SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
Form 10-QSB
QUARTERLYREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
Commission file number 0-25680
WAVERIDER COMMUNICATIONS INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 33-0264030
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
255 Consumers Road, Suite 500, Toronto, Ontario M2J 1R4 (Address of
principal executive offices and Zip (Postal) Code)
(416) 502-3200
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirement for the past 90 days.
Yes __X__; No _____
Applicable only to corporate issuers:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
May 7, 2003: 128,118,058 Common shares, $.001 par value.
Transitional Small Business Disclosure Format: (check one):
Yes _____; No __X__
WAVERIDER COMMUNICATIONS INC.
FORM 10 - QSB
For the Period Ended March 31, 2003
INDEX
Page
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 3-9
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis
or Plan of Operation 10-13
Item 3. Controls and Procedures 14
PART II OTHER INFORMATION 14
Item 5. Other Information 14
Item 6. Reports on Form 8-K 14
Signatures 14
Certifications 15-16
2
PART I. FINANCIAL INFORMATION
WaveRider Communications Inc.
CONSOLIDATED BALANCE SHEETS
(in U.S. dollars)
Quarter ended Year ended
March 31, December 31,
2003 2002
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 963,785 $ 1,025,604
Accounts receivable, less allowance for doubtful accounts 1,369,708 1,342,533
Due from contract manufacturers - 53,437
Inventories 970,059 1,230,048
Note receivable 35,200 32,761
Prepaid expenses and other assets 59,218 75,362
------------- --------------
Current assets 3,397,970 3,759,745
Property, plant and equipment, net 745,071 885,475
------------- --------------
$ 4,143,041 $ 4,645,220
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 2,467,819 $ 2,708,268
Deferred revenue 255,321 259,235
Current portion of obligation under capital lease 12,374 12,094
------------- --------------
Current liabilities 2,735,514 2,979,597
Obligation under capital lease 6,261 6,004
------------- --------------
Total liabilities 2,741,775 2,985,601
------------- --------------
Commitments and Contingencies (Note 7)
Shareholders' equity:
Preferred Stock, $0.01 par value per share:
issued and outstanding 15,700 at March 31, 2003 and 16,700 shares
at December 31, 2002. 157 167
Common Stock, $0.001 par value per share:
issued and outstanding - 117,844,551 shares at March 31, 2003
116,755,119 shares at December 31, 2002 117,845 116,755
Additional paid-in capital 72,399,784 72,397,489
Other equity 12,618,832 12,621,831
Deferred compensation (124,261) (173,260)
Accumulated other comprehensive loss (151,606) (102,371)
Accumulated deficit (83,459,485) (83,200,992)
------------- --------------
Total shareholders' equity 1,401,266 1,659,619
------------- --------------
$ 4,143,041 $ 4,645,220
============= ==============
See accompanying notes to financial statements.
3
WaveRider Communications Inc.
CONSOLIDATED STATEMENTS OF LOSS, DEFICIT AND COMPREHENSIVE LOSS
(in U.S. dollars)
Quarter ended March 31
2003 2002
------------------ ----------------
(Unaudited) (Unaudited)
REVENUE
Product revenue $ 2,873,546 $ 1,160,165
Service revenue 304,816 452,823
------------------ ----------------
3,178,362 1,612,988
COST OF REVENUE
Product revenue 1,884,484 1,086,613
Service revenue 118,803 65,120
------------------ ----------------
2,003,287 1,151,733
------------------ ----------------
GROSS MARGIN 1,175,075 461,255
------------------ ----------------
EXPENSES
Selling, general and administration 1,066,747 2,232,282
Employee stock based compensation 48,999 204,000
Research and development 156,602 336,108
Depreciation and amortization 147,755 270,420
Bad debt expense - 15,764
Interest expense 15,279 336,882
Interest income (1,814) (878)
------------------ ----------------
1,433,568 3,394,578
------------------ ----------------
NET LOSS $ (258,493) $ (2,933,323)
================== ================
BASIC AND FULLY DILUTED LOSS PER SHARE $ (0.002) $ (0.037)
================== ================
Weighted Average Number of Common Shares 116,694,303 79,322,684
================== ================
- ------------------------------------------------------------------------------------------------------------------------------------
OPENING DEFICIT $ (83,200,992) $ (71,951,290)
NET LOSS FOR THE PERIOD (258,493) (2,933,323)
------------------ ----------------
CLOSING DEFICIT $ (83,459,485) $ (74,884,613)
================== ================
- ------------------------------------------------------------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD $ (258,493) $ (2,933,323)
OTHER COMPREHENSIVE INCOME/(LOSS)
Cumulative translation adjustment (49,235) 21,804
------------------ ----------------
COMPREHENSIVE LOSS $ (307,728) $ (2,911,519)
================== ================
See accompanying notes to financial statements.
