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
incorporation or organization) Identification No.)
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]
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TABLE OF CONTENTS
PART I Page
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
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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."
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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(TM)" Communications Technology
WaveRider's "Last Mile Solution(TM)" 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(R) 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(R) 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(R)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.
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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(R) technology lends itself to accommodate all three areas
without changing the basic technology or structure of the network. Specifically,
the WaveRider(R) 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(R)
technology permits Secure Private Virtual Networking services which other
platforms cannot provide without the addition of expensive equipment.
WaveRider(R) 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(R) technology is scheduled to be commercially available in the
summer of 1998 preceding the commercial availability of the WaveRider(R)
technology described above.
The WaveRider(R) 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.
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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:
1996 Bid 1997 Bid
High Low High Low
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
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(R) 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(R) 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.
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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(R) products. Revenues were generated by Jetstream as the
result of the provision of Internet Services from August 1st, 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.
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C. REGULATION OF WIRELESS COMMUNICATIONS
Currently, the WaveRider(R) 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(R) products in the
902 to 928 MHz band is subordinate to certain licensed and unlicensed uses of
the band and WaveRider(R) 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(R) 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(R) 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(R)
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.
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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>
<S> <C> <C>
NAME AGE POSITION
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.
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.
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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.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE 1997
<S> <C> <C>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Name and
Principal Position Salary Other Ann. Securities LTIP Payouts Other
Comp. Stock Options Comp.
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.$270,000 in cash for
the first year with the balance payable in shares out of the Employee Stock
Compensation Plan subject to certain performance criteria. The amount shown as
salary above is the amount paid in cash for the period Mr. Sinclair was with the
Company in 1997. A total of 800,000 Series B Preferred Shares were transferred
to Mr. Sinclair by way of an additional incentive together with the private
option to obtain additional common shares of up to 1,000,000 to be earned at the
rate of 150,000 per month. Both the Series B Preferred shares and the common
shares are being provided by existing shareholders and are not payable by or
otherwise constitute a liability of the Company.
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The following table summarizes option grants during 1997 to the executive
officer named in the Summary Compensation Table (the "Named Executive Officer")
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------
Percent of
Total
Number of Options Potential Realizable Value
Securities Granted to Exercise Market at Assumed Annual Rates
Underlying Employees or Base Price on of Stock Price Appreciation
Options in Fiscal Price Date of Expiration for Option Term
Granted Year ($/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>
11
<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.
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.
12
<PAGE>
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.
13
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
WaveRider Communications Inc.
VANCOUVER, BRITISH COLUMBIA, CANADA
DECEMBER 31, 1997
1. AUDITORS' REPORT
2. CONSOLIDATED BALANCE SHEETS
3. CONSOLIDATED STATEMENTS OF LOSS
4. CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOWS
5. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
6. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14
<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 5975 Greenwood Plaza Boulevard,
Certified Public Accountants Suite 140
Member of the Private Companies Greenwood Village, Colorado, 80111
Practice Section
Member of the SEC Practice Section (303) 694-2727
Fax (303) 694-3172
15
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(in U.S. dollars)
Year ended December 31, 1997
1997 1996
- --------------------------------------------------------------------------------
ASSETS
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
================================================================================
16
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF LOSS
(in U.S. dollars)
Year ended December 31, 1997
Inception
(Aug. 6/87
1997 1996 to Dec. 31/97
- --------------------------------------------------------------------------------
REVENUE
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
================================================================================
17
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in U.S. dollars)
Year ended December 31, 1997
Inception
(Aug. 6/87
1997 1996 to Dec. 31/97
- --------------------------------------------------------------------------------
OPERATIONS
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
================================================================================
18
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(in U.S. dollars)
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>
19
<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
20
<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
================================================================================
21
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Year ended December 31, 1997
4. EQUIPMENT
- --------------------------------------------------------------------------------
Accumulated Net Book Value
Cost Depreciation 1997 1996
- --------------------------------------------------------------------------------
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
================================================================================
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>
22
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Year ended December 31, 1997
<TABLE>
<CAPTION>
CAPITAL STOCK (Continued)
- ---------------------------------------------------------------------------------------------------------
During the year two private placements of stock were issued as follows:
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.
