-----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, D6LYKGZ7whcIzyqGuLD6RXxtcc2G7Ru5xcs83Fruxvh5IJJC8HWrZ031kM28B69B hXg6tHhVDZPqmCwgYnKXeg== 0000910647-00-000060.txt : 20000223 0000910647-00-000060.hdr.sgml : 20000223 ACCESSION NUMBER: 0000910647-00-000060 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000222 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: 10QSB SEC ACT: SEC FILE NUMBER: 001-13588 FILM NUMBER: 550593 BUSINESS ADDRESS: STREET 1: 72 DEVON ROAD STREET 2: BRAMPTON CITY: ONTARIO, CANADA L4Z STATE: A6 BUSINESS PHONE: 9057120505 MAIL ADDRESS: STREET 1: 72 DEVON ROAD STREET 2: BRAMPTON CITY: ONTARIO, CANADA L4Z STATE: A6 10QSB 1 BODY OF 10QSB ============================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1999 ----------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from _______________ to _______________ Commission file number 1-13588 ------- THE WIDECOM GROUP INC. - ---------------------------------------------------------------------------- (Exact Name of Registrant as specified in Its Charter) ONTARIO, CANADA 98-0139939 - ---------------------------------------------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 72 DEVON ROAD, UNIT 17-18, BRAMPTON, ONTARIO, CANADA L6T 5B4 - ---------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, Including Area Code (905) 712-0505 -------------- - ---------------------------------------------------------------------------- Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report. Indicate by check X 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 periods 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 ----- ----- The number of shares outstanding of registrant's common stock as of February 18, 2000 was 2,579,541 shares. 1 of 9 THE WIDECOM GROUP INC. FORM 10-QSB INDEX Page No. -------- Part I Financial Information Item 1 - Financial Statements Consolidated Balance Sheets - December 31, 1999 and December 31, 1998 3 Consolidated Statements of Operations - Three and Nine months ended December 31, 1999 and December 31, 1998 4 Consolidated Statements of Cash Flows - Three and Nine months ended December 31, 1999 and December 31, 1998 5 Notes to Consolidated Financial Statements 6-7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 7-8 Part II Other Information None. Signatures 9 2 of 9 PART I FINANCIAL INFORMATION THE WIDECOM GROUP INC. CONSOLIDATED BALANCE SHEET (in United States dollars)
December 31, -------------------------- 1999 1998 ---- ---- (unaudited) (unaudited) Assets Current assets Cash and cash equivalents $ 40,269 $ 130,687 Accounts receivable 743,467 723,509 Deferred financing charges 54,083 - Prepaid expenses 77,612 92,017 Advance(s) to related parties 201,541 160,273 Inventory (Note 3) 1,398,449 1,734,772 -------------------------- Total current assets 2,515,421 2,841,258 Capital assets (Note 4) 1,362,322 1,418,033 Research and development technology 57,401 - Investment in affiliates 368,537 722,180 -------------------------- Total assets $ 4,303,681 $ 4,981,471 ========================== Liabilities and Shareholders' Equity Current liabilities Bank indebtedness 260,404 270,457 Accounts payable and accrued liabilities 675,411 779,108 Loan(s) from related parties 287,998 13,333 Convertible debentures (Note 5) 350,000 150,000 -------------------------- Total current liabilities 1,573,813 1,212,898 -------------------------- Shareholders' equity Common shares $14,501,808 $13,452,497 Contributed surplus 159,825 159,825 Deficit (11,447,306) (9,554,752) Cumulative translation adjustment (484,459) (288,997) -------------------------- 2,729,868 3,768,573 -------------------------- Total liabilities and shareholders' equity $ 4,303,681 $ 4,981,471 ==========================
See accompanying notes to the consolidated financial statements. 3 of 9 THE WIDECOM GROUP INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in United States dollars)
For the Three For the Three For the Nine For the Nine Months ended Months ended Months ended Months ended December 31, December 31, December 31, December 31, 1999 1998 1999 1998 (unaudited) (unaudited) (unaudited) (unaudited) --------------------------------------------------------------- Product sales $ 684,840 $ 646,081 $2,073,185 $1,914,231 Cost of product sales 171,116 161,520 473,958 493,559 ------------------------------------------------------------ Gross profit 513,724 484,561 1,599,227 1,420,672 Research and development grants - 78,235 - 480,630 Interest income 122 1,053 3,965 15,269 ------------------------------------------------------------ Net revenue 513,846 563,849 1,603,192 1,916,571 ------------------------------------------------------------ Expenses Selling, general and administrative 500,290 520,498 1,485,168 1,973,682 Interest and bank charges 19,738 11,087 52,905 40,095 Management fees and salaries 67,992 53,691 207,980 210,265 Amortization 73,359 86,839 221,460 264,851 Foreign exchange loss - 21,344 - 70,849 ------------------------------------------------------------ Total operating expenses 661,379 693,459 1,967,513 2,559,742 ------------------------------------------------------------ Operating loss (147,533) (129,610) (364,321) (643,171) ------------------------------------------------------------ Equity in (loss) of affiliate (60,999) (67,126) (190,650) (263,597) Legal settlement costs - - - - ------------------------------------------------------------ Earnings (loss) before extraordinary item (208,532) (196,736) (554,971) (906,768) Extraordinary item, net of tax - - - - ------------------------------------------------------------ Net earnings (loss) for the period $ (208,532) $ (196,736) $ (554,971) $ (906,768) ============================================================ Loss per common share before extraordinary item, basic and diluted $ (0.09) $ (0.12) $ (0.23) $ (0.56) ============================================================ Loss per common share, basic and diluted $ (0.09) $ (0.12) $ (0.23) $ (0.56) ============================================================ Weighted average number of shares outstanding 2,438,326 1,623,338 2,438,326 1,623,338 ============================================================
