SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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: October 29, 2003
141,128,439 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 September 30, 2003
INDEX
Page
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 3-11
Consolidated Balance Sheets 3
Consolidated Statements of Loss, Deficit and Comprehensive Loss 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7-11
Item 2. Management's Discussion and Analysis
or Plan of Operation 12-17
Item 3. Controls and Procedures 17
PART II OTHER INFORMATION 18
Item 4. Submission of matters to a vote of security holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 18
Certifications 19-21
2
PART I. FINANCIAL INFORMATION
WaveRider Communications Inc.
CONSOLIDATED BALANCE SHEETS
(in U.S. dollars)
September 30, December 31,
2003 2002
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,574,574 $ 1,025,604
Accounts receivable, less allowance for doubtful accounts 1,695,633 1,395,970
Inventories 839,757 983,573
Note receivable 19,800 32,761
Prepaid expenses and other assets 145,985 75,362
-------------------------------
Current assets 6,275,749 3,513,270
Property, plant and equipment, net 518,213 885,475
Goodwill 2,755,446 -
-------------------------------
$ 9,549,408 $ 4,398,745
===============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 2,923,716 $ 2,461,793
Deferred revenue 386,736 259,235
Current portion of obligations under capital lease 16,296 12,094
-------------------------------
Current liabilities 3,326,748 2,733,122
Convertible debentures 854,463 -
Obligations under capital lease 11,989 6,004
-------------------------------
Total liabilities 4,193,200 2,739,126
-------------------------------
Commitments and Contingencies (Note 10)
Shareholders' equity:
Preferred Stock, $0.01 par value per share:
issued and outstanding 5,800 at September 30, 2003 and 16,700 shares
at December 31, 2002 58 167
Common Stock, $0.001 par value per share:
issued and outstanding - 140,337,611 shares at September 30, 2003
116,755,119 shares at December 31, 2002 140,338 116,755
Additional paid-in capital 76,443,660 72,397,489
Other equity 13,588,346 12,621,831
Deferred compensation (15,519) (173,260)
Accumulated other comprehensive loss (260,829) (102,371)
Accumulated deficit (84,539,846) (83,200,992)
--------------------------------
Total shareholders' equity 5,356,208 1,659,619
--------------------------------
$ 9,549,408 $ 4,398,745
================================
See accompanying notes to financial statements.
3
WaveRider Communications Inc.
CONSOLIDATED STATEMENTS OF LOSS, DEFICIT AND COMPREHENSIVE LOSS
(in U.S. dollars)
Three Months ended Nine Months ended
September 30 September 30 September 30 September 30
2003 2002 2003 2002
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
CONSOLIDATED STATEMENT OF LOSS
REVENUE
Product sales $ 3,169,644 $ 1,868,749 $ 8,729,256 $ 4,748,948
Service sales 364,420 255,661 1,119,323 1,333,317
-------------- ------------ -------------- -----------
3,534,064 2,124,410 9,848,579 6,082,265
-------------- ------------ -------------- ------------
COST OF PRODUCT AND INTERNET SALES
Product sales 2,041,844 1,755,417 5,598,285 4,432,765
Service sales 170,002 66,137 388,306 225,774
-------------- ------------ -------------- ------------
2,211,846 1,821,554 5,986,591 4,658,539
-------------- ------------ ------------- -----------
GROSS MARGIN 1,322,218 302,856 3,861,988 1,423,726
-------------- ------------ -------------- -----------
EXPENSES
Selling, general and administration 1,280,337 1,480,272 3,519,412 4,947,752
Employee stock based compensation 46,557 12,000 143,741 172,500
Research and development 450,870 497,753 883,465 1,313,518
Depreciation and amortization 119,173 273,736 384,573 826,828
Bad debt expense 1,256 8,127 1,256 37,622
Foreign exchange loss/(gain) (12,155) (36,634) (163,352) 60,622
Write down of goodwill - 4,069,696 - 4,069,696
Interest expense 403,721 42,902 441,374 402,131
Interest income (5,952) (7,087) (9,627) (21,582)
--------------- ------------ -------------- -------------
2,283,807 6,340,765 5,200,842 11,809,087
