6-K 1 d58224_6-k.txt SECURITES AND EXCHANGE COMMISSION Washington, D.C. FORM 6-K Report of Foreign Issuer Pursuant to Rule 13a - 16 or 15d-16 of the Securities Exchange Act of 1934 Annual Financial Statements Eiger Technology, Inc. 330 Bay Street Suite 602 Toronto, ON M5H 2S8 [Indicate by check mark whether the registrant files or will file annual reports under cover 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 by the Commission pursuant to Rule 12g3-2 (b) under the Securities Act of 1934.] Yes |X| No |_| 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. Eiger Technology, Inc. Date: February 10, 2004 Mr. Gerry Racicot President EIGER TECHNOLOGY, INC. CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 EIGER TECHNOLOGY, INC. INDEX September 30, 2003 and 2002 Auditors' Report Consolidated Financial Statements: Balance Sheets Statements of Operations and Retained Earnings Statements of Cash Flows Notes to the Consolidated Financial Statements [LETTERHEAD OF MONTEITH, MONTEITH & CO.] AUDITORS' REPORT To the Shareholders of Eiger Technology, Inc.: We have audited the consolidated balance sheets of Eiger Technology, Inc. as at September 30, 2003 and 2002, and the consolidated statements of operations and retained earnings and cash flows for the years then ended. 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 auditing standards generally accepted in Canada and 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 Eiger Technology, Inc. as at September 30, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in Canada. Monteith, Monteith & Co. CHARTERED ACCOUNTANTS. Stratford, Ontario, December 30, 2003. EIGER TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS as at September 30, 2003 and 2002 ASSETS 2003 2002 ----------- ----------- $ $ Current: Cash 618,000 1,982,000 Short-term Investments (Note 5) 409,000 1,653,000 Accounts Receivable (Note 6) 3,598,000 5,004,000 Inventory 3,049,000 4,493,000 Prepaid Expenses 681,000 378,000 ----------- ----------- 8,355,000 13,510,000 Long-term Investments (Note 5) 736,000 1,650,000 Capital (Note 7) 3,528,000 4,867,000 Goodwill 2,114,000 3,013,000 Future Income Tax Benefit 98,000 -- Other (Note 8) 947,000 718,000 ----------- ----------- 15,778,000 23,758,000 =========== =========== LIABILITIES and SHAREHOLDERS' EQUITY Current: Bank Indebtedness (Note 9) 3,766,000 4,028,000 Accounts Payable and Accrued Liabilities 4,569,000 4,395,000 Current Portion of Long-term Debt (Note 10) 420,000 145,000 ----------- ----------- 8,755,000 8,568,000 ----------- ----------- Long-term Debt (Note 10) 1,036,000 940,000 ----------- ----------- Non-controlling Interest (3,172,000) (1,873,000) ----------- ----------- Shareholders' Equity: Share Capital (Note 12) 42,685,000 42,235,000 Contributed Surplus 217,000 217,000 Retained Earnings (33,743,000) (26,329,000) ----------- ----------- 9,159,000 16,123,000 ----------- ----------- 15,778,000 23,758,000 =========== =========== On Behalf of the Board: "Gerry Racicot" Director ---------------------------------- Gerry Racicot "Jason Moretto" Director ---------------------------------- Jason Moretto (See Accompanying Notes) EIGER TECHNOLOGY, INC. CONSOLIDATED STATEMENTS of OPERATIONS and RETAINED EARNINGS for the years ended September 30, 2003 and 2002 2003 2002 ----------- ----------- $ $ Sales 22,722,000 19,325,000 Cost of Sales 19,896,000 17,146,000 ----------- ----------- Gross Margin 2,826,000 2,179,000 ----------- ----------- Expenses: Selling, General and Administration 6,500,000 8,451,000 Amortization of Capital Assets 658,000 562,000 Amortization of Goodwill and Other 171,000 235,000 Interest on Long-term Debt 66,000 60,000 Other Interest and Bank Charges 401,000 501,000 ----------- ----------- 7,796,000 9,809,000 ----------- ----------- Income (Loss) before Provision for Income Taxes and Non-controlling Interest (4,970,000) (7,630,000) Provision for Income Taxes - Future (98,000) -- Non-controlling Interest (885,000) (2,392,000) ----------- ----------- Income (Loss) before Unusual Items (3,987,000) (5,238,000) Unusual Items: Discontinued Operations (Note 13) (321,000) -- Non-recurring Items (Note 14) (3,106,000) -- ----------- ----------- Net Income (Loss) for the Year (7,414,000) (5,238,000) Retained Earnings - Beginning of Year (26,329,000) (21,091,000) ----------- ----------- Retained Earnings - End of Year (33,743,000) (26,329,000) =========== =========== Earnings per Share: Before Non-recurring Items: Basic (0.11) (0.15) ----------- ----------- Diluted (0.11) (0.15) ----------- ----------- Net Income (Loss) Basic (0.20) (0.15) ----------- ----------- Diluted (0.20) (0.15) ----------- ----------- (See Accompanying Notes) EIGER TECHNOLOGY, INC. CONSOLIDATED STATEMENTS of CASH FLOWS for the years ended September 30, 2003 and 2002
