SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
Form 10-QSB
QUARTERLYREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30th, 1997.
Commission file number 0-25680
WAVERIDER COMMUNICATIONS INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 33-0264030
(State or other jurisdiction of
incororation or organization) (IRS Employer Identification Number)
700 - 555 West Hastings St., Vancouver, BC., Canada, V6B 4N5
(Address of principal executive offices and Zip (Postal) Code)
(604) 482-1211
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirement for the past 90 days.
Yes __X__; No _____
Applicable only to corporate issuers:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable 941456635date: October 31 , 1997 - 20763849
Common shares, $.001 par value.
Transitional Small Business Disclosure Format: (check one):
Yes _____; No __X__
<PAGE>
WAVERIDER COMMUNICATIONS INC.
FORM 10 - QSB
For the Period Ended September 30th, 1997
INDEX
Page
PART I. FINANCIAL INFORMATION 2
Item 1. Financial Statements 2-3
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6-8
Item 2. Management's Discussion and Analysis or Plan of Operation 9-10
PART II OTHER INFORMATION 11
Item 5. Other Information 11
Item 6. Reports on Form 8-K 11
Signatures 11
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
Unaudited Consolidated Financial Statements
WAVERIDER COMMUNICATIONS INC.
( A Development Stage Company)
Quarter ended September 30, 1997 and year ended December 31, 1996
The Financial statements for the three months ended September 30, 1997 and
1996 include, in the opinion of the Company, all adjustments (which consist only
of normal recurring adjustments) necessary to present fairly the results of
operations for such periods. Results of operations for the three months ended
September 30, 1997, are not necessarily indicative of results of operations
which will be realized for the year ending December 31, 1997. The financial
statements should be read in conjunction with the Company's Form 10-KSB for the
year ended December 31, 1996 and the Company's Forms 10Q-KSB for the three
months ended March 31, 1997 and three months ended June 30, 1997.
-2-
<PAGE>
WaveRider Communications Inc.
( A Development Stage Company)
Balance Sheets
Quarter ended September 30, 1997 and year ended December 31, 1996
September December
30,1997 31, 1996
(Unaudited) (Audited)
------------- -------------
CURRENT ASSETS
Cash and Equivalents ......................... $ 140,080 $ 1,809
Accounts Receivable.... 7,809 -
Trade Name ................................... - 22,189
Other ........................................ 57,442 (1,452)
------------ ------------
Total Current Assets $ 205,331 $ 22,546
------------ ------------
EQUIPMENT
Equipment and Fixtures ....................... $ 248,013 $ 27,712
Less Accumulated depreciation ............... - (13,857)
------------ ------------
Net Equipment ........................... $ 248,013 $ 13,855
------------ ------------
Total assets ......................... $ 453,344 $ 36,401
============ ============
LIABILITIES
CURRENT LIABILITIES
Accounts Payable ............................. $ 53,065 $ 73,602
Accrued Liabilities .. ..................... 80,000 58,239
Loans Payable-Affiliates ..................... (12,357) -
Advance on sale of stock .................... (26,790) -
Capitalized leases payable-current ........... -- -
------------ ------------
Total Current Liabilities ............... $ 93,918 $ 131,841
------------ ------------
LONG TERM LIABILITIES
Capitalized leases payable ................... $ -- $ -
------------ ------------
Total liabilities ........................ $ 93,918 $ 131,841
============ ============
STOCKHOLDER'S EQUITY
Preferred stock, $.001 par value:
authorized 5,000,000 shares: issued
and outstanding 4,000,000 shares as of
September 30, 1997 nil at December 31,1996 .... $ 4,000 $ --
Common Stock $.001 par value;
authorized 50,000,000 shares; issued
and outstanding 20,330,759 and
5,184,559 shares at September 30,1997
and December 31,1996, respectively ............ 20,331 5,185
Paid in capital .............................. 3,509,853 2,496,574
Accumulated deficit .......................... (3,174,758) (2,597,199)
------------ ------------
Total Stockholder's Equity .............. $ 359,426 $ (95,440)
------------ ------------
------------ ------------
Total Liabilities and Stockholder's Equity .... $ 453,344 $ 36,401
============ ============
See accompanying notes to financial statements.
