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 Quarter Ended January 1, 1994 Commission file number 0-12643
--------------- -------
GANDALF TECHNOLOGIES INC.
- ---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
ONTARIO, CANADA NOT APPLICABLE
- --------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
130 COLONNADE ROAD SOUTH, NEPEAN, ONTARIO K2E 7M4
- ----------------------------------------- ------------------
(Address of principal executive offices) (Postal Code)
Registrant's telephone number, including area code (613) 723-6500
--------------
NOT APPLICABLE
- -----------------------------------------------------------------
Former name, former address and former fiscal year, if changed
since last report.
*Indicate by check mark whether the registrant (1) has filed all
reports required to be iled by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90
days.
Yes X No
----- -----
The number of shares outstanding as at January 31, 1994 was
28,041,333.
GANDALF TECHNOLOGIES INC.
INDEX
Page
No.
- --------
PART I FINANCIAL INFORMATION
Consolidated Balance Sheet - 3
Consolidated Statements of Income and
Retained Earnings - 4
Consolidated Statement of Changes in
Financial Position - 5
Notes to Consolidated Financial Statements - 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations - 11
PART II OTHER INFORMATION 17
SIGNATURE PAGE 17
GANDALF TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Thousands of U.S. dollars)
Jan 1
Mar 31
1994
1993
-------
-------
ASSETS
Current assets:
Cash and short-term deposits $ 1,759
$ 9,737
Accounts receivable (note 1) 29,946
35,950
Inventories (note 2) 24,177
25,898
Other current assets 2,191
2,464
--------
- --------
Total current assets 58,073
74,049
Fixed assets (note 3) 27,852
30,768
Goodwill, net of amortization of $2,624
(March 31, 1993: $2,441) 3,790
3,973
Deferred income taxes 8,488
8,381
Other assets (note 4) 12,397
12,432
--------
- --------
Total assets $110,600
$129,603
========
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank operating lines $ 2,957
$ 10,025
Accounts payable and accrued liabilities (note 5) 19,549
28,802
Deferred revenue 7,116
8,932
Current portion of long-term debt 784
694
--------
- --------
Total current liabilities 30,406
48,453
Long-term debt 2,182
22,980
8.5% convertible debentures, due 2002 22,659
23,862
Shareholders' equity:
Capital stock:
Common shares, 28,041,333 issued and
outstanding (March 31, 1993: 15,864,833) (note 6) 79,742
45,585
Retained earnings (deficit) (17,614)
(6,532)
Cumulative translation adjustment (6,775)
(4,745)
--------
- --------
Total shareholders' equity 55,353
34,308
--------
- --------
Total liabilities and shareholders' equity $110,600
$129,603
========
========
<FN>
(See accompanying notes to consolidated financial statements)
GANDALF TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Unaudited)
(Thousands of U.S. dollars)
13 Weeks Ended
39 Weeks Ended
-------------------
- --------------------
Jan 1 Dec 26
Jan 1 Dec 26
1994 1992
1994 1992
-------- -------
- -------- -------
INCOME
Revenues:
Product revenue $ 20,301 $ 29,365 $
68,386 $ 87,089
Service revenue 9,965 11,926
31,071 35,326
-------- --------
- -------- --------
30,266 41,291
99,457 122,415
Operating expenses:
Cost of product sales 11,295 14,569
35,754 47,317
Service expenses 6,963 7,378
20,569 21,970
Selling and distribution 11,274 11,323
33,027 37,099
Administration and general 2,825 3,073
7,938 12,088
Research and development(note 7) 4,204 3,671
10,646 13,670
-------- --------
- -------- --------
Income (loss) from operations (6,295) 1,277
(8,477) (9,729)
Unusual items (note 8) - -
- (5,547)
Interest expense (1,010) (1,395)
(3,468) (3,396)
Other income 517 126
863 140
-------- --------
- -------- --------
Net income (loss) for the period $ (6,788) $ 8
$(11,082) $(18,532)
======== ========
======== ========
Basic earnings (loss) per share $ (0.29) $ - $
(0.60) $ (1.18)
(note 9) ======== ========
======== ========
Weighted average number of
shares outstanding (thousands) 23,517 15,682
18,460 15,681
====== ======
====== ======
RETAINED EARNINGS
Balance at beginning of period $(10,826) $ (5,565) $
(6,532) $ 12,975
Net income (loss) for the period (6,788) 8
(11,082) (18,532)
-------- --------
- -------- --------
Balance at end of period $(17,614) $ (5,557)
$(17,614) $ (5,557)
======== ========
======== ========
<FN>
(See accompanying notes to consolidated financial statements)
GANDALF TECHNOLOGIES INC.
