<PAGE
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 July 1, 1995 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 filed 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 July 31, 1995 was
39,282,307.
GANDALF TECHNOLOGIES INC.
INDEX
Page No.
--------
PART I FINANCIAL INFORMATION
Consolidated Balance Sheet - 3
Consolidated Statement of Income - 4
Consolidated Statement of Changes in
Financial Position - 5
Consolidated Statement of Shareholders' Equity - 6
Notes to Consolidated Financial Statements - 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations - 11
PART II OTHER INFORMATION 16
SIGNATURE PAGE 16
GANDALF TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Thousands of U.S. dollars)
July 1 March 31
1995 1995
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 11,342 $ 11,817
Accounts receivable 26,223 26,880
Inventories (note 1) 14,900 15,230
Other 2,096 2,268
-------- --------
Total current assets 54,561 56,195
Fixed assets (note 2) 18,211 18,619
Goodwill, net of amortization of $3,008
(March 31, 1995: $2,952) 3,406 3,462
Other assets 2,785 3,232
-------- --------
Total assets $ 78,963 $ 81,508
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank operating lines (note 3) $ 4,266 $ 5,854
Accounts payable and accrued liabilities (note 4) 19,992 21,369
Deferred revenue 7,721 7,758
Current portion of long-term debt 250 157
-------- --------
Total current liabilities 32,229 35,138
Long-term debt 2,149 1,877
8.5% convertible debentures, due 2002 (note 5) 4,055 10,051
Shareholders' equity:
Capital stock:
Common shares, 38,934,289 issued and
outstanding (March 31, 1995: 35,238,064) 97,775 91,644
Retained earnings (deficit) (52,298) (52,364)
Cumulative translation adjustment (4,947) (4,838)
-------- --------
Total shareholders' equity 40,530 34,442
-------- --------
Total liabilities and shareholders' equity $ 78,963 $ 81,508
======== ========
(See accompanying notes to consolidated financial statements)
GANDALF TECHNOLOGIES INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Thousands of U.S. dollars except per share amounts)
13 Weeks Ended
July 1
--------------------
1995 1994
-------- --------
Revenues:
Product $ 19,414 $ 20,745
Service 9,236 8,973
-------- --------
28,650 29,718
Operating expenses:
Cost of product sales 9,663 10,896
Service expenses 5,869 5,871
Sales and marketing 8,198 8,742
Administration and general 2,071 1,929
Research and development 2,595 2,413
Restructuring costs (note 6) - 685
-------- --------
Income (loss) from operations 254 (818)
Interest expense (206) (798)
Interest income and foreign exchange 18 57
-------- --------
Net income (loss) for the period $ 66 $ (1,559)
======== ========
Basic earnings (loss) per share (note 7) $ - $ (0.06)
======== ========
Weighted average number of
shares outstanding (thousands) 37,642 28,072
======== ========
(See accompanying notes to consolidated financial statements)
GANDALF TECHNOLOGIES INC.