-3-
<PAGE>
WaveRider Communications Inc.
( A Development Stage Company)
Statements of Operations
Quarter Ending September 30, 1997
<TABLE>
<CAPTION>
Inception
Nine Months Ended (August 6
----------------- 1987) to
Quarter Ended September 30 September 30, September 30,
-------------------------- ----------------- ------------
1997 1996 1997 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUES
Administrative services ....... $ -- $ -- $ -- $ -- $ 25,304
Interest Income ............... -- -- 22 -- 14,474
Other Income .................. -- 12,500 30,310 12,500 34,122
----------- ----------- ---------- ---------- -----------
Total Revenue ................. $ -- $ 12,500 $ 30,332 $ 12,500 $ 73,900
----------- ----------- ---------- ---------- -----------
EXPENSES
Salaries and Benefits ......... $ 71,419 $ -- $ 121,061 $ 1,239 $ 448,767
Professional fees ............. 28,449 5,107 45,851 21,819 279,851
Interest ...................... 747 -- 860 -- 10,424
Consulting fees ............... 91,056 (6,416) 129,364 31,822 1,067,988
Research and Development/Lab... 33,983 -- 152,435 -- 238,132
Administrative cost-other ..... 126,353 9,109 158,356 66,388 1,135,674
Depreciation and Loss on Sale.. (13,891) -- (36) -- 67,821
----------- ----------- ---------- ----------- -----------
TOTAL EXPENSE ................. $ 338,116 $ 7,800 $ 607,891 $ 121,268 $ 3,248,658
=========== =========== ========== =========== ===========
Net (Loss) .................... $ (338,116) $ 4,700 $ (577,559) $ (108,768) $(3,174,758)
=========== =========== ========== =========== ===========
Income (loss ) per share ...... $ (0.02) $ (0.01) $ (0.06) $ (0.02) $ (1.60)
=========== =========== =========== =========== ===========
Weight Average Number of Common
Shares Outstanding ........... 15,284,162 5,184,559 9,216,954 5.184,559 1,983,361
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
WaveRider Communications Inc.
(Formerly Channel i Limited)
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Nine Months Inception
to August 6,1987
September 30 to September 30
--------------------------- ---------------
1997 1996 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) ....................................... $ (239,443) $ (108,768) $(3,174,758)
Adjustments to reconcile net (loss) to cash ..... -- -- --
Depreciation .................................... -- -- 67,857
Loss on sale of fixed assets .................... 13,855 37,484 69,905
Increase in accounts receivable ................. 74,897 -- (7,809)
Increase in trade name .......................... 22,189 -- --
Decrease (increase) in other assets ............. (23,557) 28,736 (57,442)
Increase (decrease) in accounts payable ......... (10,023) (31,912) 60,565
Increase (decrease) in accrued liabilities ...... 7,890 36,509 80,000
----------- ----------- -----------
Net Cash Flows Used for Operating Activities . $ (283,940) $ 37,931 $(2,967,683)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of equipment ....................... $ (219,421) $ -- $ (384,627)
Organizational Costs ........................... -- -- (1,035)
----------- ----------- -----------
Net Cash Flows Used for Investing Activities . $ (219,421) $ -- $ (385,662)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from Affiliate ............................ 134,267 (2,657) 99
Payment of loans from Affiliate ................. (2,657) 7,005 (9,799)
Proceeds from lease obligations ................. -- -- 58,820
Payments on lease obligations ................... -- (5,985) (55,589)
Advance on sale of stock ....................... 76,012 (455,057) 428,267
Sale of stock, net of offering costs ............ 315,281 498,541 3,071,627
----------- ----------- -----------
Net Cash Flows Provided by Financing Activities $ 522,903 $ 27,837 $ 3,493,424
----------- ----------- -----------
Net increase in cash ............................. $ 19,542 $ (10,094) $ 140,080
Cash and cash equivalents-beginning of period .... 1,809 12,158 --
----------- ----------- -----------
Cash and cash equivalents-end of period .......... $ 21,351 $ 2,064 $ 140,080
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
NON-CASH ACTITIES
2,388,000 shares of common stock have been issued for services performed since
inception.
