[LOGO] EIGER TECHNOLOGY, INC. | 2001 Annual Report
EIGER TECHNOLOGY, INC.
producing the internet enabled technologies of tomorrow.
EIGER TECHNOLOGY, INC. 2001 | contents
To Our Shareholders - P 1
Onlinetel Corp. - P 2
K-Tronik International Corp. - P 3
Eiger Net Inc. and ADH - P 4
Management Discussion & Analysis - P 5-6
Auditors' Report - P 7
Consolidated Balance Sheets - P 8
Consolidated Statements of Operations and Retained Earnings - P 9
Consolidated Statements of Cash Flows - P 10
Notes to the Consolidated Financial Statements - P 11-20
Segmented Information - p 20-22
producing the internet enabled technologies of tomorrow.
FISCAL 2001 | acquisition & consolidation
TO OUR SHAREHOLDERS
Eiger shareholders will notice that we have scaled back the paper-based edition
of this year's annual report. The reason for this change is that we believe that
a premier website and online annual report represent greater value to our
shareholders than a glossy paper-based annual report. While continuing to meet
all the regulatory requirements for disclosure and analysis, whether paper-based
or electronic, using the website as our primary shareholder communication
platform will enable us to provide more timely disclosure with a greater depth
of content. Please provide any comments about this new format by linking to our
new website at www.eigertechnology.com.
2001 was a year filled with many accomplishments, including the acquisition of
Kitchener-Waterloo based Onlinetel Inc., Canada's leading Voice over Internet
Protocol (VoIP) telecommunications company, and another year of record growth
and revenues at our K-Tronik International Corporation subsidiary. In 2001 we
also suffered a setback and found that our Eiger Net Inc. subsidiary was and
still is susceptible to the global economic slowdown, prompting us to write down
the carrying value of our Eiger Net and Nixxo related investments.
As we look at 2002 and beyond, Eiger is well positioned to create shareholder
value by capitalizing on its earlier investments in K-Tronik and ADH Custom
Metal Fabricators, and leveraging our acquisition of Onlinetel into positive
earnings and cash flow momentum:
o VoIP has been identified as one of the top six sectors of 2002
(Globe and Mail). Onlinetel is Canada's leading VoIP
telecommunications company, with over 500,000 users, an expanding
VoIP network that connects every major city between Ottawa and
London, and two 10-10 casual calling numbers that are expected to be
activated in Q3, 2002.
o K-Tronik is expected to begin trading as a public company in Q3,
2002. K-Tronik is a leading manufacturer of energy efficient
electronic ballasts for fluorescent lighting, has experienced
compounded annual revenue growth of over 100% over the last three
years, and is positioned to both maintain a high internal growth
rate and to embark on an acquisition strategy in the energy savings
technology industry.
o ADH Custom Metal Fabricators Inc. is expected to begin trading as a
public company in Q4, 2002, with a focus on growing both internally
and through acquisition in a highly fragmented manufacturing
industry.
o We have working capital of $12,815,000 million, including $5,993,000
in cash and short-term investments. And, as in 1999 and 2000, we
expect to be cash flow positive in 2002.
Eiger is focused on creating shareholder value. Our strategy is to be
financially stable and, from that base of financial strength, to acquire
companies that are involved in emerging long-term technology trends, and that
have a proven product or service and an existing base of revenue. When we make
acquisitions, we do so patiently and at the right price. We look for negative
sentiment and valuations in the overall market, industry or company in question,
and generally use earn-out shares based on performance in making acquisitions.
We then help management to grow the acquired business with a view to realizing
value for Eiger shareholders through an ultimate public listing of that
business.
Today, we are poised to realize shareholder value in 2002 from a public listing
of our earlier investments in K-Tronik and ADH, and rapidly growing our most
recent investment in Onlinetel. The combination of these initiatives is expected
to create positive momentum in both earnings and cash flow during 2002, which
will ultimately be realized by our shareholders.
G.A. RACICOT K. ATTOE, C.A. ROLAND P. AUSTRUP
Chief Executive Officer Chief Financial Officer Vice-President
[PHOTO OMITTED] [PHOTO OMITTED] [PHOTO OMITTED]
/s/ G.A. Racicot /s/ K. Attoe, C.A. /s/ Roland P. Austrup
1
[LOGO] onlinetel (TM)
talk freely to the world (TM)
ONLINETEL CORP.
Onlinetel Corp. is a next generation telecommunications software and services
company, which harnesses the power of soft-switch technology to deliver state of
the art Voice over Internet Protocol (VoIP) communication services to
individuals, businesses and carriers. Utilizing soft switch technology,
Onlinetel converts analog voice conversations to digital I.P. packets and routes
voice calls, phone-to-phone, over the Internet from any wireless or landline
connection. VoIP and the integration of voice and data networks is a competitive
threat to providers of traditional telecom services because of the substantial
increase in communication cost efficiencies of both running voice and data over
a single integrated infrastructure and the ability to bypass per minute usage
rates.
Using its Intelliswitch application, Onlinetel pioneered and developed a new
media for advertisers, enabling individuals and businesses to benefit from free
long distance calling in exchange for listening to a 15 second paid
advertisement, and enabling sponsors to benefit from one-to-one advertisements
to callers. The first commercial application of this advertising based calling
network was launched in the Greater Toronto Area (GTA) 905 area code. In 2001,
Onlinetel experienced dramatic growth in advertising revenue as its user base in
the GTA 905 area code grew to over 200,000 households, or just under 20% of the
market. Additionally, Onlinetel is currently processing over 15 million minutes
of traffic per month in this market, and subsequent to September 30th year end
expanded to the 416 area code and increased its user base to 250,000 households.
In 2002, Onlinetel anticipates launching advertising based calling networks in
additional area codes nationally in order to significantly expand its user base
and advertising revenue. As well, by leveraging its technology platform and
scalable network infrastructure, Onlinetel has identified several potentially
lucrative product offerings targeted to its growing user base; lowest cost 10-10
based international calling, residential and corporate flat rate subscription
plans for unlimited calling between major centers nationally, flat rate
unlimited internet access services, and customized prepaid phone card plans.
Onlinetel delivers toll-quality communications at the lowest long distance rates
available. With reduced investment cost burdens, Onlinetel's soft-switch
technology reliably scales to service millions of callers. Onlinetel's continued
expansion of its own national network along with seamless and virtual
connections worldwide with leading carriers will extend Onlinetel's reach to the
global community in 2002 and beyond.
[GRAPHIC OMITTED]
2
[LOGO] K-TRONIK BALLASTS
K-TRONIK INTERNATIONAL CORPORATION
K-Tronik is a leading North American manufacturer of energy efficient electronic
ballasts for fluorescent lighting. K-Tronik supplies ballasts worldwide to OEMs
such as Lightolier, Fontana, Edison, Visioneering, Peerless and others. With a
broad product line, low cost production and one of the lowest product defect
rates in the industry (less than 0.04%), K-Tronik has developed a solid
reputation in the rapidly growing energy savings technology industry.
K-Tronik had sales of CDN$10,107,000 in 2001, and has experienced 119%
compounded annual revenue growth over the past two years. This rapid growth is
due in part to the United States Department of Energy's mandate that all
fluorescent lamp ballasts produced after April 1, 2005 must be energy efficient
electronic ballasts, as opposed to less efficient electromagnetic ballasts.
Currently, electronic ballasts represent 40% of the annual US $1 Billion North
American ballast market. The strong brand recognition and market share built by
K-Tronik over the past three years has also contributed significantly to its
growth and has positioned it for sales momentum in the future.