-------------- ------------ -------------- ------------
NET LOSS $ (961,589) $(6,037,909) $ (1,338,854) $(10,385,361)
============== =========== ============== ============
BASIC AND FULLY DILUTED LOSS PER SHARE $ (0.007) $ (0.053) $ (0.011) $ (0.102)
============== ============ ============== ============
Weighted Average Number of Common Shares 138,813,670 114,790,464 126,984,735 101,554,237
============== ============ ============== ============
CONSOLIDATED STATEMENTS OF DEFICIT
OPENING DEFICIT $ (83,578,257) $(76,298,742) $ (83,200,992) $(71,951,290)
NET LOSS FOR THE PERIOD (961,589) (6,037,909) (1,338,854) (10,385,361)
-------------- ------------ -------------- ------------
CLOSING DEFICIT $ (84,539,846) $(82,336,651) $ (84,539,846) $(82,336,651)
============== ============ ============== ============
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
NET LOSS FOR THE PERIOD $ (961,589) $ (6,037,909) $ (1,338,854) $(10,385,361)
OTHER COMPREHENSIVE INCOME/(LOSS)
Cumulative translation adjustment (17,304) (20,658) (158,458) 33,495
-------------- ------------ -------------- ------------
COMPREHENSIVE LOSS $ (978,893) $ (6,058,567) $ (1,497,312) $(10,351,866)
============== ============ ============== ============
See accompanying notes to financial statements.
4
WaveRider Communications Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in U.S. dollars)
Nine months ended September 30
2003 2002
------------------------------------
(Unaudited) (Unaudited)
OPERATIONS
Net loss $ (1,338,854) $ (10,385,361)
Items not involving cash
Depreciation and amortization 384,573 826,828
Unrealized foreign exchange gain (183,866) (15,649)
Compensatory stock options 143,741 -
Non-cash financing charges 385,226 263,607
Bad debt expense 1,256 37,622
Write-down of goodwill - 4,069,696
Charges for shares released from escrow - 710,813
Compensatory shares released from escrow to employee - 172,500
Loss on disposal of fixed assets - 40,295
Non-employee stock options - 21,569
Net changes in working capital items 432,734 63,190
-----------------------------------
Net cash used in operating activities (175,190) (4,194,890)
-----------------------------------
INVESTING
Cash received on acquisition of Avendo Wireless Inc. 1,177,420 -
Acquisition of property, plant and equipment (34,733) (78,834)
------------------------------------
Net cash provided by (used in) investing activities 1,142,687 (78,834)
-----------------------------------
FINANCING
Proceeds from sale of shares net of issue fees 18,770 4,357,962
Proceeds from sale of convertible debentures net of issue fees 1,416,880 -
Payment of consideration payable on business combination - (105,256)
Repayment of promissory notes - (432,500)
Payments on capital lease obligations (1,240) (104,822)
-----------------------------------
Net cash provided by financing activities 1,434,410 3,715,384
-----------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 147,063 (6,730)
-----------------------------------
Increase (decrease) in cash and cash equivalents 2,548,970 (565,070)
Cash and cash equivalents, beginning of period 1,025,604 2,244,625
-----------------------------------
Cash and cash equivalents, end of period $ 3,574,574 $ 1,679,555
===================================
Supplementary disclosures of cash flow information:
Cash paid during the period for:
Interest $ 3,064 $ 26,294
Repayment premium on redemption of promissory notes - 68,775
Non-cash investing and financing activities
Issuance of 8,749,999 shares of common stock, 3,000,000 common stock purchase
warrants and 863,000 common stock options in connection with business combination 2,845,506 -
Acquisition (disposal) of equipment under capital lease 8,101 (19,103)
Stock released from escrow - 883,313
See accompanying notes to financial statements.
5
WaveRider Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003 (unaudited) and December 31, 2002 (audited)
1. BASIS OF PRESENTATION
The financial statements for the three and nine months ended September
30, 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 and nine months ended September 30,
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.
