SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
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, 1998
Commission File No. 0-25680
WaveRider Communications Inc.
(Name of small business issuer in its charter)
Nevada 33-0264030
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
235 Yorkland Blvd., Suite 1101
Toronto, Ontario Canada M2J 4Y8
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (416) 502-3200
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. [X]
State issuer's revenues for its most recent fiscal year: $ 254,987 (US)
The aggregate market value of the voting stock held by non-affiliates
of the registrant was approximately $79,658,675 as of March 19, 1999 (based on
the average bid and asked prices for such stock as of March 19, 1999).
As of March 26, 1999, there were 41,647,181 shares of the registrant's
common stock, par value $.001 per share, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X ]
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The purpose of this amendment #1 to the 10-KSB for the year ended December
31, 1998, is solely to append the table "Consolidated Statements of
Shareholders' Equity", which was omitted in error during the electronic filing
of the report.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
WaveRider Communications Inc.
(A Development Stage Company)
TORONTO, ONTARIO, CANADA
DECEMBER 31, 1998
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
17
<PAGE>
PRICEWATERHOUSECOOPERS
- --------------------------------------------------------------------------------
PricewaterhouseCoopers LLP
Chartered Accountants
5700 Yonge Street
February 5, 1999 Suite 1900
North York Ontario
Canada M2M 4K7
Telephone +1 (416) 218 1500
Facsimile +1 (416) 218 1499
Auditors' Report
To the Shareholders of
WaveRider Communications Inc.
We have audited the accompanying consolidated balance sheet of WaveRider
Communications Inc. as at December 31, 1998, and the related consolidated
statements of loss, cash flows and shareholders' equity for the year then ended.
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. As described in note 4 , the consolidated financial statements as
of December 31, 1997 have been restated. The restated 1997 consolidated
financial statements were audited by other auditors whose revised report dated
March 20, 1998 (except for note 4 which is as of March 22, 1999) expressed an
unqualified opinion on those statements. The other auditors' report included an
explanatory paragraph that described the going concern issue described in note 1
to the consolidated financial statements.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about 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 provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of WaveRider
Communications Inc. as at December 31, 1998, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles in the United States of America. The accompanying
consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the consolidated
financial statements, the Company has incurred a significant operating loss for
the year and has a deficit as at the end of the year, which raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ PricewaterhouseCoopers LLP
Chartered Accountants
PricewaterrhouseCoopers LLP is a Canadian member firm of PricewaterhouseCoopers
International Limited, an English company limited by guarantee.
18
<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
March 22, 1999, Note 4. Prior Period Adjustment
<TABLE>
<CAPTION>
<S> <C>
Member of the American Institute of Certified Public Accountants 5975 Greenwood Plaza
Member of the Private Companies Practice Section Boulevard, Suite 140
Member of the SEC Practice Section Greenwood Village, Colorado, 80111
(303) 694-2727
Fax (303) 694-3172
</TABLE>
19
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(in U.S. dollars)
<TABLE>
<CAPTION>
December 31
1998 1997
[Note 4]
ASSETS
Current
<S> <C> <C>
Cash $ 3,047,257 $ 437,746
Accounts receivable [Note 6] 71,257 57,045
Prepaid expenses 26,730 9,387
Inventory [Note 7] 150,494 19,656
3,295,738 523,834
Fixed Assets [Note 8] 808,531 340,599
Goodwill [Note 9] 42,565 67,728
-------------------------------
$ 4,146,834 $ 932,161
===============================
LIABILITIES
Current
Accounts payable and accrued liabilities [Note 10] $ 942,192 $ 258,087
Deferred revenue 39,558 24,155
Current portion of obligation under capital lease [Note 11] 54,161 -
-------------------------------
1,035,911 282,242
Obligation under capital lease [Note 11] 12,555 -
-------------------------------
1,048,466 282,242
-------------------------------
SHAREHOLDERS' EQUITY
Share Capital 10,849,376 4,506,289
Other equity 1,503,782 128,637
Deficit accumulated during the development stage (9,254,790) (3,985,007)
-----------------------------
3,098,368 649,919
-------------------------------
$ 4,146,834 $ 932,161
===============================
Commitments (Note 11)
Approved by the Board Director Director
</TABLE>
20
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF LOSS
(in U.S. dollars)
<TABLE>
<CAPTION>
From Inception
Year ended December 31 on August 6, 1987
1998 1997 to December 31, 1998
REVENUE
<S> <C> <C>
Product sales $ 41,133 $ - $ 41,133
Internet sales 164,749 77,459 242,208
Interest and other 49,105 - 72,673
---------------------------------------------------
254,987 77,459 356,014
COST OF PRODUCT AND INTERNET SALES 75,467 21,798 97,265
---------------------------------------------------
GROSS MARGIN 179,520 55,661 258,749
