SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
Proxy Statement Pursuant To Section 14(a)
Of The Securities Exchange Act Of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, Use of the Commission Only (as permitted by Rule 14aB6(e)(2))
Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14aB11(c) or Section 240.14aB12
WAVERIDER COMMUNICATIONS INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14aB6(i)(4) and 0B11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0B11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction: 5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0B11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE>
WAVERIDER COMMUNICATIONS INC.
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 19, 1998
----------------------------------------
To our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
WaveRider Communications Inc. (the "Company") to be held in the Vancouver Room
of the Metropolitan Hotel, 645 Howe Street, Vancouver, British Columbia, Canada
V6C 2Y9, on Friday, June 19, 1998, at 3:00 p.m. The purpose of the Annual
Meeting is to consider and vote upon the following matters, as more fully
described in the accompanying Proxy Statement:
(1) To elect 3 members of the Board of Directors, each to serve
until the next annual meeting of shareholders and until his
respective successor has been duly elected and qualified.
(2) To ratify the appointment of Price Waterhouse as independent
public accountants of the Company for the year ending December
31, 1998.
(3) To consider such other matters as may properly come before the
meeting.
The Board of Directors has fixed the close of business on May 11, 1998 as
the record date for the determination of shareholders entitled to receive notice
of and to vote at the Annual Meeting or any adjournment or postponement thereof.
YOUR VOTE IS IMPORTANT!
Please date, sign and return the accompanying proxy card promptly so that
we can be assured of having a quorum at the meeting and so that your shares may
be voted in accordance with your wishes. Doing so will assist the Company in
reducing the expenses of additional proxy solicitation.
Signing and returning the proxy card does not affect your right to vote in
person if you attend the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ D. Bruce Sinclair
D. Bruce Sinclair
President and Chief Executive Officer
DATED: May 19, 1998
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, TO ASSURE
THAT YOUR SHARES WILL BE REPRESENTED, PLEASE DATE, FILL IN, SIGN AND MAIL THE
ENCLOSED PROXY TO THE ADDRESS PROVIDED. YOUR PROXY WILL NOT BE USED IF YOU ARE
PRESENT AT THE ANNUAL MEETING AND DESIRE TO VOTE YOUR SHARES PERSONALLY.
WAVERIDER COMMUNICATIONS INC.
604 Edward Avenue, Unit No. 3
Richmond Hill, Ontario, Canada L4C 9Y7
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<PAGE>
---------------------
PROXY STATEMENT
---------------------
FOR ANNUAL MEETING OF SHAREHOLDERS
June 19, 1998
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to the shareholders of WaveRider
Communications Inc., a Nevada corporation (the "Company"), in connection with
the solicitation by the Board of Directors of the Company of proxies from
holders of outstanding shares of the Company's Common Stock, $0.001 par value
(the "Common Stock"), for use at the Annual Meeting of Shareholders of the
Company to be held Friday, June 19, 1998, and at any adjournment or postponement
thereof (the "Annual Meeting"). This Proxy Statement, the Notice of Annual
Meeting of Shareholders and the accompanying form of proxy are first being
mailed to shareholders of the Company on or about May 19, 1998.
The Company will bear all costs and expenses relating to the solicitation
of proxies, including the costs of preparing, printing and mailing to
shareholders this Proxy Statement and accompanying material. In addition to the
solicitation of proxies by use of the mails, the directors, officers and
employees of the Company, without receiving additional compensation therefor,
may solicit proxies personally or by telephone or telegram. Arrangements will be
made with brokerage firms and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of the shares of
Common Stock held by such persons, and the Company will reimburse such brokerage
firms, custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred by them in connection therewith.
VOTING
Record Date
The Board of Directors has fixed the close of business on May 11, 1998 as
the record date (the "Record Date") for determination of shareholders entitled
to notice of and to vote at the Annual Meeting. As of the Record Date, there
were issued and outstanding 39,805,529 shares of Common Stock. The holders of
record of the shares of Common Stock on the Record Date entitled to be voted at
the Annual Meeting are entitled to cast one vote per share on each matter
submitted to a vote at the Annual Meeting.
Proxies
Shares of the Common Stock which are entitled to be voted at the Annual
Meeting and which are represented by properly executed proxies will be voted in
accordance with the instructions indicated on such proxies. If no instructions
are indicated, such shares will be voted FOR the election of each of the 3
director nominees; FOR the ratification of the appointment by the Board of Price
Waterhouse, as independent public accountants of the Company for the year ending
December 31, 1998; and in the discretion of the proxy holder as to any other
matters which may properly come before the Annual Meeting. A shareholder who has
executed and returned a proxy may revoke it at any time prior to its exercise at
the Annual Meeting by executing and returning a proxy bearing a later date, by
filing with the Secretary of the Company, at the address set forth above, a
written notice of revocation bearing a later date than the proxy being revoked,
or by voting the Common Stock covered thereby in person at the Annual Meeting.
Vote Required
The presence of a majority of the issued and outstanding shares of Common
Stock entitled to vote, represented in person or by properly executed proxy, is
required for a quorum at the Annual Meeting. Abstentions and broker non-votes,
which are indications by a broker that it does not have discretionary authority
to vote on a particular matter, will be counted as "represented" for the purpose
of determining the presence or the absence of a quorum. Under Nevada corporate
law, once a quorum is established, shareholder approval with respect to a
particular proposal is generally obtained when the votes cast in favor of the
proposal exceed the votes cast against such proposal.
In the election of directors, shareholders will not be allowed to cumulate
their votes. The 3 nominees receiving the highest number of votes will be
elected. The ratification of the selection of an independent public accountant
and any other matter presented for approval by the shareholders will be
approved, in accordance with Nevada law, if the votes cast in favor of a matter
exceed the votes cast opposing such matter. Accordingly, abstentions and broker
non-votes will not affect the outcome of the election of directors, the
ratification of the selection of the independent public accountants or any other
matter presented for approval by the shareholders.
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<PAGE>
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
At the Annual Meeting, 3 directors will be elected to serve until the next
annual meeting of shareholders and until their successors are duly elected and
qualified. Each of the nominees for director identified below is currently a
director of the Company.
Shareholders do not have cumulative voting rights in the election of
directors (each shareholder is entitled to vote one vote for each share held for
each director). Unless authority is withheld, it is the intention of the persons
named in the enclosed form of proxy to vote "FOR" the election of each of the
persons identified as nominees for directors below. If the candidacy of any one
or more of such nominees should, for any reason, be withdrawn, the proxies will
be voted "FOR" such other person or persons, if any, as may be designated by the
Board of Directors. The Board has no reason to believe that any nominee herein
named will be unable or unwilling to serve.
Nominees for Election as Directors
The following sets forth information about each nominee for election as a
director:
D. Bruce Sinclair, 46, has been a director and the President of the Company
since December 1997. Mr. Sinclair has been the Chief Executive Officer of the
Company since November 1997. Mr. Sinclair is an experienced management
professional with a Masters of Business Administration from the University of
Toronto. He has worked in sales and management with companies including IBM
Canada, Northern Telecom and Harris Systems Limited. From 1988 to 1991, Mr.
Sinclair was with Dell Computer Corporation, a computer manufacturing company,
where he held the office of President of its Canadian subsidiary. In 1991 he was
appointed Vice-President, Europe for Dell Computer Corporation and subsequently
CEO of Dell in Europe, a position he held until 1994. He resigned from Dell in
1995 and operated his own independent consulting business until joining the
Company.
William E. Krebs, 51, has been a director of the Company since December
1997 and Secretary of the Company since that time. Mr. Krebs is a Chartered
Accountant by profession and practiced as such until 1978. He is an Officer and
Director of Acrex Ventures Ltd., serving in these roles since January 1995. He
formerly served as Director and President of TelcoPlus Enterprises Ltd. and its
wholly owned subsidiary, Intertec Telecommunications Inc. until 1995. He further
served as a Director and President of CT&T Telecommunications Inc. until 1995.
All of the companies named were in the telecommunications field and none were
U.S. reporting companies.
William H. Laird, 50, has been a director of the Company since December
1997. Mr. Laird is a contractor by occupation and has been President of W.H.
Laird Construction Ltd. since December 1974. He has also been a Director and
Secretary of Tech-Crete Processors Ltd. Since December 1982 and Piccadilly Place
Mall Inc. since November 1991. These companies are in the areas of
manufacturing, property and retail trade. He was a director of TelcoPlus
Enterprises Ltd. until 1994 and CT&T Telecommunications Inc. until 1995, both of
which companies were in the telecommunications field. None of the companies
named were U.S. reporting companies.
Board and Committee Meetings; Legal Proceedings
During the year ended December 31, 1997, the Board of Directors held 18
meetings. Each member attended at least 75% of all board meetings.