2. 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), convertible debentures
and preferred stock. For all periods presented, options, warrants,
convertible debentures and preferred stock were anti-dilutive and
excluded from the net loss per share computation.
3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2003, the Financial Accounting Standards Board issued SFAS No.
150, Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity. This statement establishes standards
for how an issuer classifies and measures certain financial instruments
with characteristics of both liabilities and equity. It requires that
an issuer classify a financial instrument that is within its scope as a
liability. Many of those instruments were previously classified as
equity. SFAS No. 150 is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003.
The adoption of this statement did not have any impact on our financial
position or results of operations.
4. 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:
6
WaveRider Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003 (unaudited) and December 31, 2002 (audited)
Three Months ended Nine Months ended
September 30 September 30 September 30 September 30
2003 2002 2003 2002
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------------------------------------------------------------
Net loss, as reported $ (961,589) $ (6,037,909) $ (1,338,854) $(10,385,361)
Add: Stock-based employee compensation
expense included in reported net loss 46,557 - 143,741 -
Deduct: Total stock based employee
compensation expense determined
under fair value based method
for all outstanding awards (207,535) (374,347) (838,513) (1,337,546)
----------------------------------------------------------------
Pro forma net loss $ (1,122,567) $ (6,412,256) $ (2,033,626) $(11,722,907)
===============================================================
Basic and fully diluted loss per share,
as reported $ (0.007) $ (0.053) $ (0.011) $ (0.102)
================================================================
Basic and fully diluted loss per share,
pro forma $ (0.008) $ (0.056) $ (0.016) $ (0.115)
================================================================
5. ACQUISITION OF SUBSIDIARY
Effective July 2, 2003, the Company acquired Avendo Wireless Inc.
("Avendo"), a privately-held technology developer located in
Mississauga, Ontario, Canada. The Company undertook this acquisition to
gain control of Avendo's assets, which include cash, net receivables,
in-process wireless technologies and experienced research and
development team to aid in expanding and enhancing WaveRider's
non-line-of-sight wireless broadband products.
Avendo designs and develops advanced fixed broadband wireless
technology. Avendo's technology, when completed, is targeted to
significantly improve spectral efficiency resulting in the ability to
operate in non line of sight environments thereby providing the
reliability needed to meet the needs of leading equipment vendors and
their customers. The ultimate outcome of the development of this
product cannot be determined at this time.
Under the terms of the acquisition, the Company issued 8,749,999 shares
of common stock and 3,000,000 common stock purchase warrants in
exchange for all of the issued and outstanding shares of Avendo and all
outstanding long term debt. The warrants are exercisable at $0.41per
share for a five year period and include a net share settlement
feature. In addition, the Company issued to the employees and advisors
to Avendo 863,000 employee stock options, with an exercise price of
$0.39.
The transaction was accounted for as a purchase and is summarized as
follows:
Cash on hand $ 1,177,420
Other current assets 245,379
Fixed assets 16,235
Current liabilities (64,689)
--------------
Net assets received 1,374,345
Expenses incurred on acquisition (106,865)
Goodwill 2,755,446
--------------
Total consideration received $ 4,022,926
==============
7
WaveRider Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003 (unaudited) and December 31, 2002 (audited)
Common stock issued on closing $ 3,412,500
Warrants issued on closing at fair value 416,647
Employee stock options issued on closing at fair value 193,779
--------------
Total consideration given $ 4,022,926
==============
The cash effect of this transaction is summarized as follows:
Cash acquired on closing $ 1,177,420
==============
The pro forma effect of this transaction is summarized as follows:
Nine Months ended September 30,
2003 2002
----------------------------------
Pro forma consolidated revenue $ 9,848,579 $ 6,082,265
=================================
Pro forma consolidated net loss $ (1,681,431) $ (11,740,085)
=================================
Pro forma consolidated basic and fully diluted loss per share $ (0.013) $ (0.116)
=================================
6. ACCOUNTS RECEIVABLE
September December
30, 2003 31, 2002
----------------------------
(Unaudited) (Audited)
Accounts receivable - trade $ 1,520,922 $ 1,494,622
Other receivables 227,874 113,572
Allowance for doubtful accounts (53,163) (212,224)
----------------------------
$ 1,695,633 $ 1,395,970
============================
7. INVENTORIES
September December
30, 2003 31, 2002
----------------------------
(Unaudited) (Audited)
Finished products $ 1,393,640 $ 1,327,359
Raw materials 58,330 22,043
Valuation allowance (612,213) (365,829)
-----------------------------
$ 839,757 $ 983,573
============================
During Q3 2003, the Company reclassified reserves, in the amount of
$275,374, from current liabilities to an inventory valuation allowance.
