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 September 30, 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 Canada 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: October 27, 2000 - 62,749,518 Common
shares, $.001 par value.
Transitional Small Business Disclosure Format: (check one):
Yes _____; No __X__
1
<PAGE>
WAVERIDER COMMUNICATIONS INC.
FORM 10 - Q
For the Period Ended September 30, 2000
INDEX
Page
SPECIAL NOTE ON FORWARD LOOKING STATEMENTS 3
PART I. CONSOLIDATED FINANCIAL INFORMATION 4
Item 1. Consolidated Financial Statements 4 - 11
Consolidated Balance Sheets 4
Consolidated Statements of Loss and Deficit 5
Consolidated Statements of Cash Flows 6
Notes to Financial Statements 7 - 12
Item 2. Management's Discussion and Analysis or Plan of Operation 13 - 14
PART II OTHER INFORMATION 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Reports on Form 8-K 14
Signatures 14
2
<PAGE>
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements, within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, that are based on our current expectations about our company and our
industry. We use words such as "plan," "expect," "intend," "believe,"
"anticipate," "estimate" and other similar expressions to identify some
forward-looking statements, but not all forward-looking statements include these
words. Some of these forward-looking statements relate our competitive position,
our management's discussion and analysis of our financial condition and results
of operations and the timing and extent of our funding needs. All of our
forward-looking statements involve risks and uncertainties. Our actual results
may differ significantly from our expectations and from the results expressed in
or implied by these forward-looking statements. These and other risks that we
currently consider material are described in the section captioned "Risk
Factors" appearing in our 1999 Annual Report on Form 10-K. We urge you to
consider these cautionary statements carefully in evaluating our forward-looking
statements. Except as required by law, we undertake no obligation to publicly
update any forward-looking statements to reflect subsequent events and
circumstances. The accompanying notes are an integral part of these condensed
consolidated statements.
3
<PAGE>
PART I. FINANCIAL INFORMATION
WaveRider Communications Inc.
CONSOLIDATED BALANCE SHEETS
(in U.S. dollars)
<TABLE>
<CAPTION>
As at As at
September 30, December 31,
2000 1999
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 8,875,736 $ 5,540,917
Cash held in trust [Note 8] 553,065 -
Accounts receivable [Note 4] 2,137,734 707,619
Inventories [Note 5] 2,402,750 609,363
Prepaid expenses 210,281 128,451
-------------------------------
14,179,566 6,986,350
Fixed assets 1,606,854 978,160
Acquired core technologies 842,686 1,203,837
Goodwill 2,854,409 912,169
-------------------------------
$ 19,483,515 $ 10,080,516
===============================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 2,919,524 $ 1,654,401
Deferred revenue 65,270 41,035
Current portion of obligation under capital lease 76,923 68,073
-------------------------------
3,061,717 1,763,509
Obligation under capital lease 23,490 18,625
-----------------------------
3,085,207 1,782,134
-----------------------------
SHAREHOLDERS' EQUITY [Note 6]
Preferred Stock, $.001 par value per share: authorized - 5,000,000 shares;
issued and outstanding - Nil shares at September 30, 2000 and 764,000 shares
December 31, 1999 - 764
Common Stock, $.001 par value per share: authorized - 100,000,000 shares;
issued and outstanding - 55,099,518 at September 30, 2000
43,903,145 shares December 31, 1999 55,100 43,903
Additional paid in capital 45,966,840 22,599,172
Other equity 11,693,509 3,565,327
Deficit (41,317,141) (17,910,784)
-----------------------------
16,398,308 8,298,382
-----------------------------
$ 19,483,515 $ 10,080,516
=============================
</TABLE>
Commitments - See note 7
4
<PAGE>
WaveRider Communications Inc.