The Board of Directors is directly responsible for determining and
approving the compensation of the Company's officers, reviewing matters
pertaining to the compensation of the Company's employees, and administering the
Employee Stock Option (1997) Plan (the "Option Plan") and Employee Stock
Compensation (1997) Plan (the "Stock Compensation Plan"). The Board is also
directly responsible for determining the adequacy of the Company's internal
accounting and financial controls, reviewing the auditor reports and
recommendations and interviewing and selecting the Company's independent public
accountants. The Board of Directors does not have Compensation, Audit or
Nominating Committees or any committees that perform similar functions.
EXECUTIVE OFFICERS
In addition to Bruce Sinclair and William E. Krebs, certain information is
furnished with respect to the following executive officers of the Company:
T. Scott Worthington, 43, is Vice President, Business and Finance of the
Company and the Company's chief financial officer. Mr. Worthington is a
Chartered Accountant. From 1988 to 1996, he worked at Dell Computer Corporation,
in Canada, where he held numerous positions including CFO of the Canadian
subsidiary. Subsequent to leaving Dell, he was a financial and business
consultant until his joining the Company in January 1998.
-4-
<PAGE>
Charles W. Brown, 42, is Vice President, Marketing of the Company since
February, 1998. Mr. Brown has a Masters in Business Administration. From 1994
until joining the Company, Mr. Brown was Clearnet Communications' first Vice
President and CIO. Prior to this Mr. Brown has held numerous senior Sales and
Marketing positions including Vice President, Sales and Marketing for Trillium
Communications (1993-1994) and Director, Strategic Planning and Marketing for
BCE Mobile (1990-1993).
Stephen Grant, 27, has been Vice President, Business Development of the
Company since early this year. Mr. Grant was the CEO and a co-founder of Major
Wireless Communications Inc. ("Major Wireless"), and joined the Company when it
acquired Major Wireless in 1997. Prior to founding Major Wireless, in 1996, Mr.
Grant was a consultant in the computer industry specializing in the delivery and
provision of Internet access.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain summary information concerning the
compensation paid or accrued by the Company and its subsidiaries, to or on
behalf of the individuals who served as Chief Executive Officers of the Company
during the year ended December 31, 1997. None of the Company's officers received
an annual salary and bonus exceeding $100,000. (All amounts reported are in
United States dollars unless otherwise indicated.)
<TABLE>
<CAPTION>
Annual Compensation Long Term
Compensation
----------------------------------------------------
Name and Position Year Salary Bonus Other Annual Options Granted
Compensation
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bruce Sinclair(1) 1997 $ 10,500 $ 0 $ 0 1,000,000
Chief Executive Officer and 1996 --- --- --- ---
President 1995 --- --- --- ---
Robert G. Clarke (2) 1997 $ 22,100 _____ _____ 0
Former Chief Executive Officer 1996 ______ _____ _____ _____
1995 ______ _____ _____ _____
</TABLE>
(1) Mr. Sinclair commenced his employment with the Company on November 18,
1997. Mr. Sinclair's salary for the fiscal year ended December 31st, 1997
was based on an annualized salary of Can.$500,000 payable Can.$270,000 in
cash for the first year with the balance payable in shares out of the
Employee Stock Compensation Plan subject to certain performance criteria.
The amount shown as salary above is the amount paid in cash for the period
Mr. Sinclair was with the Company in 1997. A total of 800,000 Series B
Voting Convertible Preferred Shares, par value $.001, of the Company were
transferred to Mr. Sinclair by way of an additional incentive to accept
employment with the Company (since the transfer of such shares Mr. Sinclair
has converted the shares into shares of the Common Stock of the Company).
Mr. Sinclair has also been granted the option to obtain up to 1,000,000
shares of the Common Stock of the Company at the rate of 150,000 shares per
month. The Series B Preferred Stock were provided by and the shares of the
Common Stock are being provided by existing shareholders and are not
payable by or otherwise constitute a liability of the Company.
(2) Mr. Clark resigned as a Director and President of the Company effective
December 15, 1997.
Option Grants in Last Fiscal Year
The following table sets forth individual grants of stock options made
to the Chief Executive Officers during the year ended December 31, 1997.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Options Percent of Total Exercise Expiration Rates of Stock Price
Name Granted(1) Options Granted to Price Date Appreciation for Option
Employees in Term
Fiscal Year ---------------------------
5% 10%
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
D. Bruce Sinclair 1,000,000 25.78% $0.56 11/18/00 $28,000 $56,000
</TABLE>
(1) Consists of nonqualified options granted under the Option Plan.
-5-
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Year End Option Values
The following table sets forth the aggregate value of unexercised options
to acquire shares of the Common Stock held by the Chief Executive Officer on
December 31, 1997. The Chief Executive Officer of the Company did not exercise
options during the year ended December 31, 1997.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the-Money Options at
at FY-End(#) FY-End($)(1)
------------------- -----------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
-------------------------------------------------------------------------------
<S> <C> <C>
D. Bruce Sinclair 0/1,000,000 $0/$560,000
</TABLE>
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(1) Calculated based on the difference between the exercise price and the
price of a share of the Company's Common Stock on December 31, 1997.
The Closing sale price of the Common Stock was $1.12 on December 31,
1997.
Director's Compensation
To date, the Company's non-employee directors have not been paid for
meetings of the Board of Directors attended in person or by telephone. During
the year ended December 31, 1997, William Krebs and William Laird were each paid
$28,000 for management and consulting services rendered to the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 11, 1998, information with
respect to the Company's Common Stock owned beneficially by each director or
nominee for director, by the Chief Executive Officer of the Company, by all
officers and directors as a group and by each person known by the Company to be
a beneficial owner of more than 5% of the outstanding shares of Common Stock.
Except as otherwise indicated below, each person named has sole voting and
investment power with respect to the shares indicated.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owners Amount and Nature of Percentage of
Beneficial Ownership (1) Class(2)
- ------------------------------------------------------- ------------------------ ---------------
<S> <C> <C>
Bruce Sinclair (3) 3,000,000 7.54%
32 Steeplechase Drive, Aurora, Ontario, Canada
William E. Krebs (4) 2,479,500 6.18%
300 Stewart Road, Salt Spring Island, BC Canada
William Laird (4) 1,588,500 3.96%
All Officers and Directors
as a Group (6 Persons) (5) 11,353,500 27.66%
</TABLE>
- ----------------------
(1) Includes shares subject to an Escrow Agreement, dated March 16, 1998.
(2) Based on 39,805,529 shares of Common Stock outstanding as of May 11, 1998.
(3) Includes shares beneficially owned through a purchase option agreement with
certain other shareholders of the Company that are exercisable within 60
days. Does not including employee stock options not exercisable within 60
days - See Table of Year end Option Values.
(4) Includes options to acquire 300,000 shares of common stock presently
exercisable or exercisable within 60 days of the proxy date.
(5) Includes options to acquire 1,240,000 shares of common stock presently
exercisable or exercisable within 60 days of the proxy date.
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<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors and certain beneficial owners of the Company's Common
Stock to file initial reports of ownership and reports of changes in ownership
with the SEC. These executive officers, directors and beneficial owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. Based solely on a review of the copies of such forms
furnished to the Company and written representations from the Company's
executive officers and directors, the Company is not aware of any late filings,
except Mr. Charles Brown, Vice President, Marketing of the Company, has not
files an initial report of ownership on Form 3 promulgated under Section 16 of
the Exchange Act. Since joining the Company in February 1998, Mr. Brown has not
made any transactions in the Common Stock of the Company and his only beneficial
ownership in the Company consists entirely of options granted under the Option
Plan.
PROPOSAL NO. 2 - RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
Ratification of the appointment by the Board of Directors of the
independent public accountants for the Company for the year ending December 31,
1998 is to be voted upon at the Annual Meeting. The Board of Directors
recommends shareholder ratification of the appointment of Price Waterhouse,
whose appointment has been approved, subject to shareholder approval, by the
Board of Directors. Representatives of Price Waterhouse are expected to be
present at the Annual Meeting to answer any questions shareholders may have and
will be given the opportunity to make a statement if they desire to do so.
Johnson, Holscher & Company, P.C., ("Johnson, Holscher") the independent public
auditors retained by the Company for the fiscal year ended December 31, 1997,
were dismissed on May 14th, 1998. No report of Johnson, Holscher contained an
adverse opinion or disclaimer of opinion or was qualified as to uncertainty,
audit scope, or accounting principles. The decision to change the Company's
independent public auditors was recommended by the Company's Board of Directors.
There have been no disagreements with Johnson, Holscher on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure. Representatives of Johnson, Holscher are not expected to be
present at the Annual Meeting to answer any questions shareholders may have.
The affirmative vote of a majority of the votes cast on this proposal
shall constitute ratification of the appointment of Price Waterhouse.
The Board of Directors recommends a vote FOR the ratification of the
appointment of Price Waterhouse as independent public accountants of the Company
for the year ending December 31, 1998.
