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, 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 ]
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TABLE OF CONTENTS
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PART I Page
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Item 1. Business 3
Item 2. Description of Property 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 7
Item 6. Management's Discussion and Analysis or Plan of Operation 8
Item 7. Financial Statements 10
Item 8. Changes in and Disagreements with Accountants on Accounting 10
and Financial Disclosure
PART III
Item 9. Directors and Executive Officers, Promoters and Control Persons, 11
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation 12
Item 11. Security Ownership of Certain Beneficial Owners and Management 13
Item 12. Certain Relationships and Related Transactions 13
PART IV
Item 13. Exhibits and Reports on Form 8-K 14
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Background
WaveRider Communications Inc. ("WaveRider" or the "Company" and
collectively referred to as we, us or our) was originally incorporated, under
the laws of the State of Nevada on August 6, 1987, as Athena Ventures, Inc. From
1987 until its takeover of Channel i PLC in November 1993, Athena Ventures had
no activities or operations. From November 1993 until May 1997, the Company
operated under the names Channel i Limited and Channel i Inc. and was in the
business of developing an interactive multimedia kiosk network to provide
consumers with convenient access to an array of products and services. Prior to
its takeover of Major Wireless Communications Inc. ("Major Wireless") (now
"WaveRider Communications (Canada) Inc.") in May 1997, the Company had become
dormant.
Major Wireless was organized in British Columbia, Canada, as a private
company in 1996 to address an existing and growing market need to provide
cost-effective, high-speed wireless Internet links. In May 1997, Major Wireless
consummated a business combination with Channel i Inc., pursuant to which
Channel i Inc. issued stock to the stockholders of Major Wireless, Major
Wireless became a subsidiary of the Company, and the Company changed its name to
WaveRider Communications Inc. In anticipation of this combination, the Company
completed the private placement of common and preferred share units for over
$1.5 million (US).
In July 1997, the Company incorporated a subsidiary, JetStream Internet
Services Inc., and subsequently acquired all of the assets of the local Internet
Service provider in Salmon Arm, British Columbia.
In November 1997, D. Bruce Sinclair was appointed President and Chief
Executive Officer. Since then the Company has hired Scott Worthington, Charles
Brown and James Chinnick as Vice Presidents of Finance, Marketing and
Engineering, respectively.
WaveRider's executive offices are currently located at 235 Yorkland Blvd,
Suite 1101, Toronto, Ontario, Canada M2J 4Y8. Our telephone number is (416)
502-3200 and our home page on the Internet is www.waverider.com.
Business of WaveRider Communications Inc.
WaveRider designs, develops, sells and supports customer driven wireless
information technology products. Our products are designed to facilitate
Personal Computer ("PC") and Local Area Network ("LAN") to Internet
communications by enabling the deployment of low cost high-speed wireless
networks. WaveRider's high-speed, highly secure products combine wireless and
Internet protocol ("IP") networking into a series of self contained devices. We
are currently developing two families of products, which will be our first
products. See "Products".
We believe our Wireless Internet Network ("WIN") solutions are
significantly faster and easier to implement than traditional hard-wired
communications networks of similar capacity. We also believe that, in the highly
competitive national and international markets, the ability to install reliable
network solutions quickly will give WaveRider a competitive edge over providers
of hardwired solutions. Our products should enable our customers to run
important corporate applications and communicate with their customers, suppliers
and business partners sooner than would be possible using more traditional
fibre-based facilities. Furthermore, in many areas of the world where the
communications networks lack the capacity and reliability required for Internet
connectivity, wireless solutions such as WaveRider's may prove to be the only
solution for data access. We think there is a significant market for wireless
access solutions in these regions.
Our technology makes use of unlicensed radio spectrum, and we expect will
enable WaveRider to offer solutions that provide high value and high margins to
customers in North American and international markets. We believe the use of
unlicensed spectrum will facilitate our introduction of new products on an
international basis by providing lower operating costs for our customers.
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Products
WaveRider is currently developing two families of products: the NCL and LMS
product families, which represent the first of our WaveRider Wireless Internet
Network products.
NCL Products. The NCL product family consists of intelligent wireless
routers and bridges. The NCL product family offers point-to-point and
point-to-multipoint line of sight wireless connectivity in the 2.4 to 2.485GHz
frequency band.
WaveRider's first commercially available product, the NCL 135 provides high
capacity, wireless 2.4 GHz connections between local area networks at speeds up
to 800Kbps. System administrators can use the NCL 135 to extend Ethernet
networks, access the Internet at high speed, connect to remote locations and
perform general data networking without the ongoing costs of leased telephone
lines.
The operating system built into the NCL135 differs from other wireless
networking bridges by incorporating a complete Simple Network Management
Protocol ("SNMP") compliant managed routing solution. As an industry standard,
the incorporation of SNMP, which monitors and manages network devices from
across an internetwork, into our products greatly increases their ease of
installation and use. The NCL135 operating system also adheres to IP version 4.0
thereby permitting Routing Information Protocol ("RIP") and static route
capabilities. These functions grant extensive control of the network and
increase the overall performance of network traffic by significant factors.
The NCL135 received certification for sale in Canada in November 1998 and
for sale in the United States in February of 1999. Currently we have installed a
number of test and evaluation units in the United States with potential
customers and resellers and expect to commence meaningful shipments in the
second quarter of 1999.
LMS Products. The LMS product family provides wireless connectivity to the
Internet in point-to-point and point-to-multi-point applications. The products
wirelessly link users to the Internet via Internet Service Providers ("ISPs")
using a point-to-multipoint scaleable cellular network that offers an affordable
alternative to wireline services in both rural and urban areas. LMS products are
targeted to provide the `last mile' solutions to residential, small office/home
office ("SOHO"), and small business markets. The products operate from 902 to
928 MHz at speeds up to 270 Kbps. All LMS products are optimized for IP
networks. Trial system deployments are expected to commence second quarter 1999,
with commercial Beta trials scheduled for fourth quarter 1999.
Markets for the WaveRider Product Families
According to surveys of businesses and telecommunications carriers, the
major source of telecommunication market growth will be in the data services
segment, as businesses extend their local and wide area networks to more
locations worldwide and use telecommunications network services to support an
increasing number and variety of business applications. As the market demand for
networks that support data services grows, the Internet is becoming a critical
business tool. It provides the media for businesses to transmit data in
applications ranging from product and marketing support to information provision
and e-commerce transactions.
At the same time, we believe increasing competition in Internet Service
Provider (ISP) markets is forcing many ISPs to seek alternative access options
such as wireless networks to improve their revenue and profitability. We expect
this will provide a source of growth in demand for our products. As this market
expands, we anticipate WaveRider's development and introduction of our NCL and
LMS families of products, combined with the limited availability of other
wireless network solutions, will enable us to become an important supplier in
the industry. Although some competition is developing, it is primarily from
smaller companies that have not established significant presence in either North
American or international markets.
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Sales Strategy
In the North American market, WaveRider plans to utilize a direct sales
organization to market the WIN products to the almost 5,000 ISPs servicing this
market. In addition, this direct sales organization will be approaching the
major telecommunications service providers, Value Added Resellers and Systems
Integrators to develop package solutions for the ISP market.
On the international side, the Company plans to utilize agency agreements
with Telecommunications Service Providers, Telecommunications Distributors and
large regional Internet Service Providers to distribute its products.
In addition, the Company's Web Site and Internet presence has provided an
ongoing source of potential customers, investors, business partners and
employees from around the world. It is the Company's intention to continue to
develop a leading presence on the Internet to generate further interest and
exposure.
Manufacturing and Distribution
WaveRider has entered into a long term manufacturing agreement with C-MAC
Electronic Systems Inc. ("C-MAC") to mass manufacture the WaveRider WIN
products, including packaging and distribution.
