transaction which
occurred during the period. The following list can be used as a guide but is not
exhaustive:
Acquisition or abandonment of resource properties, acquisition of fixed
assets, financings and use of proceeds, management changes, material
contracts, material expenditures, transactions with related parties, legal
proceedings, contingent liabilities, default under debt or other
contractual obligations, special resolutions passed by shareholders.
Specifically, the management discussion must include:
(a) disclosure of and reasons for any material differences in the ACTUAL
use of proceeds from the previous disclosure by the issuer regarding
its INTENDED use of proceeds; and
(b) a brief summary of the investor relations activities undertaken by or
on behalf of the issuer during the quarter and disclosure of the
material terms of any investor relation arrangements or contracts
entered into by the issuer during the quarter.
--------------------------------------------------------------------------------
FREEDOM OF INFORMATION AND PROTECTION OF PRIVACY ACT: The personal information
requested on this form is collected under the authority of and used for the
purpose of administering the Securities Act. Questions about the collection or
use of this information can be directed to the Supervisor, Statutory Filings
(604-899-6729), 200 - 865 Homby Street, Vancouver, British Columbia V6Z 2H4.
Toll Free in British Columbia 1-800-373-6393
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
ISSUER DETAILS
<S><C>
NAME OF ISSUER FOR QUARTER ENDED DATE OF REPORT
Y M D
SIDEWARE SYSTEMS INC. 03/31/00 0 0 0 5 3 0
------------------------------------------------------------------------------------------------------
ISSUER'S ADDRESS
102 - 930 WEST 1ST STREET,
------------------------------------------------------------------------------------------------------
CITY PROVINCE POSTAL CODE ISSUER FAX NO. ISSUER TELEPHONE NO.
NORTH VANCOUVER BC V 7 P 3 N 4 (604) 980-7121 (604) 986-
------------------------------------------------------------------------------------------------------
CONTACT PERSON CONTACT'S POSITION CONTACT TELEPHONE NO.
GRANT SUTHERLAND CHAIRMAN (604) 986-612
------------------------------------------------------------------------------------------------------
CERTIFICATE
THE THREE SCHEDULES REQUIRED TO COMPLETE THIS QUARTERLY REPORT ARE ATTACHED AND THE DISCLOSURE
CONTAINED THEREIN HAS BEEN APPROVED BY THE BOARD OF DIRECTORS. A COPY OF THIS QUARTERLY REPORT WILL
BE PROVIDED TO ANY SHAREHOLDER WHO REQUESTS IT.
------------------------------------------------------------------------------------------------------
DIRECTOR'S SIGNATURE PRINT FULL NAME DATE SIGNED
Y M D
- /s/ Owen Jones OWEN JONES 0 0 0 5 3 0
------------------------------------------------------------------------------------------------------
DIRECTOR'S SIGNATURE PRINT FULL NAME DATE SIGNED
Y M D
- /s/ Grant Sutherland GRANT SUTHERLAND 0 0 0 5 3 0
------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Consolidated Financial Statements of
SIDEWARE SYSTEMS INC.
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
(Unaudited)
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Balance Sheets
(Unaudited)
(Expressed in Canadian dollars)
March 31, 2000 and 1999
<TABLE>
<CAPTION>
===================================================================================================
2000 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 29,613,960 $ 1,049,681
Accounts receivable - other (note 4) 153,741 54,947
Due from related parties (note 5(b)) 98,965 632,611
Share subscriptions receivable (note 8) 376,942 --
Inventory 360,501 6,115
Prepaid expenses 442,062 115,149
Current portion of long-term receivables (note 6) 9,763 --
----------------------------------------------------------------------------------------------
31,055,934 1,858,503
Deposit on lease 130,349 25,807
Long-term receivables (note 6) 165,988 --
Deferred charges (note 6) 145,431 --
Fixed assets (note 7) 1,557,234 749,677
---------------------------------------------------------------------------------------------------
$ 33,054,936 $ 2,633,987
===================================================================================================
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 1,107,173 $ 173,794
Deferred revenue 7,911 --
---------------------------------------------------------------------------------------------------
1,115,084 173,794
Shareholders' equity:
Share capital (note 8) 56,180,455 13,225,884
Special warrants (note 8(d)) -- 2,214,490
Commitment related to investment advisory services (note 8(e)) -- 75,000
Deficit accumulated during the development stage (24,240,603) (13,055,181)
----------------------------------------------------------------------------------------------
31,939,852 2,460,193
Future operations (note 2)
Litigation (note 10)
Commitments (note 12)
Subsequent events (note 13)
---------------------------------------------------------------------------------------------------
$ 33,054,936 $ 2,633,987
===================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
On behalf of the Board:
/s/ Grant Sutherland Director /s/ Owen Jones Director
-------------------- --------------
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Statements of Operations and Deficit
(Unaudited)
(Expressed in Canadian dollars)
<TABLE>
<CAPTION>
===================================================================================================
Three months ended March 31,
----------------------------
2000 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue:
Sales to unrelated parties $ -- $ 1,783
Equipment sales to related parties (note 5(a)) 8,806 66,908
----------------------------------------------------------------------------------------------
8,806 68,691
Cost of sales (exclusive of amortization and
other costs disclosed separately below):
Sales to unrelated parties -- 894
Equipment sales to related parties (note 5(a)) 8,806 66,908
----------------------------------------------------------------------------------------------
8,806 67,802
---------------------------------------------------------------------------------------------------
Gross margin -- 889
Interest income 133,603 2,970
---------------------------------------------------------------------------------------------------
Operating income before operating expenses 133,603 3,859
Operating expenses:
Marketing 1,174,680 170,503
Research and development, net of government grants of $2,827
(March 31, 1999 - $3,454) 513,159 185,592
Selling, general and administrative 2,371,199 380,446
----------------------------------------------------------------------------------------------
4,059,038 736,541
---------------------------------------------------------------------------------------------------
Loss for the period 3,925,435 732,682
Deficit accumulated during the development
stage, beginning of period 20,315,168 12,322,499
---------------------------------------------------------------------------------------------------
Deficit accumulated during the development
stage, end of period $ 24,240,603 $ 13,055,181
===================================================================================================
Loss per share information:
Basic and diluted $ 0.07 $ 0.03
