UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 2000
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period:
SIDEWARE SYSTEMS INC.
---------------------------------------
(Exact name of Registrant as specified in its charter)
British Columbia
------------------- ----------------------
(State or jurisdiction (IRS Employer
of incorporation) Identification No.)
1810 Samuel Morse Drive, Reston, Virginia 20190-5316
------------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number (703) 437-9002
Securities registered pursuant to section 12(b) of the Act:
None
Securities registered pursuant to section 12(g) of the Act:
Common Shares without par value
------------------------------------
(Title of Class)
Check whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes x No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. x
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates, computed by reference to the closing
price for trading of the issuer's stock on the OTC-Bulletin Board as at
January 31, 2001: $87,606,000.00.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 66,167,167 common
shares without par value, as at March 16, 2001.
EXPLANATORY NOTE
The purpose of this amendment is to amend the following items of
our Annual Report on Form 10-K for the period ended December 31,
2000: Item 1 - Business, Item 5 - Market for Registrant's Common
Equity and Related Stockholder Matters, Item 8 - Financial
Statements and Supplementary Data, Item 11 - Executive
Compensation, and Item 13 - Certain Relationships and Related
Transactions.
This report continues to speak as of March 22, 2001, the date of
our original Form 10-K for the year ended December 31, 2000. Any
items not changed in this amendment shall be as set forth in our
Original Form 10-K dated March 22, 2001.
1
PART I.
ITEM 1. BUSINESS
OVERVIEW
Our business is the development and marketing of interactive e-
business software. Our current products are offered as the Sideware
Enterprise Interaction Suite 3.0. Our products support Web based
customer communication, and are intended for the growing market for
electronic Customer Relationship Management ("eCRM") software.
We were incorporated in April 1983 in the Province of British
Columbia, under the name "Heart Minerals Ltd." We entered the
business of software development in 1990. On January 9, 1991 our
corporate name was changed to "Evergreen International Technology
Inc.", following the acquisition of a private company named "Evergreen
Technology Corp.".
We came under the control of new management in May 1995, following a
series of legal disputes. Owing to events under prior management, our
shares were suspended from trading and subject to a cease trade order
of the British Columbia Securities Commission. New management began
the task of restoring our business and returning our shares to trading
status.
In November 1995, we released our first commercial product, JOT-IT!.
JOT-IT! was an enhanced version of a product named "Evergreen Notes",
whose development was commenced under prior management. Essentially
an electronic "sticky" note, JOT-IT! allowed a user to "stick" notes
directly onto documents, applications, drop down menus, text entry
fields, and other locations, allowing notes to appear when the user
required them.
In September 1996, our shares returned to trading on the Canadian
Venture Exchange. We completed our first financing under new
management, and the cease trade order of the British Columbia
Securities Commission was revoked. On January 31, 1997 we changed our
corporate name to "JOT-IT! Software Corp.".
In July 1997, 3M Corporation commenced legal proceedings against us
alleging that the name "JOT-IT!" infringed 3M trademarks. In October
1997, we settled the 3M litigation, and agreed to change our corporate
and product names. Our single user product was re-named "Tagalongs".
In November 1997, we released our first groupware product, Net
Notions, and the final version of our single user product, Tagalongs
3.0. Neither Tagalongs nor Net Notions generated material revenue,
and both products have been discontinued. On February 18, 1998, to
comply with our agreement with 3M Corporation, we changed our
corporate name to "Sideware Systems Inc."
RECENT DEVELOPMENTS
In the fall of 1997, we also commenced development of Dr. Bean, the
predecessor of our current products. Dr. Bean created direct real
time communication between customers and producers marketing their
products through Internet e-commerce sites. An alpha version of the
Dr. Bean client software was demonstrated at the fall Comdex exhibit
in November 1997, and a beta version was demonstrated at the Internet
World trade show in November 1998.
2
In April 1999, at the Spring Internet World trade show in Los Angeles,
we released the initial version of Dr. Bean for commercial
distribution. In June 1999, at the JavaOne trade show in San
Francisco, we released Dr. Bean 2.0.
In November 1999, we released Dr. Bean 3.0. Dr. Bean 3.0 included a
major upgrade in the features available to Dr. Bean users. Further
enhancements to Dr. Bean were released in January 2000 and April 2000.
In April 2000, we also released Dr. Bean On Call, which was designed
to provide the essential functions of Dr. Bean as an Internet service,
rather than as an installed product.
In January 2001, we released the Sideware Enterprise Interaction Suite
3.0, our current group of products. The Enterprise Interaction Suite
includes Sideware Collaboration, which is based on the software code
of our Dr. Bean On Call product, and which offers chat functions
similar to our previous Dr. Bean products. The Enterprise Interaction
Suite also includes Sideware Email, an e-mail management program, and
Sideware Telephony, which integrates Web based and telephone
communications.
We are continuing the development of our Enterprise Interaction Suite.
Our current development plans include enhancements to the existing
functions of our products, as well as the addition of voice over
Internet (VoIP), artificial intelligence, and wireless functions.
We have two operating subsidiaries, Sideware Corp. and Sideware
International SRL. Sideware Corp. is incorporated in the State of
Washington, and markets our products in the United States. Sideware
International SRL is incorporated in Barbados, and owns certain
intellectual property rights in our products. Further information on
our subsidiaries, and on agreements among the corporate group, is
contained under the heading "Intellectual Property".
THE SIDEWARE STRATEGY
The Internet has evolved rapidly from and information source to a new
platform for commerce. High quality customer service may be even more
important on the Internet than it is in the physical world. Whether to
ask about product features, or to check the status of an order, online
customers have traditional service needs. Companies that do not meet
those needs are only a click away from competitors who will. We believe
that successful customer service systems will have to blend, and to
exploit the different advantages of, multiple channels of customer
communications.
Our Enterprise Interaction Suite is intended for the emerging market
for eCRM software. We believe that the potential benefits to users of
eCRM software include the following:
- - increased customer loyalty;
- - easier dissemination of product information;
- - reduced operating costs;
- - increased productivity of sales and service personnel.
Our development strategy is to create a customer service system that
can:
- - meet the need for immediate and responsive interaction with
customers;
- - integrate multiple channels of customer communication, both
online and offline;
- - scale to meet growing Internet-based communication needs; and
- - integrate easily with legacy computer and data systems.
3
We have developed our products using the proprietary Java programming
language of Sun Microsystems, to enhance scalability and portability
among different operating systems and platforms. Our products include
features which integrate to existing customer databases, and which can
combine communications from different sources into a common queue.
Integration of additional communications channels, including wireless
devices and Voice over Internet (VoIP) technology, is one of our
continuing development objectives.
Our sales strategy is to:
- - develop and advance strategic relationships with major companies
in the software industry;
- - target Global 2000 customers; and
- - focus our selling efforts on key market segments, including the
public sector and banking and finance.
We have not generated substantial sales to date, and we have not yet
established referenceable accounts with major companies. Generating
sales to major companies is our primary business objective for the
balance of 2001.
PRODUCTS
GLOSSARY
Our products are technical, and we use technical terms in describing
them. The following technical terms have the following meanings.
"Applet" is a Java program which can be distributed as an attachment
to a World-Wide Web document and executed by a Java-enabled web
browser.
4
"ASP" or "Application Service Provider" is a company which makes
software applications available for use as services over the Internet,
in place of programs installed in the user's computer.
"Browser" is a computer program which allows a person to read
documents in HTML.
"Firewall" is a form of computer security which controls
communication between a private computer network and the Internet.
"GUI" or "graphical user interface" is screen display which
incorporates graphic elements, such as windows or icons, to present
the input or output of a computer program.
"Host" is a computer which makes information or a service available
to other computers.
"HTML" or "Hypertext Markup Language" is a document format used on
the World-Wide Web. HTML permits users to embed tags or links into a
web page, permitting users to move instantly from one Web page to
another.
"Interface" is a convention by which two software systems or programs
communicate.
"Java" is a computer programming language developed by Sun
Microsystems, which supports use of the Internet through its ability
to run on different operating systems.
"Natural language" means a human language, such as English.
"Server" means a computer whose purpose is to receive, store, and
retrieve information, usually for other computers connected to it by a
network, or through the Internet.
"SQL" or "Structured Query Language" is a standardized computer
language for creating databases, and conducting database searches.
"URL" or "Uniform Resource Locator" is the Internet address of a
document accessible on the World-Wide Web.
THE SIDEWARE ENTERPRISE INTERACTION SUITE
We market our products as the Sideware Enterprise Interaction Suite
3.0. The Enterprise Interaction Suite includes three separate
products: Sideware Collaboration, Sideware Email, and Sideware
Telephony. Sideware Collaboration and Sideware Email can be used as
stand alone products without any of the others. Sideware Telephony
can only be used in conjunction with either Sideware Collaboration or
Sideware Email.
DESCRIPTION OF SIDEWARE COLLABORATION
Sideware Collaboration is intended for use on Internet e-commerce
sites, and facilitates direct communication over the Internet between
customers and customer service representatives ("CSRs").
A company using Sideware Collaboration includes designated icons in
its Internet "storefront". Clicking a Collaboration icon opens an
interactive peer-to-peer link between the customer and a company CSR.
Collaboration establishes a queue of customers waiting for service,
and directs them to available CSRs.
The customer and CSR can then communicate through "real time" chat -
messages typed by either party show up immediately on the other's
display screen.
Sideware Collaboration is written in the Java programming language,
and is based on a "client/server" model. The server software
transmits messages between the customer and CSR. The client software
includes a GUI, which is downloaded to the customer's computer, and
displayed on the customer's screen.
Sideware Collaboration is designed to support two different modes of
use - as an installed solution or through an ASP. A company using
Sideware Collaboration as an installed solution must install the
server software on its own computer system. A company using Sideware
Collaboration through an ASP acquires Sideware Collaboration as a
service, utilized through the Internet, rather than as a product. The
ASP version allows companies to enjoy the principal features and
functions offered by Collaboration without the cost or commitment of
managing their own server.
Sideware Collaboration operates compatibly with system firewalls, and
can be configured to operate within a company's established security
environment. Because it is written in the Java programming language,
the Sideware Collaboration server is also compatible with a large
number of operating systems and platforms. They include commonly
implemented platforms of IBM and Sun Microsystems, and also the
Windows NT operating system.
5
Some features of Sideware Collaboration require the use of a browser
on either a CSR workstation or the computer of a customer. Sideware
Collaboration is compatible with the Internet Explorer browser of
Microsoft Corporation. Owing to the dominance of the Internet
Explorer program and the Windows operating system, we have not yet
made Sideware Collaboration compatible with other workstation
browsers. However, Sideware Collaboration is a Java based program,
and we can adapt it to other browsers and other workstation operating
systems if demand requires.
Chat sessions created by Sideware Collaboration can be stored in a
database and retrieved. Sideware Collaboration runs on any SQL
compliant database. In addition, Sideware Collaboration must operate
through an application server program, such as IBM Websphere or BEA
Weblogic.
Sideware Collaboration includes the following additional features.
- - Administration and Server Manager modules that permit users to
set up CSR accounts, and also permit ASPs to add or remove
customers.
- - A Supervisor module that permits supervisors to monitor CSR
performance, and to take over customer chat sessions from a CSR.
- - Application programmer interfaces that permit users to customize
Collaboration, so that it can be accessed from other
applications.
- - An Enterprise Application Manager that permits users to launch
other applications from Collaboration.
- - A Customer Information Manager that permits users to access data
stored in other components of a user's system.
- - ASPs can direct communications for several clients to the same
CSR or group of CSRs, making Collaboration suitable for use by
call centers providing out-sourced customer service.
- - Collaboration users can customize the "look and feel" of the
GUI shown to their users. The Collaboration GUI can also ask
customers what kind of response they want to their inquiries.
Customers can select either a chat session, a response by e-mail,
or a telephone call back. The Queue manager shows CSRs what type
of response each customer wants.
- - Collaboration can provide CSRs with pre-defined responses, such
as pre-defined chat messages or URLs to be provided to customers.
- - Collaboration permits a CSR to push web pages to customers, and
to draw graphics, known as "whiteboarding" on images being
transmitted to customers.
- - A CSR can forward customers to other CSRs.
- - Our Enterprise Reporting feature permits users to assemble a
broad range of statistical information and reports relating to
system or CSR performance.
- - CSRs can work from remote locations, connected to their
employer's server through the Internet.
6
DESCRIPTION OF SIDEWARE EMAIL
Sideware Email is an e-mail management system which allows customers
to send e-mails to specified CSR groups. On clicking a "Contact Us"
or similar button, the customer is shown an e-mail message template
which can be completed and transmitted through the Sideware Email
server.
Sideware Email incorporates the following additional features:
- - A company using both Collaboration and Email can establish a
common queue, through which requests for chat sessions and e-mail
messages can be dealt with in order, regardless of their source.
- - Email permits users to designate groups of CSRs, and allows
customers to choose which group their message will be sent to.
Sideware Email is a relatively new product, having been released
during the first quarter of 2001. Rather than incurring extensive
cost and development time to enhance Email further, our current
intention, for future releases of the Enterprise Interaction Suite, is
to secure the right to re-sell the e-mail management system of another
vendor.
DESCRIPTION OF SIDEWARE TELEPHONY
Sideware Telephony extends the ability of the Enterprise Interaction
Suite to establish a common queue for incoming customer
communications. Through Sideware Telephony, users of the Enterprise
Interaction Suite can also include telephone communications in a
common queue with Collaboration chat sessions or e-mail messages. All
incoming communications are handled through the same queue, and
directed to the appropriate CSRs in order, regardless of whether they
originate through chat, e-mail or telephone.
Sideware Telephony utilizes IBM's Callpath to control telephone
switching systems. Sideware Telephony is presently compatible with the
following switching systems:
- - ECI Telecom (Tadiran) Coral I, II, III, SL ;
- - Lucent Definity Generic PBX (G3) ;
- - Nortel DMS100 ; and
- - Nortel Meridian 1 (SL/1) .
Sideware Telephony incorporates the following additional features:
- - CSRs can place telephony communications on hold, and can switch
back and forth between customers.
- - CSRs can handle telephony communications while remaining
connected to a Web chat customer.
- - If a CSR is unable to pick up an incoming call, another CSR can
intercede to pick it up.
FUTURE DEVELOPMENT - ENTERPRISE INTERACTION SUITE 4.0
Our next planned release is the Sideware Enterprise Interaction Suite
4.0. In addition to enhancements to existing components, version 4.0
will include three new components, Sideware Assist, Sideware VoIP, and
Sideware Wireless. We expect to release version 4.0 in the second
quarter of 2001.