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(in U.S. dollars)
<TABLE>
<CAPTION>
Three Months ended Nine Months ended
September 30 September 30
2000 1999 2000 1999
---------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUE
Product sales $ 1,154,739 $ 659,164 $ 2,569,179 $ 804,839
Internet sales 52,115 46,536 159,447 145,941
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1,206,854 705,700 2,728,626 950,780
COST OF PRODUCT AND INTERNET SALES 1,123,542 488,248 2,377,400 620,435
---------------------------------------------------------------------
GROSS MARGIN 83,312 217,452 351,226 330,345
---------------------------------------------------------------------
EXPENSES
Sales, general and administration 11,325,246 1,046,026 16,054,564 3,718,522
Research and development 4,672,991 865,207 8,130,247 2,002,881
Interest (156,568) (20,404) (458,610) (49,927)
---------------------------------------------------------------------
15,841,669 1,890,829 23,726,201 5,671,476
---------------------------------------------------------------------
NET LOSS $ (15,758,357) $ (1,673,377) $(23,374,975) $ (5,341,131)
======================================================================
BASIC AND FULLY DILUTED LOSS PER SHARE $ (0.29) $ (0.05) $ (0.44) $ (0.16)
======================================================================
Weighted Average Number of Common Shares 54,992,503 35,042,642 52,566,521 33,014,825
=====================================================================
OPENING DEFICIT $ (25,558,784) $ (13,002,471) $(17,910,784) $ (9,254,790)
NET LOSS FOR THE PERIOD (15,758,357) (1,673,377) (23.374,975) (5,341,131)
DIVIDENDS ON PREFERRED SHARES - (39,317) (31,382) (119,244)
----------------------------------------------------------------------
CLOSING DEFICIT $ (41,317,141) $ (14,715,165) $ (41,317,141) $ (14,715,165)
======================================================================
</TABLE>
5
<PAGE>
WaveRider Communications Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in U.S. dollars)
<TABLE>
<CAPTION>
Nine Months ended September 30
2000 1999
--------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATIONS
Net loss $ (23,374,975) $ (5,341,131)
Items not involving cash
Depreciation and amortization 1,361,709 390,050
Extension of Employee Stock Option (1997) plan 10,944,485 -
Compensatory shares released from escrow to employee 712,500 -
Compensation shares issued to employees - 458,246
Options issued to consultants 92,301 55,500
Performance based options issued to employees 552,819 -
Warrants issued on financing - 425,000
Foreign exchange gain (7,507)
Net changes in non-cash working capital items (2,002,259) (919,442)
------------------------------------
(11,720,927) (4,931,777)
------------------------------------
INVESTING
Acquisition of fixed assets (978,932) (232,920)
Cash held in trust (553,665) -
Purchase of Transformation Techniques,
net of cash acquired - (255,288)
------------------------------------
(1,542,597) (488,208)
------------------------------------
FINANCING
Proceeds from sale of shares (net of issue fees) 16,710,429 2,996,660
Dividends on preferred shares (31,382) (119,244)
Payments on capital lease obligations (85,140) (100,920)
------------------------------------
16,593,907 2,776,496
-----------------------------------
Effect of exchange rate changes on cash (5,564) (2,486)
------------------------------------
Increase (decrease) in cash and cash equivalents 3,334,819 (2,645,975)
Cash and cash equivalents, beginning of period 5,540,917 3,047,257
-----------------------------------
Cash and cash equivalents, end of period $ 8,875,736 $ 401,282
===================================
</TABLE>
6
<PAGE>
WaveRider Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000 and December 31, 1999
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 $
23,374,975 for the nine months ended September 30, 2000 (1999 - $5,341,131) and
reported a deficit at that date of $41,317,141 (1999 - $14,715,165). In
addition, projected cash flows from the Company's current operations are not
sufficient to finance the Company's current and projected working capital
requirements. The circumstances, together with the requirements to continue
investing in research and development activities to meet the Company's growth
objectives and without assurance of broad commercial acceptance of the Company's
products, lend some doubt as to the ability of the Company to continue in normal
business operations. 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.
2) BASIS OF PRESENTATION
The condensed consolidated financial statements of WaveRider Communications Inc.
(the "Company") presented in this Form 10-Q are unaudited. In the opinion of
management, the accompanying condensed consolidated financial statements reflect
all adjustments (which include only normal recurring adjustments) which are
necessary for a fair presentation of operations for the three and nine- month
periods ended September 30, 2000 and September 30, 1999. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. These condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999, as filed with the Securities and Exchange Commission. Certain
amounts on the accompanying consolidated financial statements have been
reclassified from the previously reported balances to conform to the 2000
presentation.
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 reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The results of operations for
the three and nine-month periods ended September 30, 2000 and September 30, 1999
are not necessarily indicative of the results expected for the full fiscal year
or for any other fiscal period.
3) CHANGE IN ACCOUNTING POLICIES
Fixed Assets - Effective for 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.
