-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934
For October 26, 2001
Commission File Number 0-31943
ImagicTV Inc.
(Translation of Registrant name into English)
One Brunswick Square
14th Floor, P.O. Box 303
Saint John, New Brunswick, Canada E2L 3Y2
(Address of Principal Executive Offices) (Zip Code)
(506) 631-3000
----------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [_]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934. Yes [_] No: [X]
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
This Form 6-K is filed under the Securities Exchange Act of 1934, as amended,
and is incorporated by reference into the Registration Statement on Form S-8
(Reg. No. 333-53910) of ImagicTV Inc. and the related prospectus.
Information furnished on this form:
Second quarter report (for the quarter ended August 31, 2001)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ImagicTV Inc.
---------------------------------------
(Registrant)
By: /s/ Marjean Henderson
---------------------------------------
Vice President, Finance and Chief
Financial Officer
Date: October 26, 2001
LETTER TO SHAREHOLDERS
A Message from Marcel LeBrun, President and CEO, iMagicTV
Dear Shareholders:
During the second quarter of this fiscal year, ending August 31, 2001,
iMagicTV achieved a net loss within $100,000 of analysts' expectations,
despite the overall downturn in spending in the telecommunications sector.
This was accomplished through the aggressive management of our expenses.
iMagicTV continues to see significant activity with telephone companies around
the world, and as a result, we have a number of lab and market trials
currently underway. Given the state of the economy today, we are seeing longer
sales cycles as our customers take a more cautious approach to the timing
involved in making the significant capital investments required.
Tier-one service providers are starting to revitalize their activity in
reviewing the business case and infrastructure requirements to provide video
services. Telephone companies are under significant competitive pressure from
cable companies who have begun their own rollout of telephony services bundled
with high-speed Internet. Telcos are addressing how they can remain
competitive and generate an additional revenue stream.
I am very pleased to provide you with an update on our trials currently
underway with Telenor, the incumbent Norwegian telco, and SingTel of
Singapore. Telenor's trial has begun in Oslo where consumers are now enjoying
broadband television services using iMagicTV software. A significant
achievement in this trial is that iMagicTV's software is being used to deliver
the same high quality service over a network that utilizes ADSL, VDSL and
broadband wireless technology. We believe this demonstrates a key competitive
advantage of our solution. It gives service providers the reassurance of
knowing they can invest in their service platform while having the ability to
select multiple standards-based broadband technologies.
SingTel has now started its interactive television trial and has been joined
by the Media Corporation of Singapore (MediaCorp). As one of the region's most
established broadcasters, MediaCorp is playing a key role in developing
Singapore as a broadcasting and media production hub in Asia.
We remain focused on providing value to our commercially deployed and trial
customers, and delivering the best software platform and solutions in the
market. There are now over 12,000 subscribers using iMagicTV software to enjoy
broadband television services.
I'd like to once again assure you that iMagicTV remains confident in our
technology, the broadband television market and our ability to build upon our
base of proven, deployed customers.
Marcel LeBrun
President & CEO
Oct 18, 2001
3
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis should be read together with our annual
audited consolidated financial statements and the accompanying notes included
in our annual report and the condensed unaudited consolidated financial
statements as of and for three and six months ended August 31, 2001, and
accompanying notes appearing elsewhere in this report. All financial
information is presented in U.S. dollars unless otherwise noted.
Some of the statements set forth in this report are forward-looking statements
relating to our future results of operations. Our actual results may vary from
the results anticipated by these statements. Please see "Information Regarding
Forward-Looking Statements".
RESULTS OF OPERATIONS
Revenues
Our total revenues decreased to $803,000 for the three months ended August 31,
2001 from $2.8 million for the three months ended August 31, 2000 and
decreased to $2.5 million for the six months ended August 31, 2001 from $3.6
million for the six months ended August 31, 2000. These decreases primarily
relate to non-recurring revenues of $1.1 million for the sale of set-top boxes
to NBTel in the three and six months ended August 31, 2000 and lack of license
fee revenues in the three months ended August 31, 2001. We executed a trial
agreement with a European telephone company in the three month period ended
August 31, 2001. We intend to recognize the revenue from this agreement over
the term of the trial period.