C-MAC is a global manufacturer of advanced microelectronic modules,
interconnect systems, frequency control products, electronic system assemblies
and energy control devices. C-MAC offers a wide range of advanced technical
solutions and products - both custom and proprietary, supporting many
applications in a variety of end markets.
Through WaveRider's association with C-MAC, the Company believes it has the
capability to meet the demands of a rapidly growing Internet market, with high
quality, efficiently manufactured products.
Competition
Competition in the data communication industry is intense. Specifically,
although our products are based on a wireless technology, we compete not only
against companies that base their products on wireless technology, but also
against companies that base their products on hard-wired technology (wire or
fiber optic cable). There can be no assurance that we will be able to compete
successfully in the future against existing or new competitors or that our
operating results will not be adversely affected by increased price competition.
Competition is based on design and quality of the products, product performance,
price and service, with the relative importance of such factors varying among
products and markets. Competition, in the various markets we serve, comes from
companies of various sizes, many of which are larger and have greater financial
and other resources than we do and, thus, can better withstand adverse economic
or market conditions than we can.
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 we are not aware of any policy changes 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 our products be unable to accept
interference caused by others, the Company or our 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.
Research and Development Expenditures
In 1998, the Company expended $1,814,617 (1997 - $405,705) in the research
and development of its products.
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WaveRider's Staff
The Company, through its subsidiaries, WaveRider Communications (Canada)
Inc. and Jetstream Internet Services Inc. currently has approximately forty-two
full-time employees, thirteen in the Toronto head office and the rest directly
involved in or supportive of R&D activities and the provision of Internet
Services in the Salmon Arm, British Columbia area.
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns no real estate. We have offices and test sites in Toronto,
Ontario, and Salmon Arm, British Columbia in Canada. These offices house
administration and research operations and are leased from unrelated parties.
WaveRider's Toronto Office is leased on a month by month basis and our
Salmon Arm facility is being leased for a period of two years ending June 1,
2000. The lease for our JetStream's offices in Salmon Arm was renewed effective
January 1, 1999, for a one-year period.
We have made plans to move the Salmon Arm research and development group to
Calgary, Alberta, Canada with relocation starting in April and ending by June of
1999. We are also looking at opportunities to expand the Toronto office. We do
not believe the relocation of our offices with have any significant impact to
our costs or our development schedules. Cost commitments related to present
leases are described in Item 7.
ITEM 3. LEGAL PROCEEDINGS
There are no active or pending legal proceedings of a material nature 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 1998.
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PART II
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 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:
1998 Bid 1997 Bid
High Low High Low
First Quarter $1.50 $0.85 $0.65 $0.06
Second Quarter $4.47 $1.25 $0.47 $0.18
Third Quarter $3.05 $1.16 $0.90 $0.33
Fourth Quarter $3.41 $1.30 $1.60 $0.35
Holders: The Company has approximately 784 common shareholders of record as of
March 26, 1999. This number does not include shareholders whose shares are held
in street or nominee names.
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 common share dividends have been paid by the Company
in the last two years. The Company does not expect to pay a cash dividend to its
common shareholders in the foreseeable future and payment of dividends in the
future will depend on the Company's earnings and cash requirements. The Company
has paid $80,000 in 1998 to its 8% Series C convertible preferred shareholders.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Liquidity and Capital Resources.
We have funded our operations through equity financing and have had no line
of credit or similar credit facility available to us. We rely on our ability to
raise money through equity financing to finance all our business endeavors. The
majority of funds raised have been allocated to the development of WaveRider
products.
The Company issued 4,583,100 common shares, 800,000 preferred shares and
2,850,000 warrants to purchase common shares during 1998 for cash proceeds of
$6,350,833, net of issue costs of $348,419. Private placements and the exercise
of attached warrants accounted for the issue of 3,629,038 common shares and
800,000 preferred shares. 951,562 common shares were issued pursuant to
exercises under the Employee Stock Option (1997) Plan, and 2,500 common shares
were awarded under the Employee Stock Compensation (1997) Plan. In addition, the
Company converted the 4,000,000 Series B convertible preferred shares, issued in
1997, into 10,000,000 common shares.
As part of the private placement made on December 29, 1998, the Company
obtained commitments from the investors to purchase up to $7,000,000 of
additional common shares in two tranches during 1999. This commitment is subject
to the Company registering the shares issued under the agreement and to certain
other events and obligations as outlined in the S-3 registration statement filed
on January 19, 1999. Since certain of these events are outside the control of
the Company, there is no assurance that these funds will be available. At
current expenditure rates the Company will run out of cash by August 1999 if
these or other funds are not received.
During 1997, the Company issued 21,733,822 common shares for $1,780,489;
19,358,822 common as part of the private placements completed in the First
Quarter 1997 and the subsequent exercise of attached warrants, 908,000 common
shares for services rendered and 1,467,000 common shares for options exercised.
In addition, 4,000,000 preferred shares were issued in connection with the
acquisition of Major Wireless.
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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
ongoing operation of the Company and development of the WaveRider(R) product
line
Results of Operations - 1998
During the year, the Company incurred a net loss of $4,477,518 on revenues
of $254,987. At year-end, cash amounted to $3,047,257 and current liabilities
were $1,035,911.
The majority of the expenses incurred during 1998 related to the continued
development of the WaveRider product line. In November of 1998, we received
Canadian certification on our first product, the NCL 135, and commenced shipment
within Canada. Subsequent to the year-end, FCC approval was obtained and the
Company is now marketing and commencing to sell the product in the United States
as well as internationally.
Results of Operations - 1997
During the year, the Company incurred a restated net loss of $1,324,960 on
revenues of $77,459. At year-end, cash 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. In addition, the fair value of options
awarded to outside consultants was expensed increasing the loss previously
reported by $289,830.
Activities by WaveRider Canada 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 1, 1997, the date of acquisition to the year end.
Factors Affecting Future Results
The Company does not provide forecasts of its future financial performance.
However, from time to time, information provided by the Company or statements
made by its employees may contain "forward looking" information that involves
risks and uncertainties. In particular, statements contained in this Form 10-KSB
that are not historical facts constitute forward looking statements and are made
under the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. The Company's actual results of operations and financial condition have
varied and may in the future vary significantly from those stated in any forward
looking statements. Factors that may cause such differences include, without
limitation, the risks, uncertainties and other information discussed within this
Form 1--KSB, as well as the accuracy of the Company's internal estimates of
revenue and operating expense levels.
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 Internet Service Providers
("ISPs") has proven to be volatile and there can be no assurance that the
Company will be able to retain existing or future customers.
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B. Uncertainty Of Additional Financing
Management believes the Company will need to draw on the additional funding
arranged on December 29, 1998 in order to finalize development and market its
products. The ability to draw on this additional funding is dependent on a
number of factors including share pricing and volumes which are outside the
Company's control. If the Company is unable to draw on the additional funding
then 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.
C. 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.
D. 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.
E. 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.
F. 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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YEAR 2000
The Company is addressing the issues associated with the programming code
in existing computer systems as the Year 2000 approaches. The Year 2000 problem
is pervasive and complex as virtually every computer operation will be affected
in some way. The Company is aware of and is addressing the potential computing
difficulties that may be triggered by the Year 2000.
The Company has commenced a Year 2000 review and conversion project to
address all the necessary changes, testing and implementation issues. The
project encompasses three major areas of review: internal systems (hardware and
software), supplier compliance and Company products.
The Company has identified the changes required to its computer programs
and hardware. The necessary modifications to the Company's centralized
financial, manufacturing and operational information systems are expected to be
completed by the end of the second quarter of 1999.
