The Company believes that the following critical accounting policies affect its more significant judgements and estimates used in the preparation of its consolidated financial statements.
RESULTS OF OPERATIONS
Revenue for the quarter ended July 31, 2004, (“Q2 fiscal 2005”) was $13,299,000 compared to $14,240,000 for the quarter ended July 31, 2003 (“Q2 fiscal 2004”). The GAAP net income for Q2 fiscal 2005 was $6,053,000 or $0.54 per basic and fully-diluted share compared to net income of $1,502,000 or $0.13 per share for Q2 fiscal 2004. Cash, cash equivalents, and short-term investments stood at $56,829,000 or $5.18 per common share outstanding at the end of the quarter.
The overall gross margin for Q2 fiscal 2005 was 77.8%, as compared to 80.8% for Q2 fiscal 2004. Gross margin on maintenance and services was 62.9% in Q2 fiscal 2005, as compared to 65.6% in Q2 fiscal 2004. Total costs, including costs of revenue, were $13,880,000 for Q2 fiscal 2005, up from $12,778,000 in Q2 fiscal 2004 and down from $14,569,000 in the previous quarter. Total headcount was 278 at July 31, 2004, as compared to 275 at July 31, 2003, and down from 296 at the end of the previous quarter.
Revenue for the six months ended July 31, 2004, was $26,426,000 compared to $27,560,000 for the six months ended July 31, 2003. Reported in US currency, revenue for the first six months of fiscal 2005 was $19,678,000 as compared to $19,367,000 for the first six months of fiscal 2004, an increase of 1.6%. Net income for the first half of the year was $5,227,000 or $0.46 per share as compared to $2,117,000 or $0.19 per share for the same period in fiscal 2004.
REVENUE
Licence. Licence revenue in Q2 fiscal 2005 was $5,517,000 compared to $6,472,000 in Q2 fiscal 2004, a decrease of 14.8%. The decrease in licence revenue is attributable to several factors including the strengthening of the Canadian currency, price erosion in the iSeries high availability marketplace, and slower than expected adoption of the Company’s newer products such as iReflect and Live Audit.
Licence revenue for the six months ended July 31, 2004, was $10,425,000 compared to $11,950,000 for the six months ended July 31, 2003, a decrease of 12.8% for the same reasons cited for the decrease in Q2 fiscal 2005.
Maintenance. Maintenance revenue in Q2 fiscal 2005 was $6,744,000 compared to $6,261,000 in Q2 fiscal 2004, an increase of 7.7%. This increase was a result of maintenance revenue generated by additional licence sales since the end of Q2 fiscal 2004, the additional maintenance revenue generated by the PointBase acquisition in December 2003 and the renewal of maintenance and support contracts for licence sales completed in prior periods, offset by the effects of the stronger Canadian currency.
Maintenance revenue for the six months ended July 31, 2004, was $13,480,000 compared to $12,836,000 for the six months ended July 31, 2003, an increase of 9.7% for the same reasons cited for the increase in Q2 fiscal 2005.
Services. Services revenue in Q2 fiscal 2005 was $1,038,000 compared to $1,507,000 in Q2 fiscal 2004, a decrease of 31.1%. This decrease was primarily due to decreased revenue from consulting services for the Company’s Pervasive Gateway software.
Services revenue for the six months ended July 31, 2004, was $2,521,000 compared to $2,774,000 for the six months ended July 31, 2003, a decrease of 9.1% for the same reasons cited for the decrease in Q2 fiscal 2005.
COST OF REVENUE
Licence. Cost of licence revenue consists primarily of duplication, media, packaging, and shipping expenses. For Q2 fiscal 2005, costs of licence revenue were $65,000 (1.2% of licence revenue), relatively unchanged from $56,000 (0.9% of licence revenue) for Q2 fiscal 2004.
Cost of licence revenue for the six months ended July 31, 2004, were $128,000 (1.2% of licence revenue), relatively unchanged from $107,000 (0.9% of licence revenue) for the six months ended July 31, 2003.
Maintenance and Services.Costs of maintenance and services revenue consist primarily of the salary and related costs of providing those services. For Q2 fiscal 2005, costs of maintenance and services revenue were $2,884,000 (37.1% of maintenance and services revenue) compared to $2,676,000 (34.4% of maintenance and services revenue) for Q2 fiscal 2004. The main cause for the decrease in the gross margin on maintenance and services revenue is headcount increases in this area, particularly the addition of the PointBase support team in December 2003.
