SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the Month of: April, 2000
SPECTRUM SIGNAL PROCESSING INC.
(Registrant's Name)
One Spectrum Court, 2700 Production Way, Suite 200
Burnaby, British Columbia, Canada V5A 4X1
(Address of Principal Corporate Offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F:
Form 20-F [X] Form 40-F [ ]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g30-2(b): 82- .
<PAGE>
SPECTRUM SIGNAL PROCESSING INC.
One Spectrum Court
2700 Production Way, Suite 200
Burnaby, B.C.
V5A 4X1
(604) 421-5422 (Telephone)
(604) 421-1764 (Facsimile)
NOTICE OF ANNUAL GENERAL MEETING
TO THE MEMBERS:
NOTICE IS HEREBY GIVEN that the annual general meeting of Spectrum
Signal Processing Inc. (the "Company") will be held in the Boardroom at the
Company's offices, at One Spectrum Court, 200 - 2700 Production Way, Burnaby,
British Columbia on Thursday, the 18th day of May, 2000 at the hour of 1:30
o'clock in the afternoon (Vancouver time) to transact the usual business of an
annual general meeting and for the following purposes:
1. To receive and consider the Report of the Directors to the Members.
2. To receive and consider the financial statements of the Company together
with the auditor's report thereon for the fiscal year ended December 31, 1999.
3. To consider and, if thought fit, to approve an ordinary resolution to set
the number of directors at seven (7).
4. To elect directors to hold office until the next annual general meeting
of the Company.
5. To appoint an auditor for the Company to hold office until the next
annual general meeting of the Company.
6. To authorize the directors to fix the remuneration to be paid to the
auditor for the Company.
7. To consider and, if thought fit, to approve an ordinary resolution to
amend the existing formal stock option plan by increasing the number of options
covered by the plan, details of which are set out in the enclosed Information
Circular.
8. To transact such further or other business as may properly come before
the meeting and any adjournment or adjournments thereof.
The accompanying Information Circular provides additional information
relating to the matters to be dealt with at the meeting and is deemed to form
part of this notice.
<PAGE>
A shareholder entitled to attend and vote at the meeting is entitled
to appoint a proxy to attend and vote in his stead. If you are unable to
attend the meeting in person, please complete, sign and date the enclosed form
of Proxy and return it within the time and to the location in accordance with
the instructions set out in the form of Proxy and Information Circular
accompanying this Notice.
Please advise the Company of any change in your address.
DATED at Vancouver, British Columbia, this 14th day of April,
2000.
By Order of the Board of
SPECTRUM SIGNAL PROCESSING INC.
/s/ Pascal Spothelfer
PASCAL SPOTHELFER
President & CEO
<PAGE>
SPECTRUM SIGNAL PROCESSING INC.
One Spectrum Court
2700 Production Way, Suite 200
Burnaby, B.C. V5A 4X1
(604) 421-5422 (Telephone)
(604) 421-1764 (Facsimile)
INFORMATION CIRCULAR
(As at April 7, 2000 except as indicated)
MANAGEMENT SOLICITATION
------------------------
THIS INFORMATION CIRCULAR IS FURNISHED IN CONNECTION WITH THE SOLICITATION
OF PROXIES BY THE MANAGEMENT OF SPECTRUM SIGNAL PROCESSING INC. (THE "COMPANY")
FOR USE AT THE ANNUAL GENERAL MEETING (THE "MEETING") OF THE COMPANY TO BE HELD
ON THURSDAY, MAY 18, 2000. The solicitation will be by mail and possibly
supplemented by telephone or other personal contact to be made without special
compensation by regular officers and employees of the Company. The Company does
not reimburse shareholders, nominees or agents for the cost incurred in
obtaining from their principals authorization to execute forms of proxy. No
solicitation will be made by specifically engaged employees or soliciting
agents. The cost of solicitation will be borne by the Company.
APPOINTMENT AND REVOCATION OF PROXIES
-----------------------------------------
The persons named in the enclosed form of proxy are directors of the
Company.
Any shareholder returning the enclosed form of proxy may revoke the same at
any time insofar as it has not been exercised. In addition to revocation in any
other manner permitted by law, a proxy may be revoked by an instrument in
writing executed by the shareholder or by his attorney authorized in writing or,
where the shareholder is a corporation, by a duly authorized officer, or
attorney, of the corporation, and delivered either to the office of the Company
or the registrar and transfer agent's office at least 48 hours prior to the
scheduled time of the meeting or by the chair of such meeting at the scheduled
commencement of the meeting, or any adjournment of it, and upon any of such
deposits the proxy is revoked.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
------------------------------------------------
The Company is authorized to issue 50,000,000 common shares without par
value, of which 10,484,568 common shares are issued and 10,250,668 outstanding.
Only the holders of common shares are entitled to vote at the Meeting and
the holders of common shares are entitled to one vote for each common share
held. Holders of common shares of record on April 7, 2000 will be entitled to
vote at the Meeting.
To the knowledge of the directors and senior officers of the Company, no
persons beneficially own shares carrying more than 10% of the voting rights
attached to all shares of the Company.
<PAGE>
VOTING OF PROXIES AND EXERCISE OF DISCRETION
--------------------------------------------------
A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A
SHAREHOLDER) TO ATTEND AND ACT FOR HIM OR HER AND ON HIS OR HER BEHALF AT THE
MEETING OTHER THAN THE PERSONS DESIGNATED IN THE ACCOMPANYING FORM OF PROXY. TO
EXERCISE THIS RIGHT THE SHAREHOLDER MAY INSERT THE NAME OF THE DESIRED PERSON IN
THE BLANK SPACE PROVIDED IN THE PROXY AND STRIKE OUT THE OTHER NAMES OR MAY
SUBMIT ANOTHER PROXY.
THE SHARES REPRESENTED BY PROXIES IN FAVOUR OF MANAGEMENT WILL BE VOTED ON
ANY POLL (SUBJECT TO ANY RESTRICTIONS THEY MAY CONTAIN) IN FAVOUR OF THE MATTERS
DESCRIBED IN THE PROXY.
The enclosed form of proxy, when properly completed and delivered and not
revoked, confers discretionary authority on the persons appointed thereunder to
vote with respect to any amendments of variations of matters identified in the
Notice of Meeting and with respect to other matters which may properly come
before the Meeting. At the time of printing of this Information Circular, the
management of the Company knows of no such amendment, variation or other matter,
which may be presented to the Meeting.
ELECTION OF DIRECTORS
-----------------------
The directors of the Company are elected at each annual general meeting and
hold office until the next annual general meeting or until their successors are
appointed. In the absence of instructions to the contrary, the enclosed proxy
will be voted for the nominees herein listed.
The shareholders will be asked to pass an ordinary resolution to set the
number of directors of the Company at seven (7). Management of the Company
proposes to nominate each of the following persons for election as a director.
Information concerning such persons, as furnished by the individual nominees, is
as follows:
<TABLE>
<CAPTION>
APPROX. NO. OF
VOTING SHARES
BENEFICIALLY
OWNED, DIRECTLY
PRINCIPAL OCCUPATION OR EMPLOYMENT OR INDIRECTLY, OR DATE ON WHICH THE NOMINEE
NAME, COUNTRY OF ORDINARY RESIDENCE AND, IF NOT AN ELECTED DIRECTOR, CONTROLLED OR BECAME A DIRECTOR OF THE
AND POSITION HELD WITH THE COMPANY OCCUPATION DURING THE PAST FIVE YEARS DIRECTED COMPANY
<S> <C> <C> <C>
PASCAL SPOTHELFER (2)(4)
Canada
PRESIDENT, CHIEF
EXECUTIVE OFFICER and. . . . . . . . President and CEO of the
DIRECTOR . . . . . . . . . . . . . . Company Nil March 15, 1999
<PAGE>
KENNETH A. SPENCER(1)(2)(3)(4)
Canada
CHAIR OF THE BOARD and
DIRECTOR . . . . . . . . . . . . . . Corporate director 23,700 November 3, 1997
JOHN E. BRENNAN
United States. . . . . . . . . . . . President and director of
DIRECTOR . . . . . . . . . . . . . . Activated Communications Inc. 69,000 December 14, 1995
SAMUEL ZNAIMER(1)(3)
Canada . . . . . . . . . . . . . . . Senior vice-president of Ventures
DIRECTOR . . . . . . . . . . . . . . West Capital Ltd. 11,000 July 27, 1990
ANDREW HARRIES(2)(4) . . . . . . . . Senior vice president, Corporate
Canada . . . . . . . . . . . . . . . Development and co-founder of
DIRECTOR . . . . . . . . . . . . . . Sierra Wireless, Inc. Nil April 16, 1999
<FN>
(1) Member of audit committee. There is currently a vacancy on the audit committee, which is expected to
be filled by the board when the two board vacancies are filled.
(2) Member of compensation committee. Pascal Spothelfer is an ex-officio member.
(3) Member of governance committee.
(4) Member of nomination committee.
</TABLE>
As at April 7, 2000 the board has been actively recruiting two additional
members. It is the intention of the board to fill the two vacancies in due
course.
The Advance Notice of the Meeting inviting nominations for directors of the
Company as required by Section 111 of the Company Act (British Columbia) was
mailed to the Ontario Securities Commission, the British Columbia Securities
Commission and to the Toronto Stock Exchange (the "TSE") and was published in
The Province newspaper, Vancouver, British Columbia on March 22, 2000.