4
WaveRider Communications Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in U.S. dollars)
Quarter ended March 31
2003 2002
-------------- --------------
(Unaudited) (Unaudited)
OPERATIONS
Net loss $ (258,493) $ (2,933,323)
Items not involving cash
Depreciation and amortization 147,755 270,420
Compensatory shares released from escrow to employee 48,999 204,000
Foreign exchange (gain) loss (45,868) 2,383
Non-cash financing charges - 263,607
Charges for shares released from escrow - 710,813
Non-employee stock options - 21,569
Bad debt expense - 15,764
Net changes in working capital items 58,632 (851,995)
-------------- --------------
Net cash used in operating activities (48,975) (2,296,762)
-------------- --------------
INVESTING
Acquisition of property, plant and equipment (1,485) (2,986)
-------------- --------------
Net cash used in investing activities (1,485) (2,986)
-------------- --------------
FINANCING
Proceeds from sale of shares net of issue fees 375 4,331,266
Payment of consideration payable on business combination - (105,256)
Repayment of promissory notes - (432,500)
Payments on capital lease obligations (614) (32,547)
-------------- --------------
Net cash provided by (used in) financing activities (239) 3,760,963
-------------- --------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (11,120) (3,411)
-------------- --------------
Increase (decrease) in cash and cash equivalents (61,819) 1,457,804
Cash and cash equivalents, beginning of period 1,025,604 2,244,625
-------------- --------------
Cash and cash equivalents, end of period $ 963,785 $ 3,702,429
============== ==============
Supplementary disclosures of cash flow information:
Cash paid during the period for:
Interest $ 660 $ 19,038
Repayment premium on redemption of promissory notes $ - $ 68,775
See accompanying notes to financial statements.
5
WaveRider Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003 and December 31, 2002
1. GOING CONCERN
These consolidated financial statements are prepared on a going-concern
basis, which assumes that WaveRider Communications Inc. (the "Company")
will realize its assets and discharge its liabilities in the normal
course of business. The Company incurred a net loss of $258,493 for the
three months ended March 31, 2003 (2002 - $2,933,323) and reported an
accumulated deficit at that date of $83,459,485 (2002 - $74,884,613).
In addition, the requirements to continue investing in research and
development activities to meet the Company's growth objectives, without
assurance of broad commercial acceptance of the Company's products,
lend significant doubt as to the ability of the Company to continue in
normal business operations. Furthermore, the current financial markets
and the Company's current financial position make it unlikely in
management's view that the Company will be able to raise any additional
capital or debt financing within the next twelve months.
The Company has a plan that it believes will allow it to achieve
profitability and cash flow positive operations without the need for
additional financing. However, if the Company fails to achieve positive
cash flow in the near term, the Company does not presently have
adequate cash to fund ongoing operations. In that case, in order to
meet its needs for cash to fund its operations, the Company would need
to obtain additional financing. In the past, the Company has obtained
financing primarily through the sale of convertible securities. Due to
the Company's low stock price and the overhang represented by
outstanding convertible securities, the Company believes that it is
unlikely to be able to obtain additional financing. If the Company is
unable to either achieve its planned cash flow positive operations and
profitability or obtain significant additional financing, it will, in
all likelihood, be obliged to seek protection under the bankruptcy laws
in which event, the Company believes it is unlikely that its common
stock will have any value.
