-----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, Gnkf1Gp+7m2DcEImo+olIff7rEl88/Y7R6owS/8lvcgRLfmMrTV2dLOUMC5CcsSw oy1Cif0GdNoQ05tUHG3a5g== 0000910647-97-000265.txt : 19971121 0000910647-97-000265.hdr.sgml : 19971121 ACCESSION NUMBER: 0000910647-97-000265 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971120 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: SEC FILE NUMBER: 001-13588 FILM NUMBER: 97725217 BUSINESS ADDRESS: STREET 1: 267 MATHESON BOULEVARD EAST STREET 2: MISSISSAUGUA CITY: ONTARIO, CANADA L4Z STATE: A6 BUSINESS PHONE: 9057120505 MAIL ADDRESS: STREET 1: 267 MATHESON BOULEVARD EAST STREET 2: MISSISSAUGA CITY: ONTARIO, CANADA L4Z STATE: A6 10-Q 1 BODY OF 10-Q 1 =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 1997. 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) 267 MATHESON BOULEVARD EAST, MISSISSAUGA, ONTARIO, CANADA L4Z 1X8 (Address of principal executive offices) (Zip Code) (905) 712-0505 (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 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 November 19, 1997, was 5,636,578 shares. =============================================================================== 2 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. 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. Research and development grants are cash payments and credits against taxes payable received or receivable from the Federal government as an incentive to conduct research and development in Canada. As no taxes are payable in the quarter, no grants have been recognized. During the quarter the Company earned $27,674 interest on short -term investments compared to $49,807 earned in the same period of 1996. Results of Operations Quarter Ended September 30, 1997 Compared to Quarter Ended September 30, 1996 Revenues for the quarter ended September 30, 1997 were $678,718, an increase of $359,436 or 112.6% as compared to $319,282 for the quarter ended September 30, 1996. Sales for the quarter ended September 30, 1997 were $854,761, an increase of $495,460 as compared to $359,301 for the quarter ended September 30, 1996. Sales of the Company's SLC 436 Color Scanner accounted for a majority of the sales increase. Operating expenses for the quarter ended September 30, 1997 were $1,077,167, an increase of $214,831, or 24.9 %, as compared to $862,336 for the quarter ended September 30, 1996. Research and development expenses decreased from $188,743 for the quarter ended September 30,1996 to $28,288 for the quarter ended September 30,1997. The Company expects this amount to be substantially reduced in the future because of its investment in the Research & Development Consortium. Selling, general and administrative expenses for the quarter ended September 30,1997 increased by $328,108 and decreased as a percentage of revenues from 162.8% to 124.9%. The increase in absolute dollars was due to marketing expenses associated with continued emphasis on product commercialization, particularly the introduction of the next generation scanner and the expansion of the Company's administrative and sales staff and offices in anticipation of large expansion of the Company's operations. The Company continues to incur legal, administration, and other related costs associated with its warrant call. The Company's share of the loss incurred by the research and development consortium (3994340 Canada Inc.) that had been formed on October 2nd. 1996, for the quarter ended September 30, 1997 amounted to $67,422 as compared to $92,220 for the quarter ended June 30, 1997. 2 (CONTINUED) 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 connections 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, 1997 the Company raised $2,024,101(net) through the conversion of warrants associated with the initial public offering, to common shares, and $205,180, from the proceeds of the issuance of 8% Convertible Debentures. 3 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 4 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. Dated: November 17, 1997 /s/ Suneet S. Tuli Suneet S. Tuli, Executive Vice President Dated: November 17, 1997 /s/ Willem J.Botha Willem J. Botha, Chief Financial Officer 5 THE WIDECOM GROUP INC. CONSOLIDATED BALANCE SHEET (in United States dollars) (Unaudited)