STATEMENT OF EXECUTIVE COMPENSATION
--------------------------------------
Particulars of compensation paid to:
(a) the Company's chief executive officer ("CEO");
(b) each of the Company's six most highly compensated executive officers who
were serving as executive officers at the end of the most recently completed
financial year and whose total salary and bonus exceeds CAD$100,000 per year; or
<PAGE>
(c) any additional individuals for whom disclosure would have been provided
under (b) but for the fact that the individual was not serving as an executive
officer of the Company at the end of the most recently completed financial year;
(the "Named Executive Officers") is set out in the summary compensation
table below:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Securities
Other Under Restricted
Annual Options/ Shares or All Other
Name and Principal Compen SARs Restricted LTIP Compen-
Position Year Salary Bonus1 -sation Granted Share Units Payouts sation2
---------- ---------------- ---------- ---------- ------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $ 247,732 Nil Nil 13,000 Nil Nil $ 326.50
Barry Jinks3 . . . 1998 $ 235,935 Nil Nil 13,000 Nil Nil $ 291.00
President & CEO. . 1997 $ 221,025 $ 146,023 Nil 13,000 Nil Nil $ 286.00
Martin McConnell5. 1999 $ 192,795 $ 14,254 Nil 7,500 Nil Nil $ 238.50
VP Finance,. . . . 1998 $ 155,043 Nil Nil 7,500 Nil Nil $ 216.00
Secretary & CFO. . 1997 $ 145,245 $ 76,766 Nil 7,500 Nil Nil $ 220.00
1999 $ 161,260 $ 14,254 Nil 7,500 Nil Nil $ 236.25
Brian Lowe . . . . 1998 $ 156,302 Nil Nil 7,500 Nil Nil $ 216.00
VP Sales . . . . . 1997 $ 148,437 $ 66,753 Nil 7,500 Nil Nil $ 220.00
1999 $ 141,561 $ 14,254 Nil 7,500 Nil Nil $ 236.25
Doug Johnson . . . 1998 $ 134,820 Nil Nil 7,500 Nil Nil $ 216.00
VP Logistics . . . 1997 $ 126,300 $ 66,753 Nil 7,500 Nil Nil $ 220.00
1999 $ 141,561 $ 14,254 Nil 7,500 Nil Nil $ 247.55
David Hobbs. . . . 1998 $ 134,820 Nil Nil 7,500 Nil Nil $ 229.20
VP Engineering . . 1997 $ 126,300 $ 66,753 Nil 7,500 Nil Nil $ 233.00
1999 $ 192,937 $ 34,254 Nil 7,500 Nil Nil $ 238.50
Ron Wages4 . . . . 1998 $ 183,750 $ 38,375 Nil 7,500 Nil Nil $ 216.00
VP Marketing . . . 1997 $ 123,958 $ 70,000 Nil 50,000 Nil Nil $ 15,153
<FN>
(1) Under the Company's Executive Compensation Plan, cash bonuses may be earned by officers based upon the achievement
of targets relating to financial performance of the Company. These bonuses are reported in the year they were earned.
Bonuses earned in any particular year are paid out in the first quarter of the following year.
(2) Includes insurance premiums paid by the Company for the benefit of each Named Executive Officer for group term life
insurance.
(3) Resigned effective July 31, 1999. All options vested to July 31, 1999 in ordinary course, extended for exercise
until October 2000 or January 2001.
(4) Commenced April 15, 1997.
(5) Acting Chief Operating Officer from July 13, 1999 to December 31, 1999.
</TABLE>
The value of perquisites and other personal benefits for each Named
Executive Officer does not exceed the lesser of CAD$50,000 and 10% of the total
of his annual salary and bonus.
Other than as set out above, there were no other persons who would qualify
as Named Executive Officers serving as executive officers at the end of the most
recently completed financial year, nor were there any other executive officers
who are no longer serving the Company who received a salary in excess of
CAD$100,000 during the most recently completed financial year.
<PAGE>
There were no long term incentive plans in place for any Named Executive
Officer of the Company during the most recently completed financial year.
<TABLE>
<CAPTION>
OPTION GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
MARKET VALUE OF
% OF TOTAL SECURITIES
SECURITIES OPTIONS UNDERLYING
UNDER GRANTED TO EXERCISE OR BASE OPTIONS ON THE
OPTIONS EMPLOYEES IN PRICE DATE OF GRANT
NAME GRANTED (#) FINANCIAL YEAR ($/SECURITY) ($/SECURITY) EXPIRATION DATE
(A) (B) (C) (D) (E) (F)
<S> <C> <C> <C> <C> <C>
Barry Jinks . . . 13,000(1) 2.4% $ 2.65 $ 2.65 June 22, 2009
Martin McConnell. 7,500(2) 1.3% $ 2.65 $ 2.65 June 22, 2009
Brian Lowe. . . . 7,500(2) 1.3% $ 2.65 $ 2.65 June 22, 2009
Doug Johnson. . . 7,500(2) 1.3% $ 2.65 $ 2.65 June 22, 2009
David Hobbs . . . 7,500(2) 1.3% $ 2.65 $ 2.65 June 22, 2009
Ron Wages . . . . 7,500(2) 1.3% $ 2.65 $ 2.65 June 22, 2009
<FN>
(1) These options vest as to 2,600 each year commencing as of June 22, 2000
(2) These options vest as to 1,500 each year commencing as of June 22, 2000
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
AND FINANCIAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED
UNEXERCISED IN THE MONEY
OPTIONS AT OPTIONS AT
FY-END FY-END
AGGREGATE VALUE (#) ($)
SECURITIES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE ($) UNEXERCISABLE UNEXERCISABLE
(A) (B) (C) (D) (E)
<S> <C> <C> <C> <C>
Barry Jinks . . . 125,000 $ 312,500 307,393 / 13,000 $ 355,471 / 25,350
Martin McConnell. Nil Nil 90,000 / 30,000 $ 43,350 / 14,625
Brian Lowe. . . . Nil Nil 72,500 / 30,000 $ 13,700 / 14,625
Doug Johnson. . . Nil Nil 59,500 / 30,000 $ 4,440 / 14,625
David Hobbs . . . Nil Nil 64,000 / 30,000 $ 4,110 / 14,625
Ron Wages . . . . Nil Nil 34,850 / 30,150 Nil / 14,625
</TABLE>
There were no options held by any Named Executive Officer that were
repriced downward during the most recently completed financial year.
There were no defined benefit or actuarial plans in place for any Named
Executive Officer during the most recently completed financial year.
There are employment contracts between the Company and each Named Executive
Officer, which are triggered by a change in control of the Company. These
contracts contemplate payment of an amount equivalent to 18 months' salary and
bonus, and accelerated vesting of any options granted to date of notice or
termination.
<PAGE>
The Company has a compensation committee comprised of: Kenneth A. Spencer,
the chair of the board, Andrew Harries, chair of the committee, and Pascal
Spothelfer, CEO, sitting as an ex-officio member.
EXECUTIVE COMPENSATION REPORT
-------------------------------
It is the responsibility of the compensation committee to review and
recommend compensation policies and programs for executives of the Company. The
compensation committee makes recommendations to the board of directors, which
gives final approval on these policies. The Company's compensation policies are
designed to reward and recognize executive performance consistent with the
success of the business and to be aligned with increasing shareholder value.
Its policies are intended to attract and retain capable and experienced people.
The Company's executive compensation is designed to encourage, compensate
and reward employees on the basis of individual and corporate performance, both
in the short and long term. The compensation committee establishes aggregate
compensation levels for all executive officers and these levels have been
ratified by the board of directors.
In 1996, the compensation committee retained Towers Perrin to do a survey
of executive compensation plans of Canadian and U.S. small capital, high
technology companies. As a result of their findings and recommendations the
compensation committee adjusted the base salaries of the CEO and all executives
and provided for an annual adjustment. The compensation committee also
recommended that each vice-president receive an annual grant of options for
7,500 common shares. In 1997, the bonus plan was modified following a review by
Towers Perrin. The bonus plan was modified to provide for an executive bonus
pool that would vary based on annual earnings per share growth. In 1999, the
compensation committee modified the bonus plan to pay each vice president a
bonus that was based upon achievement of revenue and earnings objectives. Also
in 1999 the compensation committee retained Towers Perrin to do a survey of
executive compensation plans of Canadian small capital, high technology
companies.
<PAGE>
Approved by the compensation committee:
Andrew Harries Kenneth A. Spencer
PERFORMANCE GRAPH
------------------
The following graph charts performance of an investment in the Company's
common shares against the TSE 300 Share Index, assuming an investment of CAD$100
on December 31, 1994:
[GRAPH OMITTED]
<TABLE>
<CAPTION>
[GRAPHIC OMITED]
[GRAPHIC OMITED]
Dec 31/94 Dec 31/95 Dec 31/96 Dec 31/97 Dec 31/98 Dec.31/99
<S> <C> <C> <C> <C> <C> <C>
SPECTRUM . . . . 100 ($5.00) 375 ($18.75) 166 ($8.30) 166 ($8.30) 94 ($4.70) 92 ($4.60)
(share price in
brackets)
TSE300 . . . . . 100 94 119 134 130 168
</TABLE>
In addition to the above, in 1999 an Executive Management committee
was struck to assist with the management of the Company in the interim period
prior to appointment of Pascal Spothelfer as CEO. The committee members were
paid for their services from August 1999 to December 1999 as follows:
<TABLE>
<CAPTION>
NAME OF DIRECTOR COMPENSATION
<S> <C>
Kenneth A. Spencer Cdn$6,000 per month
Samuel Znaimer . . Cdn$3,000 per month
Pascal Spothelfer. Cdn$3,000 per month
</TABLE>
From January 1, 1999 to June 30, 1999, Kenneth Spencer, chair of the board,
acted as a consultant for the Company and received a consulting fee of
Cdn$10,000 for the six months.
No other compensation was paid to directors of the Company during the last
completed financial year.
In February 2000, the board approved a change to its compensation plan,
which did away with a $1,000 cash fee for meeting attendance, and is instead
exclusively based upon allotments of incentive stock options for each
non-management director as follows:
<TABLE>
<CAPTION>
NO. OF OPTIONS
<S> <C>
Initial allotment . . . . . . . . . . . . 20,000
Annual retainer
- General director retainer. . . . . . . 5,000
- Chair of the board . . . . . . . . . . 10,000
- Committee member . . . . . . . . . . . 1,000
- Chair of committee of the board. . . . 2,000
Directors in-person meetings of the board 500
Chair of in-person meetings of the board. 1,000
</TABLE>
STOCK OPTION PLAN
-------------------
Shareholder approval as evidenced by a majority of the votes cast at the
annual general meeting by "disinterested shareholders" will be sought to approve
an amendment to the existing formal stock option plan (the "Plan").