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
(Unaudited)
(Thousands of U.S. dollars)
39
Weeks Ended
- --------------------
Jan 1
Dec 26
1994
1992
--------
-------
Operating activities:
Cash provided by (applied to) operations (note 10) $(3,179)
$ 478
Decrease (increase) in operating working capital
requirements (note 11) (8,038)
1,665
-------
--------
Cash provided by (applied to) operations (11,217)
2,143
-------
--------
Financing activities:
Issue of capital stock (note 6) 34,157
9
Decrease in term bank indebtedness (20,382)
(2,638)
Increase (decrease) in operating lines (7,068)
4,095
Decrease in long-term debt (197)
(95)
Issue of convertible subordinated notes -
23,787
Escrow funds -
(23,970)
-------
--------
Cash provided by financing activities 6,510
1,188
-------
--------
Investing activities:
Proceeds on disposal of assets 2,246
-
Purchase of fixed assets (3,110)
(2,687)
Software development costs deferred (note 7) (1,923)
(2,025)
Other (159)
(310)
-------
--------
Cash applied to investing activities (2,946)
(5,022)
-------
--------
Decrease in cash in the period (7,653)
(1,691)
Effect of currency translation
adjustments on cash flows (325)
(122)
Cash and short-term deposits, beginning of period 9,737
3,832
-------
--------
Cash and short-term deposits, end of period $ 1,759
$ 2,019
=======
========
<FN>
(See accompanying notes to consolidated financial statements)
GANDALF TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts stated in thousands of U.S. dollars.)
1. ACCOUNTS RECEIVABLE
Jan 1
Mar 31
1994
1993
-------
-------
Trade $26,546
$32,797
Contract 2,583
1,291
Current portion of sales-type leases 817
1,862
-------
-------
$29,946
$35,950
=======
=======
2. INVENTORIES
Jan 1
Mar 31
1994
1993
-------
-------
Raw materials $ 7,736
$ 7,167
Work-in-process 3,970
3,271
Finished goods 12,471
15,460
-------
-------
$24,177
$25,898
=======
=======
3. FIXED ASSETS
Jan 1
Mar 31
1994
1993
-------
-------
Cost:
Land $ 211
$ 216
Buildings 4,612
4,756
Equipment 67,921
72,185
Leasehold improvements 3,954
4,056
-------
- --------
76,698
81,213
Accumulated depreciation 48,846
50,445
-------
-------
Net book value $27,852
$30,768
=======
=======
4. OTHER ASSETS
Jan 1
Mar 31
1994
1993
-------
-------
Software development costs $ 5,496
$ 5,437
Assets held for disposal 3,910
2,485
Deferred financing costs 1,656
2,122
Other 1,335
1,121
Net investment in sales-type leases -
1,267
-------
- --------
$12,397
$12,432
=======
=======
Assets held for disposal at January 1, 1994 primarily represent
certain
portfolio investments including approximately $2.6 million relating
to the
sale by the Company of its mobile dispatch subsidiary during fiscal
1994. At
March 31, 1993, assets held for disposal included a vacant facility
in the
United Kingdom which was sold during fiscal 1994. Certain
comparative figures
for March 31, 1993 have been reclassified to conform to this
presentation.