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<PAGE>
WaveRider Communications Inc.
( A Development Stage Company)
Notes to Financial Statements
September 30,1997 and December 31, 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
WaveRider Communications Inc. (formerly Channel i Inc.) (the Company) was
incorporated on August 6, 1987 under the laws of the State of Nevada. The
Company is a development stage company. On November 4, 1993, the Company
acquired 100 percent of the issued and outstanding shares of Channel I PLC
(PLC), a public limited company incorporated under the laws of England and
Wales. PLC has been inactive for over a year and the Company has written off its
investment in and advances to PLC in this quarter. On May 13, 1997 the Company
acquired 100% of the issued and outstanding shares of Major Wireless
Communications Inc. (MWCI), a private limited company incorporated under the
laws of the Province of British Columbia, Canada.
Basis of Accounting
The Company's consolidated financial statements are prepared in accordance
with generally accepted accounting principles in the United States of America.
The Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
which affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Equipment
Depreciation on equipment, fixtures and computer software is provided on
the straight line method with asset lives of three to seven years for the assets
placed in service. Leasehold improvements are amortized over the first term of
their respective lease. Depreciation expense for the nine months ended September
30, 1997 and the year ended December, 1996 was $nil and $5,221 respectively.
Depreciation and amortization was not taken in this quarter as all capital
assets are newly acquired and in a start up mode.
Principles of Consolidation
The consolidated financial statements for the nine months ended September
30,1997 and 1996 include the accounts of WaveRider Communications Inc., Channel
i PLC (1996 only) and Major Wireless Communications Inc. All significant
inter-company transactions and account balances have been eliminated.
Research and Development
Research and development costs are expensed as incurred.
Foreign Currency Transactions
Assets and liabilities denominated in foreign currencies are translated
into United States dollars using the exchange in effect at September 30, 1997
and December 31, 1996.
Revenue and expense transaction gains and losses are recorded at the
exchange rate prevailing at the time the transaction took place. Currency
transaction gains or losses are included in general and administration expenses.
Cash Equivalents
For purposes of the Statement of Cash Flows, cash equivalents are defined
as investments with maturities of three months or less.
-6-
<PAGE>
NOTE 2: ACQUISITION
On May 13, 1997, the Company acquired 100 percent of the 1,600 common stock
and 1,600 preferred stock outstanding of Major Wireless Communications Inc. in
exchange for the Company issuing 4,000,000 shares of Series B Voting Convertible
Preferred Stock with a par value of $0.001 per share (the "preferred shares").
The preferred shares are convertible into common shares at a ratio of 10 common
shares for each preferred share. The preferred shares are held in escrow and
will be released to the previous shareholders of MWCI on the occurrence of
certain performance-related events. In the event that any of the events have not
occurred by May 13, 2002, the remaining preferred shares will be cancelled by
the Company. This expiry date may be extended by up to two years at the
discretion of the Company's Board of Directors. No shares have been released to
date.
The acquisition of MWCI has been accounted for using the purchase method of
accounting with the purchase price assigned to the net assets acquired based on
their fair values at the time of acquisition. As the shares become releasable
from escrow in the future, such shares will be recorded at their fair market
value at the date the release test is met. The carrying value of the deficit of
MWCI, being the deemed excess purchase price at the date of acquisition, has
been assigned to research and development and expensed for accounting purposes.
NOTE 3: STOCKHOLDER'S EQUITY
Preferred Stock
In the second quarter of 1997 the Company completed a private placement of
298,125 units of Series A Convertible Preferred Stock for $ 193,781.25,
immediately convertible into 2,981,250 common shares with a par value of $0.001
per share. All shares have been recorded as converted to common although 130,438
units have not yet been physically transferred. The units had warrants for
common shares, expiring February 6, 1998, for 2,981,250 at $0.085, 2,981,250 at
$0.105, and 2,981,250 at $0.125 per share for series B, D, and E respectively.
