UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 1, 2000
MDSI Mobile Data Solutions Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
CANADA 0-28968 Not Available
-------------------- ------------------------ ---------------------
(Jurisdiction of (Commission file number) (I.R.S. Employer
incorporation) Identification No.)
10271 Shellbridge Way
Richmond, British Columbia,
Canada V6X 2W8
-------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (604) 207-6000
Not Applicable
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(Former name or address, if changed since last report)
<PAGE>
ITEM 7. Financial Statements and Exhibits.
(a) Financial Statements of the Business Acquired.
Financial Statements of Connectria Corporation dated December 31, 1999
(Audited), and June 30, 2000 (Unaudited).
(b) Pro Forma Financial Information.
Unaudited Pro Forma Consolidated Financial Statements of MDSI Mobile
Data Solutions Inc. dated December 31, 1997, 1998 and 1999 and June
30, 2000.
(c) Exhibits.
Exhibit
Number Description
------ -----------
2.1(1) Agreement and Plan of Reorganization, dated as of May 9,
2000, among MDSI, MDSI Acquisition Corporation, Connectria
and Certain Principal Shareholders, including a list of
exhibits thereto. Such exhibits are not filed, but the
registrant undertakes to furnish a copy of any such exhibit
to the Securities and Exchange Commission upon request.
4.1(1) Form of Voting, Lockup and Registration Rights Agreement
------------
(1) Previously filed on Form 8-K on June 15, 2000.
<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 duly
authorized undersigned.
MDSI Mobile Data Solutions Inc.
August 14, 2000 /s/ Kenneth Miller,
---------------- -----------------------------------
(Date) Kenneth Miller,
Chief Executive Officer and Director
<PAGE>
Financial Statements of
CONNECTRIA CORPORATION
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Connectria Corporation
We have audited the accompanying balance sheets of Connectria Corporation as at
December 31, 1999 and 1998 and the statements of operations, stockholders'
equity 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
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Corporation as at December 31, 1999 and
1998 and the results of its operations, stockholders' equity and cash flows for
each of the years in the three year period ended December 31, 1999 in conformity
with accounting principles generally accepted in the United States of America.
Chartered Accountants
Vancouver, British Columbia
July 7, 2000
<PAGE>
CONNECTRIA CORPORATION
Balance Sheets
(Expressed in U.S. dollars)
================================================================================
<TABLE>
June 30, December 31, December 31,
2000 1999 1998
-------------- --------------- ---------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 149,633 $ 1,466 $ 149,211
Accounts receivable, trade 1,049,229 995,183 564,433
Unbilled receivables - - 736,135
Prepaid expenses 266,755 4,200 4,200
----------------------------------------------------------------------------------------------------------------------
1,465,617 1,000,849 1,453,979
Capital assets, net (Note 2) 529,635 472,100 235,185
----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,995,252 $ 1,472,949 $ 1,689,164
----------------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness (Note 3) $ 234,310 $ 138,583 $ -
Accounts payable 118,142 189,501 68,763
Accrued liabilities 177,819 151,427 848,490
Income taxes payable - - 108
Deferred revenue 4,297 17,188 -
Due to shareholder (Note 4) 450,000 38,000 38,000
Current portion of long-term debt (Note 5) 47,831 52,135 48,020
Current obligations under capital lease (Note 7) 146,188 112,251 14,280
----------------------------------------------------------------------------------------------------------------------
1,178,586 699,085 1,017,661
Long-term debt (Note 5) 43,253 32,199 83,989
Obligations under capital lease (Note 7) 239,086 209,881 58,268
----------------------------------------------------------------------------------------------------------------------
1,460,925 941,165 1,159,918
----------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 7)
STOCKHOLDERS' EQUITY
Common stock (Note 6)
Authorized:
40,000,000 Class A voting common stock, par value $0.001 per share
20,000,000 Class B non-voting common stock, par value $0.001 per share
Issued:
1999: 6,150,000 Class A shares; 1998: 6,000,000 Class A shares;
1997: 1,000,000 Class A shares 6,150 6,150 6,000
Additional paid-up capital 362,050 362,050 354,700
Retained earnings 166,127 163,584 168,546
----------------------------------------------------------------------------------------------------------------------
534,327 531,784 529,246
----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,995,252 $ 1,472,949 $ 1,689,164
----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CONNECTRIA CORPORATION
Statement of Operations
(Expressed in U.S. dollars)
================================================================================
<TABLE>
Six months Ended June 30, Years ended December 31,
---------------------------- ------------------------------------------
2000 1999 1999 1998 1997
---------------------------- ------------ ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue
Software and services $ 3,040,179 $ 2,430,817 $ 4,845,183 $ 2,733,917 $ 298,374
Third party products and services 54,800 1,181,417 1,569,218 763,002 -
---------------------------------------------------------------------------------------------------------------------
3,094,979 3,612,234 6,414,401 3,496,919 298,374
Direct costs 2,014,454 2,701,672 4,767,013 2,532,775 200,275
---------------------------------------------------------------------------------------------------------------------