---------------------------------------------------
EXPENSES
Sales, general and administration 2,807,181 962,346 6,236,739
Research and development 1,814,617 405,705 2,306,020
Depreciation and amortization 35,240 12,570 115,667
---------------------------------------------------
4,657,038 1,380,621 8,658,426
---------------------------------------------------
NET LOSS (4,477,518) (1,324,960) (8,399,677)
====================================================
BASIC AND FULLY DILUTED LOSS PER SHARE $ (0.18) $ (0.11) $ (1.92)
====================================================
[Note 16]
Weighted Average Number of Common Shares 29,485,320 12,299,522 4,826,858
===================================================
</TABLE>
21
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in U.S. dollars)
<TABLE>
<CAPTION>
From Inception
Year ended December 31 on August 6, 1987
1998 1997 to December 31,1998
[Note 4]
OPERATIONS
<S> <C> <C> <C>
Net loss $ (4,477,518) $ (1,324,960) $ (8,399,677)
Items not involving cash
Depreciation and amortization 304,347 77,964 450,168
Loss on sale of equipment - 13,855 91,616
Options issued to consultants 341,809 289,830 631,639
Warrants issued on financing 313,325 - 313,325
Net changes in non-cash working capital items [Note 13] 560,144 17,930 688,143
---------------------------------------------------
(2,957,893) (925,381) (6,224,786)
---------------------------------------------------
INVESTING
Acquisition of fixed assets (612,184) (380,320) (1,156,830)
Purchase of Internet service business - (38,851) (38,851)
---------------------------------------------------
(612,184) (419,171) (1,195,681)
---------------------------------------------------
FINANCING
Proceeds from sale of shares (net of issue fees) 6,350,833 1,780,489 10,633,081
Dividends on preferred shares (80,000) - (80,000)
Loans from affiliates - - 2,657
Payments on capital lease obligations (68,216) - (64,985)
---------------------------------------------------
6,202,617 1,780,489 10,490,753
---------------------------------------------------
Effect of exchange rate changes on cash (23,029) - (23,029)
---------------------------------------------------
Increase in cash 2,609,511 435,937 3,047,257
Cash, beginning of period 437,746 1,809 -
---------------------------------------------------
CASH , end of period 3,047,257 437,746 3,047,257
===================================================
</TABLE>
22
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in U.S. dollars)
<TABLE>
<CAPTION>
Additional
Common Shares Preferred Shares Paid-In Share
Number Par Value Number Par Value Capital Capital
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuances ......... 4,000,000 4,000 6,000 10,000
Net income --
December 31, 1987 . 4,000,000 4,000 -- -- 6,000 10,000
Issuances ......... 2,780,000 2,780 4,170 6,950
Net loss .......... --
December 31, 1988 . 6,780,000 6,780 -- -- 10,170 16,950
Issuances ......... 2,008,000 2,008 19,618 21,626
Net loss .......... --
December 31, 1989 . 8,788,000 8,788 -- -- 29,788 38,576
Adjustment to
offeringcosts ..... (10,500) (10,500)
Net loss .......... --
December 31, 1990,
1991 & 1992 ....... 8,788,000 8,788 -- -- 19,288 28,076
Reverse stock split (8,700,120) (8,700) 8,700 --
Issuances ......... 1,200,000 1,200 6,300 7,500
Share subscriptions --
Net loss .......... --
December 31, 1993 . 1,287,880 1,288 -- -- 34,288 35,576
Issuances ......... 3,218,181 3,218 1,764,424 1,767,642
Subscriptions
returned .......... --
Net loss .......... --
December 31, 1994 . 4,506,061 4,506 -- -- 1,798,712 1,803,218
Issuances ......... 100,000 100 199,900 200,000
Net loss .......... --
December 31, 1995 . 4,606,061 4,606 -- -- 1,998,612 2,003,218
Shares cancelled .. (50,002) (50) (50)
Issuances ......... 628,500 629 497,962 498,591
Net loss .......... --
December 31, 1996 . 5,184,559 5,185 2,496,574 2,501,759
Issuances ......... 2,693,000 2,693 4,298,125 4,298 299,249 306,240
(Note 12B(i),
(ii), (iv),
(viii))
Conversions &
exercises ......... 19,040,822 19,041 (298,125) (298) 1,683,547 1,702,290
(Note 12B (i),
(ii), 12E)
Options to
non-employees
(note 12E) ........ --
Net loss .......... --
Shares in
escrow
(note 12B(iv)) .... (4,000,000) (4,000) (4,000)
December 31, 1997 . 26,918,381 26,919 -- -- 4,479,370 4,506,289
Issuances ......... 1,670,360 1,670 800,000 800 4,787,697 4,790,167
(Note 12B(iii),
(v), (vi), (vii),
12E)Conversions &
exercises.......... 12,912,740 12,912 1,550,008 1,562,920
(Note 12B (ii),
(iii), (iv), 12E)
Options to
non-employees
(note 12E)......... --
Dividends on
preferred
shares ............ --
Net loss .......... --
Shares in escrow
(note 12B(iv)) ....(10,000,000) (10,000) (10,000)
December 31, 1998 . 31,501,481 31,501 800,000 800 10,817,075 10,849,376
</TABLE>
<TABLE>
<CAPTION>
Warrants Other
Number Amount Other equity Deficit Total
----------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuances ......... 56 10,000
Net income -- 56 56
December 31, 1987 . -- -- -- -- 56 10,056
Issuances ......... -- 6,950
Net loss .......... -- (5,380) (5,380)
December 31, 1988 . -- -- -- -- (5,324) 11,626
Issuances ......... -- 21,626
Net loss .......... -- (5,112) (5,112)
December 31, 1989 . -- -- -- -- (10,436) 28,140
Adjustment to
offeringcosts ..... -- (10,500)
Net loss .......... -- (17,640) (17,640)
December 31, 1990,
1991 & 1992 ....... -- -- -- -- (28,076) --
Reverse stock split --
Issuances ......... -- 7,500
Share subscriptions 100,000 100,000 100,000
Net loss .......... -- (177,686) (177,686)
December 31, 1993 . -- -- 100,000 100,000 (205,762) (70,186)