Based on this growth, Eiger announced its plans to take K-Tronik public in the
first quarter of 2002 by way of a reverse acquisition with LMC Capital Corp., a
US reporting issuer. Subsequent to this transaction, K-Tronik plans to purchase
companies that integrate the latest technology in energy efficient lighting.
The decision to take K-Tronik public was also based on maximizing Eiger's return
on shareholder equity that is currently not reflected in Eiger's share price.
For example, utilizing a price to sales ratio of two times, based on historical
numbers, K-Tronik as a stand-alone public company represents value of CDN $0.48
per Eiger share. The public listing of K-Tronik will potentially enable Eiger to
realize this value and raise working capital without dilution to Shareholders
through the sale of its K-Tronik shares to the public.
K-Tronik's strategy moving forward is to increase market share through the
acquisition of ESCO'S (General Contractors that specialize in conducting energy
efficiency audits of multiple tenant commercial buildings and retrofitting them
with high efficiency lighting ballasts) and various other component
manufacturers that supply the Electronic Ballast Industry. Integrating both the
manufacturing and distribution of ballasts will increase gross margin
substantially and will create operating efficiencies overall.
[GRAPHIC OMITTED]
3
[LOGO] EIGER NET INC.
EIGER NET INC.
Eiger Net is involved in the R&D, engineering and manufacturing of multimedia
and data communication cards such as 56K and DSL modem cards, Home PNA cards,
LAN cards, MP3 modules and other Internet access devices for OEM consumer
electronics companies worldwide.
In 2000 Eiger Net invested in new manufacturing capacity and obtained a QS 9000
certification in order to be able to compete for large volume OEM consumer
electronics contracts. As a result of those initiatives, Eiger Net experienced
dramatic revenue growth in 2000 and was cash flow positive.
However, the global economic downturn that began last year resulted in a
difficult year for Eiger Net in 2001. The cost of new investments coupled with
much lower production volumes than anticipated substantially increased unit
production costs thereby eliminating operating margins.
With continued growth of the Internet and the convergence of voice and data
networks, demand for multimedia and data communication cards that enable
consumer electronic devices to access those networks will grow. As such, Eiger
Net is positioned in growth areas of the computer components industry. However,
until there is evidence of an overall economic recovery, Eiger Net will
experience weaker than average operating results.
[LOGO] ADH Metal Fabricators Inc.
ADH CUSTOM METAL FABRICATORS INC.
ADH Custom Metal Fabricators is a fully integrated custom sheet metal
manufacturer that specializes in custom enclosures and cabinets. Products are
custom engineered using the latest CAD technology and CNC manufacturing
equipment. Products are all built to NEMA specifications and can range in size
from a mailbox to a small house. In addition to its focus on enclosures and
cabinetry, ADH contract manufactures for nationwide distribution of data and
relay racks, custom control enclosures, fluorescent light fixtures and store
display fixtures. ADH fabricates using a wide variety of metals and finishes
including mild steels, aluminum, and stainless steel.
ADH is located in Stratford, Ontario, in a 55,000 square foot manufacturing
facility on 35 acres of land that is wholly owned by Eiger.
ADH went through significant restructuring in 2001 and, in November 2001 hired
John Ramsbottom as President. ADH identified certain high growth segments in the
electrical cabinetry and enclosure market that will fuel internal growth, and
also developed an acquisition strategy to consolidate a highly fragmented North
American manufacturing industry. As part of this consolidation strategy, Eiger
announced in December 2001 that it is taking ADH public by way of reverse
acquisition of CDNX listed Newlook Capital Corp. in order to utilize capital
markets to facilitate its acquisition strategy.
4
EIGER TECHNOLOGY, INC. | management discussion & analysis
The following discussion and analysis of operating results and financial
position should be read in conjunction with the consolidated financial
statements of the Company and notes thereto incorporated by reference in this
annual report.
The Company
Eiger Technology, Inc. is a technology company with four operating subsidiaries;
Onlinetel, Corp., K-Tronik International Corp., Eiger Net Inc., and ADH Custom
Metal Fabricators Inc. Eiger's head office is located in Toronto, Ontario and
has seven employees.
Onlinetel is a Voice over Internet Protocol (VoIP) next generation
telecommunications company that can take voice information from any landline or
cellular phone, convert that information to digital IP packets and route that
information, phone-to-phone, over the Internet. Onlinetel currently derives its
revenue from advertisers on its free calling network, and from flat fee long
distance and ISP services. It is anticipated that Onlinetel will begin offering
10-10 casual calling, corporate long distance and wholesale termination services
in fiscal 2002. Onlinetel is based in Kitchener, Ontario and has 20 employees.
Eiger Net is involved in the R&D, engineering and manufacturing of multimedia
and data communication cards such as 56K and DSL modem cards, Home PNA cards,
LAN cards, MP3 modules and other Internet access devices for OEM consumer
electronics companies worldwide. Eiger Net is located in South Korea and has 69
employees.
K-Tronik is a leading North American manufacturer of energy efficient electronic
ballasts for fluorescent lighting. K-Tronik supplies ballasts worldwide to OEM
light fixture companies, distributors and contractors. In addition to its head
office in New Jersey, K-Tronik maintains an ISO 9001 certified manufacturing
facility in South Korea. K-Tronik employs 46 people.
ADH is a fully integrated custom sheet metal manufacturer that specializes in
low volume custom enclosures and cabinets. In addition to its focus on
enclosures and cabinetry, ADH contract manufactures for nationwide distribution
of data and relay racks, custom control enclosures, fluorescent light fixtures
and store display fixtures. ADH is located in Stratford, Ontario and has 20
employees.
Results of Operations
The Company generated sales of $30.1 million in fiscal 2001 compared to 57.1
million in fiscal 2000, the decrease mainly due to a reduction in Eiger Net
Inc.'s sales of $30.1 million reflecting a weakness in the global economy and
especially in the computer peripheral sector. During the fiscal 2001 year, the
Company wrote off goodwill, investments, development and other costs amounting
to $16,366,000 and acquired a 100% interest in Onlinetel, Inc, a
Kitchener/Waterloo based Voice over Internet Protocol (VoIP) long distance and
ISP services company. Revenue from ongoing operations were as follows:
($'000's) 2001 2000 Increase
(Decrease)
Onlinetel 234 -- 234
Eiger 17,428 47,513 (30,085)
K-Tronik 10,107 6,718 3,389
ADH 2,301 2,837 (536)
------ ------ -------
30,070 57,068 (26,998)
====== ====== =======
Management of the Company has written off $ 16,366,000 of goodwill, investments,
long term loans receivable, impairment in value of inventory and deferred
product development costs during fiscal 2001 reflecting the downturn in the
worldwide computer peripheral business and global economic recession.
Management is of the opinion that the economic recession will continue for the
remainder of 2002. Management also believes that cost savings businesses such as
energy saving electronic ballasts (K-Tronik) and VoIP (Onlinetel) should benefit
from a cost conscious marketplace.
producing the internet enabled technologies of tomorrow.
5
EIGER TECHNOLOGY, INC. | management discussion & analysis
K-Tronik sales increased due to a broadening of product offerings and continued
increase in brand recognition. ADH sales decreased due to the reduction in
outsourcing needed by its primary customers in South-Western Ontario. The
percent decrease in gross margin at K-Tronik from 33% to 22% reflects K-Tronik
continuing to add lower margin volume business to previous niche markets of
specialty electronic ballasts.