OTHER MATTERS
Other Business
The Board of Directors does not know of any matter to be presented at the
Annual Meeting that is not listed in the Notice of Annual Meeting and discussed
above. If other matters should properly come before the Annual Meeting, however,
the proxy holders will vote in accordance with their best judgment.
Proposals of Security Holders for 1999 Annual Meeting
Shareholders desiring to submit proposals for the Proxy Statement for the
1999 Annual Meeting of Shareholders of the Company will be required to submit
them to T. Scott Worthington, Vice President, Finance and Administration of the
Company, at the Company's executive offices, 604 Edward Ave., Unit #3, Richmond
Hill, Ont., Canada, L4C 9Y7, in writing on or before December 31, 1998. Any
shareholder proposal must also be proper in form and substance, as determined in
accordance with the Exchange Act and the rules and regulations promulgated
thereunder.
Additional Information
A copy of the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997 is attached to this Proxy Statement. The exhibits to that
Report will also be provided upon request and payment of copying charges.
Requests should be directed to T. Scott Worthington, WaveRider Communications
Inc., 604 Edward Ave., Unit #3, Richmond Hill, Ontario, Canada, L4C 9Y7.
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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1997
Commission File No. 0-25680
WaveRider Communications Inc.
(Name of small business issuer in its charter)
Nevada 33-0264030
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
595 Howe Street, Suite 204
Vancouver, B.C. Canada V6C 2T5
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (604) 482-1211
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock par value $.001
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 requirements for the past 90 days.
YES X NO ___
Check if there is no disclosure of delinquent filers in response to item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $ 77,459
State the aggregate market value of the voting stock held by non-affiliates
of the registrant was approximately $36,303,482 as of March 23, 1998 (based on
the average bid and asked prices of such stock as of March 23, 1998, the last
date for which such information was available).
As of March 23, 1998, there were 28,984,559 shares of the registrant's
common stock, par value $.001 per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
-8-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I Page
<S> <C> <C>
Item 1. Business 3
Item 2. Description of Property 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 6
Item 6. Management's Discussion and Analysis or Plan of Operation 6
Item 7. Financial Statements 9
Item 8. Changes in and Disagreements with Accountants on Accounting 9
and Financial Disclosure
PART III
Item 9. Directors and Executive Officers, Promoters and Control Persons, 9
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation 10
Item 11. Security Ownership of Certain Beneficial Owners and Management 11
Item 12. Certain Relationships and Related Transactions 12
PART IV
Item 13. Exhibits and Reports on Form 8-K 12
</TABLE>
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<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Background
WaveRider Communications Inc. ("WaveRider" or the "Company"), formerly
Channel i Inc. and Athena Ventures, Inc., was incorporated under the laws of the
State of Nevada on August 6, 1987. In May 1997, the Company changed its name to
WaveRider Communications Inc. The Company's executive offices are currently
located at 595 Howe Street, Suite 204, Vancouver, B.C. Canada V6C 2T5. It's
telephone number is (604) 482-1211. The Company also maintains offices at 604
Edward Ave., Unit #3, Richmond Hill, Ont., Canada, L4C 9Y7. Its telephone number
there is (416) 410-4843.
Forward Looking Statements
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 or 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.
CURRENT BUSINESS
Overview
Prior to December 31st, 1996, the Company had terminated any prior
operations and was effectively inactive and in search of a business or product
with which to reactivate itself.
On May 13, 1997, the Company acquired all the issued and outstanding shares
of the capital stock of Major Wireless Communications Inc., ("Major Wireless"),
a Canadian corporation, incorporated in the Province of British Columbia.
On August 1, 1997, Major Wireless formed a wholly owned Canadian
subsidiary, incorporated in the Province of British Columbia, under the name
JetStream Internet Services Inc. ("JetStream"). JetStream then acquired all of
the assets of a Salmon Arm, British Columbia, Internet Service Provider.
JetStream provides the Company with a profitable operation and revenues, as well
as the facilities and test site for the testing of the Company's products prior
to full commercial release.
As of December 31st, 1997, and for the immediate future, the Company's
focus, attention and energies were and are expected to be directed toward the
operation of Major Wireless and that of its subsidiary, Jetstream. Revenues from
Jetstream, although profitable are not anticipated to be large in relation to
the income and profit potential of Major Wireless, however, at the present time,
are the sole source of revenue for the Company.
Major Wireless has begun the process of applying and intends to change its
name to "WaveRider Communications (Canada) Inc."
-10-
<PAGE>
Business of Major Wireless
Major Wireless is a development stage Canadian company incorporated under
the laws of the Province of British Columbia. It was founded to design, develop
and distribute more efficient and cost effective network communications between
Internet users and the Internet providers ("ISP's") and to be utilized by ISP's
in the delivery of internet services. The Company believes this objective can be
achieved by combining and designing a variety of unique communication links
between Internet users and ISP's. Major Wireless is a high-technology start-up
company with proprietary technologies at the stage of developing prototype
communication units to thoroughly test the initial models. Major Wireless is
subject to all the risks inherent in a start-up company developing unproven
technology, and no assurance can be made that it will be successful. In
particular, Major Wireless will be dependent upon the Company's ability to raise
the necessary funds for research and development, manufacturing and operating
capital. While the Company believes it can raise the funds needed, there can be
no assurances that the funding will be available.
WaveRider's "Last Mile Solution" Communications Technology
WaveRider's "Last Mile Solution" communications technology utilizes spread
spectrum modems as a cost-effective, reliable alternative to local loops and
dedicated lines provided by existing public switched telephone networks
("PSTN"). This technology provides a disaster-resistant communications link in
the 902 to 928 mhz band. Spread Spectrum was initially established for military
purposes and contrasts with wire and fibre optic cable which are susceptible to
disruption due to a variety of reasons. The WaveRider(TM) technology is
resistant to jamming and interference, detection and interception and has the
capability for encryption. Currently the Federal Communications Commission
("FCC") requires no license for the use of this means of communication so long
as FCC guidelines are followed.
The WaveRider(TM) technology is being designed so that each customer will
have a unique serial number encrypted into the hardware component that is linked
to the customer's computer. The unit will see only data addressed to itself.
Through the use of a proprietary data packet format, each unit will transact
with an access point only when requested to do so. Custom designed verification
and encryption/decryption hardware and software ensures that each packet can
only be read by its intended receiver.
Communications signals can be greatly increased in bandwidth by factors of
10 to 10,000 by combining them with binary sequences using several techniques.
Conventional signals such as narrow-band FM, SSB, and CW are rejected, as are
other spread-spectrum signals not bearing the desired coding sequence. The
result is a type of private channel, one in which only the spread-spectrum
signal using the same pseudo-noise sequence will be accepted by the end-user
receiver.
A beneficial effect of the signal spreading process is that the receiver
can reject strong undesired signals, even those much stronger than the desired
spread-spectrum signal power density. The spread-spectrum signal is below the
noise floor of a conventional receiver and thus invisible to it, while it can
clearly be received with a spread-spectrum receiver. The use of different binary
sequences allows several spread-spectrum systems to operate independently of
each other within the same band. This technology reduces the communication costs
of an ISP and provides a customer with a more cost effective, more reliable and
faster Internet access service (communication link).
Markets for the WaveRider(TM) Technology.
Currently, market topology for Internet and network access may be broken
down into three specific areas:
1. Low-speed home user access via analog telephone services;
2. Mid-range end-user/small business access via ISDN or switch 56 services;
and
3. High-speed business and educational access supplied by fractional T1 over
hyperstream/frame relay or ATM networks.
-11-
<PAGE>
Each of the above markets have their inherent problems. Virtually all
dial-up access currently is limited to a maximum of 56Kbs. There are no
restrictions and bottlenecks imposed at the network access point due to issues
such as limited dial-in services or compatibility-related problems between
modems produced by different manufacturers. Mid-range services via ISDN or
similar circuits also display inherent problems due to limited provisions at the
network access center; and in many cases, the cost of these circuits make them
an unattractive option. Finally, high-speed business access via fractional T1
lines have been primarily reserved for the ISP and larger corporations strictly
due to the costs of engineering and maintaining these circuits.
The WaveRider(TM) technology lends itself to accommodate all three areas
without changing the basic technology or structure of the network. Specifically,
the WaveRider(TM) technology offers solutions to meet every aspect of today's
market, from low-speed Internet access (56kbs) straight through to the
equivalent of multiple T1 lines without changing the hardware involved. This
allows Major Wireless to provide a flexible, upgradeable, network, where the end
user, be it home user, small business, or large corporation, has the option to
pick the "flavor" of network access best suited to the user's environment.
Finally due to the secure nature of the technology utilized, the WaveRider(TM)
technology permits Secure Private Virtual Networking services which other
platforms cannot provide without the addition of expensive equipment.
WaveRider(TM) technology is scheduled to be commercially available with
sales to ISP's beginning in the third quarter of 1998. An additional product,
capable of linking Local Area Network users to the internet and utilizing much
of the WaveRider(TM) technology is scheduled to be commercially available in the
summer of 1998 preceding the commercial availability of the WaveRider(TM)
technology described above.