As of September 30, 1997, 6,705,000 were outstanding for $704,025.
Common Stock
During the year ended December 31, 1996, the Company completed a private
placement of 628,500 shares of its common stock for $498,531.
In the first three quarters of 1997, the Company raised $89,250 through a
private placement of 1,785,000 units of its common stock. Series A warrants were
attached entitling the holders to purchase additional 7,140,000 shares for
$446,250; all have been exercised. Series B, c and D warrants attached to units
of Series A Convertible Preferred Stock totaling 8,943,750 common shares for
$939,093.75 were issued with the preferred share units in the second quarter;
2,238,750 were exercised for $235,068.25 to September 30, 1997.
The Company has entered into employment and consulting agreements with various
parties. Under these agreements, the parties currently hold options to purchase
967,000 shares of the Company's common stock at $.0625 per share. Option shares
are exercisable until January 22, 2000; 93,200 options were exercised in the
third quarter. In addition, the Company issued 908,000 shares of common stock
for services rendered. In May the Company authorized an additional 300,000
common shares for services rendered.
-7-
<PAGE>
NOTE 4: COMMITMENTS
Agreements
On June 10, 1997 the Company authorized an Employee Stock Option (1997)
Plan for 5,000,000 common shares at $0.25 per share and an Employee Compensation
(1997) Plan for 2,500,000 common shares at $0.25 per share. No shares have been
issued under either plan to September 30, 1997.
Stock Sales
In the first three quarters of 1997, the Company issued 15,146,200 shares
of common stock; 14,238,000 shares for cash of $970,175 and 908,000 shares for
services valued at $58,250.
Channel i PLC
Any amount of future expenses related to the discontinuation of PLC will
be charged to accrued liabilities and the excess, if any, will be expensed as
incurred.
NOTE 5: INCOME TAXES
WaveRider Communications Inc. incurred an operating loss for the quarter
ended September 30,1997 and the year ended December 31,1996 of $338,116 and
$52,963, respectively. The third quarter loss includes a $93,891 gain on the
discontinuation of PLC.
As of December 31, 1996 and 1995, the Company had net operating loss
Carry-forwards of $1,460,089 and $1,398,818, respectively, which expire between
the years 2005 - 2012.
NOTE 6: GOING CONCERN AND DISCONTINUED OPERATIONS
At September 30, 1997 and December 31, 1996, the Company has not generated
revenues from operations.
During the third quarter of 1997, management wrote off its investment in
Channel I PLC, a wholly owned English subsidiary whose operations have been
discontinued.
The Company, through its wholly owned subsidiary MWCI, is actively
designing, developing and planning the production and sale of wireless modem
technology for Internet Service Providers. Programming, production and
distribution commitments to support initial sales of $33,625,000 are in
progress. MWCI is entirely dependent upon the Company's ability to raise the
funds necessary for research and development, manufacturing and operating
capital.
-8-
<PAGE>
Item 2.
Management's Discussion and Analysis or Plan of Operation.
The following discussion is intended to assist in an understanding of the
Company's financial position and results of operations for the quarter ending
September 30th, 1997.
Forward-Looking Information.
This report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of its management as well
as assumptions made by and information currently available to its management.
When used in this report, the words "anticipate", "believe", "estimate",
"expect", "intend", "plan", and similar expressions as they relate to the
Company or its management, are intended to identify forward-looking statements.
These statements reflect management's current view of the Company with respect
to future events and are subject to certain risks, uncertainties and
assumptions. Should any of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in this report as anticipated, estimated or expected. The
Company's realization of its business aims could be materially and adversely
affected by any technical or other problems in, or difficulties with, planned
funding and technologies, third party technologies which render the Company's
technologies obsolete, the unavailability of required third party technology
licenses on commercially reasonable terms, the loss of key research and
development personnel, the inability or failure to recruit and retain qualified
research and development personnel, or the adoption of technology standards
which are different from technologies around which the Company's business
ultimately is built. The Company does not intend to update these forward-looking
statements.
