EIGER TECHNOLOGY, INC.
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
EIGER TECHNOLOGY, INC.
INDEX
September 30, 2002 and 2001
Auditor's Report
Consolidated Financial Statements
Balance Sheets
Statements of Operations and Retained Earnings
Statements of Cash Flows
Notes to the Consolidated Financial Statements
[LETTERHEAD OF MONTEITH, MONTEITH & CO.]
AUDITORS' REPORT
To the Shareholders of
Eiger Technology, Inc.:
We have audited the consolidated balance sheets of Eiger Technology, Inc.
as at September 30, 2002 and 2001, and the consolidated statements of operations
and retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the companys management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in Canada and the United States of America. Those standards require
that we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of Eiger Technology, Inc. as at September 30,
2002 and 2001, and the results of its operations and its cash flows for the
years then ended in accordance with accounting principles generally accepted in
Canada.
Monteith, Monteith & Co.
CHARTERED ACCOUNTANTS.
Stratford, Ontario,
January 31, 2003.
EIGER TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
as at September 30, 2002 and 2001
ASSETS
2002 2001
---- ----
$ $
Current:
Cash 1,982,000 1,847,000
Short-term Investments (Note 4) 1,653,000 4,146,000
Accounts Receivable (Note 5) 5,004,000 8,759,000
Inventory 4,493,000 6,545,000
Prepaid Expenses 378,000 769,000
----------- -----------
13,510,000 22,066,000
Long-term Investments (Note 4) 1,650,000 404,000
Capital (Note 6) 4,867,000 4,541,000
Goodwill 3,013,000 2,488,000
Other (Note 7) 718,000 1,222,000
----------- -----------
23,758,000 30,721,000
=========== ===========
LIABILITIES and SHAREHOLDERS' EQUITY
Current:
Bank Indebtedness (Note 8) 4,028,000 3,515,000
Accounts Payable and Accrued Liabilities 4,395,000 5,616,000
Current Portion of Long-term Debt (Note 9) 145,000 120,000
----------- -----------
8,568,000 9,251,000
----------- -----------
Long-term Debt (Note 9) 940,000 1,014,000
----------- -----------
Non-controlling Interest (1,873,000) (671,000)
----------- -----------
Shareholders' Equity:
Share Capital (Note 11) 42,235,000 42,001,000
Contributed Surplus 217,000 217,000
Retained Earnings (26,329,000) (21,091,000)
----------- -----------
16,123,000 21,127,000
----------- -----------
23,758,000 30,721,000
=========== ===========
On Behalf of the Board:
"Gerry Racicot" Director
- ---------------------------
Gerry Racicot
"Keith Attoe" Director
- ---------------------------
Keith Attoe
(See Accompanying Notes)
EIGER TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS of OPERATIONS and RETAINED EARNINGS
for the years ended September 30, 2002 and 2001
2002 2001
---- ----
$ $
Sales 19,325,000 30,070,000
Cost of Sales 17,146,000 27,711,000
----------- -----------
Gross Margin 2,179,000 2,359,000
----------- -----------
Expenses:
Selling, General and Administration 8,451,000 7,769,000
Amortization of Capital Assets 562,000 568,000
Amortization of Goodwill and Other 235,000 1,032,000
Interest on Long-term Debt 60,000 98,000
Other Interest and Bank Charges 501,000 480,000
----------- -----------
9,809,000 9,947,000
----------- -----------
Income (Loss) before Provision for Income Taxes (7,630,000) (7,588,000)
----------- -----------
Provision for Income Taxes:
Current -- (6,000)
Future -- (56,000)
----------- -----------
-- (62,000)
----------- -----------
Income (Loss) before Unusual Items (7,630,000) (7,526,000)
Non-recurring Items (Note 12) -- (16,366,000)
----------- -----------
Income (Loss) before Non-controlling Interest (7,630,000) (23,892,000)
Non-controlling Interest (2,392,000) (3,565,000)
----------- -----------
Net Income (Loss) for the Year (5,238,000) (20,327,000)
Retained Earnings - Beginning of Year (21,091,000) (764,000)
----------- -----------
Retained Earnings - End of Year (26,329,000) (21,091,000)
=========== ===========
Earnings per Share:
Before Non-recurring Items:
Basic (0.15) (0.23)
----------- -----------
Diluted (0.15) (0.23)
----------- -----------
Net Income (Loss)
Basic (0.15) (0.59)
----------- -----------
Diluted (0.15) (0.59)
----------- -----------
(See Accompanying Notes)
EIGER TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS of CASH FLOWS
for the years ended September 30, 2002 and 2001
2002 2001
---- ----
$ $
Cash Flows from Operating Activities:
Net Income (Loss) for the Year (5,238,000) (20,327,000)
Items not Involving Cash:
Non-recurring Items (Note 12) -- 16,366,000
Amortization 797,000 1,600,000
Future Income Taxes -- (56,000)
----------- -----------
(4,441,000) (2,417,000)
----------- -----------
Changes in Non-cash Working Capital Balances:
Accounts Receivable 3,755,000 3,280,000
Inventory 2,052,000 3,203,000
Prepaid Expenses 391,000 (83,000)
Accounts Payable and Accrued Liabilities (1,221,000) (5,568,000)
Income Taxes Payable -- (39,000)
Non-controlling Interest (1,202,000) (3,094,000)
----------- -----------
(666,000) (4,718,000)
----------- -----------
Cash Flows from Investing Activities:
Purchase of Capital Assets (888,000) (478,000)
Long-term Investments (1,246,000) (3,571,000)
Purchase of Goodwill and Other Assets (256,000) (2,531,000)
----------- -----------
(2,390,000) (6,580,000)
----------- -----------
Cash Flows from Financing Activities:
Increase (Decrease) in Long-term Debt (49,000) (474,000)
Increase (Decrease) in Bank Indebtedness 513,000 845,000
Issuance of Share Capital (Net of Costs) 234,000 3,106,000
----------- -----------
698,000 3,477,000
----------- -----------
Net Cash Flows for the Year (2,358,000) (7,821,000)
Cash and Cash Equivalents - Beginning of the Year 5,993,000 13,814,000
----------- -----------
Cash and Cash Equivalents - End of the Year 3,635,000 5,993,000
=========== ===========
Cash and Cash Equivalents Represented by:
Cash 1,982,000 1,847,000
Short-term Investments 1,653,000 4,146,000
----------- -----------
3,635,000 5,993,000
=========== ===========
(See Accompanying Notes)
EIGER TECHNOLOGY, INC.
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
1. Nature of Business:
Eiger Technology, Inc. ("the Company") is incorporated under the laws of
Ontario. Through its various subsidiaries, the Company offers Voice over
Internet Protocol services to the Canadian long-distance market and
manufactures and distributes electronic/computer peripherals and
electronic ballasts to OEM and consumer markets worldwide.
2. Significant Accounting Policies:
(a) Basis of Preparation:
These financial statements have been prepared in accordance with
accounting principles generally accepted in Canada ("Cdn. GAAP"). A
reconciliation to U.S. generally accepted accounting principles
("U.S. GAAP") is provided in Note 13. Because a precise
determination of assets and liabilities depends on future events,
the preparation of periodic financial statements necessitates the
use of estimates and approximations. Actual amounts may differ from
these estimates.
(b) Principles of Consolidation:
The accompanying consolidated financial statements include the
accounts of Eiger Technology, Inc. and all of its subsidiary
companies as listed in Note 3. All significant intercompany
transactions and balances have been eliminated upon consolidation.
(c) Cash and Cash Equivalents:
Cash and cash equivalents consist of cash on account and short-term
investments with remaining maturities of three months or less at
acquisition.
(d) Inventory:
Inventory is valued at the lower of cost and net realizable value.
Cost is determined on a first-in, first-out basis and includes the
costs of materials and direct labour plus the applicable share of
manufacturing overhead.
(e) Investments:
All non-consolidated investments are accounted for at cost.
Short-term investments are written down to market value when less
than cost. Long-term investments are written down to market value
when a decline in market value below the carrying value is
considered to be other than temporary.
EIGER TECHNOLOGY, INC.
