SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
Commission file number 0-25680
WAVERIDER COMMUNICATIONS INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 33-0264030
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
235 Yorkland Blvd., Suite 1101, Toronto, Ontario M2J 4Y8
(Address of principal executive offices and Zip (Postal) Code)
(416) 502-3200
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirement for the past 90 days.
Yes __X__; No _____
Applicable only to corporate issuers:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: May 10, 1999 - 41,712,981 Common
shares, $.001 par value.
Transitional Small Business Disclosure Format: (check one):
Yes _____; No __X__
<PAGE>
WAVERIDER COMMUNICATIONS INC.
FORM 10 - Q
For the Period Ended March 31, 1999
INDEX
Page
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 4-9
Balance Sheets 4
Statements of Operations 5
Statements of Cash Flows 6
Notes to Financial Statements 7-9
Item 2. Management's Discussion and
Analysis or Plan of Operation 9-10
PART II OTHER INFORMATION 10
Item 6. Reports on Form 8-K 10
Signatures 10
2
<PAGE>
PART I. FINANCIAL INFORMATION
Unaudited Consolidated Financial Statements
WAVERIDER COMMUNICATIONS INC.
( A Development Stage Company)
Quarter ended March 31, 1999 and year ended December 31, 1998
The Financial statements for the three months ended March 31, 1999 and 1998
include, in the opinion of the Company, all adjustments (which consist only of
normal recurring adjustments) necessary to present fairly the results of
operations for such periods. Results of operations for the three months ended
March 31, 1999, are not necessarily indicative of results of operations which
will be realized for the year ending December 31, 1999. The financial statements
should be read in conjunction with the Company's Form 10-KSB for the year ended
December 31, 1998.
3
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(in U.S. dollars)
<TABLE>
<CAPTION>
Quarter ended Year ended
March 31, December 31,
1999 1998
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current
Cash $ 1,378,964 $ 3,047,257
Accounts receivable 66,525 71,257
Prepaid expenses 93,517 26,730
Inventory 146,481 150,494
-------------------------------
1,685,487 3,295,738
Fixed Assets 940,647 808,531
Goodwill 36,388 42,565
-------------------------------
$ 2,662,522 $ 4,146,834
===============================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 612,037 $ 942,192
Deferred Revenue 45,629 39,558
Current portion of obligation under capital lease 87,325 54,161
-------------------------------
744,991 1,035,911
Obligation under capital lease 33,088 12,555
-------------------------------
778,079 1,048,466
SHAREHOLDER'S EQUITY
Share Capital 11,043,356 10,849,376
Other Equity 1,468,105 1,503,782
Deficit accumulated during development stage (10,627,018) (9,254,790)
--------------------------------
1,884,443 3,098,368
$ 2,662,522 $ 4,146,834
===============================
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF LOSS
(in U.S. dollars)
<TABLE>
<CAPTION>
From Inception
Quarter ended March 31 on August 6, 1987
1999 1998 to March 31, 1999
---------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Product sales $ 4,995 $ 0 $ 46,128
Internet sales 49,911 36,826 292,119
Interest and other 19,779 733 92,452
---------------------------------------------------------
74,685 37,559 430,699
COST OF PRODUCT AND INTERNET SALES 32,169 17,365 129,434
---------------------------------------------------------
GROSS MARGIN 42,516 20,194 301,265
---------------------------------------------------------
EXPENSES
Sales, general and administration 805,236 255,664 7,041,975
Research and development 561,339 388,254 2,867,359
Depreciation and amortization 8,169 4,850 123,836
---------------------------------------------------------
1,374,744 648,768 10,033,170
---------------------------------------------------------
NET LOSS $ (1,332,228) $ (628,574) $ (9,731,905)
=========================================================
BASIC AND FULLY DILUTED LOSS PER SHARE $ (0.042) $ (0.022) $ (1.802)
=========================================================
Weighted Average Number of Common Shares 31,594,604 28,000,877 5,399,329
=========================================================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in U.S. dollars)
<TABLE>
<CAPTION>
From Inception
Quarter ended March 31 on August 6, 1987
1999 1998 to March 31, 1999
----------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net loss $ (1,332,228) $ (628,574) $ (9,731,905)
Items not involving cash
Depreciation and amortization 78,946 44,965 529,114
Loss on sale of equipment - - 91,616
Options issued to consultants 55,500 163,882 687,139
Warrants issued on financing - - 313,325
Net changes in non-cash working capital items (382,126) 9,646 306,017
--------------------------------------------------
(1,579,908) (410,081) (7,804,694)
--------------------------------------------------
INVESTING
Acquisition of fixed assets (122,120) (115,870) (1,278,950)
Purchase of Internet service business - - (38,851)
--------------------------------------------------
(122,120) (115,870) (1,317,801)
--------------------------------------------------
FINANCING
Proceeds from sale of shares (net of issue fees) 102,803 675,323 10,735,884
Dividends on preferred shares (40,000) - (120,000)
Loans from affiliates - - 2,657
Payments on capital lease obligations (29,068) - (94,053)
--------------------------------------------------
33,735 675,323 10,524,488
--------------------------------------------------
Effect of exchange rate changes on cash - - (23,029)
--------------------------------------------------
Increase (decrease) in cash (1,668,293) 149,372 1,378,964
Cash, beginning of period 3,047,257 437,746 -
--------------------------------------------------
Cash, end of period $ 1,378,964 $ 587,118 $ 1,378,964
==================================================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
WaveRider Communications Inc.