23
<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
24
<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.
25
<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
26
Exhibit no. 3.7 Filed in the office of
the Secretary of
State of the State of Nevada,
May 27th, 1997.
CERTIFICATE OF AMENDMENT
to
ARTICLES OF INCORPORATION
of
CHANNEL i INC.
(A Nevada Corporation)
CHANNEL i INC., a corporation organized and existing under and by virtue of the
General Corporation Law of Nevada, DOES HEREBY CERTIFY THAT:
A. The shareholders of the corporation have, by written consent in lieu of a
meeting, duly adopted amendments to the Articles of Incorporation of the
corporation, consisting of amendment to Article First, to change the name of the
corporation from Channel i Inc. to WaveRider Communications Inc. and amendment
of the first paragraph of Article Fifth to, among other things, increase the
number of authorized shares of common stock.
The amendments thus adopted are as follows:
Resolved, that Article 1 of the Articles of Incorporation of this corporation be
amended to provide as follows:
"FIRST, The name of this corporation is WAVERIDER COMMUNICATIONS INC."
***
"FIFTH, The aggregate number of shares of capital stock of all classes, which
the corporation shall have authority to issue is ONE HUNDRED FIVE MILLION,
(105,000,000), of which One Hundred Million, (100,000,000) shares having a par
value of $.001 per share shall be of a class designated "Common Stock" or
"Common Shares", and Five Million, (5,000,000) shares having a par value of
$.001 per share shall be of a class designated "Preferred Stock" or "Preferred
Shares". All shares of the Corporation shall be issued for such consideration or
considerations as the Board of Directors may from time to time determine. The
designations, voting powers, preferences, optional and other special rights and
qualifications, limitations, or restrictions of the above classes of stock shall
be as follows:"
***
B. Other than the foregoing changes to Articles First and Fifth, there are no
amendments to the Articles of Incorporation.
C. The foregoing Certificate of Amendment was duly approved by affirmative vote
of the holders of a majority of the Corporation's 12,175,684 shares of capital
stock outstanding and entitled to vote on the proposed amendment, and therefore
sufficient for approval, all in accordance with the General Corporation Law of
Nevada and the existing Certificate of Incorporation and bylaws of the
corporation.
27
<PAGE>
D. This amendment was duly adopted in accordance with the provisions of Section
78.390 of the General Corporation Law of Nevada.
In Witness Whereof Channel I Inc. has caused this Certificate of Amendment to be
signed by its President and attested to by its Assistant Secretary as of the
date below.
Dated: May 21st, 1997. CHANNEL i INC.
Attest:
" Robert Clarke"
Robert Clarke, President
" Neena Deol "
Neena Deol, Assistant Secretary
28
Exhibit no. 3.8 Filed in the office of
the Secretary of
State of the State of Nevada
May 16th, 1997.
CHANNEL i INC.
CERTIFICATE OF AMENDMENT
to
ARTICLES OF INCORPORATION
of
CHANNEL i INC.
CHANNEL i INC., a corporation organized and existing under and by virtue of
the Nevada General Corporation Law, does hereby certify that:
A. The name of the corporation is CHANNEL i INC.
B. Under the authority of Section 78.195 of the Nevada General Corporation Law,
Article Fifth, Part II of the Certificate of Amendment to the Corporation's
Certificate of Incorporation expressly vests authority in the Board of Directors
to prescribe the series, number of each series, voting powers, designations,
preferences, limitations, restrictions, and relative rights of the Corporation's
preferred shares, without shareholder approval.