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
2. Significant Accounting Policies - continued:
(f) Capital Assets:
Capital assets are recorded at cost. Amortization is calculated on
the declining-balance basis at the following annual rates:
Buildings - 4-5%
Machinery and Equipment - 5-10%
Automotive Equipment - 20-30%
Computer Equipment - 20-30%
Leasehold Improvements - 10% straight line basis
(g) Goodwill:
Goodwill represents the excess of the purchase price of the Companys
interest in subsidiary companies over the fair value of the
underlying net identifiable assets at the time of acquisition.
Goodwill is amortized over 10 years on a straight-line basis (40
years for acquisitions prior to 1997). Goodwill arising on
acquisitions after June 30, 2001 is not amortized. Management
evaluates the expected future net cash flows of the companies at
each reporting date and adjusts goodwill for any impairment.
(h) Other Assets:
Product development costs meeting generally accepted criteria for
deferral are written down to expected realizable value, and are
amortized once production commences over periods ranging from three
to ten years, depending on the anticipated economic life of the
particular product. Deferred organization, finance, and regulatory
approval costs are amortized over 2 to 5 years. Long-term lease
deposits are recorded at cost.
(i) Income Taxes:
Income taxes are provided using the liability method of tax
allocation. Under this method, future tax assets and liabilities are
determined based on differences between financial reporting and
income tax bases of assets and liabilities, and are measured using
the substantially enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
(j) Issuance of Share Capital:
The costs of issuing share capital are netted against share capital.
EIGER TECHNOLOGY, INC.
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
2. Significant Accounting Policies - continued:
(k) Revenue Recognition:
Sales are recorded upon shipment of goods to customers. Fees are
recognized as services are rendered.
(l) Foreign Currency Translation:
Due to the extensive degree of financing provided to its foreign
subsidiaries by the Company, these subsidiaries are considered to be
integrated operations. Accordingly, the temporal method of foreign
currency translation is used. Under this method, monetary assets and
liabilities of foreign subsidiaries are translated into Canadian
dollars using the exchange rate in effect at the balance sheet date,
non-monetary items are translated at historical exchange rates
(except for items carried at market, which are translated at the
balance sheet date exchange rate), and revenues and expenses are
translated using average exchange rates to approximate the rates
actually in effect at the time of the transactions. Resulting
foreign exchange translation gains or losses are included in the
determination of net income for the year, except for such gains or
losses relating the translation or settlement of foreign currency
denominated long-term monetary items which are deferred and
amortized over the remaining life of the monetary item. There were
no material exchange gains or losses on long-term foreign currency
denominated monetary items during either of the reporting periods.
(m) Stock-based Compensation:
No compensation expense is recognized for stock options granted to
employees. Options are granted at the fair market value of the
shares on the day of the grant. Any consideration paid by employees
on the exercise of stock options is credited to share capital.
(n) Earnings per Share:
Basic earnings per share is calculated based on the weighted average
number of shares outstanding during the year. Diluted earnings per
share is calculated using the treasury stock method based on the
weighted average number of shares that would have been outstanding
during the year had all the dilutive options been exercised at the
beginning of the year, or date of issuance if later, and assuming
that option proceeds would be used to purchase common shares at the
average market price during the year.
EIGER TECHNOLOGY, INC.
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
3. Subsidiaries and Related Party Transactions:
Eiger Technology, Inc. is related to the following corporations:
Name of Corporation Nature of Relationship
Newlook Industries Corp. 83.2% Subsidiary
Vision Unlimited Equipment Inc.* 100% Subsidiary of Newlook
Industries Corp.
A.D.H. Custom Metal Fabricators Inc. 100% Subsidiary of Vision
Unlimited Equipment Inc.
Alexa Properties Inc. 100% Subsidiary
ETIFF Holdings, Inc.* 100% Subsidiary
K-Tronik International Corp.* 64% Subsidiary of ETIFF
Holdings, Inc.
K-Tronik North America Corp. 100% Subsidiary of K-Tronik
International Corp.
K-Tronik Asia Corp. 100% Subsidiary of K-Tronik
North America Corp.
Alexa Korea Holdings, Inc.* 100% Subsidiary
EigerNet, Inc. 58.4% Subsidiary of Alexa Korea
Holdings, Inc.
Alexa (U.S.A.), Inc.* 100% Subsidiary
Eiger Labs Group, Inc. 64% Subsidiary of Alexa
(U.S.A.), Inc.