Issuances ......... -- 1,767,642
Subscriptions
returned .......... (100,000) (100,000) (100,000)
Net loss .......... -- (1,215,576) (1,215,576)
December 31, 1994 . -- -- -- -- (1,421,338) 381,880
Issuances ......... -- 200,000
Net loss .......... -- (1,054,085) (1,054,085)
December 31, 1995 . -- -- -- -- (2,475,423) (472,205)
Shares cancelled .. -- (50)
Issuances ......... -- 498,591
Net loss .......... -- (121,776) (121,776)
December 31, 1996 . -- -- -- -- (2,597,199) (95,440)
Issuances ......... 16,083,750 101,890 101,890 (62,848) 345,282
(Note 12B(i),
(ii), (iv),
(viii))
Conversions &
exercises .........(14,592,572) (91,411) (171,672) (263,083) 1,439,207
(Note 12B (i),
(ii), 12E)
Options to
non-employees
(note 12E) ........ 289,830 289,830 289,830
Net loss .......... -- (1,324,960) (1,324,960)
Shares in
escrow
(note 12B(iv)) .... -- (4,000)
December 31, 1997 . 1,491,178 10,479 118,158 128,637 (3,985,007) 649,919
Issuances ......... 2,850,000 1,387,004 1,387,004 (712,265) 5,464,906
(Note 12B(iii),
(v), (vi), (vii),
12E)Conversions &
exercises.......... (1,961,178) (100,049) (253,619) (353,668) 1,209,252
(Note 12B (ii),
(iii), (iv), 12E)
Options to
non-employees
(note 12E)......... 341,809 341,809 341,809
Dividends on
preferred
shares ............ -- (80,000) (80,000)
Net loss .......... -- (4,477,518) (4,477,518)
Shares in escrow
(note 12B(iv)) .... -- (10,000)
December 31, 1998 . 2,380,000 1,297,434 206,348 1,503,782 (9,254,790) 3,098,368
</TABLE>
23
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Years ended December 31, 1998, 1997 and from inception on August 6, 1987 to
December 31, 1998
1. GOING CONCERN
These financial statements are prepared on a going-concern basis which assumes
that the Company will realize its assets and discharge its liabilities in the
normal course of business. The Company incurred an operating loss of $ 4,477,518
for the year ended December 31, 1998 (1997 - $1,324,960) and reported a deficit
at that date of $9,254,790 (1997 - $3,985,007). In addition, the Company's costs
are fixed in the short term and its products not yet proven to be commercially
viable, resulting in the projected depletion of cash resources by August 1999
based on current financial performance and cash available as at December 31,
1998. The ability of the Company to continue as a going concern is dependent
upon obtaining adequate sources of financing and developing and maintaining
profitable operations. Should the Company be unable to continue as a going
concern, assets and liabilities would require restatement on a liquidation basis
which would differ materially from the going concern basis.
Management has pursued various financing alternatives to provide the funding
necessary to meet the Company's plans; specifically, the private placement
funding referred to in Note 12 B(v). Nevertheless, there are no assurances that
these funding arrangements will be successful or that, together with the
projected cash flow from the operations of the Company, they will be sufficient
to
2. NATURE OF OPERATIONS
WaveRider Communications Inc. (formerly Channel i Inc.), incorporated in 1987
under the laws of the state of Nevada, is a public company traded on the OTC
Bulletin Board using the trading symbol WAVC.
The Company develops and markets wireless data communications products focusing
on Internet connectivity. Its first product has received Industry Canada
approval for sale in Canada during the fourth quarter of 1998 and, subsequent to
the year end, received FCC approval for sale in the United States.
The Company's primary market is Internet Service Providers (ISP's) and
telecommunications companies supplying high speed wireless internet connectivity
to their customers. A significant secondary market is that of Value Added
Resellers, either directly or through distribution, to allow them to supply
their customers with wireless connectivity for local area networks.
3. 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, WaveRider Communications (Canada) Inc. and Jetstream Internet
Services Inc., both of which are British Columbia companies with operations in
British Columbia, Canada.
The Company's consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States of America.
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.
Revenue recognition and deferred revenue - Revenue from the sale of products is
recognized at the time of shipment to the customer net of discounts and
allowances for estimated future returns.
Fees billed for internet services on long-term service contracts are recognized
over the period of the contracts.
24
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Years ended December 31, 1998, 1997 and from inception on August 6, 1987 to
December 31, 1998
Financial instruments - Financial instruments are initially recorded at
historical cost. If subsequent circumstances indicate that a decline in the fair
value of a financial asset is other than temporary, the financial asset is
written down to its fair value. Unless otherwise indicated, the fair values of
financial instruments approximate their recorded amounts.
The fair values of cash on deposit with commercial banks, accounts receivable
and accounts payable and accrued liabilities approximate recorded amounts
because of the short period to receipt or payment of cash.
The Company is subject to foreign currency risk on its Canadian business
activities.
Inventory - Inventory is stated at the lower of cost and net realizable value.
Cost is determined on the weighted average cost basis.