The ability of the Company to continue as a going concern is dependent
upon it achieving and maintaining profitable and cash flow positive
operations or securing additional external funding to meet its
obligations as they come due. Should the Company be unable to continue
as a going concern, assets and liabilities would require restatement on
a liquidation basis which would differ materially from the going
concern basis.
2. BASIS OF PRESENTATION
The Financial statements for the three months ended March 31, 2003 and
2002 include, in the opinion of Management, all adjustments (which
consist only of normal recurring adjustments) necessary to present
fairly the results of operations for such periods. Results of
operations for the three months ended March 31, 2003, are not
necessarily indicative of results of operations which will be realized
for the year ending December 31, 2003. The financial statements should
be read in conjunction with the Company's Form 10-K for the year ended
December 31, 2002.
3. NET LOSS PER SHARE
Basic loss per share represents loss applicable to common stock divided
by the weighted average number of common shares outstanding during the
period. Diluted loss per share reflects additional common shares that
would have been outstanding if potential dilutive common shares had
been issued, as well as any adjustment to income that would result from
the assumed conversion. Potential common shares that may be issued by
the Company relate to outstanding stock options and warrants
(determined using the treasury stock method) and preferred stock. For
all periods presented, options, warrants and preferred stock were
anti-dilutive and excluded from the net loss per share computation.
4. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
FASB FIN 46, Consolidation of Variable Interest Entities, requires
consolidation where there is a controlling financial interest in a
variable interest entity, previously referred to as a special-purpose
entity. FIN 46 will become effective during the second quarter of our
fiscal year 2003. We do not anticipate an impact to our financial
position or results of operations.
6
5. STOCK OPTIONS
The Company applies SFAS No. 123, together with APB No. 25 as permitted
under SFAS No. 123, in accounting for its stock option plans.
Accordingly, the Company uses the intrinsic value method to measure the
costs associated with the granting of stock options to employees and
this cost is accounted for as compensation expense in the consolidated
statements of loss over the option vesting period or upon meeting
certain performance criteria. In accordance with SFAS No. 123, the
Company discloses the fair values of stock options issued to employees.
Stock options issued to outside consultants are valued at their fair
value and charged to the consolidated statements of loss in the period
in which the services are rendered. Fair values of stock options are
determined using the Black-Scholes option-pricing model.
The following table illustrates the effect on net loss and net loss per
share if the Company had applied the fair value recognition provisions
of SFAS No. 123, "Accounting for Stock-Based Compensation", to the
stock-based employee compensation:
Period ended March 31,
2003 2002
------------- ------------
(Unaudited) (Unaudited)
Net loss, as reported $ (258,493) $ (2,933,323)
Add: Stock-based employee compensation
expense included in reported net loss 48,999 204,000
Deduct: Total stock based employee compensation
expense determined under fair value based method for all awards (377,582) (335,504)
------------- ------------
Pro forma net loss $ (587,076) $ (3,064,827)
============= ============
Basic and fully diluted loss per share, as reported $ (0.002) $ (0.037)
============= ============
Basic and fully diluted loss per share, pro forma $ (0.005) $ (0.039)
============= ============
6. ACCOUNTS RECEIVABLE
March December
31, 2003 31, 2002
------------- ------------
(Unaudited) (Audited)
Accounts receivable - trade $ 1,476,870 $ 1,494,622
Other receivables 31,300 60,135
Allowance for doubtful accounts (138,462) (212,224)
------------- ------------
$ 1,369,708 $ 1,342,533
============= ============
7
7. INVENTORIES
March December
31, 2003 31, 2002
------------- ------------
(Unaudited) (Audited)
Finished products $ 1,014,825 $ 1,258,620
Raw materials 20,838 22,043
Valuation allowance (65,604) (50,615)
------------- ------------
$ 970,059 $ 1,230,048
============= ============
8. SHAREHOLDERS' EQUITY
(a) Conversion of Preferred Stock - During the first
quarter of 2003, 1,000 shares of the Series D 5% convertible
preferred stock were converted to 1,051,932 shares of common
stock.