See accompanying notes to the consolidated financial statements. 4 of 9 THE WIDECOM GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in United States dollars)
For the nine months ended ---------------------------- December 31, December 31, 1999 1998 ------------ ------------ (Unaudited) (Unaudited) Cash provided by (used in) Operating activities Loss for the period before extraordinary item $ (554,971) $ (906,768) Add (deduct) items not requiring a cash outlay Amortization 221,460 264,851 Shares issued to settle lawsuits 197,150 - Foreign exchange loss - 70,849 Equity in loss of affiliate 190,650 263,597 Net changes in non-cash working capital balances related to operations (Increase) in accounts receivable (173,847) (191,317) (Increase) in inventory (265,006) (380,913) Increase (decrease) in accounts payable and accrued liabilities (656,248) 41,967 Increase (decrease) in prepaid expenses 35,298 (9,860) --------------------------- (1,005,514) (847,594) --------------------------- Investing activities Purchase of capital assets (66,336) (58,749) --------------------------- (66,336) (58,749) --------------------------- Financing activities Increase (decrease) in bank indebtedness (10,976) 86,031 Shares issued for cash 754,289 200,000 Loan from related parties 235,550 13,333 Convertible debentures 15,000 - --------------------------- 993,863 299,364 --------------------------- Effect of exchange rate changes on cash (37,938) 44,833 --------------------------- Net increase (decrease) in cash during the period (115,925) (562,146) Cash and equivalents, beginning of period 156,194 692,833 --------------------------- Cash and equivalents, end of period $ 40,269 $ 130,687 ===========================
See accompanying notes to the consolidated financial statements. 5 of 9 THE WIDECOM GROUP INC. Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 1999, and the results of operations for the three months ended December 31 1999 and 1998, and cash flows for the nine months ended December 31, 1999. Interim results are not necessarily indicative of results for full year. The condensed consolidated financial statements and notes are presented as permitted by Form 10QSB and do not contain certain information included in Widecom's audited consolidated financial statements and notes for the fiscal year March 31, 1999. 2 Financial Statements The consolidated financial statements include the accounts of Widecom and its wholly owned subsidiary. All significant intercompany balances, transactions and stockholdings have been eliminated. 3. Inventories Inventories are summarized as follows:-
December December 31, 1999 31, 1998 -------- -------- Raw materials $ 781,029 $1,018,699 Work in progress 190,384 47,697 Finished goods 427,036 668,376 ------------------------ Total inventories $1,398,449 $1,734,772 ========================
4. Capital Assets Capital assets consist of:
December 31, 1999 December 31, 1998 -------------------------- -------------------------- Accumulated Accumulated Cost Amortization Cost Amortization ---- ------------ ---- ------------ Machinery, plant and Computer equipment $1,972,208 $1,289,609 $1,838,294 $1,002,900 Furniture and fixtures 111,107 63,801 106,331 50,358 Prototype and jigs 297,525 156,475 284,737 120,642 Land 57,846 - 55,360 - Building under- construction 433,521 - 307,211 - ------------------------------------------------------- $2,872,207 $1,509,885 $2,591,933 $1,173,900 ======================================================= Net book value $1,362,322 $1,418,033 ========== ==========
6 of 9 5. Loans from Related Parties During the course of the last fiscal year, Widecom's management and related consulting companies declined receipt of regularly scheduled compensation to be treated as non-interest bearing loans from those parties in order to assist Widecom's daily cash flow position and overall liquidity during the period. Widecom has chosen to accrue this aggregate indebtedness of $287,998 in this fiscal third quarter. 6. Convertible Debentures During the spring of 1999, Widecom completed a private offering of ten $30,000 units each one comprising 10,000 shares and $20,000 dollars in convertible notes. The total amount of the offering comprised 100,000 shares and $200,000 in convertible debentures with interest payable quarterly at 12% per annum. The common shares have all been issued. In May of 1997, Widecom completed a financing of $250,000 through Global Bermuda via convertible debentures. All of the five $50,000 units have been converted in common shares of Widecom. In an agreement dated December 22, 1999, the final three units, inclusive of accrued interest, were exchanged for 21,310 of Widecom's common shares that are subject to transfer restrictions of 1,500 shares weekly. 7. Share Capital As above, in May of 1997, Widecom completed a financing of $250,000 through Global Bermuda via convertible debentures. All of the five $50,000 units have now been converted in common shares of Widecom. In an agreement dated December 22, 1999, the final three units, inclusive of accrued interest, were exchanged for 21,310 of Widecom's common shares that are subject to transfer restrictions of a maximum 1,500 shares weekly. As above, during the spring of 1999, Widecom completed a private offering of ten $30,000 units each one comprising 10,000 shares and $20,000 dollars in convertible notes. The total amount of the offering comprised 100,000 shares and $200,000 in convertible debentures with interest payable quarterly at 12% per annum. The common shares have all been issued. 