At April 7, 2000, (the "Record Date"), there were 2,264,827 total options
outstanding, vested and unvested, held by directors, former directors, executive
officers and employees of the Company. Since the incorporation of the company in
1987 a total of 564,459 options have been exercised. Exercised, lapsed, and
expired options do not automatically replenish the option pool. Therefore, the
<PAGE>
shareholders are being asked to approve the increase of the available pool of
options under the Plan by 2,500,000 to allow for the future granting to
directors and employees of the Company of options to acquire common shares in
the capital stock of the Company. Currently, the pool is 3,050,000. In all
other respects the Plan remains the same as previously approved by shareholders.
Under the policies of the TSE, a disinterested shareholder vote is required
if more than 10% of the number of outstanding shares of the Company could be
reserved for options to insiders or issued to insiders within a one-year period.
A disinterested shareholder vote is also required if more than 5% of the number
of outstanding shares could be issued upon exercise of options to any one
insider in a one-year period.
Under the policies of the TSE, "disinterested shareholders" are
shareholders entitled to vote at a meeting of the Company other than:
(a) insiders of the Company to whom shares may be issued pursuant to
the share compensation arrangement; and
(b) "associates" of such insiders, as that term is defined in the
Ontario Securities Act.
For the purpose of such resolutions, 115,800 shares held by insiders of the
Company will not be counted in the voting.
INDEBTEDNESS TO COMPANY OF DIRECTORS AND SENIOR OFFICERS
---------------------------------------------------------------
None of the directors and senior officers of the Company, proposed nominees
for election or associates of such persons is or has been indebted to the
Company or its subsidiaries at any time since the beginning of the last
completed financial year of the Company and no indebtedness remains outstanding
as at the date of this Information Circular.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
-----------------------------------------------------------------
Save and except the foregoing, or as disclosed elsewhere in this
information circular, since January 1, 1999, being the commencement of the
Company's last completed financial year, none of the following persons has any
material interest, direct or indirect, in any transaction or proposed
transaction which has materially affected or will materially affect the Company
or any of its subsidiaries:
(a) any director or senior officer of the Company;
(b) any proposed nominee for election as a director of the Company;
(c) any member holding, directly or indirectly, more than 10% of the
voting rights attached to all the shares of the Company; and
(d) any associate or affiliate of any of the foregoing persons.
<PAGE>
STATEMENT OF CORPORATE GOVERNANCE POLICIES
----------------------------------------------
The report of the TSE committee on Corporate Governance resulted in the TSE
introducing a new listing requirement in 1995 wherein companies listed on the
TSE are required to disclose their corporate governance system in their annual
reports or information circulars, with specific reference to the guidelines (the
"Guidelines") set out in the TSE Company Manual, copies of which are available
from the TSE or the Company.
Mandate and Responsibilities of the Board
The fundamental objective of the board of directors of the Company is to
ensure that the Company operates in a fashion, which maximizes shareholder value
over the long term. The board's duties and responsibilities are all carried out
in a manner consistent with that fundamental objective.
The principal duty and responsibility of the board is to oversee the
management and operations of the Company, with the day to day management of the
business and affairs of the Company delegated by the board to the CEO and other
executive officers.
The board's responsibilities include overseeing the conduct of the
Company's business, providing leadership and direction to its management, and
setting policies. Strategic direction for the Company is developed through the
board's annual planning process. Through this process, the board adopts the
operating plan for the coming year, and monitors management's progress relative
to that plan through a regular reporting and review process.
Notwithstanding the suggested Guidelines, no formal position descriptions
for the board and the CEO have been developed.
Composition and Size of the board
The shareholders of the Company elect the seven-member board of directors,
with one related director, Pascal Spothelfer. In addition to serving as a
director, Mr. Spothelfer is the Company's president and CEO. The six unrelated
directors are independent of management and free from any interest, business or
other relationships that could, or could reasonably be perceived to, materially
interfere with their ability to act with a view to the best interests of the
Company, other than interests and relationships arising from shareholding.
In 1995, the board increased the number of directors by one, bringing the
total number of directors to seven, a size which the board believes to be
appropriate for the Company.
Committees of the Board
The board has four standing committees: audit, compensation, governance and
nomination. The committees are comprised of two or three directors as noted in
the table on pages 2 and 3. The board intends to appoint another member to the
audit committee when the current board vacancies are filled. Each committee
also has available to it as a resource such members of management as may from
time to time be determined to be appropriate.
<PAGE>
The audit committee assesses, influences, and helps set the tone for
quality financial reporting and sound internal controls. The audit committee
meets quarterly to review and approve financial results of the quarter. The
committee reviews the annual audit and meets with the Company's independent
accountants to review the adequacy and effectiveness of the Company's internal
controls and financial management practices, and recommends the Company's
financial statements to the board for approval.
The compensation committee reviews and recommends compensation policies and
programs for executives of the Company. The committee makes recommendations to
the board which gives final approval on these policies and programs.
The governance committee reviews the composition and governance practices
of the board and makes recommendations to the board concerning board
effectiveness and contribution by each of the members.
The nomination committee recommends the appointment and/or election of
directors and is responsible for orientation of new directors.
The Guidelines contemplate that committees of the board should generally be
composed of outside directors, a majority of whom are unrelated directors. The
Company complies with the requirements of the British Columbia Company Act in
that the majority of its audit committee is comprised of directors who are not
officers or employees of the Company; however, the board feels it is appropriate
to have Pascal Spothelfer, the president and CEO of the Company, sit on the
compensation committee as an ex-officio member, as he is the director who is
most familiar with the operations of the Company.
Decision requiring prior Board approval and Expectations of Management
The board has delegated to the CEO and senior management responsibility for
the day to day management of the business of the Company. Matters of policy and
issues outside the normal course of business are brought before the board for
its review and approval, along with all matters dictated by statute and
legislation as requiring board review and approval. The CEO and senior
management review the Company's progress in relation to the current operating
plan at board meetings, which are held four times a year. The board meets on a
regular basis with and without management present. Financial, operational and
strategic issues facing the Company are reviewed, monitored and approved at the
board meetings.
Recruitment of New Directors and Assessment of Board Performance
The Company has a committee of outside, i.e. non-management directors, a
majority of whom are unrelated directors, with responsibility for proposing to
the board new nominees to the board and for assessing directors on an ongoing
basis. In addition, the nomination committee has responsibility for formal
orientation and education of new directors.
The governance committee has responsibility for assessing the effectiveness
of the board as a whole, the committees of the board and the contribution of
individual directors.
<PAGE>
Director's Compensation
In 1997, the board adopted a compensation program that provides for a fee
of Cad$1,000 for in-person meetings and for allotments of incentive stock
options. In February 2000, the board approved the change to its compensation
plan, which did away with a $1,000 cash fee for meeting attendance, and is
instead exclusively based upon allotment of incentive stock options for each
non-management director as follows:
<TABLE>
<CAPTION>
NO. OF OPTIONS
<S> <C>
Initial allotment . . . . . . . . . . . . 20,000
Annual retainer:
- General director retainer. . . . . . . 5,000
- Chair of the board . . . . . . . . . . 10,000
- Committee member . . . . . . . . . . . 1,000
- Chair of committee of the board. . . . 2,000
Directors in-person meetings of the board 500
Chair of in-person meetings of the board. 1,000
</TABLE>
The board believes this realistically reflects the responsibilities and
risk involved in being an effective director. Pascal Spothelfer, the president
and CEO, does not receive any additional remuneration for acting as a director
or as a member of either of the standing committees.
Shareholder Feedback and Concern
Under the direction of the CEO, there is a shareholder relations program in
place, which involves providing information with respect to reported financial
results and other announcements by the Company to a broad spectrum of investors
and interested parties. Shareholder concerns of a significant nature are
directed to the vice-president, finance and the CEO for information and
resolution, and management reports to the board on these matters and other major
shareholder and investor matters.
APPOINTMENT OF AUDITOR
------------------------
Unless otherwise instructed, the proxies given pursuant to this
solicitation will be voted for the re-appointment of KPMG, Chartered
Accountants, of Vancouver, British Columbia, as auditor of the Company to hold
office until the close of the next annual general meeting of the Company. It is
proposed that the remuneration to be paid to the auditor of the Company be fixed
by the board of directors.
KPMG were first appointed auditor of the Company on July 31, 1987.
<PAGE>
MANAGEMENT CONTRACTS
---------------------
There are no management functions of the Company or a subsidiary thereof,
which are to any substantial degree performed by a person other than the
directors or senior officers of the Company or a subsidiary thereof.
PARTICULARS OF OTHER MATTERS TO BE ACTED UPON
----------------------------------------------------
The management of the Company is not aware of any other matter to come
before the Meeting other than as set forth in the Notice of the Meeting. If any
other matter properly comes before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares represented
thereby in accordance with their best judgement on such matters.
By Order of the board of
SPECTRUM SIGNAL PROCESSING INC.
/s/ Pascal Spothelfer
Per: Pascal Spothelfer,
President & CEO
<PAGE>
Progress Report
April 10, 2000
[GRAPHIC OMITTED]
OVERVIEW
At the beginning of this year, Spectrum announced a new strategic plan and
business model to return the company to growth. Spectrum will become a market
and customer driven company targeting three very specific growth markets,
telecommunications, signal intelligence and sensor systems, in which we can
leverage our technological expertise.
Obviously, the goal of the new strategy is to add value for shareholders. We
will use a number of different means to achieve our goal including increased
awareness of the company, preparing for a near-term financing, seeking analyst
coverage and growing three pure play businesses which we can leverage in the
capital markets and through targeted M&A activities.