(b) Exercise of Options - During the first quarter of 2003,
employees exercised options to purchase 37,500 shares of
common stock for cash considerations of $375.
9. COMMITMENTS AND CONTINGENCIES
Employee Stock Option Agreements
The Company has four existing employee stock option plans -- the
Employee Stock Option (1997) Plan, the 1999 Incentive and Nonqualified
Stock Option Plan, the Employee Stock Option (2000) Plan and the
Employee Stock Option (2002) Plan which have authorized shares of
6,250,000, 3,000,000, 6,000,000 and 6,000,000 shares, respectively.
Through March 31, 2003, the Company had awarded 5,828,617 options under
the Employee Stock Option (1997) Plan, 2,262,550 options under the 1999
Incentive and Nonqualified Stock Option Plan, 4,431,874 options under
the Employee Stock Option (2000) Plan and 2,425,000 options under the
Employee Stock Option (2002) Plan.
Employee Stock Purchase Agreement
On July 7, 2000, the shareholders approved the establishment of the
Company's Employee Stock Purchase (2000) Plan, which has 3,000,000
authorized shares. Under the terms of the plan, employees are eligible
to purchase shares of the Company's common stock at 85% of the lower of
the closing price at the beginning or ending date of each period. To
the end of the first quarter of 2003, 570,123 shares of common stock
have been purchased under the Plan. The offerings under the plan run
for six-month periods commencing May 1 and November 1.
Litigation
As at March 31, 2003, there are no litigation matters outstanding
against the Company.
8
10. SEGMENTED INFORMATION
Industry Segments
The Company operates in one industry segment: wireless data
communications products.
Geographic Segments
The Company operated in the following geographic segments;
Three months ended March 31,
Revenue by region 2003 2002
------------- ------------
(Unaudited) (Unaudited)
United States $ 2,337,003 $ 708,381
Australia 548,225 442,207
Canada 129,142 95,493
Rest of world 163,992 366,907
------------- ------------
$ 3,178,362 $ 1,612,988
============= ============
Three months ended March 31, 2003 (Unaudited)
Canada Australia Total
-------------- ------------- ------------
Property, plant and equipment $ 650,500 $ 94,571 $ 745,071
============== ============= ============
Year ended December 31, 2002 (Audited)
Canada Australia Total
-------------- ------------- ------------
Property, plant and equipment $ 790,009 $ 95,466 $ 885,475
============== ============= ============
11. COMPARATIVE FIGURES
Certain comparative amounts have been reclassified, where appropriate,
to correspond with the current period's presentation.
12. SUBSEQUENT EVENTS
At the beginning of May 2003, 8,400 shares of the Series D 5%
convertible preferred stock were converted to 10,086,051 shares of
common stock.
9
ITEM 2.
Management's Discussion and Analysis or Plan of Operation
The following discussion is intended to assist in an understanding of the
Company's financial position and results of operations for the quarter ended
March 31, 2003.
Forward-Looking Information
This report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of its management as well
as assumptions made by and information currently available to its management.
When used in this report, the words "anticipate", "believe", "estimate",
"expect", "intend", "plan", and similar expressions as they relate to the
Company or its management, are intended to identify forward-looking statements.
These statements reflect management's current view of the Company with respect
to future events and are subject to certain risks, uncertainties and
assumptions. Should any of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in this report as anticipated, estimated or expected. The
Company's realization of its business aims could be materially and adversely
affected by any technical or other problems in, or difficulties with, planned
funding and technologies, third party technologies which render the Company's
technologies obsolete, the unavailability of required third party technology
licenses on commercially reasonable terms, the loss of key research and
development personnel, the inability or failure to recruit and retain qualified
research and development personnel, extensive regulation of the data
communications industry by U.S. or foreign governments and, in particular,
imposing license requirements in the frequency bands of our products or the
adoption of technology standards which are different from technologies around
which the Company's business ultimately is built. The Company does not intend to
update these forward-looking statements.