1,080,525 910,562 1,647,388 964,144 98,099
---------------------------------------------------------------------------------------------------------------------
Operating expenses
Research and development 214,800 37,600 179,100 - -
Sales and marketing 136,599 62,958 180,630 19,269 -
General and administrative 726,584 584,530 1,145,620 809,565 58,685
---------------------------------------------------------------------------------------------------------------------
1,077,983 685,088 1,505,350 828,834 58,685
---------------------------------------------------------------------------------------------------------------------
Net income for the period $ 2,542 $ 225,474 $ 142,038 $ 135,310 $ 39,414
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CONNECTRIA CORPORATION
Statement of Stockholders' Equity
(Expressed in U.S. dollars)
================================================================================
<TABLE>
Common Stock Additional Total
----------------- paid in Retained Shareholders'
Shares Amount Capital Earnings Equity
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 1,000,000 $ 1,000 $ - $ (6,178) $ (5,178)
Net income - - - 39,414 39,414
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 1,000,000 1,000 - 33,236 34,236
Issue of share capital 5,000,000 5,000 134,000 - 139,000
Stock based compensation - - 220,700 - 220,700
Net income - - - 135,310 135,310
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 6,000,000 6,000 354,700 168,546 529,246
Issued on payment of bonus 150,000 150 7,350 - 7,500
Distributions - - - (147,000) (147,000)
Net income - - - 142,038 142,038
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 6,150,000 6,150 362,050 163,584 531,784
Net Income 2,543 2,543
---------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2000 (Unaudited) 6,150,000 $ 6,150 $ 362,050 $ 166,127 $ 534,327
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CONNECTRIA CORPORATION
Statement of Cash Flows
(Expressed in U.S. dollars)
================================================================================
<TABLE>
Six months Ended June 30, Years ended December 31,
---------------------------- ------------------------------------
2000 1999 1999 1998 1997
---------------------------- ------------ ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the year $ 2,543 $ 225,475 $ 142,038 $135,310 $ 39,414
Items not affecting funds
Depreciation 19,056 17,822 103,622 43,348 170
Stock based compensation - - - 220,700 -
Change in non-cash working capital
Accounts receivable, trade (54,046) (324,266) (430,750) (454,485) (109,948)
Unbilled receivable - 736,135 736,135 (736,135) -
Prepaid expenses (262,555) (913) - (4,000) (200)
Accounts payable (71,359) 216,289 120,738 63,516 2,527
Accrued liabilities 26,392 (677,583) (697,063) 830,827 17,663
Income taxes payable - 2,114 (108) 108 -
Deferred revenue (12,891) - 17,188 - -
-------------------------------------------------------------------------------------------------------- -----------
(352,860) 195,073 (8,200) 99,189 (50,374)
--------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions paid - (147,000) (147,000) - -
Increase (Decrease) in due to shareholder 412,000 - - 8,000 60,000
(Repayment) issuance of long-term debt 6,750 (23,802) (47,675) 132,009 -
Increase (Decrease) in obligations under
capital lease, net 63,142 96,128 (51,495) (8,936) (209)
Issuance of common stock - - 7,500 100,000 -
-------------------------------------------------------------------------------------------------------- -----------
481,892 (74,674) (238,670) 231,073 59,791
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CASH FLOWS TO INVESTING ACTIVITIES
Purchase of capital assets (76,591) (121,608) (39,458) (197,010) -
--------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH POSITION 52,441 (1,209) (286,328) 133,252 9,417
CASH POSITION, BEGINNING OF PERIOD (137,117) 149,211 149,211 15,959 6,542
-------------------------------------------------------------------------------------------------------- -----------
CASH POSITION, END OF PERIOD $ (84,676) $ 148,002 $(137,117) $149,211 $ 15,959
--------------------------------------------------------------------------------------------------------------------
Cash comprises:
Cash and cash equivalents $ 149,633 $ 148,003 $ 1,466 $149,211 $ 15,959
Bank indebtedness (234,309) - (138,583) - -
--------------------------------------------------------------------------------------------------------------------
$ (84,676) $ 148,003 $(137,117) $149,211 $ 15,959
--------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 5,369 $ 2,764 $ 10,706 $ 5,943 $ 733
--------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Issue of shares for settlement of shareholder loans $ - $ - $ - $ 39,000 $ -
--------------------------------------------------------------------------------------------------------------------
Acquisition of assets by capital lease $ 106,359 $ 123,432 $ 301,079 $ 74,874 $ 6,819
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CONNECTRIA CORPORATION
Notes to the Financial Statements
June 30, 2000 and December 31, 1999 and 1998
(Information as at June 30, 2000 and for the six months ended June 30, 2000 and
1999 is unaudited)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States in America and reflect
the following significant accounting policies:
(a) Nature of operations
Connectria is an application service provider and e-commerce
development firm specializing in custom development and hosting of
proprietary Web-based systems for large corporate clients, hosting of
leading commercial applications, as well as development of its own
commercial, ASP-delivered software for the service industry.