Cost of maintenance and services revenue for the six months ended July 31, 2004, was $6,202,000 (38.8% of maintenance and services revenue) compared to $5,388,000 (34.5% of maintenance and services revenue) for the six months ended July 31, 2003, with the decrease in gross margins being caused by the same factors cited for the decrease in Q2 fiscal 2005.
OPERATING EXPENSES
Selling and Marketing.Selling and marketing expenses include expenses for sales commissions, salaries, advertising, tradeshows, promotional materials, and other selling and marketing related expenses. For Q2 fiscal 2005, these expenses totaled $5,287,000 (39.8% of revenue), up significantly from $4,717,000 (33.1% of revenue) for Q2 fiscal 2004. The increase is due primarily to the effect of increased headcount in this area due to the expansion of the Company’s sales force, the increase caused by the addition of the PointBase sales and marketing team, and an increase in Web-based marketing activities. Management expects selling and marketing expenses to increase as the Company expands its sales and marketing activities.
Selling and marketing expenses for the six months ended July 31, 2004, were $10,826,000 (41.0% of revenue) compared to $9,423,000 (34.2% of revenue) for the six months ended July 31, 2003, an increase of 14.9% for the same reasons cited for the increase in Q2 fiscal 2005.
Research and Development.Research and development expenses include only salaries and other direct costs associated with the development of new products and are net of related investment tax credits. Research and development expenses were $2,587,000 (19.5% of revenue) for Q2 fiscal 2005 up from $2,408,000 (16.9% of revenue) for Q2 fiscal 2004. This increase was caused by increased headcount in research and development which is due mainly to the addition of the PointBase team in December 2003.
Research and development expenses for the six months ended July 31, 2004, were $5,297,000 (20.0% of revenue) compared to $4,896,000 (17.8% of revenue) for the six months ended July 31, 2003, an increase of 8.2% for the same reasons cited for the increase in Q2 fiscal 2005.
General and Administration.General and administration expenses consist primarily of administrative salaries, rent, recruiting costs, and professional fees. For Q2 fiscal 2005, general and administration expenses were $2,214,000 (16.6% of revenue) compared to $2,037,000 (14.3% of revenue) for Q2 fiscal 2004, an increase of 8.7% due mainly to the overhead associated with the PointBase facilities.
General and administration expenses for the six months ended July 31, 2004, were $4,192,000 (15.9% of revenue) compared to $3,843,000 (13.9% of revenue) for the six months ended July 31, 2003, an increase of 9.1% for the same reasons cited for the increase in Q2 fiscal 2005.
Stock-based Compensation.Effective February 1, 2004, the Company adopted the recommendations set forth in Section 3870 of the CICA Handbook concerning the adoption of the fair value based method of accounting for expensing stock option grants. The Company has adopted these changes on a retroactive basis with restatement of prior periods. This change resulted in a decrease to net income of $116,000 for the three months and $164,000 for the six months ended July 31, 2003, an increase to deficit and contributed surplus of $286,000 as at January 31, 2003, and an increase to deficit and contributed surplus of $798,000 as at January 31, 2004.
For Q2 fiscal 2005, the expense for stock-based compensation was $103,000 compared to $116,000 in Q2 fiscal 2004. This decrease is largely due to the effect of options which have expired since Q2 fiscal 2004 offset by the expense related to additional options issued over the same period.
For the six months ended July 31, 2004, the expense for stock-based compensation was $215,000 compared to $164,000 for the six months ended July 31, 2003, an increase of 31.1% for the same reasons cited for the increase in Q2 fiscal 2005.
Amortization of Intangibles.For Q2 fiscal 2005, amortization of intangibles was $739,000 compared to $768,000 for Q2 fiscal 2004. The decrease of $29,000 is due to additional amortization of the PointBase technology acquired in December 2003 offset by the impact of other technologies becoming fully amortized since Q2 fiscal 2004.
For the six months ended July 31, 2004, amortization of intangibles was $1,532,000 compared to $1,536,000 for the six months ended July 31, 2003, a decrease of $4,000 the same reasons cited for the decrease in Q2 fiscal 2005.
INVESTMENT INCOME, NET
Investment income, net includes interest on short-term investments and other investment income net of interest expense on long-term liabilities and lease obligations. In Q2 fiscal 2005, net investment income was $273,000 compared to $346,000 in Q2 fiscal 2004. This decrease is primarily due to the decrease in interest rates, offset by an increase in invested cash balances resulting from positive cash flow from operations since the end of Q2 fiscal 2004 and the funds received from the sale of the Company’s investment in Idion in May 2004.
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DataMirror 2005 Quarterly Report | |
6 | | |
Investment income, net for the six months ended July 31, 2004, was $459,000 compared to $603,000 for the six months ended July 31, 2003, with the decrease being caused by the same reasons cited for the decrease in Q2 fiscal 2004.