Fixed assets - Fixed assets are recorded at cost and depreciated over the
estimated lives of the assets, commencing in the year the assets are put into
use, as follows:
- Computer software - 50% - declining balance method
- Computer equipment - 30% - declining balance method
- Lab equipment - 25% - declining balance method
- Lab equipment under capital lease - 25% - declining balance method
- Equipment and fixtures - 20% - declining balance method
- Modem housing mold - 100% in year of purchase
- Leasehold improvements - 2 years - straight line method
- Station site development - 100% in year of purchase
Foreign currency translation - The Company's functional currency is the United
States dollar. Monetary assets and liabilities denominated in foreign currencies
are translated into United States dollars at the exchange rate prevailing at the
balance sheet date. Other assets, liabilities and operating items are translated
at exchange rates prevailing at the respective transaction dates. Resulting
translation adjustments are included in the consolidated statement of loss.
Income taxes - Income taxes are accounted for in accordance with the Statement
of Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income
Taxes". Under this method, deferred tax assets and liabilities are determined
based on differences between the financial reporting and income tax bases of
assets and liabilities and are measured using the tax rates and laws currently
enacted. Valuation allowances are established, when necessary, to reduce
deferred tax assets when realization is less likely than not.
Stock options - The Company applies SFAS 123, together with APB 25 as permitted
under SFAS 123, in accounting for its stock option plan. Accordingly, the
Company uses the intrinsic value method to measure the costs associated with the
granting of stock options to employees and this cost is accounted for as
compensation expense in the consolidated statement of loss over the option
vesting period. In accordance with SFAS 123, the Company discloses the fair
values of stock options issued to employees. Stock options issued to outside
consultants are valued at their fair value and charged to the consolidated
statement of loss in the period in which the services are rendered.
Goodwill - Goodwill, representing the excess of cost over fair value of the net
assets and liabilities of Jetstream Internet Services Inc. acquired, is
amortized using the straight-line method over a period of three years. The value
of goodwill is regularly evaluated and, in the event that the carrying amount
exceeds the related estimated net cash flows on a non discounted basis, goodwill
is written down.
Research and development costs - Research and development costs are expensed as
incurred.
25
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Years ended December 31, 1998, 1997 and from inception on August 6, 1987 to
December 31, 1998
4. PRIOR PERIOD ADJUSTMENTS
During the year ended December 31, 1998, it was determined that the Company had
not accounted for stock options issued for services rendered by outside
consultants, nor for the purchase of Major Wireless Communications Inc., as
required by generally accepted accounting principles. As a result, the 1997
consolidated financial statements have been restated to include the fair value
of options issued to consultants. These changes, which had no net impact on the
Company's cash flow results, have affected the prior reported financial results
as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1997 Inception to Dec. 31, 1997
--------------------------------------------------------------------
Restated Originally Restated Originally
Information Reported Information Reported
<S> <C> <C> <C> <C>
Sales, general and administration $ 962,346 $ 702,492 $ 3,429,558 $ 3,169,704
Research and development 405,705 379,729 491,403 465,427
Depreciation and amortization 12,570 12,570 80,427 80,427
-------------------------------------------------------------------
TOTAL EXPENSES $ 1,380,621 $ 1,094,791 $ 4,001,388 $ 3,715,558
=====================================================================
NET LOSS $ (1,324,960) $ (1,039,130) $ (3,922,159) $ (3,636,329)
=====================================================================
BASIC AND FULLY DILUTED
LOSS PER SHARE $ (0.11) $ (0.08) $ (1.62) $ (1.48)
=====================================================================
SHAREHOLDERS' EQUITY
Share Capital $ 4,506,289 $ 4,286,248
Other Equity 128,637 -
Deficit accumulated during
the development stage (3,985,007) (3,636,329)
$ 649,919 $ 649,919
=============================
</TABLE>
In addition, note disclosure has been modified for the 1997 comparative figures
to conform with generally accepted accounting principles.
5. ACQUISITION OF SUBSIDIARIES
WaveRider Communications (Canada) Inc. - On May 13, 1997, the Company acquired
all of the shares of WaveRider Communications (Canada) Inc. (formerly Major
Wireless Communications Inc.) in exchange for the issue of 4,000,000 Series B
voting convertible preferred shares having a par value of $0.001 per share. The
Series B preferred shares were convertible into common shares at a ratio of 10
common shares for each preferred share.
On April 15, 1998, the Company completed an agreement with the holders of the
Series B preferred shares to reduce their ratio to 2.5 common share for each
preferred share. At the same time, all Series B preferred shares were converted
to common shares. As specified in the original share exchange agreement, the
common shares issued upon conversion of the Series B preferred shares are held
in escrow and will be released upon achievement of certain levels of
performance. In the event that all the shares are not released before May 13,
2002, the remaining escrowed 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.
26
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Years ended December 31, 1998, 1997 and from inception on August 6, 1987 to
December 31, 1998
The shares will be considered to be issued when the respective performance
events have occurred and the value of the shares will be measured and recorded
at that date.