The WaveRider(TM) technology will be sold to ISP's throughout the world
both directly and through licensed representatives in some areas.
The Company has management, sales and training facilities set up in
Vancouver, British Columbia and Richmond Hill, Ontario. Major Wireless has
offices located in Salmon Arm, British Columbia from which research and
development, some administration, and assembly occurs.
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns no real estate or other properties. It has offices and
test sites in Vancouver, B.C., Toronto, Ont., and Salmon Arm, B.C. all in
Canada. These offices house administration and research operations and are
leased from unrelated parties. The Salmon Arm facility is in the process of
being replaced by another leased property to provide additional space for the
expanding research, development and product testing activities. These premises
are being leased for a period of 2 years with the option to renew for an
additional period of up to 4 years, at the discretion of Major Wireless. The
present properties and planned expansion is adequate for the Company's immediate
needs. Cost commitments related to present leases are described in Item 7.
ITEM 3. LEGAL PROCEEDINGS
There are no active or pending legal proceedings to which the Company is a
party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the shareholders during the fourth
quarter of 1997.
-12-
<PAGE>
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common shares are quoted under the symbol "WAVC" on the OTC
(over-the-counter) Electronic Bulletin Board operated by the National
Association of Securities Dealers, Inc. ("NASD") and are traded in the
non-NASDAQ segment of the United States over-the-counter market. [The trading
market in the Company's shares has evolved from sporadic, in-active trading to a
relatively vigorous market, albeit one which continues to demonstrate wide
swings and varying liquidity.] The following table sets forth the closing high
and low bid prices of the Common Stock for the periods indicated, as reported by
the NASD. These quotations are believed to be representative inter-dealer
prices, without retail mark-up, markdown or commissions and may not represent
prices at which actual transactions occurred:
<TABLE>
<CAPTION>
1996 Bid 1997 Bid
High Low High Low
<S> <C> <C> <C> <C>
First Quarter $0.63 $0.38 $0.65 $0.06
Second Quarter $0.42 $0.12 $0.47 $0.18
Third Quarter $0.38 $0.06 $0.90 $0.33
Fourth Quarter $0.38 $0.06 $1.60 $0.35
</TABLE>
Holders: The Company has approximately 745 common shareholders of record as of
March 23, 1998. This number does not include shareholders whose shares are held
in street or nominee names. The Company has approximately 26 shareholders of
record holding Series B Preferred Shares.
Dividends: While there are no restrictions on the ability of the Company to pay
dividends other than those common to all companies incorporated under the laws
of the State of Nevada, no dividends have been paid by the Company in the last
two years. The Company does not expect to pay a cash dividend on its capital
stock in the foreseeable future and payment of dividends in the future will
depend on the Company's earnings and cash requirements.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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 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 21,734,000 shares of common stock during 1997 and
4,000,000 shares of preferred stock, for $1,784,489; 19,358,852 as part of the
private placements completed in the First Quarter 1997 and the subsequent
exercise of attached warrants, 908,000 for services rendered and 1,467,000 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 1,491,178, generated additional stock sales proceeds of
$156,574 subsequent to the year-end. In addition, the Company, in a private
placement subsequent to the year-end, issued 500,000 common share units,
consisting of one common share and one common share warrant, for $500,000. The
common share warrants are exercisable for up to one year at $1.25 per share.
-13-
<PAGE>
Current Activities.
The Company, through its subsidiaries, Major Wireless and Jetstream
currently has approximately twenty full-time employees, three in the Richmond
Hill administrative office and the rest directly involved in or supportive of
R&D activities and the provision of Internet Services in the Salmon Arm,
Province of British Columbia area. The Company is actively recruiting additional
staff to support its R&D and marketing activities.
Results of Operations - 1997
During the year, the Company incurred a net loss of $1,039,130 on revenues
of $77,459. At year end cash and equivalents amounted to $437,746 and current
liabilities were $282,242. Expenses during the year 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 by Major
Wireless during the year centered around developing production and marketing
plans for WaveRider(TM) products. Revenues were generated by Jetstream as the
result of the provision of Internet Services from August 1stt, 1997, the date of
acquisition to the year end.
Results of Operations - 1996
The Company realized an operating loss in 1996 of $121,776. The Company
did not generate revenues from operations but generated revenue of $20,000 for
the licensing and use of the "Channel i" name and logo in Canada. Activities
during 1996 were principally limited to attempts to raise additional operating
capital through stock sales and to acquire or generate a going business. During
the year, the company paid out $77,227 in administrative costs and $31,913 in
consulting fees. The Company received $43,484 in proceeds from an offering of is
common shares commenced in 1995.
Factors Affecting Future Results
The Company faces a number of risk factors which may create circumstances
beyond the control of management which may adversely impact on the Company's
ability to achieve its business plan. The key risk factors are described below.
A. UNCERTAINTY OF MARKET ACCEPTANCE
Commercial success of the Company is dependent upon market acceptance, as the
market for wireless Internet access is still developing. As a result, future
market success cannot be reliably estimated. In addition, the Company is only in
the early stages of its marketing program and the longer term impact of this
program has yet to be seen. To date the market for ISPs has proven to be
volatile and there can be no assurance that the Company will be able to retain
existing or future customers.
B. UNCERTAINTY OF ADDITIONAL FINANCING
Management estimates that the Company need to raise approximately $ 5 million in
additional capital in order to finalize development and market its products. The
timing and amount of capital expenditures may vary significantly depending on a
number of factors. The Company will need to raise the additional funds through
the sale of its equity or debt securities in private or public financing or
through strategic partnerships in order to fully exploit the potential of its
products. There can be no assurance that the funds required can be raised.
-14-
<PAGE>
C. REGULATION OF WIRELESS COMMUNICATIONS
Currently, the WaveRider(TM) technology is not subject to any wireless or
transmission licensing in either Canada or the United States. Continued
license-free operation will be dependent upon the continuation of existing
government policy and while no policy changes are planned or expected this
cannot be assured. License-free operation of the WaveRider(TM) products in the
902 to 928 MHz band is subordinate to certain licensed and unlicensed uses of
the band and WaveRider(TM) products must not cause harmful interference to other
equipment operating in the band and must accept interference from any of them.
If the Company should be unable to eliminate any such harmful interference, or
should be unable to accept interference caused by others, the Company or its
customers could be required to cease operations in the band in the locations
affected by the harmful interference. Additionally, in the event the 902 to 928
MHz band becomes unacceptably crowded, and no additional frequencies are
allocated, the Company's business could be adversely affected.
D. DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on key members of its management and engineering
teams and the loss of the services of one or more of them may adversely affect
its ability to achieve the goals of its business plan. Recruiting and retaining
qualified technical personnel to carry out R&D and technical support work will
be critical to the Company's future success, as will the recruitment and
retention of experienced marketing and management personnel. Currently, not all
key employees have employment contracts with the Company although certain key
personnel have significant incentives via performance clauses and all others
have performance incentives via the Company's option plans. Although there are
no guarantees, the Company believes that recruitment and retention of qualified
personnel is a likelihood.
E. EARLY-STAGE TECHNOLOGY
The WaveRider(TM) technology is at an early stage of development and is just
readying to entering the commercial marketplace. As a result, the Company has no
historical financial information upon which a prospective investor could make an
evaluation. The Company's future operating results are subject to a number of
risks, including its abilities to implement its strategic plan, to attract
qualified personnel and to raise sufficient financing as required. Management's
inability to guide growth effectively, including implementing appropriate
systems, procedures and controls, could have an adverse effect on the Company's
financial condition and operating results.
F. TECHNOLOGICAL CHANGE
Telecommunications, particularly data communications, is characterized by
rapidly changing technology and evolving industry standards in both the wireless
and wireline industries. The success of the Company will depend heavily on its
continuing ability to develop and introduce enhancements to its existing systems
and new products that meet changing markets. There can be no assurance that the
WaveRider(TM) technology or systems will not become obsolete due to the
introduction of alternative technologies. If the Company cannot continue to
successfully innovate its business and operating results could be adversely
affected.
G. MANAGEMENT OF RAPID GROWTH
Management of rapid growth will be a key challenge for the Company. An inability
to effectively meet this challenge could have a material adverse effect on the
Company's operating results. Successful commercialization of the WaveRider(TM)
technology will require management of a number of operational activities. There
is no assurance that the Company will be able to successfully manage the rapid
growth of its business.
With regard to all of the above factors, although management is aware of their
potential for adverse impacts on the Company and is developing plans to avoid or
mitigate against them, there can be no assurance that one or more of these
factors will not have an adverse impact on the Company and its ability to
realize its business and profit objectives.