===================================================================================================
Weighted average number of common shares outstanding 56,190,341 28,051,622
===================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in Canadian dollars)
<TABLE>
<CAPTION>
==================================================================================
Three months ended March 31,
----------------------------
2000 1999
----------------------------------------------------------------------------------
<S> <C> <C>
Cash provided by (used in):
Operations:
Loss for the period $ (3,925,435) $ (732,682)
Amortization, an item not involving cash 147,714 56,536
Changes in non-cash operating working capital:
Accounts receivable 24,214 (19,766)
Due from related parties (155,745) (57,296)
Inventory (253,850) 37,990
Prepaid expenses (91,276) (16,741)
Accounts payable and accrued liabilities 524,080 (104,944)
Deferred revenue 7,911 --
----------------------------------------------------------------------------------
(3,722,387) (836,903)
Financing:
Due to directors and officers (317,000) --
Share subscriptions receivable (376,942) --
Special warrants issued for cash -- 1,237,408
Shares issued for cash, net share issue costs 10,203,976 509,110
Share subscriptions received 15,739,680 --
-----------------------------------------------------------------------------
25,249,714 1,746,518
Investments:
Long-term receivables and deferred charges 1,337 --
Purchase of capital assets (372,009) (159,684)
Deposit on lease (101,177) (17,594)
-----------------------------------------------------------------------------
(471,849) (177,278)
----------------------------------------------------------------------------------
Increase in cash and cash equivalents 21,055,478 732,337
Cash and cash equivalents, beginning of period 8,558,482 317,344
----------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 29,613,960 $ 1,049,681
==================================================================================
Supplemental information:
Cash paid for interest $ -- $ --
Cash paid for taxes $ -- $ --
Non-cash financing activities:
Shares issued on exercise of special warrants $ -- $ 1,237,408
==================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
1. GENERAL:
The Company was incorporated in 1983 under the Company Act (British
Columbia). Its principal business activity is developing and marketing of
software technology solutions with a principal focus on the e-commerce
market.
2. FUTURE OPERATIONS:
For financial reporting purposes, the Company is considered to be in the
development stage and the accompanying financial statements are those of a
development stage enterprise.
The Company has not generated significant revenues from these operations.
As at March 31, 2000, the Company has an accumulated deficit of $24,240,603
and incurred a loss of $3,925,435 during the three months ended March 31,
2000. In addition, the Company is the defendant in a number of legal
proceedings and claims, for which the maximum potential losses are material
(note 10). The Company has filed counterclaims on certain of these claims.
These financial statements have been prepared in accordance with Canadian
generally accepted accounting principles applicable to a going concern.
Accordingly, they do not give effect to adjustments that would be necessary
should the Company be unable to continue as a going concern. The Company's
continuance as a going concern is dependent upon its ability to obtain
adequate equity financing, to reach profitable levels of operation and its
success in defending existing legal claims all of which are consistent with
management's intentions. There is no certainty that such conditions can be
achieved. In the next twelve months, management of the Company intends on
applying existing working capital to continue development of its products
and to pursue sales and strategic alliance opportunities with respect to
such products.
3. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in Canada
which, except as set out in note 14, also comply in all material
respects with generally accepted accounting principles in the United
States. The consolidated financial statements include the accounts of
the company, and its subsidiaries, Sideware International SRL, 3032650
Nova Scotia Company, 9050 Investments Ltd. (inactive), Sideware Corp.
(formerly Collaborative Groupware Inc.), Evergreen International
Technology Inc. (inactive) and 9123 Investments Ltd. (inactive), all of
which are wholly-owned. In addition, the Company accounts by the equity
method for its one-third interest in Concurrent Adoptive Recognition
Corp., which is inactive. All material intercompany balances and
transactions have been eliminated.
(b) Cash and cash equivalents:
Cash equivalents are highly liquid financial instruments having terms
to maturity at the date of acquisition of not more than three months.
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 2
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(c) Share subscriptions receivable:
Share subscriptions receivable represent amounts receivable on issued
common shares.
(d) Inventory:
Inventory is valued at the lower of cost and net realizable value with
cost being determined on a first-in-first-out basis. Cost is defined as
the cost paid to third parties for materials plus other applicable
direct costs.
(e) Fixed assets:
Fixed assets are carried at cost less accumulated amortization.
Amortization is calculated annually as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Asset Basis Rate
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Furniture and fixtures declining-balance 20%
Computer equipment declining-balance 30%
Trade show assets declining balance 20%
Computer software straight-line 50%
Leasehold improvements straight-line lease term
---------------------------------------------------------------------------------------------------
</TABLE>
(f) Deferred charges:
Deferred charges represent the discount on notes receivable and will be
recognized by the yield method over the term of the note.
(g) Income taxes:
The Company follows the asset and liability method of accounting. Under
this method, future income tax assets and liabilities are measured
using enacted tax rates for future income tax consequences attributable
to differences between the financial statement carrying amount of
existing assets and liabilities and their respective tax bases. In
addition, the Company records those investment tax credits, for which
it has reasonable assurance of realization, as a reduction of the
expenses or the cost of capital assets to which they relate.
(h) Research and development costs:
Research costs are expensed as incurred. Development costs are deferred
if they meet certain specified criteria which relate to the
identification of costs, future benefits and funding requirements.
Where development costs do not meet such criteria, they are expensed as
incurred. Government grants, which are not refundable, are disclosed as
a reduction of the related cost. Management periodically assesses the
underlying value of deferred development costs by reference to business
plans and estimated future cash flows and records write-downs where
appropriate.