The Company invests its cash in a variety of short-term Canadian dollar denominated financial instruments, including government bonds, commercial paper, and banker’s acceptances. The portfolio is diversified and consists primarily of investment grade securities to minimize credit risk. Cash balances in foreign operations are generally invested in term deposits in the local operating banks. The investment in short-term financial instruments carries a degree of interest rate risk, and consequently our future investment income may fall short of expectations due to changes in short-term interest rates.
GAIN ON SALE OF INVESTMENT IN IDION
On May 14, 2004, the Company was successful in selling its investment in Idion for total net proceeds of approximately $19,891,000, resulting in a gain of approximately $7,611,000.
INCOME TAX EXPENSE (RECOVERY)
During Q2 fiscal 2005, the Company recorded an income tax provision of $1,251,000 as compared to $383,000 in Q2 fiscal 2004.
For the first six months of fiscal 2004, the Company recorded an income tax provision of $877,000 as compared to $968,000 for the first six months of fiscal 2004.
The combined basic Canadian federal and provincial tax rate used in determining the income tax provision for the three and six months ended July 31, 2004, was 36.6%, consistent with the rate in effect for the same periods the previous fiscal year. The income tax provision (recovery) is different than that obtained by applying this rate to the income (loss) before income taxes due to a combination of factors including: a portion of the amortization of intangibles being non-deductible for tax purposes, other non-deductible expenses, the gain on the sale of the Company’s investment being taxable at half of the prescribed rate, the inability to benefit from certain foreign tax losses incurred during the year, the effect of foreign tax rates, the effect of the rate changes on future taxes, and the manufacturing and processing tax deduction.
ACQUISITIONS AND INVESTMENTS
On December 18, 2003, the Company completed an agreement and plan of merger and acquired one hundred percent control of PointBase in a cash transaction valued at approximately $3,300,000 at closing, with certain additional amounts which may become payable contingent on future revenue or proceeds that may be received in connection with the acquired business. DataMirror is accounting for the acquisition under the purchase method. Under terms of the agreement and plan of merger, future payments of a portion of the funds received from an identified current customer of PointBase will become due to the former shareholders of PointBase contingent upon the Company either securing additional revenue from or selling the business or a portion thereof to this customer. No contingent consideration is due for the three and six months ended July 31, 2004.
On January 7, 2003, the Company acquired the technology and certain related assets of SmartSales Inc., a developer of CRM solutions, in a cash transaction. The Company acquired current assets valued at $15,000, capital assets valued at $22,000, and technology valued at $362,000 for cash consideration of $399,000. The technology acquired was amortized over a term of one year.
On March 18, 2002, the Company announced its intention to make a take-over bid for all of the shares of Idion, a South African company listed on the JSE Securities Exchange (“JSE”) under the symbol IDI, in a cash bid valued at $9,800,000. On April 18, 2002, the bid was increased to $18,900,000, and subsequently, on May 8, 2002, the bid was further increased to $30,400,000. On July 4, 2002, the Company closed its bid to acquire Idion, having not been successful in completing the take-over.
On May 14, 2004, the Company was successful in selling its investment in Idion for total net proceeds of approximately $19,891,000, resulting in a gain of approximately $7,611,000.
The Company expects to continue to explore and pursue acquisitions as a strategy to build its distribution channels, enhance its product offerings, increase its market share in its existing markets, and achieve revenue growth. The consideration and completion of possible acquisitions may divert significant management time and other resources, including financial resources, of the Company. It is not certain that future acquisitions will achieve their business objectives.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its cash requirements from the sale of equity securities, funds provided by shareholders, bank lines of credit, long-term debt, and capital lease financing. In December 1996, the Company completed an initial public offering of 2,000,000 common shares for net proceeds of $9,377,000, and in September 1997, raised net proceeds of $15,721,000 through the issue of 1,600,000 special warrants (subsequently converted into 1,600,000 common shares). In April 2000, the Company raised net proceeds of $34,151,000 through the issuance of 1,305,000 common shares.