7
Sideware Assist will permit a company to provide automated responses
to questions from its customers. Sideware Assist will offer customers
an inquiry window, in which questions can be typed. Sideware Assist
will utilize the principles of natural language processing and
interpretation to interpret the questions, and to select an
appropriate response from a series of pre-defined responses.
To offer Sideware Assist, we will have to license natural language
processing software, and artificial intelligence software, from third
parties. We are in negotiation with third parties to license the
required software.
We expect that installations of Sideware Assist will be highly
customized to individual users, and will require a user to assemble:
- - a "knowledge" database of words, phrases, and questions that
are likely to be used by its customers; and
- - a set of standardized responses, and procedures that can be used
to select the appropriate response.
Sideware VoIP will permit customers to send voice messages over the
Internet to CSRs. Sideware VoIP will also require us to utilize
technology licensed from third parties, to facilitate transmission of
digitised voice data over the Internet. We are in negotiation with
third parties to secure either licensing or marketing rights in
appropriate third party software. Our software will include an
interface to the applicable third party software.
Sideware Wireless will include software which interfaces with browsers
used by wireless devices, such as cellular phones or palm pilots.
Wireless will thus permit customers using those devices to interact
with companies using Collaboration.
Our development plans may change, depending on our technical and
financial capabilities, and our assessment of the demands of the
marketplace. There can be no assurance that our development work will
produce commercially viable products, or that we will be able to
license the third party technology we require on commercially
acceptable terms.
SALES, MARKETING, AND PROFESSIONAL SERVICES
We earned our first material revenue, totalling $667,628, during the
year ended December 31, 2000.
- - License revenue accounted for $461,962, or approximately 69% of
total revenue.
- - Services revenue accounted for $96,217 or approximately 14% of
total revenue. Services revenue during 2000 was incidental to
product sales.
- - Re-sales of hardware and software to arm's length parties
accounted for $27,504, or approximately 4.1% of total revenue.
- - Re-sales of hardware and software to related parties accounted
for $81,945, or approximately 12.3 % of total revenue.
We did not have material sales revenue from sales to arm's length
parties during either the year ended December 31, 1999 or the eight
month period ended December 31, 1998. Total revenue during those
periods was $33,389 and $104,982, respectively. The substantial
majority of that revenue, in each period, came from hardware and
software re-sales to related parties.
8
All of our sales to date have taken place in the United States and
Canada. With the exception of intellectual property rights owned by
our Barbados subsidiary, Sideware International SRL, all of our assets
are also located in the United States and Canada. We do not believe
that our prospects for generating future sales are dependent on any
single customer, or a few customers.
SOLUTION SALES
We plan to sell the Enterprise Interaction Suite through two principal
channels, our direct sales force and value added resellers.
Our direct sales force is headquartered in Reston, Virginia. We
employ regional sales personnel in Atlanta, San Jose, Los Angeles, New
York, Chicago, Toronto and Vancouver. Including sales representatives
and system engineers, our direct sales force consists of approximately
34 employees.
We augment our direct sales force with the Sideware Partner Program.
As of March 15, 2001 we have signed re-seller agreements with 51
companies. Participants in the Sideware Partner Program purchase our
products for re-sale at specified discounts. We have 7 employees
administering the Sideware Partner Program, and other programs aimed
at developing industry alliances and joint marketing programs.
We have been accepted into the Independent Software Vendor program of
IBM. If we are able to do so, we intend to increase our involvement
in IBM marketing programs, and to develop marketing agreements with
other major companies in the computer industry.
ASP OFFERING
Beginning in February 2001, we offer the Enterprise Interaction Suite
as a service, available over the Internet. We currently host the
application service at our own facilities. If we are able to develop
a sufficient customer base for our ASP service, we will likely
contract with a third party to host the service. ASP customers
purchase our service on a monthly fee basis.
PROFESSIONAL SERVICES
We offer a range of services in defining the eCRM needs of our
customers, and in designing software, hardware, and networking
environments to meet those needs. We plan to offer professional
services independently of our software sales. To date, however, all
of our services revenue has been incidental to sales of our software
products.
MARKETING
As of March 15, 2001 we have 14 employees in our marketing group. Our
marketing strategy is to build awareness of Sideware as a provider of
eCRM solutions. We participate in industry trade shows, and we have
also used direct mail and telemarketing campaigns to create brand
awareness for our products.
CUSTOMERS
As of March 15, 2001 we have approximately 35 customers, including
both installed sales and signed contracts awaiting installation.
9
EMPLOYEES
As of March 15, 2001 we have a total of 134 employees, including our
research and development, sales and marketing, and administrative
personnel.
ENTERPRISE INTERACTION SUITE - COMPETITIVE POSITION
Our competitors include companies offering one or more products for
the eCRM market, some of which compete directly with our products.
Some of our competitors are: eGain Communications Corp., eShare
Technologies, Inc., Interactive Intelligence, Kana Communications,
Inc., Liveperson Inc., Primus Knowledge Solutions Inc., Quintus Corp.,
ServiceSoft Inc. and WebLine Communications Corp., a subsidiary of
Cisco Systems.
Vendors of eCRM software compete on many factors. We believe that
some of the most important factors are:
- - price;
- - reliability;
- - the ability of the product to scale, to service increasing
demand; and
- - ease of integration to existing systems and to other
applications.
We do not have sufficient sales history with our products to state how
well they will compete against specific products of our competitors.
We believe that an important competitive factor for our products
will be how well they integrate to other systems and applications. Our
development strategy has been to emphasize features that will make
that integration easier and more complete, such as our Customer
Information Manager and our Enterprise Application Manager.
Investors are cautioned that:
- - The market for e-commerce software is intensely competitive, and
is changing rapidly. We expect the intensity of the competition
to increase.
- - The list of competitors set out above is not exhaustive. We are
aware of over 30 companies providing products or services which
are competitive to some degree with the Enterprise Interaction
Suite.
RESEARCH AND DEVELOPMENT
We employ research and development personnel in both the United States
and Canada. As of March 15, 2001, approximately 53 of our employees
are engaged in research and development activities.
During the years ended December 31, 2000 and December 31, 1999, we
incurred research and development expenditures of $4,526,397 and
$1,490,352, respectively. These figures include non-cash stock based
compensation expenses of $1,131,887 and $55,508, respectively. During
the eight month period ended December 31, 1998, we incurred research
and development expenditures of $349,434, which includes non-cash
stock based compensation expense of $12,349. Our own personnel
currently do substantially all of our research and development work.
10
INTELLECTUAL PROPERTY
COPYRIGHT AND TRADEMARK
Computer source code for our products is protected by copyright.
Under the Copyright Act (Canada), copyright protection lasts for a
minimum of 50 years.
We have registered the trademarks "Sideware" and "Dr. Bean" with the
United States Patent and Trademark office, and under the Trademark Act
of Canada. We also have pending applications to register our "Dr.
Bean" graphic logo in both Canada and the United States. We no longer
use the name "Dr. Bean" in marketing our products, but we continue to
use the Dr. Bean logo. We have not submitted applications to register
the name "Enterprise Interaction Suite" as a trademark, as we believe
that name is descriptive of our products, and is thus unlikely to
receive trademark protection.
THIRD PARTY SOFTWARE
Our Enterprise Interaction Suite includes software licensed from
Actuate Corporation, which forms part of our Enterprise Reporting
feature. A license fee of $1,000 must be paid to Actuate Corporation,
either by us or by our customer, for each copy of the Actuate software
licensed. The functions provided by the Actuate software are an
optional part of the Enterprise Interaction Suite.
We expect that we will have to license additional third party software
to continue development of our Assist and VoIP products. As yet, we
have not secured any of the additional license rights we will require.
DEVELOPMENT AND MARKETING AGREEMENTS WITH SUBSIDIARIES
The description of our business contained in this annual report
includes the business activities of Sideware Systems Inc., Sideware
Corp., and Sideware International SRL.
Sideware Corp. was incorporated on January 21, 1997 in the State of
Washington, under the name "Collaborative Groupware Inc." On August
13, 1998, Collaborative Groupware Inc. changed its name to "Sideware
Corp.". Sideware Corp. markets our products in the United States.
Sideware International SRL was organised as a society with restricted
liability under the laws of Barbados on August 27, 1999. Sideware
Systems Inc. owns 100% of Sideware International SRL, in part
directly, and in part through another subsidiary, 3032650 Nova Scotia
Company.
Sideware Systems Inc. and Sideware International SRL entered into a
Software License Agreement effective August 27, 1999, under which
Sideware International SRL received a license to use our previous Dr.
Bean software to develop and market new products. Sideware Systems
Inc. and Sideware International SRL also entered into a Software
Development Cost Sharing Agreement effective August 27, 1999, under
which the two companies agreed to develop new software jointly.
Under the first agreement, Sideware International SRL agreed to pay
Sideware Systems Inc. a royalty based on the revenues realized from
the new products. Under the second, the parties agreed to share
development costs, with Sideware International SRL having the right to
exploit the new software worldwide except in Canada, and Sideware
Systems Inc. having the right to exploit the software in Canada.
Our Enterprise Interaction Suite has been developed under the Software
Development Cost Sharing Agreement.
11
Sideware Corp., our United States subsidiary, has entered into
distribution agreements with Sideware International SRL effective
January 2, 2001. The distribution agreements give Sideware Corp. the
right to market both the ASP and license versions of the Enterprise
Interaction Suite in the United States. Sideware Corp. purchases
copies of the software in question from Sideware International SRL at
specified prices.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
NATURE OF TRADING MARKET
Our common shares currently trade on the Toronto Stock Exchange under
the symbol "SYD.U" and are quoted on the OTC Bulletin Board under the
symbol "SDWS". Trading on the Toronto Stock Exchange commenced
November 10, 2000. Quotation on the OTC Bulletin Board was authorized
to commence October 29, 1999.
Prior to November 20, 2000 our shares also traded on the Canadian
Venture Exchange. Up to November 4, 1999 trading on the Canadian
Venture Exchange was in Canadian dollars.
The following table sets forth trading information for the quarters indicated.
Figures quoted for the third quarter of 1999 and all previous periods are in
Canadian dollars and are based on data from the Canadian Venture Exchange.
Figures quoted for the fourth quarter of 1999 and all subsequent periods are
in United States dollars and are based on data from the Canadian
Venture Exchange, the Toronto Stock Exchange, and the OTC Bulletin
Board.
Figures stated for the Canadian Venture Exchange and the Toronto Stock Exchange
represent high and low trading prices. Figures stated for the OTC-Bulletin
Board represent high and low bids. Figures stated for the OTC-Bulletin Board
reflect inter-dealer prices, without retail mark-up, mark-down, or commision,
and may not represent actual transactions.
CVE/TSE CVE/TSE OTC-BB OTC-BB
High Low High Low
($/C$) ($/C$) ($) ($)
2000
Fourth Quarter $2.40 $0.44 $2.25 $0.44
Third Quarter $4.25 $1.92 $4.00 $1.91
Second Quarter $10.35 $3.30 $10.19 $3.28
First Quarter $25.50 $7.05 $24.88 $7.06
1999
Fourth Quarter $10.15 $1.48 $12.85 $1.38
Third Quarter C$3.38 C$2.20
Second Quarter C$3.47 C$0.94
First Quarter C$0.85 C$0.45
12
On, March 15, 2001 the closing price for our shares on the Toronto
Stock Exchange and the OTC-Bulletin Board was $0.60.
DIVIDEND POLICY
We have never paid cash dividends on our capital stock. We currently
intend to retain all earnings, if any, to finance the growth and
development of our business. We do not anticipate paying any cash
dividends in the foreseeable future.
DESCRIPTION OF OUTSTANDING CAPITAL STOCK
Our authorized capital consists of 199,949,375 common shares without
par value. The holders of the common shares are entitled to receive
notice of, attend and vote at all shareholders' meetings. The common
shares carry one vote per share and have no par value. The holders of
the common shares are entitled to receive dividends if, as, and when
declared by our board of directors. The common shares carry no
preemptive rights, conversion rights, redemption provisions, sinking
fund provisions or liability to further calls or to assessment. There
are no restrictions on our ability to repurchase or redeem the common
shares except under applicable securities laws, and to the extent that
any such repurchase or redemption would render our company insolvent.
As of March 15, 2001 we have 66,116,167 common shares issued and
outstanding. Approximately 323 record holders of common shares
(including CEDE & Co., a US depository) are within the United States,
holding 20,688,400 shares (approximately 31% of the total shares
issued and outstanding). 40,797,581 million shares are registered in
the name of CDS & Co., a Canadian depository. 10,378,540 million
shares are registered in the name of CEDE & Co., a United States
depository.
Based on information we assembled to conduct our June 2000
shareholders' meeting, we believe that we have in excess of 20,000
beneficial shareholders. We do not have reliable information as to
the extent of beneficial ownership of our shares by United States
residents, but we believe that in excess of 50% of our shares are
owned beneficially by United States residents.
750,000 of our issued and outstanding shares are performance shares,
issued in September 1996 at $0.01 per share, and held by the following
individuals:
Name No. of Shares
Owen Jones 275,000
Grant Sutherland 275,000
Paco Nathan 50,000
Edward White 25,000
Paul Hildebrand 125,000
The performance shares will be held in escrow to be released, pro rata
to the holders of performance shares, on the basis of one share for
each $0.18 in cumulative cash flow, as defined in the escrow
agreement. As at the date of the annual report we have not had any
Cumulative cash flow for purposes of the escrow agreement, and none of
the 750,000 performance shares have been released from escrow. Any
performance shares not released by September 10, 2001 will be subject
to cancellation.
