FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of November 2004
Commission File No. 000-19865
CEDARA SOFTWARE CORP.
(Registrant's name)
6509 Airport Road
Mississauga, Ontario, Canada L4V 1S7
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40F.
Form 20-F X Form 40-F
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Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7):
Indicate by check mark whether by furnishing the information
contained in this Form, the registrant is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-_______________
Documents Included as Part of this Report:
No. Document
1. MD&A and Financial Statements for First Quarter Fiscal 2005
Document 1
CEDARA
Software with Vision
Management Discussion and Analysis
&
Financial Statements
First Quarter Fiscal Year 2005
www.cedara.com
MANAGEMENT DISCUSSION AND ANALYSIS
This Management Discussion and Analysis ("MD&A") was prepared as of November
8, 2004 and should be read in conjunction with Cedara Software Corp.'s
("Cedara" or the "Company") unaudited Consolidated Interim Financial
Statements and the notes thereto for the three months ended September 30, 2004
and the MD&A and the Consolidated Financial Statements and the notes thereto
for the year ended June 30, 2004. All financial information is presented in
Canadian dollars unless otherwise noted. The Company prepares its financial
statements in accordance with generally accepted accounting principles in
Canada ("Canadian GAAP").
Additional information about Cedara, including copies of continuous disclosure
materials such as the Company's annual information form, is available on
Cedara's website at http://www.cedara.com, or the SEDAR website at
http://www.sedar.com.
OVERVIEW OF THE COMPANY
Overview of the Business of the Company
Established in 1982, Cedara Software Corp. is a leading independent provider
of medical technologies used worldwide by key medical device manufacturers,
healthcare information technology companies, hospitals, imaging centres, and
medical clinics.
Cedara's Technologies and Markets
Many of Cedara's innovative medical technologies are sold through major
healthcare device manufacturers and information technology providers,
including GE, Siemens, Philips, Toshiba, Hitachi and Cerner.
Through the years Cedara's software has been deployed in thousands of
hospitals and clinics worldwide, including prestigious facilities such as
Johns Hopkins University School of Medicine; Shands Hospital, University of
Florida; University of California, Los Angeles; Lund University in Sweden; and
University Hospital of Geneva, Switzerland.
Cedara is unique in that its advanced medical imaging technologies are used in
all aspects of clinical workflow including:
o The operator consoles of many medical imaging devices
o Picture Archiving and Communications Systems (PACS)
o Sophisticated clinical applications that further analyze and
manipulate images
o The use of imaging in computer-assisted therapy
Cedara is also unique in another way: it has expertise and technologies that
span all the major digital imaging modalities and related subspecialties,
including magnetic resonance imaging (MRI), computed tomography (CT), positron
emission tomography (PET), nuclear medicine, digital X-ray, ultrasound,
mammography, cardiology, angiography, and fluoroscopy.
The Company generates revenue in three ways:
o by developing and licensing its software technology and products;
o through development of custom software for healthcare equipment
manufacturers; and
o through service and support provided to its customers.
As with many software companies, the Company is reliant on individual
transactions that can be material in any given quarter. In addition, the
quarterly revenue and earnings of the Company can fluctuate materially between
quarters, principally due to the timing of annual license contract renewals.
-1-
The Company anticipates that the healthcare imaging software market will
continue to grow over the next several years. At the same time, it is difficult
to forecast the Company's sales with precision due to the nature of the
Company's large, long-term sales contracts, and long sales cycles. To help
mitigate the Company's reliance on large, long-term sales contracts, the Company
has taken steps to add a new sales channel directly to hospitals, imaging
centres and radiology groups to complement its OEM channel. Additionally, on
October 8, 2004, the Company completed the acquisition of eMed Technologies
Corporation ("eMed"), a privately-held provider of PACS and web-based medical
imaging radiology solutions. Now a wholly-owned subsidiary of Cedara Software
Corp., eMed will immediately be a complementary addition to the Company. eMed's
sizable installed base of hospitals and imaging centres across the United States
will provide an opportunity for the eMed sales force to promote Cedara's
clinical applications and image management technologies. At the same time,
Cedara will use its extensive global channel to promote eMed solutions
worldwide. The Company expects that the acquisition will provide an opportunity
to capture greater market share and develop better product capabilities by
leveraging the strengths of two leading solution providers in the medical
information management market. The Company intends to continue to maximize
existing revenue opportunities, and to build a future of sustainable, more
predictable revenue through identifying new projects and opportunities. The
Company intends to continue to monitor and control its cost structure in an
effort to maintain cash positive operations. The operating results of the
Company as at September 30, 2004 do not include any impact of the eMed
acquisition.
Principal Products and Services
The Company believes it has one of the most diverse product and service offering
of any independent provider of medical imaging software. The Company's medical
imaging solutions are used in all aspects of clinical workflow including the
capture of patient digital images, the sharing and archiving of images,
sophisticated tools to analyze and manipulate images, and the use of imaging in
surgery. The Company is unique in that it has expertise and technologies that
span all the major digital imaging modalities and is deployed in hospitals and
clinics worldwide - approximately 28,000 medical imaging systems and
approximately 6,400 PACS workstations have been licensed to date.
In a clinical environment, medical images are created, viewed, used to diagnose
illnesses, stored, communicated and used in the treatment of diseases. Each
modality uses differing technology to acquire images and has unique needs in
viewing images, diagnosing illnesses with images, as well as in treating these
diseases with the aid of images. The Company has developed a number of advanced
technologies, products and services that are utilized in all of these areas.
FIRST QUARTER FISCAL 2005 BUSINESS HIGHLIGHTS
Significant events and actions taken in the first quarter of fiscal 2005
include:
o On September 9, 2004 the Company announced that NASDAQ had approved
Cedara's application to re-list its securities on the NASDAQ National
Market. As a result, trading of the Company's common shares resumed
on the NASDAQ National Market on September 14, 2004 under the symbol
"CDSW".
o On September 14, 2004 the Company announced that it had signed a
definitive agreement pursuant to which it would acquire all of the
issued and outstanding shares of eMed of Burlington, Massachusetts, a
privately-held provider of PACS and web-based medical imaging radiology
solutions. Cedara agreed to pay a cash consideration of US$48.0
million (approximately $62.0 million) for the acquisition as a result
of which eMed would become a wholly owned subsidiary of Cedara.
o On September 30, 2004 Fischer Imaging announced that it had begun
initial shipments of a new, leading edge digital mammography
workstation, the result of its collaboration with Cedara Software
Corp. The softcopy workstation, named SenoView Plus, is integrated
with Fischer's SenoScan(R) digital mammography system to provide
radiologists with powerful new capabilities for diagnosing breast
cancer.