The decrease in sales by Eiger Labs and Eiger Net subsidiaries reflect the
downturn in the overall computer peripheral OEM manufacturing sector. Expenses
increased approximately 30% during the year ended September 30, 2001 to
$9,947,000 from $7,076,000 for the year ended September 30, 2000. Selling,
General and Administration Expenses ("SG&A") increased by approximately 63%
(2001: $7,769,000; 2000: $5,514,000). SG&A consisted principally of salaries and
benefits, the operating costs associated with sales at Eiger Labs, Eiger Net and
K-Tronik, the operating costs of the Company's R&D, engineering and
manufacturing facilities, and the costs associated with strengthening head
office infrastructure to ensure enhanced investment management control and
compliance with regulatory and governance matters.
While interest on long-term debt also remained steady (September 30, 2001:
$98,000; September 30, 2000: $92,000), other interest and bank charges decreased
(September 30, 2001: $480,000; September 30, 2000: $552,000). This was due to a
reduction in long-term debt at Eiger Group of Companies.
Amortization of goodwill and other assets increased from $871,000 in fiscal 2000
to $1,032,000 in fiscal 2001.
Liquidity and Capital Reserves
At September 30, 2001, the Company's cash position had decreased to $5,993,000
from $13,814,000 at the end of September 30, 2000 and its working capital
decreased by $10,589,000 to $12,815,000 at September 30, 2001, $6,580,000
principally as a result of investment commitments funded during the year. The
Company increased its share capital from $38,895,000 at September 30, 2000 to
$42,001,000 at September 30, 2001, through the issuance of 2,269,995 shares at
an average price of $ 1.37.
The decrease in the Company's accounts receivable to $8,759,000 at September 30,
2001 from $12,039,000 at September 30, 2000 is due to the decrease in the volume
of business at Eiger Net, offset partially by an increase in business at
K-Tronik.
Inventory decreased to $6,545,000 September 30, 2001 from $10,878,000 as a
result of the decrease in the volume of business at Eiger Net offset by
K-Tronik.
Financial Risk and Foreign Exchange
Earnings and cash flow are subject to volatility stemming mainly from movements
in the U.S./Canadian dollar and South Korean Won/Canadian dollar exchange rate
and interest rates. The Company does not hedge its foreign currency or interest
rate exposure. This is a result of an evaluation of the costs of hedging and
labour being a large component of K-Tronik Asia and Eiger Net's Korean Won
exposure offset by Korean Won based revenue. Foreign exchange loss for the year
ended September 30, 2001 was $191,188.
6
EIGER TECHNOLOGY, INC. 2001 | auditors' report
Monteith, Monteith & Co.
Chartered Accountants
208 Ontario Street
Stratford, Ontario N5A 3H4
Telephone: 519 271 6550 Fax: 519 271 4796
email: administrator@monteith.on.ca
Partners:
ROBERT F. LIGHTFOOT, C.A. Principal:
STEPHEN J. LANDERS, B.A., C.A.
ROBERT B. LIGHTFOOT, B.B.A, C.A. MERVYN T. DIETZ, C.M.A.
To the Shareholders of Eiger Technology, Inc.:
We have audited the consolidated balance sheets of Eiger Technology, Inc. as at
September 30, 2001 and 2000, and the consolidated statements of operations and
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Canada and the United States of America. Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of Eiger Technology, Inc. as at September 30,
2001 and 2000, and the results of its operations and its cash flows for the
years then ended in accordance with accounting principles generally accepted in
Canada.
/s/ Monteith Monteith & Co.
CHARTERED ACCOUNTANTS.
Stratford, Ontario,
January 26, 2002.
7
EIGER TECHNOLOGY, INC. 2001 | annual report
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
EIGER TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
as at September 30, 2001 and 2000
ASSETS
2001 2000
- --------------------------------------------------------------------------------
$ $
Current:
Cash 1,847,000 2,031,000
Cash Held in Escrow -- 4,978,000
Short-term Investments (Note 4) 4,146,000 6,805,000
Accounts Receivable (Note 5) 8,759,000 12,039,000
Inventory 6,545,000 10,878,000
Prepaid Expenses 769,000 686,000
- --------------------------------------------------------------------------------
22,066,000 37,417,000
Long-term Investments (Note 4) 404,000 4,337,000
Capital (Note 6) 4,541,000 4,998,000
Goodwill 2,488,000 7,640,000
Other (Note 7) 1,222,000 2,753,000
- --------------------------------------------------------------------------------
30,721,000 57,145,000
================================================================================
LIABILITIES and SHAREHOLDERS' EQUITY
Current:
Bank Indebtedness (Note 8) 3,515,000 2,670,000
Accounts Payable and Accrued Liabilities 5,616,000 11,184,000
Income Taxes Payable -- 39,000
Current Portion of Long-term Debt (Note 9) 120,000 120,000
- --------------------------------------------------------------------------------
9,251,000 14,013,000
- --------------------------------------------------------------------------------
Long-term Debt (Note 9) 1,014,000 1,488,000
- --------------------------------------------------------------------------------
Future Income Taxes (Note 10) -- 43,000
- --------------------------------------------------------------------------------
Non-controlling Interest (671,000) 3,253,000
- --------------------------------------------------------------------------------
Shareholders' Equity:
- --------------------------------------------------------------------------------
Share Capital (Note 11) 42,001,000 38,895,000
Contributed Surplus 217,000 217,000
Retained Earnings (21,091,000) (764,000)
- --------------------------------------------------------------------------------
21,127,000 38,348,000
- --------------------------------------------------------------------------------
30,721,000 57,145,000
================================================================================
On Behalf of the Board:
/s/ Gerry Racicot Director
-------------------
Gerry Racicot
/s/ Keith Attoe Director
-------------------
Keith Attoe
(See Accompanying Notes)
- --------------------------------------------------------------------------------
8
EIGER TECHNOLOGY, INC. 2001 | annual report
CONSOLIDATED STATEMENTS of OPERATIONS and RETAINED EARNINGS
- --------------------------------------------------------------------------------
EIGER TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS of OPERATIONS and RETAINED EARNINGS
for the years ended September 30, 2001 and 2000
2001 2000
- --------------------------------------------------------------------------------
$ $
Sales 30,070,000 57,068,000
Cost of Sales 27,711,000 50,731,000
- --------------------------------------------------------------------------------
Gross Margin 2,359,000 6,337,000
- --------------------------------------------------------------------------------
Expenses:
Selling, General and Administration 7,769,000 5,154,000
Amortization of Capital Assets 568,000 407,000
Amortization of Goodwill and Other 1,032,000 871,000
Interest on Long-term Debt 98,000 92,000
Other Interest and Bank Charges 480,000 552,000
- --------------------------------------------------------------------------------
9,947,000 7,076,000
Income (Loss) before Provision for Income Taxes (7,588,000) (739,000)
Provision for Income Taxes: (Note 12)
Current (6,000) 289,000
Future (56,000) (132,000)
- --------------------------------------------------------------------------------
(62,000) 157,000
- --------------------------------------------------------------------------------
Income (Loss) before Unusual Items (7,526,000) (896,000)
Discontinued Operations -- (162,000)
Gain on Disposal of Discontinued Operations -- 226,000
Non-recurring Items (Note 14) (16,366,000) --
- --------------------------------------------------------------------------------
Income (Loss) before Non-controlling Interest (23,892,000) (832,000)
Non-controlling Interest (3,565,000) (139,000)
- --------------------------------------------------------------------------------
Net Income (Loss) for the Year (20,327,000) (693,000)
Retained Earnings - Beginning of Year (764,000) (71,000)
- --------------------------------------------------------------------------------
Retained Earnings - End of Year (21,091,000) (764,000)
================================================================================
Earnings per Share:
Before Non-recurring Items:
Basic (0.23) (0.04)
-----------------------------
Diluted (0.23) (0.04)
-----------------------------
Net Income (Loss)
Basic (0.61) (0.03)
-----------------------------