7
<PAGE>
WaveRider Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000 and December 31, 1999
4) ACCOUNTS RECEIVABLE
September December
30, 2000 31, 1999
--------------------------------
(Unaudited) (Audited)
Accounts receivable - trade $ 2,136,726 $ 665,525
Other receivables 339,930 108,410
Allowance for doubtful accounts (338,922) (66,316)
---------------------------------
$ 2,137,734 $ 707,619
================================
5) INVENTORIES
September December
30, 2000 31, 1999
--------------------------------
(Unaudited) (Audited)
Finished products $ 783,182 $ 161,350
Raw materials 1,619,568 448,013
--------------------------------
$ 2,402,750 $ 609,363
================================
6) SHAREHOLDERS' EQUITY
During the nine months ended September 30, 2000, the Company issued 11,196,373
common shares for cash consideration of $16,827,829, less fees of $117,400, and
transferred $2,816,301 from other equity to additional paid in capital, net of
additions, while adding an additional $10,994,485 to other equity 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.
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 during the first quarter of the year
and holders of 50,000 shares of Series C preference stock
converted to 50,000 shares of common stock during the second
quarter of the year. As a result, all shares of preference
stock had been converted to shares of common stock by
September 30, 2000.
c) Exercise of Options - during the first quarter of 2000,
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
During the second quarter of 2000, employees and former
employees exercised 121,450 options to purchase common stock
for cash proceeds of $153,745 and non-employees exercised
33,000 options to purchase common stock for cash proceeds of
$16,500.
8
<PAGE>
WaveRider Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000 and December 31, 1999
During the third quarter of 2000, employees and former
employees exercised 73,000 options to purchase common stock
for cash proceeds of $84,370.
d) Warrants - the following warrants were exercised for cash
consideration
Quarter ended March 31, 2000
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
--------------------------------------------------------------
Quarter ended June 30, 2000
Number Cash
Exercise Prices Exercised Received
--------------- ---------- ----------
$2.00 421,333 842,666
$2.50 652,000 1,630,000
--------------------------------------------------------------
$2.00 - $2.50 1,073,333 $ 2,472,666
--------------------------------------------------------------
Quarter ended September 30, 2000
Number Cash
Exercise Prices Exercised Received
--------------- ---------- ----------
--------------------------------------------------------------
$2.00 148,112 $ 296,224
--------------------------------------------------------------
In addition, warrants to purchase 150,000 shares of common
stock at $3.00 were exercised, during the first quarter, 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.
e) Release of Escrow Shares - During the second quarter, the
second milestone related to the release of the common shares
held in escrow was met with the first of the LMS systems
becoming operational in at least one community. As a result,
the Company requested and the Escrow Agent released, on May
26th, the second 10% of the shares held under the Escrow
Agreement, 900,000 shares of Common Stock, valued at
$3,206,250. The Company charged $712,500 to compensation
expense and charged $2,493,750 to Goodwill. The valuation was
based on the closing price of the common stock on May 26th of
$3.5625 per share.
In addition, certain options awarded to employees and
consultants vested based on the release from escrow. The
vesting resulted in an expense of $645,120, in a charge to
sales, general and administration of $476,194 and to research
and development of $168,926.
9
<PAGE>
WaveRider Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000 and December 31, 1999
f) Extension of Employee Stock Option (1997) Plan -- On July 7,
2000, at the Company's annual general meeting of stockholders,
a resolution was passed extending the Company's Employee Stock
Option (1997) Plan and the options awarded under the Plan to
current employees and non-employee consultants for a further
10 years.
Under Generally Accepted Accounting Principles, a modification
that either renews a fixed award or extends the award's period
(life) results in a new measurement of compensation cost as if
the award were newly granted. As such, for the fixed awards to
employees the difference between the fair market value of the
shares of Common Stock at the time of the extension and the
time of the original award will be recorded as an expense to
the Company. At July 7, 2000, the total charge related to the
extension of the fixed awards, based on a closing stock price
of $8.75 per share, was $11,099,858.
For exercisable options, the expense of $10,944,485 was
recognized in the third quarter, in a charge to sales, general
and administration of $9,112,676 and to research and
development of $1,831,809. For unexercisable options the
expense will be deferred and amortized over the period they
become exercisable.
Options granted to non-employees and performance based options
awarded to employees, 318,535 and 850,000 options respectively
which have not yet vested will be valued at the time the
options are earned. Extension of these options allows for
additional time for the options to be earned but has not
resulted in a change in the measurement date.