-2-
Significant events and actions subsequent to quarter end:
o The Company completed the acquisition of eMed on October 8, 2004. In
accordance with terms disclosed when the original agreement was
announced, Cedara paid US$48.0 million in cash for eMed. The Company
financed the net cash disbursement of approximately US$29.0 million
after giving effect to cash reserves of eMed to complete the
transaction with approximately US$14.5 million from its own cash
reserves and approximately US$14.5 million from its new credit
facility with Royal Bank of Canada.
o On October 8, 2004 the Company entered into a $29.8 million credit
facility with Royal Bank of Canada ("RBC"). Under the credit facility,
RBC provided a term facility of up to $22.5 million to allow the
Company to finance part of the acquisition of eMed. The credit facility
also includes a revolving credit facility, a corporate VISA facility
and a foreign exchange credit facility in an aggregate amount of up to
$7.3 million for purposes of financing Cedara's general operating
requirements, office and travel expenses, and facilitating foreign
exchange transactions.
At the same time, the Company operating line of credit of $14.0 million
with the National Bank of Canada was cancelled.
o On October 20, 2004, the Company announced the election of Dr. Myrna
Francis as a new member to its Board of Directors at the Company's
Annual and Special Meeting held in Toronto on October 18, 2004.
FORWARD-LOOKING STATEMENTS
Certain statements contained in the unaudited Consolidated Financial
Statements and Notes, and this Management Discussion and Analysis, may
constitute forward-looking statements within the meaning of securities laws.
When used in these documents, the words, "may", "will", "should", "plan",
"intend", "anticipate", "believe", "estimate", "predict", "potential",
"continue", "expect" or similar expressions, concerning matters that are not
historical facts, as they relate to the Company or its management, are
intended to identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future events and are subject to
certain risks, uncertainties and assumptions. In particular, statements
relating to the healthcare imaging software market and market share, relating
to the Company's expectations concerning its licensed software products,
relating to the Company's expectations as to revenues, costs and cash flows,
relating to the sufficiency of capital to meet working capital and capital
expenditure requirements, and relating to the acquisition of eMed are
forward-looking statements. Many factors could cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance, or achievements that may be expressed or implied
by such forward-looking statements, including, among others:
o Dependence on major customers,
o Reliance on individual contracts,
o Fluctuations in quarterly financial results,
o Dependence on key personnel,
o Intense competition,
o Rapid technological change,
o Exchange rate fluctuations,
o Risks related to international operations,
o Dependence on intellectual property rights,
o Regulatory clearances and approvals for new products,
o Risks relating to product defects and product liability,
o Adverse consequences of financial leverage,
o Ability to service debt,
o Continued acceptance of Cedara's products, and
o Risks related to the acquisition of eMed,
-3-
and other risks detailed from time to time in other continuous disclosure
filings of the Company. There is also no guarantee or assurance that the Company
will be able to retain eMed's key employees or integrate eMed's employees,
products or technologies into operations or that the Company will be able to
execute a successful strategy and realize the revenue goals and control costs
relating to the acquisition. All of these factors could have a material adverse
impact on eMed's client base, its products and/or the consolidated business
operations. Should one or more of these risks or uncertainties materialize, or
should assumptions underlying the forward-looking statements prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated or expected. Forward-looking statements contained in the
unaudited Consolidated Financial Statements and Notes and this Management
Discussion and Analysis are based on the Company's current estimates,
expectations and projections, which the Company believes are reasonable as of
the current date. A reader should not place undue importance on forward looking
statements and should not rely upon them as of any other date. The Company does
not intend, and does not assume any obligation, to update these forward-looking
statements at any particular time.
RESULTS OF CONTINUING OPERATIONS
For the three months ended September 30, 2004, ("Q1 fiscal 2005") revenue was
$12.3 million compared to $10.1 million in Q1 of the previous fiscal year
("fiscal 2004"), an increase of 22%. The net income from continuing operations
for Q1 fiscal 2005 was $3.2 million or $0.10 per share ($0.10 per share on a
diluted basis) compared to a net income from continuing operations of $1.6
million or $0.07 per share ($0.06 on a diluted basis) in the same period in the
prior year. The improvement of $1.6 million in net income during the current
quarter was primarily a result of growth in revenues by $2.2 million and an
increase in net interest income of $0.5 million that was offset partially by
$1.2 million of unrealized foreign exchange losses and other increased expenses.
Revenue by Product Category
(in millions of dollars)
================================================================================
Variance
% of % of Increase/(Decrease)
2005 Total 2004 Total $ %
================================================================================
Software licenses $6.6 54% $6.2 61% $0.4 7%
Engineering services 4.3 35% 3.0 30% 1.3 42%
Support Services and other 1.4 11% 0.9 9% 0.5 57%
- -------------------------------------------------------------------------------
total $12.3 100% $10.1 100% $2.2 22%
================================================================================
License revenue during the first quarter of fiscal 2005 was $0.4 million or 7%
higher than in the same period last year. During Q1 of fiscal 2005, the Company
generated software license revenues from a number of existing and new customers,
including $1.0 million with Analogic Corporation ("Analogic"). In Q1 of the
prior year, software license revenue included a portion of the minimum $4.2
million arrangement with Philips Medical Systems ("Philips").
Engineering services revenue was up $1.3 million or 42% in Q1 fiscal 2005 as
compared to Q1 of fiscal 2004. Revenue from engineering services varies by the
number of active contracts and the individual characteristics of each contract,
including contract life cycle. In Q1 of fiscal 2005, 10 active engineering
services contracts generated revenue of $4.3 million, three of which were new
contracts that were not active in the same period last year. In Q1 of fiscal
2004, 11 active contracts produced revenue of $3.0 million. Engineering services
revenue in Q1 fiscal 2005 includes $2.4 million of revenue from Analogic. The
Company commenced development of certain technologies during the prior fiscal
year in anticipation of entering into contractual arrangements with prospective
customers, including Analogic.