13
STOCK OPTIONS
From time to time we grant stock options to directors, officers,
employees, and consultants. As of March 15, 2001, we have 17,476,400
stock options outstanding as follows:
(1) options to acquire 348,000 shares at C$0.50 per share expiring
June 24, 2001;
(2) options to acquire 205,000 shares at C$0.70 per share expiring
December 16, 2002;
(3) options to acquire 250,000 shares at C$0.36 per share expiring
July 6, 2003;
(4) options to acquire 290,000 shares at C$1.14 per share expiring
April 14, 2004;
(5) options to acquire 78,500 shares at C$1.35 per share expiring
April 29, 2004;
(6) options to acquire 769,500 shares at C$2.33 per share expiring
June 17, 2004;
(7) options to acquire 305,500 shares at C$2.66 per share expiring
October 4, 2004;
(8) options to acquire 70,900 shares at C$2.78 per share expiring
October 20, 2004;
(9) options to acquire 1,000,000 shares at $8.69 per share expiring
January 14, 2005;
(10) options to acquire 889,500 shares at $11.08 per share expiring
January 21,2005;
(11) options to acquire 4,688,000 shares at $5.10 per share expiring
April 20, 2005;
(12) options to acquire 1,813,000 shares at $2.25 per share expiring
August 30, 2005;
(13) options to acquire 5,780,500 shares at $1.00 per share expiring
January 18, 2006;
(14) options to acquire 798,000 shares at $1.00 per share expiring
February 9, 2006; and
(15) options to acquire 190,000 shares at $1.00 per share expiring
February 22, 2006.
We have adopted two stock option plans. Effective February 11, 2000
we adopted our Stock Option Plan (2000), which reserved 5,700,000
shares for issuance pursuant to stock options. Effective April 20,
2000 we increased the number of shares reserved for issuance under our
2000 plan to 7,000,000. Of the options listed above, the following
were granted under the Stock Option Plan (2000):
- - all of the options listed under (11) and (12);
- - 150,000 of the options listed under (13);
- - 300,000 of the options listed under (14).
None of the options granted under the Stock Option Plan (2000) have
been exercised, but some have expired on the termination of employment
contracts.
Effective December 6, 2000 we adopted our Stock Option Plan (2001),
which reserved 6,000,000 shares for issuance pursuant to stock
options. Effective February 9, 2001, we increased the number of
shares reserved for issuance under our 2001 plan to 7,000,000. Of the
options listed above, the following were granted under the Stock
Option Plan (2001):
- - 5,688,500 of the options listed in (13);
- - 498,000 of the options listed in (14);
- - all of the options listed under (15).
None of the options granted under the Stock Option Plan (2001) have
been exercised, but some have expired on the termination of employment
contracts. Under the regulations of the Toronto Stock Exchange, our
Stock Option Plan (2001) is subject to shareholder approval, which we
intend to seek at our next shareholders' meeting.
Of the options listed above, our directors and executive officers hold
the following:
14
Optionee Number Exercise Expiry No. Exercisable
of Price Date within 60 days of
Shares February 28, 2001
James Speros 250,000 C$0.36 07/06/03 250,000
125,000 C$2.33 06/17/04 125,000
500,000 $1.00 02/09/06 250,000
Grant
Sutherland 198,000 C$0.50 06/24/01 198,000
75,000 C$0.70 12/16/02 75,000
125,000 C$2.33 06/17/04 125,000
170,000 C$2.66 10/10/04 170,000
150,000 $1.00 01/18/06 75,000
Peter Kozicki 50,000 C$0.50 06/24/01 50,000
25,000 C$0.70 12/16/02 25,000
25,000 C$2.33 06/17/04 25,000
25,000 $5.10 04/20/05 18,750
20,000 $1.00 01/18/06 10,000
Edward White 100,000 C$0.50 06/24/01 100,000
25,000 C$0.70 12/16/02 25,000
25,000 C$2.33 06/17/04 25,000
25,000 $5.10 04/20/05 18,750
20,000 $1.00 01/18/06 10,000
Jay Nussbaum 200,000 $11.08 01/21/05 200,000
200,000 $5.10 04/20/05 150,000
50,000 $1.00 01/18/06 25,000
150,000 $1.00 02/09/06 75,000
Jack Kemp 150,000 $1.00 02/09/06 75,000
John
Shoemaker 150,000 $1.00 02/09/06 75,000
Scott
Friedlander 1,000,000 $8.69 01/14/05 1,000,000
1,000,000 $5.10 04/20/05 750,000
500,000 $1.00 01/18/06 250,000
Rahul Bardhan 1,000,000 $2.25 08/30/05 400,000
500,000 $1.00 01/18/06 250,000
Stewart
Walchli 100,000 $11.08 01/21/05 100,000
200,000 $5.10 04/20/05 150,000
500,000 $1.00 01/18/05 250,000
The total number of common shares called for by all outstanding stock
options held by our directors and executive officers at March 15, 2001
is 7,578,000.
During the year ended December 31, 1999, Grant Sutherland exercised
options to purchase 102,000 shares at $0.50 per share and options to
purchase 148,000 shares at $0.36 per share. During the year ended
December 31, 2000, Grant Sutherland exercised options to purchase
80,000 shares at C$2.66 per share. No other options were exercised by
any other current directors or executive officers during either the
year ended December 31, 1999 or the year ended December 31, 2000.
No stock options have been exercised between December 31, 2000 and
March 15, 2001.
15
SHARE PURCHASE WARRANTS
As at March 15, 2001 we have 12,426,888 outstanding share purchase
warrants as follows:
(1) 197,882 share purchase warrants permit the holder to purchase one
share of common stock at a price of $0.383 per share up to March
26, 2001.
(2) 2,000,000 share purchase warrants permit the holder to purchase
one share of common stock at a price of C$0.63 per share up to
April 7, 2001.
(3) 1,417,254 share purchase warrants permit the holder to purchase
one share of common stock at a price of $1.89 per share up to
September 14, 2001.
(4) 1,901,271 share purchase warrants permit the holder to purchase
one share of common stock at a price of $1.89 per share up to
December 14, 2001.
(5) 900,000 share purchase warrants permit the holder to purchase one
share of common stock at a price of $1.00 per share up to April
13, 2002.
(6) 139,000 share purchase warrants permit the holder to purchase one
share of common stock at a price of $3.00 per share up to April
13, 2002.
(7) 45,000 share purchase warrants permit the holder to purchase on
share of common stock up to April 13, 2002 at a price of $10.00
up to April 13, 2001 or $11.50 from April 13, 2001 to April 13,
2002.
(8) 5,229,752 share purchase warrants permit the holder to purchase
one share of common stock at a price of $1.00 per share up to
February 22, 2004. Under the terms of these warrants, if the
trading price of our shares exceeds 200% of the exercise price
for 20 consecutive days, and if there is a registration statement
in effect qualifying sale of shares issued on exercise of the
warrants, we have the right to redeem the shares on 10 days
notice to the warrant holders.
The warrants listed in (5), (6), and (7), above, were all issued in a
private placement of 1,084,000 shares and 1,084,000 share purchase
warrants which we completed in April 2000. Initially, the exercise
prices for all of the warrants were as set out in (7). In October
2000, 810,000 of the warrants were re-priced under regulations of the
Canadian Venture Exchange, reducing the exercise prices to C$2.82 in
the first year and C$3.24 in the second year. In March 2001, there
was a further re-pricing of 1,039,000 warrants under regulations of
the Toronto Stock Exchange. The exercise price for 900,000 of the
warrants was reduced to $1.00. The exercise price for 139,000 of the
warrants was reduced to $3.00. Under regulations of the Toronto Stock
Exchange, as a condition of the re-pricing, the term of the warrants
will be reduced to 30 calendar days if the weighted average trading
price for our shares on the Toronto Stock Exchange exceeds 125% of
the reduced exercise price over any period of 20 consecutive trading
days. 45,000 of the warrants have not been re-priced, and the term
of those warrants is unaffected.
Of the share purchase warrants listed above, the following are held by
our directors and executive officers:
- - James Speros holds 1,000,000 of the warrants described in (2) and
60,000 of the warrants described in (4); and
- - Grant Sutherland holds 60,000 of the warrants described in (4)
and 1,250,000 of the warrants described in (8).
The total number of common shares called for by all outstanding share
purchase warrants held by our directors and executive officers as of
March 15, 2001 is 2,370,000.
During the fiscal year ended December 31, 2000, the following share
purchase warrants were exercised:
16
(1) 600,000 warrants at C$0.32 per share;
(2) 110,000 warrants at C$0.40 per share;
(3) 581,394 warrants at $0.333 per share;
(4) 700,000 warrants at C$0.55 per share;
(5) 1,329,579 warrants at $1.64 per share; and
(6) 598,729 warrants at $1.64 per share.
Of the warrants listed above, the following were exercised by our
directors and executive officers:
- - James Speros exercised the warrants described in (1); and
- - Grant Sutherland exercised the warrants described in (4).
No share purchase warrants have been exercised between December 31,
2000 and March 15, 2001.
BROKERS' WARRANTS
As consideration for private placement services, we have granted to
H.C. Wainwright & Co., Inc. and certain of its associates warrants to
purchase 526,316 units at a price of $0.76 per unit, with each unit
consisting of one share and one share purchase warrant. Each of the
share purchase warrants will permit the holder to acquire one additional
share at a price of $1.00 per share. The brokers' warrants, and any share
purchase warrants issued under them, expire February 22, 2004.
RECENT SALES OF UNREGISTERED SECURITIES
Subsequent to December 31, 1999 we have issued the following
securities in private placements, pursuant to exemptions from
registration under section 4(2) of the Securities Act of 1933.
(1) On January 21, 2000, we issued 2,500,000 units at a price
of $1.64 per unit to 18 purchasers. Each unit consisted of one share
and one share purchase warrant. Each share purchase warrant entitled
the holder to purchase one additional share for a period of two years
at a price of $1.64 in the first year or $1.89 in the second year. We
paid a commission of $397,782 to BC Financial Services Inc. in
connection with the private placement. The purchasers of the units
included the following directors and executive officers:
Owen Jones 60,000 units
Grant Sutherland 60,000 units
Jim Speros 60,000 units
Other purchasers who acquired 5% or more of this offering included the
following:
Andrew Fisher 750,000 units
Brian C. Pennington 312,500 units
Joshua L. Mandell 125,000 units
Jeffrey Rosenbluth 166,667 units
Robert Stavis 166,667 units
William Montgomery 166,667 units
Titan Investment Group, LLC 182,925 units
Reicher Capital Management Co. Inc. 125,000 units
17
The units were issued to accredited investors pursuant to Rule 506
of Regulation D to the Securities Act. Three of the purchasers were
resident outside the United States. We began negotiations with purchasers
in this private placement in November 1999. This private placement closed
January 21, 2000.
(2) On April 13, 2000 we issued 1,084,000 units at a price of
$10.00 per unit to 36 purchasers. Each unit consisted of one share
and one share purchase warrant. Each share purchase warrant entitled
the holder to purchase one additional share for a period of two years
at a price of $10.00 in the first year or $11.50 in the second year.
We paid a commissions totalling $442,900 to the following parties:
George Tsiolis $54,400
Golden Capital Securities Ltd. $50,000
Jeffrey Lubore $262,500
Brian Cohn $67,500
None of the units were purchased by our directors or executive
officers. Agora Partners of Markham, Ontario acquired 139,000 units.
No other purchaser acquired 5% or more of this offering. Certain of
the share purchase warrants issued in this offering have been re-
priced, as explained under "Share Purchase Warrants", above.
The units were issued to accredited investors pursuant to Rule 506
of Regulation D to the Securities Act. Eight of the purchasers were
resident outside the United States. We began negotiations with purchasers
in this private placement in January 2000. This private placement closed
April 13, 2000.
(3) On February 22, 2001 we issued 3,667,252 units at a price
of $0.76 per unit and 1,562,500 units at a price of $0.80 per unit.
Each unit consisted of one share and one share purchase warrant. Each
share purchase warrant entitled the holder to purchase one additional
share for a period of three years at a price of $1.00. We paid
commissions totalling $282,253 to H.C. Wainwright & Co., Inc. for
acting as placement agent in the private placement. In addition, we
issued to H.C. Wainwright warrants to acquire 526,316 units at a price
of $0.76 per unit, with each unit consisting of one share and one
share purchase warrant. The brokers' warrants, and any share purchase
warrants issued under them, expire February 22, 2004. The purchasers
of the units included the following directors and executive officers:
Grant Sutherland 1,250,000 units
Paul Hildebrand and Alder Enterprises Ltd. acquired, respectively,
187,500 and 125,000 units. Mr. Hildebrand is our corporate Secretary
and Alder Enterprises Ltd. is a private holding company in which Mr.
Hildebrand holds a 45% interest. Under regulations of the Toronto
Stock Exchange, Mr. Sutherland, Mr. Hildebrand, and Alder Enterprises
Ltd. were required to pay $0.80 per unit, as opposed to $0.76 per unit
for other purchasers.
Other purchasers who acquired 5% or more of this offering included the
following:
American High Growth Equities Retirement Trust 328,947 units
Michael Colen 263,158 units
SDS Merchant Fund 394,737 units
Welcome Opportunities Ltd. 500,000 units
18
The units were issued to accredited investors pursuant to Rule 506
of Regulation D to the Securities Act. Eight of the purchasers were
resident outside the United States. We began negotiations with purchasers
in this private placement in December 2000. This private placement closed
February 22, 2001.
(4) In addition to the foregoing, we have issued shares pursuant to
stock options and share purchase warrants. The number of shares
issued is set out in our financial statements and elsewhere in this
Form 10-K.
Proceeds from all of the securities listed above have been used as
general working capital, to finance our ongoing operations.
EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
We are unaware of any governmental laws, decrees or regulations in
force in Canada which restrict the export or import of capital, or the
remittance of dividends, interest, or other payments to US residents.
There are no limitations imposed by the laws of British Columbia, or
by our charter or other governing documents, on the right of a non-
resident to hold or vote our common shares. However, investments in
our commons shares could be affected by either the Investment Canada
Act (the "Investment Act") or the Competition Act of Canada.
INVESTMENT ACT REVIEW
The following summarizes the principal features of the Investment Act
for a non-resident who proposes to acquire common shares. The summary
is of a general nature only and is not intended to be more; nor is it
a substitute of independent advice from an investor's own advisor.
The summary does not anticipate statutory or regulatory amendments.
The Investment Act generally prohibits implementation of "reviewable"
investments by persons, including governments, who are not
"Canadians" as defined in the Investment Act. The prohibition does
not apply if the responsible cabinet Minster, after review, is
satisfied that the investment is likely to be of a net benefit to
Canada.
Whether an investment is "reviewable" under the Investment Act can
depend on the nationality of the investor. A US citizen qualifies as
a "World Trade Organization Investor." As a result, and subject to
the restrictions noted below, an investment in a Canadian business by
a US citizen is only reviewable if it is an investment to acquire
control of the Canadian business, and if the value of the assets of
the Canadian business, as shown on its financial statements, exceeds a
specified amount. For 2001 the specified amount is $209 million.