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 was accounted for using the purchase method of
accounting with the purchase price assigned as follows:
Current assets $ 9,869
Current liabilities (76,989)
Equipment 27,315
Goodwill 78,656
-------------
Cash consideration $ 38,851
=============
6. ACCOUNTS RECEIVABLE
1998 1997
-------------------------------
Accounts receivable - trade $ 52,281 $ 66,605
Other receivables 22,237 46,449
(3,261) (56,009)
-------------------------------
$ 71,257 $ 57,045
===============================
7. INVENTORIES
1998 1997
-------------------------------
Finished products $ 128,740 $ -
Raw Materials 21,754 19,656
-------------------------------
$ 150,494 $ 19,656
==============================
8. FIXED ASSETS
<TABLE>
<CAPTION>
Accumulated Net Book Accumulated Net Book
Depreciation/ Value Depreciation/ Value
Cost Amortization 1998 Cost Amortization 1997
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computer software $ 326,079 $ 139,187 $ 186,892 $ 136,214 $ 34,046 $ 102,168
Computer equipment 259,405 53,597 205,808 88,928 11,292 77,636
Lab equipment and tools 235,111 41,356 193,755 80,762 10,095 70,667
Lab equipment under capital lease 134,932 15,145 119,787 - - -
Equipment and fixtures 99,755 14,335 85,420 25,712 2,334 23,378
Modem housing mold 47,891 47,891 - 47,891 - 47,891
Leasehold improvements 40,242 23,373 16,869 16,835 7,011 9,824
Station site development 14,718 14,718 - 11,293 2,258 9,035
-----------------------------------------------------------------------------
$ 1,158,133 $ 349,602 $ 808,531 $ 407,635 $ 67,036 $ 340,599
==============================================================================
</TABLE>
27
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Years ended December 31, 1998, 1997 and from inception on August 6, 1987 to
December 31, 1998
9. GOODWILL
1998 1997
----------------------------------
Cost $ 78,656 $ 78,656
Less: accumulated amortization (36,091) (10,928)
----------------------------------
$ 42,565 $ 67,728
==================================
10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
1998 1997
----------------------------------
Accounts payable - trade $ 121,339 $ 83,905
Accrued liabilities - trade 332,191 174,182
Accrued salaries and benefits 270,243 -
Accrued cost of private share placement 218,419 -
----------------------------------
$ 942,192 $ 258,087
==================================
11. COMMITMENTS
Obligation under Capital Lease
Gross Lease commitments:
1999 $ 63,517
2000 13,640
------
77,157
Less: imputed interest (10,441)
66,716
Less: current portion (54,161)
Long-term obligation under capital lease $ 12,555
========
Operating Leases
1999 $ 149,450
2000 44,592
2001 3,490
28
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Years ended December 31, 1998, 1997 and from inception on August 6, 1987 to
December 31, 1998
12. SHARE CAPITAL
A Authorized share capital
Preferred shares issuable in series, par value of $0.001 - 5,000,000 shares
Common shares, par value of $0.001 - 100,000,000 shares
B Issued share capital
i) Common share units - On February 3, 1997, the Company issued 1,785,000
common share units at a price of $0.05 per unit for cash proceeds of
$89,250. Each unit consisted of one common share and four Series A
warrants. Based on the fair value of the underlying instruments within the
common share unit, $50,208 of the total proceeds was allocated to common
shares and the balance of $39,042 was allocated to the Series A warrants.
Each Series A warrant entitled the holder to purchase one common share at
$0.0625 per share on or before August 3, 1997. In July and August 1997, all
the warrants were exercised for cash proceeds of $446,250.
ii) Series A preferred share units - On February 6, 1997, the Company issued
298,125 preferred share units at a price of $0.65 per unit for cash
proceeds of $193,782. Each unit consisted of one Series A voting preferred
share, convertible immediately into 10 common shares for no additional
consideration, and three warrants (Series B, C and D). Based on the fair
value of the underlying instruments within the preferred share unit,
$130,934 of the total proceeds was allocated to preferred shares and
$26,239, $20,426 and $16,183 was allocated to the Series B warrants, Series
C warrants and Series D warrants, respectively. As the preferred shares
were immediately convertible into common shares, the $62,848 difference
between the proceeds allocated to preferred shares and the fair value of
the underlying common shares has been recorded as a dividend in 1997. Each
warrant entitled the holder to purchase one common share at the following
respective exercise prices of $0.085 (Series B), $0.105 (Series C) and
$0.125 (Series D) on or before February 6, 1998.
Immediately after the units were sold, the preferred shares were converted
into 2,981,250 common shares. During the 3rd quarter of 1997, 2,238,750
warrants were exercised for cash proceeds of $235,068. During the 4th
quarter of 1997, 5,213,822 warrants were exercised for cash proceeds of
$547,452. During the 1st quarter of 1998, the remainder of the warrants,
1,491,178, were exercised for cash proceeds of $156,573.
iii) Common share units - On February 16, 1998, the Company issued 500,000
common share units at a price of $1.00 per unit for cash proceeds of
$500,000. Each unit consisted of one common share and a Series E warrant.
Based on the fair value of the underlying instruments within the common
share unit, $404,713 of the total proceeds was allocated to common shares
and the balance of $95,287 was allocated to the Series E warrants. The
Series E warrants entitled the holder to purchase one common share at $1.25
per share on or before February 16, 1999.
During the 2nd quarter of 1998, 410,000 of the warrants were exercised for
cash proceeds of $512,500. During the 4th quarter of 1998, 60,000 warrants
were exercised for cash proceeds of $75,000. The remaining 30,000 were
exercised subsequent to December 31, 1998 for cash proceeds of $37,500.
iv) Series B preferred shares - 4,000,000 Series B preferred shares were issued
upon the acquisition of Major Wireless Communication Inc. (See note 5). The
shares were voting and convertible into common shares at a ratio of ten
common shares for each preferred share. Each preferred share entitled the
holder to 10 votes.