Onlinetel, Inc. 100% Subsidiary
Onlinetel, Corp. 100% Subsidiary
* Inactive - holding company only
All transactions within the corporate group are in the normal course of
business, are transacted at fair market value and recorded at the carrying value
at the time, and are eliminated upon consolidation. Intercompany balances at the
financial statement date are also eliminated upon consolidation.
Service fees paid to corporations owned by management personnel during the
period totalled $456,000 (2001: $412,000).
EIGER TECHNOLOGY, INC.
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
4. Investments:
(a) Short-term Investments:
Short-term investments are comprised of Canadian money market funds and
short-term commercial paper plus accrued interest, having a market value
equivalent to their cost amount.
(b) Long-term Investments: 2002 2001
---- ----
$ $
Advances to Lexatec VR Systems Inc. (Note 10) 123,000 324,000
Subsidiary long-term portfolio equity investments 1,527,000 --
Subsidiary long-term investment in debt securities -- 80,000
Other -- --
--------- ---------
1,650,000 404,000
========= =========
The advances noted above are non-interest bearing, and have no specific
terms of repayment.
5. Accounts Receivable:
Accounts receivable are reported net of an allowance for doubtful accounts
of $2,373,000 (2001: $196,000).
6. Capital Assets:
2002 2001
--------------------------------- ---------
Accumulated Net Book Net Book
Cost Amortization Value Value
--------------------------------- ---------
$ $ $ $
Land 217,000 -- 217,000 159,000
Buildings 1,060,000 150,000 910,000 920,000
Machinery and Equipment 5,497,000 2,549,000 2,948,000 2,315,000
Furniture and Fixtures 652,000 397,000 255,000 428,000
Automotive Equipment 157,000 62,000 95,000 118,000
Leasehold Improvements 116,000 4,000 112,000 116,000
Computer Hardware 409,000 134,000 275,000 283,000
Computer Software 58,000 3,000 55,000 202,000
--------------------------------- ---------
8,166,000 3,299,000 4,867,000 4,541,000
=============================================
EIGER TECHNOLOGY, INC.
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
7. Other:
2002 2001
---- ----
$ $
Product Development Costs -- 298,000
Non-interest Bearing Long-term Deposits 409,000 682,000
Regulatory Approval 153,000 174,000
Other 156,000 68,000
--------- ---------
718,000 1,222,000
========= =========
8. Bank Indebtedness :
Foreign subsidiary lines of credit balances totalling $4,028,000 (Cdn.),
bear interest at rates ranging from 5 - 7.25%, are secured by short-term
investments, inventory and equipment, and are repayable upon demand.
9. Long-term Debt:
2002 2001
---- ----
$ $
Royal Bank of Canada term loan repayable in
monthly instalments of $10,000 plus interest
calculated at Royal Bank prime plus 1/4% 625,000 745,000
Shin Han Bank (Korea) term loan repayable -- 303,000
KiUp Bank (Korea) term loan repayable in
monthly instalments of $2,083 plus interest
calculated at 5.9% per annum 375,000 --
Other 85,000 86,000
---------- ----------
1,085,000 1,134,000
Less: Current Portion (145,000) (120,000)
---------- ----------
940,000 1,014,000
========== ==========
Principal payments required on long-term debt for the next five years are
as follows: 2003: $145,000; 2004: $230,000; 2005: $145,000; 2006:
$145,000; 2007: $145,000.
EIGER TECHNOLOGY, INC.
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
10. Financial Instruments:
(a) Fair Value:
Cash and cash equivalents, short-term investments, accounts receivable and
payable, and bank indebtedness are carried at cost which approximates fair
value due to their short time to maturity. Management believes the
carrying value of long-term investments to be equivalent to their fair
market value. The fair values of the Company's long-term debt obligations,
based on current rates for debt with similar terms and maturities, are
approximately the same as their carrying values.
(b) Interest Rate Risk:
The Company is not exposed to significant interest rate risk due to the
short-term maturity of its current monetary assets and liabilities. The
Company's interest rate risk pertaining to its long-term debt obligations
is not considered to be significant due to the relatively low amounts
involved.
(c) Credit Risk:
The Company's financial assets that are exposed to credit risk consist
primarily of short-term investments, accounts receivable, and long-term
investments.