C. On January 31st, 1997, the Board of Directors designated 2,000,000 of the
authorized and unissued shares of preferred stock of the Company as the Series
A, Voting Convertible Preferred Stock of the Company. On March 24th, 1997, the
Company filed a Certificate of Amendment to Articles of Incorporation, formally
establishing and designating the Series A, Voting Convertible Preferred Stock.
An aggregate of 298,125 of the Series A, Voting Convertible Preferred Stock have
been issued, and no other share of such series have been or will be issued. The
Board of Directors, as reflected in paragraph 11 of Exhibit A hereto, has
cancelled the designation of 1,701,875 preferred shares heretofore designated as
Series A, Voting Convertible Preferred Stock, such shares to immediately return
to the status of undesignated and unissued preferred share of the Company. The
designation of 2,000,000 shares of preferred stock as the Series A, Voting
Convertible Preferred Stock of the Company hereby is amended to reduce the
number of authorized shares of Series A, Voting Convertible Preferred Stock from
2,000,000 to 298,125 shares.
D. The Board of Directors of the Corporation has, by the unanimous written
consent of its members taken on May 13th, 1997, pursuant to Section 78.315 of
the Nevada General Corporation Law, duly adopted a resolution setting forth an
amendment to the Certificate of Incorporation of the Corporation, designating
and establishing a series of preferred stock consisting of 4,000,000 preferred
shares known as the
"SERIES B VOTING CONVERTIBLE PREFERRED STOCK"
E. The Corporation submits this Certificate of Amendment to its Certificate of
Incorporation for the purpose of establishing and designating such series of
preferred stock as required by Section 78.1955 of the Nevada General Corporation
Law.
F. A copy of the Resolution of Directors Establishing a Series of Shares of
Preferred Stock of Channel i Inc., dated as of May 13th, 1997, setting forth the
text of the amendment prescribing the series, number of each series, voting
powers, designations, preferences, limitations, restrictions and relative rights
of the Series B, Voting Convertible Preferred Stock, is attached hereto as
Exhibit A and is incorporated by reference in this document as if fully set
forth herein.
29
<PAGE>
G. No shares of the Series B, Voting Convertible Preferred Stock have been
issued.
H. No approval of the corporation's shareholders is necessary in regard to this
amendment or its filing with the Nevada Secretary of State.
In Witness Whereof, the undersigned has executed this Certificate of Amendment
as of the below date:
Dated: May 13th, 1997. CHANNEL i
INC.
By: "Robert Clarke"
Robert Clarke,
President
Attest:
"Walter Pickering"
Walter Pickering, Secretary.
30
Exhibit no. 10.10
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made as of the 18th day of November, 1997.
B E T W E E N:
WAVERIDER COMMUNICATIONS INC., a corporation incorporated
pursuant to the laws of Nevada, in the United States of
America (herein called the "Corporation")
OF THE FIRST PART
and
D. BRUCE SINCLAIR, residing in the Town of Aurora, in
the Province of Ontario
(herein called the "the Executive")
OF THE SECOND PART
WHEREAS the Corporation desires to employ the Executive and to enter
into an agreement (the "Employment Agreement") embodying the terms of such
employment;
AND WHEREAS the Executive has accepted such employment on
the basis of the terms and conditions set forth herein;
IN CONSIDERATION of the recitals and mutual covenants contained
herein and for other good and valuable consideration, the parties agree as
follows:
1. EMPLOYMENT
----------
The Corporation hereby employs the Executive and the Executive hereby
accepts employment with the Corporation for the term of this Employment
Agreement set forth in Section 2 below, in a position and with the duties,
responsibilities and authority as the Corporation may from time to time assign
to him including, without limitation, those duties, responsibilities and
authority more particularly set forth in Section 3 below, and upon all other
terms and conditions in this Employment Agreement set forth herein.
31
<PAGE>
2. TERM
----
The term (the "term") of the Executive's employment pursuant to this
Employment Agreement shall commence on November 18, 1997 and shall continue
until December 31, 2000, subject to the provisions of this Employment Agreement
providing for earlier termination of the Executive's employment in certain
circumstances. Thereafter, the term shall be automatically extended for
additional one year periods from and after December 31, 2000 upon the agreement
of the Executive and the board of directors of the Corporation, and subject to
the provisions of paragraph 10 hereof.