Support services and other revenue include revenue from technical support
services, hardware or system based sales and other services. The increase in
revenue was due primarily to the sale of mammography clinical workstations which
are sold as a combined software and hardware solution. Support fees and other
revenue for Q1 fiscal 2005 were maintained at similar levels compared to Q1 of
fiscal 2004.
-4-
The decline in value of the United States dollar in Q1 fiscal 2005 compared to
Q1 fiscal 2004 had a negative impact on the overall revenue for the current
quarter. Substantially all of the Company's revenue is billed and received in
United States dollars.
Revenue by Geographic Region
(in millions of dollars)
===============================================================================
Variance
% of % of Increase/(Decrease)
2005 Total 2004 Total $ %
===============================================================================
United States $7.4 60% $2.7 27% $4.7 169%
Asia 3.9 32% 2.6 26% 1.3 51%
Europe 1.0 8% 4.8 47% (3.8) (79%)
- -------------------------------------------------------------------------------
Total $12.3 100% $10.1 100% $2.2 22%
===============================================================================
The increase in revenue from the United States represents primarily increased
license and engineering services revenue. Higher revenue from system sales of
newer products also contributed to the increased revenue from the United
States. Revenue from Asia increased, due primarily to the higher license
sales. Revenue from Europe was higher in Q1 fiscal 2004 compared to the
revenue in Q1 fiscal 2005 due primarily to revenue recognized in Q1 fiscal
2004 from the technology agreement signed with Philips.
Gross Margin
Gross margin was $9.9 million or 81% of revenue in Q1 fiscal 2005, an increase
of $2.2 million or 28% compared to $7.7 million or 77% of revenue in Q1 fiscal
2004. The gross margin of the Company is heavily influenced by the relative mix
of software licenses compared to other revenue sources, as software license
gross margins are considerably higher. Direct costs include personnel and other
costs related to delivering engineering services, third-party software costs
associated with software licenses, hardware costs, personnel-related support
services costs and other direct costs such as commissions and sales-related
taxes. The increase in gross margin was attributable in part to 7% higher
software license revenues on which the Company earns higher margins. The Company
also experienced higher margins on certain engineering services contracts in Q1
of fiscal 2005. The Company commenced development on certain technologies during
fiscal 2004 in anticipation of entering into contractual arrangements with
prospective customers, including Analogic. As a result, the direct costs
associated with these projects were expensed as incurred. During Q1 of fiscal
2005, the Company recorded revenue of $2.4 million under an arrangement with
Analogic, where a substantial portion of the costs had been expensed as incurred
in prior periods.
Operating Expenses
Total operating expenses for Q1 fiscal 2005 were $7.0 million, an increase of
$1.2 million or 20% from the $5.8 million incurred in same period for the
prior year. Excluding the $1.0 million of incremental unrealized foreign
exchange charges included in operating results for the quarter, the remaining
operating expenses were in line with the prior year quarter.
Cost control measures implemented by the Company during fiscal 2003 and fiscal
2004 resulted in the Company operating at a lower cost level. The Company
recently undertook several growth initiatives including developing a direct
sales channel, opening an office in China, regaining Cedara's listing on the
NASDAQ National Market, entering into a new banking relationship with the
Royal Bank of Canada and further steps towards assessing complementary revenue
streams and acquisition opportunities.
The increase in Q1 fiscal 2005 operating expenses is primarily explained by:
o $1.0 million in higher foreign exchange charges;
o $0.7 million in higher sales and marketing expenses;
o $0.4 million in increased general and administrative expenses;
-5-
o partially offset by savings of $0.4 million in research and development
expenses and $0.2 million in lower depreciation and amortization.
Research and development costs were $1.9 million for Q1 fiscal 2005 compared
to $2.3 million for the same period last year, down 17% or $0.4 million which
is attributable primarily to lower employee related costs. Research and
development costs for Q1 fiscal 2005 represent 16% of revenue in the quarter,
as compared to 23% of revenue in the same period in the prior year. The
Company continues to invest research and development resources in new software
technologies, partnering with various organizations and in maintaining and
enhancing the Company's existing line of products and technologies.
Sales and marketing expenses mainly consist of salaries, other employee
related costs, travel expenses and trade show expenses associated with
promoting, product managing, selling and marketing of the Company's products
and services. Sales and marketing costs for Q1 fiscal 2005 were up $0.7
million or 66% compared to the same period in previous year, due primarily to
adding direct-to-end user sales staff in the fourth quarter of fiscal 2004,
the new business operation in Shanghai, China and participation in two trade
shows in the quarter.
General and administrative expenses consist primarily of salaries and other
employee related costs of administrative personnel, professional fees,
investor related costs, insurance costs and facilities related expenditures.
General and administrative costs increased 23% or $0.4 million in Q1 fiscal
2005 compared with the same period of previous year. The cost increases are
attributable primarily to legal and listing fees associated with regaining the
Company's NASDAQ listing, increased commercial legal expenses, costs related
to entering into the new banking relationship and a marginal increase in
employee related expenses.
Other charges increased $0.6 million in Q1 of fiscal 2005 compared to the same
period in the prior year as a result of an unfavorable swing of $1.0 million in
predominantly unrealized foreign exchange charges incurred in Q1 fiscal 2005.
The foreign exchange losses in Q1 fiscal 2005 were partially offset by a decline
in computer equipment lease costs of $0.2 million and lower bad debt and other
expenses by $0.2 million. A substantial portion of the foreign exchange charges
during Q1 fiscal 2005 are represented by unrealized translation losses on the
Company's accounts receivable balances and cash equivalents denominated in
United States dollars due to the significant decline in the United States dollar
compared to the Canadian dollar. Substantially all of the Company's revenue is
billed and received in United States dollars.
Intangible asset amortization and capital asset depreciation charges decreased
in Q1 fiscal 2005 compared to the same period in the prior year due to certain
intangible assets becoming fully amortized. The Company has not needed to
sustain the level of capital asset investment of previous fiscal years,
resulting in certain capital assets becoming fully depreciated.