September 30, September 30, 1997 1996 ------------- ------------- Assets Current assets Cash and short term investments $ 1,440,814 $ 3,407,945 Accounts receivable 891,845 600,451 Research and development grants receivable 271,099 704,123 Prepaid expenses 100,338 - Receivable from shareholders 32,110 - Advance to related parties 85,320 - Inventory (Note 3) 1,752,621 1,425,475 ------------------------------ Total current assets 4,574,147 6,137,994 Capital assets (Note 4) 1,655,485 1,820,763 Investment in Joint Venture 1,529,802 - Investment in affiliate - 504,000 ------------------------------ Total assets $ 7,759,434 $ 8,462,757 ============================== Liabilities and Shareholders' Equity Current liabilities Bank indebtedness 316,380 147,835 Accounts payable and accrued liabilities 1,258,464 521,704 8% Convertible debentures (Note 6) 205,180 - Deferred income taxes - 62,728 ------------------------------ Total current liabilities 1,780,024 732,267 ------------------------------ Shareholders' equity Common shares (Note 5) $ 12,622,985 9,532,294 Contributed surplus 159,825 159,825 Retained earnings (deficit) (6,801,738) (1,859,928) Cumulative translation adjustment (1,662) ( 101,701) ------------------------------ 5,979,410 7,730,490 ------------------------------ Total liabilities and shareholders' equity $ 7,759,434 $ 8,462,757 ==============================
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THE WIDECOM GROUP INC. CONSOLIDATED STATEMENTS OPERATIONS For The Three For the Three For the Six For the Six (in United States dollars) Months Ended Months Ended Months Ended Months Ended (Unaudited) September 30, September 30, September 30, September 30, 1997 1996 1997 1996 ------------- ------------- ------------- ------------- Product sales $ 854,761 $ 359,301 $ 1,738,656 $ 845,197 Cost of sales 203,717 89,826 438,369 211,300 -------------------------------------------------------------- Gross profit 651,044 269,475 1,300,287 633,897 Research and development grants - - - - Interest income 27,674 49,807 91,577 105,833 -------------------------------------------------------------- Net revenue 678,718 319,282 1,391,864 739,730 -------------------------------------------------------------- Expenses Research and development 28,288 188,743 116,036 408,927 Selling, general and administrative 847,955 519,847 1,813,200 1,092,537 Interest and bank charges 10,595 4,002 14,800 7,126 Management fees 92,367 - 209,982 - Amortization 97,962 149,744 192,812 266,774 -------------------------------------------------------------- Total operating expenses 1,077,167 862,336 2,346,830 1,775,364 -------------------------------------------------------------- Operating income (loss) (398,449) (543,054) (954,966) (1,035,634) -------------------------------------------------------------- Equity in earnings (loss) of Joint Venture (67,422) - (159,654) - Shareholders lawsuit resolutions (Note 7) - - (375,000) - -------------------------------------------------------------- Earnings (loss) before extraordinary item (465,871) (543,054) (1,489,620) (1,035,634) Extraordinary item, net of tax - - - - -------------------------------------------------------------- Net earnings (loss) for the period $ (465,871) $ (543,054) $ (1,489,620) $ (1,035,634) ============================================================== Earnings (loss) per common share before extraordinary item, primary and fully diluted $ (0.08) $ (0.12) $ (0.27) $ (0.23) ============================================================== Earnings (loss) per common share primary and fully diluted $ (0.08) $ (0.12) $ (0.27) $ (0.23) ============================================================== Weighted average number of shares outstanding 5,565,251 4,464,073 5,565,251 4,434,073 ==============================================================