3. POSITION, RESPONSIBILITY
------------------------
It is intended that the Executive shall serve as the President and
Chief Executive Officer of the Corporation with responsibility for performing
such duties for the Corporation as the Executive shall reasonably be directed to
perform by the Board of Directors of the Corporation.
Throughout the term of this Employment Agreement, the Executive
shall devote his full business time and undivided attention during normal
business hours to the business and affairs of the Corporation, except for
vacations and except for illness or incapacity, but, subject to Section 10 and
subject to the approval of the Board of Directors of the Corporation, which will
not be unreasonably withheld, nothing in this Employment Agreement shall
preclude the Executive from devoting reasonable periods required for serving, as
appropriate, on boards of directors of other corporations, from engaging in
charitable and public service activities, and from managing his personal
investments, provided such activities do not materially interfere with the
performance of his duties and responsibilities under this Employment Agreement
and do not constitute a conflict of interest with respect to his employment
herein.
4. SALARY, CASH AND STOCK COMPENSATION PLAN
----------------------------------------
For services rendered by the Executive during the term of this
Agreement, the Executive shall be entitled to receive an annual remuneration
package of $500,000. In recognition of the Corporation's cash flow situation
prior to the shipment of product and the receipt of financing (collectively, the
"Cash Flow Events"), for the period December 1, 1997 to March 31, 1998, the
Executive shall be paid the sum of $15,000 (before deductions) per month.
Thereafter, the Executive shall be paid the sum of $25,000 (before deductions)
per month.
The Executive shall also be eligible to receive, in accordance with
the provisions of the Corporation's Employee Stock Compensation (1997) Plan, in
such a manner as the parties hereto mutually determine is most tax effective for
the Executive, shares of the Corporation having a value of $230,000 for the 13
month period ended December 31, 1998 and thereafter $200,000 per annum, to be
payable in arrears on the basis of performance objectives selected by the
Executive and ratified by the board of directors of the Corporation.
The Executive's salary shall be reviewed annually and may be
adjusted taking into account, among other things, individual performance and
general business conditions. In addition, the Executive shall be eligible to
participate in the Corporation's Employee Stock Option (1997) Plan (the "Stock
Option Plan") and any successor plans thereto established by the Corporation for
the general benefit of employees. Pursuant to the Stock Option Plan, the
Executive shall be awarded options (the "Stock Options") to acquire 1,000,000
common shares ("Common Shares") in the capital of the Corporation at an exercise
price of US$0.56 per share, being the market price of the Common Shares on
November 18, 1997. The Stock Options will vest on the basis of performance
objectives selected by the Executive and ratified by the board of directors of
the Corporation.
32
<PAGE>
5. SIGNING INCENTIVE
-----------------
In recognition of the Executive's extensive executive, marketing and
management experience, the Executive shall further be entitled to an incentive
bonus as follows:
(i) 800,000 series B preferred shares (the "Series B
Preferred Shares") in the capital of the
Corporation are subject to be released in
accordance with the terms and conditions of a
share exchange agreement executed May 13, 1997
among Channel i Inc., Rick Antoine, Stephen Grant,
Tim Zboyovsky, Pacific Western Mortgage Corp. and
Major Wireless Communications Inc., as amended by
a collateral agreement of the same date as follows:
- --------------------------------------------------------------------------------
% of Shares
Event
- --------------------------------------------------------------------------------
Prototype development completed 5%
- --------------------------------------------------------------------------------
Prototype operational in one community 10%
- --------------------------------------------------------------------------------
25 non-conditional licence agreements 15%
signed with non-refundable deposits
received
- --------------------------------------------------------------------------------
25 licencees operational utilizing the system 15%
- --------------------------------------------------------------------------------
Gross revenue exceeds CDN$10 million 25%
- --------------------------------------------------------------------------------
Gross revenue exceeds CDN$25 million 30%
- --------------------------------------------------------------------------------
;and
(ii) the Executive shall be issued options (the "Purchase
Options") to acquire 1,000,000 Common Shares at an exercise
price of US$0.56 per share. The Purchase Options will vest as
to 150,000 per month commencing on December 1, 1997.