Overview
We design, develop, market and support fixed wireless Internet access
products. Our products are designed to deliver efficient, reliable, and
cost-effective solutions; bringing high-speed Internet access to markets around
the world.
We are focused on providing the solution to the "last mile" problem faced
by traditional wired telecommunications services: how to profitably build out a
network that provides the level of services demanded by end users. In medium to
small markets, and in areas of the world with limited or no existing
telecommunications infrastructure, the cost to install or upgrade wired services
to provide the level of access customers expect can be prohibitive.
We believe that our fixed wireless Internet access products are faster and
less expensive to deploy than traditional wired services, with a lower
cost-per-user to install, deploy and manage.
Our wireless network products are designed to operate in the license-free
ISM radio spectrum, which facilitates a more rapid and low-cost market
introduction for service providers than for licensed or hardwire solutions. Our
products utilize direct sequence spectrum or DSS communications, which ensures
reliable, secure, low-interference communications.
Market Environment and Strategic Direction
Over the past three years, the global telecommunications market
deteriorated, reflecting a significant reduction in capital spending by
established service providers and a lack of venture capital for new entrants.
This trend is expected to continue at least throughout 2003. Reasons for this
market deterioration include the economic slowdown in the technology sector,
network overcapacity, customer bankruptcies, network build-out delays and
limited capital availability. As a result, our sales and results of operations
have been significantly adversely affected.
10
During this prolonged sector downturn, we have concentrated on the things we can
control, such as working closely with our customers to get our products and
services established in a number of markets, significantly reducing our cost
structure, reducing our breakeven revenue level and improving our balance sheet.
However, if capital investment levels continue to decline, or if the
telecommunications market does not improve or improves at a slower pace than we
anticipate, our revenues and profitability will continue to be adversely
affected. In addition, if our sales volume and product mix does not improve, or
we do not continue to realize cost reductions or reduce inventory related
charges, our gross margin percentage may not improve as much as we have
targeted, resulting in lower than expected results of operations.
Liquidity and Capital Resources
The Company has funded its operations for the most part through equity
financing and has had no line of credit or similar credit facility available to
it. The Company's outstanding shares of Common stock, par value $.001 per share,
are traded under the symbol "WAVC" in the over-the-counter market on the OTC
Electronic Bulletin Board by the National Association of Securities Dealers,
Inc.
The Company has a plan that it believes will allow it to achieve
profitability and cash flow positive operations without the need for additional
financing. However, if the Company fails to achieve positive cash flow in the
near term, the Company does not presently have adequate cash to fund ongoing
operations. In that case, in order to meet its needs for cash to fund its
operations, the Company would need to obtain additional financing. In the past,
the Company has obtained financing primarily through the sale of convertible
securities. Due to the Company's low stock price and the overhang represented by
outstanding convertible securities, the Company believes that it is unlikely to
be able to obtain additional financing. If the Company is unable to either
achieve its planned cash flow positive operations and profitability or obtain
significant additional financing, it will, in all likelihood, be obliged to seek
protection under the bankruptcy laws in which event, the Company believes it is
unlikely that its common stock will have any value.
Critical Accounting Policies
Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses the Company's consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.
On an ongoing basis, management evaluates its estimates and judgments,
including those related to bad debts, inventories, investments, intangible and
other long-lived assets, income taxes, warranty obligations, product returns,
restructuring costs, litigation and contingencies. Management bases its
estimates and judgments on historical experience, current economic and industry
conditions and on various other factors that are believed to be reasonable under
the circumstances. This forms the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.