License Fees. We had no license fee revenues for the three months ended August
31, 2001 compared to $1.5 million for the three months ended August 31, 2000,
and our license fee revenues decreased to $522,000 for the six months ended
August 31, 2001 from $2.1 million for the six months ended August 31, 2000. We
did not execute any commercial license agreements in the three months ended
August 31, 2001, compared with two commercial license agreements executed in
the three months ended August 31, 2000, and as a result did not record any
license fee revenues in the three months ended August 31, 2001. This decrease
in license fee revenues reflects the longer sales cycle we are experiencing,
as our customers delay their move from a market trial to commercial
deployments.
Royalty Fees. Our royalty fee revenues decreased to $37,000 for the three
months ended August 31, 2001 from $47,000 for the three months August 31,
2000, and increased to $118,000 for the six months ended August 31, 2001 from
$70,000 for the six months ended August 31, 2000. The royalty fee revenues for
the three and six months ended August 31, 2001 were generated from Kingston
Vision based on their monthly royalty fee payable to us for each active
subscriber. The decrease from the three months ended August 31, 2000 is the
result of no royalty fee revenues from NBTel in the three months ended August
31, 2001. NBTel prepaid royalty fees for a block of subscribers in
January 2001 for the use of DTV Manager, and therefore, we did not anticipate
any royalty fee revenues from NBTel in the three months ended August 31, 2001.
Services. Our services revenues increased to $766,000 for the three months
ended August 31, 2001 from $200,000 for the three months ended August 31,
2000, and increased to $1.8 million for the six months ended August 31, 2001
from $337,000 for the six months ended August 31, 2000. As we anticipated, our
services revenues increased due to the increased level of professional
services provided by us to our customers during market trials. These revenues
also represent maintenance and technical support and consulting services
provided to our customers under the terms of their license agreements.
4
MANAGEMENT'S DISCUSSION AND ANALYSIS
Equipment. We had no equipment revenues for the three and six months ended
August 31, 2001 compared $1.0 million for the three months ended August 31,
2000 and $1.1 million for the six months ended August 31, 2000. The equipment
revenues for the three and six months ended August 31, 2000 were generated
from sales of set-top boxes to NBTel under a set-top box supply agreement from
us. We no longer sell set-top boxes to our customers as they now purchase the
set-top boxes directly from the suppliers.
Cost of revenues
Excluding cost of equipment revenues, our cost of revenues increased to
$801,000 for the three months ended August 31, 2001 from $363,000 for the
three months ended August 31, 2000, and increased to $1.6 million for the
six months ended August 31, 200 from $678,000 for the six months ended August
31, 2000. We increased our staff levels to 34 at August 31, 2001 from 13 at
August 31, 2000 to provide implementation, installation, professional services
and maintenance and technical support services to our customers. Our cost of
revenues currently reflects this increase in personnel and other related costs
to support our professional services effort provided to customers during their
market trials.
Operating Expenses
Sales and marketing. Sales and marketing expenses increased to $2.5 million
for the three months ended August 31, 2001 from $1.5 million for the three
months ended August 31, 2000, and increased to $5.5 million for the six months
ended August 31, 2001 from $2.8 million for the six months ended August 31,
2000. This increase is primarily due to the addition of sales and marketing
personnel, marketing activities associated with trade show participation,
product demonstration, partner marketing and sales support and increased
travel and related expenses. Our combined sales and marketing departments
increased to 56 employees at August 31, 2001 from 37 employees at August 31,
2000. These increases in staffing levels were the result of our efforts to
expand our direct sales force and technical sales support staff coverage
areas, including Asia and Europe, and to support our marketing activities.
Research and development. Research and development expenses increased to $1.9
million for the three months ended August 31, 2001 from $1.7 million for the
three months ended August 31, 2000, and increased to $4.1 million for the six
months ended August 31, 2001 from $3.2 million for the six months ended August
31, 2000. At August 31, 2001, our research and development personnel had
increased to 99 from 89 at August 31, 2000. The increases reflect our
continued efforts to enhance the functionality of our existing products and
develop new products and services.
General and administration. General and administration expenses increased to
$1.3 million for the three months ended August 31, 2001 from $604,000 for the
three months ended August 31, 2000, and increased to $2.9 million for the six
months ended August 31, 2001 from $1.0 million for the six months ended August
31, 2000. The increase primarily relates to increased professional services
fees related to regulatory compliance required since we became a public
company in November 2000 and to $1.2 million in bad debt reserves recorded in
the six months ended August 31, 2001. We are actively pursuing collection of
these amounts.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS
Non-cash Operating Expenses
The following non-cash operating expenses have been incorporated in the
operating expense categories to which they relate.