In the event that: (a) there is a Change in Control (as hereinafter
defined) of the Corporation; or (b) the Executive is terminated by the
Corporation without cause as provided for in subparagraph 10(d), all of the
Stock Options and all of the Purchase Options shall immediately vest. A "Change
in Control" shall be deemed to have occurred if:
(A) any person or entity acquires beneficial ownership of 20%
or more of the common shares of the Corporation then
outstanding, or such other voting securities of the
Corporation which results in such person or entity owning
20% or more of the combined voting power of the
Corporation's outstanding voting securities; or
(B) the shareholders of the Corporation approve a
reorganization, merger, consolidation, liquidation or
dissolution of the Corporation, or the sale or disposition
of all or substantially all of the assets of the
Corporation; or
(C) a change in the composition of the Board of Directors of
the Corporation occurs such that the individuals who
constitute the board on December 15, 1997 become for any
reason a minority of the board; provided that such change
does not occur as a result of the sickness, health,
disability or death or voluntary resignation of a board
member or members.
33
<PAGE>
In the event the Executive voluntarily resigns from his position of
employment with the Corporation, dies, or is disabled with the meaning of
subparagraph 10(b) or is terminated for just cause pursuant to subparagraph
10(c) hereof, Stock Options and Purchase Options which have not yet vested will
be forfeited by the Executive.
6. AUTOMOBILE
----------
The Employer shall provide the Executive with an automobile at its
expense for the Executive's business and personal use, such automobile to have a
monthly lease expense not to exceed $1,100. The Employer shall also be
responsible for insurance, gas, maintenance and repair expenses generated by the
use of the automobile on behalf of the Corporation.
7. PERQUISITES AND BUSINESS EXPENSES
---------------------------------
The Executive will be reimbursed for all reasonable expenses
incurred by him or her in connection with the conduct of the Corporation's
business upon presentation of sufficient evidence of such expenditures are
authorized expenditures pursuant to policies adopted by the Board of Directors
of the Corporation from time to time.
8. BENEFIT PROGRAMS
----------------
The Executive will be entitled to participate effective November 18,
1997 in all the Executive benefit programs of the Corporation from time to time
in effect under the terms and conditions of such programs, including, but not
limited to, pension and other retirement plans, group life insurance,
hospitalization and surgical and major medical coverages, dental insurance, sick
leave, including salary continuation arrangements, vacations and holidays,
long-term disability, and such other fringe benefits as are or may be available
from time to time to other executives of the Corporation.
9. VACATION
--------
The Executive shall be entitled to all usual public holidays and, in
addition, to 30 business days paid vacation during each year of the Executive's
employment hereunder. Such vacation shall be utilized by the Executive at such
time or times as do not materially interfere with the ongoing conduct of the
Corporation's business and operations.
10. TERMINATION OF EMPLOYMENT
-------------------------
(a) Death - In the event of the death of the Executive during
the term of this Employment Agreement, the Executive's
salary will be paid to the Executive's designated
beneficiary, and in the absence of such designation, too the
estate or other legal representatives of the Executive,
through the end of the month in which death occurs. Rights
and benefits of the Executive under the Executive benefit
plans and programs of the Corporation, including life
insurance, will be determined in accordance with the terms
and conditions of such plans and programs.