2003 2002 ---------- ---------- $ $ Cash Flows from Operating Activities: Net Income (Loss) for the Year (7,414,000) (5,238,000) Items not Involving Cash: Amortization (Including Discontinued Operations) 908,000 797,000 Non-controlling Interest (Including Discontinued Operations) (968,000) (2,392,000) Non-recurring Items 3,106,000 -- Future Income Taxes (98,000) -- ---------- ---------- (4,466,000) (6,833,000) Changes in Non-cash Working Capital Balances: Accounts Receivable 1,406,000 3,755,000 Inventory 1,444,000 2,052,000 Prepaid Expenses (303,000) 391,000 Accounts Payable and Accrued Liabilities 174,000 (1,221,000) Income Taxes Payable -- -- Non-controlling Interest -- 1,190,000 ---------- ---------- (1,745,000) (666,000) ---------- ---------- Cash Flows from Investing Activities: Net Disposals (Purchases) of Capital Assets (224,000) (888,000) Long-term Investments (847,000) (1,246,000) Net Disposals (Purchases) of Goodwill and Other Assets (135,000) (256,000) ---------- ---------- (1,206,000) (2,390,000) ---------- ---------- Cash Flows from Financing Activities: Increase (Decrease) in Long-term Debt 371,000 (49,000) Increase (Decrease) in Bank Indebtedness (262,000) 513,000 Issuance of Share Capital (Net of Costs) 234,000 234,000 ---------- ---------- 343,000 698,000 ---------- ---------- Net Cash Flows for the Year (2,608,000) (2,358,000) Cash and Cash Equivalents - Beginning of the Year 3,635,000 5,993,000 ---------- ---------- Cash and Cash Equivalents - End of the Year 1,027,000 3,635,000 ========== ========== Cash and Cash Equivalents Represented by: Cash 618,000 1,982,000 Short-term Investments 409,000 1,653,000 ---------- ---------- 1,027,000 3,635,000 ========== ==========
(See Accompanying Notes) EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 1. Nature of Business: Eiger Technology, Inc. ("the Company") is incorporated under the laws of Ontario. Through its various subsidiaries, the Company offers Voice over Internet Protocol services to the Canadian long-distance market and manufactures and distributes electronic/computer peripherals and electronic ballasts to OEM and consumer markets worldwide. 2. Significant Accounting Policies: (a) Basis of Preparation: These financial statements have been prepared in accordance with accounting principles generally accepted in Canada ("Cdn. GAAP"). A reconciliation to U.S. generally accepted accounting principles ("U.S. GAAP") is provided in Note 15. Because a precise determination of assets and liabilities depends on future events, the preparation of periodic financial statements necessitates the use of estimates and approximations. Actual amounts may differ from these estimates. (b) Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Eiger Technology, Inc. and all of its subsidiary companies as listed in Note 4. All significant intercompany transactions and balances have been eliminated upon consolidation. (c) Cash and Cash Equivalents: Cash and cash equivalents consist of cash on account and short-term investments with remaining maturities of three months or less at acquisition. (d) Inventory: Inventory is valued at the lower of cost and net realizable value. Cost is determined on a first-in, first-out basis and includes the costs of materials and direct labour plus the applicable share of manufacturing overhead. (e) Investments: All non-consolidated investments are accounted for at cost. Short-term investments are written down to market value when less than cost. Long-term investments are written down to market value when a decline in market value below the carrying value is considered to be other than temporary. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 2. Significant Accounting Policies - continued: (f) Capital Assets: Capital assets are recorded at cost. Amortization is calculated on the declining-balance basis at the following annual rates: Buildings - 4-5% Machinery and Equipment - 5-10% Automotive Equipment - 20-30% Computer Equipment - 20-30% Leasehold Improvements - 10% straight line basis (g) Goodwill: Goodwill represents the excess of the purchase price of the Company's interest in subsidiary companies over the fair value of the underlying net identifiable assets at the time of acquisition. Goodwill is amortized over 10 years on a straight-line basis (40 years for acquisitions prior to 1997). Goodwill arising on acquisitions after June 30, 2001 is not amortized. Management evaluates the expected future net cash flows of the companies at each reporting date and adjusts goodwill for any impairment. (h) Other Assets: Product development costs meeting generally accepted criteria for deferral are written down to expected realizable value, and are amortized once production commences over periods ranging from three to ten years, depending on the anticipated economic life of the particular product. Deferred organization, finance, and regulatory approval costs are amortized over 2 to 5 years. Long-term lease deposits are recorded at cost. (i) Income Taxes: Income taxes are provided using the liability method of tax allocation. Under this method, future tax assets and liabilities are determined based on differences between financial reporting and income tax bases of assets and liabilities, and are measured using the substantially enacted tax rates and laws that will be in effect when the differences are expected to reverse. (j) Issuance of Share Capital: The costs of issuing share capital are netted against share capital. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 2. Significant Accounting Policies - continued: (k) Revenue Recognition: Sales are recorded upon shipment of goods to customers. Fees are recognized as services are rendered. (l) Foreign Currency Translation: Due to the extensive degree of financing provided to its foreign subsidiaries by the Company, these subsidiaries are considered to be integrated operations. Accordingly, the temporal method of foreign currency translation is used. Under this method, monetary assets and liabilities of foreign subsidiaries are translated into Canadian dollars using the exchange rate in effect at the balance sheet date, non-monetary items are translated at historical exchange rates (except for items carried at market, which are translated at the balance sheet date exchange rate), and revenues and expenses are translated using average exchange rates to approximate the rates actually in effect at the time of the transactions. Resulting foreign exchange translation gains or losses are included in the determination of net income for the year, except for such gains or losses relating the translation or settlement of foreign currency denominated long-term monetary items which are deferred and amortized over the remaining life of the monetary item. There were no material exchange gains or losses on long-term foreign currency denominated monetary items during either of the reporting periods. (m) Stock-based Compensation: Effective October1, 2002, the Company adopted the recommendations of CICA Section 3870, "Stock-based Compensation and Other Stock-based Payments", which established standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services. Under the new provisions, stock-based compensation should be recognized on a fair value basis for stock-based payments to non-employees, and for employee awards that are direct awards of stock, or call for settlement in cash or other assets. The new section permits the Company to continue its existing policy of not recognizing any compensation expense upon the granting of stock options to its employees. Consideration paid by employees on the exercise of stock options is recorded as share capital. The new section does, however, require additional disclosures for options granted to employees, including the disclosure of pro-forma earnings and pro-forma earnings per share calculated as if the fair value method of accounting had been used. This information is provided in Note 3. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 2. Significant Accounting Policies - continued: (n) Earnings per Share: Basic earnings per share is calculated based on the weighted average number of shares outstanding during the year. Diluted earnings per share is calculated using the treasury stock method based on the weighted average number of shares that would have been outstanding during the year had all the dilutive options been exercised at the beginning of the year, or date of issuance if later, and assuming that option proceeds would be used to purchase common shares at the average market price during the year. 3. Stock-based Compensation: Effective October 1, 2002, the Company adopted the recommendations of CICA Section 3870, "Stock-based Compensation and Other Stock-based Payments", which requires the disclosure of pro-forma net income as if the Company had accounted for its stock options issued to employees subsequent to September 30, 2002 under the fair value method. Pro-forma results, including stock-based compensation, for the year ended September 30, 2003 and the year ended September 30, 2002 for comparison, are as follows:
2003 2002 ---------- ---------- $ $ Net Loss - as Reported (7,414,000) (5,238,000) Stock-based Compensation Expense (195,000) (285,000) ---------- ---------- Net loss - Pro-forma 7,609,000 (5,523,000) ========== ========== Basic and Diluted Earnings per Share - as Reported (0.20) (0.15) ========== ========== Basic and Diluted Earnings per Share - Pro-forma (0.21) (0.15) ========== ==========
The fair value of each option grant is estimated as of the grant date using the Black-Scholes option-pricing model. For the twelve months ended September 30, 2003, the Company used the following weighted average assumptions: risk-free interest rate of 4.50%; expected volatility of 6%; expected life of 5 years; expected dividend yield of 0%. Details of outstanding stock options are disclosed in Note 12. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 4. Subsidiaries and Related Party Transactions: Eiger Technology, Inc. is related to the following corporations: Name of Corporation Nature of Relationship ------------------- ---------------------- Newlook Industries Corp. 83.2% Subsidiary Vision Unlimited Equipment Inc.* 100% Subsidiary of Newlook Industries Corp. A.D.H. Custom Metal Fabricators Inc. 100% Subsidiary of Vision Unlimited Equipment Inc. Alexa Properties Inc. 100% Subsidiary ETIFF Holdings, Inc.* 100% Subsidiary K-Tronik International Corp.* 64% Subsidiary of ETIFF Holdings, Inc. K-Tronik North America Corp. 100% Subsidiary of K-Tronik International Corp. K-Tronik Asia Corp. 100% Subsidiary of K-Tronik North America Corp. Alexa Korea Holdings, Inc.