SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Sections 13 or 15(d) of the Securities and Exchange Act of 1934
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Date of Report (Date of earliest event reported): January 10, 2001
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WAVERIDER COMMUNICATIONS INC.
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(Exact name of registrant as specified in charter)
NEVADA
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(State or other jurisdiction of incorporation or organization)
0-25680 33-0264030
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(Commission File Number) (I.R.S. Employer Identification Number)
255 Consumers Road, Suite 500, Toronto, Ontario, Canada M2J 1R4
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(Address of principal executive offices) (Zip Code)
(416) 502-3200
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(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report)
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Item 9 Regulation FD Disclosure
This document contains forward-looking statements that involve risks and
uncertainties, including the risks associated with the effect of changing
economic conditions, trends in the development of the Internet as a commercial
medium, market acceptance risks, technological development risks, seasonality
and other risk factors detailed in the Company's filings with the Securities and
Exchange Commission.
Can you provide further details on your pre-announced revenue for the year 2000
and what are the implications for the street's 2001 revenue projections?
WaveRider made significant progress in 2000 both in terms of sales and new
product introductions. As laid out in the news release, our unaudited revenue
for 2000 increased by 130% over 1999 and Q4 revenue showed an increase of 84%
over Q4 1999 and 24% over Q3 2000.
Notwithstanding our accomplishments to date, these numbers do not meet the
projections that have been issued by the street. We have suggested on several
occasions that WaveRider would not provide revenue projections and that actual
revenue could be double or half that of street estimates. At our stage of
development, WaveRider has a very limited product portfolio such that any
product delays will have a relatively larger impact on revenue. As we go forward
we plan to expand our product portfolio and become less vulnerable and sensitive
to any one product delay.
We would emphasize however that these delays have not diminished our belief in
our positive growth outlook going forward. Our products are generating
excitement in the marketplace and we remain confident that we will capture
significant market share.
We are particularly pleased with the customer feedback on LMS2000 and NCL1155
performance.
After successfully testing a prototype installation over several months, the
LMS3000 is currently being deployed in a pilot installation using the latest
version of the end user modem. This version of the LMS3000 features a new design
and lower cost and has incorporated numerous performance improvements over the
earlier pilot installation. We are also in the final stage of FCC approval for
the LMS3000. The FCC approval process for the LMS3000 has been more complicated
and has taken longer than for the LMS2000 mainly due to its use of an interior
antenna. Specifically, because the LMS3000 incorporates an interior antenna in
close proximity to the end user, these antennae must meet very rigid FCC safety
standards.
In the news release you refer to certain accomplishments and acquired expertise
- can you elaborate?
We view our R & D capability as well as our professional services capabilities
as major competitive advantages that differentiate WaveRider in the wireless
sector. Our R & D department has grown from less than 25 people a year ago to
more than 55 professionals presently. The building and integration of the team
is now largely completed and the team's experience and capabilities are such
that we expect significant contributions in terms of new product development
going forward. Also, given our relatively small size and flexibility, we believe
that we will be able to shorten typical industry product development cycles.
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Similarly, our professional services group has grown and acquired substantial
capabilities. Our product deployment experience, while admittedly involving
longer cycles than expected, have provided WaveRider with valuable experience.
This wireless network deployment experience, combined with the global
capabilities of our service partners should facilitate WaveRider's global
growth.
How did the ADE acquisition perform?
ADE was a strategic acquisition for WaveRider and we are pleased with their
performance to date. ADE has a strong sales and service team that has captured
significant market share in Australia in their 15 year history. The ADE
personnel was one of the main motivators for the acquisition and it is
gratifying to note that we have had no turnover in the sales and service areas.
As with most mergers, product sales and deployments were affected operationally
by the merger and this has impacted the revenue contribution for Q4. ADE has now
incorporated WaveRider's NCL and LMS2000 product lines and we anticipate
significant growth going forward in their immediate market area as well as their
expanded target market in Southeast Asia.
Other wireless companies have announced revenue shortfalls. Does this mean the
wireless sector will experience slower growth than previously expected?
We believe the outlook for the wireless sector continues to be very positive for
several reasons. The global Internet population is projected to continue to grow
rapidly.
According to estimates released in December 2000, by Nua Ltd., the global online
population has grown to over 400 million, almost double their estimate of 201
million online at September 1999. They, also, note that, despite this rapid
growth, less than 7 percent of the world's population accesses the Internet,
meaning that the potential for growth remains large. According to the Computer
Industry Almanac, 490 million people around the world will have Internet access
by 2002 and the ARC Group estimated, in July 2000, that this number could expand
to 670 million users by 2005..
At the same time, according to the ARC Group in their report published in July
2000, most US homes and businesses do not have access to broadband Internet
while demand for high speed Internet access is increasing. Although, the
availability of high-speed Internet access is expanding in major urban centers
(cable and DSL), the last mile to suburban, rural and international markets
remains under-serviced.
Notwithstanding the current economic slowdown, we believe that the global demand
for broadband wireless access equipment will exceed affordable solutions. Our
customer experience to date with both the LMS2000 and the LMS3000 leads us to
believe that we are well placed to capture significant market share both in
North America and Internationally.
What are the inventory write-offs that you mention in the Press Release?
During the second half of 2000, the unlicensed wireless bridge market saw a
number of new competitive offerings and significant price reductions, including
the introduction of our own NCL1155. In fact, we believe our new NCL1155 to be
the leading bridge/router in the industry in terms of data transmission speeds
and price/performance features.
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These competitive pressures, however, did seriously impact our older generation
of products. The NCL 1135 product, which was derived from the TTI acquisition in
FY1999, was limited in its feature set and too expensive to manufacture in light
of the new competitive product offerings and, therefore, was discontinued at the
beginning of Q4. The NCL135, our original product offering, while still offering
significant feature benefits, was significantly discounted due to its slower
transmission rates. The discontinuation of the NCL1135 and the discounting of
the NCL135 resulted in write off of raw materials, inventory and service spares
which impacted margins in Q3 and Q4.
What is meant by non-cash accounting charges?
In our current financing, the Company issued $5 million in 6% convertible notes
with two warrants - one for five years at 165% of the bid price at closing and
one for one year at 125% of the bid price at closing. In addition, we committed
to issue future 6% convertible notes and warrants for a further $7 million.
When we look at this arrangement, the Company is receiving a reduced interest
rate due to the fact that the notes can be converted to common stock and that
warrants are being issued with the notes. Without these components the Company's
ability to raise the funds or the interest rate charged would be significantly
different. Accounting rules, therefore, attempt to determine the impact of these
components.
Under U.S. GAAP, one must look at each component of a financial offering and
give value to it. When there is no easy method to determine the exact value
accounting estimates must be used - generally, for option and warrant pricing
this entails the Black-Scholes valuation model.
For accounting purposes, we must look at and value:
1. The convertible feature of the notes
2. The one & five year warrants
3. The cash-less exercise component of the 5 year warrants
4. The commitment to issue future convertible notes
Once an appropriate value for each of these components is determined the amount
will be expensed as a financing charge with the offsetting credit posted to
other equity. This charge will not effect our cash or working capital position.
Signatures:
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this current report on Form 8-k to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: January 11, 2001
WaveRider Communications Inc.
Per: /s/ Bruce Sinclair
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Bruce Sinclair, President