The shares were held in escrow to be released upon occurrence of certain
performance related events. If the events had not occurred by May 13, 2002,
the remaining shares held in escrow would be cancelled. On April 15, 1998,
the Company and the Series B preferred shareholders agreed to amend the
terms of the preferred shares. The conversion ratio was amended to a ratio
of 2.5 common shares for each preferred share. On the same date, the
preferred shares were converted into 10,000,000 common shares. These common
shares are held in escrow and will be released upon the occurrence of
certain performance related events. If the specified criteria have not been
met by May 13, 2002, the remaining common shares held in escrow will be
cancelled. The Board of Directors may extend the escrow period by up to two
years. No shares have been released as at December 31, 1998.
29
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Years ended December 31, 1998, 1997 and from inception on August 6, 1987 to
December 31, 1998
As the shares are held in escrow, the number of shares outstanding and the
par value ascribed has been deducted from the respective share capital
accounts. The shares will be considered to be issued when the respective
performance events have occurred and the value of the shares will be
measured and recorded at that date.
v) Common share purchase agreement - Under a Common Share Purchase Agreement
dated December 29, 1998, the Company entered into an arrangement to sell up
to an aggregate amount of $10,000,000 of common stock in three tranches and
to issue four groups of warrants. On December 29th, 1998 the Company issued
1,167,860 common shares in the First Tranche at $2.57 per shares for cash
proceeds of $3,000,000.
Pursuant to the agreement, the Company is required to issue additional
shares to the investors if the average bid price for the common stock for
30 days prior to certain future dates ("Reset Price") is below the initial
purchase price multiplied by 117.5 per cent. The number of shares to be
issued will be based on the following formula: ((Number of shares subject
to repricing) X (Initial Purchase Price X 117.5% - Reset Price)) / Reset
Price.
The Reset Price will be determined for certain blocks of shares within a
specified number of days from the date that the registration of the shares
issued is effective under the Securities Act of 1933 as follows: 34% within
30 days, 33% within 60 days and 33% within 90 days.
Under the agreement, the Company has the right, but not the obligation to
issue additional shares in a Second Tranche for up to $3,000,000 and a
Third Tranche for up to $4,000,000. The number of shares to be issued will
be based on the average bid price for the company's common stock for five
trading days before the respective closing dates. The Second Tranche option
is exercisable after the earlier of June 12, 1999 or 62 days after the
effective date of the registration of the initial shares. The Third Tranche
option is exercisable after the earlier of September 10, 1999 or two days
after the final reset period for the shares issued in the Second Tranche.
The company's rights to exercise the option are subject to a number of
conditions including that the average bid price for 20 trading days prior
to each closing cannot be below $1.25, certain trading volumes and no
change in control. Shares issued under these options will be subject to
price reset provisions similar to those provided under the First Tranche
for a period of 90 days from the respective closing date of each Tranche.
As part of the agreement, the Company issued to the investors four groups
of warrants as follows: 225,000 with an exercise price of $2.00, 225,000
with an exercise price of $2.61, 225,000 with an exercise price of $3.00
and 225,000 with and exercise price of $4.00. Each warrant entitles the
holder to acquire one common share at the specified exercise price. The
warrants expire on December 29, 2003.
Costs of the transaction include fees of $298,419 and issued 150,000
warrants with a fair value of $103,686. Each warrant entitles the holder to
acquire one common share at an exercise price of $3.00 per share. The
warrants expire on December 29, 2003. The Company has committed to pay
additional fees equaling 7% of the proceeds received under the Second and
Third Tranches.
The initial proceeds less costs of the First Tranche have been allocated
between common stock and warrants, based on the respective relative fair
values, as follows:
Common stock $2,136,846
$2.00 warrant 124,980
$2.61 warrant 117,662
$3.00 warrant 113,607
$4.00 warrant 104,800
30
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Years ended December 31, 1998, 1997 and from inception on August 6, 1987 to
December 31, 1998
vi) Series C Preferred share units - On June 11, 1998, the Company issued
800,000 preferred share units at a price of $2.50 per unit for cash
proceeds of $2,000,000, less costs of $50,000. Each unit consisted of an 8%
voting, convertible preferred share and one Series F warrant. Each
preferred share may be converted at the option of the holder into one
common share for no additional consideration on or before April 30, 2000.
Based upon the fair value of the underlying instruments within the
preferred share unit, $1,536,343 of the total proceeds, net of costs, was
allocated to preferred shares and $413,657 was allocated to the Series F
warrants. As the preferred shares were immediately convertible into common
shares, the $712,265 difference between the proceeds allocated to preferred
shares and the fair value of the underlying common shares has been recorded
as a dividend in 1998.
Each Series F warrant entitles the holder to purchase one common share at
the exercise price of $2.50 on or before June 11, 2000.
vii) Series G Warrants - As a commitment fee for the right to issue up to
$2,000,000 in convertible debentures to certain investors, the Company
issued the investors warrants to purchase 500,000 common shares at and
exercise price of $1.50 per share. The warrants expire on December 15,
2003. The warrants have been recorded at their fair value of $313,325 with
the costs charged to the consolidated statement of loss in 1998. The
Company terminated the debenture agreement on January 8, 1999 without
drawing any funds.
viii)Issued for services rendered - In the first and second quarter of 1997,
the Company issued 908,000 common shares to individuals for services
rendered. The fair value of the service, in the amount of $58,250, has been
charged to the consolidated statement of loss in 1997.