-15-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The information required hereunder in this report as set forth in the
"Index to Financial Statements" on page 14.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
Directors and Executive Officers
On November 18th, 1997, Mr. Bruce Sinclair was appointed as the Chief
Executive Officer of the Company. On November 30th, 1997 Charlie Rodriquez
resigned as a Director of the Company. On December 15th, 1997 the Company
received notice of the resignations of Robert G. Clarke and Walter J.K.
Pickering as Directors and officers of the Company. On the same date Bruce
Sinclair, William E. Krebs and William H. Laird were appointed as Directors of
the Company, Bruce Sinclair was appointed to the position as President and
William E. Krebs was appointed to the position of Secretary. The present
directors and officers of the Company, their ages and their positions held in
the Company are listed below. Each director will serve until the next annual
meeting of the stockholders or until his successor has been elected and duly
qualified. Directors serve one year terms and officers hold office at the
pleasure of the Board of Directors, subject to employment agreements. There are
no family relationships between or among directors or executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Bruce Sinclair 46 Director, President and Chief Executive Officer
William E. Krebs 51 Director and Secretary.
William H. Laird 50 Director
Scott Worthington 43 Vice President, Business and Finance
Charles Brown 42 Vice President, Marketing
Stephen Grant 27 Vice President, Business Development
</TABLE>
The following describes the business experience of the Company's directors
and executive officers, including, for each director, other directorships held
in reporting companies and naming each Company.
D. Bruce Sinclair is an experienced management professional with a Masters
Degree in business administration from the University of Toronto. He has worked
in sales and management with companies including IBM Canada, Northern Telecom
and Harris Systems Limited. From 1988 to 1991, Mr. Sinclair was with Dell
Computer Corporation, a computer manufacturing company, where he held the office
of President of its Canadian subsidiary. In 1991 he was appointed
Vice-President, Europe for Dell Computer Corporation and subsequently CEO of
Dell in Europe, a position he held until 1994. He resigned from Dell in 1995 and
operated his own independent consulting business until joining the Company in
November 1997.
William E. Krebs is a Chartered Accountant by profession and practiced as
such until 1978. He formerly served as Director and President of TelcoPlus
Enterprises Ltd. and its wholly owned subsidiary, Intertec Telecommunications
Inc. until 1995. He further served as a Director and President of CT&T
Telecommunications Inc. All of the companies named were in the
telecommunications field and none were U.S. reporting companies.
-16-
<PAGE>
William H. Laird is a contractor by occupation and President of W.H. Laird
Construction Ltd. He is also a Director and Secretary of Tech-Crete Processors
Ltd. and Piccadilly Place Mall Inc. These companies are in the areas of
construction, property and retail trade. He was a former director of TelcoPlus
Enterprises Ltd. until 1994 and CT&T Telecommunications Inc. until 1995, both of
which companies were in the telecommunications field. Non of the companies named
were U.S. reporting companies.
T. Scott Worthington is a Chartered Accountant. From 1988 to 1996, he
worked at Dell Computer Corporation, in Canada, where he held numerous positions
including CFO of the Canadian subsidiary. Subsequent to leaving Dell, he was a
financial and business consultant until his joining the Company in January 1998.
Charles W. Brown, MBA, was Clearnet Communications' first Vice President
and CIO from 1994 to 1997. Prior to this Mr. Brown has held numerous senior
Sales and Marketing positions including Vice President, Sales and Marketing for
Trillium Communications (1993-1994) and Director, Strategic Planning and
Marketing for BCE Mobile (1990-1993)
Stephen Grant has been a consultant in the computer industry specializing
in the delivery and provision of internet access. A co-founder of Major
Wireless, Mr. Grant was the CEO of that Company from 1996 through to early 1998
when he resigned that position and accepted a position as Vice-President,
Business Development, of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Act"), requires officers, directors and persons who beneficially own more than
10% of a class of the Company's equity securities registered under the Exchange
Act to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. Based solely on a review of the forms it has received
and on representation from certain reporting persons, the Company believes to
the best of its knowledge, that, during the year ended December 31st, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and 10%
beneficial owners were complied with by such persons, with the following
exception. As a result of a delay in completion of his employment agreement, Mr.
Bruce Sinclair was late in filing his Form 3 in December 1997.
Item 10. EXECUTIVE COMPENSATION
The following table describes the compensation earned in fiscal 1997 by
the Chief Executive Officer of the Company. No executive officer received
compensation in excess of $100,000 in 1997. The two other directors of the
Company received $28,000 each as directors of the Company.
SUMMARY COMPENSATION TABLE 1997
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Name and
Principal Position Salary Other Ann. Securities LTIP Payouts Other
Comp. Stock Options Comp.
<S> <C> <C> <C> <C> <C>
Bruce Sinclair (1) 10,500 1,000,000
Pres./CEO/Director
</TABLE>
(1) Mr. Sinclair's salary for the fiscal year ended December 31st, 1997 was
based on an annualized salary of Can.$500,000 payable Can.$270,000 in cash
for the first year with the balance payable in shares out of the Employee
Stock Compensation Plan subject to certain performance criteria. The amount
shown as salary above is the amount paid in cash for the period Mr.
Sinclair was with the Company in 1997. A total of 800,000 Series B
Preferred Shares were transferred to Mr. Sinclair by way of an additional
incentive together with the private option to obtain additional common
shares of up to 1,000,000 to be earned at the rate of 150,000 per month.
Both the Series B Preferred shares and the common shares are being provided
by existing shareholders and are not payable by or otherwise constitute a
liability of the Company.
-17-
<PAGE>
The following table summarizes option grants during 1997 to the
executive officer named in the Summary Compensation Table (the "Named Executive
Officer").
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------
Percent of
Total
Number of Options Potential Realizable Value
Securities Granted to Exercise Market at Assumed Annual Rates
Underlying Employees or Base Price on of Stock Price Appreciation
Options in Fiscal Price Date of Expiration for Option Term
Granted Year ($/sh) Grant Date 0% 5% 10%
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bruce Sinclair 1,000,000 25.78 0.56 0.56 11/18/00 - 28,000 56,000
</TABLE>
Mr. Sinclair did not exercise any options during fiscal 1997.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following tables set forth, as of March 23rd, 1998, the stock ownership
of each officer and director of the Company, of all officers and directors of
the Company as a group, and of each person known by the Company to be a
beneficial owner of 5% or more of its Common stock, $0.001 par value per share.
Except as otherwise noted, each person listed below is the sole beneficial owner
of the shares and has sole investment and voting power with respect to such
shares. No person listed below has any option, warrant or other right to acquire
additional securities of the Company, except as may otherwise be noted. The
Company had 28,984,559 common shares and 4,000,000 preferred shares issued and
outstanding as of such date, which numbers do not include any options or
warrants issued and outstanding.
<TABLE>
<CAPTION>
Name and Address of Amt. Of Common % of Common Stock
Beneficial Owner Stock benef. Owned outstanding
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
*Bruce Sinclair, Director, CEO, President 2,000,000 6.45
32 Steeplechase Dr. Aurora Ontario Canada
*William Krebs, Director, Secretary 1,979,500 6.76
300 Stewart Road, Salt Spring Island, BC Canada
*William Laird, Director 1,213,500 4.14
*Scott Worthington, Vice-President 550,000 1.86
*Charles Brown, Vice-President 240,000 0.82
*Stephen Grant, Vice-President 380,500 1.31
Rick Antoine, 320,000 1.10
*All Directors and Executive Officers (6) 6,683,500 20.34
</TABLE>
<TABLE>
<CAPTION>
Name and Address of Amt. of Preferred % of Preferred Stock
Beneficial Owner Stock benef. Owned outstanding
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
*Bruce Sinclair, Director, CEO, President 800,000 20.00
32 Steeplechase Dr. Aurora Ontario Canada
*William Krebs, Director, Secretary 200,000 5.00
300 Stewart Road, Salt Spring Island, BC Canada
*William Laird, Director 150,000 3.75
*Scott Worthington, Vice-President - 0.00
*Charles Brown, Vice-President - 0.00
*Stephen Grant, Vice-President 600,000 15.00
3702 Wilho Road, Sorrento, BC Canada
Rick Antoine, 650,000 16.25
Box 538, Salmon Arm, BC Canada
*All Directors and Executive Officers (6) 1,750,000 43.75
</TABLE>
-18-
<PAGE>
Above numbers are calculated on a diluted basis and include all unexercised
options awarded. The Common Stock numbers do not include the potential dilutive
affect of the conversion of the Series B Voting Convertible Preferred shares.
Upon completion of certain future events, each Series B Voting Convertible
Preferred share may be converted to 10 common shares of the Company. As well,
these numbers do not include common shares to which Mr. Sinclair may be entitled
under the Company's Employee Stock Compensation (1977) Plan because the number
of shares issuable is not determinable at this time.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There were no transactions or series of transactions, for the fiscal year
ended December 31st, 1997, to which the Company is a party, in which the amount
exceeds $60,000 and in which, to the knowledge of the Company, any director,
executive officer, nominee, five percent or greater stockholder, or any member
of the immediate family of any of the foregoing persons, have or will have any
direct or indirect material interest other than as disclosed in the 10 KSB filed
by the Company for the year ended December 31st, 1996.