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999 and December 31, 1998
1. GOING CONCERN
The Company incurred an operating loss of $1,332,228 (1998 - $628,574) for the
three months ended March 31, 1999. These financial statements are prepared on a
going-concern basis which assumes the Company will realize its assets and
discharge its liabilities in the normal course of business. The ability of the
Company to continue as a going-concern is dependent upon its ability to obtain
adequate sources of financing as required and its ability to develop and
maintain profitable operations. If the Company is 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.
On December 29, 1998, the Company entered into private placement financing which
the Company projects is sufficient to fund the continued development of its
products and the development of its sales and marketing activities. Management
believes that the proceeds from that financing, together with the anticipated
cash flow from the operations of the Company, will be sufficient to support
currently anticipated working capital requirements.
2. NATURE OF OPERATIONS
WaveRider Communications Inc. (formerly Channel i Inc.), incorporated in 1987
under the laws of the state of Nevada, USA is a public company traded on the OTC
Bulletin Board, trading symbol WAVC.
The Company develops and markets wireless data communications products with a
focus on Internet connectivity. Its first product, the "NCL 135" received
Industry Canada approval for sale in Canada during the fourth quarter of 1998
and received FCC approval for sale in the United States during the first quarter
of 1999.
3. PRIOR PERIOD ADJUSTMENT
During the year ended December 31, 1998, it was determined that the Company had
not accounted for stock options issued for services rendered by non-employees
and the purchase of Major Wireless, as required by GAAP. As a result, the March
31, 1998 consolidated financial statements have been restated to include the
fair value of the non-employee options. These changes, which had no impact on
the Company's cash flow results, have affected the prior reported financial
results as follows:
<TABLE>
<CAPTION>
Quarter Ended March 31, 1998 Inception to March 31, 1998
- -------------------------------------------------------------------------------------------------------------------
Restated Originally Restated Originally
Information Reported Information Reported
<S> <C> <C> <C> <C>
Sales, general and administration 233,229 193,337 3,662,787 3,363,041
Research and development 383,271 286,699 874,674 752,126
Depreciation and amortization 4,850 4,850 85,277 85,277
-------------------------------------------------------------------
Total expenses 621,350 484,886 4,622,738 4,200,444
-------------------------------------------------------------------
NET LOSS (601,156) (464,692) (4,523,315) (4,101,021)
==================================================================
LOSS PER COMMON SHARE (0.02) (0.02) (1.34) (1.48)
====================================================================
STOCKHOLDER'S EQUITY
Common stock 4,957,572 4,957,572
Preferred stock 4,000 4,000
Other Equity 136,464 -
Deficit accumulated during
the development stage (4,237,485) (4,101,021)
-----------------------------
860,551 860,551
============================
</TABLE>
In addition, note disclosure for the 1998 comparative figures has been modified
to conform with GAAP.
7
<PAGE>
4. STOCKHOLDER'S EQUITY
Common Stock
In the first quarter of 1999, the remainder of the Series E warrants,
amounting to 30,000 common shares, were exercised for $37,500. In addition,
131,700 common share options, pursuant to the Employee Stock Option (1997) Plan,
were exercised for $65,303.
5. COMMITMENTS
Agreements
On June 10, 1997 the Company authorized an Employee Stock Option (1997)
Plan for 5,000,000 common shares and an Employee Compensation (1997) Plan for
2,500,000 common shares. On February 16, 1998, the Company authorized an
increase to the Employee Stock Option (1997) Plan to 6,250,000.
As of March 31, 1999, the Directors had awarded 6,122,217 options under
the Employee Stock Option (1997) Plan and 2,500 shares under the Employee
Compensation (1997) Plan. Awards under the Employee Stock Option (1997) Plan are
made at the average price of the stock on the date of the date of the award.
6. COMPARATIVE FIGURES
Certain comparative amounts have been reclassified, where appropriate,
to correspond with the current year's presentation.
8
<PAGE>
ITEM 2.
Management's Discussion and Analysis or Plan of Operation.
The following discussion is intended to assist in an understanding of the
Company's financial position and results of operations for the quarter ending
March 31, 1999.
Forward-Looking Information.
This report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of its management as well
as assumptions made by and information currently available to its management.