The Company earned interest income of $0.2 million in Q1 fiscal 2005 compared
to $0.3 million of interest expense in Q1 fiscal 2004. The Company's cash
position improved significantly at the end of the third quarter of fiscal 2004
as a result of the Company's successful equity financing of $50.0 million. The
Company's two major interest bearing liabilities in the prior year, the
operating line of credit and the Convertible Debentures, were settled during
the third quarter of fiscal 2004. The Company earns interest income from its
cash balances with banks and liquid short-term investments.
QUARTERLY OPERATING RESULTS
The following table summarizes selected unaudited quarterly operating results
for each of the eight most recent quarters ended on the dates indicated below.
This information should be read in conjunction with the Company's quarterly
unaudited and annual audited consolidated financial statements (including
notes). The operating results for each quarter are not necessarily indicative
of results for any future period, and should not be relied on to predict the
Company's future performance.
-6-
===================================================================================================================================
Summary Table of Unaudited Quarterly Operating Results
(In millions of dollars Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
except share amounts) 2004 2004 2004 2003 2003 2003 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Revenue $ 12.3 $ 14.7 $ 13.4 $ 12.2 $ 10.1 $ 6.6 $ 9.0 $ 8.3
Net income (loss) from
continuing operations $ 3.2 $ 4.9 $ 5.1 $ 4.0 $ 1.6 $ (3.7) $ (1.6) $ (3.9)
Income (loss) from
discontinued operations - - - $ (0.1) $ 0.1 - - -
Net income (loss) $ 3.2 $ 4.9 $ 5.1 $ 3.9 $ 1.7 $ (3.7) $ (1.6) $ (3.9)
Earnings (loss) per share
from continuing operations:
Basic $ 0.10 $ 0.16 $ 0.20 $ 0.16 $ 0.07 $ (0.15) $ (0.07) $ (0.16)
Diluted $ 0.10 $ 0.15 $ 0.18 $ 0.14 $ 0.06 $ (0.15) $ (0.07) $ (0.16)
Earnings (loss) per share:
Basic $ 0.10 $ 0.16 $ 0.20 $ 0.16 $ 0.07 $ (0.15) $ (0.07) $ (0.16)
Diluted $ 0.10 $ 0.15 $ 0.18 $ 0.14 $ 0.06 $ (0.15) $ (0.07) $ (0.16)
Weighted average shares
outstanding:
Basic 31,378,091 31,043,959 26,007,932 24,168,495 23,954,467 24,157,621 24,157,621 24,157,621
Diluted 33,485,858 33,341,097 28,749,093 27,762,206 26,427,255 24,157,621 24,157,621 24,157,621
===================================================================================================================================
Off-Balance Sheet Arrangements
In the normal course of its business, the Company is expected to perform its
obligations under contractual business arrangements with its customers and
suppliers. There are no commitments for capital expenditures or any
off-balance sheet arrangements that have, or are reasonably likely to have, a
current or future effect on the results of operations or financial condition
of the Company.
RESULTS OF DISCONTINUED OPERATIONS
During Q1 fiscal 2005, the Company provided services and licenses to Carl Zeiss
Inc. ("Zeiss") in partial settlement of non-cash liabilities under the terms of
a settlement agreement between Zeiss and the Company. Further details on
discontinued operations can be found in note 4 to the Unaudited Consolidated
Financial Statements.
CRITICAL ACCOUNTING ESTIMATES
The preparation of the Company's consolidated financial statements in accordance
with Canadian GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities as at the dates of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting periods.
These estimates and assumptions require management's most difficult, subjective
or complex judgments, about the effect of matters that are inherently uncertain.
As a result, the amounts reported for these items could be different if
different assumptions were used, or if conditions change in the future.
Allowance for doubtful accounts
The Company maintains allowances for losses that it expects will result from
customers who do not make their contractually required payments. The allowance
is estimated based on the likelihood of recovering the accounts receivable. The
estimate is based on past experience, taking into account current and expected
collection trends.
If economic conditions decline and customer losses increase, the allowance for
doubtful accounts will increase by recording an additional expense to the
statement of operations.
-7-
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment on a regular basis or
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of capital assets is measured by
comparison of their carrying amount with the undiscounted projected future net
cash flows that the long-lived assets are expected to generate. If the carrying
value exceeds the estimated amount recoverable, a write down equal to the excess
of the carrying value over the asset's fair value is charged to the consolidated
statement of operations.
The Company assesses the recoverability of intangible assets with finite lives
by determining whether the carrying amounts can be recovered through
undiscounted projected future net cash flows. The amount of impairment, if any,
is measured based on undiscounted projected future net cash flows relative to
the carrying amount of the asset.
Goodwill is tested for impairment annually or more frequently if events or
changes in circumstances indicate that the asset might be impaired. The
impairment test is carried out in two steps. In the first step, the carrying
amount of the reporting unit is compared with its fair value. When the fair
value of a reporting unit exceeds its carrying amount, goodwill of the reporting
unit is considered not to have been impaired and the second step of the
impairment test becomes unnecessary. The second step is carried out when the
carrying amount of a reporting unit exceeds its fair value, in which case the
implied fair value of the reporting unit's goodwill is compared with its
carrying amount to measure the amount of the impairment loss, if any. The
implied fair value of goodwill is determined in the same manner as the value of
goodwill is determined in a business combination, using the fair value of the
reporting unit as if it was the purchase price. When the carrying amount of
reporting unit goodwill exceeds the implied fair value of the goodwill, an
impairment loss is recognized in an amount equal to the excess and is presented
as a separate line item in the statement of operations.
The determination of impairment requires that management make estimates and
exercise judgment in evaluating the fair value of goodwill. In order to do this
it is necessary to identify the reporting unit associated with the goodwill and
to assess the value of the goodwill in the context of that reporting unit. It
has been determined that the Company consists of a single reporting unit. As a
result, goodwill is tested for impairment at a corporate level. The Company uses
the quoted market price of its shares as a basis for fair value measurement.
