EX-99.2 3 a07-16018_1ex99d2.htm INTERIM FINANCIAL STATEMENTS DATED MAY 14, 2007

Exhibit 99.2

formerly

 

THIRD QUARTER RESULTS

Unaudited Interim Consolidated Financial Statements

Three months and nine months ended March 31, 2007

May 14, 2007




 

 

formerly

4210 Commerce Circle

Victoria BC Canada V8Z 6N6

phone (250) 881-1982

facsimile (250) 881-1974

website www.vecimanetworks.com

 

Dear Shareholders

I am pleased to welcome all the new Vecima shareholders resulting from the acquisition of Spectrum Signal Processing Inc. (SSP) announced February 16 and completed on May 2, 2007. Spectrum’s shareholders voted overwhelmingly in favour of the arrangement that fuses two powerful technological portfolios to enhance our position and opportunities in the emerging WiMAX market.

The increase in shares outstanding and in the number of shareholders will help to address Vecima’s strategic goal of providing enhanced liquidity for our shareholders. We have also made significant progress in our strategic objective of market segment diversification. Our sales in the data over cable market segment represented 47% of total revenue for the nine months ended March 31, 2007 compared to 61% for the same period last year.

Another important event was the culmination of an original equipment manufacturer (OEM) arrangement with Motorola. Over the past several quarters, we developed and have begun deliveries of a product Motorola will use in broadband cable systems to provide a return path from customer’s digital set top boxes to the source of video programming in the cable headend. The adoption of video on demand, switched digital video and other interactive applications requires significant increases in return path bandwidth. This new OEM deal reinforces Vecima’s position as a leading provider of new infrastructure equipment for digital video processing.

The WiMAX Forum protocols for certification of WiMAX products have been delayed again and the certification testing for the full standard is not likely to begin until this summer. We continue to progress our family of WiMAX products and to participate in deployments around the world. The delay in ramp-up of WiMAX sales has affected our expected sales for the fiscal year but, with the inclusion of revenues attributed to SSP, we expect revenue to be in our target range.

The Vecima family continues to grow. We had 667 employees at March 31, 2007 not including the 84 SSP staff members. We have opened a software development office in Mangalore on the west coast of India that now has seven employees. The SSP acquisition also brings offices in San Jose and the Washington, D.C. area.

Vecima’s revenue for the third quarter of our 2007 fiscal year was a record $24.1 million, more than our total revenue for our 2000 fiscal year. In addition, our total assets have grown 15% over the nine months to more than $100 million. Revenue increased 16% to $67.4 million in the nine months ended March 31, 2007 from $58.1 million in the same period last year. We have more than doubled our research and development expense to $5.6 million in the nine months ended March 31, 2007 from $2.6 million in the same period last year. Our sales and marketing costs are up 46% to $3.1 million year-to-date compared to $2.1 million last fiscal year. The increases were predominantly for new personnel to take advantage of growth opportunities. These strategic expenditures in excess of our revenue growth rate affected our net margin, which was just outside our target range at 9% of sales for the nine months compared to 14% in the nine-month period last year. In the nine months ended March 31, 2007, we recorded an extraordinary gain from the acquisition of WaveRider that added 30¢ per share to earnings after taxes, bringing the net income per share to 58¢ per share compared to 38¢ per share for the same period last year.

Sincerely,

/s/ Surinder Kumar

 

 

 

Dr. Surinder Kumar

Chair of the Board of Directors

 

1




 

 

formerly

4210 Commerce Circle

Victoria BC Canada V8Z 6N6

phone (250) 881-1982

facsimile (250) 881-1974

website www.vecimanetworks.com

 

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

The accompanying unaudited interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company’s management.

The Company’s independent auditor has not performed a review of these financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity’s auditor.

 

May 14, 2007

 

 

 

 

 

 

 

 

/s/ Surinder Kumar

 

 

 

/s/ J. M. Barry

 

 

 

 

 

 

 

 

Surinder Kumar

 

J. Michael Barry

President and Chief Executive Officer

 

Chief Financial Officer

 

2




VECIMA NETWORKS INC.

