-----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, LS42D+ax0oHLiK1mNuNuSVbefjthMS4HpWpRZMFjZqIpQN6b4sgtK8xuAUDdXFIm JFR9fNy3Q4wqTfhKuUqSgw== 0000910647-99-000306.txt : 19991123 0000910647-99-000306.hdr.sgml : 19991123 ACCESSION NUMBER: 0000910647-99-000306 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991122 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: 99761951 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 September 30, 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 Incorporation or Organization) Identification No.) 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 November 19, 1999 was 2,542,541 shares. THE WIDECOM GROUP INC. FORM 10-QSB INDEX Page No. -------- Part I Financial Information Item 1 - Financial Statements Consolidated Balance Sheets - September 30, 1999 and September 30, 1998 3 Consolidated Statements of Operations - Three and Six months ended September 30, 1999 and September 30, 1998 4 Consolidated Statements of Cash Flows - Three and Six months ended September 30, 1999 and September 30, 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 Item 2 - Changes in Securities 9 Item 2 - Reports on Form 8-K 9 Signatures 9 PART I FINANCIAL INFORMATION THE WIDECOM GROUP INC. CONSOLIDATED BALANCE SHEET (in United States dollars)
September 30, --------------------------- 1999 1998 ---- ---- (unaudited) (unaudited) Assets Current assets Cash and cash equivalents $ 221,637 $ 392,849 Accounts receivable 604,155 585,571 Deferred financing charges 54,083 - Prepaid expenses 65,110 89,140 Advance to related parties 201,541 167,767 Inventory (Note 3) 1,407,802 1,730,296 ---------------------------- Total current assets 2,554,328 2,965,623 Capital assets (Note 4) 1,428,644 1,506,737 Research and development technology 65,242 - Investment in affiliates 430,308 790,778 ---------------------------- Total assets $ 4,478,522 $ 5,263,138 ============================ Liabilities and Shareholders' Equity Current liabilities Bank indebtedness 123,280 305,398 Accounts payable and accrued liabilities 894,572 768,554 Loan from related parties 66,766 13,333 Convertible debentures (Note 5) 350,000 150,000 ---------------------------- Total current liabilities 1,434,618 1,237,285 ---------------------------- Shareholders' equity Common shares $14,476,808 $13,452,497 Contributed surplus 159,825 159,825 Deficit (11,221,718) (9,377,072) Cumulative translation adjustment (371,011) (209,397) 3,043,904 4,025,853 ---------------------------- Total liabilities and shareholders' equity $ 4,478,522 $ 5,263,138 ============================
See accompanying notes to the consolidated financial statements. THE WIDECOM GROUP INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in United States dollars)
For the three For the three For the six For the six Months ended Months ended Months ended Months ended September 30, September 30, September 30, September 30, 1999 1998 1999 1998 ------------- ------------- ------------- ------------- (unaudited) (unaudited) (unaudited) (unaudited) Product sales $ 593,692 $ 635,955 $1,378,017 $1,254,050 Cost of product sales 129,603 168,470 300,952 332,323 ---------------------------------------------------------- Gross profit 464,089 467,485 1,077,065 921,727 Research and development grants - 301,285 - 405,799 Interest income 2,734 3,057 3,838 13,281 ---------------------------------------------------------- Net revenue 466,823 771,827 1,080,903 1,340,807 ---------------------------------------------------------- Expenses Selling, general and administrative 486,915 743,033 961,019 1,458,674 Interest and bank charges 14,893 19,418 33,004 29,058 Management fees and salaries 69,686 81,620 139,372 157,254 Amortization 73,352 89,913 147,798 178,072 Foreign exchange loss - 28,163 - 49,505 ---------------------------------------------------------- Total operating expenses 644,846 962,147 1,281,193 1,872,563 ---------------------------------------------------------- Operating income (loss) (178,023) (190,320) (200,290) (531,756) ---------------------------------------------------------- Equity in (loss) of affiliate (60,879) (67,055) (129,092) (197,333) Legal settlement costs - - - - ---------------------------------------------------------- Earnings (loss) before extraordinary item (238,902) (257,375) (329,382) (729,089) Extraordinary item, net of tax - - - - ---------------------------------------------------------- Net earnings (loss) for the period $ (238,902) $ (257,375) $ (329,382) $ (729,089) ========================================================== Loss per common share before extraordinary item, basic and diluted $ (0.10) $ (0.16) $ (0.14) $ (0.48) ========================================================== Loss per common share, basic and diluted $ (0.10) $ (0.16) $ (0.14) $ (0.48) ========================================================== Weighted average number of shares outstanding 2,293,790 1,540,683 2,293,790 1,540,683 ==========================================================