Short-term investments consist solely of money market funds and short-term
commercial paper issued by investment-rated Canadian financial
institutions which are invested for terms not exceeding 90 days.
The Company, in the normal course of business, is exposed to credit risk
from its customers. Management believes that sufficient allowance has been
made for bad debts in these financial statements based on a review of
accounts on an individual basis. The concentration of credit risk in trade
accounts receivable is not considered to be significant due to the
Company's large client base.
The Company is also exposed to credit risk with respect to its long-term
advances to Lexatec VR Systems Inc. and certain subsidiary investments.
Advances to Lexatec VR Systems Inc. are partially secured by a pledge of
reciprocal shareholdings.
EIGER TECHNOLOGY, INC.
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
11. Share Capital:
Authorized: 100,000,000 Common Shares
Issued:
2002 2001
------------------------ ------------------------
No. of Shs. $ No. of Shs. $
----------- -----------
Beginning of Year: 36,215,853 42,543,000 33,945,858 39,437,000
Issued: - private placement -- -- 70,000 1,839,000
- exercise of options 310,000 209,000 400,000 350,000
- acquisitions -- -- 1,799,995 936,000
- other 90,000 47,000 -- --
- costs of issue -- (19,000)
End of Year: 36,615,853 42,799,000 36,215,853 42,543,000
------------------------- -------------------------
Reciprocal Shareholdings (568,049) (564,000) (526,929) (542,000)
------------------------- -------------------------
Net per Balance Sheets 35,047,804 42,235,000 35,688,924 42,001,000
========================= =========================
The Company awards unconditional stock options to employees, officers,
directors and others at the recommendation of the CEO as approved by the
shareholders. Options are granted at the fair market value of the shares
on the day granted, and vest immediately. The following is a continuity
schedule of outstanding options for the reporting periods, where WAEP
refers to "weighted average exercise price".
2002 2001
----------------------- -----------------------
No. of Options WAEP No. of Options WAEP
-------------- ---- -------------- ----
$ $
Beginning of Year: 3,446,000 2.29 1,713,000 3.37
Granted 1,075,000 0.55 2,133,000 1.16
Exercised (310,000) .67 (400,000) .88
Expired (300,000) 2.02 -- --
--------- ---------
End of Year: 3,911,000 1.96 3,446,000 2.29
========= =========
EIGER TECHNOLOGY, INC.
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
11. Share Capital - continued:
Stock options were exercised during the year at prices ranging from $0.50
to $ 0.75. The weighted average contractual life for options outstanding
at year end was 1,224 days.
During the year, proceeds from exercised stock options of $209,000 was
credited to share capital (2001: $350,000). No amounts were recognized as
compensation expense with respect to stock options granted or exercised in
either of the reporting periods.
Stock options have been granted to the CEO of K-Tronik North America Corp.
contingent upon meeting sales quotas for that company as tabled below:
Number of
Monthly Sales for Six Options
Consecutive Months Exercisable Total Excercise
Units of Ballasts Per Plateau Cumulative Price
----------------------------------------- ----------- ---------- ---------
50,000 per month for 6 consecutive months 70,000 70,000 .60
60,000 per month for 6 consecutive months 70,000 140,000 .60
70,000 per month for 6 consecutive months 70,000 210,000 .60
80,000 per month for 6 consecutive months 70,000 280,000 .60
90,000 per month for 6 consecutive months 70,000 350,000 .60
No shares were issued in fiscal 2002 or fiscal 2001 as a result of this
agreement.
Management agreed to issue shares of the Company to four members of the
management team of EigerNet, Inc. and Eiger Labs Group Inc. as performance
earn out consideration contingent upon achieving the criteria tabled below
for the combined results of those two companies:
Common
Year Gross Sales Net Income Shares
---- ----------------- ----------------- ---------
1999 $27 million U.S. $1.0 million U.S. 600,000
2000 $70 million U.S. $2.5 million U.S. 750,000
2001 $80 million U.S. $3.5 million U.S. 750,000
2002 $90 million U.S. $4.0 million U.S. 900,000
2003 $110 million U.S. $4.5 million U.S. 1,000,000
600,000 shares were issued in fiscal 2000 as a result of this agreement
based on the operating results for 1999. No shares have been issued since
that time, and none will be issued in fiscal 2003 pursuant to this
agreement as the sales and income criteria have not been met.
