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UNITED STATES
Form 6-K
Report of Foreign Issuer
For the month of June 2003
Silent Witness Enterprises Ltd.
6554 176 Street
[indicate by check mark whether the registrant files or will file annual reports
Form 20-F X Form 40-F
[indicate by check mark whether the registrant by furnishing information contained
Yes No X
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned, thereunto duly authorized.
| SILENT WITNESS ENTERPRISES LTD. | ||||
| Date: June 6, 2003 | By: /s/ R. K. (Rob) Bakshi | |||
| Name: R. K. (Rob) Bakshi | ||||
| Title: Chairman, President & CEO | | |||
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Silent Witness Third Quarter Report 2003
Quarter Ended April 30, 2003
(Expressed in Canadian Dollars)
To Our Shareholders:
Revenues for the third quarter ended April 30, 2003 were $13,615,000, a 5 percent decrease from the prior year’s comparable quarter of $14,360,000. Earnings for the quarter totaled $456,000 compared to $515,000 during the prior year’s third quarter and represented basic earnings per share of $0.06 ($0.06 fully diluted) compared with $0.07 ($0.07 fully diluted) for the prior year’s third quarter. Cash flow from operations, including changes in working capital, totaled $2,077,000 compared with cash used in operations of $471,000 in the prior year’s third quarter. The stronger Canadian dollar reduced reported sales by approximately $876,000, or 6 percent, compared to the prior year’s third quarter.
For the nine months ended April 30, 2003, revenues increased by 2 percent to $43,682,000 from $42,791,000 in the prior year’s comparable period. Net income was $2,286,000, compared to $419,000 during the first nine months of the prior fiscal year. Earnings per share were $0.30 ($0.30 fully diluted) for the nine months ended April 30, 2003, compared with $0.06 ($0.06 fully diluted) in the prior year. Cash flow from operations, including changes in working capital, increased to $10,536,000, compared to cash used in operations of $4,865,000 during the prior year’s comparable period. The results for the nine months ended April 30, 2002, included a pre-tax charge of $2,502,000 for one-time business integration expenses associated with the acquisition and reorganization of the CCTV recorder business acquired from Gyyr, Inc.
Analysis
Sales of CCTV products totaled $10,927,000, a decrease of 12 percent from the prior year’s third quarter. Slower general economic conditions in the United States and secondarily in Europe and the stronger Canadian dollar contributed to the reduction in sales.
Sales in the Mobile Division were $2,136,000 during the third quarter, compared with $1,488,000 in the prior year’s third quarter. Revenue increased due to the sale of 1250 FareView systems to the San Francisco Taxi Association and better than expected sales to school bus customers.
Original Equipment Manufacturing (OEM) sales totaled $552,000, a 32 percent increase from the prior year’s third quarter. The growth in revenue was due to larger shipment volumes to The Stanley Works.
Revenue and earnings were affected by the strengthening Canadian dollar. During the fiscal third quarter the Canadian dollar averaged 1.48 per U.S. dollar compared to an average of 1.59 in the prior year’s fiscal third quarter. The change in exchange rate from the prior year’s fiscal third quarter reduced the current year’s fiscal third quarter revenue by approximately $876,000 and excluding the effect of balance sheet revaluation, reduced earnings and earnings per share by $256,000 and $0.03 per share respectively. The company reported a foreign currency loss of $293,000 (net of hedging gains of $339,000) compared to a foreign currency gain of $72,000 in the prior year’s third quarter due mainly to the revaluation of U.S. dollar accounts receivable.
At April 30, 2003, to partially protect against the further strengthening of the Canadian dollar, the Company had entered into agreements to sell U.S. $5 million over the period of May 2003 to May 2004 at prices ranging from CDN $1.3662 to CDN $1.4959 for each U.S. dollar. To protect against valuation loss of its accounts receivable denominated in U.S. dollars, the Company has the right to sell U.S. $ 4.2 million at a rate of CDN dollar 1.4361 for 1 U.S. dollar at May 31, 2003. The Company expects to add additional forward sales contracts to exchange U.S. dollars into Canadian dollars upon temporary weakness in the Canadian dollar, and to continue to protect against losses in accounts receivable by entering into separate 30 day hedging contracts.