7) COMMITMENTS
a) Employee Stock Option Agreements
The Company has three existing employee stock option plans -- the Employee Stock
Option (1997) Plan, the 1999 Incentive and Nonqualified Stock Option Plan and
the Employee Stock Option (2000) Plan which have authorized shares of 6,250,000,
3,000,000 and 6,000,000 shares respectively. Through September 30, 2000, the
Company had awarded 6,145,745 options under the Employee Stock Option (1997)
Plan, 2,991,860 options under the 1999 Incentive and Nonqualified Stock Option
Plan and 2,029,812 under the Employee Stock Option (2000) Plan.
b) Employee Stock Purchase Agreement
On July 7, 2000, the shareholders approved the establishment of the Company's
Employee Stock Purchase (2000) Plan, which has 3,000,000 authorized shares.
Under the terms of the plan, employees are eligible to purchase shares of the
Company's common stock at 85% of the lower of the opening or closing price
during any plan period. On September 1, 2000, the Company implemented its first
plan period which will run until January 31, 2001. Subsequent offerings will run
for six-month periods commencing February 1, 2001.
c) 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 their procuring
specific volumes of WaveRider products. 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. As of September 30, 2000 none of the purchase requirements
had been met and no warrants earned.
10
<PAGE>
WaveRider Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000 and December 31, 1999
8) SUBSEQUENT EVENTS
Effective October 1, 2000, the Company acquired ADE Network Technology Pty of
Melbourne, Australia, ("ADE") a privately-held wireless infrastructure company.
The Company undertook this acquisition to provide a sales presence in Australia
and South East Asia where it believes a strong growing potential market for its
products exists.
ADE Network Technology operates offices in Melbourne, Sydney, Canberra, Brisbane
and Perth in Australia. In addition to marketing the Company's fixed wireless
Internet access products, ADE's team of 27 sales, engineering, administration
and management professionals will provide professional planning, installation
and maintenance services to wireless Internet Service Providers throughout the
continent.
Under the terms of the Agreement, the Company committed to pay a minimum of
$2,178,000 ($4,000,000 Australian) in 4 equal quarterly installments commencing
the closing date. In addition, the former shareholders of ADE could receive up
to $487,800 ($900,000 Australian) additional compensation based on 40% of any
revenue in excess of $4,065,000 ($7.5 Million Australian) earned by ADE during
the 12 months ended September 30, 2001. When the final revenues are determined
any additional compensation will be recorded as goodwill and amortized over the
balance of the useful life.
Payment of the first installment of $1,000,000 Australian was made in cash. As
at September 30, 2000, the payment was being held in trust pending finalization
of the Agreement. Payment of the balance of the consideration, after the initial
payment at closing, can be made, at the Company's sole discretion, in the form
of shares, cash or a combination of each.
The transaction, will be accounted for as a purchase, is summarized as follows:
Cash on hand $ 136,614
Other current assets 901,738
Fixed assets 289,642
Term loan (75,631)
Other current liabilities (1,193,344)
Non-current liabilities (124,194)
------------
Net liabilities assumed (65,175)
Expenses incurred on acquisition (51,237)
Goodwill 2,204,394
-----------
Total consideration received $ 2,087,982
===========
Cash paid on closing $ 552,000
Quarterly committed payments 1,535,982
-----------
Total consideration given $ 2,087,982
===========
The cash effect of this transaction is summarized as follows:
Bank indebtedness assumed $ 75,631
Cash paid on closing 552,000
Cash acquired (136,614)
-----------
Net cash paid $ 491,017
===========
11
<PAGE>
WaveRider Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000 and December 31, 1999
The purchase price allocation for this acquisition has been based on available
information at the time of preparation of these financial statements. To the
extent that these amounts prove to be excessive or inadequate they will be
adjusted up to a year from the date of acquisition.
The following summarizes certain supplementary pro forma disclosure assuming
that the acquisition had occurred at the beginning of 1999:
<TABLE>
<CAPTION>
Nine Months ended September 30,
2000 1999
---------------------------------
<S> <C> <C>
Proforma consolidated revenue $ 5,879,963 $ 4,204,024
=================================
Proforma consolidated net loss $ (24,448,816) $ (5,819,846)
==================================
Proforma consolidated basic and fully diluted loss per share $ (0.47) $ (0.18)
==================================
</TABLE>
9) 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 operating segments.
10) NEW ACCOUNTING STANDARDS
In September 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, hedging activities and exposure
definition. The pronouncement is effective for fiscal years beginning after
September 15, 2000. The Company believes the pronouncement will not have a
material effect on its financial statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." SAB
101 provides guidance on applying generally accepted accounting principles to
revenue recognition issues in financial statements. The Company has adopted SAB
101 as required in the fourth quarter of 2000. The Company does not expect the
adoption of SAB 101 to have a material effect on the Company's consolidated
results of operations and financial position.