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 3
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(i) Revenue recognition:
The Company recognizes revenue when title has passed to the customer,
the collectability of the consideration is measurable and the Company
has no significant remaining performance obligations. This includes
revenues from sales to resellers, which are recorded in accordance with
their terms, when the resellers have no right of return and the Company
has no other remaining performance obligations. The Company recognizes
sales of equipment, to related parties, in revenues and related costs
in cost of sales as the Company takes title to and holds the equipment,
bearing all of the risks and rewards of ownership, prior to sale, and
bears the same risks as for sales to unrelated parties after sale
including the risks related to collection of receivables.
Cash received in advance of meeting the revenue recognition criteria is
recorded as deferred revenue.
(j) Foreign currency translation:
Monetary assets and liabilities denominated in a foreign currency have
been translated into Canadian dollars at rates of exchange in effect at
the balance sheet date. Non-monetary assets and liabilities and revenue
and expense items are translated at rates prevailing when they were
acquired or incurred. Exchange gains and losses arising on translation
of assets and liabilities denominated in foreign currencies are
included in operations.
The Company's subsidiaries are treated as integrated operations and the
related accounts are translated into Canadian dollars using the
temporal method as follows:
(1) Revenue and expenses at average exchange rates for the year;
(2) Monetary items at the rates of exchange prevailing at the balance
sheet dates;
(3) Non-monetary items at historical exchange rates; and
(4) Exchange gains and losses arising from translation are included in
the determination of net earnings for the year.
(k) Use of estimates:
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 reporting period. Significant areas requiring
the use of management estimates relate to the useful lives of assets
for amortization. Actual amounts may differ from these estimates.
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 4
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(l) Loss per share:
Loss per share is calculated based on the weighted average number of
shares outstanding.
As the effect of outstanding options, warrants and special warrants is
anti-dilutive, fully diluted loss per share does not differ from basic
loss per share.
(m) Unaudited interim financial statements:
The financial information as at March 31, 2000 and 1999, and for the
three months ended March 31, 2000 and 1999 is unaudited. Such financial
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are necessary for a fair presentation of
the results for the periods presented.
4. ACCOUNTS RECEIVABLE OTHER:
Accounts receivable, at March 31, 2000, is comprised of $132,668 (March 31,
1999 - $54,947) of Goods and Services Tax credits receivable with the
balance made up of miscellaneous recoverable amounts.
5. RELATED PARTY TRANSACTIONS:
(a) Transactions with related parties:
The following table summarizes the Company's related party transactions
with certain directors of the Company:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Three months ended March 31,
----------------------------
2000 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Services rendered $ 243,500 $ 94,092
Salaries 321,126 81,938
--------------------------------------------------------------------------------
</TABLE>
Included in revenues and cost of sales are revenues and related costs
associated with equipment sales to BrainTech, Inc. and TechWest
Management Inc., companies with certain common shareholders and
directors to the Company.
(b) Due from related parties:
At March 31, 2000, the Company was owed $98,695 (March 31, 1999 -
$632,611) with respect to costs incurred by the Company on behalf of
BrainTech Inc. and TechWest Management Inc., companies with directors
in common.
These amounts are unsecured, payable on demand and bear no interest.
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 5
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
6. LONG-TERM RECEIVABLES:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
March 31, March 31,
2000 1999
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Employee loan, maturing September 30, 2024, bearing
interest at 1% per annum, repayable in bi-monthly blended
instalments of $565, except if employment is terminated
in which case it is repayable immediately, real estate has
been pledged as security, net of unamortized discount of
$145,431 $ 149,687 $ --
Employee loans, maturing September 30, 2002, bearing
interest at prime plus 1% per annum 26,064 $ --
--------------------------------------------------------------------------------------------------------
$ 175,751 $ --
Less current portion (9,763) $ --
--------------------------------------------------------------------------------------------------------
$ 165,988 $ --
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
</TABLE>
The employee loan secured by real estate has been discounted to fair market
value calculated at prime plus 1%, which is the prevailing rate of similar
financial instruments, over 25 years
7. FIXED ASSETS:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Accumulated Net book
MARCH 31, 2000 Cost amortization value
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Furniture and fixtures $ 543,440 $ 148,379 $ 395,061
Computer equipment 1,160,063 468,327 691,736
Trade show assets 210,662 41,017 169,645
Computer software 162,680 91,546 71,134
Leasehold improvements 951,001 721,343 229,658
--------------------------------------------------------------------------------------
$ 3,027,846 $ 1,470,612 $ 1,557,234
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Accumulated Net book
MARCH 31, 1999 Cost amortization value
--------------------------------------------------------------------------------------
Furniture and fixtures $ 251,314 $ 88,908 $ 162,406
Computer equipment 558,466 297,424 261,042
Trade show assets 112,580 12,683 99,897
Computer software 110,678 57,923 52,755
Leasehold improvements 709,504 535,927 173,577
--------------------------------------------------------------------------------------
$ 1,742,542 $ 992,865 $ 749,677
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 6
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
8. SHARE CAPITAL:
Authorized:
200,000,000 common shares without nominal or par value.
Issued:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Number
of shares Amount
-------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, April 30, 1996 10,792,309 $ 5,451,969
Shares issued on exercise of special warrants 7,683,000 1,754,500
Shares issued on exercise of non-transferable warrants 404,500 202,250
Cancellation of shares (a) (3,924,396) --
Shares issued for settlement of debt 1,489,446 372,362
Performance shares issued for cash 750,000 7,500
Shares issued on exercise of options 123,000 44,280
Less share issue costs -- (93,437)
-------------------------------------------------------------------------------------------
Balance, April 30, 1997 17,317,859 7,739,424
Shares issued on exercise of special warrants 4,450,000 1,293,750
Shares issued on exercise of non-transferable warrants 4,203,100 2,106,500
Shares issued on exercise of options 699,000 352,100
Shares issued to a director in satisfaction of a royalty claim 100,000 25,000
-------------------------------------------------------------------------------------------
Balance, April 30, 1998 26,769,959 11,516,774
Shares issued on exercise of special warrants 500,000 1,200,000
-------------------------------------------------------------------------------------------
Balance, December 31, 1998 27,269,959 12,716,774
Shares issued on exercise of special warrants 9,724,611 4,149,843
Shares issued on exercise of non-transferable warrants 10,434,335 5,078,666
Shares issued on exercise of options 1,343,500 1,198,310
Shares issued for cash 2,746,833 6,712,155
Shares issued for services rendered 250,000 160,000
Share subscriptions (243,900 common shares) -- 589,296
Less share issue costs -- (368,245)
-------------------------------------------------------------------------------------------
Balance, December 31, 1999 51,769,238 30,236,799
Shares issued on exercise of non-transferable warrants 2,623,927 3,326,573
Shares issued on exercise of options 1,043,600 1,901,213
Shares issued for cash 2,256,100 5,369,256
Shares issued for subscriptions previously received 243,900 --
Share subscriptions (1,084,000 common shares) -- 15,739,680
Less share issue costs -- (393,066)
-------------------------------------------------------------------------------------------
Balance, March 31, 2000 (Unaudited) 57,936,765 $ 56,180,455
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
</TABLE>
Unless otherwise indicated, common shares issued for non-cash consideration
are valued at their market value at date of issuance.