(b) Disability - The Executive's employment shall terminate
automatically upon written notice from the Corporation in
the event of the Executive's absence or inability to render
the services required hereunder due to disability, illness,
34
<PAGE>
incapacity or otherwise for an aggregate of one hundred and
eighty days during any 12 month period during the term. In
the event of any such absence or inability, the Executive
shall be entitled to receive the compensation provided for
herein for such period, and thereafter the Executive shall
be entitled to receive compensation in accordance with the
Corporation's long-term disability plan, if any, together
with such compensation, if any, as may be determined by the
Board of Directors of the Corporation.
(c) Termination by the Corporation for Cause - In the event of a
termination for cause, there will be no continued salary
payments by the Corporation to the Executive and any rights
and benefits of the Executive under the Executive benefit
plans and programs of the Corporation will be determined in
accordance with the terms of such plans and programs. For
the purposes of this Section 10(c) and of the Executive's
employment with the Corporation, "cause" shall mean that:
i) The Executive has committed a felony or indictable
offence or has improperly enriched himself at the
expense of the Corporation or has committed an act
evidencing dishonesty or moral turpitude, including
without limitation an act of theft;
ii) The Executive, in carrying out his duties hereunder,
(A) has been wilfully or grossly negligent, or (B) has
committed wilful and gross misconduct or, (C) has
failed to comply with a clear instructions or
directives from the Board of Directors of the
Corporation after having been informed of a failure to
so comply;
iii) The Executive has breached a material term of this
Employment Agreement;
iv) The Executive becomes bankrupt or in the event a
receiving order (or any analogous order under any
applicable law) is made against the Executive or in the
event the Executive makes any general disposition or
assignment for the benefit of his creditors; or
v) The Executive commits any other act giving the
Corporation cause to terminate the Executive's
employment, including, but not limited to chronic
alcoholism or drug addiction, material malfeasance or
non-feasance with respect to the Executive's duties
hereunder.
Prior to any termination of the Executive for cause due to
any occurrence described in subparagraphs 10(c)(ii), (iii),
(v) and (vi) above, the Corporation shall notify the
Executive in writing of the particulars of the occurrence
upon which termination would be based and shall in such
notice advise the Executive as to whether, in the
Corporation's sole discretion, the default of the Executive
occasioned by such occurrence is capable of being cured or
rectified in full without loss or damage to the Corporation,
in which case the Corporation shall afford the Executive a
reasonable period of not less than five business days in
which to cure or rectify such default. In such event and
provided the Executive cures or rectifies such default in
full without loss or damage to the Corporation, the
Executive's employment shall not be terminated on the basis
of such occurrence.
(d) Termination by the Corporation without Cause - In the event
of a termination without cause, the Employer will provide a
severance package which will include a minimum of one year's
salary, plus one month's salary for each year of employment
in excess of twelve years service, to be calculated on base
salary and pro-rated for car allowance and bonus incentive.
It is agreed and understood that these amounts are
reasonable and include any obligations which the employer
35
<PAGE>
may have or pay in lieu of notice and/or severance pay
pursuant to the Employment Standards Act, R.S.O. 1990, c.
E-14, or its counterpart in any other jurisdiction. In
addition, it is agreed that if the Executive is terminated
without cause, the Vesting Dates with respect to all Signing
Bonus Options shall be deemed to have occurred immediately
prior to such termination. It is agreed that this Employment
Agreement may not be terminated by the Corporation without
cause, without the approval of the board of directors of the
Corporation.
11. NON-COMPETITION
---------------
The Executive agrees that during the period of the Executive's
employment with the Corporation and for a period of twelve months from the last
payment of compensation to the Executive by the Corporation, the Executive shall
not engage in or participate in any business activity that competes, directly or
indirectly in the North American market, with the businesses of the Corporation,
or its subsidiaries or affiliates.
For the purposes of this Section 11, the Executive shall be deemed
to "compete, directly or indirectly, with the business of the Corporation, or
its subsidiaries or affiliates" if the Executive is or becomes engaged,
otherwise than at the request of the Corporation, as an officer, director or the
Executive of, or is or becomes associated in a management or ownership,
consultant or agent, capacity with any corporation, partnership or other
enterprise or venture whose business includes the distribution of competing
products.