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Gross profit in the third quarter was 44 percent of sales, consistent with the prior year. The gross profit margin is lower than the nine month average of 45 percent due to the stronger Canadian dollar and sales in the third quarter contained a higher percentage of OEM and mobile products which have lower average gross margins.
For the third quarter ended April 30, 2003, expenses, before foreign currency gains and losses, totaled $4,979,000 or 37 percent of revenue compared to $5,539,000 or 39 percent of revenue in the prior year’s third quarter. The Company expects to continue its focus on cost containment and working capital management until economic conditions in its major markets improve.
On April 30, 2003, working capital totaled $25,404,000 compared to $22,437,000 at the end of fiscal 2002 and the working capital ratio increased to 5.98 from 3.83. Cash totaled $8,260,000 or 27 percent of current assets while inventory, prepaid expenses and accounts receivable were reduced compared to July 31, 2002. At the end of the third quarter inventory turns improved to 2.9 from 2.6 at July 31, 2002 and days sales in accounts receivable improved to 64 days from 80 days at July 31, 2002.
Business Update
Effective May 21, 2003, the Company sold its 16.5 percent interest in SmartSight Networks Inc. for cash to a subsidiary of Verint Inc. The transaction resulted in a pre-tax capital gain of approximately $784,000 to Silent Witness. In conjunction with the sale, Silent Witness entered into an OEM agreement allowing for the purchase of certain products from SmartSight.
The Company requires a more efficient operating facility to house its production, sales, research and development and administrative functions. During May 2003, the Company completed the purchase of land totaling $3,072,000 utilizing cash on hand. The company is currently considering proposals from real estate developers and intends to sell the land and complete an operating lease agreement for use of the proposed facility.
I would like to thank all of our customers, employees, directors, business partners, and shareholders for helping us achieve our goals.
Sincerely,
| “R.K. (Rob) Bakshi” Chairman, President & CEO June 6, 2003 |
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Silent Witness Enterprises Ltd.
Consolidated Statements of Operations
| CANADIAN DOLLARS, UNAUDITED, PREPARED BY MANAGEMENT | THREE MONTHS ENDED APRIL 30 | NINE MONTHS ENDED APRIL 30 | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
| Revenue | $ | 13,615,312 | $ | 14,360,314 | $ | 43,682,099 | $ | 42,791,409 | ||||||||||
| Cost of sales | 7,674,588 | 8,004,595 | 24,027,776 | 23,580,610 | ||||||||||||||
| Gross margin | 5,940,724 | 6,355,719 | 19,654,323 | 19,210,799 | ||||||||||||||
| Operating expenses | ||||||||||||||||||
| Sales and marketing | 1,917,701 | 2,149,507 | 5,784,436 | 6,272,473 | ||||||||||||||
| General & administration | 843,349 | 992,252 | 3,322,289 | 3,150,911 | ||||||||||||||
| Research and development (net of ITC) | 1,103,767 | 1,349,855 | 3,134,041 | 3,714,847 | ||||||||||||||
| Amortization | 842,582 | 811,156 | 2,395,409 | 2,282,713 | ||||||||||||||
| Service | 271,841 | 236,350 | 628,120 | 777,226 | ||||||||||||||
| Integration costs of acquired business (note 4) | — | — | — | 2,502,134 | ||||||||||||||
| Foreign currency loss (gain) | 293,246 | (71,953 | ) | 825,444 | (298,016 | ) | ||||||||||||
| 5,272,486 | 5,467,167 | 16,089,739 | 18,402,288 | |||||||||||||||
| Earnings before interest and income taxes | 668,238 | 888,552 | 3,564,584 | 808,511 | ||||||||||||||
| Interest income (expense) | 36,533 | (45,580 | ) | 36,562 | (122,845 | ) | ||||||||||||
| Earnings before income taxes | 704,771 | 842,972 | 3,601,146 | 685,666 | ||||||||||||||
| Income taxes expense | 248,275 | 328,216 | 1,314,988 | 266,867 | ||||||||||||||
| Net earnings for the period | $ | 456,496 | $ | 514,756 | $ | 2,286,158 | $ | 418,799 | ||||||||||
| Retained earnings, beginning of period | $ | 18,472,711 | $ | 15,596,357 | $ | 16,643,049 | $ | 15,692,314 | ||||||||||
| Net earnings for the period | 456,496 | 514,756 | 2,286,158 | 418,799 | ||||||||||||||
| Retained earnings, end of period | $ | 18,929,207 | $ | 16,111,113 | $ | 18,929,207 | $ | 16,111,113 | ||||||||||
| Earnings per share | ||||||||||||||||||
| Basic | $ | 0.06 | $ | 0.07 | $ | 0.30 | $ | 0.06 | ||||||||||
| Diluted | $ | 0.06 | $ | 0.07 | $ | 0.30 | $ | 0.06 | ||||||||||
| Weighted average number of shares | ||||||||||||||||||
| Basic | 7,502,962 | 7,536,960 | 7,527,723 | 7,040,520 | ||||||||||||||
| Diluted | 7,709,614 | 7,903,968 | 7,744,667 | 7,514,644 | ||||||||||||||
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Silent Witness Enterprises Ltd.