As at July 31, 2004, the Company had cash, cash equivalents, and short-term investments of $56,829,000, compared to $41,345,000 at the end of Q2 fiscal 2004 and $42,006,000 at January 31, 2004. The increase in cash, cash equivalents, and short-term investments during the quarter was primarily due to the funds received from the sale of the Company’s investment in Idion, offset by funds used in operations and the Company’s normal course issuer bid (“NCIB”). For Q2 fiscal 2005, cash flow used in operations was ($2,056,000,) a decrease from $499,000 in Q2 fiscal 2004 due to the reduced level of profitability in the quarter and an increase in days sales outstanding in accounts receivable to 55 days at quarter’s end from 46 days at April 30, 2004. During Q2 fiscal 2005, capital expenditures of $96,000 ($388,000 in Q2 fiscal 2004) were financed internally and none (none in Q2 fiscal 2004) were financed under capital lease facilities. During Q2 fiscal 2005, the Company used $4,761,000 ($1,558,000 in Q2 fiscal 2004) in cash to repurchase 434,900 (136,000 in Q2 fiscal 2004) of its common shares under a normal course issuer bid and raised an additional $26,000 ($221,000 in Q2 fiscal 2004) through the issuance of common shares pursuant to the Company’s stock option plans.
The Company has available short-term bank credit facilities amounting to approximately $3,363,000. At July 31, 2004, there was no outstanding indebtedness under these credit facilities. Management believes that its current cash, cash equivalents, and short-term investments together with anticipated future positive cash flow from operations will be adequate to fund the Company’s short-term financial requirements with the exception of acquisition related cash requirements. In the short-term, the Company does not plan on making any acquisitions that would result in short-term financial requirements exceeding the sources of cash described above. In the long-term, the Company may finance its long-term requirements from the sale of equity securities, by borrowing under bank lines of credit, by issuing long-term debt, or by entering into capital lease financing arrangements.
NEW ACCOUNTING RECOMMENDATIONS
In November 2003, the CICA made changes to Section 3870, “Stock-based Compensation and Other Stock-based Payments”, requiring equity instruments awarded to employees be measured and expensed using the fair value method. The main impact for the Company will be to record compensation expense relating to the award of stock options to employees that the Company had previously chosen to disclose. The Company has adopted these changes effective February 1, 2004, on a retroactive basis with restatement of prior periods. This change resulted in a decrease to net income of $48,000 for the three months ended July 31, 2003, an increase to deficit and contributed surplus of $286,000 as at January 31, 2003, and an increase to deficit and contributed surplus of $798,000 as at January 31, 2004.
In June 2003, the CICA issued Accounting Guideline AcG-15, “Consolidation of Variable Interest Entities”, to provide guidance for applying the principles in Handbook Section 1590, “Subsidiaries”, to certain entities. Although the CICA is contemplating amendments to the guideline, it is expected to be effective for the Company’s fiscal year beginning February 1, 2005. The Company will review the impact of the amended guideline, if any, on the Company’s consolidated financial statements when the CICA issues the amended Guideline.
In June 2002, Financial Accounting Standards Board (“FASB”) introduced Statement of Financial Accounting Standard (“SFAS”) 146, which addresses financial accounting and reporting for costs associated with exit or disposal activities. Prior to SFAS 146, a liability for an exit cost was recognized at the date of an entity’s commitment to an exit plan. Under SFAS 146, a liability for a cost associated with an exit or disposal activity is recognized when the liability is incurred. SFAS 146 applies to exit or disposal activities initiated after December 31, 2002. Adopting the recommendations of SFAS 146 did not have a material impact on the Company’s financial condition as of July 31, 2004, or its results of operations for the three and six months then ended.
In November 2001, the Accounting Standards Board (“AcSB”) approved AcG-13, an accounting guideline establishing conditions which must be satisfied in order to apply hedge accounting. These guidelines are effective for the fiscal year starting February 1, 2004. The adoption of AcG-13 had no impact on the Company’s consolidated financial statements for the three and six months ended July 31, 2004.
RISKS AND UNCERTAINTIES
The primary risks and uncertainties that affect or may affect the Company and its business, financial condition, and results of operations are substantially unchanged from those discussed in the Company’s latest Annual Information Form and its Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended January 31, 2004, contained in the Company’s 2004 Annual Report to Shareholders, and all of such risks and uncertainties are incorporated herein by reference.
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DataMirror 2005 Quarterly Report | |
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DataMirror Corporation
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Three and six months ended July 31, 2004 and 2003 (unaudited)
NOTICE TO READER
The attached consolidated financial statements have been prepared by management of DataMirror Corporation. The consolidated financial statements for the three and six month period ended July 31, 2004 and 2003 have not been reviewed by the auditors of DataMirror Corporation.