Income Taxes
The Company believes that it has adequately provided for income taxes based on
all of the information that is currently available. Tax filings are subject to
audits, which could materially change the amount of current and future income
tax assets and liabilities. As outlined in Note 17 to the audited consolidated
annual financial statements of the Company, a full valuation allowance has been
taken against all future tax assets of the Company, resulting in no future tax
asset being recorded in the financial statements.
ADOPTION OF ACCOUNTING POLICIES
Effective July 1 2004, the Company adopted CICA Section 1100, Generally Accepted
Accounting Principles and 1400 "General Standards of Financial Statement
Presentation", which establish standards for financial reporting and financial
statement presentation in accordance with GAAP. The standards define primary
sources of GAAP and require that an entity apply every relevant primary source.
The adoption of these standards did not have a material impact on the Company's
financial statements.
Effective July 1, 2004, the Company adopted the CICA Accounting Guideline (AcG)
13, "Hedging Relationships". This guideline addresses the identification,
designation, documentation and effectiveness of hedging relationships for the
purpose of applying hedge accounting. The guideline establishes certain criteria
for the application of hedge accounting and the discontinuance of hedge
accounting. EIC 128, "Accounting for Trading, Speculative or Non-Hedging
Derivative Financial Instruments", requires that any derivative financial
instrument not designated as an AcG 13 compliant hedge relationship be measured
at fair value with changes
-8-
in fair value recorded in current income. The Company did not enter into any
hedging contracts during the three months ended September 30, 2004.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated balance sheets as at September 30, 2004 and June
30, 2004 are summarized as follows:
Consolidated Balance Sheets
================================================================================
September 30, June 30,
(In millions of dollars) 2004 2004
- --------------------------------------------------------------------------------
Current assets of continuing operations $ 62.6 $ 60.0
Less: Current liabilities of continuing operations (5.7) (5.1)
- --------------------------------------------------------------------------------
Working capital of continuing operations 56.9 54.9
Current liabilities of discontinued operations (0.2) (1.0)
- --------------------------------------------------------------------------------
Working capital 56.7 53.9
Capital assets 2.0 2.2
Long-term investment 0.5 0.5
Goodwill 9.1 9.1
Deferred acquisition costs 0.8 -
Intangible assets 0.3 0.4
- --------------------------------------------------------------------------------
$ 69.4 $ 66.1
================================================================================
Represented by:
Shareholders' equity 69.4 66.1
- --------------------------------------------------------------------------------
$ 69.4 $ 66.1
================================================================================
At September 30, 2004, the Company had working capital of $56.7 million, an
improvement of $2.8 million over the working capital position at June 30, 2004.
The improvement was primarily a result of increased accounts receivable balances
of $4.5 million offset by a reduction in the cash and cash equivalents of $2.1
million. Liquidity of the Company is expected to be sustained principally
through cash provided by operations, with short-term investments and highly
liquid cash-equivalent instruments available to provide additional sources of
cash.
Continuing operating activities used cash of $0.7 in Q1 fiscal 2005, compared to
$0.6 million of cash used in Q1 fiscal 2004. The cash usage from operating
activities in Q1 fiscal 2005 resulted mainly from $5.4 million increased working
capital requirements partially offset by $4.7 million of cash generated from
operations before working capital changes.
Investing activities consumed cash of $0.9 million in Q1 fiscal 2005 compared to
cash used of $0.3 million in Q1 fiscal 2004. The net cash outflow from investing
activities during the current quarter was primarily a result of deferred
acquisition costs incurred up to September 30, 2004 related to the acquisition
of eMed which was completed on October 8, 2004. On closing of the acquisition,
the deferred acquisition costs will form part of the acquisition consideration.
Financing activities for Q1 fiscal 2005 generated cash of $0.1 million compared
to $1.2 million in Q1 fiscal 2004. The cash generated from financing activities
in the current quarter reflects the cash inflow from the issue of shares on
exercise of employee stock options.
On October 8, 2004 the Company entered into a $29.8 million credit facility with
RBC. Under the credit facility, RBC provided an acquisition term facility of up
to $22.5 million to allow Cedara to finance part of the acquisition of all of
the issued and outstanding shares of eMed on October 8, 2004. The Company
accessed approximately $19.0 million of the available $22.5 million to
consummate the acquisition of eMed. The remaining unused portion of the
acquisition term facility was then cancelled. The new credit facility also
includes a revolving credit facility, a corporate VISA facility and a foreign
exchange credit facility in an aggregate amount of up to $7.3 million for
purposes of financing Cedara's general operating requirements,
-9-
office and travel expenses, and facilitating foreign exchange transactions. At
the same time, the Company's operating line of credit of $14.0 million with the
National Bank of Canada was cancelled.
As of September 30, 2004, the Company's principal sources of liquidity consisted
of cash and short-term investments of $49.4 million, accounts receivable of
$12.0 million, The National Bank credit facility of $14.0 million, and ongoing
future operating cash flows. The Company's cash requirements in the short-term
relate to the ongoing funding of its operations and growth initiatives and
management believes the results of the above will provide sufficient operating
cash flows to meet the Company's cash requirements during fiscal 2005.
The Company intends to use the cash resources available to finance any future
working capital needs that cannot be met through cash provided from operations
and to finance any future strategic acquisitions or partnerships that support
the Company's growth objectives. The timing and amount of actual expenditures
will be based on many factors, including finding the right partners, ongoing
cash flows and the growth of the Company's business. In the interim, the Company
intends to invest the funds in short-term, investment grade, interest bearing
securities, in government securities or in bank accounts.
Acquisition of eMed Technologies Corporation
On September 14, 2004, the Company announced that it had entered into a
definitive agreement pursuant to which it will acquire all of the issued and
outstanding shares of eMed of Burlington, Massachusetts, a privately-held
provider of PACS and web-based medical imaging radiology solutions. The
transaction closed on October 8, 2004 with the Company acquiring all of eMed's
shares for cash consideration of US$48.0 million (approximately C$62.0 million).
For the year ended December 31, 2003, eMed posted approximately US$24.0 million
in revenue, US$3.0 million in net income and US$5.0 million in cash flow from
operating activities. On closing, eMed's balance sheet included cash of
approximately US$19.0 million and no debt. The Company financed the net cash
disbursement of approximately US$29.0 million to complete the transaction with
approximately US$14.5 million from its own cash reserves and approximately
US$14.5 million from its new credit facility with RBC. The results of eMed's
operations will be consolidated in the Company's financial statements starting
with the quarter ending December 31, 2004.