For an investor who does not qualify as a "World Trade Organization
Investor", when the target company is not controlled by a World Trade
Organization Investor, a more stringent standard applies. An
investment is reviewable if it is an investment to acquire control of
the Canadian business and the value of the assets of the Canadian
business, as shown on its financial statements, is $5 million or more.
A non-Canadian would acquire control of our company for purposes of
the Investment Act if the non-Canadian acquired a majority of the
common shares. The acquisition of less than a majority, but of one-
third or more of the common shares, would be presumed to be an
acquisition of control unless it could be
19
established that, on acquisition, the company would not be controlled
in fact by the acquirer through the ownership of common shares.
In addition to the review provisions, any transaction involving the
acquisition of control of a Canadian business, or the establishment of
a new business in Canada by a non-Canadian, is a notifiable
transaction, and must be reported to Industry Canada by the non-
Canadian making the investment either before or within thirty (30)
days after the investment.
Certain transactions relating to common shares are exempt from the
Investment Act, including:
- - an acquisition of common shares by a person in the ordinary
course of that person's business as a trader or dealer in
securities;
- - an acquisition of control of the company in connection with the
realization of security granted for a loan or other financial
assistance and not for a purpose related to the provisions of the
Investment Act; and
- - an acquisition of control of the company by reason of an
amalgamation, merger, consolidation or corporate reorganization,
following which the ultimate direct or indirect control in fact
of the company, through the ownership of common shares, remains
unchanged.
COMPETITION ACT REVIEW
Investments giving rise to the acquisition or establishment, directly
or indirectly, by one or more persons of control over, or a
significant interest in the whole or part of, a business of a
competitor, supplier, customer, or other person are subject to
substantive review by Canada's Competition Law Authority, the Director
of Investigation and Research (the "Director").
If the Director concludes that a merger, whether by purchase or lease
of shares or assets, by amalgamation or by combination, or otherwise,
prevents or lessens, or is likely to prevent or lessen competition
substantially, he may apply as may be necessary to eliminate the
substantial lessening or
prevention of competition. The substantive merger review power
applies to all mergers, whether or not they meet limits for pre-
notification under the Competition Act.
In addition to substantive merger review, the Competition Act provides
for a pre-notification regime respecting mergers of certain size. The
regime applies in respect of share acquisitions, asset acquisitions,
amalgamations, and combinations. This filing refers specifically to
share acquisition, although the pre-notification regime applies, with
the appropriate modification, to other types of acquisition of control
as well.
In order for a share acquisition transaction to be pre-notifiable, the
parties to the transaction (being the person or persons who proposed
to acquire shares, and the corporation the shares of which are to be
acquired), together with their affiliates (being all firms with a 50%
or more voting shares linkage up and down the chain), must have:
- - aggregate gross assets in Canada that exceed $400,000,000 in
value, as shown on their audited financial statements for the
most recently completed fiscal year (which must be within the
last fifteen (15) months); or
- - aggregate gross revenue from sales in, from, or into Canada that
exceed $400,000,000 for the most recently completed fiscal year,
as shown on the financial statements; and
- - the party being acquired or corporations controlled by that party
must have gross assets in
20
Canada, or gross revenues from sales in or from Canada, exceeding
$35,000,000 as shown on the financial statements.
Acquisition of shares carrying up to 20% of the votes of a publicly
traded corporation, or 35% of the votes in a private corporation,
will not be subject to pre-notification, regardless of the above
thresholds. However, exceeding the 20% or the 35% threshold, and
again exceeding the 50% threshold, gives rise to an obligation of
notification if the applicable size threshold is met.
If a transaction is pre-notifiable, a filing must be made with the
Director containing the prescribed information with respect to the
parties, and a waiting period, (either seven or twenty-one days,
depending on whether a long or short form filing is chosen) must
expire prior to closing.
As an alternative to pre-notification, the Director may grant an
Advance Ruling Certificate which exempts the transaction from pre-
notification. Advance Ruling Certificates are granted where the
Director concludes, based on the information provided to him, that he
would not have sufficient grounds on which to apply to the Competition
Tribunal to challenge the Merger.
TAXATION
The following summarizes the principal Canadian federal income tax
considerations applicable to the holding and disposition of common
shares in the capital of our company by a holder of our common shares
who is resident in the United States of America, who has never been a
resident of Canada, and who holds common shares solely as capital
property (a "U.S. Holder"). This summary is based on the current
provisions of the Income Tax Act (Canada) (the "ITA"), the regulations
thereunder, all amendments thereto publicly proposed by the government
of Canada to the date hereof, the published administrative practices
of Revenue Canada, Taxation, and on current provisions of the Canada-
United States Income Tax Convention, 1980, as amended (the "Treaty").
Except as otherwise expressly provided, this summary does not take
account of any provincial, territorial or foreign tax law or treaty.
It has been assumed that all currently proposed amendments will be
enacted substantially as proposed and that there is no other relevant
change in any governing law or practice, although no assurance can be
given in these respects.
This summary is not intended to include all circumstances in which a
disposition of common shares might occur. This summary does not
constitute, and should not be construed to constitute, tax advice to
any particular reader. Readers are, therefore, advised to consult
their own tax advisors with respect to their individual circumstances.
This summary contains information relating only to provisions of
Canadian federal income tax law, as set out above. This summary does
not include information relating to the provisions of any taxation
legislation of the United States of America or any state thereof.
Readers who are or may be subject to liability to tax under any
legislation of the United States of America, or any state thereof, are
advised to consult with their own tax advisors with respect to such
liability.
DIVIDENDS ON COMMON SHARES
Under the ITA, amounts paid or credited or deemed paid or credited on
account of dividends to holders of common shares that are resident in
a country other than Canada will be subject to withholding tax of 25%
of the amount of the dividend. The rate of withholding tax may be
reduced pursuant to the terms of a bilateral income tax treaty between
Canada and the country in which a holder of common shares is
21
resident. In certain circumstances, the purchase by us of our common
shares may result in a deemed dividend.
Under the Treaty, if the recipient of a dividend on the common shares
is the beneficial owner of such dividends and is considered to be a
resident of the United States for purposes of the Treaty, the rate of
Canadian withholding tax on such dividends will generally be reduced
to 15% of the amount of such dividends or, if the recipient is a
corporation which owns at least 10% of our voting stock, to 5% of the
amount of such dividends.
DISPOSITION OF COMMON SHARES
A holder of common shares who is not resident in Canada will not be
subject to tax under the ITA in respect of any capital gain, or be
entitled to deduct any capital loss, realized on a disposition of the
common shares unless at the time of such disposition such common
shares constitute "Taxable Canadian Property" of the holder for
purposes of the ITA and the holder is not entitled to relief under a
bilateral income tax treaty between Canada and the country in which
the holder of the common shares is resident. If the holder is not
entitled to relief under a tax treaty, one half of the gain arising on
a disposition of Taxable Canadian Property will be taxable at the
rates that approximate the rates applicable to residents of Canada.
Our common shares will not generally constitute "Taxable Canadian
Property" at a particular time if they are listed on a prescribed
stock exchange (which includes the Toronto Stock Exchange) at that
time. However, a holder's common shares and rights to acquire common
shares or interests in common shares will be considered "Taxable
Canadian Property" if the holder uses or holds, or is deemed to use or
hold, such shares in, or in the course of carrying on, a business in
Canada, or if at any time during the five year period immediately
preceding the disposition of such common shares, the non-resident
holder and persons with whom the non-resident holder did not deal at
arm's length owned, had rights to acquire, or had interests in, 25% or
more of the issued shares of any class.
Under the Treaty, any gain from a disposition of common shares by a
person who is considered a resident of the United States for purposes
of the Treaty may be exempt from Canadian tax even if the shares
constitute Taxable Canadian Property. This exemption will apply if,
at the time of disposition, the value of the common shares did not
derive principally from Canadian real property and such shares do not
form part of the business property of a permanent establishment of the
holder in Canada, or pertain to a fixed base available to the holder
in Canada for the purpose of performing independent personal services.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Appended hereto are the following financial statements:
(1) Consolidated balance sheets as of December 31, 2000 and December
31, 1999;
(2) Consolidated statements of operations and comprehensive loss for
the fiscal years ended December 31, 2000 and 1999, the eight
month period ended December 31, 1998, and the fiscal year ended
April 30, 1998;
(3) Consolidated statement of stockholders equity for the fiscal
years ended December 31, 2000 and 1999, the eight month period
ended December 31, 1998, and the fiscal year ended April 30,
1998;
(4) Consolidated statements of cash flows for the fiscal years ended
December 31, 2000 and 1999, the eight month period ended December
31, 1998, and the fiscal year ended April 30, 1998; and
(5) the auditors' report of KPMG LLP thereon.
22
Supplementary financial data showing revenues, gross margin, net loss and
net loss per share on a quarterly basis during our two most recent fiscal
years is contained in Note 15 to the audited consolidated financial
statements appended to this annual report.
ITEM 11. EXECUTIVE COMPENSATION
Apart from stock options, we do not presently compensate our directors
for services provided as directors. We provide compensation to our
directors who are also officers or employees, for services rendered as
officers or employees. We provide the following compensation to our
directors and executive officers.
JAMES L. SPEROS. We currently pay Mr. Speros an annual salary of
$250,000. During 2000 Mr. Speros' salary was $225,000 per year.
During November and December 1999, Mr. Speros' salary was $15,000
per month. Between April 1999 and November 1999, Mr. Speros' salary
was $11,500 per month. Between August 1998 and April 1999, Mr.
Speros' salary was $8,000 per month. In October and November 1999,
Mr. Speros received bonus payments totaling $50,000. In addition,
Mr. Speros holds stock options to acquire 875,000 shares.
GRANT SUTHERLAND. Effective September 1, 2000 we pay Mr. Sutherland
an annual salary of $100,000. Between January 1, 2000 and August 31,
2000 Mr. Sutherland's salary was $200,000 per year. Between June 1,
1998, and December 31, 1999, Mr. Sutherland's salary was $6,600 per
month, which we shared with BrainTech, Inc., paying 80% during 1999
and 50% during 1998. Prior to June 1, 1998, we paid Mr. Sutherland
$3,300 per month. Mr. Sutherland exercised stock options to acquire
250,000 shares in 1999 and options to acquire 80,000 shares in 2000.
Mr. Sutherland holds additional stock options to acquire 718,000
shares. At the end of the first quarter of 2000 we paid Mr. Sutherland
a discretionary bonus of $85,140, in respect of services rendered
during 1999.
SCOTT FRIEDLANDER. Effective January 1, 2001 we pay Mr. Friedlander
an annual salary of $250,000. Between September 1, 2000 and December
31, 2000 Mr. Friedlander's annual salary was $200,000. Between
February 1, 2000 and August 31, 2000 Mr. Friedlander's annual salary
was $175,000. We paid Mr. Friedlander a bonus of $16,800 as an
inducement to accept employment with our company. We also accrued an
additional payment for Mr. Friedlander in the amount of $200,000 as
at December 31, 2000, as an adjustment to Mr. Friedlander's
compensation in recognition of additional executive and administrative
responsibilities undertaken by Mr. Friedlander, beyond his initial
responsibilities in managing our US sales operations. We expect to
make that payment in April 2001. Mr. Friedlander will be entitled
to receive bonuses equal to:
- - 75% of his base salary if our revenue exceeds $20 million during
2001; and
- - 200% of his base salary if our revenue exceeds $26.7 million
during 2001.
We have also entered into a Change of Control Severance Agreement with
Mr. Friedlander, entitling Mr. Friedlander to receive up to two
years salary and bonus payments if we terminate his employment
following a change in control of the company. Mr. Friedlander holds
options to purchase 2,500,000 shares.
23
RAHUL BARDHAN. We currently pay Mr. Bardhan an annual salary of
$250,000. We also accrued a bonus in the amount of $60,000 for Mr.
Bardhan as at December 31, 2000, which we agreed to at the time Mr.
Bardhan commenced employment, as an inducement to join our company.
We expect to pay that bonus in April 2000. Mr. Bardhan will
also be entitled to receive bonuses equal to:
- - 75% of his base salary if our revenue exceeds $20 million during
2001;
- - 200% of his base salary if our revenue exceeds $26.7 million
during 2001;
- - 75% of his base salary if our revenue exceeds $33 million during
2002; and
- - 200% of his base salary if our revenue exceeds $40 million during
2002.
We have entered into a Change of Control Severance Agreement with Mr.
Bardhan, entitling Mr. Bardhan to receive up to two years salary and
bonus payments if we terminate his employment following a change in
control of the company. Mr. Bardhan holds options to purchase
1,500,000 shares.
STEWART WALCHLI. We currently pay Mr. Walchli a salary of $132,000
per year. Prior to December 31, 2000, Mr. Walchli's salary was
$100,000 per year. We also accrued an additional payment for Mr. Walchli
in the amount of $50,000 as at December 31, 2000, as an adjustment
to Mr. Walchli's compensation in recognition of additional duties and
responsibilities undertaken by Mr. Walchli in assuming the role of
Chief Financial Officer, after accepting employment with us as Vice-
President Finance. We expect to make that payment in April
2001. Mr. Walchli will be entitled to receive bonuses equal to:
- - 75% of his base salary if our revenue exceeds $20 million during
2001; and
- - 200% of his base salary if our revenue exceeds $26.7 million
during 2001.
We have entered into a Change of Control Severance Agreement with Mr.
Walchli, entitling Mr. Walchli to receive up to two years salary and
bonus payments if we terminate his employment following a change in
control of the company. Mr. Walchli also holds options to purchase
800,000 shares.