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 7
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
8. SHARE CAPITAL (CONTINUED):
Of the common shares issued on the exercise of options, $1,524,271 was
received in cash and $376,942 is receivable at March 31, 2000.
(a) Escrow shares:
Included in issued shares at March 31, 2000 are 1,030,378 shares (March
31, 1999 - 1,030,378) held in escrow to be released based on
achievement of a cash flow formula.
(b) Stock options:
(i) Activity during the three months ended March 31, 2000 is as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Exercise Outstanding Outstanding Vested
price per December 31, Expired/ March 31, March 31,
Expiry date share 1999 Granted Exercised cancelled 2000 2000
-----------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 2001 $ 0.50 753,000 -- (100,000) -- 653,000 653,000
February 12, 2002 0.36 123,000 -- - -- 123,000 123,000
March 26, 2002 0.82 10,000 -- (10,000) -- -- --
December 16, 2002 0.70 380,000 -- (95,000) -- 285,000 285,000
July 6 ,2003 0.36 365,000 -- (20,000) -- 345,000 345,000
April 14, 2004 1.14 470,000 -- (210,000) -- 260,000 160,000
April 29, 2004 1.35 161,000 -- (67,500) -- 93,500 93,500
June 17, 2004 2.33 967,000 -- (97,000) -- 870,000 825,000
October 4, 2004 2.66 728,500 -- (376,000) -- 352,500 317,500
October 20, 2004 2.78 149,000 -- (68,100) -- 80,900 45,900
January 14, 2005 US 8.69 -- 1,000,000 -- -- 1,000,000 300,000
January 21, 2005 US 11.08 -- 1,000,000 -- -- 1,000,000 550,000
-----------------------------------------------------------------------------------------------------
4,106,500 2,000,000 (1,043,600) -- 5,062,900 3,697,900
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
</TABLE>
Stock options vest over periods of up to two years. Exercise price
per share is equal to weighted average exercise per share.
(ii) Activity during the three months ended March 31, 1999 is as
follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Exercise Outstanding Outstanding Vested
price per December 31, Expired/ March 31, March 31,
Expiry date share 1998 Granted Exercised cancelled 1999 1999
-----------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 2001 $ 0.50 895,000 -- (10,000) -- 885,000 885,000
February 12, 2002 0.36 267,000 -- (1,000) (20,000) 246,000 246,000
February 12, 2002 0.50 40,000 -- (20,000) -- 20,000 20,000
March 26, 2002 0.82 93,000 -- -- -- 93,000 93,000
December 16, 2002 0.70 740,000 -- -- -- 740,000 740,000
July 6, 2003 0.36 555,000 -- (50,000) -- 505,000 505,000
-----------------------------------------------------------------------------------------------------
2,590,000 -- (81,000) (20,000) 2,489,000 2,489,000
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 8
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
8. SHARE CAPITAL (CONTINUED):
(b) Stock options (continued):
(iii) A summary of the Company's stock option activity is as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
OUTSTANDING OPTIONS
-----------------------------------
Number of Weighted average
shares exercise price
----------------------------------------------------------------------------------------
<S> <C> <C>
Balances at April 30, 1996 -- $ --
Options granted 2,308,000 0.49
Options exercised (123,000) 0.36
Options canceled (120,000) 0.50
----------------------------------------------------------------------------------------
Balances at April 30, 1997 2,065,000 0.50
Options granted 800,000 0.70
Options exercised (699,000) 0.50
Options canceled (45,000) 0.68
----------------------------------------------------------------------------------------
Balances at April 30, 1998 2,121,000 0.57
Options granted 555,000 0.36
Options exercised -- --
Options canceled (86,000) 0.55
----------------------------------------------------------------------------------------
Balances at December 31, 1998 2,590,000 0.52
Options granted 2,960,000 2.06
Options exercised (1,343,500) 0.89
Options canceled (100,000) 0.63
----------------------------------------------------------------------------------------
Balances at December 31, 1999 4,106,500 1.51
Options granted 2,000,000 14.35
Options exercised (1,043,600) 1.80
Options canceled -- --
----------------------------------------------------------------------------------------
Balances at March 31, 2000 (Unaudited) 5,062,900 $ 4.76
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</TABLE>
(c) Share purchase warrants:
(i) The following non-transferable share purchase warrants were
outstanding at March 31, 2000:
<TABLE>
<CAPTION>
--------------------------------------------------------------------
Number Exercise price Expiry
of shares per share date
--------------------------------------------------------------------
<S> <C> <C>
176,000 $0.40 December 23, 2000
197,882 $0.333 US To March 26, 2001
2,500,000 $0.55 To April 7, 2000
$0.63 From April 8, 2000
To April 7, 2001
1,614,300 $1.64 US To September 14,2000
$1.89 US From September 15, 2000
To September 14, 2001
2,500,000 $1.64 US To December 14, 2000
$1.89 US From December 15, 2001
To December 14, 2001
--------------------------------------------------------------------
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 9
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
8. SHARE CAPITAL (CONTINUED):
(c) Share purchase warrants (continued):
(ii) The following non-transferable share purchase warrants were
outstanding at March 31, 1999:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Number Exercise price Expiry
of shares per share date
--------------------------------------------------------------------------------
<S> <C> <C>
210,000 $0.465 April 16, 1999
2,175,000 $0.43 April 16, 1999
1,500,000 $0.92 October 23, 1999
--------------------------------------------------------------------------------
</TABLE>
Share purchase warrants generally expire two years subsequent
to their issuance date.