Consolidated Balance Sheets
| CANADIAN DOLLARS, PREPARED BY MANAGEMENT | April 30, 2003 | July 31, 2002 | |||||||
| Unaudited | |||||||||
ASSETS | |||||||||
| Current assets | |||||||||
| Cash and cash equivalents | $ | 8,259,623 | $ | 2,391,016 | |||||
| Accounts receivable | 10,283,612 | 12,736,269 | |||||||
| Income taxes recoverable | 435,089 | 1,024,680 | |||||||
| Inventory | 11,017,127 | 12,710,277 | |||||||
| Prepaid expenses and deposits | 512,456 | 1,492,205 | |||||||
| 30,507,907 | 30,354,447 | ||||||||
| Investments | 1,358,552 | 1,358,552 | |||||||
| Property, plant & equipment (net) | 4,717,682 | 4,283,758 | |||||||
| Other assets (net) | 6,348,136 | 7,782,406 | |||||||
| 12,424,370 | 13,424,716 | ||||||||
| $ | 42,932,277 | $ | 43,779,163 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||
| Current liabilities | |||||||||
| Accounts payable and accrued liabilities | $ | 4,671,912 | $ | 5,081,086 | |||||
| Warranty reserve | 432,149 | 460,000 | |||||||
| Bank loan | — | 2,376,450 | |||||||
| 5,104,061 | 7,917,536 | ||||||||
| Long term liabilities | |||||||||
| Future income tax payable | 963,461 | 368,381 | |||||||
| Total liabilities | 6,067,522 | 8,285,917 | |||||||
| Shareholders’ equity | |||||||||
| Share capital | |||||||||
| Authorized:100,000,000 Common Shares without par value | |||||||||
| 10,000,000 preference shares without par value of | |||||||||
| which 1,450,000 are designated as Series A preferred | |||||||||
| Common shares outstanding: 7,510,541 (2002: 7,596,241) (note 3) | 17,888,815 | 18,784,295 | |||||||
| Contributed surplus | 46,733 | 65,902 | |||||||
| Retained earnings | 18,929,207 | 16,643,049 | |||||||
| 36,864,755 | 35,493,246 | ||||||||
| $ | 42,932,277 | $ | 43,779,163 | ||||||
Commitments (note 5)
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Silent Witness Enterprises Ltd.
