SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
Form 10-Q
QUARTERLYREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
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)
255 Consumers Road, Suite 500, Toronto, Ontario M2J 1R4
--------------------------------------------------------------
(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 5, 2000
61,390,130 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, 2000
INDEX
Page
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 4-9
Balance Sheets 4
Statements of Loss and Deficit 5
Statements of Cash Flows 6
Notes to Financial Statements 7-9
Item 2. Management's Discussion and Analysis
or Plan of Operation 10-11
PART II OTHER INFORMATION 11
Item 6. Reports on Form 8-K 11
Signatures 11
2
<PAGE>
PART I. FINANCIAL INFORMATION
Unaudited Consolidated Financial Statements
WAVERIDER COMMUNICATIONS INC.
Quarter ended March 31, 2000 and year ended December 31, 1999
The Financial statements for the three months ended March 31, 2000 and 1999
include, in the opinion of Management, 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, 2000, are not necessarily indicative of results of operations which
will be realized for the year ending December 31, 2000. The financial statements
should be read in conjunction with the Company's Form 10-K for the year ended
December 31, 1999.
3
<PAGE>
WaveRider Communications Inc.
CONSOLIDATED BALANCE SHEETS
(in U.S. dollars)
<TABLE>
<CAPTION>
Quarter ended Year ended
March 31, December 31,
2000 1999
(Unaudited) (Audited)
-------------- -------------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 16,147,254 $ 5,540,917
Accounts receivable [Note 3] 1,043,563 707,619
Prepaid expenses 147,263 128,451
Inventories [Note 4] 1,045,469 609,363
18,383,549 6,986,350
Fixed assets 1,094,985 978,160
Acquired core technologies 1,083,453 1,203,837
Goodwill 819,194 912,169
-------------------------------
$ 21,381,181 $ 10,080,516
===============================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 1,780,860 $ 1,654,401
Deferred revenue 53,855 41,035
Current portion of obligation under capital lease 88,094 68,073
-------------------------------
1,922,809 1,763,509
Obligation under capital lease 47,435 18,625
-------------------------------
1,970,244 1,782,134
SHAREHOLDERS' EQUITY [Note 5]
Preferred Stock, $.001 par value per share: authorized - 5,000,000 shares;
issued and outstanding 50,000 shares at March 31, 2000 and 764,000 shares
December 31, 1999 50 764
Common Stock, $.001 par value per share: authorized - 100,000,000 shares;
issued and outstanding - 52,700,623 at March 31, 2000
43,903,145 shares December 31, 1999 52,701 43,903
Additional paid in capital 38,514,604 22,599,172
Other equity 1,328,736 3,565,327
Deficit (20,485,154) (17,910,784)
------------------------------
19,410,937 8,298,382
$ 21,381,181 $ 10,080,516
===============================
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
WaveRider Communications Inc.
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(in U.S. dollars)
<TABLE>
<CAPTION>
Quarter ended March 31
2000 1999
--------------------------------------------
<S> <C> <C>
REVENUE
Product sales $ 757,219 $ 4,995
Internet sales 48,933 49,911
806,152 54,906
COST OF PRODUCT AND INTERNET SALES 647,483 32,169
--------------------------------------------
GROSS MARGIN 158,668 22,737
--------------------------------------------
EXPENSES
Sales, general and administration 1,433,502 813,405
Research and development 1,396,178 561,339
Interest (126,151) (48,096)
---------------------------------------------
2,703,529 1,326,648
--------------------------------------------
NET LOSS $ (2,544,861) $ (1,332,228)
=============================================
BASIC AND FULLY DILUTED LOSS PER SHARE $ (0.05) $ (0.04)
=============================================
Weighted Average Number of Common Shares 49,263,629 31,594,604
============================================
OPENING DEFICIT $ (17,910,784) $ (9,254,790)
NET LOSS FOR THE PERIOD (2,544,861) (1,332,228)
DIVIDENDS ON PREFERRED SHARES (29,509) (40,000)
---------------------------------------------
CLOSING DEFICIT $ (20,485,154) $ (10,627,018)
=============================================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
WaveRider Communications Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in U.S. dollars)
<TABLE>
<CAPTION>
Quarter ended March 31
2000 1999
--------------------------------------
<S> <C> <C>
OPERATING
Net loss $ (2,544,861) $ (1,332,228)
Items not involving cash
Depreciation and amortization 353,253 78,946
Options issued to consultants - 55,500
Foreign exchange gain (2,177) -
Net changes in non-cash operating working capital items (646,691) (382,126)
---------------------------------------
(2,840,476) (1,579,908)
---------------------------------------
INVESTING
Acquisition of fixed assets (178,552) (122,120)
---------------------------------------
FINANCING
Proceeds from sale of shares (net of issue fees) 13,686,924 102,803
Dividends on preferred shares (29,509) (40,000)
Payments on capital lease obligations (31,290) (29,068)
---------------------------------------
13,626,125 33,735
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Effect of exchange rate changes on cash (760) -
--------------------------------------
Increase (decrease) in cash 10,606,337 (1,668,293)
Cash, beginning of period 5,540,917 3,047,257
--------------------------------------
Cash, end of period $ 16,147,254 $ 1,378,964
======================================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
WaveRider Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
1) NATURE OF OPERATIONS
WaveRider Communications Inc. (formerly Channel i Inc.), incorporated in 1987
under the laws of the state of Nevada, USA is a public company traded on the OTC
Bulletin Board, trading symbol WAVC.