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THE WIDECOM GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six For the Six (in United States dollars) Months Ended Months Ended (Unaudited) September 30, September 30, 1997 1996 ------------- ------------- Cash provided by (used in) Operating activities Earnings (loss) for the period before extraordinary item $ (1,489,620) $ (1,035,634) Add (deduct) items not requiring a cash outlay Amortization 192,812 266,774 Equity in earnings (loss) of Joint Venture 159,654 - ----------------------------- (1,137,154) (768,860) Net changes in non-cash working capital balances related to operations (Increase) in accounts receivable (133,522) (96,937) Decrease/(Increase) in R & D grants receivable 425,556 - Increase/(decrease) in inventory (548,621) (974,087) Increase/ (decrease) in accounts payable (96,536) 131,362 (Increase)/ decrease in prepaid expenses 209 - ----------------------------- (1,490,068) (1,708,522) ----------------------------- Investing activities Purchase of capital assets (115,886) (787,284) ----------------------------- (115,886) (787,284) ----------------------------- Financing activities Increase (decrease) in bank indebtedness (14,173) 16,600 Shares issued for cash 2,150,499 231,500 Private placements 250,000 - ----------------------------- 2,386,326 248,100 ----------------------------- Effect of exchange rate changes on cash 28,956 12,160 ----------------------------- Net increase (decrease) in cash during the period 809,328 (2,235,546) Cash and equivalents, beginning of period 631,486 5,643,491 ----------------------------- Cash and equivalents, end of period $ 1,440,814 $ 3,407,945 =============================
8 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, 1997, and the results of operations for the three months ended September 30, 1996 and 1997 and cash flows for the six months ended September 30, 1997. 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, 1997. 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. 3. Inventories Inventories are summarized as follows:-
September 30, 1997 September 30, 1996 ------------------ ------------------ Raw materials $ 911,363 $ 550,700 Work in progress 613,417 705,129 Finished goods 227,841 169,646 --------------------------------- Total inventories $ 1,752,621 $ 1,425,475 =================================
9 The WideCom Group Inc. Notes to Consolidated Financial Statements (in United States dollars) (Unaudited) - ------------------------------------------------------------------------------ 4. Capital Assets Capital assets consist of:
September 30, 1997 September 30, 1996 --------------------------- --------------------------- Accumulated Accumulated Cost Amortization Cost Amortization ----------- ------------ ----------- ------------ Machinery, plant and computer equipment $ 1,521,841 $ 571,111 $ 1,344,159 $ 282,665 Furniture and fixtures 180,862 57,902 151,988 30,911 Prototype and jigs 250,252 78,632 440,910 75,740 Land 60,850 - 66,954 - Building under construction 349,325 - 206,068 - --------------------------------------------------------- $ 2,363,130 $ 707,645 $ 2,210,079 $ 389,316 ========================================================= Net book value $ 1,655,485 $ 1,820,763 =========== ===========
5. Share Capital During the quarter ended June 30, 1997, 716,833 warrants were exercised in exchange for 716,833 common shares. The proceeds of this issue, net of related expenses of $126,398, was $ 2,024,101. 6. Convertible Debentures During the quarter ended June 30, 1997, the Company issued $250,000 in 8% Convertible Debentures. The proceeds of this issue, net of related expenses of $45,250 was $205,180. 7. Shareholders Lawsuit Resolution As of June 27, 1997 the Company reached a settlement with the plaintiffs Don Johnson, Walter J. Lack, Thomas V. Girardi, Glenn Mc Cusker, and Gino Aiello who initiated an action in Los Angeles Superior Court against the Company, Raja S. Tuli, and unnamed defendant's designated Does 1-100 on or about March 10, 1997, which action was subsequently removed to the United States District Court for the Central District of California in the State of California. 10 The WideCom Group Inc. Notes to Consolidated Financial Statements (in United States dollars) (Unaudited) - ------------------------------------------------------------------------------- 8. Contingent Liabilities Statement of claim was filed against the Company with respect to the following matter in 1993: Claim for non-payment of invoices in the amount of $110,000 relate to invoices for accounting services provided by an accounting firm. The Company has accrued $35,000 for this claim. 11 EX-27 2 ART. 5 FDS FOR 2ND QUARTER 10-Q
5 6-MOS MAR-31-1997 SEP-30-1997 1,440,814 0 891,845 0 0 4,574,147 2,363,130 707,434 7,759,434 1,780,024 0 0 0 12,622,985 0 7,759,434 1,738,656 1,830,233 438,369 2,785,199 534,654 0 14,800 (1,489,620) 0 (1,489,620) 0 0 0 (1,489,620) (0.27) (0.27)
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