In the short-term, revenues and earnings, while important performance criteria
should not be the prime valuation factors. We believe that a company which is
re-inventing itself, as Spectrum is, needs to be valued more on its potential
and management's ability to realize that potential.
The yardstick we are applying to measure our short-term success is a list of
critical milestones. We have made our milestones public and they are published
on page 6 of our annual report. These milestones are important stepping-stones
in reaching our long-term strategic goals and with one quarter behind us, we
wanted to take this opportunity to bring our shareholders up to date on our
progress.
TELECOMMUNICATIONS MILESTONES
1. CONCLUDE STRATEGIC ALLIANCE WITH A SOFTWARE PARTNER
On March 24, 2000 Spectrum announced a partnership with Virata Corporation
(NASDAQ: VRTA) to license its vCore software algorithms for telecommunications
applications. Spectrum can now offer a fully integrated telecommunications
solution to OEM companies and will co-promote and co-market its products with
Virata.
2. LAUNCH FIRST PLATFORM IN THE FOURTH QUARTER OF 2000
We anticipate that a demo version of our first platform will be available late
in the second quarter. By the fourth quarter we expect to be ready to begin
mass production with a lead customer.
3. LINE UP OUR LEAD CUSTOMER
With the first platform now defined and a demo available before the end of the
second quarter our sales team will build on their efforts in the first quarter
which we expect will lead to signing our lead customer.
SIGNAL INTELLIGENCE MILESTONES
1. BE SELECTED AS A CORPORATE STANDARD IN 3 TIER ONE CUSTOMERS
Spectrum expects to announce the first of its long-term, multi-million dollar
contract wins with a tier one customer in April 2000.
------------------------------------------------------------------------------
For more information about Spectrum, visit our web site at
www.spectrumsignal.com
<PAGE>
2. INCORPORATE SPECTRUM USA
We are in the process of incorporating Spectrum USA and planning the transition
of our Signal Intelligence business into this new entity. Later this year we
will also recruit new board members for Spectrum USA and we expect the process
to be complete by the end of 2000.
3. LAUNCH A SMART ANTENNA PLATFORM IN THE FOURTH QUARTER OF 2000
The smart antenna platform is a very important technical milestone for this
business unit. This product is truly innovative and solves a key problem for
our defense customers: namely detection of weak signals.
We also believe that this product will have a role to play in our
telecommunications product strategy as a key technology for base stations to
provide telecom OEM's with extended range and the more efficient use of their
bandwidth - two important issues for telecom companies as the volume of voice,
data and fax communication over the wireless infrastructure continues to grow.
SENSOR SYSTEMS MILESTONES
1. CONCLUDE AT LEAST THREE COMMERCIAL AND/OR TECHNOLOGICAL STRATEGIC
PARTNERSHIPS.
On February 16, 2000 Spectrum announced the first strategic partnership with
Northrop Grumman Corporation. Spectrum and Northrop Grumman have designed a new
multiprocessing application for radar programs. Spectrum expects several
contract wins to be generated from this relationship.
2. LAUNCH NEXT GENERATION SIGNAL PROCESSING PLATFORMS WITH PROCESSING POWER
INCREASED BY A FACTOR OF EIGHT BY THE THIRD QUARTER OF 2000.
Spectrum's sensor systems customers demand high performance, high density and a
reasonable price tag. Spectrum currently provides the highest performance
systems in the sensor systems market and building upon our strategic partnership
with Analog Devices (NYSE: ADI) we will have our next generation products
available for mass production in the third quarter of this year.
3. PROVIDE SYSTEM LEVEL PRODUCTS BY THE FOURTH QUARTER OF 2000.
Our customers want the convenience of working with one supplier who can provide
them with a complete system solution. During the coming year, the sensor
systems team will develop strategic partnerships with other industry leaders,
and enhance its own product offering to ensure that they can provide their
customers with a "one stop shop" experience.
CORPORATE MILESTONES
1. STRENGTHEN THE BOARD OF DIRECTORS BY ADDING TELECOMMUNICATIONS AND
DEFENSE INDUSTRY EXPERTS
Spectrum expects to announce two new directors with telecommunications expertise
prior to its annual general meeting, which will be held on May 18th, 2000 at
Spectrum's headquarters.
2. PREPARE AND POSITION THE COMPANY FOR NEAR-TERM FINANCING
We have increased our investor relations activity to reacquaint the market with
Spectrum and our new strategy. We will be presenting at two institutional
conferences in early May, and we will continue to visit with new and current
shareholders as our travel schedules allow.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
(Prepared in accordance with accounting principles generally accepted in Canada)
AUDITORS' REPORT
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Consolidated Statements of Retained Earnings (Deficit) 6
Notes to Consolidated Financial Statements 7
<PAGE>
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of Spectrum Signal Processing
Inc. as at December 31, 1999 and 1998 and the consolidated statements of
operations, retained earnings and cash flows for each of the years in the
three-year period ended December 31, 1999. 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 audits.
We conducted our audits in accordance with Canadian 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1999
and 1998 and the results of its operations and its cash flows for each of the
years in the three year period ended December 31, 1999 in accordance with
generally accepted accounting principles in Canada. As required by the Company
Act of British Columbia, we report that, these principles have been applied on a
consistent basis.
On February 4, 2000, we reported separately to the shareholders of the Company
on the consolidated financial statements as at and for the periods presented
above, which consolidated financial statements were prepared in accordance with
generally accepted accounting principles in the United States.
Chartered Accountants
Richmond, Canada
February 4, 2000
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM SIGNAL PROCESSING INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States dollars, except share amounts)
--------------------------------------------------------------------------------
Prepared in accordance with accounting principles generally accepted in Canada.
December 31,
1999 1998
-------------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . . $ 1,422 $ 1,693
Accounts receivable, net of allowance for doubtful accounts
of $204 (1998 - $173). . . . . . . . . . . . . . . . . . . . 6,461 5,404
Inventories (note 3) . . . . . . . . . . . . . . . . . . . . 2,402 4,935
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . 69 203
------------------------------------------------------------ -------------- --------
10,354 12,235
PROPERTY AND EQUIPMENT (NOTE 4). . . . . . . . . . . . . . . 2,545 2,287
OTHER ASSETS (NOTE 5). . . . . . . . . . . . . . . . . . . . 5,469 7,863
$ 18,368 $22,385
============== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank indebtedness (note 6) $ --- $ 2,202
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 3,319 3,680
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . 1,618 1,303
Current portion of long-term debt (note 6) . . . . . . . . . 73 80
------------------------------------------------------------ -------------- --------
5,010 7,265
LONG-TERM DEBT (NOTE 6) --- 75
FUTURE INCOME TAXES (NOTE 8) . . . . . . . . . . . . . . . . 404 990
STOCKHOLDERS' EQUITY
SHARE CAPITAL (NOTE 7)
Authorized 50,000,000 common shares, no par value
Issued 10,395,204 (1998 -10,268,954) . . . . . . . . . . . . 15,462 15,397
Outstanding 10,161,904 (1998 -10,035,654)
Warrants (note 7). . . . . . . . . . . . . . . . . . . . . . 140 140
Additional paid-in capital . . . . . . . . . . . . . . . . . 74 74
Treasury stock, at cost, 233,300 shares (1998 - 233,300) . . (1,191) (1,191)
Retained earnings (deficit). . . . . . . . . . . . . . . . . (914) 737
Cumulative translation adjustments . . . . . . . . . . . . . (617) (1,102)
Commitments (note 10). . . . . . . . . . . . . . . . . . . . 12,954 14,055
$ 18,368 $22,385
============== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM SIGNAL PROCESSING INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in thousands of United States dollars, except per share amounts)
-------------------------------------------------------------------------------------
Prepared in accordance with accounting principles generally accepted in Canada
Years ended
December 31,
1999 1998 1997
-------------- -------- --------
<S> <C> <C> <C>
SALES (NOTE 11). . . . . . . . . . . . . . . . . . . . . . . . . $ 26,391 $26,000 $25,483
COST OF SALES. . . . . . . . . . . . . . . . . . . . . . . . . . 11,030 10,607 10,871
---------------------------------------------------------------- -------------- -------- --------
15,361 15,393 14,612
EXPENSES
Administrative . . . . . . . . . . . . . . . . . . . . . . . . . 4,695 3,417 3,059
Sales and marketing. . . . . . . . . . . . . . . . . . . . . . . 6,379 7,204 4,638
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 2,566 1,600 660
Research and development . . . . . . . . . . . . . . . . . . . . 3,591 4,374 2,466
-------------- -------- --------
17,231 16,595 10,823
EARNINGS (LOSS) BEFORE UNDERNOTED. . . . . . . . . . . . . . . . (1,870) (1,202) 3,789
OTHER
Interest income (expense) and bank charges . . . . . . . . . . . (121) (149) 2
Other income (expense) . . . . . . . . . . . . . . . . . . . . . 95 (7) 12
-------- --------
(26) (156) 14
-------------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS. (1,896) (1,358) 3,803
INCOME TAX EXPENSE (RECOVERY) (NOTE 8)
Current 341 88 ---
Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (586) (233) 1,492
---------------------------------------------------------------- -------------- -------- --------
(245) (145) 1,492
-------------- -------- --------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS . . . . . . . . . . . (1,651) (1,213) 2,311
LOSS FROM DISCONTINUED OPERATIONS (NOTE 12) --- --- (515)
NET EARNINGS (LOSS). . . . . . . . . . . . . . . . . . . . . . . $ (1,651) $(1,213) $ 1,796
================================================================ ============== ======== ========
EARNINGS (LOSS) PER SHARE (NOTE 9)
Basic
From continuing operations . . . . . . . . . . . . . . . . . . . $ (0.16) $ (0.12) $ 0.25
After discontinued operations. . . . . . . . . . . . . . . . . . $ (0.16) $ (0.12) $ 0.19
Fully diluted
From continuing operations . . . . . . . . . . . . . . . . . . . $ (0.16) $ (0.12) $ 0.23
After discontinued operations. . . . . . . . . . . . . . . . . . $ (0.16) $ (0.12) $ 0.18
Weighted average shares (in thousands)
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,077 9,860 9,235
Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . 10,077 9,860 10,146
================================================================ ============== ======== ========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM SIGNAL PROCESSING INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States dollars)
-------------------------------------------------------
Prepared in accordance with accounting principles generally accepted in Canada.