DataMirror Corporation
CONSOLIDATED BALANCE
SHEETS (Thousands of CDN$ —
unaudited)
| | July 31,
| January 31,
|
| | 2004
| 2004
|
| | | (restated -
Note 2) |
| ASSETS | | | | | | | | |
| CURRENT ASSETS | | |
| Cash and cash equivalents | | | $ | 56,829 | | $ | 9,286 | |
| Short-term investments | | | | 0 | | | 32,720 | |
| Accounts receivable | | | | 8,030 | | | 11,797 | |
| Prepaid expenses | | | | 1,820 | | | 1,803 | |
| Future income taxes | | | | 2,353 | | | 2,540 | |
|
|
|
| | |
| | | | | 69,032 | | | 58,146 | |
| CAPITAL ASSETS | | | | 3,635 | | | 3,845 | |
| INVESTMENT TAX CREDITS RECOVERABLE | | | | 188 | | | 1,019 | |
| INVESTMENT | | | | 0 | | | 12,185 | |
| INTANGIBLES | | | | 4,321 | | | 5,853 | |
| GOODWILL | | | | 5,175 | | | 5,175 | |
|
|
|
| | |
| | | | $ | 82,351 | | $ | 86,223 | |
|
|
|
| | |
| LIABILITIES | | |
| CURRENT LIABILITIES | | |
| Accounts payable and accrued liabilities | | |
| | | | $ | 3,112 | | $ | 5,544 | |
| Deferred revenue | | | | 18,734 | | | 18,839 | |
| Income taxes payable | | | | 295 | | | 1,785 | |
| Current portion of capital lease obligations | | | | 0 | | | 32 | |
|
|
|
| | |
| | | | | 22,141 | | | 26,200 | |
| FUTURE INCOME TAXES | | | | 430 | | | 1,076 | |
|
|
|
| | |
| | | | | 22,571 | | | 27,276 | |
|
|
|
| | |
| SHAREHOLDERS' EQUITY | | |
| Share capital | | |
| Common shares (July 31, 2004 - 10,974,290 | | |
| January 31, 2004 - 11,364,952) | | |
| | | | | 62,686 | | | 64,625 | |
| Deficit | | | | (3,421 | ) | | (5,978 | ) |
| Contributed surplus | | | | 1,013 | | | 798 | |
| Cumulative translation adjustment | | | | (498 | ) | | (498 | ) |
|
|
|
| | |
| | | | | 59,780 | | | 58,947 | |
|
|
|
| | |
| | | | $ | 82,351 | | $ | 86,223 | |
|
|
|
| | |
See accompanying notes
On behalf of the board:
 | |  | | |
| Nigel Stokes | | Donald Lenz | | |
| Director | | Director | | |
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DataMirror 2005 Quarterly Report | |
10 | | |
DataMirror Corporation
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of CDN$, except per share data — unaudited)
| | Three Months Ended
| Six Months Ended
|
| | 2004
| 2003
| 2004
| 2003
|
| REVENUE | | | | | | | | | | | | | | |
| Licence | | | $ | 5,517 | | $ | 6,472 | | $ | 10,425 | | $ | 11,950 | |
| Maintenance | | | | 6,744 | | | 6,261 | | | 13,480 | | | 12,836 | |
| Services | | | | 1,038 | | | 1,507 | | | 2,521 | | | 2,774 | |
|
|
|
|
|
| | | | |
| | | | | 13,299 | | | 14,240 | | | 26,426 | | | 27,560 | |
|
|
|
|
|
| | | | |
| COST OF REVENUE | | |
| Licence | | | | 65 | | | 56 | | | 128 | | | 107 | |
| Maintenance and services | | | | 2,884 | | | 2,676 | | | 6,202 | | | 5,388 | |
|
|
|
|
|
| | | | |
| | | | | 2,949 | | | 2,732 | | | 6,330 | | | 5,495 | |
|
|
|
|
|
| | | | |
| GROSS MARGIN | | | | 10,350 | | | 11,508 | | | 20,096 | | | 22,065 | |
|
|
|
|
|
| | | | |
| OPERATING EXPENSES | | |
| Selling and marketing | | | | 5,287 | | | 4,717 | | | 10,826 | | | 9,423 | |
| Research and development | | | | 2,587 | | | 2,408 | | | 5,297 | | | 4,896 | |
| General and administration | | | | 2,214 | | | 2,037 | | | 4,192 | | | 3,843 | |
| Stock-based compensation | | | | 103 | | | 116 | | | 215 | | | 164 | |
| Amortization of intangibles | | | | 739 | | | 768 | | | 1,532 | | | 1,536 | |
|
|
|
|
|
| | | | |
| | | | | 10,930 | | | 10,046 | | | 22,062 | | | 19,862 | |
|
|
|
|
|
| | | | |
| OPERATING INCOME (LOSS) | | | | (580 | ) | | 1,462 | | | (1,966 | ) | | 2,203 | |
| INVESTMENT INCOME, NET | | | | 273 | | | 346 | | | 459 | | | 603 | |
| GAIN ON SALE OF INVESTMENT IN IDION | | | | 7,611 | | | 0 | | | 7,611 | | | 0 | |
| OTHER INCOME | | | | 0 | | | 279 | | | 0 | | | 279 | |
|
|
|
|
|
| | | | |
| INCOME BEFORE INCOME TAXES | | | | 7,304 | | | 2,087 | | | 6,104 | | | 3,085 | |
