-----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, KD4uWIsai4gi1QOieAuZsNTC2vS3f4h+sGO3+7M+Bt6VCkdcXn7kJOBy00Bi8M4U 9z3M9he5NJ2EbFEhN1Fugg== 0000910647-97-000054.txt : 19970222 0000910647-97-000054.hdr.sgml : 19970222 ACCESSION NUMBER: 0000910647-97-000054 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970218 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: 97537567 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 10-Q FOR 3RD 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: Commission file number: December 31, 1996 1-13588 THE WIDECOM GROUP INC. (Exact name of registrants 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 office, 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 February 18, 1997 the Company had 4,579,073 shares of its common stock, $.01 par value outstanding. PART l: FINANCIAL INFORMATION Item 1. Financial Statements. See Attachment A. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. General The Company's revenues are derived from product sales, which are recognized when products are shipped. Prior to January, 1996 the company was eligible for substantial research and development grants. As of January 1, 1996 grants are made as a reduction of taxes payable. As no taxes are payable in the quarter, no grants have been recognized. This compares to $94,810 recognized in the same period of the prior fiscal year. During the quarter the Company earned $12,391 interest on short-term investments. No interest was earned in the same period of 1995 as no funds were available for investment. Results of Operations Quarter Ended December 31, 1996 Compared to Quarter Ended December 31, 1995 Revenues for the quarter ended December 31, 1996 were $376,861 an increase of $32,993 or 9.59%, as compared to $343,868 for the quarter ended December 31, 1995. Sales for the quarter ended December 31, 1996 were $364,470, an increase of $115,412 as compared to $249,058 for the quarter ended December 31, 1995. For the quarter ended December 31, 1995, sales of the 36" WIDEfax Modular Unit and WIDEfax Scan accounted for approximately 46.10% and 32.60%, respectively, of the Company's product sales. For the quarter ended December 31, 1996, sales of the WIDEfax Color Scan and WIDEfax Scan accounted for approximately 72.30% and 24.70% respectively, of the Company's sales. No revenues were recognized from government sponsored research programs for the quarter ended December 31, 1996 as compared to $94,810 for the quarter ended December 31, 1995. Operating expenses for the quarter ended December 31, 1996 were $1,179,624, an increase of $842,090, or 249.48%, as compared to $337,534 for the quarter ended December 31, 1995. Research and development expenses decreased from $137,089 for the quarter ended December 31, 1995 to $91,828 for the quarter ended December 31, 1996. Selling, general and administrative expenses for the quarter ended December 31, 1996 increased by $762,315 and increased as a percentage of revenues from 43.45% to 241.92%. The increases in absolute dollars and as a percentage of revenues were due to marketing expenses associated with 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. Nine Months Ended December 31, 1996 Compared to Nine Months Ended December 31, 1995 Revenues for the nine months ended December 31, 1996 were $1,328,648, a decrease of $102,821 or 7.18%, compared to $1,431,469 for the nine months ended December 31, 1995. Operating expenses for the nine months ended December 31, 1996 were $2,952,437, an increase of $1,667,437, or 129.76%, compared to $1,285,000 for the nine months ended December 31, 1995. Operating expenses also increased as a percentage of revenues from 89.77% for the nine months ended December 31, 1995 to 222.21% for the nine months ended December 31, 1996. The increases in absolute dollars and as a percentage of revenues were due to marketing expenses associated with 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. 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 historically satisfied its working capital requirements principally through the issuance of debt and equity securities, government sponsored research and development grants and reimbursement and cash flow from operations. During the quarter ended December 31, 1996 the Company raised $340,000 (net) upon the conversion of warrants to common shares. In light of the Company's current cash position, management expects that additional equity capital will be required during the first several months of 1997. The Company expects that such equity will be supplied by its currently-ongoing warrant redemption program. There can be no assurance, however, that sufficient equity will be raised by that program. Investors should refer to the Risk Factors describing the Company's need for liquidity in the Company's preexisting filings with the Securities and Exchange Commission. PART ll: 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. Exhibit 27-Financial Data Schedule. 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 February 18, 1997 /s/ Raja S. Tuli ------------------------- ---------------------------------------- Raja S. Tuli, President Date February 18, 1997 /s/ Willem J. Botha ------------------------- ---------------------------------------- Willem J. Botha, Chief Financial Officer THE WIDECOM GROUP INC. CONSOLIDATED BALANCE SHEET (in United States dollars) (Unaudited)