It is the desire and intent of the parties that the provisions of
this Section 11 shall be enforceable to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular portion of this Section 11 is adjudicated
unenforceable in any jurisdiction such adjudication shall apply only in that
particular jurisdiction in which such adjudication is made.
12. NON-SOLICITATION
----------------
The Executive agrees that for a period of one year following
the termination of the Executive's employment with the Corporation for any
reason whatsoever, the Executive will not, whether as principal, agent, the
Executive, employer, director, officer, shareholder or in any other individual
or representative capacity, solicit or attempt to retain in any way whatsoever
any of the Executives of the Corporation or their respective subsidiaries or
affiliates.
13. CONFIDENTIAL INFORMATION
------------------------
All confidential records, material and information and copies
thereof and any and all trade secrets concerning the business or affairs of the
Corporation or any of its affiliates obtained by the Executive in the course and
by the reason of his employment shall remain the exclusive property of the
Corporation. During the Executive's employment or at any time thereafter, the
Executive shall not divulge the contents of such confidential records or any of
such confidential information or trade secrets to any person other than to the
Corporation of to the Corporation's qualified the Executives, and the Executive
shall not, following the termination of his employment hereunder, for any reason
use the contents of such confidential records or other confidential information
or trade secrets for any purpose whatsoever.
14. WITHHOLDING
-----------
Anything to the contrary notwithstanding, all payments required to
be made by the Corporation hereunder to the Executive or his estate or
beneficiaries, shall be subject to the withholding of such amounts relating to
taxes as the Corporation may reasonably determine, after consultation with the
Executive, it should withhold pursuant to any applicable law or regulation. In
36
<PAGE>
lieu of withholding such amounts, in whole or in part, the Corporation may, in
its sole discretion, accept other provisions for payment of taxes and
withholdings as required by law, provided the Corporation is satisfied that all
requirements of law affecting the Corporation's responsibilities to withhold
have been complied with.
15. ENTIRE AGREEMENT
----------------
This Employment Agreement contains the entire agreement between the
parties hereto with respect to matters herein and supersedes all prior
agreements and understandings, oral or written, between the parties hereto
relating to such matters.
16. ASSIGNMENT
----------
Except as herein expressly provided, the respective rights and
obligations of the Executive and the Corporation under this Employment Agreement
shall not be assignable by either party without the written consent of the other
party and shall enure to the benefit of and be binding upon the Executive and
the Corporation and their permitted successors or assigns, including, in the
case of the Corporation, any other corporation or entity with which the
Corporation may be merged or otherwise combined or which may acquire the
Corporation or its assets in whole or in substantial part, and, in the case of
the Executive, his estate or other legal representatives. Nothing herein
expressed or implied is intended to confer on any person other than the parties
hereto any rights, remedies, obligations or liabilities under or by reason of
this Employment Agreement.
17. APPLICABLE LAW
--------------
This Employment Agreement shall be deemed a contract under, and for
all purposes shall be governed by and construed in accordance with, the laws of
the Province of Ontario without regard to the conflict of laws rules thereof.
The Corporation and the Executive hereby each irrevocably consent and attorn to
other jurisdiction of the courts of the Province of Ontario with respect to any
dispute or proceeding arising in connection with this Employment Agreement.
18. AMENDMENT OR MODIFICATION: WAIVER
---------------------------------
No provision of this Employment Agreement may be amended or waived
unless such amendment or waiver is authorized by the Corporation (including any
authorized officer or committee by the Board of Directors) and is in writing
signed by the Executive and by a duly authorized officer of the Corporation.
Except as otherwise specifically provided in this Employment Agreement, no
waiver by either party hereto of any breach by the other party of any condition
or provision of this Employment Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar breach, condition or
provision at the same time or at any prior or subsequent time.