-10-
CEDARA SOFTWARE CORP.
Consolidated Balance Sheets
(In thousands of Canadian dollars)
=======================================================================================================================
September 30, 2004 June 30, 2004
- -----------------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 38,432 $ 40,510
Short-term investments 10,962 10,902
Accounts receivable 11,960 7,449
Inventory 325 268
Prepaid expenses and other assets 924 881
- -----------------------------------------------------------------------------------------------------------------------
62,603 60,010
Capital assets 1,968 2,201
Long-term investment 510 510
Goodwill 9,053 9,053
Deferred acquisition costs 772 -
Intangible assets 370 373
- -----------------------------------------------------------------------------------------------------------------------
$ 75,276 $ 72,147
=======================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,710 $ 4,207
Deferred revenue 976 861
Current liabilities of discontinued operations (note 4) 199 986
- -----------------------------------------------------------------------------------------------------------------------
5,885 6,054
Non-current portion of provision for loss on sublease 30 44
Shareholders' equity:
Capital stock 161,608 161,536
Contributed surplus 439 388
Deficit (92,686) (95,875)
- -----------------------------------------------------------------------------------------------------------------------
69,361 66,049
Subsequent events (notes 3, 7 and 9)
- -----------------------------------------------------------------------------------------------------------------------
$ 75,276 $ 72,147
=======================================================================================================================
See accompanying notes to unaudited consolidated financial statements
-11-
CEDARA SOFTWARE CORP.
Unaudited Consolidated Statements of Operations
(In thousands of Canadian dollars, except per share amounts)
=======================================================================================================================
Three months ended September 30
-------------------------------
2004 2003
- -----------------------------------------------------------------------------------------------------------------------
Revenue $ 12,341 $ 10,103
Direct costs 2,404 2,364
- -----------------------------------------------------------------------------------------------------------------------
Gross margin 9,937 7,739
Expenses:
Research and development 1,918 2,310
Sales and marketing 1,688 1,015
General and administration 1,913 1,554
Severance costs 79 21
Other charges (note 6) 1,069 435
Amortization of intangible assets 13 56
Depreciation and amortization 303 449
- -----------------------------------------------------------------------------------------------------------------------
6,983 5,840
- -----------------------------------------------------------------------------------------------------------------------
Income before interest expense 2,954 1,899
Interest income (expense), net 235 (266)
- -----------------------------------------------------------------------------------------------------------------------
Income from continuing operations 3,189 1,633
Income from discontinued operations (note 4) - 53
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 3,189 $ 1,686
- -----------------------------------------------------------------------------------------------------------------------
Earnings per share from continuing operations (note 8):
Basic $ 0.10 $ 0.07
Diluted $ 0.10 $ 0.06
Earnings per share (note 8):
Basic $ 0.10 $ 0.07
Diluted $ 0.10 $ 0.06
=======================================================================================================================
See accompanying notes to unaudited consolidated financial statements
-12-
CEDARA SOFTWARE corp.
Unaudited Consolidated Statements of Shareholders' Equity
(In thousands of Canadian dollars)
==============================================================================================================================
Total
Shareholders'
Contributed Equity
Common Shares Warrants Surplus Deficit (deficiency)
- ------------------------------------------------------------------------------------------------------------------------------
Number Amount Number Amount
- ------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2003 24,157,621 $106,328 605,636 $ 3,260 $ - $(111,441) $ (1,853)
Net income for the year - - - - - 1,686 1,686
- ------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 2003 24,157,621 $106,328 605,636 $ 3,260 $ - $(109,755) (167)
- ------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2004 31,540,267 $161,536 - - $ 388 $ (95,875) $ 66,049
Net income for the period - - - - - 3,189 3,189
Issue of shares on exercise of
stock options 20,698 72 - - - - 72
Stock-based compensation expense - - - - 51 - 51
- ------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 2004 31,560,965 $161,608 - - $ 439 $ (92,686) $ 69,361
==============================================================================================================================
See accompanying notes to unaudited consolidated financial statements
-13-
CEDARA SOFTWARE CORP.
Unaudited Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
========================================================================================================================
Three months ended September 30
2004 2003
- -----------------------------------------------------------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Net income from continuing operations $ 3,189 $ 1,633
Items not involving cash:
Depreciation and amortization 316 505
Accretion of interest on convertible subordinated debentures - 18
Stock-based compensation charges 51 -
Other 1,103 50
- -----------------------------------------------------------------------------------------------------------------------
4,659 2,206
- -----------------------------------------------------------------------------------------------------------------------
Change in non-cash operating working capital:
Accounts receivable (5,915) (2,769)
Inventory (57) (7)
Prepaid expenses and other assets (43) 310
Accounts payable and accrued liabilities 509 (1,121)
Deferred revenue 167 780
- -----------------------------------------------------------------------------------------------------------------------
(5,339) (2,807)
- -----------------------------------------------------------------------------------------------------------------------
(680) (601)
Investing activities:
Increase in deferred acquisition costs (772) -
Increase in short-term investments (60) -
Additions to intangible assets (10) (34)
Additions to capital assets (68) (230)
- -----------------------------------------------------------------------------------------------------------------------
(910) (264)
Financing activities:
Increase in bank indebtedness - 1,229
Issue of shares on exercise of stock options 72 -
- -----------------------------------------------------------------------------------------------------------------------
72 1,229
- -----------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (560) -
- -----------------------------------------------------------------------------------------------------------------------
Change in cash and cash equivalents from continuing operations (2,078) 364
Change in cash and cash equivalents from discontinued operations (note 4) - (364)
Cash and cash equivalents, beginning of period 40,510 -
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 38,432 $ -
========================================================================================================================
Supplemental cash flow information
Cash paid for:
Interest $ - $ 203
Taxes $ - $ -
Cash received for:
Interest $ 226 $ -
========================================================================================================================
See accompanying notes to unaudited consolidated financial statements
-14-
CEDARA SOFTWARE CORP.