To date, the Company's suppliers have been sent letters requesting
information regarding their own Year 2000 plan, as well as requesting
confirmation that the components supplied by these vendors are Year 2000
compliant. The Company has evaluated the vendor responses which have been
received and concluded that the vendors which have responded either are Year
2000 compliant or are proceeding with their own Year 2000 compliance programs.
The Company will continue to follow-up with vendors with which the Company has a
material relationship and who have not responded to obtain assurances that they
expect to be Year 2000 compliant in time.
Equipment and systems manufactured and supplied by the Company have been
evaluated and determined to be free of any material problems that could be
caused by the Year 2000 issue.
Costs incurred to date have been nominal and Management estimates that the
Company's remaining Year 2000 compliance expense will be less than $5,000. To
date, the Company believes that Year 2000 problems related to its own internal
systems and equipment and systems it sells will not have a material effect on
the Company's business, financial condition and results of operations. However,
there can be no assurance that the systems of other companies upon which the
Company's systems and business rely will be timely converted or that any such
failure to convert by another company would not have a material adverse effect
on the Company's business, financial conditions or results of operations.
ITEM 7. FINANCIAL STATEMENTS
The information required hereunder in this report as set forth in the
"Index to Financial Statements" on page 17.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
On May 14, 1998, upon the recommendation and approval of the Board of
Directors, the Company engaged PricewaterhouseCoopers LLP, of Toronto, Ontario,
Canada, as the independent auditors of the Company to audit the financial
statements for the year ending December 31, 1998. The Company's previous
independent auditors, Johnson, Holscher & Company, P.C., of Denver Colorado,
were notified of their dismissal on May 14, 1998.
The change of accountants was reported on form 8-K filed on May 20, 1998
and ratified by the shareholders of the Company at the annual general meeting
held in Vancouver, British Columbia, Canada on June 19th, 1998.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
Directors and Executive Officers
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.
NAME AGE POSITION
Bruce Sinclair 47 Director, President and Chief Executive Officer
William E. Krebs 52 Director and Secretary.
William H. Laird 51 Director
Scott Worthington 44 Vice President, Finance and Administration
Charles Brown 43 Vice President, Marketing
James Chinnick 52 Vice President, Engineering
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 head 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 is currently a Director of Acrex Ventures Ltd. And Voice Mobility
Inc. Formerly he 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 was an U.S.
reporting company.
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. None of the companies
named was an U.S. reporting company.
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)
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James H. Chinnick, was vice president and general manager of Harris
Corporation's Wireless Access Division in Calgary, AB, from 1995 to 1998. Prior
to this, Mr. Chinnick held several senior positions with NovAtel (1988-1995),
Northern Telecom (1985-1988), Foundation Electronic Instruments (1980-1984) and
the Communications Research Centre in Ottawa (1971-1980). In addition to a B.Sc.
Engineering (Physics), he has an M.Sc. in Electrical Engineering
(Communications) and a Diploma in Business Administration. He is a member of the
Association of Professional Engineers, Geologists and Geophysicists of Alberta
(APEGGA).
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange 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 that, during the year ended December 31, 1998, all Section 16(a) filing
requirements applicable to its officers, directors and 10% beneficial owners
were complied with by such persons.
ITEM 10. EXECUTIVE COMPENSATION
The following table describes the compensation earned in fiscal 1998 by the
Chief Executive Officer of the Company and the Vice President, Marketing. No
other executive officer received compensation in excess of $100,000 in 1998. The
two other directors of the Company received $30,333 each as directors of the
Company and a Company related to Mr. Krebs received compensation of $55,000 for
services rendered in support of two of the private placements made in 1998.
SUMMARY COMPENSATION TABLE 1998
Annual Compensation
Name and -------------------
Principal Position Year Salary Bonus Stock Options
- - --------------------------------------------------------------------------
Bruce Sinclair (1) 1998 182,002 155,038 -
Pres./CEO/Director 1997 10,500 - 1,000,000
Charles Brown 1998 101,112 39,045 465,000
Vice Pres., Marketing
(1) Mr. Sinclair's compensation for the fiscal year ended December 31, 1998 was
based on an annualized salary and bonus of Can.$500,000 payable Can.$270,000 in
cash for the year with the balance payable in shares out of the Employee Stock
Compensation (1997) Plan. The amount shown as salary above is the amount paid in
cash for the period. The bonus portion, Can. $230,000, was accrued and included
in accounts payable at December 31, 1998. In 1997, a total of 800,000 Series B
Preferred Shares were transferred to Mr. Sinclair by way of an additional
incentive together with the private option to purchase up to 1,000,000
additional common shares. Both the Series B Preferred shares and the private
option to purchase common shares were provided by existing shareholders and were
not payable by or otherwise a liability of the Company.
12
<PAGE>
The following table summarizes option grants during 1998 to the
executive officers named in the Summary Compensation Table (the "Named Executive
Officers")
<TABLE>
<CAPTION>
Individual Grants
-----------------
Percent of
Total
Number of Options Potential Realizable Value
Securities Granted to Exercise Market at Assumed Annual Rates
Underlying Employees or Base Price on of Stock Price Appreciation
Options in Fiscal Price Date of Expiration for Option Term
Granted Year ($/sh) Grant Date 0% 5% 10%
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles Brown 240,000 8.5 1.07 1.07 2/16/01 0 12,840 25,680
225,000 8.0 1.68 1.68 8/28/01 0 18,900 37,800
</TABLE>
Mr. Brown did not exercise any options during fiscal 1998.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following tables set forth, as of March 26, 1999, 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. 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
41,647,181 shares of Common Stock and 800,000 shares of Preferred Stock 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 Amount Of Common % of Common Stock
Beneficial Owner Stock beneficially Owned outstanding
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C>
*Bruce Sinclair, Director, CEO, President 4,000,000 9.16
32 Steeplechase Dr. Aurora Ontario Canada
*William Krebs, Director, Secretary 2,479,500 5.91
300 Stewart Road, Salt Spring Island, BC Canada
*William Laird, Director 1,588,500 3.79
*Scott Worthington, Vice-President 550,000 1.30
*Charles Brown, Vice-President 465,000 1.10
*Jim Chinnick 220,000 0.53
--------- -----
*All Directors and Executive Officers (5) 9,303,000 20.46
--------- -----
</TABLE>
Above numbers are calculated on a fully diluted basis and include all
unexercised options awarded. 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. The numbers do include 2,000,000 common shares held by Mr. Sinclair,
500,000 common shares held by Mr. Krebs, and 375,000 common shares held by Mr.
Laird which are subject to the restrictions of the share exchange escrow
agreement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There were no transactions or series of transactions, for the fiscal year ended
December 31, 1998, 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, 5% 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 31, 1998.
13
<PAGE>
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
incorporated by reference to Exhibit 3.7 on Form 10KSB for the
year ended December 31, 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 incorporated by
reference to Exhibit 3.8 on Form 10KSB for the year ended
December 31, 1997.
3.9 Certificate of Amendment to the Certificate of Designation of the
Series B Voting Convertible Preferred Stock, filed with the
Nevada Secretary of State on May 16, 1997 incorporated by
reference to Exhibit 99.1 on Form 8-K filed May 5, 1998.
3.10 Certificate of Amendment to the Articles of Incorporation of the
Company designating the Series C Voting 8% Convertible Preferred
Stock, filed with the Nevada Secretary of State on June 3, 1998
incorporated by reference to Exhibit 4 on Form 8-K filed June 18,
1998
4.1 Specimen common stock certificate, incorporated by reference to
Exhibit 4.1 to registration statement on Form S-18, File no.
33-25889-LA.
4.2 Specimen Class A Common Stock Purchase Warrant Certificate,
incorporated by reference to Exhibit 4.2 on Form 10KSB for the
year ended December 31, 1996.