PART IV
ITEM 13. Exhibits and Reports on Form 8-K
(a) Exhibits. The exhibits below marked with an asterisk (*) are included with
and filed as part of this report. Other exhibits have previously been filed with
the Securities and Exchange Commission and are incorporated by reference to
another report, registration statement or form. References to the "Company"
below includes Channel i Inc., the Company's previous name under which exhibits
may have been filed.
Exhibit No. Description.
3.1 Articles of Incorporation of the Company, incorporated by reference to
Exhibit 3.1 registration statement on Form S-18, File no. 33-25889-LA.
3.2 Bylaws of the Company, incorporated by reference to Exhibit 3.2 to the
annual report on Form 10-KSB for the year ended December 31, 1996.
3.3 Certificate of Amendment to the Articles of Incorporation of the
Company filed with the Nevada Secretary of State on October 8th, 1993,
incorporated by reference to Exhibit 3.3 to the quarterly report on
Form 10-QSB for the period ended September 30th, 1994.
3.4 Certificate of Amendment to the Articles of Incorporation of the
Company filed with the Nevada Secretary of State on October 25th,
1993, incorporated by reference to Exhibit 2(d) to the registration
statement on Form 8-A, File No. 0-25680.
3.5 Certificate of Amendment to the Articles of Incorporation of the
Company filed with the Nevada Secretary of State on March 25th, 1995,
incorporated by reference to Exhibit 2(e) to registration statement on
Form 8-A, File no. 0-25680.
3.6 Certificate of Amendment to the Articles of Incorporation of the
Company, designating the Series A Voting Convertible Preferred Stock,
filed with the Nevada Secretary of State on March 24th, 1997,
incorporated by reference to Exhibit 3.6 on Form 10KSB for the year
ended December 31, 1996.
3.7* Certificate of Amendment to the Articles of Incorporation of the
Company designating the Series B Voting Convertible Preferred Stock,
filed with the Nevada Secretary of State on May 16, 1997.
3.8* Certificate of Amendment to the Memorandum of the Company changing the
name to WaveRider Communications Inc., filed with the Nevada Secretary
of State on May 27, 1997.
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<PAGE>
4.1 Specimen common stock certificate, incorporated by reference to
Exhibit 4.1 to registration statement on Form S-18, File no.
33-25889-LA.
4.2 Specimen Class A Common Stock Purchase Warrant Certificate,
incorporated by reference to Exhibit 4.2 on Form 10KSB for the year
ended December 31, 1996.
4.3 Specimen Class B Common Stock Purchase Warrant Certificate,
incorporated by reference to Exhibit 4.3 on Form 10KSB for the year
ended December 31, 1996.
4.4 Specimen Class C Common Stock Purchase Warrant Certificate,
incorporated by reference to Exhibit 4.4 on Form 10KSB for the year
ended December 31, 1996.
4.5 Specimen Class D Common Stock Purchase Warrant Certificate,
incorporated by reference to Exhibit 4.5 on Form 10KSB for the year
ended December 31, 1996.
4.6 Warrant Terms dated February 10th, 1997, relating to the Class A,
Class B, Class C and Class D, Common Stock Purchase Warrants,
incorporated by reference to Exhibit 4.6 on Form 10KSB for the year
ended December 31, 1996.
10.1 Agreement dated February 2nd, 1997, between Ray Hoag and the Company,
incorporated by reference to Exhibit 10.2 on Form 10KSB for the year
ended December 31, 1996.
10.2 Agreement dated February 2nd, 1997, between C. Jeremy Renton and the
Company, incorporated by reference to Exhibit 10.21 on Form 10KSB for
the year ended December 31, 1996.
10.3 Stock Option Agreement dated January 22nd, 1997 between the Company
and Charlie Rodriguez, incorporated by reference to Exhibit 10.22 on
Form 10KSB for the year ended December 31, 1996.
10.4 Stock Option Agreement dated January 22nd, 1997 between the Company
and C. Jeremy Renton, incorporated by reference to Exhibit 10.23 on
Form 10KSB for the year ended December 31, 1996.
10.5 Stock Option Agreement dated January 22nd, 1997, between the Company
and Ray Hoag, incorporated by reference to Exhibit 10.24 on Form 10KSB
for the year ended December 31, 1996.
10.6 Share Exchange Agreement executed the 13th day of May, 1997 between
the Company and the shareholders of Major Wireless Communications
Inc., ("Major Wireless"), with respect to the purchase by the Company
of all the issued and outstanding shares in the capital stock of Major
Wireless, incorporated by reference to Exhibit 2.1 in Form 8-K filed
May 29, 1997
10.7 Agreement supplemental to the Share Exchange Agreement executed the
13th day of May, 1997 (see 10.6 supra) incorporated by reference to
Exhibit 10.1 in Form 8-K filed May 29, 1997.
10.8 Employee Stock Compensation (1997) Plan incorporated by reference to
Exhibit 99 in Form S-8 filed August 29th, 1997.
10.9 Employee Stock Option (1997) Plan incorporated by reference to Exhibit
99 in Form S-8 filed August 29th, 1997.
10.10* Employment Agreement between the Company and D. Bruce Sinclair dated
November 18, 1997.
21 *Subsidiaries
23 *Consent of Independent Auditors on Form S-8
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the 4th quarter of 1997.
-20-
<PAGE>
Johnson, Holscher & Company, P.C.
Certified Public Accountants
Stockholders and Board of Directors
WaveRider Communications Inc.
INDEPENDENT AUDITORS' REPORT
We have audited the consolidated balance sheet of WaveRider Communications
Inc. as of December 31, 1997 and 1996, and the related consolidated statements
of loss and deficit, stockholder's equity (deficit) and cash flows for the years
ended December 31, 1997 and 1996 and the period from inception to December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the reports of other auditors provide a reasonable
basis for our opinion
In our opinion, based on our audit and the reports of other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of WaveRider Communications Inc. as of
December 31, 1997 and 1996 and the results of its operations and its cash flows
for the years ended December 31, 1997 and 1996 and the period from inception to
December 31, 1997 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has not generated revenues from operations
which raises substantial doubt about its ability to continue as a going concern.
Management's plan in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Johnson, Holscher & Company, P.C.