Years ended
December 31,
1999 1998 1997
-------------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,651) $(1,213) $ 1,796
Add loss from discontinued operations --- --- 515
----------------------------------------------------------------------- -------------- -------- --------
Earnings (loss) from continuing operations. . . . . . . . . . . . . . . (1,651) (1,213) 2,311
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities
Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,355 2,244 793
Future income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . (586) (233) 1,495
Deferred share issue costs --- --- 184
Changes in operating assets and liabilities
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . (713) 1,154 1,587
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,783 (739) (2,373)
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 2 293
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . (979) 149 (312)
Accrued liabilities 364 150 ---
Deferred revenue --- (18) ---
----------------------------------------------------------------------- -------------- -------- --------
Net cash provided by continuing operations. . . . . . . . . . . . . . . 2,717 1,496 3,978
----------------------------------------------------------------------- -------------- -------- --------
Loss from discontinued operations --- --- (515)
Deferred income taxes, an item not involving cash --- --- (331)
Net cash used for discontinued operations --- --- (846)
Net cash provided by operating activities . . . . . . . . . . . . . . . 2,717 1,496 3,132
-------------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment. . . . . . . . . . . . . . . . . . . (797) (559) (1,011)
Proceeds from disposition of property and equipment --- 1 ---
Software and related development costs --- (477) (1,354)
Acquisition of net assets of Alex Computer, net of cash received --- (2,204) ---
Cash received on acquisition of 3L Limited, net of expenses --- --- 182
Net cash used for investing activities. . . . . . . . . . . . . . . . . (797) (3,239) (2,183)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in bank indebtedness --- 2,036 ---
Repayment of bank indebtedness (2,284) --- ---
Issue of shares from share options. . . . . . . . . . . . . . . . . . . 65 149 179
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . (80) (61) (6)
Purchase of treasury shares --- --- (1,164)
Net cash provided by (used for) financing activities. . . . . . . . . . (2,299) 2,124 (991)
Effect of foreign currency exchange rates on cash and cash equivalents 108 (71) ---
-------------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DURING THE YEAR. . (271) 310 (42)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR. . . . . . . . . . . . . . 1,693 1,383 1,425
CASH AND CASH EQUIVALENTS, END OF YEAR. . . . . . . . . . . . . . . . . $ 1,422 $ 1,693 $ 1,383
======================================================================= ============== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
See supplementary information (note 14).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM SIGNAL PROCESSING INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (Deficit)
(Expressed in thousands of United States dollars)
-------------------------------------------------------
Prepared in accordance with accounting principles generally accepted in Canada.
Years ended
December 31,
1999 1998 1997
-------------- -------- ------
<S> <C> <C> <C>
RETAINED EARNINGS, BEGINNING OF YEAR. . . $ 737 $ 1,950 $ 154
NET EARNINGS (LOSS) . . . . . . . . . . . (1,651) (1,213) 1,796
RETAINED EARNINGS (DEFICIT), END OF YEAR. $ (914) $ 737 $1,950
========================================= ============== ======== ======
</TABLE>
<PAGE>
SPECTRUM SIGNAL PROCESSING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1999, 1998 and 1997 (Expressed in thousands of United
States dollars except per share amounts and numbers of shares)
Prepared in accordance with accounting principles generally accepted in Canada.
The Company was incorporated under the laws of British Columbia. The
Company develops, manufactures and supports a broad range of
multiprocessor-based hardware and software solutions for customers in the
telecommunications, signal intelligence and sensor systems markets.
1. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting
principles generally accepted in Canada.
Basis of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary 3L Limited. All material intercompany balances
and transactions have been eliminated.
Use of estimates
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, particularly the
recoverability of property and equipment and other assets, and liabilities and
the disclosure 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 the estimates.
Cash equivalents
Cash equivalents include short-term deposits, which are all highly
marketable securities with a maturity of three months or less when acquired.
Short term deposits are valued at cost.
Inventories
The Company uses the weighted average cost method of accounting for its
inventory. Inventories are valued at the lower of cost and net realizable
value.
Government assistance
Government assistance is recorded as a reduction of the cost of the
applicable property and equipment or credited against expenses incurred in the
statement of operations, as determined by the terms and conditions of the
agreements under which the assistance is provided to the Company.
<PAGE>
SPECTRUM SIGNAL PROCESSING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Years ended December 31, 1999, 1998, 1997 (Expressed in thousands of United
States dollars except per share amounts and numbers of shares)
Prepared in accordance with accounting principles generally accepted in Canada.
1. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Research and development costs
Research costs are expensed as incurred. Development costs are expensed as
incurred unless they meet certain criteria under generally accepted accounting
principles for deferral and amortization. Software development costs related to
software which will become an integral part of the Company's products are, after
the establishment of technological feasibility, capitalized until the product is
available for general release to customers. Annual amortization is the amount
determined by the greater of the ratio of current product revenue to the total
current and anticipated product revenue or the straight-line method over the
remaining estimated economic life, generally three years. Amortization
commences when the product is available for general release to customers.
Property and equipment
Property and equipment are initially recorded at cost. Amortization is
subsequently provided on the following assets using the declining balance basis
at the following annual rates:
Computer equipment 30%
Computer software 20%
Furniture and fixtures 20%
Laboratory equipment 20%
Amortization of leasehold improvements is provided on a straight-line basis
over the lesser of their estimated useful lives or the lease term.
Translation of foreign currencies
A majority of the Company's shareholders, customers, and industry analysts
are located in the United States. Accordingly, effective January 1, 1998, the
Company adopted the U.S. dollar as its reporting currency. Historical figures
previously reported in Canadian dollars have been translated into U.S. dollars
using the exchange rate in effect on December 31, 1997. Commencing January 1,
1998, Canadian dollars have been translated into U.S. dollars as follows:
assets and liabilities are translated into U.S. dollars at the rate of exchange
in effect at the balance sheet date and revenue and expense items are translated
at the average rates for the period. Unrealized gains and losses resulting from
the translation to the reporting currency are accumulated in a separate
component of stockholders' equity, described as cumulative translation
adjustments.
The Company's currency of measurement is the Canadian dollar. The
Company's financial statements are prepared in Canadian dollars before
translation to the U.S. dollar reporting currency. Accordingly, foreign
currency denominated balances of the Company are measured in Canadian dollars.
Under this method, monetary assets and liabilities denominated in a foreign
currency have been remeasured in Canadian dollars at the rate of exchange in
effect at the balance sheet date. Other assets, revenue and expense items are
measured using the rate of exchange prevailing at their respective transaction
dates. Exchange gains and losses resulting from the remeasurement of foreign
denominated monetary assets and liabilities in Canadian dollars are reflected in
earnings for the period.
<PAGE>
SPECTRUM SIGNAL PROCESSING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Years ended December 31, 1999, 1998 and 1997 (Expressed in thousands of United
States dollars except per share amounts and numbers of shares)
Prepared in accordance with accounting principles generally accepted in Canada.
1. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Financial statements of foreign operations for which the currency of
measurement is the local currency are translated into Canadian dollars using the
current rate at the balance sheet date. Under this method, assets and
liabilities are translated into Canadian dollars at the rate of exchange in
effect at the balance sheet date and revenue and expense items are translated at
the average rates for the period. Unrealized gains and losses resulting from
the translation of the financial statements are deferred and accumulated in a
separate component of stockholders' equity, described as cumulative translation
adjustments.
Goodwill and other intangibles
Goodwill and other intangibles are stated at cost, based on fair value at
the acquisition date, less accumulated amortization. Amortization is recorded
utilizing the straight line method over the estimated lives of the respective
assets, generally three to seven years.
Revenue recognition
Revenue is recognized upon the later of shipment or when title passes to
the customer. Revenue from product development contracts is recognized upon
reaching certain development milestones, which are generally correlated to the
timing of payments.
Warranty
The Company generally provides a one year warranty to the original
purchaser. Warranty costs are accrued based on a best estimate, with reference
to past experience, at the time of sale.
Income taxes
The Company follows the asset and liability method for accounting for
income taxes. Under this method, future income taxes are recognized for the
future income tax consequences attributable to differences between the financial
statement carrying values and their respective income tax basis (temporary
differences). The resulting changes in the net future tax asset or liability
are included in income. Future tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
temporary differences are expected to be recovered or settled. The effect on
future income tax assets and liabilities of a change in tax rates is included in
income in the period that includes the enactment date. Future income tax assets
are evaluated and if realization is not considered "more likely than not", a
valuation allowance is provided.
The Company follows the cost reduction method of accounting for investment
tax credits whereby the benefit of tax credits is recognized as a reduction in
the cost of the related asset or expenditure when there is reasonable assurance
the tax credits will be realized.
Share issue costs
The costs of issuing common shares, net of income tax recoveries thereon,
are applied to reduce the proceeds of such shares.
<PAGE>
SPECTRUM SIGNAL PROCESSING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Years ended December 31, 1999, 1998 and 1997 (Expressed in thousands of United
States dollars except per share amounts and numbers of shares)
Prepared in accordance with accounting principles generally accepted in Canada.
1. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Foreign currency hedging instruments
The Company enters into future exchange and currency option contracts to hedge
its foreign currency risks. To be accounted for as hedges, such contracts must
be effective at reducing the foreign currency risk associated with the
underlying transaction being hedged and must be designated as a hedge at the
inception of the contract.
The Company currently uses future exchange and currency option contracts as
hedges of firmly committed transactions. Gains and losses on these contracts
are recognized as an offset to the gain or loss of the underlying transaction
when recognized.