5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Jan 1
Mar 31
1994
1993
-------
-------
Trade accounts payable $ 9,419
$14,989
Payroll, commissions and related taxes 4,442
5,055
Other payables 5,688
8,758
-------
-------
$19,549
$28,802
=======
=======
6. CAPITAL STOCK
The authorized capital stock of the Company consists of an
unlimited number of
common shares without par value. An analysis of the capital stock
account for
each of the thirty-nine week periods ended January 1, 1994 and
December 26,
1992 is presented in the following table. During the third quarter
of fiscal
1994, the Company completed the sale of 12,000,000 common shares
through
public issue.
39
Weeks Ended
- --------------------
Jan 1
Dec 26
1994
1992
--------
-------
Shares:
Balance March 31 15,864,833
15,671,907
Issued for cash 12,176,500
5,926
----------
----------
Balance end of period 28,041,333
15,677,833
==========
==========
Amount:
Balance March 31 $45,585
$45,242
Issued for cash, net of share issue costs 34,157
9
-------
-------
Balance end of period $79,742
$45,251
=======
=======
7. RESEARCH AND DEVELOPMENT
13 Weeks Ended 39
Weeks Ended
---------------------
- ---------------------
Jan 1 Dec 26 Jan 1
Dec 26
1994 1992 1994
1992
------ ------ ------
------
Research and development costs $4,185 $4,320 $11,415
$16,401
Investment incentives (156) (500) (710)
(1,726)
Software development costs:
Amortized 602 395 1,864
1,020
Deferred (427) (544) (1,923)
(2,025)
------ ------ -------
-------
$4,204 $3,671 $10,646
$13,670
====== ====== =======
=======
8. UNUSUAL ITEMS
Unusual items appearing on the consolidated statement of income for
the
thirty-nine week period ended December 26, 1992 represent
provisions for
severance and redundant facilities which were made at the end of
the second
quarter of fiscal 1993.
Under Staff Accounting Bulletin 67, issued by the Securities and
Exchange
Commission in the United States, such costs would be presented as
a component
of the loss from operations. Under this format of presentation the
loss from
operations for the thirty-nine week period ended December 26, 1992
would have
been $15.3 million instead of $9.7 million.
Subsequent to the January 1, 1994 fiscal quarter end, the Company
eliminated
approximately 60 staff positions. The Company anticipates that
further
downsizing of the workforce will occur during the balance of the
current fiscal
quarter. Severance costs relating to these actions will be recorded
during the
fourth quarter ending March 31, 1994.
9. BASIC LOSS PER SHARE
Fully diluted earnings per share information has not been presented
as
potential conversions are anti-dilutive. Basic loss per share
figures are
calculated using the monthly weighted average number of common
shares
outstanding for the period.
10. CASH PROVIDED BY (APPLIED TO) OPERATIONS
Cash provided by (applied to) operations is computed as
follows:
39 Weeks
Ended
- ---------------------
Jan 1
Dec 26
1994
1992
------
- ------
Loss from operations $(8,477)
$(9,729)
Depreciation and amortization 7,541
11,237
Other reserves not requiring an
outlay of cash -
6,182
Gain on disposal of assets (542)
-
Income taxes 438
(1,208)
Restructuring costs paid -
(2,748)
Interest paid (3,002)
(3,396)
Other income 863
140
-------
- -------
$(3,179) $
478
=======
=======
During the thirty-nine week period ended December 26, 1992, other
non-cash
reserves of $6.2 million represented provisions relating to
inventory and other
reserves made during the second quarter of fiscal 1993.