8
WaveRider Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003 (unaudited) and December 31, 2002 (audited)
8. CONVERTIBLE DEBENTURES
On July 14, 2003, the Company issued convertible debentures, at a 6%
discount, in the aggregate principal amount of $1,600,000 to two
investment companies and received cash proceeds of $1,504,000, before
cash fees of $87,120. The debt is unsecured, has no stated interest
rate and matures in three years. In conjunction with the convertible
debentures, the Company issued Series R warrants to purchase 1,019,108
shares of common stock at a price of $.4121 per share with a term of
five years. The Series R warrants also have a net share settlement
feature.
The convertible debentures are initially convertible into shares of
common stock at $0.4318. However, upon a request for conversion, if the
price of the Company's common stock at the time of the request is less
than $0.5182, the Company, at its option, may either a) pay cash equal
to 120% of the face value of the note or b) issue conversion shares
based on a conversion price equal to 95% of the average of the lowest
three Closing Bid Prices during the 20 Trading Day period immediately
preceding the Conversion Date, as defined in the agreement.
The net proceeds of the transaction have been allocated to the primary
financial instruments as follows:
Convertible debentures $ 1,038,366
Beneficial conversion feature 322,937
Series R warrants 134,459
Deferred financing costs (78,882)
------------------
Net cash proceeds $ 1,416,880
==================
The proceeds received were first allocated to the convertible
promissory note and the warrants based on the relative fair values of
the respective instruments. Then the beneficial conversion feature
embedded in the convertible debentures was calculated and measured
using the intrinsic value of the feature based on the most beneficial
conversion available to the investors on the commitment date.
During the third quarter, convertible debentures in an aggregate
nominal value of $331,000 were converted to 1,457,665 shares of common
stock. As a result of a decline in the conversion price from the date
of issue, the Company determined that there was an additional
beneficial conversion feature in the amount of $220,068. This amount
was recorded as other equity and as a reduction in the carrying amount
of the convertible debt. Upon conversion, an amount of $286,876, being
the prorated portion of the original beneficial conversion feature
amount and the additional beneficial conversion feature amount, was
transferred from other equity to paid in capital and common shares.
During the quarter, $385,226 in non-cash financing expenses were
charged to the statement of loss. These expenses included the
accretion of the convertible debentures, the write-off of the original
and additional beneficial feature related to the converted debentures
and the amortization of deferred financing expenses.
Subsequent to September 30, 2003, convertible debentures with an
aggregate nominal value of $169,000 were converted to 790,828 shares of
common stock.
9. SHAREHOLDERS' EQUITY
Exercise of Options - During the third quarter of 2003, employees
exercised options to purchase 172,083 shares of common stock for cash
considerations of $2,222.
9
WaveRider Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003 (unaudited) and December 31, 2002 (audited)
10. 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 September 30, 2003, the Company had awarded, net of
forfeitures, 5,828,617 options under the Employee Stock Option (1997)
Plan, 2,151,150 options under the 1999 Incentive and Nonqualified Stock
Option Plan, 5,295,263 options under the Employee Stock Option (2000)
Plan and 2,375,000 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 third quarter of 2003, 757,579 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.