When used in this report, the words "anticipate", "believe", "estimate",
"expect", "intend", "plan", and similar expressions as they relate to the
Company or its management, are intended to identify forward-looking statements.
These statements reflect management's current view of the Company with respect
to future events and are subject to certain risks, uncertainties and
assumptions. Should any of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in this report as anticipated, estimated or expected. The
Company's realization of its business aims could be materially and adversely
affected by any technical or other problems in, or difficulties with, planned
funding and technologies, third party technologies which render the Company's
technologies obsolete, the unavailability of required third party technology
licenses on commercially reasonable terms, the loss of key research and
development personnel, the inability or failure to recruit and retain qualified
research and development personnel, or the adoption of technology standards
which are different from technologies around which the Company's business
ultimately is built. The Company does not intend to update these forward-looking
statements.
Liquidity and Capital Resources.
The Company has funded its operations for the most part through equity
financing and has had no line of credit or similar credit facility available to
it. The Company's outstanding shares of Common stock, par value $.001 per share,
are traded under the symbol "WAVC" in the over-the-counter market on the OTC
Electronic Bulletin Board by the National Association of Securities Dealers,
Inc. The Company must rely on its ability to raise money through equity
financing to pursue any business endeavors. The majority of funds raised have
been allocated to the development of the WaveRider(R) line of wireless data
communications products.
During the first three months of 1999, the Company has raised $102,803
through the exercise of warrants and Employee Stock options.
The Company, also, filed a registration statement, on form S-3, with the
Security and Exchange Commission which became effective on April 29, 1999. This
provides the Company with the opportunity to draw the second tranche of funds
available under the share purchase agreement completed on December 29, 1999.
Under this agreement the Company may sell up to $3,000,000 of the common stock
of the Company to the investors.
Current Activities.
The Company currently has 46 employees working in its two subsidiaries,
WaveRider Communications (Canada) Inc. and JetStream Internet Services Inc. The
majority of these employees are involved in the design, development and
marketing of the WaveRider(R) line of wireless data communications products.
Results of Operations - First Quarter 1999
During the first quarter of the year, the Company incurred a net loss of
$1,332,228. Cash amounted to $1,378,964 and current liabilities were $744,991
including accruals for expenses. Expenses during the first quarter related
primarily to R&D costs and the establishment of sales and marketing programs for
the introduction of the NCL 135 wireless data communications product.
Results of Operations - First Quarter 1998
During the quarter ended March 31, 1998 the Company incurred a net loss of
$628,574. Cash amounted to $587,118 and current liabilities were $279,633
including accruals for expenses. Expenses during the quarter related primarily
to R&D costs and the salaries and benefits of personnel and consulting fees for
experts engaged in management and R&D of the wireless modem project. Activities
during the quarter centered around developing production and marketing plans for
WaveRider products.
9
<PAGE>
Year 2000 Readiness Disclosure
As a development stage Company, WaveRider has specifically designed and
developed its products not to utilize the two digit format in the "year" data
code field and has considered this issue in procuring outside software and
hardware.
The Company established a Year 2000 Committee in the last quarter of 1998
to evaluate mission critical software and hardware. Data was gathered and
reviewed from software and hardware vendors and testing performed in an effort
to confirm Year 2000 compliance. To date the Company has not spent any monies
specifically to make our application software, operating systems and computer
hardware Year 2000 compliant and does not believe that any future costs to
achieve compliance will have a material impact on the Company's results of
operations. To extent that the Company is unable to assess and correct Year 2000
problems arising from its software and hardware vendors, problems embedded in
their products could have a material adverse effect on the Company.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
NONE
Signatures:
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized,
WaveRider Communications Inc.
Date: May 11, 1999 /s/ D. Bruce Sinclair
-------------------------------
D. Bruce Sinclair
President and Chief Executive Officer
/s/ T. Scott Worthington
-------------------------------
T. Scott Worthington
Chief Financial Officer.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000844053
<NAME> WaveRider, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,378,964
<SECURITIES> 0
<RECEIVABLES> 69,786
<ALLOWANCES> (3,261)
<INVENTORY> 146,481
<CURRENT-ASSETS> 1,685,487
<PP&E> 1,300,408
<DEPRECIATION> (359,761)
<TOTAL-ASSETS> 2,662,522
<CURRENT-LIABILITIES> 744,991
<BONDS> 0
0
800
<COMMON> 31,663
<OTHER-SE> 1,851,980
<TOTAL-LIABILITY-AND-EQUITY> 2,662,522
<SALES> 54,906
<TOTAL-REVENUES> 74,685
<CGS> 32,169
<TOTAL-COSTS> 1,363,567
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,332,228)
<INCOME-PRETAX> 0
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<INCOME-CONTINUING> (1,332,228)
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<EPS-PRIMARY> (0.042)
<EPS-DILUTED> (0.042)
</TABLE>