Diluted (0.61) (0.03)
-----------------------------
(See Accompanying Notes)
- --------------------------------------------------------------------------------
9
EIGER TECHNOLOGY, INC. 2001 | annual report
CONSOLIDATED STATEMENTS of CASH FLOWS
- --------------------------------------------------------------------------------
EIGER TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS of CASH FLOWS
for the years ended September 30, 2001 and 2000
2001 2000
- ---------------------------------------------------------------------------------------------
$ $
Cash Flows from Operating Activities:
Net Income (Loss) for the Year (20,327,000) (693,000)
Items not Involving Cash:
Extraordinary Items (Note 14) 16,366,000 --
Amortization 1,600,000 1,278,000
Future Income Taxes (56,000) (132,000)
- ---------------------------------------------------------------------------------------------
(2,417,000) 453,000
Changes in Non-cash Working Capital Balances:
Accounts Receivable 3,280,000 (6,812,000)
Inventory 3,203,000 (7,145,000)
Prepaid Expenses (83,000) (438,000)
Accounts Payable and Accrued Liabilities (5,568,000) 7,665,000
Income Taxes Payable (39,000) (198,000)
Non-controlling Interest (3,094,000) (137,000)
- ---------------------------------------------------------------------------------------------
(4,718,000) (6,612,000)
- ---------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Purchase of Capital Assets (478,000) (3,349,000)
Long-term Investments (3,571,000) (3,977,000)
Purchase of Goodwill and Other Assets (2,531,000) (2,243,000)
- ---------------------------------------------------------------------------------------------
(6,580,000) (9,569,000)
- ---------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Increase (Decrease) in Long-term Debt (474,000) 397,000
Increase (Decrease) in Bank Indebtedness 845,000 910,000
Subsidiary Share Capital Issued to Non-controlling Interest -- 2,020,000
Subsidiary Dividends Paid to Non-controlling Interest -- (409,000)
Issuance of Share Capital (Net of Costs) 3,106,000 25,904,000
- ---------------------------------------------------------------------------------------------
3,477,000 28,822,000
- ---------------------------------------------------------------------------------------------
Net Cash Flows for the Year (7,821,000) 12,641,000
Cash and Cash Equivalents - Beginning of the Year 13,814,000 1,173,000
- ---------------------------------------------------------------------------------------------
Cash and Cash Equivalents - End of the Year 5,993,000 13,814,000
=============================================================================================
Cash and Cash Equivalents Represented by:
Cash 1,847,000 2,031,000
Cash Held in Escrow -- 4,978,000
Short-term Investments 4,146,000 6,805,000
- ---------------------------------------------------------------------------------------------
5,993,000 13,814,000
=============================================================================================
(See Accompanying Notes)
- --------------------------------------------------------------------------------
10
EIGER TECHNOLOGY, INC. 2001 | annual report
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001 and 2000
1. Nature of Business:
Eiger Technology, Inc. ("the Company") is incorporated under the laws of
Ontario. Through its various subsidiaries, the Company manufactures and
distributes electronic/computer peripherals and electronic ballasts to OEM
and consumer markets worldwide, and offers Voice over Internet Protocol
services to the Canadian long-distance market.
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of Preparation:
These financial statements have been prepared in accordance with
accounting principles generally accepted in Canada ("Cdn. GAAP"). A
reconciliation to U.S. generally accepted accounting principles
("U.S. GAAP") is provided in Note 15. Because a precise
determination of assets and liabilities depends on future events,
the preparation of periodic financial statements necessitates the
use of estimates and approximations. Actual amounts may differ from
these estimates.
(b) Principles of Consolidation:
The accompanying consolidated financial statements include the
accounts of Eiger Technology, Inc. and all of its subsidiary
companies as listed in Note 3. All significant intercompany
transactions and balances have been eliminated upon consolidation.
(c) Cash and Cash Equivalents:
Cash and cash equivalents consist of cash on account and short-term
investments with remaining maturities of three months or less at
acquisition.
(d) Inventory:
Inventory is valued at the lower of cost and net realizable value.
Cost is determined on a first-in, first-out basis and includes the
costs of materials and direct labour plus the applicable share of
manufacturing overhead.
(e) Investments:
All non-consolidated investments are accounted for at cost.
Short-term investments are written down to market value when less
than cost. Long-term investments are written down to market value
when a decline in market value below the carrying value is
considered to be other than temporary.
(f) Capital Assets:
Capital assets are recorded at cost. Amortization is calculated on
the declining-balance basis at the following annual rates:
Buildings - 4-5%
Machinery and Equipment - 5-10%
Automotive Equipment - 20-30%
Computer Equipment - 20-30%
Leasehold Improvements - 10% straight line basis
(g) Goodwill:
Goodwill represents the excess of the purchase price of the
Company's interest in subsidiary companies over the fair value of
the underlying net identifiable assets at the time of acquisition.
Goodwill is amortized over 10 years on a straight-line basis (40
years for acquisitions prior to 1997). Goodwill arising on
acquisitions after June 30, 2001 is not amortized. Management
evaluates the expected future net cash flows of the companies at
each reporting date and adjusts goodwill for any impairment.
11
EIGER TECHNOLOGY, INC. 2001 | annual report
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001 and 2000
2. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
(h) Other Assets:
Product development costs meeting generally accepted criteria for
deferral are written down to expected realizable value, and are
amortized once production commences over periods ranging from three
to ten years, depending on the anticipated economic life of the
particular product. Deferred organization, finance, and regulatory
approval costs are amortized over 2 to 5 years. Long-term lease
deposits are recorded at cost.
(i) Income Taxes:
Income taxes are provided using the liability method of tax
allocation. Under this method, future tax assets and liabilities are
determined based on differences between financial reporting and
income tax bases of assets and liabilities, and are measured using
the substantially enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
(j) Issuance of Share Capital:
The costs of issuing share capital are netted against share capital.
(k) Revenue Recognition:
Sales are recorded upon shipment of goods to customers. Fees are
recognized as services are rendered.
(l) Foreign Currency Translation:
Due to the extensive degree of financing provided to its foreign
subsidiaries by the Company, these subsidiaries are considered to be
integrated operations. Accordingly, the temporal method of foreign
currency translation is used. Under this method, monetary assets and
liabilities of foreign subsidiaries are translated into Canadian
dollars using the exchange rate in effect at the balance sheet date,
non-monetary items are translated at historical exchange rates
(except for items carried at market, which are translated at the
balance sheet date exchange rate), and revenues and expenses are
translated using average exchange rates to approximate the rates
actually in effect at the time of the transactions. Resulting
foreign exchange translation gains or losses are included in the
determination of net income for the year, except for such gains or
losses relating the translation or settlement of foreign currency
denominated long-term monetary items which are deferred and
amortized over the remaining life of the monetary item. There were
no material exchange gains or losses on long-term foreign currency
denominated monetary items during either of the reporting periods
(m) Stock-based Compensation:
No compensation expense is recognized for stock options granted to
employees. Options are granted at the fair market value of the
shares on the day of the grant. Any consideration paid by employees
on the exercise of stock options is credited to share capital.