December 31, December 31, 1996 1995 ---- ---- - ---------------------------------------------------------------------------- Assets Current assets Cash and short term investments $ 744,136 $ 6,131,223 Accounts receivable 698,394 377,354 Research and development grants receivable 703,358 699,371 Inventory 1,462,211 555,570 --------------------------- Total current assets 3,608,099 7,763,518 Capital assets 1,986,253 627,147 Investment in joint venture 1,786,892 - Investment in affiliate 468,000 614,129 --------------------------- Total assets $ 7,849,244 $ 9,004,794 - --------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities Bank indebtedness $ 231,051 $ - Accounts payable and accrued liabilities 409,027 542,938 Loan from non-management shareholders - 304,333 Deferred income taxes 62,659 - --------------------------- Total current liabilities 702,737 847,271 Shareholders' equity Common shares 9,872,294 8,266,528 Contributed surplus 159,825 159,825 Retained earnings (deficit) (2,800,464) (191,384) Cumulative translation adjustment (85,148) (77,446) --------------------------- 7,146,507 8,157,523 --------------------------- Total liabilities and shareholders' equity $ 7,849,244 $ 9,004,794 - ---------------------------------------------------------------------------
THE WIDECOM GROUP INC. CONSOLIDATED STATEMENTS OPERATIONS For The Three For the Three For the Nine For the Nine (in United States dollars) Months Ended Months Ended Months Ended Months Ended (Unaudited) December 31, December 31, December 31, December 31, 1996 1995 1996 1995 ------------- ------------- ------------ ------------ - ---------------------------------------------------------------------------------------------------------------- Product sales $ 364,470 $ 249,058 $ 1,210,093 $ 1,179,731 Cost of sales 91,118 47,694 302,524 262,322 Gross profit 273,352 201,364 907,569 917,409 Research and development grants - 94,810 - 251,738 Interest income 12,391 - 118,555 - Net revenue 285,743 296,174 1,026,124 1,169,147 Expenses Research and development 91,828 137,089 501,666 494,998 Selling, general and administrative 911,711 149,396 2,001,125 420,060 Interest and bank charges 4,892 (3,666) 12,007 53,292 Compensation benefit on stock transaction - - - 166,974 Amortization 171,193 54,715 437,639 149,676 Total operating expenses 1,179,624 337,534 2,952,437 1,285,000 Operating income (loss) (893,881) (41,360) (1,926,313) (115,853) Equity in earnings (loss) of joint venture (49,857) - (49,857) - Debt discount - 255,478 - 255,478 Finance fees - 167,277 - 167,277 (49,857) 422,755 (49,857) 422,755 Earnings (loss) before income taxes and extraordinary item (943,738) (464,115) (1,976,170) (538,608) Provision for (recovery of) income taxes Current - - - - Deferred - (63,200) - (63,200) - (63,200) - (63,200) Earnings (loss) before extraordinary item (943,738) (400,915) (1,976,170) (475,408) Extraordinary item, net of tax - 269,017 - 269,017 Net earnings (loss) for the period $ (943,738) $ (131,898) $(1,976,170) $ (206,391) - --------------------------------------------------------------------------------------------------------------- Earnings (loss) per common share before extraordinary item, primary and fully diluted $ (0.21) $ (0.14) $ (0.43) $ (0.19) - --------------------------------------------------------------------------------------------------------------- Earnings (loss) per common share primary and fully diluted $ (0.21) $ (0.05) $ (0.43) $ (0.08) - --------------------------------------------------------------------------------------------------------------- Weighted average number of shares outstanding 4,579,073 2,770,226 4,579,073 2,569,547 - ---------------------------------------------------------------------------------------------------------------