Liquidity and Capital Resources.
The Company has funded its operations for the most part through equity
financing and has had no line of credit or similar credit facility available to
it. The Company's outstanding shares of Common stock, par value $.001 per share,
are traded under the symbol "WAVC" in the over-the-counter market on the OTC
Electronic Bulletin Board by the National Association of Securities Dealers,
Inc. The Company must rely on its ability to raise money through equity
financing to pursue any business endeavors and, at the present time, is working
exclusively on the funding of the Major Wireless Communications inc. ("Major
Wireless"). Major Wireless Communications Inc. is a Canadian development stage
company, incorporated under the laws of the Province of British Columbia. The
majority of funds raised have been allocated to the development of Major
Wireless' WaveRider TM products. The Company issued 9,871,950 shares of common
stock during the Third Quarter 1997, for $713,143.75; 9,378,750 from the
exercise of warrants which were issued as part of the private placements
completed in the First Quarter 1997, 400,000 for services rendered and 93,200
for options outstanding.. The details of these offerings were set out in
previous filings. The proceeds from these issues have and will continue to be
used to continue the on-going operation of the Company and development of the
WaveRider TM product line, primarily within Major Wireless. Warrants B, C, and D
outstanding, totaling 6,705,000, are expected to generate stock sales proceeds
of $704,025 on or before February 6, 1998.
-9-
<PAGE>
Current Activities.
The Company currently has no full-time employees and little in the way of
direct general or administrative overhead expenses. Its subsidiary. Major
Wireless currently has twelve full-time employees all of whom are directly
involved in or supportive of R&D activities. Currently, the Company is
contemplating an increase in the number of employees.
Results of Operations Third Quarter 1997
During the third quarter of the year, the Company incurred a net loss of
$338,116. Cash and equivalents amounted to $140,080 and current liabilities were
$93,918 including accruals for expenses to terminate Channel i PLC. Expenses
during the second quarter related primarily to R&D costs and the salaries and
benefits of personnel and consulting fees for experts engaged in management and
R&D of the wireless modem project. Activities during the quarter centered around
developing production and marketing plans for WaveRider TM products. A closely
related event was a visit to Moscow, Russia and Vancouver, Canada for a sales
and demonstration activity in support of distribution arrangements for Eastern
Europe and North America. Agreements are being negotiated to obtain software and
hardware for production units of WaveRider TM products now undergoing testing
and development.
The Company discontinued operations of its dormant subsidiary, Channel i
PLC in the UK as announced in previous filings. There was a small accounting
gain on termination.
Results of Operations Third Quarter 1996
During the quarter ended September 30th, 1996 the Company incurred a net
loss of $4,700 and had available cash of $2,064. No income was earned from
operations nor was any expected to be earned. Throughout the period the
Company's focus was on the securing of additional financing through the private
placement of equity securities and the negotiation of new business opportunities
with other companies and investors. For the period no results were achieved from
these efforts.
-10-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
July 25th, 1997 - Financial Information filed as a result of acquisition of
Major Wireless Communications Inc.
(previously reported on Form 8K filed May 29th, 1997)
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,
WaveRider Communications Inc.
Date: November 19, 1997 /s/ Robert Clarke
--------------------------------
Signature
Robert Clarke,
President, Chief Executive Officer
and Chief Financial Officer.
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000844053
<NAME> Waverider Communications, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1.000
<CASH> 140,080
<SECURITIES> 0
<RECEIVABLES> 7,809
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 205,331
<PP&E> 248,013
<DEPRECIATION> 0
<TOTAL-ASSETS> 453,334
<CURRENT-LIABILITIES> 93,918
<BONDS> 0
0
4,000
<COMMON> 20,331
<OTHER-SE> 339,095
<TOTAL-LIABILITY-AND-EQUITY> 453,344
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 337,369
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 747
<INCOME-PRETAX> (338,116)
<INCOME-TAX> 0
<INCOME-CONTINUING> (338,116)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (338,116)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.005)
</TABLE>