Current Activities
We currently have approximately 40 employees located in our head office in
Toronto, Ontario and our sales offices and subsidiaries in the United States,
Canada and Australia, as well as at our subsidiary, JetStream Internet Services
in Salmon Arm, British Columbia.
The majority of these employees are involved in the design, development and
marketing of our line of wireless data communications products.
11
Results of Operations
Revenue
The following table presents our North American and non-North American
revenues and the approximate percentage of total revenues ($000's):
Three months
ended March 31,
----------------------------------
2003 2002 % Change
-------- -------- --------
North America $ 2,466 $ 804 206.7%
Non-N.A. 712 809 (12.0%)
-------- -------- ------
Total revenues $ 3,178 $ 1,613 97.0%
======== ======== ======
Percentage of total revenue
North America 77.6% 49.8%
Non-N.A. 22.4% 50.2%
Total revenue increased 97% in Q1 2003 compared to Q1 2002 and 9% compared
to Q4 2002. The Company's focus on the 900 MHz non-line of sight LMS product
family has allowed it to make strong gains in the North American market but has
limited its potential in a large part of the rest of the world, where the 900
MHz band is not available on a license exempt basis. The Company has taken
initial steps to access the Caribbean, Latin American and South American
markets, which in most parts do provide license exempt availability of 900 MHz
spectrum, but expects that there will be relatively long sales cycles in these
markets. The Company does expect continued growth in the North American
markets with the introduction of volume discounts on the new EUM 3003 customer
premise device and the ongoing expansion of our customers' networks.
Total revenue declined 12% in Q1 2002 compared to Q1 2001 and 11% compared
to Q4 2001. The first quarter of 2002 saw the introduction of a low cost version
of the LMS product lines, LMS starter kits, which has allowed the Company to
place a number of initial systems in a number of jurisdictions within the United
States and Canada.
At the same time, however, the Company saw a significant slowing of its
sales of NCL products, as the result of the continuing tight market for telecom
products. Each of Q1 2001 and Q4 2001 had a few large volume NCL sales, which
were not matched in Q1 2002.
Gross Margins
The following table presents our gross margin and the percentage of total
revenues ($000's):
Three months ended
March 31,
2003 2002
------- -------
Gross margin $ 1,175 $ 461
Gross margin rate 37.0% 28.6%
Gross margins in Q1 2003 increased to 37.0% compared to 28.6% of revenue in
Q1 2002 and 27.6% of revenue in Q4 2002. In conjunction with the increase in
quarterly revenue, total gross margin dollars increased 155% compared to Q1 2002
and 46% compared to Q4 2002.
12
The increase in gross margin percentage and dollars was primarily due to
continued cost reductions in the LMS products and the introduction of the new
cost reduced customer premise unit, the EUM 3003. The Company is actively
involved in continuing to find cost savings, through economies of scale and
product refinement. However, it expects that future reductions will be offset by
volume discounts offered to its customers and competitive pricing pressures. As
such, the Company expects that gross margin percentages will be at or below
current levels over the balance of the fiscal year.
Gross margins in Q1 2002 increased to 28.6% compared to 24.1% of revenue in
Q1 2001 and 7.4% of revenue in Q4 2001. As a result, total gross margin dollars
exceeded both Q4 and Q1 2001 despite the lower revenue dollars.
The increase in gross margin percentage and dollars was due to the
increasing mix of LMS products sold, especially the infrastructure rich starter
kits. The ongoing weakness of the telecom sector, combined with the highly
competitive market for 2.4 GHz products, means that NCL sales continue to see
extremely competitive price pressures, which result in lower overall margins.
Expenses
Selling, general and administrative expenses, including stock based
compensation, declined to $1,115,746 in Q1 2003 from $2,436,282 in Q1 2002 and
$1,204,084 in Q4 2002. Included in the expenses for Q1 2002 was an amount of
$936,382 related to the fair value of shares released from escrow. The decline
in Q1 of 2003 was mainly due to the restructuring that was undertaken in Q4 of
2002. As a result, the Company has reduced its compensation costs and related
staff expenses and reduced its costs of professional services.