Depreciation. Depreciation expense increased to $457,000 for the three months
ended August 31, 2001 from $263,000 for the three months ended August 31,
2000, and increased to $893,000 for the six months ended August 31, 2001 from
$484,000 for the six months ended August 31, 2000. The increase is due to our
increased investment in computer and other equipment and leasehold
improvements required to provide infrastructure to support our increase in
staff and geographic locations.
Stock-based compensation. Stock-based compensation expense increased to
$101,000 for the three months ended August 31, 2001 from $76,000 for the three
months ended August 31, 2000, and increased to $293,000 for the six months
ended August 31, 2001 from $92,000 for the six months ended August 31, 2000.
The expense is largely attributable to amortization of deferred stock-based
compensation related to options granted between May 2000 and August 2000. We
did not record any additional deferred stock-based compensation expense in the
three months ended August 31, 2001. The deferred stock-based compensation
represents the difference between the exercise prices of options granted to
acquire our common shares and the deemed fair value, for financial reporting
purposes, of our common shares on the date of their respective granting.
Deferred stock-based compensation is being amortized on a straight-line basis
over the vesting periods of the options.
Other income
Interest income increased to $490,000 for the three months ended August 31,
2001 from $5,000 for the three months ended August 31, 2000, and increased to
$1.2 million for the six months ended August 31, 2001 from $79,000 for the six
months ended August 31, 2000. The increases are primarily due to interest
earned on proceeds received from our September and October 2000 private
placements and our November 2000 initial public offering. Given the recent
reductions in prevailing interest rates, we anticipate we will continue to
receive lower rates of interest on our short term investments during fiscal
2002 than we received in fiscal 2001.
Net loss
We recorded a net loss of $5.1 million for the three months ended August 31,
2001 compared to a net loss of $2.3 million for the three months ended August
31, 2000, and our net loss increased to $10.6 million for the six months ended
August 31, 2001 from $5.0 million for the six months ended August 31, 2000.
Our net loss per share, using the weighted average number of shares
outstanding, was $0.21 for the three months ended August 31, 2001 compared
with a net loss per share of $0.13 for the three months ended August 31, 2000,
and increased to $0.43 for the six months ended August 31, 2001 from $0.28 for
the six months ended August 31, 2000. This increased loss is primarily a
result of our decreased revenues, increased costs for sales and marketing,
research and development and general and administrative expenses, offset by
increases in interest income.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
From our inception, we have financed our operations primarily through the
issuance of common equity, long-term debt and revenues from our operations.
Our operating activities used cash in the amount of $4.4 million for the three
months ended August 31, 2001 compared to $2.1 million for the three months
ended August 31, 2000, and used cash in the amount of $8.1 million for the six
months ended August 31, 2001 compared to $3.6 million for the six months ended
August 31, 2000. Cash used in operating activities for the three months ended
August 31, 2001 reflects our net operating loss of $5.1 million, partially
offset by depreciation of $457,000, amortization of stock-based compensation
of $101,000 and net decreases in working capital of $221,000.
Our cash used in investing activities, before the sale and purchase of
temporary investments, was $56,000 for the three months ended August 31, 2001
compared to $478,000 for the three months ended August 31, 2000, and decreased
to $703,000 for the six months ended August 31, 2001 from $1.2 million for the
six months ended August 31, 2000. The decrease in our use of cash for
investing for the six months ended August 31, 2001 is primarily due to our
reduced purchases of computer equipment and office furniture as we have not
significantly increased our staff levels during this period. Our current
expenditures reflect our investing activities on demonstration and testing
hardware used with our products and services.
We did not use any cash in financing activities for the three months ended
August 31, 2001, compared to $5,000 for the three months ended August 31,
2000, and our cash used in financing activities increased to $70,000 for the
six months ended August 31, 2001 from $9,000 for the six months ended August
31, 2000. We have not commenced nor completed any financing activities in the
current fiscal year. Financing expenses incurred in the six months ended
August 31, 2001 relate to costs incurred for our November 2000 initial public
offering.