Impairment of long-lived assets
The Company monitors the recoverability of long-lived assets which include
property and equipment and other assets, based on factors such as future asset
utilization, business climate and future undiscounted cash flows expected to
result from the use of the related assets. The Company's policy is to record an
impairment loss in the period when it is determined that the carrying amount of
the asset may not be recoverable, at which time the asset is written down to
fair market value.
Comparative figures
Certain comparative figures have been reclassified to conform to the
presentation adopted in the current year.
2. ACQUISITION OF NET ASSETS OF ALEX COMPUTER SYSTEMS, INC.
On March 17, 1998 the Company acquired the majority of the operating assets and
liabilities of Alex Computer Systems Inc., of Ithaca, New York. The acquisition
has been accounted for using the purchase method of accounting and the results
of operations have been consolidated since the date of the acquisition. The
Company's interest in the net assets acquired at assigned values are as follows:
<PAGE>
SPECTRUM SIGNAL PROCESSING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Years ended December 31, 1999, 1998 and 1997 (Expressed in thousands of United
States dollars except per share amounts and numbers of shares)
Prepared in accordance with accounting principles generally accepted in Canada.
2. ACQUISITION OF NET ASSETS OF ALEX COMPUTER SYSTEMS, INC., CONTINUED.
<TABLE>
<CAPTION>
<S> <C>
Cash . . . . . . . . . . . . . $ 10
Current assets . . . . . . . . 1,093
Property and equipment . . . . 229
Goodwill and other intangibles 6,883
Current liabilities. . . . . . (933)
Long term liabilities. . . . . (141)
-------
Acquisition cost . . . . . . . $7,141
=======
Consideration:
772,626 common shares . . $4,787
110,375 warrants. . . . . 140
Cash. . . . . . . . . . . 675
Expenses on acquisition . 1,539
-------
$7,141
=======
</TABLE>
<TABLE>
<CAPTION>
3. INVENTORIES
Net inventories at December 31, 1999 and 1998 consisted of the following:
December 31,
--------------
1999 1998
-------------- --------
<S> <C> <C>
Finished goods. . . . . . . . $ 1,353 $ 2,683
Work in progress. . . . . . . 394 1,132
Raw materials . . . . . . . . 655 1,120
----------------------------- -------------- --------
$ 2,402 $ 4,935
============== ========
4. PROPERTY AND EQUIPMENT
December 31,
--------------
1999 1998
-------------- --------
Computer equipment. . . . . . $ 2,739 $ 2,527
Computer software . . . . . . 1,166 1,039
Furniture and fixtures. . . . 997 820
Laboratory equipment. . . . . 768 619
Leasehold improvements. . . . 362 296
6,032 5,301
Less accumulated amortization (3,487) (3,014)
Net book value. . . . . . . . $ 2,545 $ 2,287
============================= ============== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM SIGNAL PROCESSING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Years ended December 31, 1999, 1998 and 1997 (Expressed in thousands of United States dollars except per share amounts
----------------------------------------------------------------------------------------------------------------------
and numbers of shares)
-------------------------
Prepared in accordance with accounting principles generally accepted in Canada.
5. OTHER ASSETS
December 31,
-------------
1999 1998
------------- ------
<S> <C> <C>
Software and related development costs, net of accumulated amortization of $1,607 (1998 - $876) $ 823 $1,534
Goodwill and other intangibles, net of accumulated amortization of $2,709 (1998 - $827) . . . . 4,646 6,329
$ 5,469 $7,863
============= ======
</TABLE>
6. LONG-TERM DEBT AND BANK INDEBTEDNESS
(a) Bank indebtedness
The Company has a credit facility with the Bank of Montreal (the "Bank")
consisting of a Cdn $5,000,000 (approximately U.S. $3,450,000) operating line of
credit (the "Line of Credit"). The Company's U.S. dollar borrowing capacity
under its Canadian dollar denominated Line of Credit will vary period to period
based on exchange rate fluctuations. Borrowings under the Line of Credit bear
interest at the Bank's U.S. base rate plus %, unless borrowings are denominated
in Canadian dollars, in which case the rate of interest is the Bank's prime rate
plus %. Borrowings are due on demand and interest is to be paid monthly.
Borrowings may not exceed certain percentages of a specified borrowing base
consisting of domestic and foreign accounts receivable and inventories. The
Line of Credit agreement requires the Company to maintain certain financial
ratios and limits capital expenditures. Borrowings under the Line of Credit are
secured by substantially all of the Company's current assets.
(b) Long-term debt
<TABLE>
<CAPTION>
December 31,
--------------
1999 1998
--------------------
<S> <C> <C>
Development loan
The Company has received a loan from Lothian and
Edinburgh Enterprise Limited ("LEEL") for the purpose of
product development. There are no formal terms of
repayment, and royalty payments are to be made to LEEL
based on gross sales revenue of the particular product.
The loan is repayable on demand if the Company does
not comply with the terms of the funding. . . . . . . . .$ 73 $ 75
Capital lease
The Company leased office equipment under a capital
lease which expired August 1, 1999. Under the terms of
the lease, the Company made monthly installments of $8,
including interest at 9.58%, with a final payment of $24. --- 80
73 155
Less: current portion. . . . . . . . . . . . . . . . . . (73) (80)
$ --- $ 75
============== ======
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
SPECTRUM SIGNAL PROCESSING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Years ended December 31, 1999, 1998 and 1997 (Expressed in thousands of United States
-------------------------------------------------------------------------------------
dollars except per share amounts and numbers of shares)
---------------------------------------------------------------
Prepared in accordance with accounting principles generally accepted in Canada.
7. SHARE CAPITAL
(a) Issued and outstanding
Number of Shares Stated Values
---------------- --------------
<S> <C> <C>
Outstanding, December 31, 1996. . . . . . . . . . . 9,243,683 $ 9,372
Issued for cash from share options. . . . . . . . . 42,381 179
Issued for acquisition of 3L Limited. . . . . . . . 173,333 910
--------------------------------------------------- ---------------- --------------
Outstanding, December 31, 1997. . . . . . . . . . . 9,459,397 10,461
Issued for cash from share options. . . . . . . . . 36,931 149
Issued for net assets of Alex Computer Systems Inc. 772,626 4,787
--------------------------------------------------- ---------------- --------------
Outstanding, December 31, 1998. . . . . . . . . . . 10,268,954 15,397
Issued for cash from share options. . . . . . . . . 126,250 65
--------------------------------------------------- ---------------- --------------
Outstanding, December 31, 1999. . . . . . . . . . . 10,395,204 $ 15,462
--------------------------------------------------- ---------------- --------------
</TABLE>
(b) Stock option plan
The Company has reserved 3,050,000 common shares for issuance under its stock
option plan. Of these, 564,459 options have been exercised, 738,601 options
have been cancelled, 1,853,448 options are currently outstanding of which
106,508 are subject to shareholder approval, and nil options are available for
issue. The plan provides for the granting of stock options to directors,
officers and eligible employees at the fair market value of the Company's stock
at the grant date.
Options generally vest over three years in equal amounts at the anniversary date
of the grant. Options generally have a five year term with ten years being the
maximum.
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------------------------------
Weighted Weighted
Number of Average Number of Average Number of Weighted Average
shares Exercise Price Shares Exercise Price Shares Exercise Price
-------------- -------------- ---------------
Cdn USD Cdn USD Cdn USD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding, beginning
of year . . . . . . . 1,763,884 $6.62 $4.31 1,657,288 $6.63 $4.54 1,493,896 $ 6.69 $4.58
Granted. . . . . . . . 562,049 3.50 2.42 312,200 6.80 4.42 330,353 7.74 5.30
Exercised. . . . . . . (126,250) 0.77 0.53 (36,931) 5.94 3.86 (42,381) 6.03 4.13
Canceled . . . . . . . (346,235) 7.32 5.07 (168,673) 7.29 4.74 (124,580) 10.22 6.99
---------------------------------------------------------------------------------------------------------
Outstanding, end of
year . . . . . . . . . 1,853,448 $5.92 $4.10 1,763,884 $6.62 $4.31 1,657,288 $ 6.63 $4.54
---------------------------------------------------------------------------------------------------------
Exercisable, end of
year . . . . . . . . . 1,017,469 $6.76 $4.68 975,197 $5.69 $3.70 918,201 $ 5.34 $3.66
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM SIGNAL PROCESSING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Years ended December 31, 1999, 1998 and 1997 (Expressed in thousands of United
States dollars except per share amounts and numbers of shares)
Prepared in accordance with accounting principles generally accepted in Canada.
---------------------------------------------------------------------------------
7. SHARE CAPITAL, CONTINUED
Information regarding the stock options outstanding at December 31, 1999 is
summarized below:
Options Outstanding Options Exercisable
---------------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Shares Average
Exercise Shares Contractual Exercise Exer- Exercise
Prices Outstanding Life Price cisable Price
---------------------------------------------------------------------------------
CAD USD CAD USD
<S> <C> <C> <C> <C> <C> <C> <C>
0.70 - $4.87 804,306 4.16 years $3.26 $2.26 237,960 $2.76 $1.91
5.75 - $7.00 345,555 2.96 years 6.83 4.73 313,905 6.85 4.74
7.50 - $9.90 703,587 3.77 years 8.44 5.85 465,604 8.73 6.05
---------------------------------------------------------------------------------
0.70 - $9.90 1,853,448 3.79 years $5.92 $4.10 1,017,469 $6.76 $4.68
</TABLE>
The options outstanding at December 31, 1999 expire between February 15,
2000 and June 21, 2009.
(c) Employee share purchase plan
The Company established an Employee Share Purchase Plan ("the ESPP")
effective November 1, 1999. A total of 250,000 shares are authorized for
issuance under the ESPP. The ESPP allows eligible employees to purchase a
limited number of shares of the Company's stock at 85% of the market value at
certain plan-defined dates. No shares were issued pursuant to the ESPP in the
year ended December 31, 1999.