Consolidated Statements of Cash Flow
| CANADIAN DOLLARS, UNAUDITED, PREPARED BY MANAGEMENT | THREE MONTHS ENDED APRIL 30 | NINE MONTHS ENDED APRIL 30 | |||||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||||||
| Cash flows from operating activities | |||||||||||||||||||||
| Net earnings for the period | $ | 456,496 | $ | 514,756 | $ | 2,286,158 | $ | 418,799 | |||||||||||||
| Items not involving cash | |||||||||||||||||||||
| Amortization | 842,582 | 811,156 | 2,395,409 | 2,282,713 | |||||||||||||||||
| Future income taxes | 281,308 | 262,000 | 595,080 | 692,343 | |||||||||||||||||
| Stock- based compensation | (19,169 | ) | — | (19,169 | ) | — | |||||||||||||||
| 1,561,217 | 1,587,912 | 5,257,478 | 3,393,855 | ||||||||||||||||||
| Changes in non-cash working capital | |||||||||||||||||||||
| Accounts receivable | 1,261,812 | (639,461 | ) | 2,452,657 | (4,386,181 | ) | |||||||||||||||
| Income taxes recoverable | (435,089 | ) | (102,323 | ) | 589,591 | (102,323 | ) | ||||||||||||||
| Inventory | 331,015 | 138,953 | 1,693,150 | (1,947,149 | ) | ||||||||||||||||
| Prepaid expenses and deposits | 306,741 | 40,975 | 979,749 | (701,416 | ) | ||||||||||||||||
| Accounts payable and accrued liabilities | (759,796 | ) | (1,514,555 | ) | (409,174 | ) | (1,015,755 | ) | |||||||||||||
| Income taxes payable | (131,065 | ) | (12,077 | ) | — | (186,260 | ) | ||||||||||||||
| Warranty reserve | (57,851 | ) | 30,000 | (27,851 | ) | 80,000 | |||||||||||||||
| 2,076,984 | (470,576 | ) | 10,535,600 | (4,865,229 | ) | ||||||||||||||||
| Cash flows from investing activities | |||||||||||||||||||||
| Acquisition of Gyyr product lines (note 2) | — | — | — | (13,686,893 | ) | ||||||||||||||||
| Purchase of other assets | — | (61,962 | ) | (79,386 | ) | (598,733 | ) | ||||||||||||||
| Purchase of property, plant & equipment | (849,751 | ) | (331,256 | ) | (1,315,677 | ) | (707,053 | ) | |||||||||||||
| (849,751 | ) | (393,218 | ) | (1,395,063 | ) | (14,992,679 | ) | ||||||||||||||
| Cash flows from financing activities | |||||||||||||||||||||
| Share repurchases | (248,490 | ) | (94,600 | ) | (1,103,640 | ) | (987,925 | ) | |||||||||||||
| Issue of special warrants, net of fees (note 3) | — | 152,275 | — | 14,116,772 | |||||||||||||||||
| Bank loan | — | (36,750 | ) | — | 14,371,366 | ||||||||||||||||
| Principal payment | — | — | (2,376,450 | ) | (12,019,666 | ) | |||||||||||||||
| Share issue | 200,000 | — | 208,160 | — | |||||||||||||||||
| (48,490 | ) | 20,925 | (3,271,930 | ) | 15,480,547 | ||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | 1,178,743 | (842,869 | ) | 5,868,607 | (4,377,361 | ) | |||||||||||||||
| Cash and cash equivalents, beginning of period | 7,080,880 | 2,035,244 | 2,391,016 | 5,569,736 | |||||||||||||||||
| Cash and cash equivalents, end of period | $ | 8,259,623 | $ | 1,192,375 | $ | 8,259,623 | $ | 1,192,375 | |||||||||||||
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Silent Witness Enterprises Ltd.
Notes to Interim Financial Statements: Segmented disclosures
CANADIAN DOLLARS, UNAUDITED, PREPARED BY MANAGEMENT
| SEGMENT INFORMATION | CCTV | % of Total | Mobile | % of Total | OEM | % of Total | Total | |||||||||||||||||||||
| FOR THE THREE MONTHS ENDED APRIL 30, 2003 | ||||||||||||||||||||||||||||
| Revenue | $ | 10,927,050 | 80 | % | $ | 2,135,771 | 16 | % | $ | 552,491 | 4 | % | $ | 13,615,312 | ||||||||||||||
| Cost of sales including sales and marketing | 7,569,795 | 79 | % | 1,595,569 | 17 | % | 426,924 | 4 | % | 9,592,289 | ||||||||||||||||||