4.3 Specimen Class B Common Stock Purchase Warrant Certificate,
incorporated by reference to Exhibit 4.3 on Form 10KSB for the
year ended December 31, 1996.
4.4 Specimen Class C Common Stock Purchase Warrant Certificate,
incorporated by reference to Exhibit 4.4 on Form 10KSB for the
year ended December 31, 1996.
4.5 Specimen Class D Common Stock Purchase Warrant Certificate,
incorporated by reference to Exhibit 4.5 on Form 10KSB for the
year ended December 31, 1996.
14
<PAGE>
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.
4.7 *Warrant Terms dated April 15, 1998, relating to the Class E
Common Stock Purchase Warrants.
4.8 *Warrant Terms dated June 11, 1998, relating to the Class F
Common Stock Purchase Warrants.
4.9 *Warrant Terms dated December 15, 1998, relating to the Class G
Common Stock Purchase
Warrants
4.10 *Warrant Terms dated December 29, 1998, relating to the Common
Stock Purchase Warrants
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 incorporated by reference to Exhibit
10.10 on Form 10KSB for the year ended December 31, 1997.
10.11 Amendment 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 4,1998.
10.12 Amendment to the Employee Stock Option (1997) Plan incorporated
by reference to Form S-8 filed May 13, 1998
10.13 Convertible Debenture Agreement between WaveRider and
International Advisory Services Ltd. And Wyndel Consulting Ltd.
dated December 15, 1998 incorporated by reference to Exhibit
10.11 on Form S-3 filed January 19, 1999.
10.14 Letter of termination of the Convertible Debenture, dated January
8, 1999, incorporated by reference to Exhibit 10.11 on Form S-3
filed January 19, 1999.
10.15 Common Stock Purchase Agreement between WaveRider and Sovereign
Partners LP and Canadian Advantage Limited Partnership, dated
December 31, 1998, including the exhibits to such agreement
incorporated by reference to Exhibit 10.13 on Form S-3 filed
January 19, 1999.
15
<PAGE>
21 *Subsidiaries
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the 4th quarter
of 1998.
16
<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)
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>
Exhibit 4.7
The warrants evidenced by this certificate and the common shares issuable upon
warrant exercise have not been registered under the U.S. Securities Act of 1933
("Act"). Transfer of these securities is prohibited except in accordance with
the provisions of Regulation S under the Act. This warrant may not be exercised,
in whole or part, by or on behalf of any "U.S. Person" (as defined in Regulation
S) unless the shares to be acquired have been registered under the Act or an
exemption from registration is available.
WAVERIDER COMMUNICATIONS INC.
Organized under the laws of the State of Nevada
CLASS E COMMON STOCK PURCHASE WARRANT
WARRANTS TO PURCHASE
No. WE - ** **
COMMON SHARES
THIS CERTIFIES that, for value received
Or registered assigns ("Warrantholder") is entitled to purchase from WAVERIDER
COMMUNICATIONS INC., a Nevada corporation ("Company"), at any time from the date
of issuance and during the period (the "Exercise Period") expiring on February
15TH, 1999 (the "Expiration Date"), unless extended, the number of fully paid,
nonassessable shares shown above of the Company's common stock, $.001 par value
(the "Common Shares"), in the manner stated below, at the purchase price of
US$1.25 (one dollar twenty-five cents) per Common Share (the "Exercise Price").
EXERCISE. Subject to the Warrant Terms, this Class E Warrant may be
exercised in whole or in part at any time during the Exercise Period for a whole
number of shares, by surrendering it with the Exercise Form on the reverse side
duly completed at the offices of the Company, and by paying in full the Exercise
Price for all Common Shares being purchased, together with all transfer fees and
transfer taxes and other governmental charges due, if any. Payment shall be made
in lawful money of the United States of America, in cash or by bank check,
cashier's check, certified check, or postal or express money order made payable
to the order of the Company. Upon partial exercise hereof, a new Class E Warrant
of like tenor shall be issued to the registered holder hereof evidencing the
number of Common Shares not purchased. No fractional shares or scrip certificate
evidencing fractional shares will be issued upon exercise hereof, nor will any
cash be paid in lieu of any fractional share not issued. In order to exercise
this warrant, the registered holder must at the time of exercise complete and
sign the Exercise form on the reverse side of this certificate, which contains a
representation that the exercising registered holder is not a U.S. Person and
that exercise is not being made for or on behalf of a U.S. Person.
ASSIGNMENT. This Class E Warrant may be assigned or transferred by the
registered holder or by attorney duly authorized in writing, in whole or in
part, at the offices of the Company with the Assignment form on the reverse side
duly completed, upon payment of the applicable transfer fee and any transfer tax
or other governmental charges due, if any. Upon any such assignment or transfer,
a new Class E Warrant Certificate or certificates of like tenor and representing
in the aggregate the right to purchase a like number of Common Shares, subject
to any adjustments made in accordance with the provisions of the Warrant Terms,
will be issued in accordance with the registered holder's lawful instructions.
EXCHANGE. This Class E Warrant Certificate may at any time be exchanged
for one or more Class E Warrant Certificates of like tenor and representing in
the aggregate the right to purchase a like number of Common Shares, subject to
any adjustments made in accordance with the provisions of the Warrant Terms,
upon presentation therefor at the offices of the Company and upon payment of the
requisite fees.
TRANSFER AND ASSIGNMENT FEES. Whenever this Class E Warrant Certificate
is exercised for Common Shares, is assigned or transferred, or is exchanged for
one or more like certificates, there shall be paid to the Company therewith a
fee for every Class E Warrant Certificate or Common Share certificate to be
issued, in accordance with the Company's fee schedule.
ADJUSTMENTS. Under the Warrant Terms, the Exercise Price is subject to
adjustment if the Company effects any stock split or combination (reverse stock
split) or recapitalization with respect to the Common Shares and in certain
other circumstances. Any adjustment of the Exercise Price probably will result
in a corresponding adjustment of the number of Common Shares purchasable
hereunder. Further, the Exercise Price may be reduced, irrespective of whether a
stock split, combination or other adjustment is effected, and the Expiration
Date may be extended one or more times, from time to time, for an indefinite
period at the Company's discretion upon giving at least two days' notice thereof
to the registered holders of the Class E Warrants.
STATUS OF HOLDER. The Company may deem and treat the registered holder
of this Class E Warrant Certificate as the absolute owner hereof for all
purposes, notwithstanding any notation of ownership or other writing made hereon
by any person, and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary. No registered holder of Class E Warrants, as
such, shall have any rights as a shareholder of the Company, either at law or at
equity, and the rights of each such registered holder, as such, are limited to
those expressly provided in the Warrant Terms and this Certificate.
WITNESS the facsimile seal of the Company and the facsimile signatures
of its duly authorized officers.
DATED: April 15, 1998 WAVERIDER COMMUNICATIONS INC.
------------------------------------
Secretary
38
<PAGE>
WAVERIDER COMMUNICATIONS INC.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIFORM GIFTS TO MINORS ACT -
TEN ENT - as tenants by the entireties
______________Custodian_____________
JT TEN - as joint tenants with right of Custodian) (Minor)
survivorship and not as tenants in
common and not as community property under the Uniform Gifts to Minors
Act of the State of ________________
EXERCISE
I or we hereby irrevocably elect to exercise the right of purchase
represented by this certificate to purchase _______________ Common Shares of the
Company and hereby make payment of $_____________ (number of shares purchased
multiplied by US$1.25) payable to the order of WAVERIDER COMMUNICATIONS INC. in
payment of the exercise price for such shares, and request that certificates for
the Common Shares shall be issued in the name of:
<TABLE>
<CAPTION>
<S> <C>
Please insert social security or EIN number Name and address, including zip code:
or other identifying number:
--------------------------------------------------------
- - ------------------------------------- --------------------------------------------------------
</TABLE>
And, if such number of Common Shares shall not be all of the shares purchasable
hereunder, that a new Class E Warrant Certificate of like tenor for the balance
of the remaining Common Shares purchasable hereunder be delivered to the
undersigned at the address above. I hereby certify that I am not a "U.S. Person"
as defined in Regulation S of the United States Securities and Exchange
Commission and that I am not exercising this Class E Warrant to purchase shares
for or on behalf of any U.S. Person. I understand that the term "U.S. Person"
includes, among other persons, an individual resident in the United States, any
corporation, partnership or other entity organized under United States law, any
agency or branch of a corporation, partnership or other entity organized under
the laws of a country other than the United States which is located in the
United States, any trust or estate of which any trustee, administrator or
executor is a U.S. Person, and any account held for the benefit of a U.S.
