-----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, GdqgxDARrjC3ZTOwcR4gnm/leX6cuJ/Iq+lFS7LcVQNlu1XIQhK6y253zsPJ6yY3 b89ljuiwbX5phMjbeMpG0w== 0000910647-96-000206.txt : 19961120 0000910647-96-000206.hdr.sgml : 19961120 ACCESSION NUMBER: 0000910647-96-000206 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961118 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: 96668264 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 THE SECOND 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 Commission file number: 1-13589 ended: September 30, 1996 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 November 14, 1996, the Company had 4,494,073 shares of its common stock, $.01 par value outstanding. 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. 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 $86,971 recognized in the same period of the prior fiscal year. During the quarter the Company earned $49,807 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 September 30, 1996 Compared to Quarter Ended September 30, 1995 Revenues for the quarter ended September 30, 1996 were $409,108, a decrease of $148,136 or 26.6%, as compared to $557,244 for the quarter ended September 30, 1995. Sales for the quarter ended September 30, 1996 were $359,301, a decrease of $110,972 as compared to $470,273 for the quarter ended September 30, 1995. For the quarter ended September 30, 1995, sales of the 36" WIDEfax Modular Unit accounted for approximately 63.2% of the Company's product sales. For the quarter ended September 30, 1996, sales of the WIDEfax Scan and WIDEfax Modular Unit accounted for approximately 58.9% and 29.8%, respectively, of the Company's sales. No revenues were recognized from government sponsored research programs for the quarter ended September 30, 1996 as compared to $86,971 for the quarter ended September 30, 1995. Operating expenses for the quarter ended September 30, 1996 were $862,336, an increase of $216,990, or 33.6%, as compared to $645,346 for the quarter ended September 30, 1995. Research and development expenses decreased from $211,084 for the quarter ended September 30,1995 to $188,743 for the quarter ended September 30, 1996. Selling, general and administrative expenses for the quarter ended September 30, 1996 increased by $210,406 and increased as a percentage of revenues from 55.5% to 127.1%. 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. Six Months Ended September 30, 1996 Compared to Six Months Ended September 30, 1995 Revenues for the six months ended September 30, 1996 were $951,030, a decrease of $126,872 or 11.8%, compared to $1,077,902 for the six months ended September 30, 1995. Operating expenses for the six months ended September 30, 1996 were $1,775,364, an increase of $836,683, or 89.0%, compared to $939,681 for the six months ended September 30, 1995. Operating expenses also increased as a percentage of revenues from 87.2% for the six months ended September 30, 1995 to 186.7% for the six months ended September 30, 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 June 30, 1996 the Company raised $231,500 (net) upon the conversion of warrants to common shares. 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. None. 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 November 13, 1996 /s/ Suneet S. Tuli -------------------------------------- Suneet S. Tuli, Executive Vice President Date November 13, 1996 /s/ Willem J. Botha -------------------------------------- Willem J. Botha, Chief Financial Officer THE WIDECOM GROUP INC. CONSOLIDATED BALANCE SHEET (in United States dollars) (Unaudited)
September 30, September 30, 1996 1995 ---- ---- Assets - ------ Current assets Cash and short term investments $ 3,407,945 $ 26,115 Accounts receivable 600,451 431,004 Accounts receivable from affiliated companies - 136,075 Research and development grants receivable 704,123 641,928 Inventory 1,425,475 541,593 --------------------------- Total current assets 6,137,994 1,776,715 Capital assets 1,820,763 343,561 Deferred issue costs of public offering - 760,699 Investment in affiliate 504,000 660,000 --------------------------- Total Assets $ 8,462,757 $3,540,975 Liabilities and Shareholders' Equity - ------------------------------------ Current liabilities Bank indebtedness 147,835 - Accounts payable and accrued liabilities 521,704 767,054 IOC loan payable - 223,590 Accrued interest on IOC loan payable - 334,596 Loan from non-management shareholders - 310,711 Deferred income taxes 62,728 - ---------------------------- Total current liabilities 732,267 1,635,951 ---------------------------- Shareholders' equity Common shares 9,532,294 1,909,324 Contributed surplus 159,825 159,825 Retained earnings (deficit) (1,859,928) (59,486) Cumulative translation adjustment (101,701) (104,639) ---------------------------- 7,730,490 1,905,024 ---------------------------- Total Liabilities and Shareholders' equity $ 8,462,757 $ 3,540,975
THE WIDECOM GROUP INC. CONSOLIDATED STATEMENTS OPERATIONS (in United States dollars) (Unaudited)