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
(Unaudited)
(Thousands of U.S. dollars)
13 Weeks Ended
July 1
--------------------
1995 1994
-------- --------
Operating activities:
Cash provided by (applied to) operations (note 8) $ 1,576 $ (514)
Increase in operating working capital (note 9) (202) (2,170)
-------- --------
Cash provided by (applied to) operating activities 1,374 (2,684)
-------- --------
Financing activities:
Issue of capital stock 6,423 -
Conversion of 8.5% convertible debentures (note 5) (6,197) -
Other 302 (265)
-------- --------
Cash provided by (applied to) financing activities 528 (265)
-------- --------
Investing activities:
Proceeds on disposal of investment - 1,263
Purchase of fixed assets (674) (674)
Other (34) 1
-------- --------
Cash provided by (applied to) investing activities (708) 590
-------- --------
Effect of exchange rate changes on cash balances (81) 69
-------- --------
Increase (decrease) in cash position in the period 1,113 (2,290)
Cash position at beginning of period 5,963 (5,239)
-------- --------
Cash position at end of period $ 7,076 $ (7,529)
======== ========
Cash position is comprised of:
Cash and cash equivalents $ 11,342 $ 5,641
Bank operating lines (4,266) (13,170)
-------- -------
$ 7,076 $ (7,529)
======== ========
(See accompanying notes to consolidated financial statements)
GANDALF TECHNOLOGIES INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
(Thousands of U.S. dollars)
13 Weeks Ended
July 1
----------------------------------------------------
1995 1994
------------------------- -------------------------
Shares Dollars Shares Dollars
--------- --------- --------- ---------
Capital Stock:
Consisting of an unlimited
number of common shares
authorized, without par value
Balance at beginning of period 35,238,064 $ 91,644 28,072,333 $ 79,811
Issued:
On conversion of debentures (note 5) 3,613,592 5,905 - -
On exercise of stock options 82,633 226 - -
---------- --------- ---------- ---------
Balance at end of period 38,934,289 $ 97,775 28,072,333 $ 79,811
========== ========= ========== =========
Retained Earnings (Deficit):
Balance at beginning of period $ (52,364) $ (53,770)
Net income (loss) 66 (1,559)
--------- ---------
Balance at end of period $ (52,298) $ (55,329)
========= =========
Cumulative Translation Adjustment:
Balance at beginning of period $ (4,838) $ (6,932)
Adjustment arising on translation of
foreign subsidiaries' financial
statements to U.S. dollars 776 438
Adjustment relating to subsidiary loans
designated as long-term investments (885) 303
--------- ---------
Balance at end of period $ (4,947) $ (6,191)
========= =========
(See accompanying notes to consolidated financial statements)
GANDALF TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
All amounts are stated in U.S. dollars unless otherwise
indicated. C$ refers to Canadian dollars. Tabular amounts
are in thousands except per share data.
1. INVENTORIES
July 1 March 31
1995 1995
-------- --------
Raw materials $ 3,673 $ 3,336
Work-in-process 4,505 4,591
Finished goods 6,722 7,303
-------- --------
$ 14,900 $ 15,230
======== ========
2. FIXED ASSETS
July 1 March 31
1995 1995
-------- --------
Cost:
Land $ 228 $ 232
Buildings 4,716 4,725
Equipment 56,904 55,879
Leasehold improvements 1,962 1,930
--------- --------
63,810 62,766
Accumulated depreciation 45,599 44,147
-------- --------
Net book value $ 18,211 $ 18,619
======== ========
3. BANK OPERATING LINES
The Company's authorized bank operating lines at July 1, 1995
totalled $19.0 million. At that time, there was sufficient
margin available to borrow $14.8 million and $4.3 million was
being utilized. Cash and short-term deposits held as of that
date represented a further $11.3 million of available cash
resources, and cash and unused credit lines totalled $21.8
million. Cash and unused credit lines at March 31, 1995 were
$20.8 million. The authorized lines include two committed
credit facilities with a Canadian chartered bank and a demand
facility with a bank in the United Kingdom. They are secured
by certain of the accounts receivable, inventories and other
assets of the Company and bear interest at rates ranging from
0.5% to 2.5% above the respective banks' prime or base rates.
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
July 1 March 31
1995 1995
-------- --------
Trade accounts payable $ 6,695 $ 7,341
Payroll, commissions and related taxes 3,832 4,072
Accrued restructuring charges 2,626 3,033
Other payables 5,162 5,266
Income and other taxes payable 1,677 1,657
-------- --------
$ 19,992 $ 21,369
======== ========
5. 8.5% CONVERTIBLE DEBENTURES
Shares Issued
Aggregate Principal Amount % Upon Conversion
---------------------------------------------------------------------- ---------------
Balance at March 31, 1994 C$ 30,000 $ 21,681 100%
Converted during the year (15,939) (11,533) (53%) 6,782,519
Impact of foreign exchange - (97) -
----------------------------------------------------------------------
Balance at March 31, 1995 C$ 14,061 $ 10,051 47%
Converted during the quarter (8,492) (6,197) (28%) 3,613,592
Impact of foreign exchange 201
----------------------------------------------------------------------
Balance at July 1, 1995 C$ 5,569 $ 4,055 19%
======================================================================
In November 1992 the Company issued 8.5% convertible debentures
with an aggregate principal amount of C$30.0 million which
mature in November 2002. At any time prior to maturity they
are convertible into common shares of the Company at the option
of the holder at a conversion price of C$2.35 (approximately
$1.71) which would yield 425.53 common shares for each C$1,000
(approximately $728) of principal amount of debentures held.