11. DECREASE (INCREASE) IN OPERATING WORKING CAPITAL REQUIREMENTS
The decrease (increase) in operating working capital
requirements is
computed as follows:
39 Weeks
Ended
- ---------------------
Jan 1
Dec 26
1994
1992
------
- ------
Accounts receivable $ 4,339 $
2,814
Inventories 189
1,230
Other current assets 228
815
Accounts payable and accrued liabilities (9,244)
(3,025)
Deferred revenue (1,383)
(72)
Foreign currency equity adjustment (2,167)
(97)
-------
- -------
$(8,038) $
1,665
=======
=======
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
- ------------
The consolidated financial statements for the third fiscal quarter
ended
January 1, 1994, together with accompanying notes, should be read
as an
integral part of this review. These financial statements have been
prepared
by management in accordance with accounting principles generally
accepted in
Canada, the application of which, in the case of the Company,
conforms in all
material respects for the periods presented with accounting
principles
generally accepted in the United States and the International
Accounting
Standards for historical costs. All amounts are stated in U.S.
dollars unless
otherwise indicated. "C$" refers to Canadian dollars.
Liquidity and Capital Resources
- -------------------------------
During the third quarter of fiscal 1994, the Company completed the
sale of
12,000,000 common shares through public issue and received proceeds
of C$45.1
million (approximately $33.8 million) net of the underwriters' fees
and before
deducting expenses of the issue. Term bank indebtedness of $19.7
million was
retired during the third quarter of fiscal 1994 from the proceeds
of the share
issue, representing the full amount outstanding under these loans.
The
balance of the proceeds of approximately $13.5 million following
payment of
expenses of the issue was retained for working capital purposes.
This latter
amount was initially applied in November 1993 to eliminate the
utilization of
short-term bank operating lines thereby making those lines
available for
future working capital purposes and reducing interest costs to the
Company.
At January 1, 1994, the Company was borrowing $1.2 million under
these lines,
net of cash and short-term deposits of $1.8 million. At the end of
the
previous quarter on October 2, 1993, utilization of these
operating lines on
a net basis was $8.6 million.
Following the completion of the share issue in the third quarter of
fiscal
1994 and the subsequent retirement of all term bank debt, the
Company
renegotiated the terms of its operating loan agreements with a
Canadian
chartered bank. These amended agreements, which represent
committed credit
facilities until the annual review date of July 31, 1994, became
effective in
January 1994 following the end of the third quarter. Under the
amended
agreements, the authorized amount of the facilities increased from
$11.3
million to $15.8 million, when expressed in U.S. funds. The extent
to which
these facilities are available to the Company at any time is
determined by a
margin formula based on trade accounts receivable and inventories
of two of
the Company's subsidiaries. During January 1994, following the
date on which
the amended loan agreements became effective, approximately $11.8
million of
the $15.8 million was available to the Company under the margin
formulas. A
demand loan facility in the United Kingdom provided an additional
$2.1
million in available short-term credit. As indicated above, at
January 1,
1994, borrowings under these facilities were $1.2 million, net of
cash balances
of $1.8 million.
The two operating loan agreements in Canada contain covenants
relating to the
Company's financial performance during the period for which the
facility is
committed (i.e. up to July 31, 1994). Although the Company is
currently in
compliance with these covenants, the Company is unlikely to be in
full
compliance with the terms of the agreements at the end of the
current fiscal
quarter ending March 31, 1994. The breach of a financial covenant
would
constitute an event of default for which the Company would seek a
waiver from
the bank. There can be no assurance that such a waiver would be
granted. The
breach of a financial covenant, if not waived, would give the bank
the right
to repayment on demand of all outstanding borrowings. If such
demand is made
the Company does not currently have the financial resources
available to repay
those lines. Upon maturity of the operating loans on July 31,
1994, the
outstanding borrowings under these facilities become repayable on
demand unless
a renewal of the committed operating facility is agreed between the
Company and
the bank. There can be no assurance that such an offer to renew
the facilities
will be provided by the bank.