* 100% Subsidiary EigerNet, Inc. 58.4% Subsidiary of Alexa Korea Holdings, Inc. Alexa (U.S.A.), Inc.* 100% Subsidiary Eiger Labs Group, Inc. 64% Subsidiary of Alexa (U.S.A.), Inc. Onlinetel Corp. 100% Subsidiary Onlinetel Inc. 100% Subsidiary of Onlinetel Corp. * Inactive - holding company only All transactions within the corporate group are in the normal course of business, are transacted at fair market value and recorded at the carrying value at the time, and are eliminated upon consolidation. Intercompany balances at the financial statement date are also eliminated upon consolidation. Service fees paid to corporations owned by management personnel during the period totalled $481,000 (2002: $456,000). EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 5. Investments: (a) Short-term Investments: Short-term investments are comprised of Canadian money market funds and short-term commercial paper plus accrued interest, having a market value equivalent to their cost amount. (b) Long-term Investments:
2003 2002 --------- --------- $ $ Advances to Lexatec VR Systems Inc. (Note 11) 96,000 123,000 Subsidiary long-term portfolio equity investments 640,000 1,527,000 Subsidiary long-term investment in debt securities -- -- Other -- -- --------- --------- 736,000 1,650,000 ========= =========
The advances noted above are non-interest bearing, and have no specific terms of repayment. 6. Accounts Receivable: Accounts receivable are reported net of an allowance for doubtful accounts of $2,662,000 (2002: $2,373,000). 7. Capital Assets:
2003 2002 --------------------------------------- --------- Accumulated Net Book Net Book Cost Amortization Value Value --------------------------------------- --------- $ $ $ $ Land 218,000 -- 218,000 217,000 Buildings 1,102,000 183,000 919,000 910,000 Machinery and Equipment 3,340,000 2,392,000 948,000 1,930,000 Furniture and Fixtures 663,000 474,000 189,000 255,000 Automotive Equipment 183,000 107,000 76,000 95,000 Leasehold Improvements -- -- -- 112,000 Telecommunications 1,338,000 386,000 952,000 1,018,000 Computer Equipment 464,000 238,000 226,000 330,000 --------------------------------------- --------- 7,308,000 3,780,000 3,528,000 4,867,000 ======================================= =========
EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 8. Other: 2003 2002 ------- ------- $ $ Product Development Costs 172,000 -- Non-interest Bearing Long-term Deposits 544,000 409,000 Regulatory Approval 143,000 153,000 Other 88,000 156,000 ------- ------- 947,000 718,000 ======= ======= 9. Bank Indebtedness: Foreign and domestic subsidiary lines of credit balances totalling $3,766,000 (Cdn.), bear interest at rates ranging from 5.0 - 7.3%, are secured by short-term investments, inventory and equipment, and are repayable upon demand. 10. Long-term Debt:
2003 2002 ---------- ---------- $ $ Royal Bank of Canada term loan repayable in monthly instalments of $10,000 plus interest calculated at Royal Bank prime plus 1/4% 505,000 625,000 Capital lease obligations - repayable over two years; interest rates averaging 22.0% 542,000 -- KiUp Bank (Korea) term loan, interest only through fiscal 2005, then repayable at $71,000 per year through fiscal 2010, interest calculated at 4.9% per annum 354,000 375,000 Other 55,000 85,000 ---------- ---------- 1,456,000 1,085,000 Less: Current Portion (420,000) (145,000) ---------- ---------- 1,036,000 940,000 ========== ==========
Principal payments required on long-term debt for the next five years are as follows: 2004: $420,000; 2005: $362,000; 2006: $191,000; 2007: $191,000; 2008: $96,000. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 11. Financial Instruments: (a) Fair Value: Cash and cash equivalents, short-term investments, accounts receivable and payable, and bank indebtedness are carried at cost which approximates fair value due to their short time to maturity. Management believes the carrying value of long-term investments to be equivalent to their fair market value. The fair values of the Company's long-term debt obligations, based on current rates for debt with similar terms and maturities, are approximately the same as their carrying values. (b) Interest Rate Risk: The Company is not exposed to significant interest rate risk due to the short-term maturity of its current monetary assets and liabilities. The Company's interest rate risk pertaining to its long-term debt obligations is not considered to be significant due to the relatively low amounts involved. (c) Credit Risk: The Company's financial assets that are exposed to credit risk consist primarily of short-term investments, accounts receivable, and long-term investments. Short-term investments consist solely of money market funds and short-term commercial paper issued by investment-rated Canadian financial institutions which are invested for terms not exceeding 90 days. The Company, in the normal course of business, is exposed to credit risk from its customers. Management believes that sufficient allowance has been made for bad debts in these financial statements based on a review of accounts on an individual basis. The concentration of credit risk in trade accounts receivable is not considered to be significant due to the Company's large client base. The Company is also exposed to credit risk with respect to its long-term advances to Lexatec VR Systems Inc. and certain subsidiary investments. Advances to Lexatec VR Systems Inc. are partially secured by a pledge of reciprocal shareholdings. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 12. Share Capital: Authorized: 100,000,000 Common Shares Issued:
2003 2002 ----------------------------- ----------------------------- No. of Shs. $ No. of Shs. $ ----------- ----------- Beginning of Year: 36,615,853 42,799,000 36,215,853 42,543,000 Issued: - private placement 993,098 450,000 -- -- - exercise of options -- -- 310,000 209,000 - acquisitions -- -- -- -- - other -- -- 90,000 47,000 - costs of issue -- -- ----------------------------- ----------------------------- End of Year: 37,608,951 43,249,000 36,615,853 42,799,000 Reciprocal Shareholdings (568,049) (564,000) (568,049) (564,000) ----------------------------- ----------------------------- Net per Balance Sheets 37,040,902 42,685,000 36,047,804 42,235,000 ============================= =============================
The Company awards unconditional stock options to employees, officers, directors and others at the recommendation of the CEO as approved by the shareholders. Options are granted at the fair market value of the shares on the day granted, and vest immediately. The following is a continuity schedule of outstanding options for the reporting periods, where WAEP refers to "weighted average exercise price". 2003 2002 ---------------------- ---------------------- No. of Options WAEP No. of Options WAEP -------------- ---- -------------- ---- $ $ Beginning of Year: 3,991,000 1.96 3,446,000 2.29 Granted 460,000 0.56 1,075,000 0.55 Exercised -- -- (310,000) .67 Expired (125,000) 1.07 (300,000) 2.02 --------- --------- End of Year: 4,246,000 1.83 3,991,000 1.96 ========= ========= EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 12. Share Capital - continued: No stock options were exercised during the year. The weighted average contractual life remaining for options outstanding at year end was 896 days. During the year, proceeds from exercised stock options of $Nil was credited to share capital (2002: $209,000). No amounts were recognized as compensation expense with respect to stock options granted or exercised in either of the reporting periods. Stock options have been granted to the CEO of K-Tronik North America Corp. contingent upon meeting sales quotas for that company as tabled below:
Number of Monthly Sales for Six Options Consecutive Months Exercisable Total Exercise Units of Ballasts Per Plateau Cumulative Price ----------------------------------------- ----------- ---------- ----- 50,000 per month for 6 consecutive months 70,000 70,000 .60 60,000 per month for 6 consecutive months 70,000 140,000 .60 70,000 per month for 6 consecutive months 70,000 210,000 .60 80,000 per month for 6 consecutive months 70,000 280,000 .60 90,000 per month for 6 consecutive months 70,000 350,000 .60
No shares were issued in fiscal 2003 or fiscal 2002 as a result of this agreement. Management agreed to issue shares of the Company to four members of the management team of EigerNet, Inc. and Eiger Labs Group Inc. as performance earn out consideration contingent upon achieving the criteria tabled below for the combined results of those two companies: Common Year Gross Sales Net Income Shares ---- ----------- ---------- ------ 1999 $27 million U.S. $1.0 million U.S. 600,000 2000 $70 million U.S. $2.5 million U.S. 750,000 2001 $80 million U.S. $3.5 million U.S. 750,000 2002 $90 million U.S. $4.0 million U.S. 900,000 2003 $110 million U.S. $4.5 million U.S. 1,000,000 600,000 shares were issued in fiscal 2000 as a result of this agreement based on the operating results for 1999. No shares have been issued since that time, and none will be issued in fiscal 2004 pursuant to this agreement as the sales and income criteria have not been met. EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 12. Share Capital - continued: In connection with the Company's acquisition of Onlinetel, Inc. in fiscal 2001, the share exchange agreement allows that additional shares of Eiger Technology, Inc. may be issued to the former shareholders of Onlinetel, Inc. if certain earn out provisions are met as follows: Fiscal Gross Net Common Year Revenue Income Shares ---- ------- ------ ------ $ $ # 2002 19,083,000 2,442,000 1,800,000 2003 37,348,000 6,213,000 1,800,000 2004 50,849,000 9,353,000 1,800,000 2005 59,867,000 13,849,000 1,800,000 Unmet earn out targets may be carried forward and met on a cumulative basis. The targets for fiscal 2003 were not met and are not being carried forward. 13. Discontinued Operation: As of May 28, 2003, management decided to discontinue the operations of Newlook Industries Corp., and on July 8, 2003 the assets of its operating subsidiaries, ADH Custom Metal Fabricators Inc. and Vision Unlimited Equipment Inc., were sold by public auction. The operating results of this business segment are disclosed in Note 18. Segment assets remaining at September 30, 2003 were comprised mainly of land and building owned by Alexa Properties Inc., having a carrying value of $552,000. 14. Non-recurring Items:
2003 2002 --------- ---- $ $ Charge for impairment in value of consolidated goodwill 805,000 -- Charge for decline in value of long-term investments in shares of other corporations 1,021,000 -- Loss on disposal of assets of discontinued operation (net of non-controlling interest share of $331,000) 1,280,000 -- --------- ---- 3,106,000 -- ========= ====
EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 15. Reconciliation to U.S. GAAP: These financial statements have been prepared in accordance with accounting principles generally accepted in Canada ("Cdn. GAAP"). Significant differences under U.S. GAAP are discussed below. For fiscal years beginning after December 15, 1998, U.S. GAAP requires that all organization costs (including those previously deferred) be expensed currently. Also, all product development costs are to be expensed as incurred. U.S. GAAP requires the measurement and reporting of "comprehensive income". Comprehensive income includes net income and all other changes to Shareholders' Equity other than amounts received from or paid to shareholders. The only reportable comprehensive income item for the Company relates to foreign currency translation adjustments as described below. U.S. GAAP requires the use of the current rate method of foreign currency translation, with any resulting foreign exchange translation adjustments forming part of comprehensive income for the year and accumulating as a separate component of shareholders' equity. U.S. GAAP permits, pursuant to APB Opinion 25, the use of the intrinsic method of accounting for stock-based compensation, while SFAS No. 123, as modified by SFAS No. 148, requires pro-forma reconciliations to the fair value method. Reconciliations to U.S. GAAP are as follows:
2003 2002 ---------- ---------- $ $ Net Income (Loss): - per Cdn. GAAP (7,414,000) (5,238,000) - expense deferred product development costs net of portion relating to non-controlling interest (172,000) 298,000 - foreign currency translation adjustment (283,000) 341,000 - future income tax savings related to above -- (100,000) ---------- ---------- - per U.S. GAAP (7,869,000) (4,699,000) ---------- ---------- Comprehensive item - foreign exchange adjustment 283,000 (341,000) ---------- ---------- Comprehensive Income (7,586,000) (5,040,000) ========== ==========
EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 15. Reconciliation to U.S. GAAP - continued:
2003 2002 ----------- ----------- $ $ Retained Earnings: - per Cdn. GAAP (33,743,000) (26,329,000) - expense deferred product development costs (172,000) -- - foreign currency translation adjustments 384,000 667,000 ----------- ----------- - per U.S. GAAP (33,531,000) (25,662,000) =========== =========== Accumulated Other Comprehensive Items: - per Cdn. GAAP -- -- - foreign currency translation adjustments (384,000) (667,000) ----------- ----------- - per U.S. GAAP (384,000) (667,000) =========== =========== Total Assets: - per Cdn GAAP 15,778,000 23,758,000 - expense deferred product development costs (172,000) -- ----------- ----------- - per U.S. GAAP 15,606,000 23,758,000 =========== =========== Earnings per Share (Basic and Fully Diluted): Income (Loss) before Unusual Items (.11) (.14) ----------- ----------- Net Income (Loss) (.21) (.14) ----------- ----------- Pro-forma Disclosure (SFAS No. 148): Comprehensive Income (Loss) - as Reported (7,586,000) (5,040,000) Stock-based Compensation Expense (195,000) (285,000) ----------- ----------- Comprehensive Income (Loss) - Pro-forma (7,781,000) (5,325,000) =========== =========== Basic and Fully Diluted Earnings per Share: Income (Loss) before Unusual Items (.12) (.15) ----------- ----------- Net Income (Loss) (.21) (.15) ----------- -----------
EIGER TECHNOLOGY, INC. NOTES to the CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 and 2002 16. Cash Payments of Interest and Income Taxes: 2003 2002 ------- ------- $ $ Interest 508,000 538,000 ======= ======= Income Taxes -- -- ======= ======= 17. Commitments: As at September 30, 2003, the Company had commitments under the terms of various operating leases requiring annual rental payments as follows: 2004: $347,000; 2005: $160,000; 2006: $160,000; 2007: $160,000; 2008: $Nil. 18. Segmented Information: Management has identified four reportable segments: "Newlook", "K-Tronik", "Onlinetel" and "Eiger". Segmentation is determined on the basis of the types of goods and services provided and geographic location. "Newlook", which was discontinued during the year, consisted of Vision Unlimited Equipment Inc., A.D.H. Custom Metal Fabricators Inc. and Alexa Properties Inc. Prior to its assets being sold, A.D.H. Custom Metal Fabricators Inc. was a manufacturer of fluorescent light fixtures, data racks and other metal cabinetry. Vision Unlimited Equipment Inc. was inactive. Alexa Properties Inc. owns the land and manufacturing facility in Stratford, Ontario. "K-Tronik" includes K-Tronik North America Corp., a distributor of electronic ballasts based in Hackensack, New Jersey, and K-Tronik Asia Corp., a manufacturer of electronic ballasts operating in Korea. "Onlinetel" consists of Onlinetel Corp. and Onlinetel Inc. which provide Voice over Internet Protocol services to the Canadian long distance market. "Eiger" includes Eiger Labs Group, Inc. and EigerNet, Inc. Both of these companies are involved in the production and distribution of electronic communications products. EigerNet, Inc. is located in South Korea, while Eiger Labs Group, Inc. operates out of California. Segmented financial information is presented on the following two pages. EIGER TECHNOLOGY, INC. SEGMENTED INFORMATION September 30, 2003