2,190 shares were also issued to one of the placement underwriters on an exercise of a placement warrant just after quarter end. 8. Contingent Liabilities In December 1996, two individuals filed a lawsuit seeking 60,000 shares and 40,000 warrants. This action has been formally dismissed. An additional three (3) shareholders have also commenced related litigation, alleging purchase of our securities from the two previously noted individuals, who are named as co-defendants. We have filed and received default judgments on our cross-claims against the two individuals co-defendants. The total number of shares of common stock claimed under these suits is less than 15,000. A Statement of Claim was filed against Widecom in 1998 for breach of sales and royalty agreement and breach of trademark and copyright issues in the amount of approximately $15.85 million. Widecom believes it has a good and meritorious defense to this claim. Loss, if any, on the above-mentioned claims will be recorded when settlement is probable and the amount of any such settlement is estimable. 7 of 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Widecom's revenues are derived from product sales, which are recognized when products are shipped. While Widecom's has received government grants in the past, it does not meet the required pre-qualification for such grants subsequent to conducting its public offering. In consideration of this fact, Widecom has shifted its research and development to an affiliated joint venture based in Montreal, Canada. Results of Operations Quarter Ended December 31, 1999 Compared to Quarter Ended December 31,1998 Sales for the quarter ended December 31, 1999 were $684,680, an increase of $38,759 or 6.0 % as compared to $646,081 for the quarter ended December 31, 1998. Net Revenues for the quarter ended December 31, 1999 showed a decrease of $50,003 or 8.8% as compared to $563,849 for the quarter ended December 31, 1998. This decrease occurred because our research and development reimbursements declined from $78,235 to $ nil thereby offsetting the sales increase of this quarter versus the quarter ended December 31, 1998. Widecom was unable to take advantage of on-hand orders for our 72" color scanner due to unforeseen completion and delivery difficulties. Revenue also declined due to delays in printer delivery related to ongoing improvements in our paper and ribbon loading mechanisms. Operating expenses for the quarter ended December 31, 1999 were $661,379, a decrease of $32,080, or 4.6%, as compared to $693,459 for the quarter ended December 31, 1998. Selling, general and administrative expenses for the quarter ended December 31, 1999, decreased by $20,208 or 3.9% versus the same period in the previous fiscal year. Widecom also continues to incur legal, administration, and other related costs associated with its initial public offering and its warrant call. Widecom's share of the loss incurred by the research and development consortium (3294340 Canada Inc.) that had been formed on the second of October 1996, for the quarter ended December 31, 1999, amounted to $ 60,999 as compared to $67,126 for the quarter ended December 30, 1998. Liquidity and Capital Resources Widecom's primary cash requirements have been to fund research and development activities, acquisition of equipment and inventories and to meeting operations expenses incurred in connection with the commercialization of its products. Widecom meets 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. At December 31, 1999, Widecom had working capital of $941,608, as compared to $1,628,360 at December 31, 1998. However, Widecom had only approximately $40,269 in unrestricted cash available. Widecom's cash requirements in connection with the manufacture and marketing of its products has been and will continue to be significant. Widecom does not presently have any material commitments for any additional capital expenditures. Widecom believes, based on its currently proposed plans and assumptions, that its contemplated cash requirements for the foreseeable future will be met. In the event that Widecom's plan or assumptions change, or prove to be incorrect, or if the projected cash flows otherwise prove to be insufficient to fund operations (due to unanticipated expenses, delay, problems or otherwise), Widecom may be required to seek additional financing. There can be no assurance that any additional financing will be available to Widecom if needed on commercially reasonable terms, or at all. 8 of 9 PART II: OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None ITEM 2. CHANGES IN SECURITIES. No material change. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. ITEM 6. REPORTS ON FORM 8-K and EXHIBITS None Exhibit 27 FINANCIAL DATA SCHEDULE-ARTICLE 5 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. February 21, 2000 /s/Suneet S. Tuli - ----------------- ---------------------- Date Suneet S. Tuli, Executive Vice President February 21, 2000 /s/Raja S. Tuli - ----------------- ---------------------- Date President , C.E.O 9 of 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS MAR-31-1999 APR-01-1999 DEC-31-1999 40,269 0 743,467 106,702 1,398,449 2,515,421 2,872,207 1,509,885 4,303,681 1,573,813 0 0 0 14,501,808 0 4,303,681 2,073,185 2,077,150 473,958 1,967,513 190,650 0 52,905 (554,971) 0 (554,971) 0 0 0 (554,971) $(0.23) $(0.23)
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