Unaudited Notes to Consolidated Financial Statements
(In thousands of Canadian dollars, except per share and per option amounts)
Three months ended September 30, 2004 and September 30, 2003
- --------------------------------------------------------------------------------
1. Significant accounting policies:
The disclosures contained in these unaudited interim consolidated
financial statements do not include all disclosures required under
generally accepted accounting principles (GAAP) for annual financial
statements. The unaudited interim consolidated financial statements
should be read in conjunction with the audited annual consolidated
financial statements for the year ended June 30, 2004.
Management believes these unaudited interim consolidated financial
statements include all adjustments, including normal recurring
adjustments, necessary to present fairly the financial position of the
Company as at September 30, 2004 and the results of its operations and
its cash flows for the three months ended September 30, 2004 and 2003.
Results for the three months ended September 30, 2004 are not
necessarily indicative of the results to be expected for the entire
year.
The unaudited interim consolidated financial statements are based upon
accounting policies consistent with those used and described in the
annual consolidated financial statements, except as herein noted:
Effective July 1 2004, the Company adopted CICA Section 1100, Generally
Accepted Accounting Principles and 1400 "General Standards of Financial
Statement Presentation", which establish standards for financial
reporting and financial statement presentation in accordance with GAAP.
The standards define primary sources of GAAP and require that an entity
apply every relevant primary source. The adoption of these standards
did not have a material impact on the Company's financial statements.
Effective July 1, 2004, the Company adopted the CICA Accounting
Guideline (AcG) 13, Hedging Relationships. This guideline addresses the
identification, designation, documentation and effectiveness of hedging
relationships for the purpose of applying hedge accounting. The
guideline establishes certain criteria for the application of hedge
accounting and the discontinuance of hedge accounting. EIC 128,
Accounting for Trading, Speculative or Non-Hedging Derivative Financial
Instruments, requires that any derivative financial instrument not
designated as an AcG 13 compliant hedge relationship be measured at
fair value with changes in fair value recorded in current income. The
Company did not enter into any hedging contracts during the three
months period ended September 30, 2004.
2. Transactions with Analogic Corporation:
During the three months ended September 30, 2004, the Company earned
license revenue of $1,000 and engineering services revenue of $2,400
from Analogic. The rates charged to Analogic approximate the fair
market value of similar product and services.
3. Bank operating facility:
At September 30, 2004, the Company had an operating line of credit of
$14,000 bearing interest at prime plus 1/2%. The operating line was
secured by a general security agreement granting a first security
interest in all of the Company's present and after-acquired property to
National Bank of Canada ("NBC").
Subsequent to September 30, 2004, the operating line of $14,000 and the
general security agreement with the NBC were cancelled and the Company
entered into a $29,750 credit facility with the Royal Bank of Canada
("RBC"). Under the new credit facility, RBC will provide a term facility
-15-
CEDARA SOFTWARE CORP.
Unaudited Notes to Consolidated Financial Statements
(In thousands of Canadian dollars, except per share and per option amounts)
Three months ended September 30, 2004 and September 30, 2003
- --------------------------------------------------------------------------------
of up to $22,500 to allow the Company to finance part of the acquisition
of eMed Technologies Corporation ("eMed"). The credit facility also
includes a revolving credit facility, a corporate VISA facility and a
foreign exchange credit facility in an aggregate amount of up to $7,250
for purposes of financing the Company's general operating requirements,
office and travel expenses, and facilitating foreign exchange
transactions. The credit facility is secured by a general security
agreement granting a first security interest in all of the Company's
present and after acquired property to RBC.
4. Discontinued operations:
The following summarizes the balance sheet, statement of operations and
statement of cash flows information for the Company's discontinued
operations:
-------------------------------------------------------------------------
Balance Sheet September 30, June 30,
2004 2004
-------------------------------------------------------------------------
Current liabilities $ 199 $ 986
-------------------------------------------------------------------------
Net liabilities of discontinued operations $ 199 $ 986
-------------------------------------------------------------------------
The Company was obligated to pay US$1,500 over 18 months commencing
April 2002 and ending in September 2003, and to provide US$1,500 in
software licenses and/or services to Carl Zeiss Inc. ("Zeiss") during
the period December 10, 2001 to December 1, 2004 in settlement of
discontinued operations liabilities. At September 30, 2003, the Company
had fully paid out the liability of US$1,500 payable in cash. During
the three months ended September 30, 2004, the Company provided
services of $309 and licenses of $514 in partial settlement of the
remaining non-cash liabilities (services and licenses provided during
three months ended September 30, 2003 - Nil).
Included in current liabilities at September 30, 2004, is the Company's
remaining obligation to Zeiss, as noted above, of $135 (June 30, 2004 -
$957; September 30, 2003 - $1,955).
=========================================================================
Three months ended September 30
--------------------------------
Statement of Operations 2004 2003
-------------------------------------------------------------------------
Revenue $ - $ -
Income from Operations - -
Income from discontinued operations $ - $ 53
=========================================================================
Earnings (loss) per share from
discontinued operations:
Basic $ - $ -
Diluted $ - $ -
=========================================================================
=========================================================================
Three months ended September 30
--------------------------------
Statement of Cash Flows 2004 2003
-------------------------------------------------------------------------
Operating activities $ - $ (364)
Financing activities - -
Investing activities - -
-------------------------------------------------------------------------
Cash used in discontinued operations $ - $ (364)
=========================================================================
-16-
CEDARA SOFTWARE CORP.
Unaudited Notes to Consolidated Financial Statements
(In thousands of Canadian dollars, except per share and per option amounts)
Three months ended September 30, 2004 and September 30, 2003
- --------------------------------------------------------------------------------
5. Segmented information and major customers:
The Company develops and markets diagnostic imaging, image management,
and software products for integration with medical solutions offered by
world leaders in the healthcare sector. The Company's products include
2D and 3D medical imaging software applications, components, platforms,
and custom engineering solutions. The Company serves one industry
segment, medical imaging and related information solutions.