March 20, 1998
Member of the American Institute of
Certified Public Accountants 5975 Greenwood Plaza Boulevard, Suite 140
Member of the Private Companies Greenwood Village, Colorado, 80111
Practice Section (303) 694-2727 Fax (303) 694-3172
Member of the SEC Practice Section
-21-
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(in U.S. dollars)
Year ended December 31, 1997
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------ ---------
ASSETS
<S> <C> <C>
Current
Cash $ 437,746 1,809
Accounts receivable 57,045 -
Prepaid expenses 9,387 -
Inventory 19,656 -
Trade name - 22,189
- ------------------------------------------------------------ ---------
523,834 23,998
Equipment [Note 4] 340,599 13,855
Goodwill [Note 5] 67,728 -
- ------------------------------------------------------------ ---------
$ 932,161 37,853
============================================================ =========
LIABILITIES
Current
Accounts payable $ 108,060 75,054
Accrued liabilities 150,027 58,239
Deferred revenue 24,155 -
- ------------------------------------------------------------ ---------
282,242 133,293
STOCKHOLDERS' EQUITY
Share capital [Note 6] 4,286,248 2,501,759
Deficit accumulated during the development stage (3,636,329) (2,597,199)
- ------------------------------------------------------------ ---------
649,919 (95,440)
- ------------------------------------------------------------ ---------
$ 932,161 37,853
============================================================ =========
</TABLE>
-22-
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF LOSS
(in U.S. dollars)
Year ended December 31, 1997
<TABLE>
<CAPTION>
Inception
(Aug. 6/87
1997 1996 to Dec. 31/97
- --------------------------------------------------------------------------------------------
REVENUE
<S> <C> <C> <C>
Internet sales $ 77,459 - 77,459
Interest and other - - 23,568
- --------------------------------------------------------------------------------------------
77,459 - 101,027
EXPENSES
Office and general 394,096 57,227 1,360,978
Consulting fees 247,497 31,913 1,186,121
Research and development:
Salaries and benefits 215,889 - 301,587
Equipment and materials 66,209 - 66,209
Depreciation 65,394 - 65,394
Overhead 32,237 - 32,237
Legal and accounting 55,665 26,176 289,665
Internet services 21,798 - 21,798
Depreciation and amortization 12,570 5,221 80,427
Salaries and benefits 5,234 1,239 332,940
- --------------------------------------------------------------------------------------------
1,116,589 121,776 3,737,356
- --------------------------------------------------------------------------------------------
NET LOSS (1,039,130) (121,776) (3,636,329)
============================================================================================
LOSS PER COMMON SHARE $ (0.08) (0.02) (0.68)
============================================================================================
Weighted Average Number of Common Shares 12,299,522 5,113,041 2,463,539
============================================================================================
</TABLE>
-23-
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in U.S. dollars)
Year ended December 31, 1997
<TABLE>
<CAPTION>
Inception
(Aug. 6/87
1997 1996 to Dec. 31/97
- ---------------------------------------------------------------------------------------------
OPERATIONS
<S> <C> <C> <C>
Net loss $ (1,039,130) (121,776) (3,636,329)
Items not involving cash
Depreciation and amortization 77,964 5,221 145,821
Loss on sale of equipment 13,855 31,596 91,616
- ---------------------------------------------------------------------------------------------
(947,311) (84,959) (3,398,892)
Net changes in non-cash working capital items 85,050 40,885 195,119
- ---------------------------------------------------------------------------------------------
(862,261) (44,074) (3,203,773)
- ---------------------------------------------------------------------------------------------
INVESTING
Acquisition of equipment (407,635) - (571,961)
Acquisition of goodwill in subsidiary (78,656) - (78,656)
- ---------------------------------------------------------------------------------------------
(486,291) - (650,617)
- ---------------------------------------------------------------------------------------------
FINANCING
Shares issued 1,784,489 43,484 4,286,248
Loans from Affiliates - - 2,657
Proceeds (payments) from lease obligations - (9,759) 3,231
- ---------------------------------------------------------------------------------------------
1,784,489 33,725 4,292,136
- ---------------------------------------------------------------------------------------------
Increase in cash 435,937 (10,349) 437,746
Cash, beginning of year 1,809 12,158 -
- ---------------------------------------------------------------------------------------------
CASH , end of year 437,746 1,809 437,746
=============================================================================================
</TABLE>
-24-
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
(in U.S. dollars)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Year ended December 31, 1997
<TABLE>
<CAPTION>
Common Stock Paid-in B Pref. Deficit during
Number Par Value Capital Par Value development stage Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issued for cash 4,000,000 $ 4,000 6,000 - - 10,000
Net income, August 6, 1987
(inception) to December 31, 1987 - - - - 56 56
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1987 4,000,000 4,000 6,000 - 56 10,056
Issued for cash 2,100,000 2,100 3,150 - - 5,250
Issued for services 680,000 680 1,020 - - 1,700
Net loss for year - - - - (5,380) (5,380)
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1988 6,780,000 6,780 10,170 - (5,324) 11,626
Public offering for cash 2,008,000 2,008 48,192 - - 50,200
Deferred costs of public offering - - (28,574) - - (28,574)
Net loss for year - - - - (5,112) (5,112)
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1989 8,788,000 8,788 29,788 - (10,436) 28,140
Offering costs - - (10,500) - - (10,500)
Net loss for year - - - - (17,640) (17,640)
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1990 8,788,000 8,788 19,288 - (28,076) -
Net loss for year - - - - - -
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1991 8,788,000 8,788 19,288 - (28,076) -
Net loss for year - - - - - -
- -----------------------------------------------------------------------------------------------------------------------
Balance December 31, 1992 8,788,000 8,788 19,288 - (28,076) -
Reverse stock split 1:100 (8,700,120) (8,700) 8,700 - - -
Issued shares for Channel i PLC 400,000 400 2,100 - - 2,500
Issued for services 800,000 800 4,200 - - 5,000
Share subscriptions received - - 100,000 - - 100,000
Net loss for year - - - - (177,686) (177,686)
- -----------------------------------------------------------------------------------------------------------------------
Balance December 31, 1993 1,287,880 1,288 134,288 - (205,762) (70,186)
Public Offerings 3,218,181 3,218 1,764,424 - - 1,767,642
Share subscriptions returned - - (100,000) - - (100,000)
Net loss for year - - - - (1,215,576) (1,215,576)
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 4,506,061 4,506 1,798,712 - (1,421,338) 381,880
Public offering 100,000 100 199,900 - - 200,000
Net loss for year - - - - (1,054,085) (1,054,085)
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 4,606,061 4,606 1,998,612 - (2,475,423) (472,205)
Cancellation of shares (50,002) (50) - - - (50)
Public Offerings 628,500 629 497,962 - - 498,591
Net loss for year - - - - (121,776) (121,776)
- -----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 5,184,559 5,185 2,496,574 - (2,597,199) (95,440)
Private Placements 4,766,250 4,766 278,266 - - 283,032
For Services 908,000 908 57,342 - - 58,250
Options exercised 1,467,000 1,467 208,970 - - 210,437
Warrants exercised 14,592,572 14,593 1,214,177 - - 1,228,770
B Preference - - - 4,000 - 4,000
Net loss for year - - - - (1,039,130) (1,039,130)
- -----------------------------------------------------------------------------------------------------------------------
26,918,381 $ 26,919 4,255,329 4,000 (3,636,329) 649,919
=======================================================================================================================
</TABLE>
-24-
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Year ended December 31, 1997
1. NATURE OF OPERATIONS
- --------------------------------------------------------------------------------
WaveRider Communications Inc. (formerly Channel i Inc.), incorporated in 1987
under the laws of the state of Nevada, USA is a public company traded on NASD's
OTC Bulletin Board, trading symbol WAVC.
The Company is in the process of developing and marketing digital wireless
internet access technology.
The Company incurred an operating loss of $1,039,130 (1996 - $121,776) for the
year ended December 31, 1997. The Company's ability to discharge liabilities in
the normal course of business is dependent on future profitable operations
and/or obtaining additional debt or equity financing.
2. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Principles of Consolidation and Basis of Accounting - The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries, Major Wireless Communications Inc. and Jetstream Internet Services
Inc., both of which are British Columbia companies with operations in British
Columbia, Canada. For the year ended December 31, 1996 the consolidated
financial statements include the accounts of Channel i PLC, which was
discontinued in 1997.
The Company's consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States of America.
Financial instruments - The Company's financial instruments consist of accounts
receivable, prepaid expenses, accounts payable, and accrued liabilities. It is
management's opinion that the Company is not exposed to significant interest,
currency or credit risks arising from the financial instruments mentioned and
that their fair values approximate their carrying values, unless otherwise
noted.
Use of estimates in the preparation of financial statements - 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 disclosures of contingent assets and
liabilities at the date of the financial statements and the reporting period.
Actual results could differ from those estimates.
Foreign currency translation - As all of the Company's operations are in Canada,
the Canadian dollar has been chosen as the Company's functional currency. All
assets and liabilities denominated in Canadian dollars are translated at the
current rate and revenues, expenses, gains and losses are translated at weighted
average exchange rates. Translation adjustments on US dollar transactions are
expensed.
Equipment - Equipment is recorded at cost and depreciated over the estimated
lives of the assets, commencing in the year the assets are put into use, as
follows:
- Modem software - 50% - declining balance method
- Computer equipment - 30% - declining balance method
- Lab equipment - 25% - declining balance method
- Modem housing mold - 25% - declining balance method
- Computer software - 50% - declining balance method
- Office equipment and furniture - 20% - declining balance method
- Leasehold improvements - 2 years - straight line
- Station site development - 40% - declining balance method
-26-
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
(in U.S. dollars)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended December 31, 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
- --------------------------------------------------------------------------------
Goodwill - Goodwill represents the excess of cost over fair value of the net
assets and liabilities of Jetstream Internet Services Inc. It is amortized using
the straight-line method over a period of three years.
Revenue recognition and deferred revenue - Fees billed for internet services on
long term service contracts are recognized over the period of the contracts.
Research and development costs - Research and development costs are expensed as
incurred.
3. ACQUISITION OF SUBSIDIARIES
- --------------------------------------------------------------------------------
Major Wireless Communications Inc. - On May 13, 1997, the Company acquired all
of the shares of Major Wireless Communications Inc. (MWCI) in exchange for the
issue of 4,000,000 Series B voting convertible preferred stock with a par value
of $0.001 per share. The B 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 on achievement of certain levels of
performance. In the event that all the shares are not released before May 13,
2002, the remaining escrowed preference shares will be cancelled. At the
discretion of the Company's Board of Directors the cancellation date may be
extended for a maximum of two years.
MWCI was created for the purpose of developing certain wireless communications
technology. At the effective date of the acquisition the company had no assets
or liabilities.