Selling, general and administrative expenses, including stock based
compensation, decreased to $2,436,282 in Q1 2002 from $2,497,560 in the
corresponding period of 2001 and increased from $1,075,010, in Q4 2001. The
increase from Q4 2001 was the result of; incurring expenses in the amount of
$936,382 related to the fair value of escrow shares, returning all staff to full
compensation from the decreased levels imposed in Q4 2001, and increased
spending on legal, consulting and marketing activities. The decline from prior
year is the result of the significant staff reductions in Q3 2001 and continued
focus on discretionary spending.
As discussed in the Company's 10-K for 2002 and 2001, the Company moved to
a level of sustaining engineering for its NCL and LMS product families, with
Research and Development costs in Q1 2003 amounting to $156,602 compared to
$336,108 in Q1 2002 and $181,362 in Q4 2002. During the third quarter of 2002,
we closed our Calgary facility and transitioned the operations to our Toronto
location. We anticipate that we will continue to maintain our reduced
expenditure levels through 2003.
Research and Development expenses in Q1 2002 were $336,108, compared to
$1,620,093 for the corresponding quarter in 2001 and $453,035 in Q4 2001. The
reduction was the result of the Company's move to sustaining engineering and the
reduction of both our staff and facilities.
Depreciation and amortization expense declined to $147,755 in Q1 2003
compared to $270,420 in Q1 2002. During the last two years, the Company has
withheld spending on new capital assets and does not plan any major capital
acquisitions through the balance of fiscal 2003.
Depreciation and amortization expense declined to $270,420 in Q1 2002 from
$671,534 in Q1 2001 and $769,992 in Q4 2001 as a result of a new accounting
pronouncement which ended the amortization of goodwill effective January 1,
2002.
Interest expense amounted to $15,279 compared to $336,882 in Q1 2002 and
$4,561,043 in Q1 2001. Included in interest and other expenses in Q1 2002 was
$263,607 related to the accretion of the promissory notes. Costs in Q1 2001 were
the result of the conversion of the promissory notes issued in December 2000.
13
ITEM 3.
Controls and Procedures
Within 90 days prior to the filing date of this report on Form 10-QSB, the
Company carried out an evaluation, under the supervision and with the
participation of the Company's principal executive officer and principal
financial officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on this evaluation, the
Company's principal executive officer and principal financial officer concluded
that the Company's disclosure controls and procedures are effective in timely
alerting them to material information required to be included in the Company's
reports filed or submitted under the Securities Exchange Act of 1934. Since this
evaluation, there have not been any significant changes in the Company's
internal controls or in other factors that could significantly affect those
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART II. OTHER INFORMATION
Item 5. Other Information
Certification Under Sarbanes-Oxley Act
Our chief executive officer and chief financial officer have furnished
to the SEC the certification with respect to this Report that is
required by Section 906 of the Sarbanes-Oxley Act of 2002.
Item 6. Exhibits and Reports on Form 8-K
None
Signatures:
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized,
WaveRider Communications Inc.
Date: May 8, 2003 /s/ D. Bruce Sinclair
-------------------------------------
D. Bruce Sinclair
President and Chief Executive Officer
/s/ T. Scott Worthington
-------------------------------------
T. Scott Worthington
Chief Financial Officer.
14
CERTIFICATIONS
I, D. Bruce Sinclair, Chief Executive Officer of WaveRider Communications Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-QSB of WaveRider
Communications Inc..
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 8, 2003
By: /s/ D. Bruce Sinclair
------------------------------------------
D. BRUCE SINCLAIR, CHIEF EXECUTIVE OFFICER
15
CERTIFICATIONS
I, T. Scott Worthington, Chief Financial Officer of WaveRider Communications
Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of WaveRider
Communications Inc..
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 8, 2003
By: /s/ T. Scott Worthington
---------------------------------------------
T. SCOTT WORTHINGTON, CHIEF FINANCIAL OFFICER
16