(b) Unaudited interim financial statements
The interim financial information for the six months ended June 30,
2000 and 1999 is unaudited and has been prepared on the same basis as
the audited financial statements. In the opinion of management, such
unaudited financial information includes all adjustments (consisting
only of normal recurring adjustments) necessary for a fair
presentation of the interim information.
(c) Capital assets
The Corporation's capital assets are recorded at cost. Depreciation is
charged to operations over the estimated useful lives of the assets as
follows:
Computer hardware and software 30% declining balance
Furniture and fixtures 20% declining balance
Leasehold improvements lesser of lease term or useful life
(d) Revenue recognition
Statement of Position 97-2 (Software Revenue Recognition) (SOP 97-2),
was issued in October 1997 by the American Institute of Certified
Public Accountants (AICPA) and was amended by the Statement of
Position 98-4 (SOP 98-4). The Corporation adopted SOP 97-2 effective
for the Corporation's year ended December 31, 1997. Based upon our
interpretation of SOP 97-2 and SOP 98-4, the Corporation believes its
current revenue recognition policies and practices are consistent with
SOP 97-2 and SOP 98-4. Additionally, the AICPA issued SOP 98-9, which
provides certain amendments to SOP 97-2, which is effective for
transactions entered into beginning July 1, 1999. This pronouncement
has not materially impacted the Corporation's revenue recognition
practices.
<PAGE>
CONNECTRIA CORPORATION
Notes to the Financial Statements
June 30, 2000 and December 31, 1999 and 1998
(Information as at June 30, 2000 and for the six months ended June 30, 2000 and
1999 is unaudited)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(d) Revenue recognition (continued)
The Corporation's revenue is derived primarily from the following
sources:
(i) Software and services
Revenue related to software and services, including software
licenses, is generally recognized on a percentage of completion
basis, representing costs incurred relative to total estimated
costs. Where the Corporation has contracted to deliver software
without significant production, modification or customization
required, revenue is recognized upon delivery if the fee is
determinable and there is reasonable assurance of collection.
Provisions for estimated losses on contracts are recorded when
identifiable.
(ii) Third party products and services
Revenue from sales of third party products and services is
recognized on delivery of products.
(e) Valuation of long-lived assets
The Corporation periodically evaluates the carrying value of its
long-lived assets including, but not limited to, property and
equipment. The carrying value of a long-lived asset is considered
impaired when the undiscounted net cash flow from such asset is
estimated to be less than its carrying value. Management does not
believe that there were long-lived assets, which were subject to
impairment, at June 30, 2000.
(f) Research and development
Research and development costs related to software are expensed as
incurred unless a project meets the specified criteria for
capitalization in accordance with Statement of Financial Accounting
Standard No. 86, Accounting for the Costs of Computer Software to be
Sold, Lease or Otherwise Marketed. Acquired research and development
costs related to software are charged to earnings on acquisition if
there is no alternative future use and technological feasibility has
not been established.
(g) Income taxes
The Corporation has elected a Subchapter S Corporation status, as
defined by the Internal Revenue Code, which provides that shareholders
are taxed on their proportionate share of a company's taxable income.
Therefore, no provision for federal or state income taxes has been
presented in the accompanying financial statements.
<PAGE>
CONNECTRIA CORPORATION
Notes to the Financial Statements
June 30, 2000 and December 31, 1999 and 1998
(Information as at June 30, 2000 and for the six months ended June 30, 2000 and
1999 is unaudited)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(h) Stock-based compensation
The Corporation's stock option plan is subject to the provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). Under the provisions of this
standard, employee and director stock-based compensation expense is
measured using either the intrinsic-value method as prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"), or the fair value method described in
SFAS 123. Companies choosing the intrinsic-value method are required
to disclose the pro forma impact of the fair value method on net
income. The Corporation has elected to account for its employee and
director stock-based awards under the provisions of APB 25. Under APB
25, compensation cost for stock options is measured as the excess, if
any, of the fair value of the underlying common stock on the date of
grant over the exercise price of the stock option. The Company is
required to implement the provisions of SFAS 123 for stock-based
awards to those other than employees and directors. Stock-based
compensation expense for all equity instruments is recognized on an
accelerated basis.
(i) Comprehensive income
The Corporation has adopted the provisions of Statements of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"). SFAS No. 130 requires the presentation of comprehensive
income and its components. Comprehensive income is the change in
equity from transactions and other events and circumstances other than
those resulting from investments by owners and distributions to
owners. For the six months ended June 30, 2000 and the years ended
December 31, 1999, 1998 and 1997, the components of other
comprehensive income were insignificant.
(j) 401(k) savings
The Corporation has a 401(k) profit sharing plan ("the Plan").