The Company develops and markets wireless data communications products with a
focus on Internet connectivity. With the release of the Company's initial
products in both the NCL and LMS product families and the completion of its
financing arrangements to date, the Company no longer meets the criteria to be
defined as a Development Stage Company.
2) CHANGE IN ACCOUNTING POLICIES
Fixed Assets - Effective the first quarter of 2000, the Company adopted a change
in its method of depreciation from a declining balance to a straight line basis,
as follows:
Computer software 3 years
Computer equipment 4 years
Lab equipment and tools 4 years
Equipment and fixtures 5 years
Leasehold improvements 2 years
The change in policy had no significant effect on current or prior period
reported amounts for depreciation.
3) ACCOUNTS RECEIVABLE
March December
31, 2000 31, 1999
--------------------------------
Accounts receivable - trade $ 1,047,079 $ 665,525
Other receivables 171,932 108,410
Allowance for doubtful accounts (175,448) (66,316)
---------------------------------
$ 1,043,563 $ 707,619
================================
4) INVENTORIES
March December
31, 2000 31, 1999
--------------------------------
Finished products $ 334,770 $ 161,350
Raw materials 710,698 448,013
--------------------------------
$ 1,045,469 $ 609,363
================================
5) STOCKHOLDER'S EQUITY
During the period ended March 31, 2000, the Company issued 8,797,478 common
shares for cash consideration of $13,804,324, less fees of $117,400, and
transferred $2,236,591 from other equity to additional paid in capital, as
outlined below:
a) Common Stock Purchase Agreement - On January 4, 2000, the investor
under the Common Stock Purchase Agreement, dated October 18, 1999,
completed its commitment to purchase stock in connection with the
public underwriting completed on December 23, 1999. At that time, the
investor purchased the balance of 1,437,036 common share units for cash
proceeds of $1,940,000 less fees of $117,400.
7
<PAGE>
b) Conversion of Series C Preference Shares - holders of 714,000 shares of
Series C preference stock converted to 714,000 shares of common stock.
c) Exercise of Options - employees and former employees exercised
1,290,390 options to purchase common stock for cash proceeds of
$1,438,571 and non-employees exercised 153,625 options to purchase
common stock for cash proceeds of $82,284
d) Warrants - the following warrants were exercised for cash consideration
Number Cash
Exercise Prices Exercised Received
--------------- --------- ---------
$1.01 380,000 $ 383,800
$1.35 444,444 600,000
$2.00 3,481,212 6,962,424
$2.50 148,000 370,000
$2.61 225,000 587,250
$3.00 225,000 675,000
$4.00 191,249 764,995
-------------------------------------------------------
$1.01 - $4.00 5,094,905 $ 10,343,469
-------------------------------------------------------
In addition, warrants to purchase 150,000 shares of common stock at $3.00 were
exercised using a cashless feature. This resulted in the issuance of 107,522
common shares and the return and cancellation of the balance of 42,478 warrants.
6) COMMITMENTS
a) Mexican Contract
On March 9, 2000, the Company entered into a distribution agreement with VoIP
International S.A. de C.V. ("VoIP"), a company incorporated in Mexico. As part
of the agreement WaveRider has granted VoIP exclusive rights to market WaveRider
products in Mexico in exchange for commitments to procure a minimum of
$28,000,000 of WaveRider products. As an incentive, WaveRider has issued to VoIP
4,500,000 Common Stock Purchase Warrants, exercisable at $3.15 up to February 2,
2003. VoIP will earn the right to exercise the warrants based on achievement of
the following minimum commitments.