Newlook K-Tronik Onlinetel Eiger =========== =========== ========== ========== $ $ $ $ Sales: External: - Domestic 787,000 -- 4,932,000 -- - Foreign -- 9,152,000 -- 8,638,000 Intersegment -- -- -- -- ----------- ----------- ---------- ---------- 787,000 9,152,000 4,932,000 8,638,000 Cost of Sales 821,000 6,896,000 4,114,000 8,886,000 ----------- ----------- ---------- ---------- Gross Margin (34,000) 2,256,000 818,000 (248,000) ----------- ----------- ---------- ---------- Expenses: Operations and Administration 251,000 2,905,000 702,000 1,681,000 Amortization of Capital and Other Assets 79,000 364,000 287,000 147,000 Interest on Long-term Debt 36,000 -- 35,000 31,000 Other Interest and Bank Charges 4,000 226,000 40,000 133,000 ----------- ----------- ---------- ---------- 370,000 3,495,000 1,064,000 1,992,000 ----------- ----------- ---------- ---------- Income (Loss) before Provision for Income Taxes and Non-controlling Interest (404,000) (1,239,000) (246,000) (2,240,000) Provision for Income Taxes - Future -- -- (98,000) -- Non-controlling Interest (111,000) (444,000) -- (413,000) ----------- ----------- ---------- ---------- Income (Loss) before Unusual Items (293,000) (795,000) (148,000) (1,827,000) Unusual Items: Discontinued Operations -- -- -- -- Non-recurring Items (1,953,000) -- -- (1,153,000) ----------- ----------- ---------- ---------- Net Income (Loss) for the Year (2,246,000) (795,000) (148,000) (2,980,000) =========== =========== ========== ========== Cash Flows: From Operating Activities (204,000) 151,000 (806,000) (301,000) From Investing Activities -- (304,000) (159,000) (1,058,000) From Financing Activities 135,000 (85,000) 889,000 182,000 ----------- ----------- ---------- ---------- (69,000) (238,000) (76,000) (1,177,000) Cash and Cash Equivalents: Beginning of the Year 232,000 442,000 77,000 1,679,000 ----------- ----------- ---------- ---------- End of the Year 163,000 204,000 1,000 502,000 =========== =========== ========== ========== Expenditures on Capital Assets and Goodwill during the Year -- 304,000 159,000 1,812,000 =========== =========== ========== ========== Balance of Capital Assets and Goodwill - End of the Year - Domestic 552,000 -- 2,451,000 - Foreign -- 1,331,000 -- 1,211,000 ----------- ----------- ---------- ---------- 552,000 1,331,000 2,451,000 1,211,000 =========== =========== ========== ========== Amount of Investment in Investees Subject to Significant Influence -- -- -- -- =========== =========== ========== ========== Total Assets 733,000 6,121,000 3,491,000 4,990,000 =========== =========== ========== ========== Totals per All Reconciling Financial Others Items Statements =========== =========== =========== $ $ $ Sales: External: - Domestic -- (787,000) 4,932,000 - Foreign -- -- 17,790,000 Intersegment -- -- -- ----------- ----------- ----------- -- (787,000) 22,722,000 Cost of Sales -- (821,000) 19,896,000 ----------- ----------- ----------- Gross Margin -- 34,000 2,826,000 ----------- ----------- ----------- Expenses: Operations and Administration 1,212,000 (251,000) 6,500,000 Amortization of Capital and Other Assets 31,000 (79,000) 829,000 Interest on Long-term Debt -- (36,000) 66,000 Other Interest and Bank Charges 2,000 (4,000) 401,000 ----------- ----------- ----------- 1,245,000 (370,000) 7,796,000 ----------- ----------- ----------- Income (Loss) before Provision for Income Taxes and Non-controlling Interest (1,245,000) 404,000 (4,970,000) Provision for Income Taxes - Future -- -- (98,000) Non-controlling Interest -- 83,000 (885,000) ----------- ----------- ----------- Income (Loss) before Unusual Items (1,245,000) 321,000 (3,987,000) Unusual Items: Discontinued Operations -- (321,000) (321,000) Non-recurring Items -- -- (3,106,000) ----------- ----------- ----------- Net Income (Loss) for the Year (1,245,000) -- (7,414,000) =========== =========== =========== Cash Flows: From Operating Activities (980,000) 395,000 (1,745,000) From Investing Activities (518,000) 833,000 (1,206,000) From Financing Activities 450,000 (1,228,000) 343,000 ----------- ----------- ----------- (1,048,000) -- (2,608,000) Cash and Cash Equivalents: Beginning of the Year 1,205,000 -- 3,635,000 ----------- ----------- ----------- End of the Year 157,000 -- 1,027,000 =========== =========== =========== Expenditures on Capital Assets and Goodwill during the Year 2,000 -- 2,277,000 =========== =========== =========== Balance of Capital Assets and Goodwill - End of the Year - Domestic 97,000 -- 3,100,000 - Foreign -- -- 2,542,000 ----------- ----------- ----------- 97,000 -- 5,642,000 =========== =========== =========== Amount of Investment in Investees Subject to Significant Influence -- -- -- =========== =========== =========== Total Assets 443,000 15,778,000 =========== =========== ===========