Lease Commitments
During the second quarter of 2003, the Company extended its lease on
its principal office location for an additional five years until May
31, 2009. The minimum monthly rent for the principal lease has been
reduced to $7,500 per month until February 2006 and $10,500 from March
2006 until May 2009. Prior to the extension, the Company was committed
to paying $12,900 in minimum monthly rent for the principal lease
through May 2004.
Litigation
As at September 30, 2003, there are no litigation matters outstanding
against the Company.
11. SEGMENT 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 Nine Months ended
September 30 September 30
2003 2002 2003 2002
---------------------------------------------------------------------
Revenue by Region (Unaudited) (Unaudited) (Unaudited) (Unaudited)
United States $ 2,330,810 $ 1,220,637 $6,785,053 $3,208,076
Canada 519,916 175,232 961,530 525,499
Australia 549,162 477,417 1,669,532 1,454,506
Rest of World 134,176 251,124 432,464 894,184
---------------------------------------------------------------------
$3,534,064 $2,124,410 $9,848,579 $6,082,265
=====================================================================
10
WaveRider Communications Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003 (unaudited) and December 31, 2002 (audited)
As at September 30, 2003 (Unaudited)
Canada Australia Total
----------------------------------------------------
Property, plant and equipment $ 407,062 $ 111,151 $ 518,213
====================================================
As at December 31, 2002 (Audited)
Canada Australia Total
----------------------------------------------------
Property, plant and equipment $ 790,009 $ 95,466 $ 885,475
====================================================
12. COMPARATIVE FIGURES
Certain comparative amounts have been reclassified, where appropriate,
to correspond with the current period's presentation.
11
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2002, AS WELL AS THE
FINANCIAL STATEMENTS AND NOTES THERETO. EXCEPT FOR HISTORICAL MATTERS CONTAINED
HEREIN, STATEMENTS MADE IN THIS QUARTERLY REPORT ON FORM 10-QSB ARE
FORWARD-LOOKING AND ARE MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, WORDS SUCH AS "MAY", "WILL", "TO", "PLAN",
"EXPECT", "BELIEVE", "ANTICIPATE", "INTEND", "COULD", "WOULD", "ESTIMATE", OR
"CONTINUE" OR THE NEGATIVE OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY
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. INVESTORS AND OTHERS
ARE CAUTIONED THAT A VARIETY OF FACTORS, INCLUDING CERTAIN RISKS, MAY AFFECT OUR
BUSINESS AND CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH IN
THE FORWARD-LOOKING STATEMENTS. 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, 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.
12
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.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 2002
Revenue
Total revenue increased 66.4% in the quarter ended September 30, 2003
compared to the quarter ended September 30, 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 following table presents our North American and non-North American
revenues and the approximate percentage of total revenues ($000's) for the
quarters ended September 30, 2003 and 2002 respectively:
Three months ended September 30,
-------------------------------------
2003 2002 % Change
-------------------------------------
North America $ 2,851 $ 1,396 104.2%
Non-North America 683 728 (6.2%)
-------------------------------------
Total revenues $ 3,534 $ 2,124 66.4%
=====================================
Percentage of total revenue
North America 80.7% 65.7%
Non- North America 19.3% 34.3%
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.
During the Q2 2003, the Company entered into a Distribution Agreement in
North America to complement its direct sales endeavors in this market. The
Company expects that over time sales through the distribution channel will
become a significant portion of the Company's revenues.
Gross Margin
The following table presents our gross margin and the percentage of total
revenues ($000's):
Three months ended
September 30,
2003 2002
------ -----
Gross margin $1,322 $303
Gross margin rate 37.4% 14.3%
Gross margins in Q3 2003 increased to 37.4% of revenue compared to 14.3% of
revenue in Q3 2002. In conjunction with the increase in quarterly revenue, total
gross margin dollars increased 336.3% compared to Q3 2002.
The increase in gross margin percentage and dollars from 2002 levels 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, during Q3 2003, current cost
reductions were offset by volume discounts offered to our customers. The Company
expects that ongoing volume discounts and competitive pricing pressures will
result in gross margin percentages at or below current levels over the balance
of the fiscal year.
