-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TCXfk1N2nIOWsw+dA3dYDCJK6Iugn2o3X7/v1uRwgdmXpo8DsjPUBNfFfRzLwRFV IzeEOaOgkDKYLc8Jp/Ovjw== 0000910647-96-000144.txt : 19960819 0000910647-96-000144.hdr.sgml : 19960819 ACCESSION NUMBER: 0000910647-96-000144 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960816 SROS: BSE SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WIDECOM GROUP INC CENTRAL INDEX KEY: 0000922023 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 980139939 STATE OF INCORPORATION: A6 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13588 FILM NUMBER: 96616704 BUSINESS ADDRESS: STREET 1: 55 CITY CENTER DR STREET 2: STE 500 L5B 1M3 MISSISSAUGA CITY: ONTARIO, CANADA STATE: A6 BUSINESS PHONE: 9057120505 MAIL ADDRESS: STREET 1: 55 CITY CENTRE DRIVE STREET 2: STE 500 MISSISSAUGA L5B 1M3 CITY: ONTARIO, CANADA STATE: A6 10-Q 1 BODY OF 10Q--FOR 1ST QUARTER FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 1996 Commission file number: 1-13589 THE WIDECOM GROUP INC. (Exact name of registrant as specified in its charter) ONTARIO 98-0139939 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 CITY CENTER DRIVE, SUITE 500, MISSISSAUGA, ONTARIO, CANADA, L5B 1M3 (Address of principal executive offices, zip code) 905-566-0180 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of August 14, 1996, the Company had 4,494,160 shares of its common stock, $.01 par value outstanding. 1 PART I: FINANCIAL INFORMATION Item 1. Financial Statements. See Attachment A. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The Company's revenues are derived from product sales, which are recognized when products are shipped. Prior to January the Company was eligible for substantial research and development subsidies under certain programs established by the Canadian and Ontario governments. As of January 1, 1996, such programs were changed to provide for payment of such subsidies in the form of a reduction of taxes payable. Because the Company did not record a profit during the first fiscal quarter of 1996, and therefore no taxes were payable, no benefit from such government programs have been recognized in the current quarter. Results of Operations Quarter Ended June 30, 1996 Compared to Quarter Ended June 30, 1995 Revenues for the quarter ended June 30, 1996 were $543,033, an increase of $22,375 or 4.3%, as compared to $520,658 for the quarter ended June 30, 1995. Sales for the quarter ended June 30, 1996 were $486,892, an increase of $34,792 as compared to $452,100 for the quarter ended June 30, 1995. Sales of the Company's WIDEfax Scan and 36" WIDEfax Modular Unit accounted for a majority of the sales increase. For the quarter ended June 30, 1995, sales of the 36" WIDEfax Modular Unit accounted for approximately 65% of the Company's product sales. For the quarter ended June 30, 1996, sales of the WIDEfax Scan and WIDEfax Modular Unit accounted for approximately 52% and 31%, respectively, of the Company's sales. No revenues were recognized from government sponsored research programs for the quarter ended June 30, 1996 as compared to $68,558 for the quarter ended June 30, 1995. During the current quarter the Company recognized revenue of $56,141 from interest on investments, as compared to no such earnings during the first fiscal quarter of 1995. The Company's cost of goods sold increased slightly from approximately 21.3% of product revenues in the quarter ended June 30, 1995 to 25% of product revenues during the same period of 1996. Operating expenses for the quarter ended June 30, 1996 were $914,829, an increase of $620,494, or 211%, as compared to $294,335 for the quarter ended June 30, 1995. Such increase was attributable primarily to increases in the Company's selling, general and administrative expenses, research and development expenses, and amortization charges. Selling, general and administrative expenses for the quarter ended June 30, 1996 increased by 357%, to $573,143, compared to $125,335 during the comparable quarter of 1995, which has been attributed by management to the Company's continued emphasis on product commercialization, particularly the introduction of the next generation WIDEfax Scan and WIDEfax Plotter, and the expansion of the Company's administrative and sales staff and offices in anticipation of expanding the Company's operations. Consistent with the Company's previously stated intention to increase its research and development work, such expenses increased by 63%, from $135,247 for the quarter ended June 30, 1995 to $220,636 for the same quarter of 1996. Amortization charges , which were only $7,497 in the first fiscal quarter of 1995 increased to $117,198 in the recently ended quarter, which reflects the amortization of the Company's increased asset base. Liquidity and Capital Resources The Company's primary cash requirements have been to fund research and development activities, acquisition of equipment and inventories, and marketing expenses incurred in connection with the commercialization of its products. The Company has satisfied its working capital requirements principally from revenues and the proceeds of the Company's initial public offering, which closed in December 1995. Additionally, the Company received $231,500 (net) through the exercise of warrants to purchase 60,000 shares at a price of $4.00 per share during the first fiscal quarter of the current fiscal year. 2 PART II: OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. Current Report filed on Form 8-K on June 3, 1996, incorporated herein by reference. 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. THE WIDECOM GROUP INC. Date August 15, 1996 /s/ SUNEET S. TULI ------------------- ---------------------------------------- Suneet S. Tuli, Executive Vice President Date August 15, 1996 /s/ WILLEM J. BOTHA ------------------- ---------------------------------------- Willem J. Botha, Chief Financial Officer 3 THE WIDECOM GROUP INC. CONSOLIDATED BALANCE SHEET (in United States dollars) (Unaudited)
For the Three For the Three Months Ended Months Ended June 30, June 30, 1996 1995 ------------- ------------- Assets Current assets Cash and short term investments $ 4,508,475 $ 101,548 Term deposits - 97,648 Accounts receivable 721,530 355,768 Research and development grants receivable 706,918 577,010 Inventory 1,169,419 641,522 Advances to related parties 85,052 10,007 ------------------------------ Total current assets 7,191,394 1,783,503 Capital assets 1,412,614 356,371 Deferred issue costs of public offering - 678,080 Investment in affiliate 540,000 85,500 ------------------------------ Total assets $ 9,144,008 $ 2,903,454 Liabilities and Shareholders' Equity Current liabilities Bank indebtedness $ 131,778 $ 90,918 Accounts payable and accrued liabilities 645,341 690,158 Income taxes payable - 10,502 IOC loan payable - 218,580 Accrued interest on IOC loan payable - 305,241 Loan from non-management shareholders - 264,424 Deferred income taxes 62,977 - ------------------------------ Total current liabilities $ 840,096 $ 1,579,823 ------------------------------ Shareholders' equity Common shares $ 9,532,294 $ 1,107,850 Contributed surplus 159,825 159,825 Retained earnings (deficit) (1,317,812) 134,318 Cumulative translation adjustment (70,395) (78,362) ------------------------------ $ 8,303,912 $ 1,323,631 ------------------------------ Total liabilities and shareholders' equity $ 9,144,008 $ 2,903,454
4 THE WIDECOM GROUP INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in United States dollars) (Unaudited)
For the Three For the Three Months Ended Months Ended June 30, June 30, 1996 1995 ------------- ------------- Revenue Product sales $ 486,892 $ 452,100 Research and development grants 68,558 Interest income 56,141 ------------------------------ Total revenue $ 543,033 $ 520,658 ------------------------------ Expenses Cost of sales $ 121,723 $ 96,510 Research and development 220,636 135,247 Selling, general and administrative 573,143 125,335 Interest and bank charges 3,851 26,256 Amortization 117,198 7,497 ------------------------------ Total expenses $ 1,036,551 $ 294,335 ------------------------------ Operating income (loss) $ (493,518) $ 129,813 Net earnings (loss) for the period $ (493,518) $ 129,813 Earnings (loss) per common share before extraordinary item, primary and fully diluted $ (0.11) $ 0.05 Earnings (loss) per common share primary and fully diluted $ (0.11) $ 0.05 Weighted average number of shares outstanding 4,434,073 2,468,660
5 THE WIDECOM GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in United States dollars) (Unaudited)