EIGER TECHNOLOGY, INC.
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
11. Share Capital - continued:
In connection with the Company's acquisition of Onlinetel, Inc. in fiscal
2001, the share exchange agreement allows that additional shares of Eiger
Technology, Inc. may be issued to the former shareholders of Onlinetel,
Inc. if certain earn out provisions are met as follows:
Fiscal Gross Net Common
Year Revenue Income Shares
---- ------- ------ ------
$ $ #
2002 19,083,000 2,442,000 1,800,000
2003 37,348,000 6,213,000 1,800,000
2004 50,849,000 9,353,000 1,800,000
2005 59,867,000 13,849,000 1,800,000
Unmet earn out targets may be carried forward and met on a cumulative
basis. The targets for fiscal 2002 were not met and are not being carried
forward.
12. Non-recurring Items:
2002 2001
---- ----
$ $
Charge for impairment in value of consolidated goodwill -- 6,500,000
Charge for impairment in value of long-term loans receivable -- 7,003,000
Non-recurring charge for impairment in value of inventory -- 566,000
Charge for impairment in value of capital assets -- 184,000
Charge for decline in value of long-term investments
in shares of other corporations -- 982,000
Charge for impairment in value of deferred product
development costs -- 1,131,000
---------- ----------
-- 16,366,000
========== ==========
Due to unfavourable economic conditions, particularly in the Republic of
South Korea, the Company experienced significant and long-term decline in
the value of the asset groups noted above.
EIGER TECHNOLOGY, INC.
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
13. Reconciliation to U.S. GAAP:
These financial statements have been prepared in accordance with
accounting principles generally accepted in Canada ("Cdn. GAAP").
Significant differences under U.S. GAAP are discussed below.
For fiscal years beginning after December 15, 1998, U.S. GAAP requires
that all organization costs (including those previously deferred) be
expensed currently. Also, all product development costs are to be expensed
as incurred.
U.S. GAAP requires the measurement and reporting of "comprehensive
income". Comprehensive income includes net income and all other changes to
Shareholders' Equity other than amounts received from or paid to
shareholders. The only reportable comprehensive income item for the
Company relates to foreign currency translation adjustments as described
below.
U.S. GAAP requires the use of the current rate method of foreign currency
translation, with any resulting foreign exchange translation adjustments
forming part of comprehensive income for the year and accumulating as a
separate component of shareholders' equity.
APB Opinion 25 requires the intrinsic value based method be used to
measure stock option compensation. As the Company grants stock options at
fair market value, no compensation is recognized. SFAS No. 123 requires
pro-forma disclosure of net income and earnings per share as if the fair
value method had been applied.
Reconciliations to U.S. GAAP are as follows:
2002 2001
---- ----
$ $
Net Income (Loss):
- per Cdn. GAAP (5,238,000) (20,327,000)
- expense deferred product development costs net
of portion relating to non-controlling interest 298,000 856,000
- expense deferred organization costs net of
portion relating to non-controlling interest -- 219,000
- foreign currency translation adjustment 341,000 191,000
- future income tax savings related to above (100,000) (347,000)
----------- -----------
- per U.S. GAAP (4,699,000) (19,408,000)
----------- -----------
Comprehensive item - foreign exchange adjustment (341,000) (191,000)
----------- -----------
Comprehensive Income (5,040,000) (19,599,000)
=========== ===========
EIGER TECHNOLOGY, INC.
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
13. Reconciliation to U.S. GAAP - continued:
2002 2001
---- ----
$ $
Retained Earnings:
- per Cdn. GAAP (26,329,000) (21,091,000)
- expense deferred product development costs
net of portion relating to non-controlling interest -- (298,000)
- foreign currency translation adjustments 667,000 326,000
- future income tax savings related to above -- 100,000
----------- -----------
- per U.S. GAAP (25,662,000) (20,963,000)
=========== ===========
Accumulated Other Comprehensive Items:
- per Cdn. GAAP -- --
- foreign currency translation adjustments (667,000) (326,000)
----------- -----------
- per U.S. GAAP (667,000) (326,000)
=========== ===========
Total Assets:
- per Cdn GAAP 23758,000 30,721,000
- expense deferred product development costs -- (298,000)
- increase in future income tax assets -- 100,000
----------- -----------
- per U.S. GAAP 23,758,000 30,523,000
=========== ===========
Earnings per Share:
Basic (.14) (.59)
----------- -----------
Fully Diluted (.14) (.59)
----------- -----------
Pro-forma Disclosure (SFAS No. 123):
Had SFAS No. 123 been followed, net income would have decreased by
$285,000 in fiscal 2002 (2001: $1,766,000), and basic and fully
diluted earnings per share would have been (.15) and (.15)
respectively (2001: (.64) and (.64)).