All of the Company's revenues are exports as follows:
=========================================================================
Three months ended September 30
--------------------------------
2004 2003
-------------------------------------------------------------------------
United States $ 7,440 $ 2,768
Asia 3,898 2,574
Europe 1,003 4,761
-------------------------------------------------------------------------
$ 12,341 $ 10,103
=========================================================================
The following are product and service revenues of the Company:
=========================================================================
Three months ended September 30
--------------------------------
2004 2003
-------------------------------------------------------------------------
Software licenses $ 6,611 $ 6,171
Engineering services 4,334 3,042
Services and other 1,396 890
-------------------------------------------------------------------------
$ 12,341 $ 10,103
=========================================================================
All of the assets of continuing operations are located in North
America. Revenues to customers that individually generated more than
10% of revenue are as follows:
=========================================================================
Three months ended September 30
--------------------------------
2004 2003
-------------------------------------------------------------------------
Customer A 27% -
Customer B 12% 1%
Customer C 17% 16%
Customer D 1% 43%
Customer E 2% 11%
=========================================================================
-17-
CEDARA SOFTWARE CORP.
Unaudited Notes to Consolidated Financial Statements
(In thousands of Canadian dollars, except per share and per option amounts)
Three months ended September 30, 2004 and September 30, 2003
- --------------------------------------------------------------------------------
6. Other charges:
=========================================================================
Three months ended September 30
--------------------------------
2004 2003
-------------------------------------------------------------------------
Bad debt expense $ (62) $ 45
Computer and equipment operating leases 46 201
Foreign exchange charges 1,161 166
Other (income) expense (76) 23
-------------------------------------------------------------------------
$ 1,069 $ 435
-------------------------------------------------------------------------
7. Stock-based compensation:
The Company issues stock options under the terms of its stock option
plan. At the Annual and Special Meeting held in Toronto on October 18,
2004, the shareholders of the Company provided approval to amend the
Company's Stock Option Plan to increase the maximum number of stock
options which may be issued under the Plan from 4,200,000 options to
5,700,000 options.
The Company accounts for stock options granted under the provisions of
CICA Section 3870 "Stock-based Compensation and Other Stock-based
Payments" for options granted under its stock option plan. CICA Section
3870 requires all stock-based compensation awards be expensed based on
their fair value for fiscal years beginning on or after January 1,
2004. During the fourth quarter of 2004, as permitted under the
transitional provisions of the amended CICA Section 3870, the Company
prospectively adopted the fair value method of accounting for employee
stock based awards, granted on or after July 1, 2003. This resulted in
stock based compensation expense of $51 during the current quarter and
recorded in the statement of operations as follows: cost of sales - $9,
research and development - $23, sales and marketing $13, and general
and administrative - $6. For the options granted during the year ended
June 30, 2003, for which no charge has been recorded, the Company is
required to provide pro-forma disclosure of the net income and earnings
per share, as if the fair value-based method, as opposed to the
intrinsic value based method of accounting for employee stock options,
had been applied. The disclosures in the following table show the
Company's net income and earnings per share on a pro-forma basis using
the fair value method, on a straight-line basis, as determined by using
a Black-Scholes option pricing model.
=========================================================================
Three months ended September 30
--------------------------------
2004 2003
-------------------------------------------------------------------------
Net income - as reported $ 3,189 $ 1,686
Estimated stock-based compensation
costs for the period (77) (95)
-------------------------------------------------------------------------
Net income - pro-forma $ 3,112 $ 1,591
=========================================================================
Pro-forma earnings (loss) per share:
Basic $ 0.10 $ 0.07
Diluted $ 0.09 $ 0.06
=========================================================================
The weighted average grant date fair value of options granted was
calculated as follows using a Black-Scholes option pricing model with
the following assumptions:
-18-
CEDARA SOFTWARE CORP.
Unaudited Notes to Consolidated Financial Statements
(In thousands of Canadian dollars, except per share and per option amounts)
Three months ended September 30, 2004 and September 30, 2003
- --------------------------------------------------------------------------------
=========================================================================
Three months ended September 30
--------------------------------
2004 2003
-------------------------------------------------------------------------
Number of options issued - -
Weighted average grant date
fair value of each option - -
Assumptions:
Risk free interest rates 4.0% 4.0%
Average expected life in years 5.0 5.0
Expected dividend yield - -
Volatility 85% 85%
=========================================================================
8. Earnings per share:
The weighted average number of common shares outstanding is as follows:
=========================================================================
Three months ended September 30
--------------------------------
2004 2003
-------------------------------------------------------------------------
Weighted average number of common
shares outstanding, for
basic earnings per share 31,378,091 23,954,467
Shares held as security on
share purchase loans 165,834 203,154
Incremental shares from assumed
conversion of employee stock options 1,941,933 332,940
Incremental shares from assumed
conversion of share purchase warrants - 1,936,694
-------------------------------------------------------------------------
Weighted average number of common
shares outstanding, for diluted
earnings per share 33,485,858 26,427,255
=========================================================================
There were no anti-dilutive options that were excluded from the
calculation for the three months ended September 30, 2004 (2003 -
1,871,334).
9. Acquisition of eMed Technologies Corporation:
On September 14, 2004, the Company announced that it had entered into a
definitive agreement pursuant to which it would acquire all of the
issued and outstanding shares of eMed Technologies Corporation ("eMed")
of Burlington, Massachusetts, a privately-held provider of Picture
Archiving and Communications Systems ("PACS") and web-based medical
imaging radiology solutions. The transaction closed on October 8, 2004
with the Company acquiring all of eMed's outstanding shares for cash
consideration of US$48,000. The Company financed the acquisition
purchase price of US$48,000 with US$19,000 of eMed's cash reserves,
approximately US$14,500 of the Company's cash reserves and
approximately US$14,500 from the new credit facility with RBC
Net assets acquired at the date of acquisition include cash, accounts
receivable, inventory, other current assets identifiable, intangible
assets and goodwill. This acquisition will be accounted for under the
purchase method. The Company is in the process of finalizing the
allocation of the purchase price to the net assets acquired at the date
of acquisition. The Company has retained the services of an independent
valuator to assist in the purchase price allocation. The results of
eMed's operations will be consolidated in the Company's financial
statements starting with the quarter ending December 31, 2004.
-19-
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.
November 16, 2004
CEDARA SOFTWARE CORP.
By: /s/ Brian Pedlar
------------------------
Brian Pedlar
Chief Financial Officer