For The Three For the Three For the Six For the Six Months Ended Months Ended Months End Months Ended September 30, September 30, September 30, September 30, 1996 1995 1996 1995 ------------- ------------- ------------- ------------- Product sales $ 359,301 $ 470,273 $ 845,197 $ 922,373 Cost of sales 89,826 116,204 211,300 212,714 ----------------------------------------------------------- Gross profit 269,475 354,069 633,897 709,659 Research and development grants - 86,971 - 155,529 Interest income 49,807 - 105,833 - ----------------------------------------------------------- Net revenue 319,282 441,040 739,730 865,188 ----------------------------------------------------------- Expenses Research and development 188,743 211,084 408,927 346,331 Selling, general and administrative 519,847 309,441 1,092,537 434,776 Interest and bank charges 4,002 30,194 7,126 56,450 Amortization 149,744 94,627 266,774 102,124 ----------------------------------------------------------- Total operating expenses 862,336 645,346 1,775,364 939,681 ----------------------------------------------------------- Operating income (loss) (543,054) (204,306) (1,035,634) (74,493) ----------------------------------------------------------- Earnings (loss) before extraordinary item (543,054) (204,306) (1,035,634) (74,493) Extraordinary item, net of tax - - - - ----------------------------------------------------------- Net Earnings (loss) for the period $ (543,054) $ (204,306) $ (1,035,634) $ (74,493) Earnings (loss) per common share before extraordinary item, primary and fully diluted $ (0.12) $ (0.08) $ (0.23) $ (0.03) Earnings (loss) per common share primary and fully diluted $ (0.12) $ (0.08) $ (0.23) $ (0.03) Weighted average number of shares outstanding 4,464,073 2,476,993 4,464,073 2,476,993
THE WIDECOM GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in United States dollars) (Unaudited)
For the Six For the Six Months Ended Months Ended September 30, September 30, 1996 1995 ------------- ------------- Cash provided by (used in) Operating activities Earnings (loss) for the period before extraordinary item $(1,035,634) $ (74,493) Add (deduct) items not requiring a cash outlay Amortization 266,774 102,124 Accrued interest on IOC loan payable - 44,004 Compensation benefit on stock transaction - 166,974 --------------------------- (768,860) 238,609 Net changes in non-cash working capital balances related to operations (Increase) in accounts receivable (96,937) (173,407) (Increase) in R & D grants receivable - (125,928) (Increase) decrease in inventory (974,087) 71,150 Increase in accounts payable 131,362 174,246 --------------------------- (1,708,522) 184,670 Investing activities Decrease in term deposits - 98,921 Purchase of capital assets (787,284) (19,373) Advances to related parties - (21,699) --------------------------- (787,284) 57,849 --------------------------- Financing activities Increase (decrease) in bank indebtedness 16,600 (104,427) Shares issued for cash 231,500 - Deferred issue costs of public offering - (126,280) Loan from shareholders - 39,585 --------------------------- 248,100 (191,122) --------------------------- Effect of exchange rate changes on cash 12,160 (28,810) --------------------------- Net increase (decrease) in cash during the period (2,235,546) 22,587 Cash and equivalents, beginning of period 5,643,491 3,528 --------------------------- Cash and equivalents, end of period $ 3,407,945 $ 26,115
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 September 30, 1996 and the results of operations for the three months ended September 30, 1995 and 1996 and cash flows for the six months ended September 30, 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 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 $216,000. 3. Inventories Inventories are summarized as follows:-
September September 30, 1996 30, 1995 ------------------------- Raw materials $ 550,700 $260,834 Work in progress 705,129 210,506 Finished goods 169,646 70,253 ------------------------ Total inventories $1,425,475 $541,593
4. Capital Assets Capital assets consist of:
September 30, 1996 September 30, 1995 --------------------------- ------------------------- Accumulated Accumulated Cost Amortization Cost Amortization ---- ------------ ---- ------------ Machinery, plant and computer equipment $1,344,159 $ 282,665 $346,863 $ 47,286 Furniture and fixtures 87,105 23,064 75,048 31,064 Motor vehicles 64,883 7,847 - - Prototype and jigs 440,910 75,740 - - Land 66,954 - - - Building under construction 206,068 - - - ------------------------------------------------------- $2,210,079 $ 389,316 $421,911 $ 78,350 Net book value $1,820,763 $343,561
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 net 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. EX-27 2 FINANCIAL DATA SCHEDULE FOR WIDECOM GROUP INC.
5 6-MOS MAR-31-1997 SEP-30-1996 3,407,945 0 600,451 5,349 1,425,475 6,137,994 1,820,763 389,316 8,462,757 732,267 0 0 0 4,464,073 0 8,462,757 359,301 319,282 89,826 952,162 0 0 4,002 (543,054) 0 (543,054) 0 0 0 (543,054) (0.12) (0.12)
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