EIGER TECHNOLOGY, INC. SEGMENTED INFORMATION September 30, 2002
Newlook K-Tronik Onlinetel Eiger =========== =========== ========== ========== $ $ $ $ Sales: External: - Domestic 1,310,000 -- 1,870,000 -- - Foreign 108,000 10,107,000 48,000 5,882,000 Intersegment -- -- -- -- ----------- ----------- ---------- ---------- 1,418,000 10,107,000 1,918,000 5,882,000 Cost of Sales 1,342,000 8,023,000 1,616,000 6,358,000 ----------- ----------- ---------- ---------- Gross Margin 76,000 2,084,000 302,000 (476,000) ----------- ----------- ---------- ---------- Expenses: Operations and Administration 314,000 2,890,000 1,573,000 2,242,000 Amortization of Capital and Other Assets 164,000 147,000 252,000 202,000 Interest on Long-term Debt 39,000 -- -- 21,000 Other Interest and Bank Charges 5,000 351,000 12,000 127,000 ----------- ----------- ---------- ---------- 522,000 3,388,000 1,837,000 2,592,000 ----------- ----------- ---------- ---------- Income (Loss) before Provision for Income Taxes and Non-controlling Interest (446,000) (1,304,000) (1,535,000) (3,068,000) Provision for Income Taxes -- -- -- -- Non-controlling Interest (34,000) (443,000) -- (1,915,000) ----------- ----------- ---------- ---------- Income (Loss) before Unusual Items (412,000) (861,000) (1,535,000) (1,153,000) Unusual Items: Discontinued Operations -- -- -- -- Non-recurring Items -- -- -- -- ----------- ----------- ---------- ---------- Net Income (Loss) for the Year (412,000) (861,000) (1,535,000) (1,153,000) =========== =========== ========== ========== Cash Flows: From Operating Activities (331,000) (147,000) (660,000) (698,000) From Investing Activities 144,000 -- (1,380,000) 593,000 From Financing Activities 107,000 442,000 1,909,000 323,000 ----------- ----------- ---------- ---------- (80,000) 295,000 (131,000) 218,000 Cash and Cash Equivalents: Beginning of the Year 312,000 147,000 208,000 1,461,000 ----------- ----------- ---------- ---------- End of the Year 232,000 442,000 77,000 1,679,000 =========== =========== ========== ========== Expenditures on Capital Assets and Goodwill during the Year 614,000 -- 794,000 235,000 =========== =========== ========== ========== Balance of Capital Assets and Goodwill - End of the Year - Domestic 2,323,000 -- 2,579,000 -- - Foreign -- 1,338,000 -- 1,533,000 ----------- ----------- ---------- ---------- 2,323,000 1,338,000 2,579,000 1,533,000 =========== =========== ========== ========== Amount of Investment in Investees Subject to Significant Influence -- -- -- -- =========== =========== ========== ========== Total Assets 3,573,000 7,012,000 3,870,000 8,579,000 =========== =========== ========== ========== Totals per All Reconciling Financial Others Items Statements =========== =========== =========== $ $ $ Sales: External: - Domestic -- 3,180,000 - Foreign -- -- 16,145,000 Intersegment -- -- -- ----------- ----------- ----------- -- -- 19,325,000 Cost of Sales -- (193,000) 17,146,000 ----------- ----------- ----------- Gross Margin -- 193,000 2,179,000 ----------- ----------- ----------- Expenses: Operations and Administration 1,239,000 193,000 8,451,000 Amortization of Capital and Other Assets 32,000 -- 797,000 Interest on Long-term Debt -- -- 60,000 Other Interest and Bank Charges 6,000 -- 501,000 ----------- ----------- ----------- 1,277,000 193,000 9,809,000 ----------- ----------- ----------- Income (Loss) before Provision for Income Taxes and Non-controlling Interest (1,277,000) -- (7,630,000) Provision for Income Taxes -- -- -- Non-controlling Interest -- -- (2,392,000) ----------- ----------- ----------- Income (Loss) before Unusual Items (1,277,000) -- (5,238,000) Unusual Items: Discontinued Operations -- -- -- Non-recurring Items -- -- -- ----------- ----------- ----------- Net Income (Loss) for the Year (1,277,000) -- (5,238,000) =========== =========== =========== Cash Flows: From Operating Activities (1,271,000) 2,441,000 (666,000) From Investing Activities (1,622,000) (125,000) (2,390,000) From Financing Activities 233,000 (2,316,000) 698,000 ----------- ----------- ----------- (2,660,000) -- (2,358,000) Cash and Cash Equivalents: Beginning of the Year 3,865,000 -- 5,993,000 ----------- ----------- ----------- End of the Year 1,205,000 -- 3,635,000 =========== =========== =========== Expenditures on Capital Assets and Goodwill during the Year 5,000 -- 1,648,000 =========== =========== =========== Balance of Capital Assets and Goodwill - End of the Year - Domestic 107,000 -- 5,009,000 - Foreign -- -- 2,871,000 ----------- ----------- ----------- 107,000 -- 7,880,000 =========== =========== =========== Amount of Investment in Investees Subject to Significant Influence -- -- -- =========== =========== =========== Total Assets 34,261,000 (33,537,000) 23,758,000 =========== =========== ===========