(d) Warrants
As part of the consideration on the purchase at March 17, 1998 of the net
assets of Alex Computer Systems Inc., the Company issued warrants to purchase
110,375 common shares of the Company at Cdn $9.06 (USD $6.27). The warrants
expire on April 30, 2000. The fair value of the warrants was estimated to be
Cdn $1.81 (USD $1.25) per warrant, using the Black-Scholes option valuation
model.
8. INCOME TAXES
Income tax expense varies from the amounts that would be computed by applying
the Canadian federal and provincial income tax rate of 45.6% for each of the
periods presented to earnings (loss) before income taxes and discontinued
operations as shown in the following table:
<PAGE>
SPECTRUM SIGNAL PROCESSING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Years ended December 31, 1999, 1998 and 1997 (Expressed in thousands of United
States dollars except per share amounts and numbers of shares)
Prepared in accordance with accounting principles generally accepted in Canada.
8. INCOME TAXES, CONTINUED
<TABLE>
<CAPTION>
Years ended
December 31,
-------------------------------------------------------------------
1999 1998 1997
-------------------------------------------------------------------
<S> <C> <C> <C>
Combined Canadian federal and
provincial income taxes at expected rate . $(865) $(619) $1,735
Permanent and other differences. . . . . . 409 261 3
Change in valuation allowance. . . . . . . 96 29 (246)
Foreign tax losses effected at lower rates 65 96 ---
State taxes 50 88 ---
-------------------------------------------------------------------
$(245) $(145) $1,492
-------------------------------------------------------------------
</TABLE>
As at December 31, 1999 the Company, for Canadian income tax purposes, has
claimed investment tax credits of approximately $5,205 which are available to
reduce future years' income taxes payable. These investment tax credits expire
between 2003 and 2009. The potential tax benefits that may arise from the
utilization of $4,978 of these tax credits have not been recognized in these
financial statements, because their realization is not considered more likely
than not.
The Company has losses for UK income tax purposes of approximately $780 which
can be carried forward indefinitely to reduce future taxable income.
The tax effect of the temporary differences that give rise to future tax assets
and future tax liabilities are presented below:
<TABLE>
<CAPTION>
December 31,
1999 1998
------------------------
<S> <C> <C>
Future tax assets
Tax loss carry forwards. . . . . .. . $ 182 $ 106
Investment tax credits recoverable. . 220 213
Share issue costs. . . . . . . . .. . 69 109
Goodwill, acquired technology and other 414 50
Total gross future tax assets. . . . 885 478
less: valuation allowance. . . . . . (202) (106)
------------------------
Total future tax assets. . . . . . . 683 372
------------------------
Future tax liabilities
Research and development expenses.. . (366) (551)
Acquired technology --- (210)
Tax depreciation in excess of accounting (537) (504)
Investment tax credits . . . . . . . (184) (97)
Total future tax liabilities . . . . (1,087) (1,362)
------------------------
Net future tax liabilities . . . . . . . $ (404) $ (990)
========================
</TABLE>
<PAGE>
SPECTRUM SIGNAL PROCESSING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Years ended December 31, 1999, 1998 and 1997 (Expressed in thousands of United
States dollars except per share amounts and numbers of shares)
Prepared in accordance with accounting principles generally accepted in Canada.
--------------------------------------------------------------------------------
9. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is calculated based upon the weighted average
number of shares outstanding during the year, which was 10,077,496 (1998 -
9,860,218, 1997 - 9,234,926).
Fully diluted earnings per share reflect the dilutive effect of the conversion
of the stock options and warrants outstanding at the end of the year or those
options or warrants exercised during the year, as if they had been exercised at
the beginning of the year or the date granted, if later. The number of shares
used for the calculation of the fully diluted earnings per share is 10,077,496
(1998 - 9,860,218, 1997 - 10,146,238). Interest on the funds which would have
been received had the options or warrants been exercised, in the amount of nil
(1998 - nil, 1997 - $180) net of income tax, has been imputed at a rate of 4%
(1998 - 4%, 1997 - 4%) per annum.
10. COMMITMENTS
The Company has entered into various operating lease agreements with
remaining terms of up to ten years, for office premises and equipment. As at
December 31, 1999, the minimum lease payments are approximately as follows:
2000 $ 756
2001 796
2002 797
2003 797
2004 843
2005 and thereafter 4,316
$ 8,305
========
In March 1999, the Company entered into a contribution agreement with
Technology Partnerships Canada to develop a new line of communications products.
Under this agreement, Technology Partnerships Canada will contribute 31% of the
costs incurred in the development of these products to a maximum contribution of
$4,350. In exchange for this contribution, the Company has agreed to a 2.5%
contingently repayable royalty on communications product revenues to a maximum
of $7,400 commencing January 1, 2001. During the year ending December 31, 1999,
the Company claimed and credited $219 against research and development expenses.
<PAGE>
SPECTRUM SIGNAL PROCESSING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Years ended December 31, 1999, 1998 and 1997 (Expressed in thousands of United
States dollars except per share amounts and numbers of shares)
Prepared in accordance with accounting principles generally accepted in Canada.
--------------------------------------------------------------------------------
11. SEGMENTED INFORMATION
In the opinion of management, the Company operates in the digital signal
processing systems industry, and all sales of its products and services are made
in this segment. Management of the Company makes decisions about allocating
resources based on the one operating segment. Substantially all assets and
operations are in Canada. A summary of sales by region and by major customers
is as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
--------------------------------------------------
1999 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
By Region
United States . . $ 21,325 $21,821 $21,669
Other . . . . . . 5,066 4,179 3,814
--------------------------------------------------
Total Sales . . . $ 26,391 $26,000 $25,483
By Major Customer
Customer A. . . $ 10,056 $ 6,251 $ 6,401
Customer B --- --- 4,709
Customer C 3,963 --- ---
==================================================
</TABLE>
12. DISCONTINUED OPERATIONS
The Company adopted a plan during 1997 to discontinue the operation of its
desktop Computer Telephony board business ("CTI"). The CTI division was in the
business of developing boards which integrate telephone, fax, and modem
functions into computers and selling them to OEMs and end users. The Company
ceased operations in this business as of December 31, 1997. Accordingly, the
results of operations have been disclosed separately from those of continuing
operations for the years presented. The financial position of these
discontinued operations was consolidated in accordance with generally accepted
accounting principles.
The operating results of this business segment were as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
----------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ --- $ --- $ 503
Gross margin --- --- 185
Expenses --- --- 1,031
Provision for taxes --- --- (331)
----------------------------------------------------------------
Loss from discontinued operations $ --- $ --- $ (515)
----------------------------------------------------------------
</TABLE>
<PAGE>
SPECTRUM SIGNAL PROCESSING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Years ended December 31, 1999, 1998 and 1997 (Expressed in thousands of United
States dollars except per share amounts and numbers of shares)
Prepared in accordance with accounting principles generally accepted in Canada.
--------------------------------------------------------------------------------
13. FINANCIAL INSTRUMENTS
a) Fair value of financial instruments
Carrying amounts of certain of the Company's financial instruments, including
cash and cash equivalents, accounts receivable, bank indebtedness, accounts
payable and accrued liabilities approximate fair value due to their short
maturities. Due to the uncertainty over the timing of repayment, the fair value
of the Company's long term debt is not reasonably determinable.
b) Foreign exchange risk management
The Company utilizes future exchange and currency option contracts to manage its
exposure to fluctuations in foreign exchange rates which typically expire within
one year. These instruments are used for purposes other than trading and are
employed in connection with an underlying asset or liability. At December 31,
1999, the Company had future exchange and currency option contracts with a
notional principal of $4,000 (1998 -$1,061) maturing between March 3, 2000 and
June 20, 2000. At December 31, 1999 and December 31, 1998, deferred gain and
losses on future exchange and currency option contracts were not material to the
consolidated financial statements. The counterparties to these contracts are
major commercial financial institutions. Management believes that losses
related to credit risk are remote.
The fair values of future exchange and currency option contracts are evaluated
by obtaining quotes from brokers. At December 31, 1999 and December 31, 1998
there were no carrying amounts related to future exchange and currency option
contracts on the consolidated balance sheets. Future exchange and currency
option contracts to sell $4,000 had an estimated fair value of $4,045 at
December 31, 1999 compared to future exchange contracts to sell $1,061 with an
estimated fair value of $1,051 at December 31, 1998.
c) Concentration of credit risk
Financial instruments that potentially subject the Company to concentrations of
credit risk are primarily accounts receivable. Credit risk in receivables is
limited to original equipment manufacturers and to dealers and distributors of
hardware and software products. The Company performs ongoing credit evaluations
of its customers' financial condition and requires letters of credit or other
guarantees whenever deemed necessary.
A substantial amount of the Company's revenues have been recognized in
currencies other than the Canadian dollar, principally the United States dollar.
Fluctuations in the exchange rates between these currencies and the Canadian
dollar could have a material effect on the Company's business, financial
condition and results of operations. The Company attempts to mitigate some of
this risk by denominating many of its payment obligations in United States
dollars, and, to a lesser extent, through the use of currency derivative
contracts.
<PAGE>
SPECTRUM SIGNAL PROCESSING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Years ended December 31, 1999, 1998 and 1997 (Expressed in thousands of United
States dollars except per share amounts and numbers of shares)
Prepared in accordance with accounting principles generally accepted in Canada.