Eligible employees may make voluntary contributions to the Plan, which
are matched by the Corporation up to 6% of the employee's
compensation. The amount of employee contributions is limited as
specified in the Plan. The Corporation may, at its discretion, make
additional contributions to the Plan. The Corporation made
contributions of $180,069, $39,540 and $1,255 in 1999, 1998 and 1997,
respectively.
(k) Cash and cash equivalents
The Corporation considers all highly liquid instruments purchased with
a maturity of three months or less to be cash equivalents.
<PAGE>
CONNECTRIA CORPORATION
Notes to the Financial Statements
June 30, 2000 and December 31, 1999 and 1998
(Information as at June 30, 2000 and for the six months ended June 30, 2000 and
1999 is unaudited)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(l) 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 and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Estimates are used for, but
not limited to, the accounting for doubtful accounts, amortization,
determination of net recoverable value of assets, taxes and
contingencies. Actual results could differ from those estimates.
(m) New accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 "SFAS No. 133"),
"Accounting for Derivative Instruments and Hedging Activities", which
establishes accounting and reporting standards for derivative
instruments and hedging activities. SFAS No. 133, which is effective
for the Corporation for the fiscal year and quarters beginning after
June 15, 2000, requires than an entity recognize all derivatives as
either assets or liabilities in the statement of financial position
and measure those instruments at fair value. The adoption of the
provisions of SFAS No. 133 does not have a significant impact on the
Corporation's financial position, results of operations and cash
flows.
(n) Fair value of financial instruments
The Corporation's financial instruments consist of cash and cash
equivalents, accounts receivable, unbilled receivables, accounts
payables, accrued liabilities, deferred revenue, due to shareholder
long term debt and capital lease obligations. Except for long term
debt and capital leases, the carrying amounts of financial instruments
approximate fair value due to their maturities. The fair values of
long term debt and capital leases are not materially different from
their carrying amounts, based on interest rates available to the
Company for similar types of arrangements.
<PAGE>
CONNECTRIA CORPORATION
Notes to the Financial Statements
June 30, 2000 and December 31, 1999 and 1998
(Information as at June 30, 2000 and for the six months ended June 30, 2000 and
1999 is unaudited)
================================================================================
2. CAPITAL ASSETS
<TABLE>
June 30, December 31, December 31,
2000 1999 1998
----------- ------------ -------------
<S> <C> <C> <C>
Computer hardware and software $ 565,386 $ 488,795 $ 164,093
Furniture and fixtures 24,627 24,627 8,792
Leasehold improvements 105,818 105,818 105,818
--------------------------------------------------------------------------------------------------
695,831 619,240 278,703
Less: accumulated amortization (166,196) (147,140) (43,518)
--------------------------------------------------------------------------------------------------
$ 529,635 $ 472,100 $ 235,185
--------------------------------------------------------------------------------------------------
</TABLE>
3. BANK INDEBTEDNESS
Bank indebtedness includes a letter of credit, which bears interest at
8.5%, is due on demand and secured by accounts receivable, inventory and
equipment.
4. DUE TO SHAREHOLDER
The promissory note of $38,000 is due to a shareholder is unsecured,
non-interest bearing and has no specific terms of repayment. The loan was
repaid in the period to June 30, 2000.
During the six months ended June 30, 2000, the Corporation's parent
company, MDSI Mobile Data Solutions Inc. advanced $450,000 without interest
or specific repayment terms.
5. LONG-TERM DEBT
<TABLE>
June 30, December 31, December 31,
2000 1999 1998
---------- ------------ -------------
<S> <C> <C> <C>
Bank of America, term loan, secured by general accounts,
receivable, inventory and equipment, repayable in blended
payments of $4,722, bearing interest at 8.25%. $ 91,084 $ 84,334 $ 132,009
Less: Current portion of long-term debt 47,831 52,135 48,020
--------------------------------------------------------------------------------------------------------------
$ 43,253 $ 32,199 $ 83,989
--------------------------------------------------------------------------------------------------------------
</TABLE>
Instalments of long-term debt principal payable subsequent to December
31, 1999 are:
2000 $ 52,135
2001 32,199
-----------------------------------------------------------
$ 84,334
-----------------------------------------------------------
<PAGE>
CONNECTRIA CORPORATION
Notes to the Financial Statements
June 30, 2000 and December 31, 1999 and 1998
(Information as at June 30, 2000 and for the six months ended June 30, 2000 and
1999 is unaudited)
================================================================================
6. CAPITAL STOCK
The Corporation's authorized and issued capital stock is as follows:
Upon incorporation, the authorized share capital of the Corporation was
30,000 common stock with a par value of $1.00 per share.
On April 29, 1998, the Corporation's authorized stock was changed to
3,000,000 common stock with a par value of $.001 per share. Pursuant to
this, a 100:1 stock split was declared on the 1,000 outstanding common
stock of the Corporation. Also on that date, 300,000 shares of the
Corporation were issued for cash proceeds of $39,000.
On July 6, 1998, the authorized stock of the Corporation was changed to
2,000,000 Class A voting common stock and 1,000,000 Class B non-voting
common stock, both with a par value of $.001 per share. Also, on that date,
200,000 shares of the Corporation were issued for cash proceeds of
$100,000.