CONSOLIDATED BALANCE SHEETS

(in thousands of dollars)

 

 

March 31,

 

June 30,

 

 

 

2007

 

2006

 

 

 

(unaudited)

 

(audited)

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

5,796

 

$

13,851

 

Accounts receivable

 

14,259

 

13,756

 

Income taxes receivable

 

5,620

 

4,502

 

Inventories

 

28,882

 

19,554

 

Current portion of leases receivable

 

613

 

598

 

Prepaid expenses

 

322

 

391

 

Other current assets

 

248

 

544

 

 

 

55,740

 

53,196

 

Leases receivable

 

1,081

 

1,508

 

Capital assets

 

29,379

 

22,556

 

Deferred development costs

 

1,702

 

1,461

 

Other assets

 

3,058

 

2,810

 

Tax assets

 

9,611

 

5,557

 

 

 

$

100,571

 

$

87,088

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

7,984

 

$

6,615

 

Warranty accrual

 

500

 

500

 

Deferred revenue

 

771

 

682

 

 

 

9,255

 

7,797

 

Future income taxes

 

2,726

 

2,885

 

 

 

11,981

 

10,682

 

Shareholders’ equity

 

 

 

 

 

Share capital (Note 4)

 

26,469

 

26,322

 

Contributed surplus

 

1,541

 

951

 

Retained earnings

 

60,580

 

49,133

 

 

 

88,590

 

76,406

 

 

 

$

100,571

 

$

87,088

 

See accompanying notes

On behalf of the Board,

/s/ Barry A Baptie

 

 

 

/s/ James Mutter

 

 

 

 

 

Director

Director

 

 

 

3




VECIMA NETWORKS INC.

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

(in thousands of dollars except for net income per share data)

 

 

Three months ended

 

Nine months ended

 

 

 

March 31,

 

March 31,

 

 

 

2007

 

2006

 

2007

 

2006

 

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

24,119

 

$

21,414

 

$

67,428

 

$

58,083

 

Cost of sales

 

14,476

 

13,520

 

41,592

 

36,490

 

Gross margin

 

9,643

 

7,894

 

25,836

 

21,593

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

Research and development

 

1,847

 

1,065

 

5,646

 

2,592

 

Sales and marketing

 

1,113

 

884

 

3,112

 

2,137

 

General and administrative

 

2,965

 

1,776

 

7,500

 

5,538

 

Stock-based compensation (Note 4)

 

130

 

200

 

538

 

728

 

Interest expense

 

104

 

90

 

204

 

297

 

Total Operating expenses

 

6,159

 

4,015

 

17,000

 

11,292

 

Operating income

 

3,484

 

3,879

 

8,836

 

10,301

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange (loss) gain

 

68

 

278

 

153

 

750

 

Other income

 

395

 

474

 

1,086

 

767

 

Income before income taxes

 

3,947

 

4,631

 

10,075

 

11,818

 

Income taxes

 

1,480

 

1,493

 

3,693

 

3,874

 

Net income before extraordinary items

 

2,467

 

3,138

 

6,382

 

7,944

 

Extraordinary gain (Note 3)

 

 

 

6,549

 

 

Net income

 

2,467

 

3,138

 

12,931

 

7,944

 

 

 

 

 

 

 

 

 

 

 

Retained earnings, beginning of period

 

58,470

 

43,333

 

49,133

 

38,527

 

Dividends paid (Note 5)

 

 

 

(903

)

 

Reduction of common shares purchased for cancellation (Note 4)

 

(357

)

 

(581

)

 

Retained earnings, end of period

 

$

60,580

 

$

46,471

 

$

60,580

 

$

46,471

 

 

 

 

 

 

 

 

 

 

 

Net income per share (Note 4)

 

 

 

 

 

 

 

 

 

Basic and diluted - before extraordinary gain

 

$

0.11

 

$

0.14

 

$

0.28

 

$

0.38

 

Basic and diluted - after extraordinary gain

 

$

0.11

 

$

0.14

 

$

0.58

 

$

0.38

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of Common Shares outstanding - basic

 

22,463,319

 

22,468,957

 

22,470,059

 

20,586,456

 