(d) Special warrants:
(i) At March 31, 2000, no special warrants were outstanding.
(ii) At March 31, 1999, 4,672,805 special warrants were outstanding
with the following terms:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Number Exercise price Expiry
of warrants per share date
--------------------------------------------------------------------------------------
<S> <C> <C>
90,000 $0.32 To November 19, 1999
$0.37 From November 20, 1999
to November 19, 2000
600,000 $0.28 To January 14, 2000
$0.32 From January 15, 2000
To January 14, 2001
1,432,805 US $0.265 To January 7, 2000
US $0.305 From January 8, 2000
To January 7, 2001
2,550,000 $0.35 To January 7, 2000
$0.37 From January 8, 2000
To January 7, 2001
--------------------------------------------------------------------------------------
</TABLE>
Each special warrant under these placements is exchangeable
for one common share and one share purchase warrant exercisable
for a two year period. Agreements relating to 4,072,085 of the
special warrants provided that the number of shares and share
purchase warrants will be increased by 10% if the Company does not
file documents to qualify the shares for resale within a specified
period. The 10% increase subsequently became effective.
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 10
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
8. SHARE CAPITAL (CONTINUED):
(e) Commitment related to investment advisory services:
The commitment is with respect to the issuance of 100,000 common shares
and 125,000 share purchase warrants exercisable at $0.60 - $0.75 per
share for a two year period. The value assigned to these equity
instruments of $75,000 has been expensed in a previous period.
9. INCOME TAXES
The Company has non-capital loss carry forwards for income tax purposes of
approximately $20,335,000 which are available to reduce taxable income of
future years which expire as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 1,285,000
2001 --
2002 650,000
2003 3,600,000
2004 2,200,000
2005 1,650,000
2006 7,250,000
2007 3,700,000
-----------------------------------------------------
$ 20,335,000
-----------------------------------------------------
-----------------------------------------------------
</TABLE>
At March 31, 2000, the gross future tax asset amount relating to a
non-capital loss carry forward was $8,500,000 which is reduced by a
valuation allowance of $8,500,000 due to the uncertainty surrounding the
realization of the future income tax assets. There was no future tax
liability at March 31, 2000.
10. LITIGATION:
The Company is engaged in the following litigation:
(a) During the year ended April 30, 1997, a former director of the Company
commenced legal proceedings against the Company for $276,000 alleged to
be owing to him for unpaid consulting fees and funds loaned or advanced
on behalf of the Company. The Company has filed a defense and
counterclaim.
(b) During the year ended April 30, 1997, four former directors commenced
legal proceedings against the Company and certain of its present
directors claiming unspecified damages for libel. The Company has filed
a defense and counterclaim.
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 11
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
10. LITIGATION (CONTINUED):
(c) During the year ended April 30, 1996, the Company commenced legal
proceedings against former directors and officers of the Company,
companies related to a former director, and the Company's former
solicitors and auditors. The relief claimed included damages for breach
of fiduciary duty and negligence, an injunction preventing the sale of
a computer program named "E-Glue", and an order setting aside a
disputed general security agreement against the Company's assets.
484117 B.C. Ltd., a company controlled by a former director, filed a
counterclaim alleging that the Company was indebted to it in the amount
of $1,495,594 as at November 4, 1994, and seeking to enforce the
disputed general security agreement. The Company's former auditors
filed a counterclaim for approximately $50,000 alleged to be owing for
professional services.
(d) During the year ended December 31, 1999, parties related to a former
director commenced proceedings against the Company claiming damages for
abuse of process. The Company has filed a defense and counterclaim.
While the ultimate outcomes of these claims are uncertain, management
of the Company believes it will be successful in defending these
actions and accordingly no amounts have been provided in these
financial statements.
11. FINANCIAL INSTRUMENTS:
(a) Fair values of financial instruments:
The Company's short-term financial instruments consist of cash and cash
equivalents, accounts receivable, due to/from related parties, due to
officers, accounts payable and accrued liabilities. The fair value of
these financial instruments approximate their carrying values due to
their short term maturity.
The fair value of the long-term receivables have been calculated using
the current market rate for such instruments of the same remaining
maturity term and credit risk and approximate carrying value.
(b) Foreign currency risk:
Foreign currency risk reflects the risk that the Company's net assets
or operations will be negatively impacted due to fluctuations in
exchange rates. Revenues billed in United States dollars by the Company
come due in the short-term and accordingly, management of the Company
believes there is no significant exposure to foreign currency
fluctuations. The Company does not have foreign currency hedges in
place.
(c) Credit risk:
Credit risk reflects the risk that the Company may be unable to recover
contractual receivables. No one contract represents a concentration of
credit risk. The Company employs established credit approval practices
to further mitigate this risk.
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 12
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
12. COMMITMENTS:
The Company has obligations under operating lease arrangements which
require the following minimum annual payments:
<TABLE>
<CAPTION>
<S> <C> <C>
2000 $ 1,031,211
2001 1,405,449
2002 1,357,295
2003 1,137,294
2004 770,417
2005 4,818,684
-----------------------------------------------------
$ 10,520,350
=====================================================
</TABLE>
Pursuant to agreements with companies with certain common shareholders and
directors of the Company, approximately $85,000 of these amounts are
recoverable from these related parties for the fiscal year 2000,
approximately $116,000 for the fiscal year 2001, approximately $89,000 for
the fiscal year 2002, and approximately $36,000 for the fiscal year ending
2003.