On July 1, 1999, two employees were issued 7,500 shares each as payment of
a $3,750 bonus.
On December 31, 1999, the authorized common stock of the Corporation was
changed to 40,000,000 Class A voting common stock and 20,000,000 Class B
non-voting common stock, both with a par value of $.01 per share. On that
date, a 9:1 stock dividend was declared.
All numbers on the financial statements have been restated to reflect the
9:1 stock split on December 31, 1999.
<PAGE>
CONNECTRIA CORPORATION
Notes to the Financial Statements
June 30, 2000 and December 31, 1999 and 1998
(Information as at June 30, 2000 and for the six months ended June 30, 2000 and
1999 is unaudited)
================================================================================
7. COMMITMENTS AND CONTINGENCIES
Capital and operating leases
At December 31, 1999, future minimum payments under capital and operating
leases for computer equipment and office space are as follows:
<TABLE>
Capital Operating
Leases Leases
---------- -----------
<S> <C> <C>
2000 $ 149,879 $ 101,016
2001 139,506 101,016
2002 90,020 71,508
2003 10,168 42,000
2004 - 42,000
Thereafter - 143,500
--------------------------------------------------------------------------------------
389,573 $ 501,040
-----------
Less: amount representing interest (67,441)
-------------------------------------------------------------------
Present value of minimum lease payments 322,132
Less: current portion (112,251)
-------------------------------------------------------------------
$ 209,881
-------------------------------------------------------------------
</TABLE>
Rent expense for office space and office furniture was $94,826 for the year
ended December 31, 1999 (1998 - $45,336).
<PAGE>
CONNECTRIA CORPORATION
Notes to the Financial Statements
June 30, 2000 and December 31, 1999 and 1998
(Information as at June 30, 2000 and for the six months ended June 30, 2000 and
1999 is unaudited)
================================================================================
8. STOCK OPTIONS
In May, 1998, the Corporation adopted a stock option plan which provides
for the issuance of incentive and nonstatutory common stock options to
employees and directors of the Company. The Board of Directors reserved
5,000,000 shares of common stock to be issued in conjunction with the plan.
Stock options are granted at exercise prices and vesting schedules
determined by the Board of Directors. All options granted to employees have
been approved by the Board of Directors with vesting schedules of up to
four years. Stock options expire ten years after the date of grant. The
following table summarizes stock option activity for the periods indicated:
<TABLE>
Weighted-
Average
Options Exercise
Outstanding Price
-------------- -------------
<S> <C> <C>
Options granted 3,610,000 $ 0.07
---------------------------------------------------------------------------------------
Outstanding at December 31, 1998 3,610,000 0.07
Options granted 407,000 0.96
---------------------------------------------------------------------------------------
Outstanding at December 31, 1999 4,017,000 0.16
Options granted 255,000 2.38
Options cancelled (30,000) 0.50
---------------------------------------------------------------------------------------
Outstanding at June 30, 2000 4,242,000 0.29
---------------------------------------------------------------------------------------
Options exercisable at June 30, 2000 3,410,000 $ 0.09
---------------------------------------------------------------------------------------
</TABLE>
During the year ended December 31, 1998 the Corporation recorded
compensation expense of $220,700 on stock options issued to employees.
The following table summarizes information about stock options outstanding
and exercisable at June 30, 2000:
<TABLE>
Range of Weighted-average
Exercise Number of Remaining Options
Prices Options Contractual Life Exercisable
--------- ----------- ------------------- ------------
<S> <C> <C> <C>
$ 0.01 1,430,000 7.5 years 1,400,000
0.05 1,810,000 7.9 years 1,810,000
0.10 100,000 8.2 years 100,000
0.50 240,000 8.3 years -
0.75 89,500 8.8 years -
1.00 310,500 9.3 years 100,000
2.00 229,500 9.7 years -
5.00 32,500 9.9 years -
</TABLE>
<PAGE>
CONNECTRIA CORPORATION
Notes to the Financial Statements
June 30, 2000 and December 31, 1999 and 1998
(Information as at June 30, 2000 and for the six months ended June 30, 2000 and
1999 is unaudited)
================================================================================
8. STOCK OPTIONS (Continued)
In accordance with SFAS 123, the fair value of each employee option grant
is estimated on the date of grant using the minimum value option-pricing
model assuming the following weighted average assumptions risk free
interest rate of 5.0% (December 31, 1999 and 1998 - 5.0% and 5.0%)
volatility of 0% for all periods, dividends of 0% for all periods; and an
expected life of 10 years. Had the Corporation determined compensation
expense based on the fair value of the option at the grant date for all
stock options issued to employees, the Corporation's net income (loss)
would have been changed to the pro forma amounts indicated below:
<TABLE>
June 30, December 31,
-------------------------- -------------------------------------
2000 1999 1999 1998 1997
-------------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net income (loss)
As reported $ 2,543 $225,475 $142,038 $135,310 $ 39,414
Pro forma $(63,635) $193,830 $ 78,749 $108,132 $ 39,414
-------------------------------------------------------------------------------------------------
</TABLE>
9. CONCENTRATION OF CREDIT AND OTHER RISKS
Concentration of credit risk
The Company's financial instruments that potentially subject the Company to
significant concentration of credit risk consist of accounts receivable.