The Company reported negative cash flow of $7.7 million during the
thirty-nine
week period ended January 1, 1994, representing negative cash flow
from
operating activities of $11.2 million and net positive cash flow
from
financing and investing activities (including the share issue in
the third
quarter) of $3.5 million. Of the $11.2 million in negative cash
flow from
operations during the first three quarters of fiscal 1994, $5.1
million
occurred in the third quarter ended January 1, 1994 and was
primarily related
to the net loss sustained in the quarter. Significant negative
cash flow is
expected to occur in the fourth quarter as a result of an
anticipated
operating loss and the payments associated with staff downsizing
actions.
Negative cash flow from operations is expected to continue during
the first
quarter of fiscal 1995 which will also be influenced by the fourth
quarter
restructuring actions. The restructuring measures being taken in
the fourth
quarter of fiscal 1994 will not have a full-quarter impact on
expenses until
the second quarter of fiscal 1995.
The Company intends to meet its short-term cash requirements
through operating
cash flow and currently available credit resources. However, as
described above,
it is currently unclear whether those credit resources will be
available after
the March 31, 1994 quarter. Even if they remain available, due to
anticipated
additional cash requirements during the next several fiscal
quarters relating to
operations and restructuring costs, there can be no assurance that
the Company's
short-term bank credit facilities, to the extent they remain
available, will be
sufficient to meet the Company's short-term obligations. The
availability of
these credit facilities will in part be determined by future
operating
performance. The Company is examining alternative sources of
short-term
financing. There can be no assurance that such financing will be
obtained, if
required by the Company. The Company's ability to generate
positive cash flow
is ultimately dependent on its ability to attain the break even
level resulting
from the downsizing actions being taken in the fourth quarter.
During the fourth quarter of fiscal 1994, the Company retained the
services of
Wood Gundy Inc. to explore possible strategic alliances to
accelerate the return
to profitability.
Results of Operations - Third Quarter Ended January 1, 1994
- -----------------------------------------------------------
The following table sets forth items derived from the quarterly
consolidated
statements of income as a percentage of revenues for each of the
five fiscal
quarters ended January 1, 1994. The column in the table entitled
"Percentage
Change Quarter 3, 1994 vs 1993" represents the percentage change,
either
favourable or (unfavourable), in the dollar amount of such items
for the third
quarter of fiscal 1994 compared with the third quarter of fiscal
1993.
Percentage
Fiscal 1993 Fiscal 1994
Change
--------------------
- ------------------------------- Quarter 3
Quarter 3 Quarter 4 Quarter 1 Quarter 2
Quarter 3 1994 vs. 1993
--------- --------- --------- ---------
- --------- -------------
(Thousands of dollars)
Revenues $41,291 $38,485 $34,173 $35,018
$30,266 (26.7)%
======= ======= ======= =======
======= =======
(Percentage of Revenues)
Revenues:
Product 71.1% 69.6% 68.6% 70.3%
67.1% (30.9)%
Service 28.9 30.4 31.4 29.7
32.9 (16.4)
------- ------- ------- -------
-------
100.0% 100.0% 100.0% 100.0%
100.0% (26.7)
======= ======= ======= =======
=======
Gross Profit:
Product 50.4% 48.0% 49.6% 48.7%
44.4% (39.1)
Service 38.1 37.1 36.2 34.8
30.1 (34.0)
Combined 46.9 44.7 45.4 44.6
39.7 (37.9)
Expenses:
Selling & distribution 27.4 28.1 31.0 31.9
37.3 0.4
Administration & general 7.5 7.3 7.8 7.0
9.3 8.1
Research & development 8.9 9.4 9.0 9.6
13.9 (14.5)
------- ------- ------- -------
-------
Income (loss)
from operations 3.1 (0.1) (2.4) (3.9)
(20.8)
Financial expenses (3.1) (2.4) (3.3) (2.8)
(1.6)
------- ------- ------- -------
-------
Net income (loss) -% (2.5%) (5.7%)
(6.7)% (22.4)
======= ======= ======= =======
=======
Revenues
- --------
The following table sets forth revenues by geographic segment for
the quarter
ended January 1, 1994 and for each of the preceding four quarters.