Weighted average number of Common  Shares outstanding - diluted

 

22,463,319

 

22,468,957

 

22,470,059

 

20,679,789

 

 

See accompanying notes

4




VECIMA NETWORKS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of dollars)

 

 

Three months ended

 

Nine months ended

 

 

 

March 31,

 

March 31,

 

 

 

2007

 

2006

 

2007

 

2006

 

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

Cash flows from (used in) operating activities

 

 

 

 

 

 

 

 

 

Net income

 

$

2,467

 

$

3,138

 

$

12,931

 

$

7,944

 

Add (deduct) items not requiring a current cash payment

 

 

 

 

 

 

 

 

 

Future income taxes recovery

 

1,275

 

1,914

 

3,331

 

(209

)

Amortization of capital assets

 

1,153

 

712

 

3,100

 

2,198

 

Amortization of deferred development costs

 

330

 

336

 

1,155

 

851

 

Amortization of other assets

 

5

 

(15

)

35

 

30

 

Stock-based compensation (Note 4)

 

130

 

200

 

538

 

728

 

Extraordinary gain (Note 3)

 

 

 

(6,549

)

 

Changes in non-cash working capital relating to operations

 

 

 

 

 

 

 

 

 

Net change in non-cash working capital relating to operations

 

(2,166

)

(4,765

)

(8,275

)

(7,135

)

 

 

3,194

 

1,520

 

6,266

 

4,407

 

Cash flows from (used in) investing activities

 

 

 

 

 

 

 

 

 

Payment for acquisition of business net of cash acquired

 

 

 

(1,746

)

 

Purchase of capital assets

 

(1,820

)

(176

)

(9,737

)

(2,263

)

Deferred development costs

 

(1,100

)

(748

)

(2,344

)

(1,851

)

Investment tax credits

 

500

 

492

 

948

 

809

 

Purchase of other assets

 

(161

)

15

 

(165

)

 

 

 

(2,581

)

(417

)

(13,044

)

(3,305

)

Cash flows from (used in) financing activities

 

 

 

 

 

 

 

 

 

Proceeds from shares issued through exercised options

 

8

 

 

207

 

 

Purchase and cancellation of shares (Note 4)

 

(330

)

 

(581

)

 

Dividends paid (Note 5)

 

 

 

(903

)

 

Net proceeds from issuance of shares

 

 

 

 

24,159

 

Repayment of long-term debt

 

 

(3,562

)

 

(3,904

)

 

 

(322

)

(3,562

)

(1,277

)

20,255

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash during the period

 

291

 

(2,459

)

(8,055

)

21,357

 

(Bank indebtedness) Cash and cash equivalents, beginning of period

 

5,505

 

18,933

 

13,851

 

(4,883

)

(Bank indebtedness) Cash and cash equivalents, end of period

 

$

5,796

 

$

16,474

 

$

5,796

 

$

16,474

 

 

 

 

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

 

 

 

 

Cash interest paid

 

$

104

 

$

90

 

$

204

 

$

294

 

Cash taxes paid

 

$

 

$

4,797

 

$

 

$

7,467

 

 

See accompanying notes

5




VECIMA NETWORKS INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Three months and nine months ended March 31, 2007

(in thousands of dollars)

1.                          BASIS OF PRESENTATION

The unaudited interim consolidated financial statements of the Company have been prepared in accordance with Canadian generally accepted accounting principles, except that certain disclosures required for annual financial statements have not been included.

Accordingly, the unaudited interim consolidated financial statements should be read in conjunction with the Company’s most recent annual audited consolidated financial statements for the year ended June 30, 2006. The interim consolidated financial statements follow the same accounting policies and methods of application as the most recent annual consolidated financial statements

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, WaveCom Electronics (2003) Inc., 6105971 Canada Inc. and VCom Pacific Pty., and YourLink Inc., an entity that is considered to be a variable interest entity, after elimination of significant inter-company accounts and transactions.

2.                          FINANCIAL INSTRUMENTS

The majority of the Company’s sales are in United States dollars and the Company has entered into forward foreign exchange contracts to manage foreign currency exchange risk related to exposures of the exchange rates for the Canadian dollar.