13. SUBSEQUENT EVENTS:
(a) Stock options:
Subsequent to March 31, 2000, 101,500 stock options were exercised and
converted to common shares for total cash proceeds of $171,815.
On April 20 and 27, 2000, the Company granted, subject to regulatory
approval 4,900,000 and 1,632,000 stock options, respectively,
exercisable at a price of US $5.10.
(b) Share purchase warrants:
Subsequent to March 31, 2000, 672,000 share purchase warrants were
exercised and converted to common shares for total cash proceeds of
$684,596.
(c) Private placement:
Subsequent to March 31, 2000, the Company issued, through private
placements, 1,084,000 units of the Company at a price of U.S.$10.00 per
unit. Each unit consists of one common share and one non-transferable
share purchase warrant, entitling the holder to purchase one additional
common share without par value, exercisable for a period of two years
at a price of U.S.$10.00 per share for the first year and at a price of
U.S.$11.50 per share the second year. The total proceeds of $15,739,680
from this private placement were received prior to the period ended
March 31, 2000 and reflected in share capital as subscriptions
received.
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 13
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
14. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES:
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") in Canada, the
measurement principles of which conform, in all material respects, with
those in the United States except as described below:
(a) Stock-based compensation:
For United States GAAP purposes, the Company has elected to follow the
disclosure-only provisions under Statement of Financial Accounting
Standards No. 123 ("FAS 123"), "Accounting for Stock-Based
Compensation", and applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its stock-based compensation to
employees. Accordingly, the Company's stock-based compensation expense
is measured based on the intrinsic value of the option on the date of
grant. FAS 123 requires companies that continue to follow APB 25 to
disclose the impact of applying the fair value method of FAS 123.
Under the intrinsic value method of APB 25, the stock option
compensation is the excess, if any, of the quoted market value of the
stock at the measurement date of the grant over the amount an optionee
must pay to acquire the stock. Compensation expense will be recognized
at fair value over the service period which generally represents the
vesting period. Accordingly, additional compensation expense and
paid-up capital of $6,677,748 would be recorded for the three months
ended March 31, 2000 (March 31, 1999 - $nil) for United States GAAP
purposes. As the related options are exercised, the amounts recorded in
paid-in capital are reclassified to issued share capital.
Had stock compensation expense for the Company's stock option plan been
determined based on the fair value methodology under FAS 123, the
Company's net loss would have increased for the three months ended
March 31, 2000 and 1999 by $7,846,232 and $nil, respectively. In
addition, the Company's loss per share under United States GAAP for the
three months ended March 31, 2000 and 1999 would have been $0.33 and
$0.03, respectively.
The fair value for the options was estimated using the Black-Scholes
option pricing model with the following assumptions: Expected
volatility of 80%, risk-free interest rate of 5%, expected life of five
years, and a 0% dividend yield.
The weighted-average fair value of stock options granted for the three
months ended March 31, 2000 and 1999 are $7.11 and $nil, respectively.
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 14
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
14. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED):
(b) Development stage enterprises:
For United States GAAP purposes, Statement of Financial Accounting
Standards No. 7, "Development Stage Enterprises", the Company would be
defined to be a development stage enterprise which would require the
following additional disclosures:
(i) The amounts in the consolidated statement of operations and
deficit accumulated during the development stage would be
presented on a cumulative basis from the Company's inception which
is summarized as follows:
<TABLE>
----------------------------------------------------------------------------------
<S> <C>
Revenues $ 1,271,842
Cost of sales (exclusive of amortization and other costs
disclosed separately below) 293,736
----------------------------------------------------------------------------------
978,106
Operating expenses:
Marketing 5,127,827
Research and development 4,855,022
Selling, general and administrative 22,983,209
----------------------------------------------------------------------------------
32,966,058
----------------------------------------------------------------------------------
Loss before undernoted 31,987,952
Other income (601,851)
----------------------------------------------------------------------------------
Loss accumulated during the development stage under
US GAAP (Unaudited) $ 31,386,101
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
</TABLE>
(ii) The amounts in the consolidated statement of cash flows would also
be presented on a cumulative basis from the Company's inception
which is summarized as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Operations:
<S> <C>
Loss accumulated during the development stage under US GAAP $ (31,768,104)
Items not involving the use of cash:
Amortization 1,512,582
Other 7,882,894
Changes in non-cash operating working capital items 149,937
----------------------------------------------------------------------------------
(22,222,691)
Financing 54,564,001
Investments (2,727,293)
----------------------------------------------------------------------------------
Increase in cash and cash equivalents during the development stage 29,614,017
Cash at inception of development stage (57)
----------------------------------------------------------------------------------
Cash and cash equivalents, March 31, 2000 (Unaudited) $ 29,613,960
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 15
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
14. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED):
(b) Development stage enterprises (continued):
(iii) A cumulative statement of stockholders' equity would be presented
as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Share capital Retained
--------------------------- Paid-in Special earnings
Number Assigned capital warrants (deficit)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, inception of
development stage 1,044,719 $ 526,961 $ -- $ -- $ 382,003
Shares issued for cash 400,000 100,000 -- -- --
Loss for the year -- -- -- -- (90,976)
------------------------------------------------------------------------------------------------------------
Balance, April 30, 1990 1,444,719 626,961 -- -- 291,027
Shares issued for acquisition of
subsidiary 6,660,452 1,105,231 -- -- --
Shares issued as settlement for 900,000 225,000 -- -- --