The following table summarizes compensation paid to our directors and
named executive officers for the fiscal years ended December 31, 2000
and December 31, 1999, the eight month period ended December 31, 1998,
and the fiscal year ended April 30, 1998.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Name and Awards Payouts All other
Principal Period Restricted Securities Compensation
Position Ended Salary Bonus Other Stock Underlying
mm/dd/yy Awards Optons/SARs
James Speros, 12/31/00 $225,000 $ 0 $ 0 0 0 $0 $54,000 (1)
President, CEO 12/31/99 $136,250 $ 50,000 $ 0 0 125,000 $0 $ 0
(since Oct. 12/31/98 $ 44,000 $ 0 $ 0 0 250,000 $0 $ 0
15, 2000)
Grant 12/31/00 $167,000 $ 0 $ 0 0 0 $0 $ 0
Sutherland, 12/31/99 $ 63,400 $ 85,140 $ 0 0 375,000 $0 $ 0
Chairman 12/31/98 $ 39,600 $ 0 $ 0 0 25,000 $0 $ 0
04/30/98 $ 39,600 $ 0 $ 0 0 75,000 $0 $ 0
Owen Jones, 12/31/00 $126,000 $ 0 $ 0 0 0 $0 $ 0
24
President, CEO 12/31/99 $ 80,000 $117,480 $ 0 0 125,000 $0 $ 0
(up to Oct. 15, 12/31/98 $ 31,350 $ 66,000 $ 0 0 55,000 $0 $ 0
2000) 04/30/98 $ 20,000 $ 66,000 $ 0 0 75,000 $0 $ 0
Jay Nussbaum, 12/31/00 $ 0 $ 0 $ 0 0 400,000 $0 $ 0
Director 12/31/99 $ 0 $ 0 $ 0 0 0 $0
Jack Kemp, 12/31/00 $ 0 $ 0 $ 0 0 0 $0 $ 0
Director
John Shoemaker, 12/31/00 $ 0 $ 0 $ 0 0 0 $0 $ 0
Edward White, 12/31/00 $ 0 $ 0 $ 0 0 0 $0 $ 0
Director 12/31/99 $ 0 $ 0 $ 0 0 25,000 $0 $ 0
12/31/98 $ 0 $ 0 $ 0 0 25,000 $0 $ 0
04/30/98 $ 4,600 $ 0 $ 0 0 25,000 $0 $ 0
Peter Kozicki, 12/31/00 $ 0 $ 0 $ 0 0 0 $0 $ 0
Director 12/31/99 $ 0 $ 0 $ 0 0 25,000 $0 $ 0
12/31/98 $ 0 $ 0 $ 0 0 25,000 $0 $ 0
Scott 12/31/00 $172,600 $ 16,800 $200,000 0 2,000,000 $0 $ 0
Friedlander,
Exec. VP
Rahul Bardhan, 12/31/00 $ 63,550 $ 60,000 $ 0 0 1,000,000 $0 $ 0
Chief
Technology
Officer
Stewart Walchli 12/31/00 $ 83,917 $ 0 $ 50,000 0 300,000 $0 $ 0
Chief
Financial
Officer
1. This amount represents a club membership purchased for Mr. Speros.
We do not have a long term incentive plan.
The following table summarizes options granted to our directors and
executive officers during the year ended December 31, 2000.
OPTION / SAR GRANTS IN LAST FISCAL YEAR
Name Number of Percent of Exercise or Expiration Grant date
securities total options / base price date present
underlying SARs granted to (mm/dd/yy) value (1)
Options / employees in
SARs granted fiscal year
James Speros Nil 0.0% N/A N/A N/A
Grant
Sutherland Nil 0.0% N/A N/A N/A
Owen Jones Nil 0.0% N/A N/A N/A
Jay Nussbaum 200,000 2.2% $11.08 01/21/05 $1,644,000
200,000 2.2% $5.10 04/20/05 $ 200,000
Jack Kemp Nil 0.0% N/A N/A N/A
John
Shoemaker Nil 0.0% N/A N/A N/A
Peter Kozicki 25,000 0.3% $5.10 04/20/05 Nil
Edward White 25,000 0.3% $5.10 04/20/05 Nil
Scott Friedlander 1,000,000 11.3% $8.69 01/14/05 $ 760,000
25
1,000,000 11.3% $5.10 04/20/05 $1,000,000
Rahul Bardhan 1,000,000 11.3% $2.25 08/30/05 $ 400,000
Stewart Walchli 100,000 1.1% $11.08 01/21/05 $ 822,000
200,000 2.2% $5.10 04/20/05 $ 200,000
(1) Grant date present value was calculated by multiplying the number
of option shares by the difference between the exercise price and the
closing trading price on the date of grant.
In addition to the foregoing, we granted the following options to our
directors and executive officers in January and February 2001:
Grant Sutherland 150,000 options
James Speros 500,000 options
Jay Nussbaum 200,000 options
Jack Kemp 150,000 options
John Shoemaker 150,000 options
Peter Kozicki 20,000 options
Edward White 20,000 options
Scott Friedlander 500,000 options
Rahul Bardhan 500,000 options
Stewart Walchli 500,000 options
The exercise price for these options was $1.00, and the term was five
years. None of these options have been exercised as at the date of
this annual report.
The following table summarizes options exercised by our directors and
executive officers during the year ended December 31, 2000.
Aggregated Option / SAR Exercises in Last Fiscal Year and FY-End
Option / SAR Values
Shares acquired Value realized Number of securities Value of unexercised
Name on exercise underlying unexercised in-the-money options /
options / SARS at end SARs at end of fiscal
of fiscal year year
---------------------- ---------------------
Exercisable /
Unexercisable
James Speros 0 0 375,000 / 0 $65,600 / 0
Grant Sutherland 80,000 $638,052 568,000 / 0 $36,510 / 0
Jay Nussbaum 0 0 400,000 / 0 0
Jack Kemp 0 0 0 0
John Shoemaker 0 0 0 0
Peter Kozicki 0 0 112,500 / 12,500 $9,450 / 0
Edward White 0 0 162,500 / 12,500 $17,950 / 0
Scott Friedlander 0 0 1,500,000 / 500,000 0
Rahul Bardhan 0 0 200,000 / 800,000 0
Stewart Walchli 0 0 300,000 /0 0
26
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We did not have a compensation committee during the year ended
December 31, 2000. The following officers and employees
participated in deliberations concerning executive officer
compensation during the year ended December 31, 2000: Grant
Sutherland, Chairman, James Speros, Director, President of
Sideware Corp., and Chief Executive Officer (from October 15,
2000), Owen Jones, Director (to November 30, 2000), and Chief
Executive Officer (to October 15, 2000), Scott Friedlander,
Executive Vice President and General Manager of US Operations,
Rahul Bardhan, Chief Technical Officer, Stewart Walchli, Chief
Financial Officer, and Paul Hildebrand, Secretary. Grant
Sutherland, Owen Jones, and James Speros were directors of
BrainTech, Inc. during the year ended December 31, 2000, and were
involved in determining executive officer compensation for
BrainTech, Inc. Otherwise, no executive officer of the Company
served as a director or member of the compensation committee of
any other entity (or performed similar functions as a director of
any other entity), one of whose executive officers served as a
director of the Company or participated in making compensation
decisions for the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Within the last three fiscal years, we have entered into the
transactions set out below in which our current directors or officers
were interested.
TRANSACTIONS WITH BRAINTECH, INC. AND TECHWEST MANAGEMENT INC.
We have had several transactions with BrainTech, Inc. and Techwest
Management Inc.
BrainTech is a public company engaged in the business of developing
and marketing vision systems and related hardware and software
products. The directors of BrainTech are Owen Jones, Grant
Sutherland, James Speros, and Edward White. BrainTech common shares
are quoted on the OTC-Bulletin Board. As at the date of this annual
report, inclusive of options and warrants exercisable within 60 days,
Mr. Sutherland, Mr. Speros and Mr. White own the following shares in
BrainTech, Inc.:
Name Number of Shares % of Issued and Outstanding
Grant Sutherland 5,542,499 10.2%
James Speros 300,000 0.5%
Edward White 1,125,001 2.1%
Techwest is a private management company in which Owen Jones and Grant
Sutherland each hold 50% interests.
COST SHARING
Up to November 2000 we operated under a cost sharing arrangement with
BrainTech, pursuant to which we shared the following costs:
- - costs of our North Vancouver premises, which we shared with
BrainTech;
- - salary costs of certain personnel including, inter alia, the
salary costs of our accounting personnel; and
- - miscellaneous office charges, such as office supplies and
telephone and fax charges.
27
Prior to October 1999, we shared the common costs equally with
BrainTech. By a Cost Sharing and Allocation Agreement executed in
October 1999, we agreed with BrainTech to re-allocate the common costs
80% to us and 20% to BrainTech effective from January 1, 1999. The
reason for the reallocation of costs was the substantially greater
level of our business, and our corresponding greater use of the common
premises and personnel.
Shared costs under the Cost Sharing and Allocation Agreement were
administered by Techwest. Techwest passed shared costs on to us and
to BrainTech at its costs, without any markup.
From time to time, either our payments or those of BrainTech exceeded
the proportionate share required under the cost sharing arrangement,
giving rise to indebtedness as between us, BrainTech and Techwest
Management. Accordingly, the payments were reconciled and adjusted
from time to time as required. Through much of 1999, BrainTech was
indebted to us (either directly or indirectly through Techwest) as a
result of BrainTech not paying its proportionate share of the common
operating costs, during periods when BrainTech did not have cash
available to do so. There was no material indebtedness among
Sideware, BrainTech, or Techwest during 2000.
In the summer of 2000, BrainTech, Inc. began to move its operations to
separate premises. On November 6, 2000 we entered into a letter
agreement with BrainTech, Inc. under which we agreed that BrainTech,
Inc. could continue to use a portion of our North Vancouver office, as
well as certain services provided by our personnel, during a
transitional period not to exceed six months. As at the date of this
annual report, BrainTech, Inc. no longer occupies any portion of those
premises or makes any use of our personnel.
The lease for our downtown Vancouver premises was originally taken in
the name of Techwest. By agreement dated January 19, 2001, Techwest
assigned its interest in the premises to us.
PURCHASE OF COMPUTER EQUIPMENT
We purchase computer equipment for BrainTech, Inc. and Techwest
Management Inc., owing to favorable equipment pricing available to us.
Our current policy is to pass that equipment on at cost to BrainTech, Inc.
and Techwest Management Inc. Hardware sales to BrainTech and Techwest
totaled $81,945 during the fiscal year ended December 31, 2000,
$30,856 during the fiscal year ended December 31, 1999, and $85,524
during the eight month period ended December 31, 1998.
WIZMASTER
In September 1999, we entered into a Software Development and License
Agreement with BrainTech. Under that agreement, BrainTech developed a
program named "Wizmaster", which enables the user, through a drop-
and-drag procedure, to construct customized knowledge trees. We
incorporated Wizmaster into version 3.1 of Dr. Bean, but we no longer
make any use of the Wizmaster program. We paid approximately $11,400
to BrainTech for the development of Wizmaster.
KOSTIUK LITIGATION
Effective October 31, 1998 we purchased an interest in the proceeds of
a judgment which BrainTech had obtained against John Kostiuk, in the
amount of $300,000, in the Supreme Court of British Columbia. We paid
$132,000 on account of the purchase price, which was subject to
adjustment depending on the
28
benefit we ultimately received from the judgment. On March 18, 1999
the British Columbia Court of Appeal allowed an appeal from the judgment,
and BrainTech repaid the $132,000.
PARTNER PROGRAM
BrainTech is a participant in the Sideware Partner Program.
PRIVATE PLACEMENTS
In addition to transactions disclosed under "Recent Sales of
Unregistered Securities", our directors and executive officers have
acquired the following securities in private placements during the
last three fiscal years.
(1) In a private placement completed January 14, 1999 James
Speros acquired 600,000 Special Warrants at a price of $0.28 per
Special Warrant. Each Special Warrant was exercisable at any time
within one year, without additional consideration, into one unit
comprised of one share and one non-transferable share purchase
warrant. Each share purchase warrant would entitle the holder thereof
to purchase one additional share for a period of two years at a price
of $0.28 per share for the first year and $0.32 per share in the
second year. The Special Warrants were exercised on June 4, 1999.
(2) In a private placement completed January 7, 1999, the
following directors and executive officers acquired Special Warrants
at a price of $0.35 per Special Warrant:
Owen Jones 250,000 Special Warrants
Grant Sutherland 297,500 Special Warrants
Peter Kozicki 50,000 Special Warrants
Each Special Warrant was exercisable at any time within a period of
one year, without additional consideration, into 1.1 units, with each
unit comprised of one share and one non-transferable share purchase
warrant. Each share purchase warrant would entitle the holder to
purchase one additional share for a period of two years at a price of
$0.35 per share for the first year and $0.40 per share in the second
year. The Special Warrants were exercised on June 4, 1999.
(3) In a private placement completed April 14, 1999, the
following directors and executive officers acquired Special Warrants
at a price of $0.55 per Special Warrant:
Owen Jones 1,000,000 Special Warrants
Grant Sutherland 1,000,000 Special Warrants
Jim Speros 1,000,000 Special Warrants
Each Special Warrant was exercisable at any time within a period of
one year, without additional consideration, into one unit comprised of
one share and one non-transferable share purchase warrant. Each share
purchase warrant would entitle the holder thereof to purchase one
additional share for a period of two years at a price of $0.55 per
share for the first year and $0.63 per share in the second year. The
Special Warrants were exercised on June 4, 1999.
29
OTHER TRANSACTIONS
We have acquired legal services from the law firm Sutherland Johnston,
of which Grant Sutherland is a partner. The amount of those legal
services prior to December 31, 1998 was not material. During the
years ended December 31, 1999 and December 31, 2000, we paid legal
fees to Sutherland Johnston of approximately $138,000 and $258,000,
respectively. In addition, we have sold approximately $24,000 in
computer equipment at cost to Dunsmuir Management Ltd., a management
company owned by Sutherland Johnston.
We acquired our interest in the premises at 1600 - 777 Dunsmuir
Street, Vancouver, British Columbia through an assignment from SJM
Management Ltd., a management company for the law firm Sutherland
Johnston. The assignment covered the period from July 1, 1999 to
December 31, 2000. Under the assignment, SJM Management Ltd. assigned
its interest in respect of the premises at Suite 1600 to Techwest
Management Inc., which agreed to perform all of the obligations of the
tenant under the lease. We signed the lease as an indemnifier, and
were liable to perform all of the obligations of the assignee,
including the payment of rent. The term covered by the assignment has
expired.
Paul Hildebrand is our corporate Secretary, and has been an employee
of Sideware Systems Inc. since January 1, 2000. Prior to December 31,
1999 we have acquired legal services from Dale W. Wilcox, a Law
Corporation, a law firm with which Mr. Hildebrand is associated.
Between May 3, 1995 and December 31, 1999, Dale W. Wilcox, a Law
Corporation has received payments totaling $377,000 in fees (exclusive
of taxes and disbursements) for legal services.