See accompanying notes to the consolidated financial statements. THE WIDECOM GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in United States dollars)
For the six months ended ----------------------------- September 30, September 30, 1999 1998 ------------- ------------- (Unaudited) (Unaudited) Cash provided by (used in) Operating activities Loss for the period before extraordinary item $(329,382) $(729,089) Add (deduct) items not requiring a cash outlay Amortization 147,798 178,072 Shares issued to settle lawsuits 197,150 - Foreign exchange loss - 49,505 Equity in loss of affiliate 129,092 197,333 Net changes in non-cash working capital balances related to operations (Increase) in accounts receivable (35,403) (50,297) (Increase) in inventory (197,997) (381,311) Increase (decrease) in accounts payable and accrued liabilities (437,874) 30,529 Increase (decrease) in prepaid expenses 22,844 (6,890) -------------------------- (503,772) (712,148) -------------------------- Investing activities Purchase of capital assets (66,468) (58,835) (66,468) (58,835) Financing activities Increase (decrease) in bank indebtedness (146,971) 122,971 Shares issued for cash 729,289 200,000 Loan from related parties - 13,333 Convertible debentures 15,000 - -------------------------- 597,318 336,304 -------------------------- Effect of exchange rate changes on cash 38,366 134,695 -------------------------- Net increase (decrease) in cash during the period 65,444 (299,984) Cash and equivalents, beginning of period 156,193 692,833 -------------------------- Cash and equivalents, end of period $ 221,637 $ 392,849 ==========================
See accompanying notes to the consolidated financial statements. 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 September 30, 1999, and the results of operations for the six months ended September 30, 1999 and 1998 and cash flows for the six months ended September 30, 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 the Company'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 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 September 30, 1999 30, 1998 --------- --------- Raw materials $ 741,547 $1,055,218 Work in progress 8,572 43,842 Finished goods 657,683 631,236 -------------------------- Total inventories $1,407,802 $1,730,296 ==========================
4. Capital Assets Capital assets consist of:
September 30, 1999 September 30, 1998 --------------------------- --------------------------- Accumulated Accumulated Cost Amortization Cost Amortization ---- ------------ ---- ------------ Machinery, plant and Computer equipment $1,972,208 $1,233,151 $1,840,243 $ 929,033 Furniture and fixtures 111,107 61,188 106,477 47,219 Prototype and jigs 297,525 149,458 285,128 111,798 Land 57,846 - 55,436 - Building under construction 433,755 - 307,503 - ---------------------------------------------------------- $2,872,441 $1,443,797 $2,594,787 $1,088,050 ========================================================== Net book value $1,428,644 $1,506,737 ========== ==========
5. Convertible Debentures On May 19,1997, the Company completed a private offering of $250,000 of convertible debentures maturing on May 19, 1998. The convertible debentures bear interest of 8% per annum. In addition, 12,500* warrants were also issued in conjunction with these convertible debentures. The holder of the debentures has the right to convert at a conversion price equal to the lower of $5 or 80% of the average closing bid price of the Company's shares over the past 20 trading days. On February 11, 1998, $50,000 principal plus accrued interest was converted into 14,742* common shares. The warrants are exercisable over 3 years at an exercise price of $16 per share. The value attributable to the warrants is not material. Included in accounts payable is accrued interest on the debentures of $ 31,588. On April 24, 1998, the debenture holder converted another $50,000 principal plus interest into 17,213* of common shares. The company is currently in default for the repayment of its remaining $150,000 convertible debentures that came due on May 18, 1998. The company also conducted a private placement of ten specific investment units, each comprising 10,000 common shares and a three-year 12% convertible subordinated note in the amount of $20,000. Interest payments are payable quarterly and conversion is available at an exercise price of $1.00 per share. One-half of the principal amount of the note is exercisable during the 30-day period commencing 180 days from the initial closing on February 19, 1999. The remaining principal amount is convertible at anytime following 360 days after the initial closing. Nine and one-half units closed in our preceding quarter, however, one-half unit closed during the first quarter of fiscal 2000. Included in accounts payable is accrued interest on the debentures of $13,990. * Adjusted to reflect a one-for-four reverse stock split of Widcom's common shares effective January 29, 1999. 