12
<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
September 30, 2000.
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" NASDAQ National Market System. 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. During the second and third
quarter, the Company raised an additional $2,642,911 and $ 380,594 respectively
through the exercise of warrants and Employee Stock options.
Current Activities.
The Company currently has over 150 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, Mexico, Germany and China,
as well as at its subsidiary, JetStream Internet Services in Salmon Arm, British
Columbia and, effective October 1, 2000, its new subsidiary, ADE Network
Technology Pty Ltd in Australia. 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 - Nine Months ended September 30, 2000
For the nine months ended September 30, 2000, the Company incurred a
net loss of $23,374,975 (1999 - $5,341,131). Included in the loss for the nine
months ended September 30, 2000 were special accounting charges of $10,944,485
(1999 - $Nil) related to the extension of the Company's Stock Option (1997) Plan
and $1,357,620 (1999 - $Nil) related to the vesting of non-employee and employee
performance options and release of compensatory escrow shares. These special
charges were charged to sales, general and administration in the amount of
$10,301,370 and research and development in the amount of $2,000,735.
Cash and cash equivalents amounted to $9,428,801 and current
liabilities were $3,061,717 including accruals for expenses. Accounts receivable
increased by $1,430,115 as the result of increased sales and the provision of
extended payment terms to certain customers. Inventory increased by $1,793,387
as the Company acquired parts for the anticipated roll out and growth of new NCL
and LMS products during the fourth quarter of 2000.
The Company continues to invest significantly in research and development,
incurring expenses, net of special accounting charges, of $5,753,194 (1999 -
$2,002,881) during the period. The Company was focused on the roll out of its
Wireless Network products, the LMS2000 and LMS 3000 product families, and
continued the development of the sales and marketing strategies for the
WaveRider's Wireless Bridging products, the NCL family, incurring $6,129,512
(1999 - $3,718,522) in sales, general and administration expenses, net of
special accounting charges.
During the nine-month period, the Company shipped and recognized
revenue from ten LMS 2000 systems. In addition, the Company shipped one LMS 3000
system but deferred the revenue recognition until the system is fully tested and
operational. 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 - Nine months ended September 1999
For the nine months ended September 30, 1999, the Company incurred a
net loss of $5,341,131. Cash amounted to $401,282 and current liabilities were
$1,743,718 including accruals for expenses. Activities during the period related
primarily to ongoing R&D, the acquisition of Transformation Techniques and the
establishment of sales and marketing programs for the NCL family of wireless
data communications product. Included in the loss for the period was a $425,000
non-cash expense for the estimated fair value of warrants issued for services
rendered and a $458,246 non-cash expense for shares issued to employees from the
Employee Stock Compensation (1997) Plan.
13
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
a) The Company held it annual general meeting on July 7, 2000 in Toronto,
Canada. Notice of Meeting, dated May 30, 2000, was distributed to all
shareholders of record, effective May 17, 2000, and filed with the
Security and Exchange Commission on form 14A on May 25, 2000.
Five matters were voted upon at the annual general meeting.
1) Mr. Gerry Chastelet, Mr. John Curry, Mr. Cameron Mingay, Mr.
Bruce Sinclair, Mr. Guthrie Stewart and Mr. Dennis Wing were
elected as directors of the Company. Votes for the directors
were 42,753,543 For, Nil Against.
20 The extension of the Company's Employee Stock Option (1997)
Plan was ratified. Votes for ratification were 16,657,489 For,
611,431 Against and 140,346 Abstaining.
3) The Company's Employee Stock Option (2000) Plan was approved
by the shareholders. Votes were 16,547,050 For, 660,658
Against and 201,558 Abstaining.
4) The Company's Employee Stock Purchase (2000) Plan was approved
by the shareholders. Votes were 16,752,691 For, 481,177
Against and 175,398 Abstaining.
5) The proposal to amend the Company's Restated Certificate of
Incorporation to increase the authorized number of shares of
Common Stock from 100,000,000 to 200,000,000 was approved by
the shareholders. Votes were 41,815,673 For, 835,767 Against
and 102,103 Abstaining.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
October 16, 2000 - Acquisition of ADE Network Technology PTY
Ltd
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: October 27, 2000
/s/ D. Bruce Sinclair
---------------------
D. Bruce Sinclair
President and Chief Executive Officer
/s/ T. Scott Worthington
------------------------
T. Scott Worthington
Chief Financial Officer.
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