Person.
IMPORTANT: The name of the person exercising this warrant must correspond with
the name of the Warrantholder written on the face of this Certificate in every
particular, without alteration or any change whatever, unless it has been
assigned by completing the Assignment form below.
DATED: ______________________, 19_____
X____________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
Please insert social security or EIN number Name and address, including zip
code: Or other identifying number:
the right to purchase ________________ Common Shares of the Company evidenced by
this Class E Warrant, and does hereby irrevocably constitute and appoint any
officer of the Company or its transfer agent and registrar as lawful Attorney to
transfer such right on the books of the Company with full power of substitution
in the premises. I hereby certify that, to the best of my knowledge, the person
or persons to whom these Class E Warrants are being assigned is NOT a "U.S.
Person" as defined in Regulation S of the U.S. Securities and Exchange
Commission.
DATED: ______________________, 19_____
IMPORTANT: Every registered owner of this Certificate must sign it to assign or
otherwise transfer Class E Warrants. The above signature or signatures must
correspond with the name or names written on the face of this Certificate in
every particular, without alteration, enlargement or any change whatever. Each
signature should be "medallion" guaranteed by an eligible guarantor institution
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) with
membership in an approved signature guarantee Medallion Program pursuant to Rule
17Ad-15 of the Securities and Exchange Commission.
SIGNATURE GUARANTEED:
39
<PAGE>
Exhibit no. 4.8
THE WARRANTS OF THE COMPANY EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND PARAGRAPH (13) OF
CODE SECTION 10-5-9 OF THE GEORGIA SECURITES ACT OF 1973. THE WARRANTS MAY NOT
BE SOLD, TRANSFERRED, PLEDGED OR ASSIGNED OR A SECURITY INTEREST CREATED
THEREIN, UNLESS THE PURCHASER, TRANSFEREE, ASSIGNEE, PLEDGEE OR HOLDER OF SUCH
SECURITY INTEREST COMPLIES WITH ALL STATE (INCLUDING THE GEORGIA SECURITIES ACT
OF 1973) AND FEDERAL SECURITIES LAWS (I.E., SUCH SHARES ARE REGISTERED UNDER
SUCH LAWS (INCLUDING THE GEORGIA SECURITIES ACT OF 1973) OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE THEREUNDER) AND UNLESS THE SELLER, TRANFEROR,
ASSIGNOR, PLEDGOR OR GRANTOR OF SUCH SECURITY INTEREST PROVIDES AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE TRANSACTION CONTEMPLATED
WOULD NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS. TRANSFERABILITY OF THE WARRANTS IS THEREFORE
LIMITED AND INVESTORS MUST BEAR THE ECONOMIC RISK OF THEIR INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME;
WAVERIDER COMMUNICATIONS INC.
Organized under the laws of the State of Nevada
CLASS F COMMON STOCK PURCHASE WARRANT
No.WF- WARRANTS TO PURCHASE **** COMMON SHARES
THIS CERTIFIES that, for value received
Or registered assigns ("Warrantholder") is entitled to purchase from WAVERIDER
COMMUNICATIONS INC., a Nevada corporation ("Company"), at any time from the date
of issuance and during the period (the "Exercise Period") expiring on June 11th,
2000 (the "Expiration Date"), unless extended, the number of fully paid,
nonassessable shares shown above of the Company's common stock. $.001 par value
(the "Common Shares"), in the manner stated below, at the purchase price of (two
dollars fifty cents) per Common Share (the "Exercise Price").
EXERCISE. Subject to the provisions of the Warrant Terms, this Class F
Warrant may be exercised in whole or in part at any time during US$2.50 (two
dollars fifty cents) per Common Share (the "Exercise Price"). the Exercise
Period for a whole number of shares, by surrendering it with the Exercise Form
on the reverse side duly completed at the offices of the Company, or any
successor, and by paying in full the Exercise Price for all Common Shares being
purchased, together with all transfer fees and transfer taxes and other
governmental charges due, if any. Payment shall be made in lawful money of the
United States of America, in cash or by bank check, cashier's check, certified
check, or postal or express money order made payable to the order of the
Company. Upon partial exercise hereof, a new Class F Warrant of like tenor shall
be issued to the registered holder hereof evidencing the number of Common Shares
not purchased. No fractional shares or scrip certificate evidencing fractional
shares will be issued upon exercise hereof, nor will any cash be paid in lieu of
any fractional share not issued.
ASSIGNMENT. This Class F Warrant may be assigned or transferred by the
registered holder or by attorney duly authorized in writing, in whole or in
part, at the offices of the Company with the Assignment Form on the reverse side
duly completed, upon payment of the applicable transfer fee and any transfer tax
or other governmental charges due, if any. Upon any such assignment or transfer,
a new Class F Warrant Certificate or certificates of like tenor and representing
in the aggregate the right to purchase a like number of Common Shares, subject
to any adjustments made in accordance with the provisions of the Warrant Terms,
will be issued in accordance with the registered holder's lawful instructions.
EXCHANGE. This Class F Warrant Certificate may at any time be exchanged
for one or more Class F warrant Certificates of like tenor and representing in
the aggregate the right to purchase a like number of Common Shares, subject to
any adjustments made in accordance with the provisions of the Warrant Terms,
upon presentation therefor at the offices of the Company and upon payment of the
requisite fees.
TRANSFER AND ASSIGNMENT FEES. Whenever this Class F Warrant Certificate
is exercised for Common Shares, is assigned or transferred, or is exchanged for
one or more like certificates, there shall be paid to the Company therewith a
fee for every Class F Warrant Certificate or Common Share certificate to be
issued, in accordance with the Company's fee schedule.
ADJUSTMENTS. Under the Warrant Terms, the Exercise Price is subject to
adjustment if the Company effects any stock split or combination (reverse stock
split) or recapitalization with respect to the Common Shares and in certain
other circumstances. Any adjustment of the Exercise Price probably will result
in a corresponding adjustment of the number of Common Shares purchasable
hereunder. Further, the Exercise Price may be reduced, irrespective of whether a
stock split, combination or other adjustment is effected, and the Expiration
Date may be extended one or more time, from time to time, for an indefinite
period at the Company's discretion upon giving at least two days' notice thereof
to registered holders of the Class F Warrants.
STATUS OF HOLDER. The Company may deem and treat the registered holder
of this Class F Warrant Certificate as the absolute owner hereof for all
purposes, notwithstanding any notation of ownership or other writing made hereon
by any person, and the Company shall not be affected by any notice to the
contrary. No registered holder of Class F Warrants, as such, shall have any
rights as a shareholder of the Company, either at law or at equity, and the
rights of each such registered holder, as such, are limited to those expressly
provided in the Warrant Terms and this Certificate.
WITNESS the facsimile seal of the Company and the facsimile signatures
of its duly authorized officers.
DATED: June 11th, 1998 WAVERIDER COMMUNICATIONS INC.