C Warrants
Number
Issued in 1997 [Note 12B(i) & (ii)] 16,083,750
Exercised [Note 12B(i) &( ii)] (14,592,572)
----------
Balance at December 31, 1997 1,491,178
----------
Issued in 1998 [Note 12B(iii),(v), (vi) & (vii)] 2,850,000
Exercised [Note 12B(ii) & (iii)] (1,961,178)
----------
Balance at December 31, 1998 2,380,000
----------
31
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Years ended December 31, 1998, 1997 and from inception on August 6, 1987 to
December 31, 1998
The Company has several series of warrants outstanding at December 31, 1998
as follows:
Number Weighted-Average
Exercise Prices Outstanding Remaining Life
$1.25 30,000 2 months
$1.50 500,000 60 months
$2.00 225,000 60 months
$2.50 800,000 18 months
$2.61 225,000 60 months
$3.00 375,000 60 months
$4.00 225,000 60 months
------------------------------
------------------------------
$1.50 - $4.00 2,380,000
------------------------------
D Other Equity
1998 1997
---------------------------------
Stock options to non-employees 206,348 118,158
Warrants 1,297,434 10,479
---------------------------------
1,503,782 128,637
=================================
E Employee Stock Option Plans
1994 Compensatory Stock Option Plan-
In January 1997, the Company entered into employment and consulting agreements
with various parties. Under these agreements, the parties were granted options
to purchase 967,000 shares of the Company's common stock at $0.0625 per share.
93,200 of these options were exercised in the third quarter of 1997 with the
balance being exercised in the fourth quarter for total cash proceeds of
$60,437. This plan was terminated in 1997.
Employee Stock Option (1997) Plan -
During 1997, the Company authorized an Employee Stock Option Plan for a total of
5,000,000 common shares that may be awarded to employees and certain
consultants. During 1998, the Company amended the plan to authorize an
additional 1,250,000 common shares. Each option under the incentive plan allows
for the purchase of one common share and expires not later than three years from
the date granted. The options are subject to various vesting and performance
requirements as outlined in the plan and any unvested options may be cancelled
if employment is terminated. Generally, for employees the options vest at 5% per
complete month from date of award and for non-employees are earned out over
their contract period.
32
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Years ended December 31, 1998, 1997 and from inception on August 6, 1987 to
December 31, 1998
Stock options to employees, directors and consultants are summarized as follows:
<TABLE>
<CAPTION>
Weighted
Average
Granted to employees and directors Number Exercisable exercise price
<S> <C> <C> <C>
Granted to employees & directors at $0.25 - $0.70 2,083,540 0.48
Cancelled on termination (265,288) 0.25
- ------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 1,818,252 262,466 0.48
Granted to employees & directors @ $0.94 - $3.44 2,709,400 1.32
Cancelled on termination (140,080) 0.99
Exercised (372,062) 0.46
- ------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 4,015,510 2,596,641 0.92
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Weighted
Average
Granted to consultants Number Exercisable exercise price
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Granted to consultants at $0.25 - $0.50 2,560,000 0.44
Exercised (500,000) 0.30
- ------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 2,060,000 390,000 0.47
Granted to consultants @ $0.98 - $1.82 95,000 1.22
Cancelled (890,465) 0.51
Exercised (579,500) 0.49
- ------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 685,035 189,125 0.51
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Number Weighted average Number Weighted average
Range of Outstanding at exercise price of Weighted average Exercisable at Exercise price
Exercise December 31 outstanding remaining life December 31, of exercisable
Prices 1998 options (months) 1998 options
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.25 - $0.50 967,775 $ 0.39 19 435,918 $ 0.35
$0.56 1,000,000 $ 0.56 23 - -
$0.63 - $1.15 2,044,350 $ 1.06 25 1,912,350 $ 1.06
$1.24 - $1.91 430,500 $ 1.66 31 359,900 $ 1.68
$2.13 - $3.44 257,920 $ 2.54 28 77,598 $ 2.62
</TABLE>
33
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Years ended December 31, 1998, 1997 and from inception on August 6, 1987 to
December 31, 1998
The fair value of each stock option granted to consultants was estimated on the
date the consultant earned the option using the Black-Scholes option-pricing
model. The following weighted average assumptions were used in the model: nil
annual dividends (1997 - nil), expected volatility of 90% (1997 - 90%),
risk-free interest of 5.47% (1997 - 5.76%) and expected life of 3 years (1997 -
3 years). The weighted average fair value of the stock options granted in 1998
was $0.71 (1997 - $0.49). The resulting values have been charged to the
consolidated statement of loss over the contract period of the consultant. The
amount charged to the consolidated statement of loss in 1998 was $341,809 (1997
- - $289,830)
For disclosure purposes, the fair value of each stock option granted to
employees was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used for
stock options granted in 1998: nil annual dividends (1997 - nil), expected
volatility of 90% (1997 - 90%), risk-free interest of 5.36% (1997 - 5.77%) and
expected life of 2 years (1997 - 2 years). The weighted average fair value of
the stock options granted in 1998 was $0.53 (1997 - $0.15)
Under the above model, the total value of stock options granted to employees and
directors in 1998 was $1,397,068 (1997 - $113,509), which would be amortized on
a pro forma basis over the option vesting period. Had the Company determined
compensation cost for these plans in accordance with SFAS No. 123, the Company's
pro forma loss and pro forma loss per share would have been $5,662,881 and $0.20
(1997 - $1,344,584 and $0.11)
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock option plans have characteristics significantly different
from those of traded options, and because change in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
Shareholder option agreement -
In November 1997, certain shareholders agreed to provide the Company's President
with a private option to purchase 1,000,000 common shares directly from the
shareholders. These options vested at the rate of 150,000 options per month of
employment.