As of March 31, 2007, the Company has foreign currency forward contracts that have the effect of fixing the conversion of $9,000 ($3,000 – June 30, 2006) of the Company’s net US dollar asset position at rates ranging between $1.1503 and $1.1720. Changes in the fair value of these instruments are included in foreign exchange gains/losses in the current year. In the period ended March 31, 2007, the Company has a net gain of $51 (June 30, 2006 - $325 net gain) on outstanding forward purchase contracts.

The Company has not applied hedge accounting to these forward contracts which are considered to be “held for trading” instruments according to CICA Handbook Section 3855. Changes in the value of these contracts are recorded as an element of foreign exchange gains and losses.

3.                        BUSINESS ACQUISITIONS

Effective July 1, 2006, Vecima acquired 100% of the outstanding shares, either directly or indirectly, of WaveRider Communications (Canada) Inc. (“WaveRider”) and Avendo Wireless Inc. WaveRider distributes 900 MHz radios to a wide variety of customers. The transaction has been accounted for by the purchase method, with the results of operations included in these consolidated financial statements from the date of acquisition. The aggregate purchase price of $1,626 was satisfied with cash. Vecima and WaveRider were amalgamated July 1, 2006 and the company is continuing as Vecima Networks Inc.

Effective July 1, 2006, Vecima acquired 100% of the outstanding shares, either directly or indirectly, of Jetstream Internet Services Inc. (“Jetstream”). Jetstream provides internet services to Salmon Arm, British Columbia. The transaction has been accounted for by the purchase method, with the results of operations included in these consolidated financial statements from the date of acquisition. The aggregate purchase price of $100 was satisfied with cash. YourLink Inc. and Jetstream were amalgamated July 1, 2006 and the company is continuing as YourLink Inc.

6




 

 

WaveRider

 

Jetstream

 

Total

 

Net identifiable assets acquired at fair values:

 

 

 

 

 

 

 

Accounts receivable

 

$

951

 

$

4

 

$

955

 

Inventory

 

615

 

5

 

620

 

Subscriber acquisition costs

 

 

82

 

82

 

Future tax assets

 

7,469

 

100

 

7,569

 

Total assets acquired

 

9,035

 

191

 

9,226

 

Accounts payable and accrued liabilities

 

(964

)

(45

)

(1,009

)

Total liabilities assumed

 

(964

)

(45

)

(1,009

)

Net assets acquired

 

$

8,071

 

$

146

 

$

8,217

 

 

 

 

 

 

 

 

 

Consideration

 

$

1,626

 

$

100

 

$

1,726

 

Less cash of acquired operations

 

(7

)

(51

)

(58

)

Total consideration

 

1,619

 

49

 

1,668

 

Excess of net assets purchased over consideration paid

 

$

6,452

 

$

97

 

$

6,549

 

 

The purchase price has been adjusted from the disclosure in the June 30, 2006 audited financial statements to reflect the adjustments made to the purchase price on September 30, 2006.

In accordance with Canadian generally accepted accounting principles, the excess of the fair value of assets acquired and liabilities assumed over the purchase price will be presented as an extraordinary item on the consolidated statement of income.

Effective October 1, 2006, Vecima acquired assets associated with the sales and marketing components of Wave Wireless Corporation’s 900 MHz business. The transaction has been accounted for by the purchase method, with the results of operations included in these consolidated financial statements from the date of acquisition. The aggregate purchase price of $1,996 was satisfied with $78 in cash and the retirement of $1,918 accounts receivable from Wave Wireless Corporation.

Net identifiable assets acquired at fair values:

Accounts receivable

 

$

780

 

Inventory

 

980

 

Capital assets

 

236

 

Total assets acquired

 

$

1,996

 

 

7




4.                        SHARE CAPITAL

(a) Authorized and issued share capital

The Company has the following authorized share capital: an unlimited number of common shares and an unlimited number of preferred shares. The table below provides details of common shares outstanding and their carrying values:

 

March 31, 2007

 

 

 

Number

 

Carrying

 

 

 

of shares

 

value

 

Balance as of June 30, 2006

 

22,471,198

 

$

26,322

 

Shares repurchased and canceled

 

(59,100

)

(60

)

Shares issued by exercising of options

 

27,759

 

207

 

Balance as of March 31, 2007

 

22,439,857

 

$

26,469

 

 

During the nine months ended March 31, 2007 the Company purchased 59,100 common shares for cancellation under a normal course issuer bid at an average price of $9.82 per share for $581 of which $60 reduced the stated capital of the common shares and $521 decreased retained earnings.