| INCOME TAX EXPENSE | | | | 1,251 | | | 585 | | | 877 | | | 968 | |
|
|
|
|
|
| | | | |
| NET INCOME | | | $ | 6,053 | | $ | 1,502 | | $ | 5,227 | | $ | 2,117 | |
|
|
|
|
|
| | | | |
| EARNINGS PER SHARE | | |
| Basic | | | $ | 0.54 | | $ | 0.13 | | $ | 0.46 | | $ | 0.19 | |
| Diluted | | | $ | 0.54 | | $ | 0.13 | | $ | 0.45 | | $ | 0.18 | |
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING (000'S) | | |
| Basic | | | | 11,196 | | | 11,394 | | | 11,266 | | | 11,418 | |
| Diluted | | | | 11,285 | | | 11,543 | | | 11,492 | | | 11,601 | |
See accompanying notes
DataMirror Corporation
CONSOLIDATED STATEMENTS OF CASH
FLOWS (Thousands of CDN$ - unaudited)
| | Three Months Ended
| Six Months Ended
|
| | 2004
| 2003
| 2004
| 2003
|
| CASH PROVIDED BY (USED IN) | | | | | | | | | | | | | | |
| OPERATING ACTIVITIES | | |
| Net income | | | $ | 6,053 | | $ | 1,502 | | $ | 5,227 | | $ | 2,281 | |
| Add (deduct) items not affecting cash: | | |
| Amortization of capital assets | | | | 309 | | | 346 | | | 598 | | | 680 | |
| Amortization of intangibles | | | | 739 | | | 768 | | | 1,532 | | | 1,536 | |
| Stock-based compensation | | | | 103 | | | 116 | | | 215 | | | 164 | |
| Gain on investment in Idion | | | | (7,611 | ) | | 0 | | | (7,611 | ) | | 0 | |
| Other income | | | | 0 | | | (279 | ) | | 0 | | | 0 | |
| Future income taxes | | | | (290 | ) | | (150 | ) | | (468 | ) | | (352 | ) |
| Investment tax credit | | | | 892 | | | 476 | | | 831 | | | 441 | |
| Non-cash operating expense | | | | 0 | | | 13 | | | 0 | | | 32 | |
|
|
|
|
|
| | | | |
| | | | | 195 | | | 2,792 | | | 324 | | | 4,339 | |
| Changes in non-cash working capital balances | | | | (2,251 | ) | | (2,293 | ) | | (386 | ) | | 404 | |
|
|
|
|
|
| | | | |
| | | | | (2,056 | ) | | 499 | | | (62 | ) | | 4,743 | |
|
|
|
|
|
| | | | |
| INVESTING ACTIVITIES | | |
| Capital asset additions | | | | (96 | ) | | (388 | ) | | (388 | ) | | (522 | ) |
| Sale of short-term investments | | | | 0 | | | 0 | | | 32,720 | | | 25,802 | |
| Sale of investment in Idion | | | | 19,891 | | | 0 | | | 19,891 | | | 0 | |
| Investment in Idion | | | | 0 | | | 44 | | | (96 | ) | | (49 | ) |
| Acquisition of technology | | | | 0 | | | 0 | | | 0 | | | (30 | ) |
| Other income | | | | 0 | | | 279 | | | 0 | | | 279 | |
|
|
|
|
|
| | | | |
| | | | | 19,795 | | | (65 | ) | | 52,127 | | | 25,480 | |
|
|
|
|
|
| | | | |
| FINANCING ACTIVITIES | | |
| Capital lease payments | | | | (13 | ) | | (24 | ) | | (32 | ) | | (64 | ) |
| Issuance of share capital | | | | 26 | | | 221 | | | 678 | | | 380 | |
| Repurchase of share capital | | | | (4,761 | ) | | (1,558 | ) | | (5,168 | ) | | (2,219 | ) |
|
|
|
|
|
| | | | |
| | | | | (4,748 | ) | | (1,361 | ) | | (4,522 | ) | | (1,903 | ) |
|
|
|
|
|
| | | | |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | | | 12,991 | | | (927 | ) | | 47,543 | | | 28,320 | |
| CASH AND CASH EQUIVALENTS | | |
| Beginning of period | | | | 43,838 | | | 42,272 | | | 9,286 | | | 13,025 | |
|
|
|
|
|
| | | | |
| End of period | | | $ | 56,829 | | $ | 41,345 | | $ | 56,829 | | $ | 41,345 | |
|
|
|
|
|
See accompanying notes | | |
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DataMirror 2005 Quarterly Report | |
12 | | |
DataMirror Corporation
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS Three and six months ended July
31, 2004
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been prepared by the Company in accordance with Canadian generally accepted accounting principles, consistent with those used and described in the Company’s audited consolidated financial statements and notes for the year ended January 31, 2004. These unaudited condensed notes to the interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report for the year ended January 31, 2004.