For disclosure purposes, the fair value of this private option was estimated on
the date of grant using the Black-Scholes option-pricing model with the
following assumptions: nil annual dividends, expected volatility of 90%,
risk-free interest of 5.71% and expected life of 2 years. The fair value of the
stock options granted was $0.28. Had the Company determined compensation cost
for these options in accordance with SFAS No. 123, the Company's 1998 pro forma
loss and pro forma loss per share would have been increased by $238,000 (1997-
$42,000) and $0.01 (1997 - $0.01), respectively.
F. Employee Stock Compensation (1997) Plan - During 1997, the Company authorized
an Employee Stock Compensation Plan for a total of 2,500,000 common shares that
may be awarded to employees and certain consultants. During 1998, the Company
authorized the issuance of 2,500 shares pursuant to the plan. In addition,
compensation costs included in accrued liabilities at December 31, 1998, in the
amount of $155,038, will be paid in common shares at the fair value on the date
of issue.
34
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Years ended December 31, 1998, 1997 and from inception on August 6, 1987 to
December 31, 1998
13. NET CHANGES IN NON-CASH WORKING CAPITAL ITEMS RELATING TO OPERATIONS
1998 1997
Accounts receivable $ (10,932) $ (47,176)
Prepaid and other assets (18,602) 12,802
Inventory (136,664) (19,656)
Accounts payable and accrued liabilities 708,658 47,805
Deferred revenue 17,684 24,155
--------------------------------
$ 560,144 $ 17,930
================================
14. RELATED PARTY TRANSACTIONS
During the year, a total of $ 117,767 was paid or payable to directors and
officers or to companies related to them for management and administration
services.
15. INCOME TAXES
The Company's income tax provision has been determined as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Net loss for the year $ 4,477,518 $ 1,328,960
=================================
Income taxes at 42.54% $ 1,904,740 $ 565,340
Decrease resulting from permanent non-tax
deductible expense (144,000) -
Tax benefit of losses not recognized in the accounts,
included in valuation allowance (1,760,740) (565,340)
---------------------------------
$ - $ -
=================================
</TABLE>
At December 31, 1998, the Company had approximately $6,516,000 of non capital
losses available for income tax purposes, the tax benefit of which has not been
recorded in these accounts. These losses are available to reduce taxable income
in future and expire as follows:
2004 $ 769,000
2005 4,339,000
2009 847,000
2010 316,000
2011 64,000
2012 181,000
----------------
$ 6,516,000
================
35
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Years ended December 31, 1998, 1997 and from inception on August 6, 1987 to
December 31, 1998
The deferred tax balances at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Unrealized foreign currency translation gains $ (85,100) $ (27,890)
Tax benefit of losses carried forward for income tax purposes 2,772,000 926,000
------------------------------------
2,686,900 898,110
Less: Valuation allowance (2,686,900) (898,110)
------------------------------------
$ - $ -
====================================
</TABLE>
16. LOSS PER SHARE
<TABLE>
<CAPTION>
For the year ended December 31, 1998
Loss Shares Per share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Net Loss $ 4,477,518 - -
Add: Dividends paid in year 80,000 - -
Convertible Preferred Shares [Note 12 B(vi)] 712,265 - -
Basic LPS
Loss attributable to common shareholders $5,269,783 29,485,320 $0.18
===============================================
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31, 1997
Loss Shares Per share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Net Loss $ 1,324,960 - -
Add: Dividends paid in year - - -
Convertible Preferred Shares [Note 12 B(ii)] 62,848 - -
-----------
Basic LPS
Loss attributable to common shareholders $1,387,808 12,299,522 $0.11
===============================================
</TABLE>
The warrants, options and convertible preferred shares outstanding at the end of
each year [see Note 12] have not been included in the loss per share calculation
as they are anti-dilutive. The shares held in escrow pertaining to the Major
Wireless transaction [Note 5] have not been included from the loss per share
calculation as they are contingently issuable shares.
36
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
Years ended December 31, 1998, 1997 and from inception on August 6, 1987 to
December 31, 1998
17. SEGMENTED INFORMATION
The Company's operates in two segments: wireless data communications and
internet services. Segmented information for JetStream Internet Services, which
operates as a standalone business, is provided below. All other amounts included
in the consolidated financial statements relate to the wireless data
communications segment.
Internet Services - JetStream Internet Services
1998 1997
REVENUE $ 164,749 $ 77,459
COST OF INTERNET SALES 62,022 21,798
-------------------------------
GROSS MARGIN 102,727 55,661
-------------------------------
EXPENSES
Sales, general and administration 85,656 55,685
Depreciation and amortization 35,240 12,570
-------------------------------
120,896 68,255
-------------------------------
NET LOSS $ (18,169) $ (12,594)
===============================
The total assets for the Internet Service segment was less than $50,000 in each
of the periods.
All revenues are generated from the Company's Canadian operations and all
long-lived assets are located in Canada.
18. COMPARATIVE FIGURES
Certain comparative amounts have been reclassified to correspond with the
current year's presentation.
37
<PAGE>
Signatures:
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized,
WaveRider Communications Inc.
Date: April 1, 1999 /s/ D. Bruce Sinclair
-------------------------------
D. Bruce Sinclair
President and Chief Executive Officer
/s/ T. Scott Worthington
-------------------------------
T. Scott Worthington
Chief Financial Officer.