During the fourth quarter of fiscal 1995 approximately 53% of
the original amount of debentures were converted into common
shares.
During the first quarter of fiscal 1996 debentures with an
aggregate principal amount of $6,197,000 were converted into
3,613,592 common shares. The resulting increase in capital
stock of $5,905,000 was determined as the sum of the principal
amount of the debentures converted ($6,197,000) plus interest
accrued to the date of conversion ($95,000), net of the pro
rata share of the associated unamortized deferred financing
costs ($387,000).
At July 1, 1995 approximately 19% of the original principal
amount of debentures remained outstanding which, if converted,
would result in a maximum of 2,369,787 additional common shares
being issued. The remaining outstanding debentures represent
an unsecured direct obligation of the Company. After November
10, 1995 any outstanding debentures are redeemable by the
Company provided that for the 20 trading days ending with the
fifth trading day preceding the date on which the notice of
redemption is first given, the weighted average market price at
which the shares have traded on the TSE and NASDAQ is not less
than 125% of the conversion price.
6. RESTRUCTURING COSTS
Restructuring costs of $0.7 million during the first quarter of
fiscal 1995 represented severance costs associated with the
elimination of approximately 70 positions at the end of the
first quarter in connection with an internal functional
realignment.
7. EARNINGS PER SHARE
Basic earnings (loss) per share figures are presented on the
consolidated statement of income. These figures are calculated
using the monthly weighted average number of common shares
outstanding during the period. Fully diluted earnings per
share information has not been presented as potential
conversions are anti-dilutive.
For the first quarter of fiscal 1996 adjusted earnings per
share is not materially different from the basic earnings per
share figure. The calculation assumes that the conversion of
debentures, which occurred during the first quarter of fiscal
1996, had occurred at the beginning of the quarter.
8. CASH PROVIDED BY OPERATIONS
Cash provided by (applied to) operations is computed as
follows:
<CAPITON>
13 Weeks Ended
July 1
---------------------
1995 1994
-------- --------
Income (loss) from operations $ 254 $ (818)
Depreciation and amortization 1,497 1,210
Interest paid (193) (757)
Interest income and foreign exchange 18 57
Other - (206)
-------- --------
$ 1,576 $ (514)
======== ========
9. INCREASE IN OPERATING WORKING CAPITAL
The increase in operating working capital is computed as
follows:
13 Weeks Ended
July 1
---------------------
1995 1994
-------- --------
Accounts receivable $ 657 $ (420)
Inventories 330 1,768
Prepaid expenses 172 (141)
Accounts payable and accrued liabilities (1,302) (4,001)
Income taxes payable 20 178
Deferred revenue (37) 69
Foreign currency equity adjustment (42) 377
-------- --------
$ (202) $ (2,170)
======== ========
<PAGE
10. UNITED STATES ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in
Canada ("Canadian GAAP") which in the case of the Company
differ in the following material respects from those generally
accepted in the United States ("U.S. GAAP").
(a) Under U.S. GAAP, financing and investing activities not
involving a receipt or outlay of cash are excluded from
the consolidated statement of changes in financial
position. Accordingly, the following financing
activities would not be presented in the consolidated
statement of changes in financial position for the 13
weeks ended July 1, 1995 but would be shown
supplementally.
Conversion of 8.5% convertible debentures $ (6,197)
Issue of capital stock on conversion of debentures $ 6,197
(b) Under U.S. GAAP, bank operating lines would not be
included as a component of the cash position presented in
the consolidated statement of changes in financial
position. The change in bank operating lines would be
presented as a financing activity and would therefore be
included in the determination of the increase or
decrease in cash position in the period.
(c) U.S. GAAP requires the calculation of primary earnings
per share. This figure is not materially different from
the basic earnings per share figure calculated under
Canadian GAAP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
------------
The consolidated financial statements for the first quarter ended July
1, 1995, 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. Note 10 to the consolidated financial
statements describes the impact, in the case of the Company, of
differences between accounting principles generally accepted in Canada
and the United States. All amounts are stated in U.S. dollars unless
otherwise indicated. C$ refers to Canadian dollars. References to
years are to fiscal years ended March 31.