The table
also includes the change in revenues, expressed as a percentage, in
the third
quarter of fiscal 1994 compared to the corresponding period of
fiscal 1993.
Percentage
Fiscal 1993 Fiscal 1994
Change
--------------------
- ------------------------------- Quarter 3
Quarter 3 Quarter 4 Quarter 1 Quarter 2
Quarter 3 1994 vs. 1993
--------- --------- --------- ---------
- --------- -------------
(Thousands of dollars)
United States $12,349 $10,972 $ 9,515 $ 9,226
$ 7,480 (39.4)%
United Kingdom 10,224 9,958 9,575 10,719
9,061 (11.4)
Canada 7,954 9,134 5,577 6,338
5,078 (36.2)
Holland/France 5,640 3,736 4,141 3,628
4,024 (28.7)
International markets 5,124 4,685 5,365 5,107
4,623 (9.8)
------- ------- ------- -------
- -------
$41,291 $38,485 $34,173 $35,018
$30,266 (26.7)
======= ======= ======= =======
=======
Revenues in the third quarter of fiscal 1994 were $30.3 million,
consisting of
$20.3 million of product revenue and $10.0 million of service
revenue. In the
second quarter of fiscal 1994, total revenues were $35.0 million
(product
revenue of $24.6 million and service revenue of $10.4 million) and
in the
third quarter of fiscal 1993, total revenues were $41.3 million
($29.4 million
of product revenue and $11.9 million of service). The decline in
revenues in
the third quarter of fiscal 1994 compared to the second quarter of
fiscal 1994
and the third quarter of fiscal 1993 has occurred primarily in
North America.
The decline in revenues in the third quarter of fiscal 1994
compared to the
second quarter resulted from the decline in revenues from
traditional product
lines which more than offset the growth in the Company's new remote
networking
access products.
The decline in revenues between the third quarters of fiscal 1993
and fiscal
1994 was influenced by changes in the average exchange rates used
to translate
the results of foreign operations to U.S. dollars and also as a
result of the
sale by the Company of its mobile dispatch subsidiary during the
first quarter
of the current fiscal year. On a fully comparable basis, after
adjusting for
the effect of these two items, total revenues declined by 20.5%
during the
third quarter of fiscal 1994 compared to the same quarter a year
ago. The
quarter-over-quarter decrease in reported revenues of 26.7%
included 3.2%
or $1.3 million relating to the strengthening of the U.S. dollar
against
certain European currencies and the Canadian dollar and 3.0% or
$1.2 million
relating to GMSI, the Company's former mobile dispatch subsidiary.
Revenues outside the Company's North American markets (the United
Kingdom,
Holland/France and other international markets), when expressed in
their
domestic currencies, declined by 7.5% in the third quarter of
fiscal 1994
compared to the third quarter of fiscal 1993. The weakening of the
underlying
currencies against the U.S. dollar increased the decline in
revenues in these
markets to 15.6%.
Revenues in the Company's two North American markets (the United
States and
Canada) were $12.6 million in the third quarter of fiscal 1994,
$15.6 million
in the second quarter of fiscal 1994 and $20.3 million in the third
quarter of
fiscal 1993. The continuing trend in the third quarter of fiscal
1994 to
lower product revenue resulted from declining sales in mature
product lines
which occurred at a faster rate in the third quarter than had been
anticipated.
Gross Profit
- ------------
Gross profit on product revenue (product revenue minus the cost of
product
sales), expressed as a percentage of product revenue was 44.4%
during the
third quarter of fiscal 1994, compared with 48.7% in the second
quarter of
fiscal 1994 and 50.4% in the third quarter of fiscal 1993. The
decline in the
product gross margin between the second and third quarters of
fiscal 1994
occurred primarily as a result of higher adverse manufacturing
volume
variances which are influenced by production levels.