(n) Earnings per Share:
Basic earnings per share is calculated based on the weighted average
number of shares outstanding during the year. Diluted earnings per
share is calculated using the treasury stock method based on the
weighted average number of shares that would have been outstanding
during the year had all the dilutive options been exercised at the
beginning of the year, or date of issuance if later, and assuming
that option proceeds would be used to purchase common shares at the
average market price during the year.
12
EIGER TECHNOLOGY, INC. 2001 | annual report
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001 and 2000
3. SUBSIDIARIES AND RELATED PARTY TRANSACTIONS:
Eiger Technology, Inc. is related to the following corporations:
NAME OF CORPORATION NATURE OF RELATIONSHIP
Vision Unlimited Equipment Inc.* 100% Subsidiary
A.D.H. Custom Metal Fabricators Inc. 100% Subsidiary of Vision
Unlimited Equipment Inc.
Alexa Properties Inc. 100% Subsidiary
K-Tronik Int'l Corp. 53% Subsidiary
K-Tronik Asia Corp. 59.3% owned through K-Tronik
Int'l Corp. and directly
Alexa Korea Holdings, Inc.* 100% Subsidiary
Eiger Net, Inc. 58.5% Subsidiary of Alexa Korea
Holdings, Inc.
Alexa (U.S.A.), Inc.* 100% Subsidiary
Eiger Labs Group, Inc. 64% Subsidiary of Alexa
(U.S.A.), Inc.
Onlinetel, Inc. 100% Subsidiary
* Inactive - holding company only
All transactions within the corporate group are in the normal course of
business, are transacted at fair market value and recorded at the carrying
value at the time, and are eliminated upon consolidation. Intercompany
balances at the financial statement date are also eliminated upon
consolidation.
Service fees paid to corporations owned by four management personnel
during the period totalled $412,000 (2000: $320,000).
4. INVESTMENTS:
(a) Short-term Investments:
Short-term investments are comprised of Canadian money market funds
and short-term commercial paper plus accrued interest, having a
market value equivalent to their cost amount.
(b) Long-term Investments:
2001 2000
$ $
Advances to Nixxo Technology, Inc. -- 2,221,000
Advances to Lexatec VR Systems Inc. (Note 18) 324,000 1,444,000
Subsidiary long-term investment in debt securities 80,000 437,000
Other -- 235,000
------- ---------
404,000 4,337,000
======= =========
The advances noted above are non-interest bearing, and have no
specific terms of repayment.
5. ACCOUNTS RECEIVABLE:
Accounts receivable are reported net of an allowance for doubtful accounts
of $196,000 (2000: $116,000).
13
EIGER TECHNOLOGY, INC. 2001 | annual report
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001 and 2000
6. CAPITAL ASSETS:
2001 2001 2001 2000
Accumulated Net Book Net Book
Cost Amortization Value Value
$ $ $ $
Land 159,000 -- 159,000 159,000
Buildings 1,103,000 183,000 920,000 951,000
Machinery and Equipment 5,017,000 2,702,000 2,315,000 3,124,000
Furniture and Fixtures 817,000 389,000 428,000 392,000
Automotive Equipment 201,000 83,000 118,000 108,000
Leasehold Improvements 268,000 152,000 116,000 123,000
Computer Hardware 363,000 80,000 283,000 71,000
Computer Software 240,000 38,000 202,000 70,000
------------------------------------- ---------
8,168,000 3,627,000 4,541,000 4,998,000
===================================== =========
7. OTHER:
2001 2000
$ $
Product Development Costs 298,000 1,709,000
Deferred Organization and Financing Costs -- 370,000
Non-interest Bearing Long-term Deposits 682,000 435,000
Regulatory Approval 174,000 174,000
Other 68,000 65,000
--------- ---------
1,222,000 2,753,000
========= =========
8. BANK INDEBTEDNESS:
The Canadian line of credit balance of $96,000 bears interest at Royal
Bank prime plus .75%, is due on demand, and is secured by a general
security agreement covering inventory, equipment and accounts receivable.
Foreign subsidiary lines of credit balances totalling $3,419,000 (Cdn.)
bear interest at rates ranging from 5 - 7.25%, are secured by inventory
and equipment, and are repayable upon demand.
9. LONG-TERM DEBT:
2001 2000
$ $
Royal Bank of Canada term loan repayable in
monthly instalments of $10,000 plus interest
calculated at Royal Bank prime plus 1/4%. 745,000 865,000
Shin Han Bank (Korea) term loan repayable in
bi-annual instalments of $60,500 commencing
May 8, 2006 and ending May 8, 2008
plus interest calculated at 6.75% per annum. 303,000 651,000
Other 86,000 92,000
--------- ---------
1,134,000 1,608,000
Less: Current Portion (120,000) (120,000)
--------- ---------
1,014,000 1,488,000
========= =========
Principal payments required on long-term debt for the next five years are
as follows:
Year Amount
$
2002 120,000
2003 206,000
2004 120,000
2005 120,000
2006 241,000
-------
807,000
=======
14
EIGER TECHNOLOGY, INC. 2001 | annual report
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001 and 2000
10. FUTURE INCOME TAXES:
Significant components of future income tax assets (liabilities) are as
follows:
2001 2000
$ $
Excess of net book value of capital assets
over tax value (236,000) (270,000)
Other future income tax liabilities -- (53,000)
Operating losses carried forward 2,254,000 372,000
Less: Valuation allowance (2,034,000) (102,000)
Other 16,000 10,000
---------- --------
Net future income tax assets (liabilities) -- (43,000)
========== ========
11. SHARE CAPITAL:
Authorized: 100,000,000 Common Shares
Issued:
2001 2001 2000 2000
No. of Shs. $ No. of Shs. $
Beginning of Year: 33,945,858 39,437,000 21,284,358 9,340,000
Issued:
- - private placement * 70,000 1,839,000 11,444,500 27,861,000
- - exercise of options 400,000 350,000 617,000 483,000
- - acquisitions 1,799,995 936,000 -- --
- - earn out shares -- -- 600,000 4,800,000
- - costs of issue (19,000) (3,047,000)
--------------------------- ---------------------------
End of Year: 36,215,853 42,543,000 33,945,858 39,437,000
Reciprocal Shareholdings (526,929) (542,000) (526,929) (542,000)
--------------------------- ---------------------------
Net per Balance Sheets 35,688,924 42,001,000 33,418,929 38,895,000
=========================== ===========================
* Shares in escrow: None (2000: 4,840,000)
The Company awards unconditional stock options to employees, officers,
directors and others at the recommendation of the CEO as approved by the
shareholders. Options are granted at the fair market value of the shares
on the day granted, and vest immediately. The following is a continuity
schedule of outstanding options for the reporting periods, where WAEP
refers to "weighted average exercise price".
2001 2001 2000 2000
No. of WAEP No.of WAEP
Options Options
$ $
Beginning of Year: 1,713,000 3.37 895,000 .74
Granted 2,133,000 1.16 1,535,000 3.70
Exercised (400,000) .88 (617,000) .76
Expired -- -- (100,000) .90
--------- ---------
End of Year: 3,446,000 2.29 1,713,000 3.37
========= =========
Stock options were exercised during the year at prices ranging from $0.60
to $1.40. The weighted average contractual life for options outstanding at
year end was 1,400 days.