debt
Loss for the year -- -- -- -- (2,237,102)
------------------------------------------------------------------------------------------------------------
Balance, April 30, 1991 9,005,171 1,957,192 -- -- (1,946,075)
Shares issued for cash 500,000 200,000 -- -- --
Shares issued for cash 220,000 198,000 -- -- --
Loss for the year -- -- -- -- (431,506)
------------------------------------------------------------------------------------------------------------
Balance, April 30, 1992 9,725,171 2,355,192 -- -- (2,377,581)
Shares issued for cash 783,000 567,250 -- -- (781,817)
Loss for the year -- -- -- -- --
------------------------------------------------------------------------------------------------------------
Balance, April 30, 1993 10,508,171 2,922,442 -- -- (3,159,398)
Shares issued as a finders fee 53,881 92,675 -- -- --
Shares issued for cash 1,588,550 1,671,710 -- -- --
Shares issued as settlement for 406,450 705,141 -- -- --
debt
Loss for the year -- -- -- -- (2,256,961)
------------------------------------------------------------------------------------------------------------
Balance, April 30, 1994 12,557,052 5,391,968 -- -- (5,416,359)
Shares issued as settlement for 162,165 60,001 -- -- --
debt
Earnings for the year -- -- -- -- 277,200
------------------------------------------------------------------------------------------------------------
Balance, April 30, 1995 12,719,217 5,451,969 -- -- (5,139,159)
Cancellation of escrow shares (1,926,908) -- -- -- --
Loss for the year -- -- -- -- (898,154)
------------------------------------------------------------------------------------------------------------
Balance, April 30, 1996 10,792,309 5,451,969 -- -- (6,037,313)
Special warrants issued -- -- -- 3,250,500 --
Shares issued on exercise of special
warrants 7,683,000 1,754,500 -- (1,754,500) --
Shares issued on exercise of non-
transferable warrants 404,500 202,250 -- (202,250) --
Cancellation of shares (3,924,396) -- -- -- --
Shares issued as settlement for 1,489,446 372,362 -- -- --
debt
Performance shares issued for cash 750,000 7,500 -- -- --
Shares issued on exercise of 123,000 44,280 -- -- --
options
Share issue costs -- (93,437) -- -- --
Compensatory benefit of employee
stock options -- -- 19,350 -- --
Assignment of capital on stock options
exercised -- 4,750 (4,750) -- --
Loss for the year -- -- -- -- (2,002,863)
------------------------------------------------------------------------------------------------------------
Balance, April 30, 1997,
carried forward 17,317,859 $ 7,744,174 $ 14,600 $ 1,293,750 $ (8,040,176)
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 16
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
14. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED):
(b) Development stage enterprises (continued):
(iii) (continued):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Share capital Retained
------------------- Paid-in Special earnings
Number Assigned capital warrants (deficit)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, April 30, 1997, brought forward 17,317,859 $ 7,744,174 $ 14,600 $ 1,293,750 $(8,040,176)
Shares issued on exercise of
non-transferable warrants 4,203,100 2,106,500 -- -- --
Shares issued on exercise of options 699,000 352,100 -- -- --
Shares issued in satisfaction of a royalty
claim 100,000 25,000 -- -- --
Shares issued on exercise of
special warrants 4,450,000 1,293,750 -- (1,293,750) --
Special warrants issued -- -- -- 1,200,000 --
Assignment of capital on stock options
exercised -- 2,575 (2,575) -- --
Loss for the year -- -- -- -- (2,409,390)
-------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1998 26,769,959 11,524,099 12,025 1,200,000 (10,449,566)
Shares issued on exercise
of special warrants 500,000 1,200,000 -- (1,200,000) --
Special warrant subscriptions -- -- -- 977,082 --
Compensatory benefit of employee --
stock options -- -- 44,400 --
Assignment of capital on stock options
exercised -- 322 (322) -- --
Loss for the period -- -- -- -- (1,936,683)
-------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 27,269,959 12,724,421 56,103 977,082 (12,386,249)
Shares issued on exercise of
non-transferable warrants 10,434,335 5,078,666 -- -- --
Shares issued on exercise of options 1,343,500 1,198,310 -- -- --
Shares issued on exercise of
special warrants 9,724,611 4,149,843 -- (977,082) --
Shares issued for cash 2,746,833 6,712,155 -- -- --
Shares issued for services rendered 250,000 160,000 -- -- --
Share subscriptions receivable
(243,900 common shares) -- 589,296 -- -- --
Share issue costs -- (368,245) -- -- --
Compensatory benefit of employee
stock options -- -- 404,000 -- --
Assignment of capital on stock options
exercised -- 120,292 (120,292) -- --
Loss for the year -- -- -- -- (8,396,669)
-------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 51,769,238 30,364,738 339,811 -- (20,782,918)
Shares issued on exercise of
non-transferable warrants 2,623,927 3,326,573 -- -- --
Shares issued on exercise of options 1,043,600 1,901,213 -- -- --
Shares issued for cash 2,256,100 5,369,256 -- -- --
Shares issued for subscriptions
previously received 243,900 -- -- -- --
Shares subscriptions received
(1,084,000 common shares) -- 15,739,680 -- -- --
-------------------------------------------------------------------------------------------------------------------
Balance, carried forward 57,936,765 $ 56,701,460 $ 339,811 $ -- $(20,782,918)
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 17
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
14. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED):
(b) Development stage enterprises (continued):
(iii) (continued):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Share capital Retained
--------------------- Paid-in Special earnings
Number Assigned capital warrants (deficit)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, brought forward 57,936,765 $ 56,701,460 $ 339,811 $ -- $(20,782,918)
Share issue costs -- (393,066) -- -- --
Compensatory benefit of employee
stock options -- -- 6,677,748 -- --
Assignment of capital on stock
options exercised -- 117,560 (117,560) -- --
Share subscriptions receivable -- -- (376,942) -- --
Loss for the year -- -- -- -- (10,603,183)
-------------------------------------------------------------------------------------------------------------
Balance, March 31, 2000 (Unaudited) 57,936,765 $ 56,425,954 $ 6,523,057 $ -- $(31,386,101)
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
</TABLE>
Identification as a development stage enterprise would not impact
the measurement principles applied.
(c) Research and development:
For United States GAAP purposes, Statement of Financial Accounting
Standards No. 2, "Research and Development Expenditures", requires
development costs to be expensed as incurred. Under Canadian GAAP, such
expenses are deferred if they meet specified criteria. Since April 30,
1996, no costs have been deferred under Canadian GAAP and, accordingly,
no difference has arisen to the amounts that could be reported under
United States GAAP.