Results of Operations - First Quarter Ended July 1, 1995
--------------------------------------------------------
The following table sets forth items derived from the quarterly
consolidated statements of income as a percentage of revenues for the
quarter ended July 1, 1995 and for each of the preceding four
quarters. The column in the table entitled "Percentage Change Quarter
1, 1996 vs 1995" represents the percentage change, either favourable
or (unfavourable), in the dollar amount of such items for the first
quarter of 1996 compared with the first quarter of 1995.
Percentage
Fiscal 1995 Fiscal 1996 Change
------------------------------------------ ----------- Quarter 1
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 1996 vs. 1995
--------- --------- --------- --------- --------- -------------
(Thousands of dollars)
Revenues $29,718 $30,660 $29,751 $30,382 $28,650 (3.6)%
======= ======= ======= ======= ======= =======
(Percentage of Revenues)
Revenues:
Product 69.8% 71.0% 68.4% 68.9% 67.8% (6.4)%
Service 30.2 29.0 31.6 31.1 32.2 2.9
------- ------- ------- ------- -------
100.0% 100.0% 100.0% 100.0% 100.0% (3.6
======= ======= ======= ======= =======
Gross Profit:
Product 47.5% 49.0% 47.7% 47.6% 50.2% (1.0)
Service 34.6 35.6 38.7 37.0 36.5 8.5
Combined 43.6 45.1 44.8 44.3 45.8 1.3
Expenses:
Sales & marketing 29.4 26.1 26.4 28.1 28.6 6.2
Administration & general 6.5 6.2 6.6 5.7 7.2 (7.4)
Research & development 8.1 8.4 8.9 8.4 9.1 (7.5)
Restructuring costs 2.3 - - - -
------- ------- ------- ------- -------
Income(loss)from operations (2.7) 4.4 2.9 2.1 0.9
Gain on sale of portfolio
investment - - 6.8 - -
Interest expense (2.7) (2.7) (2.7) (1.8) (0.7)
Interest income and foreign
exchange 0.2 0.3 0.2 0.4 -
------- ------- ------- ------- -------
Net income (loss) (5.2%) 2.0% 7.2% 0.7% 0.2%
======= ======= ======= ======= =======
Revenues
--------
The following table sets forth revenues by geographic segment
for the quarter ended July 1, 1995 and for each of the
preceding four quarters. The table also includes the change
in revenues, expressed as a percentage, in the first quarter
of 1996 compared to the corresponding period of 1995.
Percentage
Fiscal 1995 Fiscal 1996 Change
------------------------------------------ ----------- Quarter 1
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 1996 vs. 1995
--------- --------- --------- --------- --------- -------------
(Thousands of dollars)
United States $ 8,205 $ 8,085 $ 8,309 $ 7,948 $ 7,892 (3.8)%
Canada 5,736 6,184 5,434 5,119 5,185 (9.6)
United Kingdom 8,927 10,186 8,648 10,178 8,407 (5.8)
Holland/France 4,040 3,358 4,379 3,995 4,643 14.9
International markets 2,810 2,847 2,981 3,142 2,523 (10.2)
------- ------- ------- ------- -------
$29,718 $30,660 $29,751 $30,382 $28,650 (3.6)
======= ======= ======= ======= =======
In the first quarter of 1996 total revenues were $28.7
million representing a decrease of 3.6% from total revenues
of $29.7 million reported in the first quarter of 1995.
After adjusting for the impact of changes in foreign currency
exchange rates over the last twelve months, particularily the
strengthening of certain European currencies against the U.S.
dollar, total revenues declined 7.8% in the first quarter of
fiscal 1996 compared to the first quarter a year ago.
Product revenues for the first quarter of 1996 were $19.4
million. In the first quarter of 1995 such revenues were
$20.7 million. The 6.4% decline in product revenues in the
first quarter of 1996 compared to the first quarter a year
ago is due to a decrease in demand for the Company's
traditional products which has more than offset the growth in
more recently introduced products.