------------------------------------
Secretary
40
<PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIFORM GIFTS TO MINORS ACT
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of ___________Custodian ___________
survivorship and not as tenants ( Custodian) (Minor)
in common and not as community under the Uniform Gifts of Minors
property Act of the State of__________________
EXERCISE
I or we hereby irrevocably elect to exercise the right of purchase
represented by this certificate to purchase ______ Common Shares of the Company
and hereby make payment of _______________ (number of shares purchased
multiplied by US$2.50) payable to the order of WAVERIDER COMMUNICATIONS INC. in
payment of the exercise price for such shares, and request that certificates for
the Common Shares shall be issued in the name of:
<TABLE>
<CAPTION>
<S> <C>
Please insert social security or EIN number (Insert name address, including zip code):
or other identifying number: _________________
--------------------------------------------
--------------------------------------------
</TABLE>
And, if such number of Common Shares shall not be all of the shares purchasable
hereunder, that a new Class F Warrant Certificate or like tenor for the balance
of the remaining Common Shares purchasable hereunder be delivered to the
undersigned at the address above. I hereby certify that I am not a "U.S. Person"
as defined in Regulation S of the United States Securities and Exchange
Commission and that I am not exercising this Class F Warrant to purchase shares
for or on behalf of any U.S. Person. I understand that the term "U.S. Person"
includes, among other persons, and individual resident in the United States, any
corporation, partnership or other entity organized under United States law, any
agency or branch of a corporation, partnership or other entity organized under
the laws of a country other than the United States which is located in the
United States, any trust or state of which any trustee, administrator or
executor is a U.S. Person, and any account held for the benefit of a U.S..
Person. IMPORTANT: The name of the person exercising this warrant must
correspond with the name of the Warrantholder written on the face of this
Certificate in every particular, without alteration or any change whatever,
unless it has been assigned by completing the Assignment form below.
<TABLE>
<CAPTION>
<S> <C>
DATED: __________________ 19___ X_______________________________________
Signature of Registered Holder
X_______________________________________
Signature of Registered Holder
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto:
Please insert social security or EIN number (Insert name and address, including zip code):
or other identifying number: _____________________
----------------------------------------
----------------------------------------
</TABLE>
The right to purchase _____________ Common Shares of the Company evidenced by
this Class F Warrant, and does hereby irrevocably constitute and appoint any
officer of the Company or its transfer agent and registrar as lawful Attorney to
transfer such right on the books of the Company with full power of substitution
in the premises. I hereby certify that, to the best of my knowledge, the person
or persons to whom these Class F Warrants are being assigned in NOT a "U.S.
Person" as defined in Regulation S of the U.S. Securities and Exchange
Commission.
DATED: _______________, 19_____ X_______________________________________
Signature of Registered Holder
X_______________________________________
Signature of Registered Holder
IMPORTANT: Every registered owner of this Certificate must sign it to assign or
otherwise transfer Class F Warrants. The above signature or signatures must
correspond with the name or names written on the face of this Certificate in
every particular, without alteration, enlargement or any change whatever. Each
signature should be "medallion" guaranteed by an eligible guarantor institution
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) with
membership in an approved signature guarantee Medallion Program pursuant to Rule
17Ad-15 of the Securities and Exchange Commission.
SIGNATURE GUARANTEE:
41
Exhibit 4.9
THE WARRANTS OF THE COMPANY EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED. THE WARRANTS MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR ASSIGNED OR A SECURITY INTEREST CREATED THEREIN,
UNLESS THE PURCHASER, TRANSFEREE, ASSIGNEE, PLEDGEE OR HOLDER OF SUCH SECURITY
INTEREST COMPLIES WITH ALL STATE AND FEDERAL SECURITIES LAWS (I.E., SUCH
WARRANTS ARE REGISTERED UNDER SUCH LAWS OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE THEREUNDER) AND UNLESS THE SELLER, TRANSFEROR, ASSIGNOR, PLEDGOR OR
GRANTOR OF SUCH SECURITY INTEREST PROVIDES AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT THE TRANSACTION CONTEMPLATED WOULD NOT BE IN
VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. TRANSFERABILITY OF THE WARRANTS IS THEREFORE LIMITED AND
INVESTORS MUST BEAR THE ECONOMIC RISK OF THEIR INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
WAVERIDER COMMUNICATIONS INC.
Organized under the laws of the State of Nevada
CLASS G COMMON STOCK PURCHASE WARRANT
No. G WARRANT TO PURCHASE ****** COMMON SHARES
THIS CERTIFIES that, for value received ________________________. or registered
assigns ("Warrantholder") is entitled to purchase from WAVERIDER COMMUNICATIONS
INC., a Nevada corporation ("Company"), at any time from the date of issuance
and during the period (the "Exercise Period") expiring on December 15, 2003 (the
"Expiration Date") unless extended, the number of fully paid, nonassessable
shares shown above of the Company's common stock $0.001 par value (the "Common
Shares"), in the manner stated below, at the purchase price per share of 85% of
the lesser of (y) the average closing price of the Common Shares on the NASD OTC
Bulletin Board from and including November 9, 1998 to and including November 27,
1998 or (z) the average closing price of the Common Shares on the NASD OTC
Bulletin Board for the five trading days prior to the Loan Advance Date
indicated below (the "Exercise Price").
EXERCISE. This Class G Warrant may be exercised in whole or in part at any time
during the Exercise Period for a whole number of Common Shares by surrendering
this certificate with the Exercise Form attached hereto duly completed at the
offices of the Company or any successor and by paying in full the Exercise Price
for all Common Shares being purchased, together with all transfer taxes and
other governmental charges due, if any. Payment shall be made in lawful money of
the United States of America, in cash or by bank check, cashier's cheque,
certified cheque or postal or express money order made payable to the order of
the Company. Upon partial exercise hereof, a new Class G Warrant of like tenor
shall be issued to Warrantholder evidencing the number of Common Shares not
purchased. No fractional shares or scrip certificate evidencing fractional
shares will be issued upon exercise hereof, nor will any cash be paid in lieu of
any fractional share not issued.
ASSIGNMENT. This Class G Warrant may be assigned or transferred by Warrantholder
or by his attorney duly authorized in writing, in whole or in part, at the
offices of the Company with the Assignment Form attached duly completed, upon
payment of the applicable transfer fee and any transfer tax or other
governmental charges due, if any. Upon any such assignment or transfer, a new
Class G Warrant certificate or certificates of like tenor and representing in
the aggregate the right to purchase a like number of Common Shares, subject to
any adjustments made in accordance with the provisions of the Warrant Terms,
will be issued in accordance with Warrantholder's lawful instructions.
EXCHANGE. This Class G Warrant certificate may at any time be exchanged for one
or more Class G Warrant certificates of like tenor and representing in the
aggregate the right to purchase a like number of Common Shares, subject to any
adjustments made in accordance with the provisions of the Warrant Terms, upon
presentation therefor at the offices of the Company and upon payment of the
requisite fees.
TRANSFER AND ASSIGNMENT FEES. Whenever this Class G Warrant certificate is
exercised for Common Shares, is assigned or transferred or is exchanged for one
or more like certificates, there shall be paid to the Company therewith a fee
for every Class G Warrant certificate or Common Share certificate to be issued,
in accordance with the Company's fee schedule.
ADJUSTMENTS. The Exercise Price is subject to adjustment if the Company effects
any stock split or combination (reverse stock split) or recapitalization with
respect to the Common Shares and in certain other circumstances. Any adjustment
of the Exercise Price will result in a corresponding adjustment of the number of
Common Shares purchasable hereunder. Further, the Exercise Price may be reduced,
irrespective of whether a stock split, combination or other adjustment is
effected, and the Expiration Date may be extended from time to time for an
indefinite period at the Company's discretion upon giving at least two days'
notice thereof to registered holders of the Class G Warrants.