THE WIDECOM GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine For the Nine (in United States dollars) Months Ended Months Ended (Unaudited) December, 31 December 31, 1996 1995 ------------ ------------ - ---------------------------------------------------------------------------------------------- Cash provided by (used in) Operating activities Earnings (loss) for the period before extraordinary item $(1,976,170) $ (475,408) Add (deduct) items not requiring a cash outlay Amortization 437,639 149,676 Deferred income taxes - 63,200 Accrued interest on IOC loan payable - (269,017) Compensation benefit on stock transaction - 166,974 --------------------------- (1,538,531) (364,575) Net changes in non-cash working capital balances related to operations (Increase) in accounts receivable (196,575) (17,986) (Increase) in R & D grants receivable - (192,691) (Increase) decrease in inventory (1,016,617) - Increase in accounts payable 67,107 32,823 Other - (22,503) Decrease (increase) in prepaid expenses - 37,008 --------------------------- (2,684,616) (527,924) --------------------------- Investing activities Purchase of capital assets (1,093,145) (264,930) Purchase of equity in Joint Venture (1,836,750) - --------------------------- (2,929,895) (264,930) --------------------------- Financing activities Increase (decrease) in bank indebtedness 100,593 (101,708) Shares issued for cash 571,500 6,105,204 Advances (repayment) of Ontario Development Corporation loan - (214,290) Loan from shareholders - 45,086 Shares issued in settlement of debt - 252,000 Shares issued for purchase of investment - 720,000 --------------------------- 672,093 6,806,292 --------------------------- Effect of exchange rate changes on cash 43,063 18,526 --------------------------- Net increase (decrease) in cash during the period (4,899,355) 6,031,964 Cash and equivalents, beginning of period 5,643,491 99,259 --------------------------- Cash and equivalents, end of period $ 744,136 $ 6,131,223 - ---------------------------------------------------------------------------------------------
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 December 31, 1996 and the results of operations for the three months ended December 31, 1995 and 1996 and cash flows for the nine months ended December 31, 1996. Interim results are not necessarily indicative of results for full year. The condensed consolidated financial statements and notes are presented as permitted by Form 10-Q 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 investment 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 $252,000. In November 1996, Company entered into a joint venture with Societe Innovatech du Grand Montreal ("Innovatech") and two smaller companies to establish a research and development consortium (the "Consortium"). The Company acquired a 45% stake in the Consortium in exchange for approximately $1,836,749. This enables the Company to continue to receive research and development grants, which should substantially expand the amount of research and development that can be undertaken. The Company and Innovatech have also entered into an agreement which may permit the Company to acquire Innovatech's interest in the Consortium in exchange for 253,000 shares of Company's common stock. The investment in the Consortium is accounted for on the equity basis, and the Company's 45% share of the operating loss in the Consortium for the period ended December 31, 1996, is $49,857. - ------------------------------------------------------------------------------- 3. Inventories Inventories are summarized as follows:-
December December 31, 1996 31, 1995 ---------- -------- Raw materials $ 427,464 $263,400 Work in progress 551,362 264,330 Finished goods 483,385 27,840 ---------------------- Total inventories $1,462,211 $555,570 ---------------------- - -------------------------------------------------------------------------------
4. Capital Assets Capital assets consist of:
December 31, 1996 December 31, 1995 -------------------------- ------------------------ Accumulated Accumulated Cost Amortization Cost Amortization ---------- ------------ -------- ------------ Machinery, plant and computer equipment $1,606,318 $ 387,612 $577,570 $ 50,302 Furniture and fixtures 94,106 27,657 119,803 19,924 Motor vehicles 64,069 10,893 Prototype and jigs 440,432 95,923 Land 66,881 Building under construction 236,532 ---------- $2,508,338 $ 522,085 $697,373 $ 70,226 -------------------------------------------------- Net book value $1,986,253 $627,147 ------------------------------------ - -------------------------------------------------------------------------------
5. Share Capital Changes to issued share capital: During the period ended December 31, 1996, 145,000 of the 840,000 Bridge warrants were converted to Common shares, for proceeds of $571,500. - ------------------------------------------------------------------------------- 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. EX-27 2 ARTICLE 5 FDS FOR 3RD QUARTER 10-Q
5 9-MOS MAR-31-1997 DEC-31-1996 744,136 0 698,394 5,349 1,462,211 3,608,099 1,986,253 522,085 7,849,244 702,737 0 0 0 4,579,073 0 7,849,244 364,470 285,743 91,118 1,270,742 0 0 4,892 (943,738) 0 (943,738) 0 0 0 (943,738) (0.21) (0.21)
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