The Company manages credit risk with respect to accounts receivable through
maintaining long-term relationships with its customers. Historically, the
Company has not incurred any significant credit related losses.
Significant customers
The Company has four customers which represented 89% and 99% of total 1999
and 1998 revenues, respectively in each year.
<PAGE>
Pro Forma Consolidated Financial Statements of
MDSI MOBILE DATA SOLUTIONS INC.
<PAGE>
MDSI MOBILE DATA SOLUTIONS INC.
Pro Forma Consolidated Balance Sheet
June 30, 2000
(Unaudited)
================================================================================
<TABLE>
June 30, 2000
----------------------------------
MDSI
Mobile Data Connectria Pro Forma at
Solutions, Inc. Corporation Adjustments June 30, 2000
---------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,654,872 $ (84,676) $ - $ 9,570,196
Accounts receivable, net
Trade 12,121,664 1,049,229 - 13,170,893
Unbilled 12,449,274 - - 12,449,274
Prepaid expenses 1,603,226 266,755 - 1,869,983
Deferred income taxes 577,427 - - 577,428
Current portion of lease receivable 329,808 - - 329,808
36,736,271 1,231,308 - 37,967,581
------------------------------------------------------------------------------------------------------------------------------
LEASE RECEIVABLE - - -
INVESTMENT 6,888,486 - 6,888,486
CAPITAL ASSETS, NET 7,560,478 529,635 8,090,113
INTANGIBLE ASSETS, NET 1,981,015 - 1,981,015
ASSETS OF DISCONTINUED OPERATIONS 837,959 - 837,959
------------------------------------------------------------------------------------------------------------------------------
$54,004,209 $ 1,760,943 $ - $ 55,765,154
------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,643,735 $ 118,142 $ - $ 1,761,877
Accrued liabilities 4,285,366 177,819 - 4,463,185
Income taxes payable 898,012 - - 898,012
Deferred revenue 7,976,801 4,297 - 7,981,098
Current portion of long-term debt - 47,831 - 47,831
Current obligations under capital leases 1,465,661 146,188 - 1,611,849
------------------------------------------------------------------------------------------------------------------------------
16,269,575 494,277 - 16,763,854
------------------------------------------------------------------------------------------------------------------------------
OBLIGATIONS UNDER CAPITAL LEASES 1,877,310 239,086 - 2,116,396
LONG TERM DEBT (including intercompany loans) (488,000) 493,253 - 5,253
LIABILITIES OF DISCONTINUED 106,267 - - 106,267
------------------------------------------------------------------------------------------------------------------------------
17,765,152 1,226,616 - 18,991,770
------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock 48,179,874 6,150 141,350 48,327,375
Additional paid-up capital - 362,050 (141,350) 220,700
Treasury stock (85,043) - - (85,043)
Comprehensive income (690,104) - - (690,104)
Retained earnings (deficit) (11,165,670) 166,127 - (10,999,543)
------------------------------------------------------------------------------------------------------------------------------
$54,004,209 $ 1,760,943 $ - $ 55,765,154
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
MDSI MOBILE DATA SOLUTIONS INC.
Pro Forma Consolidated Statement of Income
June 30, 2000
(Unaudited)
================================================================================
<TABLE>
Six months to June 30, 2000
----------------------------
MDSI Pro Forma
Mobile Data Connectria for the period
Solutions, Inc. Corporation Adjustments June 30, 2000
--------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
REVENUE
Software and services $ 19,178,024 $ - $ - $ 19,178,024
e-Business - 3,040,179 - 3,040,179
Third party products and services 1,126,336 54,800 - 1,181,136
Maintenance and support 3,997,438 - - 3,997,438
------------------------------------------------------------------------------------------------------------------------
24,301,798 3,094,979 - 27,396,777
DIRECT COSTS 9,832,574 2,014,454 - 11,847,028
------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 14,469,224 1,080,526 - 15,549,749
------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Research and development 4,099,422 214,800 - 4,314,222
Sales and marketing 6,054,289 136,599 - 6,190,898
General and administrative 3,466,193 726,584 - 4,192,777
Amortization of intangible assets 137,289 - - 137,289
Costs of merger/restructuring 2,076,028 - - 2,076,028
------------------------------------------------------------------------------------------------------------------------
15,833,221 1,077,983 - 16,911,214
OPERATING INCOME (1,363,997) 2,543 (1,361,465)
OTHER INCOME (389,118) - (389,118)
------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE TAX PROVISION (1,753,115) 2,543 (1,750,583)
(PROVISION FOR) RECOVERY OF INCOME TAXES (118,272) - (118,272)
------------------------------------------------------------------------------------------------------------------------
NET INCOME (1,871,387) 2,543 - (1,868,855)
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
MDSI MOBILE DATA SOLUTIONS INC.