During the year, proceeds from exercised stock options of $350,000 was
credited to share capital (2000: $483,000). No amounts were recognized as
compensation expense with respect to stock options granted or exercised in
either of the reporting periods
15
EIGER TECHNOLOGY, INC. 2001 | annual report
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001 and 2000
11. SHARE CAPITAL - CONTINUED:
Stock options have been granted to the CEO of K-Tronik Int'l Corp.
contingent upon meeting sales quotas for that company as tabled below:
Number of
Monthly Sales for Six Options
Consecutive Months Exercisable Total Exercise
Units of Ballasts Per Plateau Cumulative Price
50,000 per month for 6 consecutive months 70,000 70,000 .60
60,000 per month for 6 consecutive months 70,000 140,000 .60
70,000 per month for 6 consecutive months 70,000 210,000 .60
80,000 per month for 6 consecutive months 70,000 280,000 .60
90,000 per month for 6 consecutive months 70,000 350,000 .60
No shares were issued in fiscal 2001 or fiscal 2000 as a result of this
agreement.
Management agreed to issue shares of the Company to four members of the
management team of EigerNet, Inc. and Eiger Labs Group Inc. as performance
earn out consideration contingent upon achieving the criteria tabled below
for the combined results of those two companies:
Common
Year Gross Sales Net Income Shares
1999 $27 million U.S. $1.0 million U.S. 600,000
2000 $70 million U.S. $2.5 million U.S. 750,000
2001 $80 million U.S. $3.5 million U.S. 750,000
2002 $90 million U.S. $4.0 million U.S. 900,000
2003 $110 million U.S. $4.5 million U.S. 1,000,000
600,000 shares were issued in fiscal 2000 as a result of this agreement
based on the operating results for 1999. No shares were issued in fiscal
2001 and none will be issued in fiscal 2002 pursuant to this agreement as
the sales and income criteria have not been met.
Additional shares may become issuable pursuant to the agreement described
in Note 16.
12. PROVISION FOR INCOME TAXES:
2001 2000
$ $
Current Provision: (6,000) 289,000
---------- --------
Future Provision:
Losses carried forward (22,000) (267,000)
Net book value of capital assets (34,000) 13,000
Canadian Exploration Expenses -- 69,000
Other -- 53,000
---------- --------
(56,000) (132,000)
---------- --------
Total Provision (62,000) 157,000
========== ========
Reconciliation of Tax Provision:
Income (Loss) before Provision for Income Taxes (7,588,000) (739,000)
Taxable Intercompany Dividend Eliminated on Consolidation -- 409,000
Amortization of Goodwill Arising on Consolidation 624,000 549,000
Valuation Allowance on Losses Carried Forward 6,716,000 408,000
---------- --------
Income Subject to Current and Future Income Taxes (248,000) 627,000
========== ========
At Average Statutory Rate (2001: 25%; 2000: 25%) (62,000) 157,000
========== ========
The average statutory rate varies depending on the relative mix of incomes
from the Company and its subsidiaries located in Canada, Korea and the
United States.
16
EIGER TECHNOLOGY, INC. 2001 | annual report
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001 and 2000
13. CASH PAYMENTS OF INTEREST AND INCOME TAXES:
2001 2000
$ $
Interest 555,000 620,000
======= =======
Income Taxes 15,000 304,000
======= =======
14. Non-recurring Items:
2001
$
Charge for impairment in value of
consolidated goodwill 6,500,000
Charge for impairment in value of
long-term loans receivable 7,003,000
Non-recurring charge for impairment
in value of inventory 566,000
Charge for impairment in value of capital assets 184,000
Charge for decline in value of long-term investments
in shares of other corporations 982,000
Charge for impairment in value of deferred
product development costs 1,131,000
----------
16,366,000
==========
Due to unfavourable economic conditions, particularly in the Republic of
South Korea, the Company has experienced significant and long-term decline
in the value of the asset groups noted above.
The charges for impairment in values reported above are shown net of a
reduction in future tax liabilities of $127,000 and non-controlling
interest of $1,170,000.
15. RECONCILIATION TO U.S. GAAP:
These financial statements have been prepared in accordance with
accounting principles generally accepted in Canada ("Cdn. GAAP").
Significant differences under U.S. GAAP are discussed below.
For fiscal years beginning after December 15, 1998, U.S. GAAP requires
that all organization costs (including those previously deferred) be
expensed currently. Also, all product development costs are to be expensed
as incurred.
U.S. GAAP requires the measurement and reporting of "comprehensive
income". Comprehensive income includes net income and all other changes to
Shareholders' Equity other than amounts received from or paid to
shareholders. The only reportable comprehensive income item for the
Company relates to foreign currency translation adjustments as described
below.
U.S. GAAP requires the use of the current rate method of foreign currency
translation, with any resulting foreign exchange translation adjustments
forming part of comprehensive income for the year and accumulating as a
separate component of shareholders' equity.
17
EIGER TECHNOLOGY, INC. 2001 | annual report
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001 and 2000
15. RECONCILIATION TO U.S. GAAP - CONTINUED:
APB Opinion 25 requires the intrinsic value based method be used to
measure stock option compensation. As the Company grants stock options at
fair market value, no compensation is recognized. SFAS No. 123 requires
pro-forma disclosure of net income and earnings per share as if the fair
value method had been applied.
Reconciliations to U.S. GAAP are as follows:
2001 2000
$ $
Net Income (Loss):
- per Cdn. GAAP (20,327,000) (693,000)
- expense deferred product development costs net
of portion relating to non-controlling interest 856,000 (328,000)
- expense deferred organization costs net of
portion relating to non-controlling interest 219,000 90,000
- foreign currency translation adjustment 191,000 129,000
- future income tax savings related to above (347,000) 60,000
----------- ----------
- per U.S. GAAP (19,408,000) (742,000)
----------- ----------
Comprehensive item - foreign exchange adjustment (191,000) (129,000)
----------- ----------
Comprehensive Income (19,599,000) (871,000)
=========== ==========
Retained Earnings:
- per Cdn. GAAP (21,091,000) (764,000)
- expense deferred product development costs
net of portion relating to non-controlling interest (298,000) (1,154,000)
- expense deferred organization costs net of
portion relating to non-controlling interest -- (219,000)
- foreign currency translation adjustments 326,000 135,000
- future income tax savings related to above 100,000 447,000
----------- ----------
- per U.S. GAAP (20,963,000) (1,555,000)
=========== ==========
Accumulated Other Comprehensive Items:
- per Cdn. GAAP -- --
- foreign currency translation adjustments (326,000) (135,000)
----------- ----------
- per U.S. GAAP (326,000) (135,000)
=========== ==========
Total Assets:
- per Cdn GAAP 30,721,000 57,145,000
- expense deferred product development costs (298,000) (1,709,000)
- expense deferred organization costs -- (370,000)
- increase in future income tax assets 100,000 404,000
----------- ----------
- per U.S. GAAP 30,523,000 55,470,000
=========== ==========
Earnings per Share:
Basic (.59) (.03)
----------- ----------
Fully Diluted (.59) (.03)
----------- ----------
Pro-forma Disclosure (SFAS No. 123):
Had SFAS No. 123 been followed, net income would have decreased by
$1,766,000 in fiscal 2001 (2000: $4,342,000), and basic and fully diluted
earnings per share would have been (.64) and (.64) respectively (2000:
(.20) and (.20)).