(d) Share subscriptions receivable:
For United States GAAP purposes, share subscriptions receivable at
March 31, 2000 of $376,942 (March 31, 1999 - $nil) would be shown as a
deduction from the assigned value of share capital in the statement of
stockholders' equity.
(e) Loss per share:
For United States GAAP purposes, 1,030,378 shares held in escrow as at
March 31, 2000 (March 31, 1999 - 1,030,378) are considered contingently
issuable. Accordingly, these shares are excluded from the weighted
average number of shares outstanding for the purposes of calculating
loss per share amounts. To the extent that common shares held in escrow
are released based on the achievement of performance measures,
compensation expense will be recognized under United States GAAP at the
date the shares became releasable for the difference between the market
value of the shares at that date and the nominal consideration
originally paid.
<PAGE>
SIDEWARE SYSTEMS INC.
(A Development Stage Enterprise)
Consolidated Notes to Financial Statements, page 18
(Unaudited)
(Expressed in Canadian dollars)
Three months ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
14. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED):
(f) Summary of United States GAAP adjustments:
The following table sets forth the effect on the loss for the period
and loss per share:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Three months ended March 31,
----------------------------
2000 1999
------------------------------------------------------------------------------------------------
<S> <C> <C>
Loss determined under Canadian GAAP $ 3,925,435 $ 732,682
Expenses relating to stock-based compensation (b) 6,677,748 --
------------------------------------------------------------------------------------------------
Loss determined under United States GAAP $ 10,603,183 $ 732,682
------------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding
under United States GAAP 55,159,963 27,021,244
------------------------------------------------------------------------------------------------
Loss per share under United States GAAP $ 0.19 $ 0.03
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
</TABLE>
There would be no impact from the above adjustments on total assets or
shareholders' equity reported under Canadian GAAP at March 31, 2000 and
December 31, 1999.
<PAGE>
SIDEWARE SYSTEMS INC. SCHEDULE B
SHARE CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2000
COMMON SHARES
<TABLE>
<CAPTION>
$ PER $
NUMBER SHARE TOTAL
<S> <C> <C> <C>
Jan 1, 2000 Balance forward 51,769,238 $30,236,799
------------ ------------
Jan-Mar 2000 Shares issued on exercise of options 1,043,600 1,901,213
Jan-Mar 2000 Shares issued on exercise
of non-transferable warrants 2,623,927 3,326,573
Jan-Mar 2000 Shares issued for cash 2,500,000 5,369,256
Jan-Mar 2000 Share subscriptions received -- 15,739,680
Jan-Mar 2000 Share issue costs -- (393,066)
------------ ------------
March 31, 2000 Total for the quarter 6,167,527 25,943,656
------------ ------------
SHARE CAPITAL MARCH 31/00 57,936,765 $56,180,455
============ ============
</TABLE>
<PAGE>
SIDEWARE SYSTEMS INC. SCHEDULE B
(CONTINUED)
OPTIONS GRANTED
DURING THE THREE MONTHS ENDED MARCH 31, 2000:
DATE: JANUARY 14, 2000
EXERCISE PRICE: US$8.69
EXPIRY DATE: JANUARY 14, 2005
<TABLE>
<CAPTION>
NAME NUMBER
<S> <C>
Friedlander, Scott 1,000,000
</TABLE>
DATE: JANUARY 21, 2000
EXERCISE PRICE: US$11.08
EXPIRY DATE: JANUARY 21, 2005
<TABLE>
<CAPTION>
NAME NUMBER
<S> <C>
Nussbaum, Jay 200,000
Hildebrand, Paul 300,000
Walchli, Stewart 100,000
Goble, Rosie 50,000
Strieb, Bill 75,000
Beaman, Lisa 20,000
Pate, Chris 20,000
Donaldson, Teri-Ann 12,000
Liebermand, Stephen 15,000
Wrenn, Christy 15,000
Sweeny, Tom 15,000
Woodward, Kathryn 17,500
Sukut, Al 10,000
Gruzin, Mark 75,000
Guyton, Will 17,500
Ostapovicz, Christopher 20,000
Mounts, Gary 5,000
Price, Joseph Lee 3,000
Woo, Anna 5,000
Green, Charles 15,000
Means, Bob 10,000
</TABLE>
<PAGE>
QUARTERLY REPORT - FORM 61
QUARTER ENDED MARCH 31, 2000
SIDEWARE SYSTEMS INC.
SHEDULE C: MANAGEMENT DISCUSSION
PERIOD: JANUARY 1, 2000 TO MAY 29, 2000
1. SCOTT FRIEDLANDER
Mr. Friedlander joined Sideware as Executive Vice President of Sales and
Marketing. Scott spent 18 years with Xerox and brings a wealth of knowledge and
contacts to Sideware.
2. SALES OFFICES
Sales offices have been opened in San Jose, Atlanta, Boston and Chicago in
addition to our main Herndon, Virginia office.
3. SALES AND SUPPORT STAFF
Sales and Support Staff in the U.S. have grown to 70 people. The company now has
approximately 130 employees.
4. FINANCING
Private Placement financing during this period resulted in approximately
US$15,000,000 being raised for Sideware.
5. INVESTOR RELATIONS ACTIVITIES
Shareholders and interested persons can contact Richard Simpson by telephone at
(604) 986-6121; fax at (604) 980-7121 or by e-mail to [email protected].
Jennifer Burke can be contacted at (604) 669-2101, ext 224, fax at (604)
669-2151 or by e-mail to [email protected]. Please visit our website at
sideware.com.
LIST OF DIRECTORS AT MAY 29, 2000
OWEN JONES
GRANT SUTHERLAND
JAMES SPEROS
JAY NUSSBAUM
EDWARD WHITE
PETER KOZICKI
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SIGNATURES
Pursuant to the requirements of the SECURITIES EXCHANGE ACT OF 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Sideware Systems Inc.
"Grant Sutherland"
Date: May 31, 2000 By: Grant Sutherland, Chairman