--------------------------------------------------------------------------------
14. SUPPLEMENTARY INFORMATION
<TABLE>
<CAPTION>
Years ended
December 31,
----------------------------
1999 1998 1997
----------------------------
<S> <C> <C> <C>
Cash received for interest. . . . . . . . . $ 56 $ 22 $ 33
Cash paid for:
Interest. . . . . . . . . . . . . . . . . . 152 149 3
Income taxes 13 15 ---
Non-cash financing and investing activities
Issue of shares for acquisition of the
net assets of Alex Computer Systems
Inc., net of share issue expenses --- 4,787 ---
Issue of warrants for acquisition of the
net assets of Alex Computer Systems
Inc. --- 140 ---
Issue of shares for acquisition of 3L
Limited, net of share issue expenses --- --- 910
Rent expense. . . . . . . . . . . . . . . . 672 512 366
Bad debt expense. . . . . . . . . . . . . . 14 17 83
Foreign exchange gains. . . . . . . . . . . 37 287 314
</TABLE>
<PAGE>
PROXY
ANNUAL GENERAL MEETING OF MEMBERS OF SPECTRUM SIGNAL PROCESSING INC., TO BE HELD
IN THE BOARDROOM AT THE COMPANY'S OFFICES, AT ONE SPECTRUM COURT, 200 - 2700
PRODUCTION WAY BURNABY, BRITISH COLUMBIA ON THURSDAY, MAY 18, 2000, AT 1:30
O'CLOCK (PDT) IN THE AFTERNOON
THE UNDERSIGNED MEMBER OF THE COMPANY HEREBY APPOINTS, Pascal Spothelfer, the
President and a Director of the Company, or in the place of the foregoing, ,
(Print the Name) as proxyholder for and on behalf of the Member with the power
of substitution to attend, act and vote for and on behalf of the Member in
respect of all matters that may properly come before the Meeting of the Members
of the Company and at every adjournment thereof, to the same extent and with the
same powers as if the undersigned Member were present at the said Meeting, or
any adjournment thereof.
The Member hereby directs the proxyholder to vote the securities of the Company
registered in the name of the Member as specific herein.
RESOLUTIONS (For full details of each item,
please see the enclosed Notice of Meeting and Information Circular)
For Against
1. To authorize the Directors to fix the
remuneration to be paid to the auditor of the Company ----- -----
2. To determine the number of Directors at
seven (7) ----- -----
3. To approve an ordinary resolution to amend
the existing formal Stock Option Plan by
increasing the number of options covered by
the plan by 2,500,000. ----- -----
For Withhold
4. Appointment of Auditors ----- -----
5. To elect PASCAL SPOTHELFER as a Director ------ -----
6. To elect KENNETH A. SPENCER as a Director ------ -----
7. To elect JOHN E. BRENNAN as a Director ------ -----
8. To elect SAMUEL ZNAIMER as a Director ------ -----
9. To elect ANDREW HARRIES as a Director ------ -----
THE UNDERSIGNED MEMBER HEREBY REVOKES ANY PROXY PREVIOUSLY GIVEN TO ATTEND
AND VOTE AT SAID MEETING.
SIGN HERE:
PLEASE PRINT NAME:
DATE:
THIS PROXY MAY NOT BE VALID UNLESS IT IS SIGNED AND DATED.
SEE IMPORTANT INFORMATION & INSTRUCTIONS ON REVERSE.
<PAGE>
INSTRUCTIONS FOR COMPLETION OF PROXY
1. THIS PROXY IS SOLICITED BY THE MANAGEMENT OF THE COMPANY.
2. This form of proxy ("Instrument of Proxy") MAY NOT BE VALID UNLESS IT IS
SIGNED by the Member or by his attorney duly authorized by him in writing, or,
in the case of a corporation, by a duly authorized officer or representative of
the corporation; and IF EXECUTED BY AN ATTORNEY, OFFICER, OR OTHER DULY
APPOINTED REPRESENTATIVE, the original or a notarial copy of the instrument so
empowering such person, or such other documentation in support as shall be
acceptable to the Chairman of the Meeting, must accompany the Instrument of
Proxy.
3. IF THIS INSTRUMENT OF PROXY IS NOT DATED in the space provided, authority
is hereby given by the Member for the proxyholder to date this proxy on the date
on which it is received by Montreal Trust Company.
4. A MEMBER WHO WISHES TO ATTEND THE MEETING AND VOTE ON THE RESOLUTIONS IN
PERSON, may do so as follows:
(a) IF THE MEMBER IS REGISTERED AS SUCH ON THE BOOKS OF THE COMPANY, simply
register the Member's attendance with the scrutineers at the Meeting.
(b) IF THE SECURITIES OF A MEMBER are HELD BY A FINANCIAL INSTITUTION, (i)
cross off the management appointees' names and insert the Member's name in the
blank space provided; (ii) indicate a voting choice for each resolution or,
alternatively, leave the choices blank if you wish not to vote until the
Meeting; and (iii) sign, date and return the Instrument of Proxy to the
financial institution or its agent. At the Meeting, a vote will be taken on
each of the resolutions set out on this Instrument of Proxy and the Member's
vote will be counted at that time.
5. A MEMBER WHO IS NOT ABLE TO ATTEND THE MEETING IN PERSON BUT WISHES TO
VOTE ON THE RESOLUTIONS, may do either of the following:
(a) TO APPOINT ONE OF THE MANAGEMENT APPOINTEES named on the Instrument of
Proxy, leave the wording appointing a nominee as is, and simply sign, date and
return the Instrument of Proxy. Where no choice is specified by a Member with
respect to a resolution set out on the Instrument of Proxy, a management
appointee acting as proxyholder will vote the securities as if the Member had
specified an affirmative vote.
(b) TO APPOINT ANOTHER PERSON, who need not be a Member of the Company, to
vote according to the Member's instructions, cross off the management
appointees' names and insert the Member's appointed proxyholder's name in the
space provided, and then sign, date and return the Instrument of Proxy. Where
no choice is specified by the Member with respect to a resolution set out on the
Instrument of Proxy, this Instrument of Proxy confers discretionary authority
upon the Member's appointed proxyholder.
6. THE SECURITIES REPRESENTED BY THIS INSTRUMENT OF PROXY WILL BE VOTED OR
WITHHELD FROM VOTING IN ACCORDANCE WITH THE INSTRUCTIONS OF THE MEMBER ON ANY
POLL of a resolution that may be called for and, if the member specifies a
choice with respect to any matter to be acted upon, the securities will be voted
accordingly. Further, if so authorized by this Instrument of Proxy, the
securities will be voted by the appointed proxyholder with respect to any
amendments or variations of any of the resolutions set out on the Instrument of
Proxy or matters which may properly come before the Meeting as the proxyholder
in its sole discretion sees fit.
7. If a registered Member has returned the Instrument of Proxy, THE MEMBER
MAY STILL ATTEND THE MEETING and may vote in person should the Member later
decide to do so. However, to do so, the Member must record his/her attendance
with the scrutineers at the Meeting and revoke the Instrument of Proxy in
writing.
TO BE REPRESENTED AT THE MEETING, THIS INSTRUMENT OF PROXY MUST BE RECEIVED AT
THE OFFICE OF "MONTREAL TRUST COMPANY" BY MAIL OR BY FAX
AT ANY TIME UP TO AND INCLUDING THE LAST BUSINESS DAY PRECEDING THE DAY OF THE
MEETING, OR ANY ADJOURNMENT THEREOF,
OR WITH THE CHAIRMAN OF THE MEETING ON THE DAY OF THE MEETING, OR ANY
ADJOURNMENT THEREOF.
The mailing address of Montreal Trust Company is 2nd Floor - 510 Burrard Street,
Vancouver, B.C., V6C 3B9, and its fax number is (604) 683-3694.
---------------------------------------------------------------
<PAGE>
SPECTRUM
To Registered Holders and Non-Registered Holders:
Spectrum is always working to find new and more efficient ways to keep its
shareholders up to date on its progress and plans. As a registered or
non-registered shareholder of Spectrum you can elect to receive our quarterly
reports during the year. By returning this form you can help us enhance our
services to shareholders and improve the dissemination of information in a way
that is convenient for each individual.
If you are interested in receiving our quarterly reports, please complete and
return this form:
Name of issuer: Spectrum Signal Processing Inc.
-----------------------------------
Name of Shareholder: ------------------------------------------
Address: ------------------------------------------
------------------------------------------
Phone number: ------------------------------------------
Fax number: ------------------------------------------
Email address: ------------------------------------------
I certify that I am a registered shareholder:
------------------------------------------
Signature
I certify that I am a non-registered shareholder:
------------------------------------------
Signature
Date: , 2000
(Optional) Which brokerage firm holds your
shares?
------------------------------------------
Please send me quarterly reports by: (please check one)
[ ] Mail [ ] Email [ ] Fax
Please add me to your news release distribution list: (please check one)
[ ] Email [ ] Fax
Mail this form to: Montreal Trust Company
2nd Floor - 510 Burrard Street
Vancouver, BC V6C 3B9
FOR FURTHER INFORMATION ABOUT SPECTRUM PLEASE VISIT OUR WEB SITE AT
WWW.SPECTRUMSIGNAL.COM OR CALL OUR INVESTOR RELATIONS DEPARTMENT AT 604-421-5422
EXTENSION 264.
<PAGE>
SPECTRUM SIGNAL PROCESSING INC.
#200, 2700 Production Way
Burnaby, B.C. V6A 4X1
April 14, 2000
TO: British Columbia Securities Commission
Ontario Securities Commission
Toronto Stock Exchange
Dear Sirs:
RE: SPECTRUM SIGNAL PROCESSING INC. (THE "COMPANY")
We confirm that the following material was sent by pre-paid mail on
Friday, April 14, 2000 to the registered shareholders of the Company:
1. 1999 Annual Report
2. Notice of Annual General Meeting
3. Information Circular
4. Form of Proxy
5. Progress Report
6. Supplemental mailing reply card
7. Canadian GAAP Financial Statements (to Canadian shareholders only)
We further confirm that copies of the above mentioned material was sent by
courier on Thursday, April 13, 2000 to each intermediary holding shares of
the Company who responded to the early search procedures pursuant to
Canadian Securities Administrators' National Policy Statement No. 41
regarding shareholder communications.
Yours truly,
SPECTRUM SIGNAL PROCESSING INC.
/s/ Martin McConnell
Per: Martin McConnell
Chief Financial Officer and Secretary
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SPECTRUM SIGNAL PROCESSING INC.
(Registrant)
Martin C. McConnell
VP Finance & Chief Financial Officer
and Secretary
Date: April 28, 2000 By: /s/ Martin C. McConnell
--------------------------
(Signature)