2. NEW ACCOUNTING PRONOUNCEMENTS
In November 2003, the Canadian Institute of Chartered Accountants (“CICA”) made changes to Section 3870, “Stockbased Compensation and Other Stock-based Payments”, of the CICA handbook requiring equity instruments awarded to employees to be measured and expensed using the fair value method. The main impact for the Company will be to record compensation expense relating to the award of stock options to employees that the Company had previously chosen to disclose.
The Company has adopted these changes effective February 1, 2004, on a retroactive basis with restatement of prior periods. This change resulted in a decrease to net income of $116,000 for the three months and $164,000 for the six months ended July 31, 2003, an increase to deficit and contributed surplus of $286,000 as at January 31, 2003, and an increase to deficit and contributed surplus of $798,000 as at January 31, 2004.
3. INVESTMENT
Investments are comprised of the Company’s investment in Idion Technology Holdings Limited (“Idion”), a South African company listed on the Johannesburg Stock Exchange.
On March 18, 2002, the Company announced its intention to make a take-over bid for all of the shares of Idion in a cash bid valued at $9,800,000. On April 18, 2002, the bid was increased to $18,900,000, and subsequently, on May 8, 2002, the bid was further increased to $30,400,000. On July 4, 2002, the Company closed its bid to acquire Idion, having not been successful in completing the take-over.
The investment in Idion had been accounted for at cost, as the Company did not have significant influence over the affairs of Idion and was not able to obtain adequate financial information from Idion to enable it to account for its investment using the equity method.
On May 14, 2004, the Company was successful in selling its investment in Idion for total net proceeds of approximately $19,891,000, resulting in a gain of $7,611,000.
4. SEGMENTED INFORMATION
The Company operates in only one industry, that being the business of developing and marketing computer software products. The Company has two reportable segments, North America, which includes the Company’s Asia Pacific operations, and Europe, based on the geographic location of its operations. The accounting policies followed by these segments are the same as those described in the summary of significant accounting policies in the Company’s audited consolidated financial statements for the year ended January 31, 2004. The Company accounts for inter-segment sales at fair value.
The Company’s reportable segments are strategic business units. They are managed separately because each reportable segment operates in different economic marketplaces and therefore requires different investing and marketing strategies. The Company evaluates segment performance based on profit or loss from operations before investment income and income taxes.
DataMirror Corporation
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS Three and six months ended July
31, 2004
(unaudited)
The following table presents certain information with respect to the reportable segments described above:
Three months ended July 31,
| 2004
| 2003
|
| REVENUE | | | | | | | | |
| North American customers | | |
| | | | $ | 9,002 | | $ | 10,152 | |
| Inter-segment | | | | 990 | | | 957 | |
|
|
|
| | |
| | | | | 9,992 | | | 11,109 | |
| European customers | | | | 4,297 | | | 4,088 | |
| Elimination of inter-segment revenue | | | | (990 | ) | | (957) | |
|
|
|
| | |
| | | | $ | 13,299 | | $ | 14,240 | |
|
|
|
| | |
| OPERATING INCOME (LOSS) | | |
| North America | | | $ | (660) | | $ | 1,361 | |
| Europe | | | | 52 | | | 83 | |
|
|
|
| | | | $ | (580) | | $ | 1,462 | |
| | | | | | |
|
|
|
| | |
| AMORTIZATION | | |