8




The following table sets forth the calculation of basic and diluted earnings per share:

 

Three months ended
March 31,

 

Nine months ended
March 31,

 

 

 

2007

 

2006

 

2007

 

2006

 

Basic net income before extraordinary gains
for the period

 

$

2,467

 

$

3,138

 

$

6,382

 

$

7,944

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

Interest on convertible debenture

 

 

 

 

17

 

Diluted net income before extraordinary
gains for the period

 

$

2,467

 

$

3,138

 

$

6,382

 

$

7,961

 

 

 

 

 

 

 

 

 

 

 

Basic net income after extraordinary gains
for the period

 

$

2,467

 

$

3,138

 

$

12,931

 

$

7,944

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

Interest on convertible debenture

 

 

 

 

17

 

Diluted net income before extraordinary
gains for the period

 

$

2,467

 

$

3,138

 

$

12,931

 

$

7,961

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares
outstanding — basic

 

22,463,319

 

22,468,957

 

22,470,059

 

20,586,456

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

Convertible debenture

 

 

 

 

93,333

 

Weighted average number of shares
outstanding — diluted

 

22,463,319

 

22,468,957

 

22,470,059

 

20,679,789

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

Basic and diluted - before extraordinary gain

 

$

0.11

 

$

0.14

 

$

0.28

 

$

0.38

 

Basic and diluted - after extraordinary gain

 

0.11

 

0.14

 

0.58

 

0.38

 

 

(b) Stock option plan

Under the Company’s stock option plan, options to acquire common shares may be issued to officers, directors and employees of the Company. The term, vesting period, exercise price and number of common shares relating to each option will be determined by the Company’s Board of Directors at the time options are granted, but will not be more favourable than those permitted under applicable securities legislation. The Company’s stock option plan will be subject to the rules and policies of any stock exchange on which the common shares are listed. The total number of common shares of the Company that will be issued pursuant to the Company’s stock option plan will not exceed 10% of the issued and outstanding shares of the Company at any given time. Options granted under the Company’s stock option plan are not assignable.

9




The changes in options and options outstanding for the period ended March 31, 2007 are as follows:

 

Nine months ended March 31, 2007

 

 

 

Number of
options

 

Weighted
average
exercise price

 

 

 

 

 

 

 

Balance, beginning of period

 

653,640

 

$

7.50

 

Granted

 

169,030

 

10.20

 

Exercised

 

(27,759

)

7.50

 

Forfeited

 

(21,388

)

7.50

 

Balance, end of period

 

773,523

 

$

8.09

 

 

The 773,523 options outstanding have exercise prices ranging from $7.50 to $10.40 with a weighted average life remaining of 5.4 years. As of March 31, 2007, 271,953 options are exercisable with an exercise price of $7.50 (June 30, 2006, 104,700 with an exercise price of $7.50).

(c) Stock-based compensation

For all stock options granted, the Company determined compensation costs based on the estimated fair values at the grant date of the share options as prescribed under CICA Handbook Section 3870. The estimated fair value of the stock options is amortized to stock-based compensation expense over the options’ vesting period in accordance with guidance provided in the CICA Handbook for graded vesting options. The stock-based compensation expense was $130 and $538 for the three month and nine month periods ended March 31, 2007, respectively ($200 and $728 for three months ending and nine months ending March 31, 2006).

The Black-Scholes option pricing model was used to estimate the fair value of the stock options. The weighted average estimated fair value for the common share options on the grant date was $3.29 per option. Management used the following assumptions within the Black-Scholes option pricing model:

Expected weighted average option life

 

4.26 years

 

Risk-free rate of return

 

3.9% - 5.5%

 

Volatility factor

 

36% - 47%

 

Expected dividends

 

 

 

5.                          DIVIDENDS

On November 13, 2006 the Company declared a dividend of $0.04 per common share with a record date of November 22, 2006. The dividend was paid December 15, 2006.