Pro Forma Consolidated Balance Sheet
December 31, 1999
(Unaudited)
================================================================================
<TABLE>
December 31, 1999
---------------------
Pro Forma at
Connectria December 31,
MDSI Corporation Adjustments 1999
------------ ------------- ----------- --------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 14,750,040 $ (137,117) $ - $14,612,923
Accounts receivable, net
Trade 13,151,828 995,183 - 14,147,011
Unbilled 5,595,902 - - 5,595,902
Prepaid expenses 1,117,380 4,200 - 1,121,580
Deferred income taxes 577,427 - - 577,427
Current portion of lease receivable 386,861 - - 386,861
-----------------------------------------------------------------------------------------------------------------------------
35,579,438 862,266 - 36,441,704
LEASE RECEIVABLE 133,723 - - 133,723
INVESTMENT 4,140,457 - - 4,140,457
CAPITAL ASSETS, NET 6,386,647 472,100 - 6,858,747
INTANGIBLE ASSETS, NET 1,907,297 - - 1,907,297
ASSETS OF DISCONTINUED OPERATIONS 960,610 - - 960,610
-----------------------------------------------------------------------------------------------------------------------------
$ 49,108,172 $ 1,334,366 $ - $50,442,538
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,571,142 $ 189,501 $ - $ 1,760,643
Accrued liabilities 2,466,097 189,427 - 2,655,524
Income taxes payable 1,567,671 - - 1,567,671
Deferred revenue 4,724,850 17,188 - 4,742,038
Current portion of long-term debt - 52,153 - 52,153
Current obligations under capital leases 1,176,957 112,251 - 1,289,208
-----------------------------------------------------------------------------------------------------------------------------
11,506,717 560,520 - 12,067,237
OBLIGATIONS UNDER CAPITAL LEASES 2,422,525 209,881 - 2,632,406
LONG TERM DEBT - 32,181 - 32,181
LIABILITIES OF DISCONTINUED OPERATIONS 173,424 - - 173,424
-----------------------------------------------------------------------------------------------------------------------------
14,102,666 802,582 - 14,905,248
STOCKHOLDERS' EQUITY
Common stock 44,814,259 6,150 141,350 44,961,759
Additional paid-up capital - 362,050 (141,350) 220,700
Treasury stock (85,043) - - (85,043)
Comprehensive income (429,438) - - (429,438)
Retained earnings (deficit) (9,294,272) 163,584 - (9,130,688)
-----------------------------------------------------------------------------------------------------------------------------
$ 49,108,172 $ 1,334,366 $ - $50,442,538
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
MDSI MOBILE DATA SOLUTIONS INC.
Pro Forma Consolidated Statement of Income
December 31, 1999
(Unaudited)
================================================================================
<TABLE>
December 31, 1999
---------------------
Pro Forma at
Connectria December 31,
MDSI Corporation Adjustments 1999
------------ ------------- ----------- --------------
<S> <C> <C> <C> <C>
REVENUE
Software and services $ 39,912,480 $ - $ - $ 39,912,480
e-Business - 4,845,183 - 4,845,183
Third party products and services 6,679,046 1,569,218 - 8,248,264
Maintenance and support 5,565,499 - - 5,565,499
------------------------------------------------------------------------------------------------------------------------
52,157,025 6,414,401 - 58,571,426
DIRECT COSTS 22,550,922 4,767,013 - 27,317,935
------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 29,606,103 1,647,388 - 31,253,491
------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Research and development 6,723,280 179,100 - 6,902,380
Sales and marketing 9,189,694 180,630 - 9,370,324
General and administrative 5,632,883 1,145,620 - 6,778,503
Amortization of intangible assets 279,240 - - 279,240
------------------------------------------------------------------------------------------------------------------------
21,825,097 1,505,350 - 23,330,447
OPERATING INCOME 7,781,006 142,038 7,923,044
OTHER INCOME (759,549) - (759,549)
------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE TAX PROVISION 7,021,457 142,038 7,163,495
(PROVISION FOR) RECOVERY OF INCOME TAXES (2,144,424) - (2,144,424)
------------------------------------------------------------------------------------------------------------------------
NET INCOME BEFORE DISCONTINUED OPERATIONS 4,877,033 142,038 - 5,019,071
INCOME (LOSS) FROM DISCONTINUED OPERATIONS (3,872,683) - (3,872,683)
------------------------------------------------------------------------------------------------------------------------
NET INCOME 1,004,350 142,038 - 1,146,388
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
MDSI MOBILE DATA SOLUTIONS INC.