| North America | | | $ | 996 | | $ | 1,031 | |
| Europe | | | | 52 | | | 83 | |
|
|
|
| | |
| | | | $ | 1,048 | | $ | 1,114 | |
|
|
|
| | |
| CAPITAL ASSET ADDITIONS | | |
| North America | | | $ | 82 | | $ | 367 | |
| Europe | | | | 14 | | | 21 | |
|
|
|
| | | |
| | | | $ | 96 | | $ | 388 | |
|
|
|
| | |
Six months ended July 31,
| 2004
| 2003
|
| REVENUE | | |
| North American customers | | | $ | 17,349 | | $ | 18,751 | |
| Inter-segment | | | | 2,101 | | | 2,177 | |
|
|
|
| | |
| | | | | 19,450 | | | 20,928 | |
| European customers | | | | 9,077 | | | 8,809 | |
| Elimination of inter-segment revenue | | | | (2,101 | ) | | (2,177 | ) |
|
|
|
| | |
| | | | $ | 26,426 | | $ | 27,560 | |
|
|
|
| | |
| OPERATING INCOME (LOSS) | | |
| North America | | | $ | (2,098 | ) | $ | 1,338 | |
| Europe | | | | 132 | | | 865 | |
|
|
|
| | |
| | | | $ | (1,966 | ) | $ | 2,203 | |
|
|
|
| | |
| AMORTIZATION | | |
| North America | | | $ | 2,020 | | $ | 2,048 | |
| Europe | | | | 110 | | | 168 | |
|
|
|
| | |
| | | | $ | 2,130 | | $ | 2,216 | |
|
|
|
| | |
| CAPITAL ASSET ADDITIONS | | |
| North America | | | $ | 352 | | $ | 484 | |
| Europe | | | | 36 | | | 38 | |
|
|
|
| | |
| | | | $ | 388 | | $ | 522 | |
|
| |
| | | | |
|---|
DataMirror 2005 Quarterly Report | |
14 | | |
DataMirror Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and six months ended July 31,
2004
(unaudited)
As at July 31
| 2004
| 2003
|
| IDENTIFIABLE ASSETS | | |
| North America | | | $ | 64,248 | | $ | 61,059 | |
| Europe | | | | 8,607 | | | 7,855 | |
|
|
|
| | |
| | | | | 72,855 | | | 68,914 | |
| Intangibles | | | | 4,321 | | | 5,850 | |
| Goodwill | | | | 5,175 | | | 3,118 | |
|
|
|
| | |
| | | | $ | 82,351 | | $ | 77,882 | |
|
|
|
| | |
Summaries of revenue, segmented according to the customers’ country of residence, and of capital and intangible assets, segmented according to the country in which the assets are located, are as follows:
Three months ended July 31,
| 2004
| 2003
|
| REVENUE | | | | | | | | |
| Canada | | | $ | 1,163 | | $ | 1,400 | |
| United States | | | | 7,031 | | | 7,984 | |
| United Kingdom | | | | 2,387 | | | 1,940 | |
| Germany | | | | 737 | | | 1,022 | |
| Other | | | | 1,981 | | | 1,894 | |
|
|
|
| | |
| | | | $ | 13,299 | | $ | 14,240 | |
|
|
|
| | |
As at July 31,
| 2004
| 2003
|
| CAPITAL ASSETS, INTANGIBLE ASSETS, AND GOODWILL | | | | | | | | |
| Canada | | | $ | 9,908 | | $ | 9,384 | |
| Germany | | | | 2,716 | | | 2,691 | |
| Other | | | | 507 | | | 666 | |
|
|
|
| | |
| | | | $ | 13,131 | | $ | 12,741 | |
|
|
|
| | |
Six months ended July 31,
| 2004
| 2003
|
| REVENUE | | | | | | | | |
| Canada | | | $ | 1,996 | | $ | 2,886 | |
| United States | | | | 13,888 | | | 14,133 | |
| United Kingdom | | | | 4,468 | | | 4,388 | |
| Germany | | | | 1,946 | | | 2,287 | |
| Other | | | | 4,128 | | | 3,866 | |
|
|
|
| | |
| | | | $ | 26,426 | | $ | 27,560 | |
|
|
|
About DataMirror
DataMirror (Nasdaq: DMCX; TSX: DMC) delivers live, secure data integration and protection solutions that give companies the power to manage, monitor and protect their corporate data in real-time. DataMirror’s comprehensive family of solutions enables customers to easily and cost-effectively capture, transform and flow live data throughout the enterprise. DataMirror software unlocksthe experience of now™by providing the live, secure data access, integration and availability companies require today across all computers in their business. Over 1,900 companies have gone live with DataMirror software. DataMirror is headquartered in Markham, Canada, and has offices around the globe.
North America 1 800 362 5955
UK + 44 (0) 20 7633 5200
France + 33 (0) 1 72 75 73 40
Germany + 49 6151 8275 0
Hong Kong + 852 2251 8226
www.datamirror.com