16. ACQUISITIONS OF SUBSIDIARY COMPANIES:
On July 31, 2001, the Company acquired 100% of the outstanding shares of
Onlinetel, Inc., a company incorporated under the laws of the state of
Nevada. Onlinetel, Inc. provides Voice over Internet Protocol ("VoIP")
long distance services to the Canadian market.
The consolidated financial statements of Eiger Technology, Inc. include
the results of operations of Onlinetel, Inc. for the two months ended
September 30, 2001.
18
EIGER TECHNOLOGY, INC. 2001 | annual report
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001 and 2000
16. ACQUISITIONS OF SUBSIDIARY COMPANIES - CONTINUED:
The acquisition was accomplished through the issuance of 1,799,995 common
shares of Eiger Technology, Inc. having a total fair market value at the
time of issuance of $936,000.
The purchase equation at the time of acquisition was as follows:
$Cdn.
Current Assets 48,000
Capital Assets 594,000
Goodwill 1,314,000
Liabilities (995,000)
---------
Net Assets Acquired 961,000
=========
T.S.E. Fee 25,000
Shares of Eiger Technology, Inc. 936,000
---------
Total Cost 961,000
=========
The share exchange agreement allows that additional shares of Eiger
Technology, Inc. may be issued to the former shareholders of Onlinetel,
Inc. if certain earn out provisions are met as follows:
Fiscal Gross Net Common
Year Revenue Income Shares
$ $ $ #
2002 19,083,000 2,442,000 1,800,000
2003 37,348,000 6,213,000 1,800,000
2004 50,849,000 9,353,000 1,800,000
2005 59,867,000 13,849,000 1,800,000
Unmet earn out targets can be carried forward and met on a cumulative
basis until fiscal 2010.
17. SUBSEQUENT EVENTS:
Subsequent to the year end, the Company announced its intention to sell
its 53% interest in K-Tronik Int'l Corporation ("K-Tronik") to LMC Capital
Corp. ("LMC"), a US reporting issuer. The Company will receive 7,571,428
shares of LMC for its holdings, plus an additional 7,071,000 shares in
settlement of debt owing from K-Tronik. The total of 14,642,428 shares are
expected to be worth approximately $8,500,000 and to represent a 51%
interest in LMC.
Subsequent to the year end, the Company has purposed to sell its 100%
interest in Vision Unlimited Equipment Inc., and its 100% subsidiary, ADH
Custom Metal Fabricators Inc., to Newlook Capital Corp. ("Newlook"), a
capital pool company pursuant to Policy 2.4 of the Canadian Venture
Exchange Inc. ("CDNX"). The sale price of $2,400,000 will be satisfied by
the issuance to the Company of 4,800,000 common shares of Newlook. These
shares are expected to be received over a period of six years due to CDNX
surplus and value security escrow restrictions. The transaction will
result in the Company becoming a controlling shareholder of Newlook.
The above-mentioned transactions are subject to approvals by the
respective Boards of Directors, performance of due diligence procedures,
and receipt of approvals from the applicable regulatory authorities.
18. FINANCIAL INSTRUMENTS
a) Fair Value:
Cash and cash equivalents, short-term investments, accounts receivable and
payable, and bank indebtedness are carried at cost which approximates fair
value due to their short time to maturity. Management believes the
carrying value of long-term investments to be equivalent to their fair
market value. The fair values of the Company's long-term debt obligations,
based on current rates for debt with similar terms and maturities, are
approximately the same as their carrying values.
19
EIGER TECHNOLOGY, INC. 2001 | annual report
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001 and 2000
18. FINANCIAL INSTRUMENTS - CONTINUED
(b) Interest Rate Risk:
The Company is not exposed to significant interest rate risk due to the
short-term maturity of its current monetary assets and liabilities. The
Company's interest rate risk pertaining to its long-term debt obligations
is not considered to be significant due to the relatively low amounts
involved.
(c) Credit Risk:
The Company's financial assets that are exposed to credit risk consist
primarily of short-term investments, accounts receivable, and long-term
investments.
Short-term investments consist solely of money market funds and short-term
commercial paper issued by investment-rated Canadian financial
institutions which are invested for terms not exceeding 90 days.
The Company, in the normal course of business, is exposed to credit risk
from its customers. Management believes that sufficient allowance has been
made for bad debts in these financial statements based on a review of
accounts on an individual basis. The concentration of credit risk in trade
accounts receivable is not considered to be significant due to the
Company's large client base.
The Company is also exposed to credit risk with respect to its long-term
advances to Lexatec VR Systems Inc. and certain subsidiary investments.
Advances to Lexatec VR Systems Inc. are partially secured by a pledge of
reciprocal shareholdings.
19. COMMITMENTS:
As at September 30, 2001, the Company had commitments under the terms of
various operating leases requiring annual rental payments as follows:
$
2002 503,000
2003 551,000
2004 347,000
2005 160,000
2006 160,000
20. SEGMENTED INFORMATION:
Management has identified four reportable segments: "ADH", "K-Tronik",
"Onlinetel" and "Eiger". Segmentation is determined on the basis of the
types of goods and services provided and geographic location.
"ADH" consists of A.D.H. Custom Metal Fabricators Inc. and Alexa
Properties Inc. A.D.H. Custom Metal Fabricators Inc. is a manufacturer of
fluorescent light fixtures, data racks and other metal cabinetry. Alexa
Properties Inc. owns the land and manufacturing facility in Stratford,
Ontario.
"K-Tronik" includes K-Tronik Int'l Corp., a distributor of electronic
ballasts based in Hackensack, New Jersey, and K-Tronik Asia Corp., a
manufacturer of electronic ballasts operating in Korea.
"Onlinetel" consists of Onlinetel, Inc. which provides Voice over Internet
Protocol services to the Canadian long distance market.
"Eiger" includes Eiger Labs Group, Inc. and EigerNet, Inc. Both of these
companies are involved in the production and distribution of electronic
communications products. EigerNet, Inc. is located in South Korea, while
Eiger Labs Group, Inc. operates out of California.
Financial information, segmented according to the above, is presented on
the following two pages.
20
EIGER TECHNOLOGY, INC. 2001 | annual report
SEGMENTED INFORMATION
- --------------------------------------------------------------------------------
EIGER TECHNOLOGY, INC.