13
Gross margins for Q3 2002 were specifically impacted by a write-off of
$275,000 in excess inventories resulting from the decline in demand for specific
product categories, specifically related to the 2.4 GHz product line. No
comparable write off of inventory was made in Q3 2003.
Selling, General and Administrative expenses
Selling, general and administrative expenses, including stock based
compensation, declined to $1,326,894 for the three months ended September 30,
2003 from $1,492,272 for the three months ended September 30, 2002. The decline
in Q3 2003 versus Q3 2002 was mainly due to the restructuring that was
undertaken in Q4 2002 and ongoing tight cost controls. As a result, the Company
has reduced its compensation costs and related staff expenses and reduced its
costs of professional services.
With the receipt of proceeds from the sale of the convertible debentures in
July 2003, the Company intends to increase its spending on sales and marketing,
both within North America and internationally. While the Company intends to
maintain tight cost controls, we believe that tactical spending in advertising
and marketing communications could provide access to additional markets and
potential customers.
Research and Development expenses
Research and Development expenses for the three months ended September 30,
2003 amounted to $450,870 compared to $497,753 for the three months ended
September 30, 2002. As discussed in the Company's 10-K for 2002 and 2001, the
Company had moved to a level of sustaining engineering for its NCL and LMS
product families. However, with the acquisition of Avendo Wireless in July 2003
and the funds obtained in the acquisition and through the sale of the
convertible debentures, the Company intends to increase its focus on new product
research and development, to complement our continued focus on cost and
capability enhancements to our current product lines.
Depreciation and Amortization expense
Depreciation and amortization expense declined to $119,173 for the three
months ended September 30, 2003 compared to $273,736 for the three months ended
September 30, 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.
Foreign Exchange
Foreign exchange gain for the three months ended September 30, 2003
decreased to $12,155 from $36,634 for the three months ended September 30, 2002.
The decrease is due to the relatively stable relationship of the U.S. dollar
versus the Canadian and Australian dollars after a number of quarters of more
significant declines.
Write down of goodwill
During the three months ended September 30, 2002, due to the continued
decline in telecom spending and its impact on projected future revenues to the
Company, management determined that there had been an impairment of the goodwill
arising from the release of escrow shares and the purchase of ADE Network
Technology Pty Ltd. As a result, the Company wrote off $4,069,696 of goodwill in
Q3 2002.
Interest expense
Interest expense amounted to $403,721 for the three months ended
September 30, 2003 compared to $42,902 for the three months ended September 30,
2002. Included in interest expense for the three months ended September 30, 2003
is $385,226 of non-cash financing charges related to the accretion and
conversion of convertible debentures issued in July 2003. With the issuance of
the convertible debentures in July 2003, the Company will incur non-cash
financial expenses during the second half of 2003 through the accretion of the
beneficial conversion feature included in the debentures.
14
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THE
NINE MONTHS ENDED SEPTEMBER 30, 2002
Revenue
Total revenue increased 61.9% in the nine months ended September 30,
2003 compared to the nine months ended September 30, 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 following table presents our North American and non-North American
revenues and the approximate percentage of total revenues ($000's) for the nine
months ended September 30, 2003 and 2002 respectively:
Nine months ended September 30,
--------------------------------------
2003 2002 % Change
--------------------------------------
North America $ 7,747 $ 3,733 107.5%
Non-North America 2,102 2,349 (10.5%)
-------------------------------------
Total revenues $ 9,849 $ 6,082 61.9%
=====================================
Percentage of total revenue
North America 78.7% 61.4%
Non-North America 21.3% 38.6%
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.
During the Q2 2003, the Company entered into a Distribution Agreement in
North America to complement its direct sales endeavors in this market. The
Company expects that over time sales through the distribution channel will
become a significant portion of the Company's revenues.
Gross Margin
The following table presents our gross margin and the percentage to total
revenues ($000's):
Nine months ended
September 30,
2003 2002
------ ------
Gross margin $3,862 $1,424
Gross margin rate 39.2% 23.4%
Gross margins for the nine months ended September 30, 2003 increased to
39.2% compared to 23.4% of revenue for the nine months ended September 30, 2002.