19. RESIGNATIONS
------------
The Executive hereby agrees that, upon termination of this
employment for any reason whatsoever, the Executive shall thereupon be deemed,
upon the request of the Corporation, to have immediately resigned any position
the Executive may have as an officer and/or director of the Corporation,
together with any other office, position or directorship which the Executive may
hold with any of the Corporation's subsidiaries or related entities in
connection with or arising from the performance of the Executive duties of
employment under this Employment Agreement. In such event, the Executive shall,
at the reasonable request of the Corporation, forthwith execute any and all
documents appropriate to evidence such resignations which are consistent with
the terms of this Employment Agreement.
37
<PAGE>
20. PROVISIONS SURVIVING TERMINATION
--------------------------------
It is expressly agreed that notwithstanding termination of the
Executive's employment with and by the Corporation for any reason or cause or in
any circumstances whatsoever, such termination shall be without prejudice to the
rights and obligations of the Executive and the Corporation, respectively, in
relation or arising up to the time up to and including the date of termination;
and the provisions of Sections 10(c) and (d), 11, 12, 13, 14, 17, 19 and 20 of
this Employment Agreement, all of which shall remain and continue in full force
and effect unless and until the Board of Directors of the Corporation at its
absolute discretion resolves otherwise and so notifies the Executive in writing.
21. SEVERABILITY
------------
In the event that any provision or portion of this Employment
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions and portions of this Employment Agreement shall be
unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law.
22. COUNTERPARTS
------------
This Employment Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
23. REFERENCES
----------
In the event of the Executive's death or a judicial determination of
his incompetency, reference in this Employment Agreement to the Executive shall
be deemed, where appropriate, to refer to his beneficiary or beneficiaries.
24. CAPTIONS
--------
Captions to the Sections of this Employment Agreement are solely for
convenience and no provision of this Agreement is to be construed by reference
to the captions of that Section.
25. CURRENCY
--------
Unless otherwise specified herein, all dollar amounts referred to
herein shall mean Canadian dollars.
38
<PAGE>
IN WITNESS WHEREOF this Employment Agreement has been executed by a duly
authorized officer of the Corporation and the Executive as of the day first
above written.
WAVERIDER COMMUNICATIONS INC.
By: /s/ William Krebs
-------------------------------
William Krebs
SIGNED, SEALED and )
DELIVERED in the presence of: )
)
)
)
)
/s/ Glen Scharf ) /s/ D. Bruce Sinclair
-------------------------------- -------------------------------
Witness D. BRUCE SINCLAIR
39
Exhibit 21
SUBSIDIARIES
The company has a wholly owned subsidiary, Major Wireless Communications Inc.,
incorporated under the laws of the Province of British Columbia, Canada the 9th
day of October, 1996 under no. 0528772. Major Wireless is presently applying to
change its name to WaveRider Communications (Canada) Inc.
Major Wireless Communications Inc. has a wholly owned subsidiary, Jetstream
Internet Services Inc., incorporated under the laws of the Province of British
Columbia, Canada the 29th day of July, 1997, under no. 0547668.
40
Exhibit no. 23
Johnson, Holscher & Company, P.C.
Certified Public Accountants
Stockholders and Board of Directors
WaveRider Communications Inc.
Securities and Exchange Commission
Washington, D.C.
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 included in the filing of the S-8 with the
Securities and Exchange Commission. In this connection we hereby state:
We are independent public accountants with respect to the Company within the
meaning of Rule 101 of the Rule of Conduct of the American Institute of
Certified Public Accountants.
We consent to the inclusion of our report dated March 20, 1998, in the S-8
filing.
/s/ Johnson, Holscher & Company, P.C.
-------------------------------------------------
Johnson, Holscher & Company, P.C.
April 14, 1998
Member of the American Institute of 5975 Greenwood Plaza Boulevard,
Certified Public Accountants Suite 140
Member of the Private Companies Greenwood Village, Colorado, 80111
Practice Section
Member of the SEC Practice Section (303) 694-2727
Fax (303) 694-3172
41