Based on our current rate of cash consumption, we expect that our cash
position of $51.9 million as of August 31, 2001, will be sufficient to cover
our cash requirements for at least the next 30 months. In the longer-term, we
may require additional equity financing or borrowing to fund our business.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Industry risk
The telecommunications industry continues to experience a significant
reduction in capital spending. As a result, we expect to continue experiencing
a longer sales cycle as our customers delay their move from a market trial to
commercial deployment. We expect continued delayed licensing and royalty fee
revenues generated by us from the commercial deployments of our products. We
expect to continue to generate revenues from professional services provided to
customers during market trials. While our expenses for the six months ended
August 31, 2001 increased from our expenses for the six-months ended August
31, 2000, we intend to hold expenses at least to the present levels and
conserve cash so as to maintain our operations as presently constituted.
Additionally, we will address the pace of the market development on a monthly
basis to determine if changes may be necessary to our operations should the
longer sales cycle persist.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS
Impact of Interest Rate Exposure
As of August 31, 2001, we had approximately $51.9 million in cash, cash
equivalents and short-term investments, of which approximately $51.8 million
were short-term investments. A significant portion of the cash earns interest
at variable rates. In addition, although a portion of our short-term
investments consists of fixed-rate instruments, the average term is short.
Accordingly, our interest income is sensitive to changes in the level of
prevailing interest rates. Interest rates have continued to decline in fiscal
2002 and as a result we anticipate our average yield earned on surplus funds
in fiscal 2002 to be lower than yields earned in fiscal 2001. We do not
anticipate this situation to have any short-term material adverse impact on
our cash position.
Impact of Foreign Exchange Rate Exposure
We continue to expect that the majority of our revenues will be earned in U.S.
dollars, and that a significant portion of our operating expenses and capital
expenditures will continue to be incurred in Canadian dollars. Changes in the
value of the Canadian dollar relative to the U.S. dollar may result in
currency translation gains and losses which could affect our operating
results. We also deal in other foreign currencies; however, we anticipate that
changes in the exchange rates of these currencies will not have a material
impact. While we do not hedge our foreign exchange rate exposure with
financial derivative instruments, we do maintain a portion of our short term
investment portfolio in Canadian dollar denominated instruments.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This report contains forward-looking statements. These statements include
statements regarding: conditions in the telecom industry, our strategy and
plans, our efforts to develop and enhance our products, our expected sources
of revenues, our future expected costs and losses, our capital requirements
and the outlook for our business. When used in this document, the words
"will," "plan," "anticipate," "expect," "intend," "believe" and similar
expressions referring to events to occur in the future are intended to
identify forward-looking statements. Such statements reflect our current views
with respect to future events, are based on information currently available to
us and are subject to risks and uncertainties, including: unanticipated trends
and conditions in our industry, delays and difficulties that we encounter in
developing enhanced products, the risk that we will not have sufficient
capital to maintain or expand our operations, delays and difficulties in
obtaining customers or in their commercial deployment of services based on our
products, and other risks described in our filings with the U.S. Securities
and Exchange Commission and Canadian Securities Administrators, including the
prospectus for our initial public offering dated November 20, 2000, our Form
20-F and Annual Information Form for the fiscal year ended February 28, 2001.
These and other factors could cause our actual results, performance or
achievements to differ materially from any future results, performance or
achievements that may be expressed or implied by such forward-looking
statements. These factors should be considered carefully, and readers should
not place undue reliance on the forward-looking statements. We do not
undertake any obligation to update this forward-looking information.