Revenues in the North American market (United States and
Canada) were $13.1 million in the first quarter of 1996, 6.2%
lower than the first quarter of 1995. The Company's European
direct sales markets (United Kingdom, Holland and France)
reported revenues expressed in U.S. dollars of $13.0 million
in the first quarter of 1996, essentially unchanged from the
first quarter of 1995. When expressed in their domestic
currencies, revenues in these markets declined 8.5% in the
first quarter of 1996 compared to the first quarter of 1995.
Revenues in the Company's other international markets were
$2.5 million in the first quarter of 1996 compared to $2.8
million in the first quarter a year ago.
Gross Profit
------------
Gross margin on product revenues (product revenues minus the
cost of product sales expressed as a percentage of product
revenues) was 50.2% in the first quarter of 1996 compared
with 47.5% in the first quarter of 1995. In general, the
combined effect of lower manufacturing costs following
restructuring actions taken in the fourth quarter of 1994 and
the first quarter of 1995 and a more favourable product mix,
has resulted in an improvement in the gross margin earned on
product revenues. However, quarterly fluctuations, such as
the improvement in the gross margin on product revenues in
the first quarter of 1996 compared to the four quarters of
1995 may not be indicative of a trend in future performance.
The gross margin on service revenues (service revenues less
service expenses expressed as a percentage of service
revenues) was 36.5% in the first quarter of 1996 and 34.6% in
the first quarter a year ago. The improvement in the service
margin in the first quarter of 1996 compared to the first
quarter of 1995 resulted from higher service revenues in the
first quarter of 1996 compared to the corresponding period a
year ago.
The combined gross profit (combined revenues minus cost of
product sales and service expenses) was $13.1 million in the
first quarter of 1996, essentially unchanged from the $13.0
million reported in the first quarter of 1995.
Operating Expenses
------------------
Operating expenses (sales and marketing, administration and
general, and research and development) were $12.9 in the
first quarter of 1996, compared to $13.1 million reported in
the first quarter a year ago. The decrease in operating
expenses occurred as a result of lower sales and marketing
expenses in the first quarter of 1996 compared to the first
quarter a year ago as a consequence of the functional
realignment which took place at the end of the first quarter
of 1995.
Restructuring costs of $0.7 million during the first quarter
of 1995 represented severance costs associated with the
elimination of approximately 70 additional positions at the
end of the first quarter in connection with an internal
functional realignment.
Since 1991, the Company has received funding of approximately
$1.4 million and $2.6 million respectively under two projects
approved through the Canadian federal government's
Microelectronics and Systems Development Program ("MSDP").
The amount that is potentially repayable is calculated
without interest as a royalty on revenues earned in the 10
years following the project completion date and is limited to
the amount of funding received.
The first MSDP project was completed on March 31, 1995 and
the Company began accruing the corresponding royalty at the
beginning of the current fiscal year. The royalty for this
project is 2% of consolidated gross revenues from the
resulting products. The second MSDP project is expected to be
completed during fiscal 1996 and the Company will commence
accruing the corresponding royalty at that time. The royalty
for this project is 1% of the Canadian subsidiary's total
product revenues. The royalty payments are due annually
between three and six months after the anniversary of the
project completion date. The Company expects that the funding
will be fully repaid within three to five years.
Income from Operations
----------------------
The Company reported income from operations of $0.3 million
on revenues of $28.7 million for the first quarter of 1996.
For the first quarter of 1995 the Company reported a loss
from operations of $0.8 million on revenues of $29.7 million.
Interest Expense
----------------
Interest expense for the first quarter of 1996 was $0.2
million compared with $0.8 million in the first quarter of
1995. The decrease in interest expense occurred primarily as
a result of the conversion to common shares of 8.5%
convertible debentures during the fourth quarter of 1995 and
the first quarter of 1996. The Company's obligation to pay
interest is limited only to those debentures which are
outstanding as of the semi-annual interest payment dates on
May 10 and November 10 each year. Lower utilization of bank
operating lines in the first quarter of 1996 compared to the
first quarter a year ago also contributed to the year-over-
year decrease in interest expense.
Net Income
----------
Net income for the first quarter of 1996 was $0.1 million, or
breakeven on a per share basis, versus a net loss of $1.6
million or $0.06 per share in the first quarter a year ago.