We have granted the following stock options to Mr. Hildebrand:
(1) options to purchase 100,000 shares at C$0.50 per share expiring
May 1, 2001;
(2) options to purchase 75,000 shares at C$0.70 per share expiring
December 16, 2002;
(3) options to purchase 55,000 shares at C$1.35 per share expiring
April 29, 2004;
(4) options to purchase 100,000 shares at C$2.33 per share expiring
June 17, 2004;
(5) options to purchase 25,000 shares at C$2.78 per share expiring
October 20, 2004;
(6) options to purchase 300,000 shares at $11.08 per share expiring
Januay 21, 2005;
(7) options to purchase 300,000 shares at $5.10 per share expiring
April 20, 2005; and.
(8) options to purchase 150,000 shares at $1.00 per share expiring
January 18, 2006.
In addition to transactions disclosed under "Recent Sales of
Unregistered Securities", Mr. Hildebrand and Alder Enterprises Ltd., a
private company in which Mr. Hildebrand owns a 45% interest, have also
acquired the following shares, special warrants, and share purchase
warrants pursuant to private placements:.
(1) In a private placement completed November 19, 1998, Mr.
Hildebrand acquired 90,000 Special Warrants at a price of $0.32 per
Special Warrant. Each Special Warrant was exercisable at any time
within a period of one year, without additional consideration, into
one unit comprised of one share and one non-transferable share
purchase warrant. Each share purchase warrant would entitle the
holder thereof to purchase one additional share for a period of two
years from the date of issuance of the Special Warrants at a price of
$0.32 per share for the first year and $0.37 per share in the second
year. The Special Warrants were exercised on June 4, 1999.
(2) In a private placement completed January 7, 1999, Mr.
Hildebrand and Alder Enterprises Ltd. acquired, respectively, 30,000
and 277,500 Special Warrants. Each Special Warrant was exercisable at
30
any time within a period of one year, without additional
consideration, into 1.1 units, with each unit comprised of one share
and one non-transferable share purchase warrant. Each share purchase
warrant would entitle the holder to purchase one additional share for
a period of two years at a price of $0.35 per share for the first year
and $0.40 per share in the second year. The Special Warrants were
exercised on June 4, 1999.
31
SIGNATURES
In accordance with Section 13 of the Securities Exchange Act of 1934,
the registrant caused this amended report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: May 7, 2001 Sideware Systems Inc.
"Grant Sutherland"
By:
W. Grant Sutherland
Chairman of the Board
of Directors
Consolidated Financial Statements
(Expressed in U.S. dollars)
SIDEWARE SYSTEMS INC.
(Prepared in accordance with generally accepted
accounting principles in the United States)
Years ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
AUDITORS' REPORT TO THE STOCKHOLDERS
We have audited the consolidated balance sheets of Sideware Systems
Inc. as at December 31, 2000 and 1999 and the consolidated
statements of operations and comprehensive loss, stockholders'
equity and cash flows for the years ended December 31, 2000 and
1999, eight months ended December 31, 1998 and year ended April 30,
1998. These consolidated 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 the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about 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. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as at December 31, 2000 and 1999 and the results of its
operations and comprehensive loss and its cash flows for the years
ended December 31, 2000 and 1999, eight months ended December 31,
1998 and year ended April 30, 1998 in accordance with generally
accepted accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
note 1 to the financial statements, the Company has suffered
recurring losses from operations and has had negative cash flows
from operating activities for each of the periods presented which
raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also
described in note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
On January 26, 2001, except for note 10(b) and 13 which are as of
February 22, 2001, we reported separately to the stockholders of
the Company on consolidated financial statements for the same
period prepared in accordance with Canadian generally accepted
accounting statements.
(signed) "KPMG LLP"
Chartered Accountants
Vancouver, Canada
January 26, 2001, except for note 10(b) and note 13
which are as of February 22, 2001
SIDEWARE SYSTEMS INC.
Consolidated Balance Sheets
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
December 31, 2000 and 1999
============================================================================
2000 1999
- ----------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 949,999 $ 5,929,801
Short-term investments (note 7) 5,982,588 -
Accounts receivable (note 4):
Trade, less allowance for
doubtful accounts of $142,047
(1999 - nil) 467,783 -
Other 126,842 123,297
Due from related parties (note 5) 29,859 -
Current portion of long-term
receivables (note 8) 6,849 14,041
Inventory 46,829 73,895
Prepaid expenses 549,639 243,044
--------------------------------------------------------------------------
8,160,388 6,384,078
Deposit on lease 129,926 20,212
Long-term receivables (note 8) 105,587 108,655
Deferred finance charges (note 8) 95,583 100,763
Fixed assets (note 9) 1,967,818 923,536
- ----------------------------------------------------------------------------
$ 10,459,302 $ 7,537,244
============================================================================
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 1,246,683 $ 623,636
Due to related parties (note 5) - 39,340
Deferred revenue 168,661 -
--------------------------------------------------------------------------
1,415,344 662,976
Stockholders' equity:
Common stock (note 10):
Authorized: 199,949,375 common shares,
no par value
Issued and outstanding: 60,886,415
(1999 - 51,769,238) 40,660,382 21,414,477
Additional paid-in capital 12,146,732 315,500
Deferred stock-based compensation (460,895) -
Accumulated other comprehensive income (503,685) 148,479
Deficit (42,798,576) (15,004,188)
--------------------------------------------------------------------------
9,043,958 6,874,268
- ----------------------------------------------------------------------------
$ 10,459,302 $ 7,537,244
============================================================================
Future operations (note 1)
Commitments (note 12)
Subsequent events (notes 10(a), 10(b) and 14)
The accompanying notes are an integral part of these consolidated
financial statements.
On behalf of the Board:
"Grant Sutherland" "Edward White"
- --------------------- Director ------------------- Director
SIDEWARE SYSTEMS INC.
Consolidated Statements of Operations and Comprehensive Loss
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
=================================================================================================
Eight
months ended Year ended
Year ended December 31, December 31, April 30,
-----------------------
2000 1999 1998 1998
- -------------------------------------------------------------------------------------------------
Revenue:
Licenses $ 461,962 $ - $ 19,458 $ 19,054
Services 96,217 - - -
Hardware and software resales 27,504 2,533 - -
Hardware resales to related
parties (note 5(a)) 81,945 30,856 85,524 -
------------------------------------------------------------------------------------------------
667,628 33,389 104,982 19,054
Cost of revenues:
Licenses 1,532 - 13,476 12,933
Services 28,843 - - -
Hardware and software resales 27,504 2,044 - -
Hardware resales to related
parties (note 5(a)) 81,945 30,856 79,510 -
------------------------------------------------------------------------------------------------
139,824 32,900 92,986 12,933
- --------------------------------------------------------------------------------------------------
Gross margin 527,804 489 11,996 6,121
Operating expenses:
Sales and marketing (including
stock-based compensation of
$5,767,155, $124,479, $13,231,
and nil) 16,807,001 2,281,827 491,287 392,367
Research and development (including
stock-based compensation of
$1,131,887, $55,508, $12,349,
and nil) 4,526,397 1,490,352 349,434 434,246
General and administrative (including
stock-based compensation of
$4,471,295, $91,921, $3,822,
and nil) 7,533,958 1,978,298 481,399 895,705
-------------------------------------------------------------------------------------------------
28,867,356 5,750,477 1,322,120 1,722,318
- ---------------------------------------------------------------------------------------------------
Operating loss (28,339,552) (5,749,988) (1,310,124) (1,716,197)
Non-operating:
Interest income 550,533 98,493 27,637 19,847
Write-off of fixed assets - (35,973) - -
Proceeds on settlement of legal
claim (note 6) 147,651 - - -
Value assigned to shares issued
in satisfaction of a legal
claim (note 6) (153,020) - - (17,786)
-------------------------------------------------------------------------------------------------
545,164 62,520 27,637 2,061
- ---------------------------------------------------------------------------------------------------
Net loss (27,794,388) (5,687,468) (1,282,487) (1,714,136)
Other comprehensive income (loss):
Net unrealized holding gain on
short-term investments (note 7) 136,550 - - -
Foreign currency translation
adjustments (788,714) 265,859 (100,935) (33,889)
-------------------------------------------------------------------------------------------------
(652,164) 265,859 (100,935) (33,889)
Comprehensive loss $ (28,446,552) $ (5,421,609) $ (1,383,422) $ (1,748,025)
====================================================================================================
Basic and diluted loss per share:
Net loss $ (0.48) $ (0.15) $ (0.05) $ (0.08)
Weighted average shares used in
computing net loss per share,
basic and diluted 58,078,005 37,391,211 25,878,357 20,400,346
====================================================================================================
The accompanying notes are an integral part of these consolidated
financial statements.
SIDEWARE SYSTEMS INC.
Consolidated Statements of Stockholders' Equity
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
================================================================================================================================
Accumulated
Additional Deferred other Total
Share capital Special warrants paid-in stock-based comprehensive stockholders
Number Assigned Number Assigned capital compensation loss Deficit equity
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, April
30, 1997 17,317,859 $6,064,036 3,450,000 $ 948,775 $ 14,190 $ - $ 17,444 $(6,320,097) $ 724,348
Shares issued
on exercise of
non-transferable
warrants 4,203,100 1,498,648 - - - - - - 1,498,648
Shares issued
on exercise of
options 699,000 250,442 - - - - - - 250,442
Shares issued in
satisfaction of
a royalty claim 100,000 17,786 - - - - - - 17,786
Special warrants
issued - - 1,500,000 853,728 - - - - 853,728
Special warrant
subscriptions - - - 53,358 - - - - 53,358
Shares issued
on exercise of
special warrants 4,450,000 1,489,577 (4,450,000) (1,489,577) - - - - -
Foreign currency
translation
adjustment - - - - - - (33,889) - (33,889)
Net loss - - - - - - - (1,714,136) (1,714,136)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, April
30, 1998 26,769,959 9,320,489 500,000 366,284 14,190 - (16,445) (8,034,233) 1,650,285
Special warrant
subscriptions - - 90,000 647,031 - - - - 647,031
Shares issued
on exercise of
special warrant
subscriptions 500,000 264,883 (500,000) (264,883) - - - - -
Deferred stock-
based
compensation - - - - 29,402 (29,402) - - -
Amortization
of deferred
stock-based
compensation - - - - - 29,402 - - 29,402
Foreign currency
translation
adjustment - - - - - - (100,935) - (100,935)
Net loss - - - - - - - (1,282,487) (1,282,487)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
1998 27,269,959 9,585,372 90,000 748,432 43,592 - (117,380) (9,316,720) 943,296
Shares issued
on exercise of
non-transferable
warrants 10,434,335 3,418,136 - - - - - - 3,418,136
Shares issued
on exercise of
options 1,343,500 806,508 - - - - - - 806,508
Special warrants
issued - - 9,326,332 2,084,911 - - - - 2,084,911
Shares issued
on exercise of
special warrants 9,724,611 2,833,343 (9,416,332) (2,833,343) - - - - -
Shares issued
for cash 2,746,833 4,514,656 - - - - - - 4,514,656
Shares issued
for services
rendered 250,000 107,686 - - - - - - 107,686
Deferred stock-
based
compensation - - - - 271,908 (271,908) - - -
Amortization of
deferred
stock-based
compensation - - - - - 271,908 - - 271,908
Share
subscriptions
receivable
(243,900 common
shares) - 396,619 - - - - - - 396,619
Share issue costs - (27,843) - - - - - - (247,843)
Foreign currency
translation
adjustment - - - - - - 265,859 - 265,859
Net loss - - - - - - - (5,687,468) (5,687,468)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December
31, 1999,
carried forward 51,769,238 21,414,477 - - 315,500 - 148,479 (15,004,188) 6,874,268
SIDEWARE SYSTEMS INC.
Consolidated Statements of Stockholders' Equity, continued
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
================================================================================================================================
Accumulated
Additional Deferred other Total
Share capital Special warrants paid-in stock-based comprehensive stockholders
Number Assigned Number Assigned capital compensation loss Deficit equity
- --------------------------------------------------------------------------------------------------------------------------------
Balance, December
31, 1999,
brought forward 51,769,238 $21,414,477 - $ - $ 315,500 $ - $ 148,479 $(15,004,188) $6,874,268
Shares issued
on exercise of
non-transferable
warrants 3,919,702 3,803,797 - - - - - - 3,803,797
Shares issued
on exercise of
options 1,584,100 1,469,279 - - - - - - 1,469,279
Shares issued
for cash 3,340,100 14,557,888 - - - - - - 14,557,888
Shares issued
for
subscriptions
previously
received 243,900 - - - - - - - -
Shares issued
on settlement
of legal claim 80,000 153,020 - - - - - - 153,020
Share issue costs (738,079) - - - - - - - (738,079)
Cancelled shares (50,625) - - - - - - - -
Stock-based
compensation - - - - 247,758 - - - 247,758
Deferred stock-
based
compensation - - - - 11,583,474 (11,583,474) - - -
Amortization
of deferred
stock-based
compensation - - - - - 11,122,579 - - 11,122,579
Net unrealized
holding gain
on short-term
investments,
net of tax
effect of nil - - - - - - 136,550 - 136,550
Foreign currency
translation
adjustment - - - - - - (788,714) - (788,714)
Net loss - - - - - - - (27,794,388) (27,794,388)
- --------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31,
2000 60,886,415 $40,660,382 - $ - $12,146,732 $ (460,895) $ (503,685) $(42,798,576) $ 9,043,958
The accompanying notes are an integral part of these consolidated
financial statements.