8
CONDENSED CONSOLIDATED BALANCE SHEET (In thousands of U.S. dollars)
August 31, February 28,
2001 2001
---------------------------------------------------------------------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 101 $ 1,332
Short-term investments 51,784 59,428
Accounts receivable, trade, net of allowance of
$ 1,150 (February 28, 2001--nil) 2,294 5,680
Instalment receivables -- 705
Inventory 232 295
Prepaid expenses, deposits and other receivables 1,080 1,436
---------------------------------------------------------------------------
Total current assets 55,491 68,876
Capital assets 2,780 2,970
---------------------------------------------------------------------------
Total assets $58,271 $71,846
===========================================================================
Liabilities and Shareholders' equity
Current liabilities:
Accounts payable $ 273 $ 1,055
Accrued liabilities 1,783 3,823
Deferred revenues and customer deposits 731 1,119
Current portion of long-term debt 71 72
---------------------------------------------------------------------------
Total current liabilities 2,858 6,069
---------------------------------------------------------------------------
Long-term debt 1,561 1,577
---------------------------------------------------------------------------
Shareholders' equity:
Authorized:
Unlimited common shares, no par value
Unlimited preferred shares, no par value
Issued and outstanding:
24,598,442 Common Shares
(February 28, 2001--24,592,624) 87,125 87,678
Deferred stock-based compensation (1,894) (2,670)
Accumulated deficit (30,853) (20,282)
Reporting currency translation adjustments (526) (526)
---------------------------------------------------------------------------
Total shareholders' equity 53,852 64,200
---------------------------------------------------------------------------
Total liabilities and shareholders' equity $58,271 $71,846
===========================================================================
See accompanying notes to condensed consolidated financial statements
9
CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS (UNAUDITED)
(In thousands of U.S. dollars, except per share amounts)
Three months ended Six months ended
August 31, August 31,
2001 2000 2001 2000
----------------------------------------------------------------------------
Revenues:
License fees $ -- $ 1,543 $ 522 $ 2,055
Royalty fees 37 47 118 70
Services 766 200 1,813 337
Equipment -- 1,048 -- 1,107
----------------------------------------------------------------------------
Total revenues 803 2,838 2,453 3,569
----------------------------------------------------------------------------
Cost of revenues:
Services 801 363 1,612 678
Equipment -- 971 -- 1,029
----------------------------------------------------------------------------
Total cost of revenues 801 1,334 1,612 1,707
----------------------------------------------------------------------------
Gross profit 2 1,504 841 1,862
----------------------------------------------------------------------------
Operating expenses:
Sales and marketing 2,499 1,510 5,524 2,752
Research and development 1,853 1,653 4,104 3,190
General and administrative 1,318 604 2,863 956
----------------------------------------------------------------------------
Total operating expenses 5,670 3,767 12,491 6,898
----------------------------------------------------------------------------
Loss from operations (5,668) (2,263) (11,650) (5,036)
Interest income, net 490 5 1,157 79
Foreign exchange gain, net 54 12 70 37
----------------------------------------------------------------------------
Loss before provision for income
taxes (5,124) (2,246) (10,423) (4,920)
Provision for income taxes ( 9) (19) ( 148) ( 30)
----------------------------------------------------------------------------
Net loss for the period $ (5,133) $ ( 2,265) $(10,571) $(4,950)
============================================================================
Basic and diluted net loss per share $ (0.21) $ (0.13) $ (0.43) $ (0.28)
============================================================================
Weighted average number of shares
used in computing basic and diluted
net loss per share (000s) 24,599 17,556 24,597 17,554
See accompanying notes to condensed consolidated financial statements
10
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS'
EQUITY (UNAUDITED) (In thousands of U.S. dollars)
Deferred Reporting
Common Shares Stock-Based Currency Total
-------------- Compensation Accumulated Translation Shareholders'
Number Amount on Stock Options Deficit Adjustments Equity
------------------------------------------------------------------------------------------------
Balances, February 29,
2000 17,549 $14,489 $ -- $ (8,824) $ 41 $ 5,706
Net loss -- -- -- (4,950) -- (4,950)
Amortization of deferred
stock-based
compensation -- -- 92 -- -- 92
Deferred stock-based
compensation -- 3,134 (3,134) -- -- --
Reporting currency
translation adjustments -- -- -- -- (103) (103)
Issuance of shares for
cash 10 9 -- -- -- 9
------------------------------------------------------------------------------------------------
Balances, August 31,
2000 17,559 $17,632 $(3,042) $(13,774) $ (62) $ 754
================================================================================================
Balances, February 28,
2001 24,593 $87,678 $(2,670) $(20,282) $ (526) $64,200
Net loss -- -- -- (10,571) -- (10,571)
Amortization of deferred
stock-based
compensation -- -- 293 -- -- 293
Deferred stock-based
compensation -- (483) 483 -- -- --
Issuance of shares for
cash 5 (70) -- -- -- (70)
------------------------------------------------------------------------------------------------
Balances, August 31,
2001 24,598 $87,125 $(1,894) $(30,853) $ (526) $53,852
================================================================================================