STATUS OF HOLDER. The Company may deem and treat the registered holder of this
Class G Warrant certificate as the absolute owner hereof for all purposes,
notwithstanding any notation of ownership or other writing made hereon by any
person, and the Company shall not be affected by any notice to the contrary. No
registered holder of Class G Warrants, as such, shall have any rights as a
shareholder of the Company, either at law or at equity, and the rights of each
such registered holder, as such, are limited to those expressly provided in this
certificate.
ANTI-DILUTION. If during the Exercise Period there is any reduction in the
number of issued and outstanding WaveRider common stock par value $0.001
resulting from an alteration by any corporate means to the share capital of
WaveRider (a "Consolidation Event") then the Exercise Price after the date of
the Consolidation Event shall be 85% of the lesser of (y) the average closing
price of the Common Shares on the NASD OTC Bulletin Board from and including
November 9, 1998 to and including November 27, 1998 or (z) the average closing
price of the Common Shares on the NASD OTC Bulletin Board for the five trading
days prior to the Consolidation Event divided by the quotient obtained when (a)
the number of Common Shares immediately prior to a Consolidation Event is
divided by (b) the number of Common Shares immediately after the Consolidation
Event. These anti-dilution provisions will cease to apply as soon as each of the
following events have occurred:
42
<PAGE>
a) the Company has completed and received gross proceeds of not less than
US$10,000,000 in debt and/or equity financings after the Loan Advance
Date; and
b) the Company's common stock has been listed for trading on The Nasdaq
SmallCap Market or another recognized national stock market; and
c) all the Company's common stock that are subject to the escrow agreement
made as of March 16, 1998 among the Company, William E. Krebs as escrow
agent and certain holders of the Company's common stock have been
released from the restrictions imposed thereby; and
d) the amount referred to as the "Accumulated Debt" in the 8% Secured
Convertible Debenture dated as of December 15, 1998 between the Company
and, among others, the first registered holder of this certificate,
shall have been repaid in full.
LOAN ADVANCE DATE. For purposes hereof, the Loan Advance Date is
______________________.
IN WITNESS WHEREOF the facsimile seal of the Company and the facsimile
signatures of its duly authorized officers are set out hereon.
DATED: December 15, 1998 WAVERIDER COMMUNICATIONS INC.
----------------------------------
Secretary
43
<PAGE>
EXERCISE FORM
______________________________________________________ (Print or type name of
registered warrant holder) (the "Holder") hereby irrevocably elects to purchase
__________ Common shares $0.001 par value (the "Purchased Shares") of WAVERIDER
COMMUNICATIONS INC. (the "Company") and tenders herewith US$____________ per
share for each of the Purchased Shares in cash or by bank check, cashier's
cheque, certified cheque or postal or express money order. The Holder hereby
undertakes to pay to the Company any and all transfer taxes and other
governmental charges due, if any, in respect of this purchase of shares. The
Holder hereby directs the Company to issue the Purchased Shares in the name of
_____________________________________________________________ and to deliver one
or more certificates representing the Purchased Shares to
<TABLE>
<CAPTION>
<S> <C>
- - ----------------------------------------------------------------- ---------------------------------------------------.
DATED: ___________________.
If the Holder is an individual:
SIGNED, SEALED and DELIVERED by )
the Holder in the presence of )
)
)
- - ----------------------------------------------------- )
Name ) -------------------------------------------
) Signature of Holder
- - ----------------------------------------------------- )
Address )
)
)
)
- - -----------------------------------------------------
If the Holder is a corporation or partnership:
-------------------------------------------
Print Name of Holder
-------------------------------------------
Per: Authorized Signatory
-------------------------------------------
Print Full Name of Authorized Signatory
</TABLE>
NOTICE: The signature of the Holder on this exercise form must correspond with
the name of the holder as written upon the face of this certificate in every
particular without alteration or enlargement or any change whatsoever.
44
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, _____________________________________ hereby sells, assigns
and transfers unto: ______________________________________________________ of
- - ------------------------------------------------------
Print or type name of transferee
- - ------------------------------------------------------
Print or type address of transferee
_____________________ Class G Warrants represented by the within Warrant
certificate and does hereby irrevocably constitute and appoint
_________________________________________________ his/her/its attorney to
transfer the said warrants on the books of the Company with full power of
substitution in the premises.
DATED: ___________________.
If the transferor is an individual:
<TABLE>
<CAPTION>
<S> <C>
SIGNED, SEALED and DELIVERED by )
the transferor in the presence of )
)
)
- - ---------------------------------- )
Name ) -----------------------------
) Signature of Transferor
- - ---------------------------------- )
Address )
) -----------------------------
) Print Name of Transferor
)
If the transferor is a corporation or partnership:
-----------------------------
Print Name of Transferor
-----------------------------
Per: Authorized Signatory
-----------------------------
Print Full Name of Authorized Signatory
</TABLE>
NOTICE: The signature of the transferor on this transfer form must correspond
with the name of the holder as written upon the face of this certificate in
every particular without alteration or enlargement or any change whatsoever.
45
<PAGE>
Exhibit 4.10
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT
No. __
To Purchase ______ Shares of Common Stock of
WAVERIDER COMMUNICATIONS, INC.
THIS CERTIFIES that, for value received, ___________________ (the
"Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after the date hereof and on or prior
to December , 2003 (the "Termination Date") but not thereafter, to subscribe for
and purchase from WAVERIDER COMMUNICATIONS, INC., a Nevada corporation (the
"Company"), ( ) shares of Common Stock (the "Warrant Shares"). The purchase
price of one share of Common Stock (the "Exercise Price") under this Warrant
shall be ______ ($___) Dollars. This Warrant is being issued in connection with
the Common Stock Purchase Agreement dated December , 1998 (the "Agreement")
entered into between the Company, the Investor and other entities not a party to
this Warrant. In the event of any conflict between the terms of this Warrant and
the Agreement, the Agreement shall control.
1. Title of Warrant. Prior to the expiration hereof and
subject to compliance with applicable laws, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the
Company by the holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.
2. Authorization of Shares. The Company covenants that all
shares of Common Stock which may be issued upon the exercise of rights
represented by this Warrant will, upon exercise of the rights represented by
this Warrant, be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).
3. Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times, in whole or in
part, before the close of business on the Termination Date, or such earlier date
on which this Warrant may terminate as provided in paragraph 11 below, by the
surrender of this Warrant and the Notice of Exercise annexed hereto duly
executed, at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company) and upon
payment of the Exercise Price in cash or by cashless exercise as hereinafter
provided; whereupon the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. Certificates
for shares purchased hereunder shall be delivered to the holder hereof within
five Business Days after the date on which this Warrant shall have been
exercised as aforesaid.
The Investor may pay the Exercise Price in cash or pursuant to
a cashless exercise, as follows:
(a) Cash Exercise. The Investor shall deliver immediately
available funds in an amount equal to the exercise price multiplied by the
number of shares being purchased;
(b) Cashless Exercise. The Investor shall surrender this
Warrant to the Company together with a notice of cashless exercise, in which
event the Company shall issue to the Investor the number of Warrant Shares
determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be
issued to the Investor.
Y = the number of Warrant Shares with respect to which this Warrant is being
exercised.
A = the average of the closing sale prices of the Common Stock for the five (5)
Trading Days immediately prior to (but not including) the date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Investor, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the issue date of this Warrant.
46
<PAGE>
4. No Fractional Shares or Scrip. No fractional shares
or scrip representing fractional shares shall be issued upon the exercise of
this Warrant.