SIDEWARE SYSTEMS INC.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
=================================================================================================
Eight
months ended Year ended
Year ended December 31, December 31, April 30,
-----------------------
2000 1999 1998 1998
- -------------------------------------------------------------------------------------------------
Cash flows used in operating
activities:
Net loss $ (27,794,388) $ (5,687,468) $ (1,282,487) $ (1,714,136)
Items not involving cash:
Amortization 704,044 284,472 90,982 108,377
Stock-based compensation 11,370,337 271,908 29,402 -
Write off of fixed assets - 35,973 - -
Investment advisory services
settled by equity instruments - - - 53,358
Value assigned to shares
issued for financial
advisory services - 107,686 - -
Value assigned to shares
issued in satisfaction of
legal claim 153,020 - - 17,786
Changes in non-cash operating
working capital:
Accounts receivable (479,183) 38,514 (121,741) 57,965
Due (to) from related parties (68,166) 290,816 (247,055) 123,529
Inventory 24,435 (42,096) (29,207) 5,443
Prepaid expenses (317,901) (169,860) 22,976 (65,339)
Accounts payable and accrued
liabilities 650,961 418,197 37,234 (119,026)
Deferred revenue 169,793 - - -
- -------------------------------------------------------------------------------------------------
Net cash used in operating activities (15,587,048) (4,451,858) (1,499,896) (1,532,043)
Cash flows from financing activities:
Special warrants issued for cash - 2,084,911 647,032 853,728
Shares issued for cash, net of share
issue costs 19,092,885 8,494,337 - 1,749,146
Share subscriptions receivable - 396,619 - -
- -------------------------------------------------------------------------------------------------
Net cash provided by financing
activities 19,092,885 10,975,867 647,032 2,602,874
Cash flows from investing activities:
Purchase of short-term investments
available for sale (6,052,335) - - -
Long-term receivables and deferred
charges 7,040 (217,068) - -
Purchase of fixed assets (1,790,479) (782,425) (153,980) (239,615)
Deposit on lease, net (111,219) (14,106) - -
-----------------------------------------------------------------------------------------------
Net cash used in investing activities (7,946,993) (1,013,599) (153,980) (239,615)
- -------------------------------------------------------------------------------------------------
Effect of exchange rates on cash and
cash equivalents (538,646) 212,423 (70,450) (25,933)
- -------------------------------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents (4,979,802) 5,722,833 (1,077,294) 805,283
Cash and cash equivalents,
beginning of period 5,929,801 206,968 1,284,262 478,979
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 949,999 $5,929,801 $ 206,968 $ 1,284,262
=================================================================================================
Supplemental information:
Non-cash financing and investing
activities:
Shares issued in satisfaction
of legal claim $ 153,020 $ - $ - $ 17,786
Shares issued for services
rendered - 107,686 - -
Shares issued on exercise
of special warrants - 657,613 - -
Shares issued for investment
advisory services - - - 53,358
Net unrealized holdings gain
on short-term investments 136,550 - - -
=================================================================================================
The accompanying notes are an integral part of these consolidated
financial statements.
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
1. DESCRIPTION OF BUSINESS AND FUTURE OPERATIONS:
Sideware Systems Inc. (the "Company") is a leading provider of
Electronic Customer Relationship Management ("eCRM") software.
The Company's collaborative solutions enable companies to better
manage their customer interactions by providing enhanced
Internet-based customer service. Substantially all of the
Company's sales were generated in the United States and Canada.
These consolidated financial statements have been prepared on the
going concern basis under which an entity is considered to be
able to realize its assets and satisfy its liabilities in the
ordinary course of business. Through the date of these
consolidated financial statements the Company has not generated
significant revenues, has incurred operating losses and negative
cash flow from operating activities. Operations to date have
been primarily financed by equity transactions. The Company's
future operations and its continuation as a going concern are
dependent upon its ability to obtain market acceptance of its
product, to increase sales of its product by penetrating markets
within North America, generating positive cash flows from
operations and ultimately attaining profitability.
Depending on the Company's ability to develop sales and related
cash flows, the Company may need to raise additional capital
through public or private financings which may not be available
on reasonable terms. Subsequent to year-end, the Company secured
private financing with net proceeds of approximately $3,800,000
(note 14). The consolidated financial statements do not include
any adjustments relating to the recoverability of assets and
classification of assets and liabilities that might be necessary
should the Company be unable to continue as a going concern.
2. BASIS OF PRESENTATION:
These financial statements have been prepared using generally
accepted accounting principles in the United States of America.
They include the financial statements of Sideware Systems Inc.
and its subsidiaries, all of which are wholly-owned. All
material intercompany balances and transactions have been
eliminated in consolidation.
3. SIGNIFICANT ACCOUNTING POLICIES:
(a) Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 2
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(b) Cash equivalents:
Cash equivalents consists of highly liquid investments having
terms to maturity at the date of acquisition of not more than
three months.
(c) Short-term investments:
The Company classifies its investments in marketable
securities as "available-for-sale." Such investments are
recorded at fair value based on quoted market prices, with
unrealized gains and losses recorded as other comprehensive
income (loss) until realized.
(d) Fixed assets:
Fixed assets are carried at cost less accumulated
amortization. Amortization is calculated annually as follows:
===============================================================
Asset Basis Rate
- ---------------------------------------------------------------
Furniture and fixtures declining-balance 20%
Computer equipment straight-line 33 1/3%
Trade show assets straight-line 33 1/3%
Computer software straight-line 50%
Leasehold improvements straight-line lease term
===============================================================
During the year, the Company changed its amortization policy
for trade show assets and computer equipment to better
approximate the useful life of the assets. The adoption of
this policy did not have a material effect on the Company's
financial position or results of operations.
(e) Deferred charges:
Deferred charges represent the discount on notes receivable
and are being recognized by the yield method over the term of
the note.
(f) Impairment of long-lived assets:
In accordance with Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of",
the Company monitors the recoverability of long-lived assets,
which include property and equipment and other assets, based
on factors such as future asset utilization, business climate
and future undiscounted cash flows expected to result from the
use of the related assets. The Company's policy is to record
an impairment loss in the period when it is determined that
the carrying amount of the asset may not be recoverable, at
which time the asset is written down to fair market value.
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 3
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(g) Income taxes:
The Company accounts for income taxes under the asset and
liability method in accordance with SFAS No. 109, "Accounting
for Income Taxes". Deferred tax assets and liabilities are
recognized for the estimated future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in the statement of operations in the period that
includes the enactment date. A valuation allowance is recorded
to reduce deferred tax assets to an amount where realization
is not considered to be more likely than not.
(h) Stock-based compensation:
The Company accounts for its stock-based employee compensation
arrangements in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for
Stock Issued to Employees" and complies with the disclosure
provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation". Deferred stock-based compensation is recorded
on the measurement date, which is generally the date of grant,
when the market value of the underlying common stock exceeds
the exercise price for stock options or the purchase price for
the shares of common stock. Non-employee options are
accounted for under SFAS No. 123 and are recognized at the
fair value of the options as determined by an option pricing
model as the related services are provided.
Stock-based compensation resulting from employee option grants
is recognized on an accelerated basis over the vesting period
of the individual options in accordance with Financial
Accounting Standards Board Interpretation ("FASB") No. 28.
Non-employee grants with future service requirements are not
recognized until the service is performed and the options
vest.
(i) Comprehensive income (loss):
In accordance with the provisions of SFAS No. 130, "Reporting
Comprehensive Income", the Company reports comprehensive
income, which includes net earnings as well as changes in
equity from other non-owner sources specifically the foreign
currency cumulative translation adjustments and unrealized
holding gain on short-term investments.
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 4
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(j) Research and development:
In accordance with SFAS No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed",
software development costs are expensed as incurred until
technological feasibility of the underlying software product
is achieved, at which time any additional costs will be
capitalized and amortized prospectively over their estimated
economic life. To date, technological feasibility and general
availability of such software have occurred simultaneously and
software development costs qualifying for capitalization have
been insignificant. Accordingly, the Company has not
capitalized any software development costs.
(k) Advertising costs:
Advertising costs are expensed as incurred and totaled
$1,044,012, $68,941, nil and $45,185 during the years ended
December 31, 2000 and 1999, the eight months ended December
31, 1998 and the year ended April 30, 1998, respectively.
(l) Revenue recognition:
SOP 97-2, "Software Revenue Recognition", as amended,
generally requires revenue from software arrangements
involving multiple elements to be allocated to each element of
the arrangement based on the relative fair values of the
elements, such as software products, post contract customer
support, installation, or training and recognized as the
element is delivered and the Company has no significant
remaining performance obligations. The determination of fair
value is based on objective evidence that is specific to the
vendor and in the case of the Company the evidence is based on
a published price list for sale of separate maintenance contracts
and actual sales of separate maintenance contracts. If evidence
of fair value for each element of the arrangement does not exist,
all revenue from the arrangement is deferred until such time as
evidence of fair value does exist or until all elements of the
arrangement are delivered.
License revenue is recognized when there is persuasive
evidence of an arrangement and delivery to the customer has
occurred, provided the arrangement does not require
significant customization of the software, the fee is fixed
and determinable, and collectibility is considered probable.
Service revenue from maintenance contracts is recognized
ratably over the term of the maintenance contract, on a
straight-line basis. Other service revenue is recognized at
the time the service is performed.
The Company recognizes sales of equipment to external and
related parties in revenues and the related costs of the sale
in cost of revenues. The Company takes title to and holds the
equipment, bearing all of the risks and rewards of ownership,
prior to sale.
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 5
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(m) Foreign currency translation:
Effective for the fiscal year ended December 31, 2000, the
Company adopted the U.S. dollar as its reporting currency.
Historical figures previously reported in Canadian dollars
have been translated into U.S. dollars as follows: assets and
liabilities are translated into U.S. dollars at the rate of
exchange in effect at each balance sheet date and revenue and
expense items are translated at the average rates for the
applicable period. Unrealized gains and losses resulting from
the translation to U.S. dollars are accumulated in a separate
component of stockholders' equity described as accumulated
other comprehensive income.
The Company's functional currency is the Canadian dollar. The
Company's financial statements are prepared in Canadian
dollars before translation to the U.S. dollar reporting
currency. Accordingly, foreign currency denominated balances
of the Company are remeasured in Canadian dollars. Under this
method, monetary assets and liabilities denominated in a
foreign currency are remeasured in Canadian dollars at the
rate of exchange in effect at the balance sheet date. Other
assets, revenue and expense items are measured using the rate
of exchange prevailing at their respective transaction dates.
Exchange gains and losses resulting from the remeasurement of
foreign denominated monetary assets and liabilities in
Canadian dollars are reflected in earnings for the period.
(n) Net loss per share:
Net loss per share is calculated in accordance with SFAS No.
128, "Earnings per Share". Under SFAS No. 128, basic net
loss per share is computed using the weighted-average number
of outstanding shares of common stock, excluding common stock
subject to repurchase. Diluted net loss per share is computed
using the weighted-average number of outstanding shares of
common stock and, when dilutive, potential common shares from
options and warrants to purchase common stock and common stock
subject to repurchase using the treasury stock method, and
from convertible securities using the as-if converted basis.
All potential common shares have been excluded from the
computation of diluted net loss per share for all periods
presented because the effect would have been anti-dilutive.
All performance escrow shares as disclosed in note 10(a) are
excluded from the calculation.
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 6
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
3. SIGNIFICANT ACCOUNTIN POLICIES (CONTINUED):
(o) Recent accounting pronouncements:
The FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which established
standards relating to the recognition and disclosure of all
aspects of derivative instruments and hedging activities. To
date, the Company has not engaged in hedging activities.
Accordingly, the Company has evaluated the impact of adopting
SFAS 133 and determined that it will not have a material
effect on its financial position, results of operations or
cash flows. The Company will implement SFAS No. 133 in its
fiscal year ending December 31, 2001.
(p) Comparative figures:
Certain comparative figures have been reclassified to conform
to the financial statement presentation adopted in the current
year.
4. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The movements in the allowance for doubtful accounts for 2000 and 1999
are set out below:
=============================================================================
2000 1999
- -----------------------------------------------------------------------------
Balance as at January 1 $ - $ -
Expense for the year 142,047 -
- -----------------------------------------------------------------------------
Balance as at December 31 $ 142,047 $ -
=============================================================================
5. RELATED PARTY TRANSACTIONS:
(a) Transactions with related parties:
The following table summarizes the Company's related party
transactions with certain directors of the Company:
=============================================================================
Eight months
Year ended Year ended ended Year ended
December 31, December 31, December 31, April 30,
2000 1999 1998 1998
- -----------------------------------------------------------------------------
Services rendered $ 257,860 $ 445,296 $ 70,776 $ 152,672
Settlement of claims - - - 17,786
=============================================================================
Hardware resales to related parties are to companies with
certain common directors to the Company.
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 7
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
5. RELATED PARTY TRANSACTIONS (CONTINUED):
(b) Due (to) from related parties:
At December 31, 2000, the Company was owed $29,859 with
respect to costs incurred by the Company on behalf of
BrainTech Inc. and TechWest Management Inc., companies with
directors in common.
At December 31, 1999, the Company owed $ 39,340 with respect
to costs incurred by TechWest Management Inc., a company with
directors in common, on behalf of the Company.
These amounts are unsecured, payable on demand and bear no
interest.
6. SETTLEMENT OF LEGAL CLAIM:
During the year ended December 31, 2000, the Company settled its
outstanding legal disputes with former management. The Company
made a cash payment of $20,135 and issued 80,000 shares to
opposing parties. The Company also received cash payments
totaling $167,786 from opposing parties.
7. SHORT-TERM INVESTMENTS:
The amortized cost, gross unrealized holding gain and fair value
of available-for-sale securities at December 31, 2000 is as
follows:
===============================================================================
Gross
unrealized
Amortized holding Fair
cost gain value
- -------------------------------------------------------------------------------
Available-for-sale commercial paper $ 5,846,038 $ 136,550 $ 5,982,588
===============================================================================
There were no short-term investments in 1999.
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 8
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
8. LONG-TERM RECEIVABLES:
======================================================================
2000 1999
----------------------------------------------------------------------
Employee loan, maturing September 30, 2024,
bearing interest at 1% per annum,
repayable in bi-monthly blended
instalments of $376, except if employment
is terminated in which case it is
repayable immediately, real estate has
been pledged as security, net of
unamortized discount of $95,583 (1999 -
$100,763) $ 98,593 $ 104,111
Employee loans, maturing September 30,
2002, bearing interest at prime plus 1%
per annum. 13,843 18,585
-----------------------------------------------------------------------
112,436 122,696
Current portion 6,849 14,041
-----------------------------------------------------------------------
$ 105,587 $ 108,655
=======================================================================
The employee loan secured by real estate has been discounted to
fair market value calculated at prime plus 1%, which is the
prevailing rate of similar financial instruments, over 25 years.
9. Fixed assets:
===========================================================
2000 1999
- -----------------------------------------------------------
Furniture and fixtures $ 710,518 $ 336,234
Computer equipment 1,553,279 696,195
Trade show assets 150,193 85,928
Computer software 289,881 93,592
Leasehold improvements 843,452 626,319
- -----------------------------------------------------------
3,547,323 1,838,268
Less accumulated amortization (1,579,505) (914,732)
- -----------------------------------------------------------
Net book value $1,967,818 $ 923,536
===========================================================
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 9
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
10. STOCKHOLDERS' EQUITY:
(a) Performance shares and escrow securities:
Included in issued shares at December 31, 2000 are 750,000
performances and 220,378 escrow securities (December 31, 1999
and 1998 and April 30, 1998 - 750,000 and 280,378,
respectively) held in escrow to be released based on
achievement of a cash flow formula. If any of the 750,000
performance shares are not released by September 10, 2001,
they will be subject to cancellation. Subsequent to December
31, 2000, 220,378 escrow securities were subject to
cancellation on January 11, 2001 due to the conditions in the
escrow agreement not being fulfilled.