See accompanying notes to condensed consolidated financial statements
11
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED) (In thousands of U.S. dollars, except per share amounts)
Three months ended Six months ended
August 31, August 31,
2001 2000 2001 2000
-------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (5,133) $ (2,265) $(10,571) $(4,950)
Items not involving cash:
Depreciation and amortization 457 263 893 484
Stock-based compensation 101 76 293 92
Change in operating assets and
liabilities:
Accounts receivable, trade (47) (299) 3,386 1,258
Instalment receivables 587 (1,081) 705 (1,078)
Inventory 52 (404) 63 (402)
Prepaid expenses, deposits, and other
receivables 202 839 356 (157)
Accounts payable (145) 422 (782) 1,411
Accrued liabilities (278) 754 (2,040) 612
Deferred revenues and customer
deposits (150) (367) (388) (839)
-------------------------------------------------------------------------------
Cash used in operating activities (4,354) (2,062) (8,085) (3,569)
-------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of capital assets (56) (478) (703) (1,215)
(Purchases) sales of short-term
investments (14,907) -- 7,644 --
-------------------------------------------------------------------------------
Cash (used in) from investing
activities (14,963) (478) 6,941 (1,215)
-------------------------------------------------------------------------------
Cash flows from financing activities:
Issuance of common shares, net of
share issue costs -- 5 (70) 9
Deferred charges related to initial
public offering -- (886) -- (886)
-------------------------------------------------------------------------------
Cash used in financing activities -- (881) (70) (877)
-------------------------------------------------------------------------------
Effect of foreign currency exchange
adjustments (2) 66 (17) (116)
-------------------------------------------------------------------------------
Decrease in cash and cash equivalents (19,319) (3,355) (1,231) (5,777)
Cash and cash equivalents, beginning of
period 19,420 3,974 1,332 6,396
-------------------------------------------------------------------------------
Cash and cash equivalents, end of
period $ 101 $ 619 $ 101 $ 619
===============================================================================
Supplemental cash flow information:
Cash paid for taxes $ 25 $ 7 $ 77 $ 31
Cash received for interest $ 524 $ 5 $ 1,352 $ --
See accompanying notes to condensed consolidated financial statements
12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of presentation
The accompanying financial statements include the accounts of ImagicTV Inc.
and its wholly owned subsidiaries. All intercompany transactions and balances
are eliminated on consolidation.
The financial statements are stated in U.S. dollars, except as otherwise
noted. They have been prepared in accordance with Canadian generally accepted
accounting principles, which, in all material respects, conform with U.S.
generally accepted accounting principles. The interim financial statements
follow the same accounting policies and methods of application as the most
recent annual financial statements. For further information, reference should
be made to the audited annual consolidated financial statements for the year
ended February 28, 2001 that are included in the Company's Annual Report.
The information furnished as at August 31, 2001 and for the three and six
month periods ended August 31, 2001 and August 31, 2000 reflects, in the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of the interim
periods presented. Interim results are not necessarily indicative of results
for future periods.
2. Segmented information
The Company operates in a single reportable operating segment, that is, to
provide software solutions to telecommunications companies and other service
providers that enable the delivery of digital broadcast television services to
residential subscribers over high-speed Internet Protocol networks. The single
reportable operating segment derives its revenue from the sale of software and
related services. As at August 31, 2001, substantially all assets related to
the Company's operations were located in Canada. Revenues are attributable to
geographic location based on the location of the customer, as follows: (in
thousands of U.S. dollars)
------------------------------------------------------------------------
Three months ended Six months ended
August 31, August 31,
2001 2000 2001 2000
------------------------------------------------------------------------
Revenues by geographic location:
United States $ 467 $ 899 $ 1,229 $ 899
Canada 158 1,851 810 2,020
Europe 118 88 311 650
Asia 60 -- 103 --
------------------------------------------------------------------------
$ 803 $ 2,838 $ 2,453 $ 3,569
========================================================================
13
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. Related Party Transactions
The following table summarizes the related party transactions and balances (in
thousands of U.S. dollars):
--------------------------------------------------------------------
Three months ended Six months ended
August 31, August 31,
2001 2000 2001 2000
--------------------------------------------------------------------
Revenues:
License fees $ -- $ -- $ -- $ --
Royalty fees -- 66 -- 66
Services 138 36 153 104
Equipment -- 997 -- 1,056
Operating expenses 298 156 618 304
---------------------------------------------------------------------
August 31, February 28,
As of 2001 2001
---------------------------------------------------------------------
Related party balances:
Accounts receivable, trade $ 202 $ 1,440
Accrued liabilities 70 850
Deferred revenue 124 27
4. Common shares
As of August 31, 2001 and February 28, 2001, there were 3,538,532 and 3,565,339
options outstanding to acquire common shares of the Company.
14