5. Charges, Taxes and Expenses. Issuance of certificates for
shares of Common Stock upon the exercise of this Warrant shall be made without
charge to the holder hereof for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be issued in
the name of the holder of this Warrant or in such name or names as may be
directed by the holder of this Warrant; provided, however, that in the event
certificates for shares of Common Stock are to be issued in a name other than
the name of the holder of this Warrant, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof; and provided further, that upon any transfer
involved in the issuance or delivery of any certificates for shares of Common
Stock, the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.
6. Closing of Books. The Company will at no time close its
shareholder books or records in any manner which interferes with the timely
exercise of this Warrant.
7. No Rights as Shareholder until Exercise. This Warrant does
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise thereof. If, however, at the
time of the surrender of this Warrant and purchase of the shares the holder
hereof shall be entitled to exercise this Warrant, the shares so purchased shall
be and be deemed to be issued to such holder as the record owner of such shares
as of the close of business on the date on which this Warrant shall have been
exercised.
8. Assignment and Transfer of Warrant. This Warrant may be
assigned by the surrender of this Warrant and the Assignment Form annexed hereto
duly executed at the office of the Company (or such other office or agency of
the Company as it may designate by notice in writing to the registered holder
hereof at the address of such holder appearing on the books of the Company);
provided, however, that this Warrant may not be resold or otherwise transferred
except (i) in a transaction registered under the Securities Act, or (ii) in a
transaction pursuant to an exemption, if available, from such registration and
whereby, if requested by the Company, an opinion of counsel reasonably
satisfactory to the Company is obtained by the holder of this Warrant to the
effect that the transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. The
Company represents and warrants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
any Warrant or stock certificate, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it, and upon reimbursement to
the Company of all reasonable expenses incidental thereto, and upon surrender
and cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and dated
as of such cancellation, in lieu of this Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday in the
state of New York, then such action may be taken or such right may be exercised
on the next succeeding day not a legal holiday.
11. Effect of Certain Events. If at any time the Company
proposes (i) to sell or otherwise convey all or substantially all of its assets
or (ii) to effect a transaction (by merger or otherwise) in which more than 50%
of the voting power of the Company is disposed of (collectively, a "Sale or
Merger Transaction"), in which the consideration to be received by the Company
or its shareholders consists solely of cash, and in case the Company shall at
any time effect a Sale or Merger Transaction in which the consideration to be
received by the Company or its shareholders consists in part of consideration
other than cash, the holder of this Warrant shall have the right thereafter to
purchase, by exercise of this Warrant and payment of the aggregate Exercise
Price in effect immediately prior to such action, the kind and amount of shares
and other securities and property which it would have owned or have been
entitled to receive after the happening of such transaction had this Warrant
been exercised immediately prior thereto.
12. Adjustments of Exercise Price and Number of Warrant
Shares. The number and kind of securities purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to time
upon the happening of any of the following:
In case the Company shall (i) declare or pay a dividend in
shares of Common Stock or make a distribution in shares of Common Stock to
holders of its outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) issue any shares of its capital
stock in a reclassification of the Common Stock, the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. An adjustment made pursuant to this paragraph
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
13. Voluntary Adjustment by the Company. The Company may at
its option, at any time during the term of this Warrant, reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant
Shares or number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, as herein provided,
the Company shall promptly mail by registered or certified mail, return receipt
requested, to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities or
property) purchasable upon the exercise of this Warrant and the Exercise Price
of such Warrant Shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
47
15. Authorized Shares. The Company covenants that during the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary to
assure that such shares of Common Stock may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the OTC
Bulletin Board or any domestic securities exchange upon which the Common Stock
may be listed.
16. Miscellaneous.
(a) Issue Date; Choice of Law; Venue; Jurisdiction. The
provisions of this Warrant shall be construed and shall be giveneffect in all
respects as if it had been issued and delivered by the Company on the date
hereof. This Warrant shall be binding upon any successors or assigns of the
Company. This Warrant will be construed and enforced in accordance with and
governed by the laws of the State of New York, except for matters arising under
the Securities Act, without reference to principles of conflicts of law. The
parties consent to the exclusive jurisdiction of the U.S. District Court sitting
in the Southern District of the State of New York in connection with any dispute
arising under this Warrant and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on forum non conveniens, to
the bringing of any such proceeding in such jurisdictions. Each party hereby
agrees that if the other party to this Warrant obtains a judgment against it in
such a proceeding, the party which obtained such judgment may enforce same by
summary judgment in the courts of any country having jurisdiction over the party
against whom such judgment was obtained, and each party hereby waives any
defenses available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Warrant irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in any other
manner permitted by law. Each party waives its right to a trial by jury.
(b) Restrictions. The holder hereof acknowledges that the
Warrant Shares acquired upon the exercise of this Warrant, if not registered (or
if no exemption from registration exists), will have restrictions upon resale
imposed by state and federal securities laws. Each certificate representing the
Warrant Shares issued to the Holder upon exercise (if not registered or if no
exemption from registration exists) will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
(c) Modification and Waiver. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required
or permitted to be given or delivered to the holders hereof of the Company shall
be delivered or shall be sent by certified or registered mail, postage prepaid,
to each such holder at its address as shown on the books of the Company or to
the Company at the address set forth in the Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated:
WAVERIDER COMMUNICATIONS, INC.
By ______________________________
Name:
Title:
48
<PAGE>
NOTICE OF EXERCISE
To: WAVERIDER COMMUNICATIONS, INC.
(1) The undersigned hereby elects to purchase ________ shares of Common Stock of
WAVERIDER COMMUNICATIONS, INC. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price in full or pursuant to a
cashless exercise, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
- - -------------------------------
(Name)
- - -------------------------------
(Address)
- - -------------------------------
Dated:
- - ------------------------------
Signature
ASSIGNMENT FORM
(To assign the
foregoing warrant,
execute this form and
supply required
information.
Do not use this form to
exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights
evidenced thereby are hereby assigned to
_______________________________________________ whose address is
- - ---------------------------------------------------------------.
- - ---------------------------------------------------------------
Dated: ______________,
Holder's Signature:_____________________________
Holder's Address:_____________________________
-----------------------------
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
49
<PAGE>
Exhibit 21
SUBSIDIARIES
The company has a wholly owned subsidiary, WaveRider Communications (Canada)
Inc. (formerly Major Wireless Communications Inc.), incorporated under the laws
of the Province of British Columbia, Canada the 9th day of October, 1996 under
no. 0528772.
WaveRider Communications (Canada) 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.
50
<PAGE>
s
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: March 29, 1999 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 March 29, 1999
- - ---------------------
D. Bruce Sinclair Officer and Director
/s/ T. Scott Worthington Chief Financial Officer March 29, 1999
- - ------------------------
T. Scott Worthington
/s/ William E. Krebs Secretary and Director March 29, 1999
- - --------------------
William E. Krebs
/s/ William H. Laird Director March 29, 1999
- - --------------------
William H. Laird
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<ARTICLE> 5
<CIK> 0000844053
<NAME> Waverider Communications, Inc.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 3,047,257
<SECURITIES> 0
<RECEIVABLES> 74,518
<ALLOWANCES> (3,261)
<INVENTORY> 150,494
<CURRENT-ASSETS> 3,295,738
<PP&E> 1,158,133
<DEPRECIATION> (349,602)
<TOTAL-ASSETS> 4,146,834
<CURRENT-LIABILITIES> 1,035,911
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0
1,536,343
<COMMON> 9,313,034
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<TOTAL-LIABILITY-AND-EQUITY> 4,146,834
<SALES> 205,882
<TOTAL-REVENUES> 254,987
<CGS> 75,467
<TOTAL-COSTS> 4,657,038
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<INCOME-PRETAX> (4,477,518)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,477,518)
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<NET-INCOME> (4,477,518)
<EPS-PRIMARY> (0.18)
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