6. Contingent Liabilities (a) Widecom has been served with an action claiming breach of contract regarding Widecom's rights under two specific joint venture and development agreements to use and distribute various iterations of software components allegedly the sole property of the claimant. The action claims damages for breach of contract along with copyright and trademark infringement as a result. The claim, as filed, seeks a total of $15.85 Million in damages and is in progress in the Superior Court of Justice in the Province of Ontario. Resolution options remain open and the action is presently scheduled for mediation in December 1999. (b) 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 previously noted two individuals, who are as co-defendants. We have filed and received default on our cross-claims against the two individual co-defendants. The total number of shares of common stock claimed under these suits is less than 15,000. Loss, if any, on the above claims will be recorded when settlement is probable and the amount of the settlement is estimable. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. RESULTS OF OPERATIONS Widecom's revenues are derived from product sales, which are recognized when products are shipped QUARTER ENDED SEPTEMBER 30, 1999 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1998 Product sales for the quarter ended September 30, 1999 were $ 593,692, a decrease of $ 42,263 or 6.6 % as compared to $635,955 for the quarter ended September 30, 1998. Revenue for the quarter ended September 30, 1998, was additionally supplemented by a non-recurring Research and Development grant of $ 301,285. Operating expenses for the quarter ended September 30, 1999 were $ 644,846, a decrease of $ 317,301, or 33.0 %, as compared to $962,147 for the quarter ended September, 1998. Selling, general and administrative expenses for the quarter ended September 30, 1999 decreased by $256,118 and decreased as a percentage of sales from 116.8% to 82.0%. The decrease in selling, general and administrative expenses was primarily due to a leveling off of expenditures and economies undertaken to effect savings as we continued expansion of our distribution channel in the United States. Widecom also continues to incur legal, administration and other related costs associated with Widecom's warrant call and the I.P.O. The slight decrease in product sales was a result of delays in deliveries of copiers and printers, as we implemented improvements to the paper and ribbon loading mechanisms. We were also unable to take advantage of orders in-hand for our 72" wide color-scanners, for which we started to make deliveries after the end of the quarter. Widecom's share of the loss incurred by the research and development consortium (3294340 Canada Inc.) that was formed on October 2, 1996, amounted to $ 60,879 for the second quarter of fiscal 2000. During the second quarter of fiscal 2000, Widecom earned $ 2,734 interest on short-term investments compared to $3,057 earned in the same period of 1998. LIQUIDITY AND CAPITAL RESOURCES Widecom'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. Widecom 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. Widecom also conducted an additional private placement approved by our board of directors wherein 325,000 common shares of Widecom were offered at $2.00 per share. The offering was fully subscribed with duly executed subscription documentation provided by accredited investors. As of the end of the first quarter of fiscal 2000, on July 9, 1999, Widecom received $605,000 USD net proceeds from this private offering. PART II.: OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None ITEM 2. CHANGES IN SECURITIES. Widecom also conducted an additional private placement approved by our board of directors wherein 325,000 common shares of Widecom were offered at $2.00 per share. The offering was fully subscribed with duly executed subscription documentation provided by accredited investors. 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 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. s/Suneet S. Tuli /s/Suneet S. Tuli Date: November 22, 1999 ---------------------------------------- Suneet S. Tuli, Executive Vice President s/Willem J. Botha /s/Willem J.Botha Date: November 22, 1999 ---------------------------------------- Willem J. Botha, Chief Financial Officer EX-27 2 EXHIBIT 27
5 6-MOS MAR-31-2000 APR-01-1999 SEP-30-1999 221,637 0 604,155 86,566 1,407,802 2,554,328 2,872,441 1,443,797 4,478,522 1,434,618 0 0 0 14,476,808 0 4,478,522 1,378,017 1,381,855 300,952 1,281,193 129,092 0 33,004 (329,382) 0 (329,382) 0 0 0 (329,382) (0.14) (0.14)
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