10




6.                        SEGMENTED FINANCIAL INFORMATION

The Company’s operations include two reportable segments. The product segment designs, develops and distributes electronic communications products to cable, wireless and telephony markets. The service segment provides cable television and Internet services in Ontario, Saskatchewan, Alberta and British Columbia. Inter-segment transactions take place on terms that approximate fair values. The majority of the Company’s operations, employees and assets are located in Canada. The following highlights key financial information for the operations of these segments.

 

Three months ended March 31, 2007

 

 

 

Product

 

Services

 

Inter-
segment 
eliminations

 

Total

 

Sales

 

$

22,379

 

$

1,934

 

$

(194

)

$

24,119

 

Cost of sales

 

13,829

 

673

 

(26

)

14,476

 

Gross margin

 

8,550

 

1,261

 

(168

)

9,643

 

Operating expenses

 

4,505

 

1,684

 

(30

)

6,159

 

Operating income

 

4,045

 

(423

)

(138

)

3,484

 

Foreign exchange (loss) gains

 

68

 

 

 

68

 

Other income

 

391

 

4

 

 

395

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

4,504

 

(419

)

(138

)

3,947

 

Income taxes

 

1,423

 

107

 

(50

)

1,480

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

3,081

 

$

(526

)

$

(88

)

$

2,467

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

100,503

 

$

10,292

 

$

(10,224

)

$

100,571

 

 

 

Three months ended March 31, 2006

 

 

 

Product

 

Services

 

Inter-segment 
eliminations

 

Total

 

Sales

 

$

19,969

 

$

1,624

 

$

(179

)

$

21,414

 

Cost of sales

 

13,009

 

663

 

(152

)

13,520

 

Gross margin

 

6,960

 

961

 

(27

)

7,894

 

Operating expenses

 

2,731

 

1,364

 

(80

)

4,015

 

Operating income

 

4,229

 

(403

)

53

 

3,879

 

Foreign exchange gains

 

278

 

 

 

278

 

Other income

 

465

 

9

 

 

474

 

Income (loss) before income taxes

 

4,972

 

(394

)

53

 

4,631

 

Income taxes

 

1,723

 

(230

)

 

1,493

 

Net income (loss)

 

$

3,249

 

$

(164

)

$

53

 

$

3,138

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

81,619

 

$

18,330

 

$

(16,803

)

$

83,146

 

 

11




 

 

Nine months ended March 31, 2007

 

 

 

Product

 

Services

 

Inter-
segment 
eliminations

 

Total

 

Sales

 

$

62,358

 

$

5,510

 

$

(440

)

$

67,428

 

Cost of sales

 

39,720

 

2,048

 

(176

)

41,592

 

Gross margin

 

22,638

 

3,462

 

(264

)

25,836

 

Operating expenses

 

12,549

 

4,511

 

(60

)

17,000

 

Operating income

 

10,089

 

(1,049

)

(204

)

8,836

 

Foreign exchange gains

 

153

 

 

 

153

 

Other income

 

1,073

 

13

 

 

1,086

 

Income (loss) before income taxes

 

11,315

 

(1,036

)

(204

)

10,075

 

Income taxes

 

3,826

 

(67

)

(66

)

3,693

 

Net income (loss) before extraordinary gain

 

7,489

 

(969

)

(138

)

6,382

 

Extraordinary gain

 

6,452

 

97

 

 

6,549

 

Net income (loss)

 

$

13,941

 

$

(872

)

$

(138

)

$

12,931

 

Total assets

 

$

100,503

 

$

10,292

 

$

(10,224

)

$

100,571

 

 

 

Nine months ended March 31, 2006

 

 

 

Product

 

Services

 

Inter-
segment 
eliminations

 

Total

 

Sales

 

$

53,696

 

$

4,668

 

$

(281

)

$

58,083

 

Cost of sales

 

34,563

 

2,112

 

(185

)

36,490

 