Liquidity and Capital Resources
-------------------------------
The Company recorded positive cash flow of $1.1 million during
the first quarter of 1996. During the twelve month period
since July 1, 1994 (represented by the final three quarters of
1995 and the first quarter of 1996) the Company has reported
positive cash flow of $14.6 million of which $13.2 million has
been provided by operating activities. At July 1, 1995 the
net cash position (cash and cash equivalents net of bank
operating lines) was $7.1 million compared with a net cash
position of $6.0 million at March 31, 1995 and net bank
borrowings (bank operating lines net of cash and cash
equivalents) of $7.5 million at July 1, 1994.
Cash provided by operating activities in the first quarter of
1996 was $1.4 million. Negative cash flow from operating
activities in the first quarter of 1995 was $2.7 million
inclusive of $2.3 million in payments for restructuring costs
which had been accrued in the fourth quarter of 1994.
At July 1, 1995, the Company's authorized bank operating
lines totalled $19.0 million. This included $15.4 million
from two committed credit facilities with a Canadian
chartered bank bearing interest at the bank's prime rate plus
0.5%. The additional authorized amount of $3.6 million
related to a demand facility with a bank in the United
Kingdom. The interest rate varies depending on borrowing
levels and ranges from 2.0% to 2.5% above the bank's base
rate.
The bank operating lines are secured by certain of the
accounts receivable, inventories and other assets of the
Company. The amount available for borrowing at any time
under the facilities is based on margin formulas relating to
levels of accounts receivable, inventories and other bank
<PAGE
covenants. Under such formulas, $14.8 million was available
to the Company at July 1, 1995 and $4.3 million was being
utilized. Cash and cash equivalents held as of that date
represented a further $11.3 million of cash resources
available to the Company. Cash and unused credit lines
totalled $21.8 million at July 1, 1995, compared to $20.8
million at March 31, 1995 and $7.8 million at July 1, 1994.
During the fourth quarter of 1995 and the first quarter of
1996 approximately 81% of the original principal amount of
the 8.5% convertible debentures, issued in November 1992,
were converted to common shares of the Company in accordance
with the terms of the debentures. At July 1, 1995
approximately 19% of the original principal amount of
debentures remained outstanding which, if converted, would
result in a maximum of 2,369,787 additional common shares
being issued. The remaining outstanding debentures represent
an unsecured direct obligation of the Company. After
November 10, 1995 any outstanding debentures are redeemable
by the Company provided that for the 20 trading days ending
with the fifth trading day preceding the date on which the
notice of redemption is first given, the weighted average
market price at which the shares have traded on the TSE and
NASDAQ is not less than 125% of the conversion price. At the
end of the first quarter of 1996 the closing price of the
Company's common shares on the Toronto Stock Exchange
represented more than 500% of the conversion price.
The Company believes that its current financial base together
with available credit facilities provides sufficient
financial resources to meet its short-term operating
requirements. The Company anticipates that its long-term
cash requirements will be satisfied through future operating
cash flows and the conversion or refinancing of term debt,
the majority of which relates to the remaining outstanding
debentures which it is anticipated will be converted to
common shares during the 1996 fiscal year either at the
option of the debenture holders on or before November 10,
1995 or as a result of redemption by the Company after
November 10, 1995.
II - OTHER INFORMATION
----------------------
Item 6(a) - Exhibits
--------------------
10.11 Consulting Agreement, dated as of March 1, 1995
between Thomas Vassiliades and the Company.
10.12 Credit Agreement, dated as of May 30, 1995,
between the Royal Bank of Canada and the Company.
10.13 Credit Agreement, dated as of May 30, 1995,
between the Royal Bank of Canada and Gandalf Canada
Limited/Gandalf Technologies Inc.
Item 6(b) - Report on Form 8-K
------------------------------
There were no reports on Form 8-K filed for the quarter ended
July 1, 1995.
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.
August 10, 1995 s/T.A. VASSILIADES
----------------------- ------------------
Date Thomas A. Vassiliades
Chairman, President and Chief
Executive Officer
August 10, 1995 s/W.R. MACDONALD
---------------------- ----------------
Date Walter R. MacDonald
Vice President, Finance
and Chief Financial Officer