Pro Forma Consolidated Balance Sheet
December 31, 1998
(Unaudited)
================================================================================
<TABLE>
As Reported As Restated
December 31, Connectria December 31,
1998 Corporation Adjustments 1998
------------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,995,775 $ 149,211 $ - $ 4,144,986
Accounts receivable, net - -
Trade 10,811,267 564,433 - 11,375,700
Unbilled 5,072,005 736,135 - 5,808,140
Prepaid expenses 2,251,822 4,200 - 2,256,022
Deferred income taxes 662,043 - - 662,043
Current portion of lease receivable 364,942 - - 364,942
-----------------------------------------------------------------------------------------------------------------------------
23,157,854 1,453,979 - 24,611,833
LEASE RECEIVABLE 550,781 - - 550,781
INVESTMENT - - - -
CAPITAL ASSETS, NET 3,345,029 235,185 - 3,580,214
INTANGIBLE ASSETS, NET 2,038,243 - - 2,038,243
ASSETS OF DISCONTINUED 7,741,245 - - 7,741,245
-----------------------------------------------------------------------------------------------------------------------------
$ 36,833,152 $1,689,164 $ - $ 38,522,316
-----------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,649,348 $ 68,763 $ - $ 4,718,111
Accrued liabilities 2,162,024 886,490 - 3,048,514
Income taxes payable 1,590,423 108 - 1,590,531
Deferred revenue 4,764,875 - - 4,764,875
Current portion of long-term debt 245,691 48,020 - 293,711
Current obligations under capital leases 568,379 14,480 - 582,859
-----------------------------------------------------------------------------------------------------------------------------
13,980,740 1,017,861 - 14,998,601
OBLIGATIONS UNDER CAPITAL LEASES 1,241,722 58,068 - 1,299,790
LONG TERM DEBT - 83,989 - 83,989
LIABILITIES OF DISCONTINUED 1,543,547 - - 1,543,547
-----------------------------------------------------------------------------------------------------------------------------
16,766,009 1,159,918 - 17,925,927
-----------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock 32,657,978 6,000 134,000 32,797,978
Additional paid-up capital - 354,700 (134,000) 220,700
Treasury stock (85,043) - - (85,043)
Comprehensive income (2,207,170) - - (2,207,170)
Retained earnings (deficit) (10,298,622) 168,546 - (10,130,076)
-----------------------------------------------------------------------------------------------------------------------------
$ 36,833,152 $1,689,164 $ - $ 38,522,316
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
MDSI MOBILE DATA SOLUTIONS INC.
Pro Forma Consolidated Statement of Income
December 31, 1998
(Unaudited)
================================================================================
<TABLE>
December 31, 1998
---------------------------
Pro Forma at
Connectria December 31,
MDSI Corporation Adjustments 1998
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUE
Software and services $ 28,729,022 $ - $ - $ 28,729,022
e-Business - 2,733,917 - 2,733,917
Third party products and services 12,296,152 763,002 - 13,059,154
Maintenance and support 3,841,225 - - 3,841,225
---------------------------------------------------------------------------------------------------------------------------
44,866,399 3,496,919 - 48,363,318
DIRECT COSTS 21,407,723 2,532,775 - 23,940,498
---------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 23,458,676 964,144 - 24,422,820
---------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Research and development 5,840,730 - - 5,840,730
Sales and marketing 7,810,677 19,269 - 7,829,946
General and administrative 3,608,778 809,565 - 4,418,343
Amortization of intangible assets 254,893 - - 254,893
Costs of merger/restructuring - - - -
Acquired research and development - - - -
---------------------------------------------------------------------------------------------------------------------------
17,515,078 828,834 - 18,343,912
OPERATING INCOME 5,943,598 135,310 6,078,908
OTHER INCOME 38,887 - 38,887
---------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE TAX PROVISION 5,982,485 135,310 6,117,795
(PROVISION FOR) RECOVERY OF INCOME TAXES (1,809,087) - (1,809,087)
--------------------------------------------------------------------------------------------------------------------------
NET INCOME BEFORE DISCONTINUED OPERATIONS 4,173,398 135,310 - 4,308,708
INCOME (LOSS) FROM DISCONTINUED OPERATIONS (532,302) - (532,302)
---------------------------------------------------------------------------------------------------------------------------
NET INCOME 3,641,096 135,310 - 3,776,406
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
MDSI MOBILE DATA SOLUTIONS INC.
Notes to the Pro Forma Consolidated Financial Statements
================================================================================
1. BASIS OF PRESENTATION
On June 1, 2000, pursuant to an Agreement and Plan of Reorganization, dated
as of June 14, 2000, (the "Agreement"), MDSI Mobile Data Solutions Inc.
("MDSI" or the "Company") merged MDSI Acquisition Corporation with
Connectria Corporation ("Connectria"). Under the terms of the Agreement,
each share of Connectria is converted into .13745 shares of MDSI common
shares. The transaction was accounted for utilizing the pooling method of
accounting.
2. PRO FORMA ADJUSTMENT
The pro forma adjustment to the consolidated statement represents the
consolidation of the equity accounts to reflect the number of shares of
common stock outstanding.