| Segment profit | $ | 3,357,255 | 84 | % | $ | 540,202 | 13 | % | $ | 125,567 | 3 | % | $ | 4,023,023 | ||||||||||||||
| FOR THE THREE MONTHS ENDED APRIL 30, 2002 | ||||||||||||||||||||||||||||
| Revenue | $ | 12,452,795 | 87 | % | $ | 1,488,139 | 10 | % | $ | 419,380 | 3 | % | $ | 14,360,314 | ||||||||||||||
| Cost of sales including sales and marketing | 8,783,562 | 87 | % | 1,015,802 | 10 | % | 354,738 | 3 | % | 10,154,102 | ||||||||||||||||||
| Segment profit | $ | 3,669,233 | 87 | % | $ | 472,337 | 11 | % | $ | 64,642 | 2 | % | $ | 4,206,212 | ||||||||||||||
| SEGMENT INFORMATION | CCTV | % of Total | Mobile | % of Total | OEM | % of Total | Total | |||||||||||||||||||||
| FOR THE NINE MONTHS ENDED APRIL 30, 2003 | ||||||||||||||||||||||||||||
| Revenue | $ | 34,980,490 | 80 | % | $ | 6,602,376 | 15 | % | $ | 2,099,233 | 5 | % | $ | 43,682,099 | ||||||||||||||
| Cost of sales including sales and marketing | 23,804,894 | 80 | % | 4,510,931 | 15 | % | 1,496,386 | 5 | % | 29,812,212 | ||||||||||||||||||
| Segment profit | $ | 11,175,596 | 81 | % | $ | 2,091,445 | 15 | % | $ | 602,847 | 4 | % | $ | 13,869,887 | ||||||||||||||
| FOR THE NINE MONTHS ENDED APRIL 30, 2002 | ||||||||||||||||||||||||||||
| Revenue | $ | 35,306,972 | 83 | % | $ | 6,034,019 | 14 | % | $ | 1,450,418 | 3 | % | $ | 42,791,409 | ||||||||||||||
| Cost of sales including sales and marketing | 25,015,030 | 84 | % | 3,628,783 | 12 | % | 1,209,270 | 4 | % | 29,853,083 | ||||||||||||||||||
| Segment profit | $ | 10,291,942 | 79 | % | $ | 2,405,236 | 19 | % | $ | 241,148 | 2 | % | $ | 12,938,326 | ||||||||||||||
| RECONCILIATION OF SEGMENT PROFITS | THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||||||||||||||
| FOR THE PERIOD ENDED APRIL 30 | 2003 | 2002 | 2003 | 2002 | ||||||||||||||||||||||||||||
| Revenues | $ | 13,615,312 | 100 | % | $ | 14,360,314 | 100 | % | $ | 43,682,099 | 100 | % | $ | 42,791,409 | 100 | % | ||||||||||||||||
| Cost of sales | 7,674,588 | 56 | % | 8,004,595 | 56 | % | 24,027,776 | 55 | % | 23,580,610 | 55 | % | ||||||||||||||||||||
| Gross margin | 5,940,724 | 44 | % | 6,355,719 | 44 | % | 19,654,323 | 45 | % | 19,210,799 | 45 | % | ||||||||||||||||||||
| Sales and marketing | 1,917,701 | 14 | % | 2,149,507 | 15 | % | 5,784,436 | 13 | % | 6,272,473 | 15 | % | ||||||||||||||||||||
| Segment profit | $ | 4,023,023 | 30 | % | $ | 4,206,212 | 29 | % | $ | 13,869,887 | 32 | % | $ | 12,938,326 | 30 | % | ||||||||||||||||
| GEOGRAPHIC INFORMATION | THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||||||||||||||
| FOR THE PERIOD ENDED APRIL 30 | 2003 | 2002 | 2003 | 2002 | ||||||||||||||||||||||||||||
| United States | $ | 10,412,703 | 77 | % | $ | 10,215,257 | 71 | % | $ | 33,805,298 | 78 | % | $ | 33,371,855 | 78 | % | ||||||||||||||||
| International | 2,779,315 | 20 | % | 3,700,632 | 26 | % | 8,039,833 | 18 | % | 8,353,907 | 20 | % | ||||||||||||||||||||
| Canada | 423,294 | 3 | % | 444,425 | 3 | % | 1,836,968 | 4 | % | 1,065,647 | 2 | % | ||||||||||||||||||||
| Segment revenues | $ | 13,615,312 | 100 | % | $ | 14,360,314 | 100 | % | $ | 43,682,099 | 100 | % | $ | 42,791,409 | 100 | % | ||||||||||||||||
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Notes to Unaudited Consolidated Financial Statements
Quarter ended April 30, 2003 (Expressed in Canadian Dollars)
The Company’s interim consolidated financial statements do not include all disclosures required by Canadian generally accepted accounting principles for annual financial statements and should be read in conjunction with the Company’s annual consolidated financial statements for the year ended July 31, 2002.
1. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies used in preparing these interim consolidated financial statements are consistent with those used in preparing the Company’s annual consolidated financial statements for the year ended July 31, 2002 except that effective August 1, 2001, the Company adopted the new recommendations of The CICA Accounting Standard, Section 3870 — Stock-based Compensation and Other Stock-based payments. The new recommendations are applied prospectively to all stock-based payments to employees granted on or after August 1, 2001. The new recommendations are applied retroactively to all stock appreciation rights granted before August 1, 2001. The change in accounting policy resulted in an adjustment of $153,476 to the Company’s opening retained earnings and contributed surplus for fiscal 2002. In accordance with the new standard the company recorded an adjustment to contributed surplus of $87,574 to recognize the SAR’s exercised during fiscal 2002, and to reflect the SAR’s outstanding and change in market price at July 31, 2002. An adjustment of $19,169 to contributed surplus for outstanding SAR’s was recorded for the nine months ended April 30, 2003.
As allowed by Section 3870, no compensation cost is recorded for the Company’s stock options under the Long-term Compensation Plan. Consideration paid by employees on the exercise of stock options is recorded as share capital. This policy is unchanged from that previously applied by the Company.
2. BUSINESS COMBINATIONS
Effective September 12, 2001, the Company acquired the assets of the CCTV Products Division of Gyyr, Inc. The transaction has been accounted for by the purchase method with the results of operations included in these financial statements from the date of acquisition. Details of the assets acquired and consideration given are as follows:
Net assets acquired, at assigned values:
| Inventory | $ | 5,637,172 | ||
| Property, plant and equipment | 1,842,594 | |||
| Software | 6,486,995 | |||
| Intellectual property | 1,488,562 | |||
| Accounts payable and assumed liabilities | (1,768,430 | ) | ||
| Cash consideration paid | $ | 13,686,893 | ||
3. SHARE CAPITAL
In October 2001, the Company sold 1,395,351 Special Warrants for net proceeds of $14,298,683 (net of tax). Each Special Warrant was sold for $10.75 and entitles the holder to receive, without further payment, one Common Share and one-half of a Common Share Purchase Warrant upon the exercise or deemed exercise of each Special Warrant. Each whole Common Share Purchase Warrant is exercisable for a period of 18 months from closing and entitles the holder to purchase one additional Common Share at $13.25 per share.
On December 12, 2001, the Special Warrants were converted to 1,395,351 Common Shares and 697,675 Common Share Purchase Warrants. Net proceeds were used to retire bank debt.
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4. BUSINESS INTEGRATION COSTS
Effective September 12, 2001, the Company entered into a 90-day transitional services agreement with Gyyr Inc. Services provided under the agreement included sales and marketing, manufacturing and inventory management, technical service, research and development and certain general and administrative functions and were charged to expense. The Company paid Gyyr Inc., the actual cost of the services performed plus a fee of US$ 400,000 per month. For the six months ended January 31, 2002, the cost of the fees plus certain integration costs, totaling $2,502,134 were charged to integration expense. Costs for the acquisition of equipment and leasehold improvements for the future production of video storage and networking products were capitalized.
5. COMMITMENTS
Because of the need for a more efficient operating facility, on October 11, 2002, the Company entered into agreements to purchase 11.9 acres of land in Surrey, British Columbia for $3,072,000. The Company intends to use a portion of this site for the construction of a new facility to house its production, sales, research and development and administrative functions currently performed at its head office in Surrey. A portion of the land was acquired during the third quarter of fiscal 2003 for $369,000 and on May 5, 2003, the remaining portion of land was acquired for $2,703,000. The land purchase was funded from cash on hand.
The Company is currently considering proposals from real estate developers and intends to sell the land and complete an operating lease agreement for use of the land and proposed facility. Leases of the Company’s current premises expire March 31, 2004.
6. SALE OF INVESTMENT IN SMARTSIGHT NETWORKS INC.
On May 22, 2003, the Company sold its 15% interest in SmartSight Networks Inc. for $2,142,000 in cash. The transaction resulted in a pre-tax capital gain of $784,000.