Gross margin

 

19,133

 

2,556

 

(96

)

21,593

 

Operating expenses

 

7,395

 

3,977

 

(80

)

11,292

 

Operating income

 

11,738

 

(1,421

)

(16

)

10,301

 

Foreign exchange gains

 

750

 

 

 

750

 

Other income

 

720

 

47

 

 

767

 

Income (loss) before income taxes

 

13,208

 

(1,374

)

(16

)

11,818

 

Income taxes

 

4,404

 

(530

)

 

3,874

 

Net income (loss)

 

$

8,804

 

$

(844

)

$

(16

)

$

7,944

 

Total assets

 

$

81,619

 

$

18,330

 

$

(16,803

)

$

83,146

 

 

12




Geographical:

 

Three months ended March 31,

 

Nine months ended March 31,

 

 

 

2007

 

2006

 

2007

 

2006

 

Sales

 

 

 

 

 

 

 

 

 

Canada

 

$

2,974

 

$

2,984

 

$

7,512

 

$

8,836

 

United States

 

3,627

 

1,940

 

11,418

 

7,132

 

Thailand

 

9,049

 

10,806

 

28,917

 

30,800

 

Israel

 

7,457

 

4,308

 

17,174

 

7,928

 

Other

 

1,012

 

1,376

 

2,407

 

3,387

 

 

 

$

24,119

 

$

21,414

 

$

67,428

 

$

58,083

 

 

7.         SUBSEQUENT EVENTS

Effective May 2, 2007, Vecima acquired 100% of the outstanding shares of Spectrum Signal Processing Inc. (SSP). SSP designs and distributes software defined radios to a variety of customers. The transaction has been accounted for by the purchase method, with the results of operations included in these consolidated financial statements from the date of acquisition. The aggregate purchase price of $18,318 was satisfied with $10,069 cash and 820,000 common shares that had a preliminary market value of $10.06.

The purchase price allocation is based on preliminary and will change once the closing costs and the final fair market value of the assets and liabilities is determined.

 

Spectrum

 

Net identifiable assets acquired at fair values:

 

 

 

Accounts receivable

 

$

2,400

 

Inventory

 

1,530

 

Future tax assets

 

25,912

 

Total assets acquired

 

29,842

 

Accounts payable and accrued liabilities

 

(2,355

)

Total liabilities assumed

 

(2,355

)

Net assets acquired

 

$

27,487

 

 

 

 

 

Consideration

 

$

 

 

Cash

 

10,075

 

Shares

 

8,249

 

Less cash of acquired operations

 

(590

)

Total consideration

 

17,734

 

Excess of net assets purchased over consideration paid

 

$

9,753

 

 

In accordance with Canadian generally accepted accounting principles, the excess of the fair value of assets acquired and liabilities assumed over the purchase price will be presented as an extraordinary item on the consolidated statement of income.

13




On April 11, 2007 Vecima incorporated Vecima Telecom India Private Limited to commence software development activities in India.

8.                          COMPARATIVE FIGURES

Certain of the prior period’s comparative figures have been reclassified to conform to the current period’s presentation.

14




VECIMA NETWORKS INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Three months and nine months ended March 31, 2007

(in thousands of dollars)

formerly

Forward-looking statements

This document may contain forward-looking statements relating to our operations or to the environment in which we operate, which are based on our operations, estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict, and/or are beyond our control. A number of important factors could cause actual outcomes and results to differ materially from those expressed in these forward-looking statements. These factors include those set forth under the heading “Risk Factors” in the Company’s Annual Information Form dated September 27, 2006, a copy of which is available at www.sedar.com. Consequently, readers should not place undue reliance on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. Vecima disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Investor relations

Mike Barry

Chief Financial Officer

Phone (250) 881-1982

Facsimile (250) 881-1974

e-mail mike.barry@vecimanetworks.com

Listing

The common shares of Vecima are traded on the Toronto Stock Exchange under the symbol “VCM”.

Transfer Agent

Computershare Investor Services Inc.

Auditors

Deloitte & Touche LLP, Saskatoon

Solicitors

Bull, Housser & Tupper LLP, Vancouver

15