Minimum Purchase Warrants Earned
---------------- ---------------
Initial purchase $ 1,000,000 500,000
Incremental purchases $ 6,000,000 1,000,000
$ 7,000,000 1,000,000
$ 7,000,000 1,000,000
$ 7,000,000 1,000,000
----------- ---------
Total $28,000,000 4,500,000
----------- ---------
In connection with the contract, the Company, also, issued to a sales agent
55,000 warrants, exercisable at $6.81 up to February 2, 2003. These warrants
will be earned upon the purchase of $1,000,000 in product by VoIP.
The fair value of the warrants will be charged to commission expense when the
warrants are earned.
8
<PAGE>
b) Employee Stock Option Agreements
The Company has two existing employee stock option plans -- the Employee Stock
Option (1997) Plan and the 1999 Incentive and Nonqualified Stock Option Plan
which have authorized shares of 6,250,000 and 3,000,000 shares respectively.
Through March 31, 2000, the Company had awarded 6,214,417 options under the
Employee Stock Option (1997) Plan and 2,525,960 options under the 1999 Incentive
and Nonqualified Stock Option Plan.
The Directors have also authorized the award of an additional 1,950,000 options
subject to the approval of the Company's Employee Stock Option (2000) Plan by
the shareholders at the annual meeting. In addition, the Company intends to
extend the exercise period of the options outstanding under the Employee Stock
Option (1997) Plan subject to shareholder approval of an extension to the plan
at the annual meeting.
7) SEGMENTED INFORMATION
The Company's operations are in the design, development, marketing, sale and
support of wireless data access products, focused on fixed wireless Internet
access. The Company does not have any other material market segments.
8) COMPARATIVE FIGURES
Certain comparative amounts have been reclassified, where appropriate, to
correspond with the current period's presentation
9
<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, 2000.
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 2000, the Company has raised
$13,686,924 through completion of the December 23, 1999 financing and the
exercise of warrants and Employee Stock options. Based on the Company's current
plans and projections, Management believes that the Company has sufficient funds
on hand to meet its current and future financial commitments until it achieves
positive cash flows from operations.
Current Activities.
The Company currently has 90 employees located in its head office in
Toronto, Ontario, its Research and Development facility in Calgary, Alberta and
its sales offices in the United States, Canada and China, as well as at its
subsidiary, JetStream Internet Services in Salmon Arm, British Columbia. 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 2000
During the first quarter of the year, the Company incurred a net loss of
$2,544,861. Cash and cash equivalents amounted to $16,147,254 and current
liabilities were $1,922,809 including accruals for expenses. The Company
continues to invest significantly in research and development, incurring
expenses of $1,396,178 (1999 - $561,339) during the quarter. The Company was
focused on the roll out of its Wireless Network products, the LMS2000 and
continuing the development of the sales and marketing strategies for the
WaveRider's Wireless Bridging products, the NCL family, incurring $1,433,502
(1999 - $813,405) in sales, general and administration expenses.
10
<PAGE>
The Company delivered the first of its LMS2000 network systems in the first
quarter and recognized $107,000 in sales for this product line, while deferring
a further $199,000 pending completion of site surveys for the customers. Margins
related to the network components of the LMS product line are significantly
higher than those realized on the current NCL product line.
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.
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 10, 2000 /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
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 16,147,254
<SECURITIES> 0
<RECEIVABLES> 1,219,011
<ALLOWANCES> (175,448)
<INVENTORY> 1,045,469
<CURRENT-ASSETS> 18,383,549
<PP&E> 1,846,009
<DEPRECIATION> (751,024)
<TOTAL-ASSETS> 21,381,181
<CURRENT-LIABILITIES> 1,922,809
<BONDS> 0
0
50
<COMMON> 52,701
<OTHER-SE> 19,358,186
<TOTAL-LIABILITY-AND-EQUITY> 21,381,181
<SALES> 806,152
<TOTAL-REVENUES> 806,152
<CGS> 647,483
<TOTAL-COSTS> 2,703,529
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 109,599
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,544,861)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,544,861)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,544,861)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