Jetstream Internet Services Inc. - On August 1, 1997, Jetstream Internet
Services Inc., a newly created subsidiary, acquired as a going concern all the
assets and liabilities of an internet provider in the Province of British
Columbia, Canada. The acquisition 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 and the deemed excess has
been assigned to goodwill as follows:
Current assets $ 9,869
Current liabilities (76,989)
Equipment 27,315
Goodwill 78,656
- --------------------------------------------------------------------------------
Total consideration $ 38,851
================================================================================
-27-
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Year ended December 31, 1997
4. EQUIPMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated Net Book Value
Cost Depreciation 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Modem software $ 108,887 27,222 81,665 -
Computer equipment 88,928 11,292 77,636 -
Lab equipment and tools 80,762 10,095 70,667 -
Modem housing mold 47,891 - 47,891 -
Computer software 27,327 6,824 20,503 -
Equipment and fixtures 25,712 2,334 23,378 13,855
Leasehold improvements 16,835 7,011 9,824 -
Station site development 11,293 2,258 9,035 -
- ----------------------------------------------------------------------------------------------
$ 407,635 67,036 340,599 13,855
==============================================================================================
</TABLE>
5. GOODWILL
- --------------------------------------------------------------------------------
Cost $ 78,656
Less accumulated amortization 10,928
- --------------------------------------------------------------------------------
$ 67,728
================================================================================
6. CAPITAL STOCK
- --------------------------------------------------------------------------------
The authorized and issued share capital of the Company is as follows:
<TABLE>
<CAPTION>
Issued
Authorized Number Par Value Paid-in Capital Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common, voting, par value of $0.001 100,000,000 26,918,381 $ 26,919 4,255,329 4,282,248
Undesignated preferred stock 701,875 - - - -
A voting convertible preferred stock 298,125 - - - -
B voting convertible preferred stock 4,000,000 4,000,000 4,000 - 4,000
- -------------------------------------------------------------------------------------------------------------------
$ 30,919 4,255,329 4,286,248
===================================================================================================================
</TABLE>
-28-
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Year ended December 31, 1997
CAPITAL STOCK (Continued)
- -------------------------------------------------------------------------------
During the year two private placements of stock were issued as follows:
<TABLE>
<CAPTION>
Common Issued Unissued Total
----------------------- ----------------------- ---------------------------
# $ # $ # $
<S> <C> <C> <C> <C> <C> <C>
Preferred stock units
Shares $0.065 2,981,250 $193,782 - $ - 2,981,250 $ 193,782
Warrants $0.085,
$0.105,$0.125 7,452,572 782,520 1,491,178 156,573 8,943,750 939,093
- ------------------------------------------------------------------------------------------------------------------
10,433,822 976,302 1,491,178 156,573 11,925,000 1,132,875
- ------------------------------------------------------------------------------------------------------------------
Common stock units
Shares $0.05 1,785,000 89,250 - - 1,785,000 89,250
Warrants $0.0625 7,140,000 446,250 - - 7,140,000 446,250
- ------------------------------------------------------------------------------------------------------------------
8,925,000 535,500 - - 8,925,000 535,500
- ------------------------------------------------------------------------------------------------------------------
19,358,822 $1,511,802 1,491,178 $156,573 20,850,000 $1,668,375
==================================================================================================================
</TABLE>
Preferred stock units - During the year the Company issued 298,125 units at a
price of $0.65 per unit. Each unit consists of one Series A voting convertible
preferred stock (convertible into 10 common shares) and three Common Stock
Purchase Warrants per converted common share. The three warrants have respective
exercise prices of $0.085, $0.105 and $0.125. The warrants expire on February 6,
1998.
Common stock units - During the year the Company issued 1,785,000 units at a
price of $0.05 per unit. Each unit consists of one common share and four common
stock purchase warrants. One warrant entitles the holder to purchase one common
share at $0.0625 per share.
Series B Voting Convertible Preferred Shares - As described in Note 3, on
acquisition of Major Wireless Communications Inc. the Company issued 4,000,000
Series B preferred shares. The Shares are held in escrow subject to release only
when certain levels of performance have been achieved by the Company. In the
event that the shares are not released before May 13, 2002, the escrowed shares
will be cancelled or at the discretion of the Board of Directors the
cancellation date may be extended for two years. When released the shares may be
converted into common shares at a ratio of 10 common shares to each preferred
share.
-29-
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Year ended December 31, 1997
CAPITAL STOCK (Continued)
- --------------------------------------------------------------------------------
Employee Stock Option Plans - During the year the Company authorized two
incentive/compensation plans for a total of 7,500,000 common shares that may be
optioned or awarded to employees and certain consultants. An initial offering to
existing employees was set at $0.25 per share. Any subsequent offerings are to
be set at market value. Stock options to employees, directors and consultants
are summarized as follows:
- --------------------------------------------------------------------------------
Exercised
price Outstanding Expiry dates
- --------------------------------------------------------------------------------
$0.25 543,712 June 11, 2000
$0.44 428,540 Oct.31/Nov. 1, 2000
$0.48 200,000 November 17, 2000
$0.49 60,000 October 6, 2000
$0.50 1,500,000 June 25, 2000
$0.56 1,000,000 November 18, 2000
$0.63 66,000 September 8, 2000
$0.70 80,000 November 21, 2000
- --------------------------------------------------------------------------------
3,878,252
================================================================================
7. RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
During the year a total of $ 88,778 was paid or payable to directors and
officers or to companies related to them under management and administration
contracts.
8. COMMITMENTS
- --------------------------------------------------------------------------------
Leases - Real estate lease commitments for the base rental payments for offices
and an antenna station site are as follows:
1998 $ 58,097
1999 $ 41,784
2000 $ 19,585
-30-
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Year ended December 31, 1997
9. INCOME TAXES
- --------------------------------------------------------------------------------
The Company and its subsidiaries have $ 1,965,146 of non-capital loss
carry-forwards, $767,325 of scientific research and development allowances and
$153,464 of tax credits which may, subject to certain restrictions, be available
to offset future taxable income or taxes payable. No future benefit of these
losses and credits has been recognized in these financial statements. The loss
carry-forwards expire as follows:
2004 $ 388,361
2005 -
2006 -
2007 28,076
2008 140,736
2009 847,091
2010 316,312
2011 63,734
2012 180,836
- --------------------------------------------------------------------------------
$ 1,965,146
================================================================================
10. COMPARATIVE FIGURES
- --------------------------------------------------------------------------------
Certain comparative amounts have been reclassified, where appropriate, to
correspond with the current year's presentation.
11. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
Warrants - In February 1998 the remaining 1,491,178 common share purchase
warrants described in Note 6 were exercised.
Private Placement of 500,000 Units - On February 16, 1998 the Company announced
a private placement consisting of 500,000 common share purchase units at a price
of $1.00 per unit. Each unit consists of one common share of the Company and one
common share purchase warrant. One warrant entitles the holder to acquire one
common share for $1.25 for a one year period.
-31-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange Act
of 1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: April 14, 1998 WAVERIDER COMMUNICATIONS INC.
By /s/ D. Bruce Sinclair
D. Bruce Sinclair, President, Chief Executive
Officer and Director
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Company and in the capacities and on
the dates indicated.
Name Title Date
/s/ D. Bruce Sinclair President, Chief Executive April 14, 1998
- --------------------- Officer and Director
D. Bruce Sinclair
/s/ T. Scott Worthington Chief Financial Officer April 14, 1998
- ------------------------
T. Scott Worthington
/s/ William E. Krebs Secretary and Director April 14, 1998
- --------------------
William E. Krebs
/s/ William H. Laird Director April 14, 1998
- --------------------
William H. Laird
-32-
<PAGE>
APPENDIX A
FORM OF PROXY
WAVERIDER COMMUNICATIONS INC.
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints T. Scott Worthington and William E. Krebs, and
each of them, as proxies, with full power of substitution, and hereby authorizes
them to represent and vote, as designated below, all shares of the Common Stock
of WaveRider Communications Inc., a Nevada corporation (the "Company"), held of
record by the undersigned on May 11, 1998 at the Annual Meeting of Shareholders
(the "Annual Meeting") to be held in the Vancouver Room of the Metropolitan
Hotel, 645 Howe Street, Vancouver, British Columbia, Canada V6C 2Y9., local
time, or at any adjournment or postponement thereof, upon the matters set forth
below, all in accordance with and as more fully described in the accompanying
Notice of Annual Meeting of Shareholders and Proxy Statement, receipt of which
is hereby acknowledged.
1. ELECTION OF DIRECTORS, each to serve until the next annual Meeting of
shareholders of the Company or until their respective successors all have
been duly elected and qualified.
[ ] FOR all nominees listed below (except as marked to the contrary).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
(INSTRUCTION: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the list below.)
D. BRUCE SINCLAIR WILLIAM E. KREBS WILLIAM H. LAIRD
2. PROPOSAL TO RATIFY the appointment of Price Waterhouse as the independent
public accountants of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES NAMED ABOVE AND FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE AS THE INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY.
Please complete, sign and date this proxy where indicated and return it promptly
to:
Mr. T. Scott Worthington
WaveRider Communications Inc.
604 Edward Avenue, Unit #3
Richmond Hill, Ontario
Canada L4C 9Y7
Date: __________, 1998 Signature: __________________________________
Signature (if held jointly):
-------------------------
Name (Print) ________________________________________
Name (Print - if held jointly)
-------------------------------------------------
Registered Address:
- --------------------------------------------------------------------------------
(Please sign above exactly as the shares are issued. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.)
-33-