(b) Stock compensation plans:
Effective February 8, 2000, the Company adopted its 2000 Stock
Option Plan ("the 2000 Plan"), which reserved 7,000,000
shares for issuance pursuant to stock options to be granted to
directors, officers, employees, and consultants. The
Company's Board of Directors have discretion to set the price,
term, vesting schedules, and other terms and conditions for
options granted under the 2000 Plan, subject to the
requirements of any stock exchange on which the Company's
shares are listed. In January 2000, 2,000,000 options were
granted under individual agreements and 6,860,000 options were
granted under the 2000 plan as follows: effective April 20, 2000,
the Company granted 4,912,000 options at $5.10 per share and
effective August 30, 2000, the Company granted a further 1,948,000
options at $2.25 per share pursuant to the 2000 Plan.
Subsequent to year-end, effective January 18, 2001 and
February 9, 2001 the Company granted 150,000 and 308,000
options, respectively, at $1.00 per share pursuant to the 2000
plan. All options were for terms of five years and subject to
vesting schedules up to 24 months. The 2000 Plan was approved
by the Company's shareholders at the Company's June 28, 2000
general meeting.
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 10
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
10. STOCKHOLDERS' EQUITY (CONTINUED):
(b) Stock compensation plans (continued):
Effective December 6, 2000, the Company adopted its 2001 Stock
Option Plan ("the 2001 Plan"), which reserved 6,000,000
shares for issuance pursuant to stock options to be granted to
directors, officers, employees, and consultants. On February
9, 2001, the Board of Directors approved an increase of the
reserved amount to 7,000,000 shares pursuant to the 2001 plan.
The Company's Board of Directors have discretion to set the
price, term, vesting schedules, and other terms and conditions
for options granted under the plan, subject to the
requirements of any stock exchange on which the Company's
shares are listed.
Subsequent to year-end, effective January 18, 2001, February
9, 2001 and February 22, 2001 the Company granted 5,680,500,
490,000 and 190,000 options, respectively, at $1.00 per share.
All options are exercisable for five years and subject to
vesting schedules of up to 18 months. The 2001 Plan, and all
options granted under it, are subject to approval by the
Company's shareholders. The Company intends to seek that
approval at its next general stockholders' meeting. For
accounting purposes, these options will not be deemed to have
been granted until approved by the stockholders and
compensation, if any, will be measured based on market values
at that date.
As at December 31, 2000, no options granted under either the
2000 or 2001 Plans have been exercised.
(i) A summary of the Company's stock option activity is as
follows:
================================================================
Weighted
Number average
of shares exercise price
- ----------------------------------------------------------------
Balance, April 30, 1997 2,065,000 $ 0.36
Options granted 800,000 0.50
Options exercised (699,000) 0.37
Options cancelled / expired (45,000) 0.48
- ----------------------------------------------------------------
Balance, April 30, 1998 2,121,000 0.41
Options granted 555,000 0.24
Options cancelled / expired (86,000) 0.40
- ----------------------------------------------------------------
Balance, December 31, 1998 2,590,000 0.37
Options granted 2,960,000 1.38
Options exercised (1,343,500) 0.61
Options cancelled / expired (100,000) 0.45
- ----------------------------------------------------------------
Balance, December 31, 1999 4,106,500 1.02
Options granted 8,860,000 5.55
Options exercised (1,584,100) 0.92
Options cancelled / expired (470,000) 4.60
- ----------------------------------------------------------------
Balance, December 31, 2000 10,912,400 $ 4.56
================================================================
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 11
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
10. STOCKHOLDERS' EQUITY (CONTINUED):
(b) Stock compensation plans (continued):
(ii) Additional information regarding options outstanding as
at December 31, 2000 is as follows:
==============================================================================
Outstanding Exercisable
- ------------------------------------------------------------------------------
Weighted
average Weighted Weighted
remaining average average
Range of Number contractual exercise Number exercise
exercise prices of shares life (years) price of shares price
- ------------------------------------------------------------------------------
$ 0.24 - $ 0.90 1,171,500 2.06 $ 0.48 1,171,500 $ 0.48
$ 1.55 - $ 2.25 3,053,900 4.25 2.01 1,377,775 1.73
$ 5.10 4,794,500 4.30 5.10 1,946,000 5.10
$ 8.69 - $ 11.08 1,892,500 4.05 9.82 955,000 10.33
- ------------------------------------------------------------------------------
10,912,400 4.00 $ 4.56 5,450,275 $ 4.17
==============================================================================
(iii) Stock-based compensation:
With respect to the stock options granted from inception
through December 31, 2000, the Company recorded stock-based
compensation of $11,671,647.
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 12
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
10. STOCKHOLDERS' EQUITY (CONTINUED):
(b) Stock compensation plans (continued):
(iii) Stock-based compensation (continued):
Pursuant to SFAS No. 123, the Company is required to
disclose the pro-forma effects on net loss and net loss per
share data as if the Company had elected to use the fair
value approach to account for its employee stock-based
compensation plans. If this approach had been applied, the
Company's net loss and net loss per share would have been as
indicated below:
=============================================================================
Eight months
Year ended Year ended ended Year ended
December 31, December 31, December 31, April 30,
2000 1999 1998 1998
- -----------------------------------------------------------------------------
Net loss:
As reported $27,794,388 $5,687,468 $1,282,487 $1,714,136
Proforma 43,301,838 7,680,247 1,342,505 1,891,150
=============================================================================
Basic and diluted net
loss per share:
As reported $ 0.48 $ 0.15 $ 0.05 $ 0.08
Proforma 0.75 0.21 0.05 0.09
=============================================================================
The fair value for the options was estimated using the
Black-Scholes option pricing model assuming no expected
dividends and the following weighted average assumptions:
======================================================================
Options
---------------
Interest
rate Term Volatility
- ----------------------------------------------------------------------
Year ended December 31, 2000 6.55% 3 yrs 70%
Year ended December 31, 1999 5.88% 3 yrs 70%
Eight months ended December 31, 1998 5.42% 3 yrs 70%
Year ended April 30, 1998 5.34% 3 yrs 70%
======================================================================
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 13
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
10. STOCKHOLDERS' EQUITY (CONTINUED):
(b) Stock compensation plans (continued):
(iii) Stock-based compensation (continued):
The weighted-average fair value of stock options granted for
the year ended December 31, 2000 and 1999, the eight months
ended December 31, 1998 and the year ended April 30, 1998,
are as follows:
==============================================================================================================
Weighted average Weighted average
exercise price fair value
------------------------------------------ ---------------------------------------
Eight Eight
Year ended months ended Year ended Year ended months ended Year ended
December 31, December 31, April 30, December 31, December 31, April 30,
-------------- --------------
2000 1999 1998 1998 2000 1999 1998 1998
================================================================================================================
Exercise price is
less than market
value on
grant date $ - $ 1.30 $ - $ 0.50 $ - $ 0.62 $ - $ 0.22
Exercise price
exceeds market
value on
grant date 5.55 1.40 0.24 - 4.12 0.79 0.16 -
- ----------------------------------------------------------------------------------------------------------------
Total options $ 5.55 $ 1.38 $ 0.24 $ 0.50 $ 4.12 $ 0.77 $ 0.16 $ 0.22
================================================================================================================
(c) Share purchase warrants:
A summary of the Company's warrant activity for the year ended
December 31, 2000 is as follows:
================================================================================================================
Outstanding Outstanding
Exercise December 31, December 31,
Expiry date price per share 1999 Granted Exercised Expired 2000
- ----------------------------------------------------------------------------------------------------------------
July 22, 2000 CDN 0.32 600,000 - (600,000) - -
December 23, 2000 CDN 0.40 286,000 - (110,000) (176,000) -
March 26, 2000/2001 U.S. 0.333/0.383 779,276 - (581,394) - 197,882
April 7, 2000/2001 CDN 0.55/0.63 2,700,000 - (700,000) - 2,000,000
September 14, 2000/2001 U.S. 1.64/1.89 2,746,833 - (1,329,579) - 1,417,254
December 14, 2000/2001 U.S. 1.64/1.89 - 2,500,000 - (598,729) 1,901,271
April 13, 2001/2002 U.S. 10.00/11.50 - 274,000 - - 274,000
April 13, 2001/2002 U.S. 2.82/3.24 - 810,000 - - 810,000
- ----------------------------------------------------------------------------------------------------------------
7,112,109 3,584,000 (3,919,702) (176,000) 6,600,407
================================================================================================================
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 14
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
10. STOCKHOLDERS' EQUITY (CONTINUED):
(c) Share purchase warrants (continued):
The share purchase warrants issued in consideration for
financing, outstanding at December 31, 2000 having an exercise
price of U.S.$2.82 in the first year and U.S.$3.24 in the
second year expiring April 13, 2001/2001 were repriced from
U.S.$10.00 in the first year and U.S.$11.50 in the second year
on September 7, 2000. The term of the re-priced warrants will
be reduced to 30 days if, for ten consecutive days, the
closing trading price of the company's shares exceeds either
U.S.$2.82 in the first year, or U.S.$3.24 in the second year.
The 30-day term commences seven days after the ten-day trading
threshold has been met.
11. Income taxes:
Deferred income taxes reflect the tax effects of temporary
differences between the carrying amount of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes, as well as net operating loss and tax credit
carryforwards.
The Company's deferred income tax assets are comprised of the
following at December 31:
==========================================================================================
2000 1999
- ------------------------------------------------------------------------------------------
Net deferred tax assets and liabilities:
Net operating loss carryforwards $ 10,553,386 $ 4,905,941
Share issue costs (186,442) (88,039)
Excess of amortization recorded for accounting over tax 695,703 391,321
- -------------------------------------------------------------------------------------------
Total deferred tax assets 11,062,647 5,209,223
Valuation allowances (11,062,647) (5,209,223)
- -------------------------------------------------------------------------------------------
Net deferred tax assets $ - $ -
===========================================================================================
The movement in the valuation allowance for deferred tax assets
in 2000 and 1999 are as follows:
=============================================================================
2000 1999
- -----------------------------------------------------------------------------
Balance as at January 1 $ 5,209,223 $ -
Increase in operating losses 5,647,445 4,905,941
Increase in share issue costs (98,403) (88,039)
Increase in amortization recorded in accounting
over tax 304,382 391,321
- -----------------------------------------------------------------------------
Balance as at December 31 $ 11,062,647 $ 5,209,223
=============================================================================
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 15
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
11. INCOME TAXES (CONTINUED):
Deferred income taxes reflect the tax effects of temporary
differences between the carrying amount of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes, as well as non-operating losses and tax credit
carryforwards.
At December 31, 2000, management believes that sufficient
uncertainty exists as to whether the deferred tax assets will be
realized, and accordingly, a valuation allowance is required.
As of December 31, 2000, the Company had net operating losses of
$13,468,489 available to offset taxable income earned in Canada
to 2007 and $10,193,813 available to offset taxable income earned
in the United States to 2015.
12. COMMITMENTS:
The Company has obligations under operating lease arrangements
which require the following minimum annual payments:
==================================================================
2001 $ 997,000
2002 947,000
2003 797,000
2004 531,000
2005 534,000
2006 and thereafter 2,850,000
- ------------------------------------------------------------------
$ 6,656,000
==================================================================
13. FINANCIAL INSTRUMENTS:
(a) Fair values of financial instruments:
The Company's short-term financial instruments consist of cash
and cash equivalents, short-term investments, accounts
receivable, due from related parties, accounts payable and
accrued liabilities. The fair value of these financial
instruments approximate their carrying values due to their
short term maturity.
The fair value of the long-term receivables, calculated using
the current market rate for such instruments of the same
remaining maturity term and credit risk, approximate their
carrying value.
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 16
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
13. FINANCIAL INSTRUMENTS (CONTINUED):
(b) Foreign currency risk:
Foreign currency risk reflects the risk that the Company's net
assets or operations will be negatively impacted due to
fluctuations in exchange rates. Revenues and expenses of the
Company denominated in foreign currencies come due in the
short-term and accordingly, management of the Company believes
there is no significant exposure to foreign currency
fluctuations. The Company does not have foreign currency
hedges in place.
(c) Credit risk:
Financial instruments subjecting the Company to concentrations
of credit risk consist primarily of cash and cash equivalents,
short-term investments and trade accounts receivable. The
Company maintains cash and cash equivalents with high quality
financial institutions.
The Company's customers are currently concentrated in the
United States and Canada. The Company performs ongoing credit
evaluations, generally does not require collateral and
establishes an allowance for doubtful accounts based upon
factors surrounding the credit risk of customers, historical
trends and other information.
14. SUBSEQUENT EVENTS:
Subsequent to December 31, 2000, the Company issued, through a
private placement, 5,229,752 common shares, for net proceeds of
approximately $3,800,000. Additionally, the Company issued
5,229,752 share purchase warrants. The Company also issued
brokers' warrants, permitting the holders to acquire 526,316
units at a price of $0.76 per unit, with each unit consisting of
one share and one share purchase warrant. Each share purchase
warrant entitles the holder to purchase one additional common
share of the Company, for a period of three years, at a price of
$1.00 per share.
SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements, page 17
(Expressed in U.S. dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)
Year ended December 31, 2000 and 1999
Eight months ended December 31, 1998
Year ended April 30, 1998
15. UNAUDITED QUARTERLY FINANCIAL INFORMATION:
The following table sets forth selected unaudited quarterly
information for the Company's last eight fiscal quarters (in
thousands):
==========================================================================================
Fiscal 2000 Quarter End
--------------------------------------------------
December 31 September 30 June 30 March 31
------------------------------------------------------------------------------------------
Revenues 288 191 183 6
Gross margin 255 164 109 -
Net loss for the period (4,721) (7,473) (12,983) (2,617)
Net loss per share (0.08) (0.13) (0.22) (0.05)
==========================================================================================
Fiscal 1999 Quarter End
--------------------------------------------------
December 31 September 30 June 30 March 31
------------------------------------------------------------------------------------------
Revenues 9 - (21) 46
Gross margin - - (1) 1
Net loss for the period (2,737) (1,731) (1,091) (488)
Net loss per share (0.08) (0.03) (0.02) (0.02)
==========================================================================================