SEGMENTED INFORMATION
for the year ended September 30, 2001
Totals per
Reconciling Financial
ADH K- Tronik Onlinetel Eiger All Others Items Statements
=================================================================================================================================
$ $ $ $ $ $ $
Sales:
External:
- - Domestic 2,301,000 -- 234,000 -- -- -- 2,535,000
- - Foreign -- 10,107,000 -- 17,428,000 -- -- 27,535,000
Intersegment -- -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
2,301,000 10,107,000 234,000 17,428,000 -- -- 30,070,000
Cost of Sales 2,004,000 7,934,000 -- 17,958,000 -- (185,000) 27,711,000
- ---------------------------------------------------------------------------------------------------------------------------------
Gross Margin 297,000 2,173,000 234,000 (530,000) -- -- 2,359,000
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses:
Operations and Administration 509,000 3,014,000 335,000 3,394,000 777,000 (260,000) 7,769,000
Amortization of Capital
and Other Assets 210,000 655,000 28,000 676,000 31,000 -- 1,600,000
Interest on Long-term Debt 65,000 -- -- 33,000 -- -- 98,000
Other Interest and Bank Charges 56,000 360,000 -- 61,000 3,000 -- 480,000
- ---------------------------------------------------------------------------------------------------------------------------------
840,000 4,029,000 363,000 4,164,000 811,000 -- 9,947,000
- ---------------------------------------------------------------------------------------------------------------------------------
Income (Loss) before Taxes (543,000) (1,856,000) (129,000) (4,694,000) (811,000) -- (7,588,000)
Provision for Income Taxes (72,000) 15,000 -- (20,000) -- 15,000 (62,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Income (Loss) before
Non-recurring Items (471,000) (1,871,000) (129,000) (4,674,000) (811,000) -- (7,526,000)
Non-recurring Items (136,000) (1,048,000) -- (8,691,000) (6,491,000) -- (16,366,000)
Non-controlling Interest 2,000 1,245,000 -- 2,318,000 -- -- 3,565,000
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) for the Year (605,000) (1,674,000) (129,000) (11,047,000) (7,302,000) -- (20,327,000)
=================================================================================================================================
Cash Flows:
From Operating Activities (224,000) (1,892,000) (303,000) (1,399,000) (900,000) -- (4,718,000)
From Investing Activities (32,000) (112,000) (158,000) (2,282,000) (10,801,000) 6,805,000 (6,580,000)
From Financing Activities 568,000 1,705,000 669,000 4,205,000 3,135,000 (6,805,000) 3,477,000
- ---------------------------------------------------------------------------------------------------------------------------------
312,000 (299,000) 208,000 524,000 (8,566,000) -- (7,821,000)
Cash and Cash Equivalents:
Beginning of the Year -- 446,000 -- 937,000 12,431,000 -- 13,814,000
- ---------------------------------------------------------------------------------------------------------------------------------
End of the Year 312,000 147,000 208,000 1,461,000 3,865,000 -- 5,993,000
=================================================================================================================================
Expenditures on Capital Assets
and Goodwill during the Year 32,000 207,000 1,472,000 43,000 38,000 -- 1,792,000
=================================================================================================================================
Balance of Capital Assets and
Goodwill - End of the Year
- - Domestic 1,803,000 -- 2,037,000 -- 116,000 -- 3,956,000
- - Foreign -- 1,596,000 -- 1,477,000 -- -- 3,073,000
- ---------------------------------------------------------------------------------------------------------------------------------
1,803,000 1,596,000 2,037,000 1,477,000 116,000 -- 7,029,000
=================================================================================================================================
Amount of Investment in Investees
Subject to Significant Influence -- -- -- -- -- -- --
=================================================================================================================================
Total Assets 4,428,000 8,440,000 2,423,000 14,351,000 35,402,000 (34,323,000) 30,721,000
=================================================================================================================================
- --------------------------------------------------------------------------------
21
EIGER TECHNOLOGY, INC. 2001 | annual report
SEGMENTED INFORMATION
- --------------------------------------------------------------------------------
EIGER TECHNOLOGY, INC.
SEGMENTED INFORMATION
for the year ended September 30, 2000
Totals per
Lexatec Reconciling Financial
ADH K- Tronik (Discontinued) Eiger All Others Items Statements
$ $ $ $ $ $ $
====================================================================================================================================
Sales:
External:
- - Domestic 2,834,000 -- -- -- -- (2,000) 2,832,000
- - Foreign 5,000 6,718,000 (123,000) 47,513,000 -- 123,000 54,236,000
Intersegment 18,000 -- -- -- -- (18,000) --
- ------------------------------------------------------------------------------------------------------------------------------------
2,857,000 6,718,000 (123,000) 47,513,000 -- 103,000 57,068,000
Cost of Sales 2,523,000 4,465,000 (92,000) 43,763,000 -- 72,000 50,731,000
- ------------------------------------------------------------------------------------------------------------------------------------
Gross Margin 334,000 2,253,000 (31,000) 3,750,000 -- 31,000 6,337,000
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Operations and Administration 612,000 2,337,000 235,000 2,374,000 (169,000) (235,000) 5,154,000
Amortization of Capital and
Other Assets 159,000 465,000 1,000 646,000 8,000 (1,000) 1,278,000
Interest on Long-term Debt 71,000 -- -- 21,000 -- -- 92,000
Other Interest and Bank Charges 103,000 252,000 1,000 195,000 2,000 (1,000) 552,000
- ------------------------------------------------------------------------------------------------------------------------------------
945,000 3,054,000 237,000 3,236,000 (159,000) (237,000) 7,076,000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) before Taxes (611,000) (801,000) (268,000) 514,000 159,000 268,000 (739,000)
Provision for Income Taxes (184,000) (55,000) 1,000 324,000 72,000 (1,000) 157,000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) before
Non-recurring Items (427,000) (746,000) (269,000) 190,000 87,000 269,000 (896,000)
Non-recurring Items -- -- -- -- -- 64,000 64,000
Non-controlling Interest 3,000 545,000 107,000 (409,000) -- (107,000) 139,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss)
for the Year (424,000) (201,000) (162,000) (219,000) 87,000 226,000 (693,000)
====================================================================================================================================
Cash Flows:
From Operating Activities (197,000) (3,067,000) (267,000) (3,360,000) 279,000 -- (6,612,000)
From Investing Activities (157,000) (734,000) -- (650,000) (16,770,000) 8,742,000 (9,569,000)
From Financing Activities 354,000 4,226,000 267,000 3,795,000 28,922,000 (8,742,000) 28,822,000
- ------------------------------------------------------------------------------------------------------------------------------------
-- 425,000 -- (215,000) 12,431,000 -- 12,641,000
Cash and Cash Equivalents:
Beginning of the Year -- 21,000 -- 1,152,000 -- -- 1,173,000
- ------------------------------------------------------------------------------------------------------------------------------------
End of the Year -- 446,000 -- 937,000 12,431,000 -- 13,814,000
====================================================================================================================================
Expenditures on Capital Assets
and Goodwill during the Year 158,000 1,434,000 -- 8,206,000 95,000 -- 9,893,000
====================================================================================================================================
Balance of Capital Assets and
Goodwill - End of the Year
- - Domestic 2,050,000 -- -- -- 90,000 -- 2,140,000
- - Foreign -- 1,708,000 -- 8,790,000 -- -- 10,498,000
- ------------------------------------------------------------------------------------------------------------------------------------
2,050,000 1,708,000 -- 8,790,000 90,000 -- 12,638,000
====================================================================================================================================
Amount of Investment in Investees
Subject to Significant Influence -- -- -- -- 175,000 -- 175,000
====================================================================================================================================
Total Assets 3,881,000 8,632,000 -- 28,042,000 40,093,000 (23,503,000) 57,145,000
====================================================================================================================================
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22
EIGER TECHNOLOGY, INC. 2001 | annual report
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ADH Metal Fabricators Inc. EIGER NET INC. onlinetel (TM) K-TRONIK BALLASTS
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23
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CORPORATE INFORMATION
Corporate Offices/ Eiger Technology, Inc.
Investor Relations 330 Bay St. Suite 602
Toronto, Ontario M5H 2S8
Phone: 416 216 8659
Fax: 416 216 1164
Auditors Monteith, Monteith & Co.
208 Ontario Street
Stratford, Ontario N5A 3H4
Attorneys (Ontario)
Eunice Kim
2384A Bloor Street West
Toronto, Ontario M6S 1P5
Transfer Agents Pacific Corporate Trust Company
Suite 830
625 Howe Street
Vancouver, British Columbia V6C 3B8
Toronto Stock Exchange AXA
NASD OTC ETIFF
Bulletin Board
Share Structure 100,000,000 Authorized
(as of September 30, 2001) 36,215,853 Issued and Outstanding
www.eigertechnology.com
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