The gross profit on service revenue (service revenues minus service
expenses),
expressed as a percentage of service revenue was 30.1% in the third
quarter of
fiscal 1994, 34.8% in the second quarter of fiscal 1994 and 38.1%
in the third
quarter of fiscal 1993. The gross margin on service revenue has
declined from
the level in the third quarter a year ago due to a decline in
service revenue of
approximately 16% while service expenses during the same period
have declined by
approximately 6%. The Company is examining alternatives to improve
the
efficiency of the service organization.
Operating Expenses
- ------------------
Operating expenses (selling and distribution, administration and
general and
research and development) were $18.3 million in the third quarter
of fiscal
1994, $17.0 million in the second quarter of fiscal 1994 and $18.1
million in
the third quarter of fiscal 1993. Operating expenses increased in
the third
quarter of fiscal 1994 compared to the second quarter of fiscal
1994 primarily
in the area of research and development which increased $0.8
million. The
primary components of the increase in net research and development
costs in
the third quarter were reduced levels of contract engineering for
customers of
$0.3 million, increased net amortization of deferred software
development
costs of $0.3 million and reduced government grants of $0.1
million.
During the third quarter of fiscal 1994, the Company received
grants of $0.2
million under the Canadian federal government's Microelectronics
and Systems
Development Program ("MSDP"). To date, grants totalling
approximately $3.8
million have been received under this program. This funding is
potentially
repayable in installments based on revenues of the Company,
provided certain
conditions are met relating to the commercialization of the
resulting
technology.
The Company is currently examining the actions necessary to reduce
operating
expenses.
Operating Loss
- --------------
The loss from operations in the third quarter of fiscal 1994 was
$6.3 million.
This loss from operations was greater than the $1.4 million
operating loss in
the second quarter of fiscal 1994 as a result of lower revenues and
higher
operating expenses, primarily in the area of research and
development. In the
third quarter of fiscal 1993, the Company reported income from
operations of
$1.3 million.
Financial Expenses
- ------------------
Interest expense was $1.0 million in the third quarter of fiscal
1994 compared
to $1.2 million in the second quarter of fiscal 1994 and $1.4
million in the
third quarter of fiscal 1993. Interest-bearing debt has been
reduced to $28.6
million at January 1, 1994 from $57.9 million at October 2, 1993.
This
reduction occurred as a result of the retirement of term bank loans
and the
reduced utilization of bank operating lines following the issuance
of common
shares by the Company in the third quarter of fiscal 1994.
Net Income (Loss)
- -----------------
The net loss for the third quarter of fiscal 1994 was $6.8 million
or $0.29
per share. In the third quarter of fiscal 1993 the Company's net
income was at
the break even level. The net loss for the thirty-nine weeks ended
January 1,
1994 was $11.1 million or $0.60 per share compared to a net loss of
$18.5
million or $1.18 per share for the corresponding period in fiscal
1993.
II - OTHER INFORMATION
- ----------------------
Item 6(a) - Exhibits
- --------------------
Exhibit No. Description
- ----------- -----------
10.1 Underwriting Agreement (Canadian) dated as of
October
20, 1993 among Wood Gundy Inc., Deacon Barclays
de Zoete
Wedd Limited, Gordon Capital Corporation and
Richardson
Greenshields of Canada Limited and the Company.
10.2 Credit Agreement dated as of January 7, 1994
between the
Royal Bank of Canada and the Company.
10.3 Credit Agreement dated as of January 7, 1994
between the
Royal Bank of Canada and Gandalf Canada Ltd.
Item 6(b) - Reports on Form 8-K
- ------------------------------
There were no reports on Form 8-K filed for the quarter ended
January 1, 1994.
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.
GANDALF TECHNOLOGIES INC.
February 10, 1994 BY: s/BRIAN R.HEDGES
________________________
___________________________________
Date Brian R. Hedges
President
(Chief Executive Officer)
February 10, 1994 BY: s/WALTER R. MACDONALD
________________________
__________________________________
Date Walter R. MacDonald
Vice President, Finance
(Chief Financial Officer)