In conjunction with the increase in revenue for the nine months ended September
30, 2003, total gross margin dollars increased 171.3% compared to the nine
months ended September 30, 2002.
The increase in gross margin percentage and dollars from 2002 levels 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, during Q3 2003, current cost
reductions were offset by volume discounts offered to our customers. The Company
expects that ongoing volume discounts and competitive pricing pressures will
result in gross margin percentages at or below current levels over the balance
of the fiscal year.
15
Gross margins for the nine months ended September 30, 2002 were
specifically impacted by a write-off of $275,000 in excess inventories resulting
from the decline in demand for specific product categories, specifically related
to the 2.4 GHz product line. No comparable write off of inventory was made
during nine months ended September 30, 2003.
Selling, General and Administrative expenses
Selling, general and administrative expenses, including stock based
compensation, declined to $3,663,153 for the nine months ended September 30,
2003 from $5,120,252 for the nine months ended September 30, 2002. The decline
in 2003 versus 2002 was mainly due to the restructuring that was undertaken
during the fourth quarter of 2002 and ongoing tight cost controls. As a result,
the Company has reduced its compensation costs and related staff expenses and
reduced its costs of professional services.
With the receipt of proceeds from the sale of the convertible debentures in
July 2003, the Company intends to increase its spending on sales and marketing,
both within North America and internationally. While the Company intends to
maintain tight cost controls, we believe that tactical spending in advertising
and marketing communications could provide access to additional markets and
potential customers.
Research and Development expenses
Research and Development costs for the nine months ended September 30, 2003
amounted to $883,465 compared to $1,313,518 for the nine months ended September
30, 2002. As discussed in the Company's 10-K for 2002 and 2001, the Company had
moved to a level of sustaining engineering for its NCL and LMS product families.
However, with the acquisition of Avendo Wireless in July 2003 and the funds
obtained in the acquisition and through the sale of the convertible debentures,
the Company intends to increase its focus on new product research and
development, to complement our continued focus on cost and capability
enhancements to our current product lines.
Depreciation and Amortization expense
Depreciation and amortization expense declined to $384,573 for the nine
months ended September 30, 2003 compared to $826,828 for the nine months ended
September 30, 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.
Foreign Exchange
For the nine months ended September 30, 2003, the company recorded a
foreign exchange gain of $163,352 compared to a $60,622 loss for the nine months
ended September 30, 2002. The increase is due to the significant declines of the
U.S. dollar versus the Canadian and Australian dollars during 2003.
Write down of goodwill
During the nine months ended September 30, 2002, due to the continued
decline in telecom spending and its impact on projected future revenues to the
Company, management determined that there had been an impairment of the goodwill
arising from the release of escrow shares and the purchase of ADE Network
Technology Pty Ltd. As a result, the Company wrote off $4,069,696 of goodwill in
Q3 2002.
Interest expense
Interest expense amounted to $441,374 for the nine months ended September
30, 2003 compared to $402,131 for the nine months ended September 30, 2002.
Included in interest expense for the nine months ended September 30, 2003 is
$385,226 of non-cash financing charges related to the accretion and conversion
of convertible debentures issued in July 2003. Included in interest expense for
the nine months ended September 30, 2002 was $263,607 related to the accretion
of the promissory notes.
With the issuance of the convertible debentures in July 2003, the Company
will incur non-cash financial expenses during the second half of 2003 through
the accretion of the beneficial conversion feature included in the debentures.
16
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 must rely on its ability to raise money through equity
financing to pursue its business endeavors. The majority of funds raised have
been allocated to the development of the WaveRider(R) line of wireless data
communications products and the operations of the Company.