For the Three For the Three Months Ended Months Ended June 30, June 30, 1996 1995 ------------- ------------- Cash provided by (used in) Operating activities Earnings (loss) for the period before extraordinary item $ (493,518) $ 119,311 Add (deduct) items not requiring a cash outlay Amortization 117,198 7,497 ------------------------------- (376,320) 126,808 Net changes in non-cash working capital balances related to operations (Increase) decrease in accounts receivable (195,356) 26,311 Increase in R & D grants receivable (60,235) Decrease (increase) in inventory (714,482) (41,414) Increase in accounts payable 253,121 113,490 Increase in income taxes - 10,500 ------------------------------- (1,033,037) 175,460 Investing activities (Increase) decrease in term deposits - (1,917) Purchase of capital assets (259,760) (10,574) Advances to related parties - (11,461) Advances to shareholder - 7,934 Purchase of shares in affiliate (85,000) ------------------------------- (259,760) (101,518) ------------------------------- Financing activities Increase (decrease) in bank indebtedness (10,790) Shares issued for cash 231,500 - Deferred issue costs of public offering (75,195) Loan payable 21,876 Shares issued for purchase of affiliate 85,500 ------------------------------- 231,500 21,391 Effect of exchange rate changes on cash (73,719) 2,687 Net increase (decrease) in cash during the period (1,135,016) 98,020 Cash and equivalents, beginning of period 5,643,491 3,528 ------------------------------- Cash and equivalents, end of period $ 4,508,475 $ 101,548 ===============================
6 The WideCom Group Inc. Notes to Consolidated Financial Statements (in United States dollars) (Unaudited) 1. Presentation of Interim Information In the opinion of Management the accompanying unaudited financial statements include all normal adjustments necessary to present fairly the financial position at June 30, 1996 and the results of operations for the three months ended June 30, 1995 and 1996 and cash flows for the three months ended June 30, 1996. Interim results are not necessarily indicative of results for the full year. The condensed consolidated financial statements and notes are presented as permitted by Form 10Q and do not contain certain information included in the Company's audited consolidated financial statements and notes for the fiscal year March 31, 1996. 2. Financial Statements The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany balances, transactions and stockholdings have been eliminated. The investments in an affiliate is accounted for on an equity basis and the $720,000 excess of the purchase price over the underlying value of the assets has been attributed to goodwill. The goodwill is being amortized over five years resulting in amortization to date of $180,000. 3. Inventories Inventories are summarized as follows:-
June 30, June 30, 1996 1995 ----------- --------- Raw materials $ 764,363 $ 532,456 Work in progress 296,300 36,763 Finished goods 108,756 72,303 -------------------------- Total inventories $ 1,169,419 $ 641,522 ==========================
4. Capital Assets Capital assets consist of:
June 30, 1996 June 30, 1995 --------------------------- -------------------------- Accumulated Accumulated Cost Amortization Cost Amortization ----------- ------------ --------- ------------ Machinery, plant and computer equipment $ 879,575 $ 196,952 $ 323,135 $ 14,820 Furniture and fixtures 150,974 24,199 75,048 26,992 Prototype and jigs 442,661 55,672 - - Land 67,219 Building under construction 149,008 ----------- $ 1,689,437 $ 276,823 $ 398,183 $ 41,812 =========================================================== Net book value $ 1,412,614 $ 356,371 =========== =========
7 The WideCom Group Inc. Notes to Consolidated Financial Statements (in United States dollars) (Unaudited) 5. Share Capital Changes to issued share capital: In June 1996, 60,000 of the 840,000 Bridge warrants were converted to Common shares, for proceeds of $231,500. 6. Contingent Liabilities Statements of claims have been filed against the Company with respect to the following matters: Claims for non-payment of invoices in the amount of $185,000. The first claim in the amount of $75,000 has been made by a printer who provided printing services for the Company. The Company has accrued $40,000 for such claim. The second claim in the amount of $110,000 relates to invoices for accounting services provided by an accounting firm. The Company has accrued $35,000 for this claim. 8 EX-27 2 FINANCIAL DATA SCHEDULE FOR WIDECOM GROUP INC
5 3-MOS MAR-31-1996 JUN-30-1996 4,508,475 0 721,530 5,349 1,169,414 7,141,394 1,412,614 276,823 9,144,008 840,096 0 0 0 4,484,160 0 9,144,008 486,842 543,033 121,723 1,036,551 0 0 3,851 (493,518) 0 (493,518) 0 0 0 (493,518) (0.11) (0.11)
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