During the third quarter, the Company issued convertible debentures, in the
aggregate principal amount of $1,600,000, for cash proceeds of $1,504,000, less
cash fees of $87,120. In addition, the Company entered into an agreement to
purchase Avendo Wireless Inc., through the issue of 8,749,999 shares of common
stock and 3,000,000 common stock purchase warrants. Upon acquisition, the
Company received cash in the amount of $1,177,420 and other net assets in the
amount of $196,925.
Based on the Company's current plans and projections, Management believes
that the Company has the funds to meet its current and future financial
commitments until it achieves positive cash flows from operations.
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 50 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.
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.
17
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
a) The Company held its annual general meeting on September 4, 2003
in Toronto, Canada. Notice of Meeting, dated July 28, 2003, was
distributed to all shareholders of record, effective July 7,
2003, and filed with the Security and Exchange Commission on
form 14A on July 29, 2003.
c) Two matters were voted upon at the annual general meeting.
1. Mr. Gerry Chastelet, Mr. John Curry, Mr. Michael Milligan, Mr.
Cameron Mingay, Mr. Bruce Sinclair, and Mr. Dennis Wing were
elected as directors of the Company. The votes for the directors
were as follows:
Votes For Withheld
Gerry Chastelet 109,300,187 3,768,608
John Curry 108,944,873 4,123,922
Michael Milligan 109,301,387 3,767,408
Cameron Mingay 109,316,987 3,751,808
Bruce Sinclair 108,566,751 4,502,044
Dennis Wing 109,164,948 3,903,847
2. The proposal to approve a proposed plan of recapitalization that
could result in a reverse stock split of the Company's common
stock, based on one of four ratios to be determined by our board
of Directors, was approved by the shareholders. Votes were
95,134,892 For, 17,605,384 Against and 328,519 Abstaining.
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
July 14, 2003 - Acquisition of Avendo Wireless Inc.
July 18, 2003 - Sale of Convertible Debentures
July 30, 2003 - Regulation FD Disclosure
August 11, 2003 - Proforma Financial Information related to acquisition
of Avendo Wireless Inc.
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: October 30, 2003 /s/ D. Bruce Sinclair
---------------- ---------------------
D. Bruce Sinclair
President and Chief Executive Officer
/s/ T. Scott Worthington
------------------------
T. Scott
Worthington Chief
Financial Officer.
18
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 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 report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the small business issuer as of, and
for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the small business issuer, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report
is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the small business
issuer's internal control over financial reporting that
occurred during the period covered by the small business
issuer's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
small business issuer's internal control over financial
reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the small business issuer's auditors
and the audit committee of the small business issuer's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
small business issuer's ability to record, process, summarize
and report financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the small
business issuer's internal control over financial reporting.
Date: October 30, 2003
By: /s/ D. Bruce Sinclair
-------------------------------------------
D. BRUCE SINCLAIR, CHIEF EXECUTIVE OFFICER
19
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 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 report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the small business issuer as of, and
for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the small business issuer, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report
is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the small business
issuer's internal control over financial reporting that
occurred during the period covered by the small business
issuer's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
small business issuer's internal control over financial
reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the small business issuer's auditors
and the audit committee of the small business issuer's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
small business issuer's ability to record, process, summarize
and report financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the small
business issuer's internal control over financial reporting.
Date: October 30, 2003
By: /s/ T. Scott Worthington
---------------------------------------------
T. SCOTT WORTHINGTON, CHIEF FINANCIAL OFFICER
20
OFFICERS' CERTIFICATION PURSUANT TO 906
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of WaveRider Communications
Inc. (the "Company") on Form 10-QSB for the period ending September 30, 2003 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, D. Bruce Sinclair, Chief Executive Officer of the Company, and I,
T. Scott Worthington, Chief Financial Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/s/ D. Bruce Sinclair /s/ T. Scott Worthington
- --------------------- ------------------------
D. Bruce Sinclair T. Scott Worthington
Chief Executive Officer Chief Financial Officer
October 30, 2003 October 30, 2003
A signed original of this written statement required by Section 906 has been
provided to WaveRider Communications Inc. and will be retained by WaveRider
Communications Inc. and furnished to the Securities and Exchange Commission or
its staff upon request.
21