EIGER TECHNOLOGY, INC.
NOTES to the CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 and 2001
14. Cash Payments of Interest and Income Taxes:
2002 2001
---- ----
$ $
Interest 538,000 555,000
======= =======
Income Taxes -- 15,000
======= =======
15. Commitments:
As at September 30, 2002, the Company had commitments under the terms of
various operating leases requiring annual rental payments as follows:
2003: $551,000; 2004: $347,000; 2005: $160,000; 2006: $160,000; 2007:
$160,000.
16. Segmented Information:
Management has identified four reportable segments: "ADH", "K-Tronik",
"Onlinetel" and "Eiger". Segmentation is determined on the basis of the
types of goods and services provided and geographic location.
"ADH" consists of A.D.H. Custom Metal Fabricators Inc. and Alexa
Properties Inc. A.D.H. Custom Metal Fabricators Inc. is a manufacturer of
fluorescent light fixtures, data racks and other metal cabinetry. Alexa
Properties Inc. owns the land and manufacturing facility in Stratford,
Ontario.
"K-Tronik" includes K-Tronik North America Corp., a distributor of
electronic ballasts based in Hackensack, New Jersey, and K-Tronik Asia
Corp., a manufacturer of electronic ballasts operating in Korea.
"Onlinetel" consists of Onlinetel, Corp. and Onlinetel Inc. which provide
Voice over Internet Protocol services to the Canadian long distance
market.
"Eiger" includes Eiger Labs Group, Inc. and EierNet, Inc. Both of these
companies are involved in the production and distribution of electronic
communications products. EigerNet, Inc. is located in South Korea, while
Eiger Labs Group, Inc. operates out of California.
Segmented financial information is presented on the following two pages.
EIGER TECHNOLOGY, INC.
SEGMENTED INFORMATION
September 30, 2002
Totals per
All Reconciling Financial
ADH K-Tronik Onlinetel Eiger Others Items Statements
--------- ---------- ---------- ---------- ---------- ----------- ----------
$ $ $ $ $ $ $
Sales:
External:
- Domestic 1,310,000 -- 1,869,000 -- -- 3,179,000
- Foreign 108,000 10,107,000 48,000 5,882,000 -- -- 16,145,000
Intersegment -- -- -- -- -- -- --
--------- ---------- ---------- ---------- ---------- ----------- ----------
1,418,000 10,107,000 1,917,000 5,882,000 -- -- 19,324,000
Cost of Sales 1,342,000 8,023,000 1,615,000 6,358,000 -- (193,000) 17,145,000
--------- ---------- ---------- ---------- ---------- ----------- ----------
Gross Margin 76,000 2,084,000 302,000 (476,000) -- 193,000 2,179,000
--------- ---------- ---------- ---------- ---------- ----------- ----------
Expenses:
Operations and Administration 314,000 2,890,000 1,573,000 2,242,000 1,237,000 193,000 8,449,000
Amortization of Capital and Other Assets 164,000 147,000 252,000 202,000 33,000 -- 798,000
Interest on Long-term Debt 39,000 -- -- 21,000 -- -- 60,000
Other Interest and Bank Charges 5,000 351,000 12,000 127,000 7,000 -- 502,000
--------- ---------- ---------- ---------- ---------- ----------- ----------
522,000 3,388,000 1,837,000 2,592,000 1,277,000 193,000 9,809,000
--------- ---------- ---------- ---------- ---------- ----------- ----------
Income (Loss) before Taxes (446,000) (1,304,000) (1,535,000) (3,068,000) (1,277,000) -- (7,630,000)
Provision for Income Taxes -- -- -- -- -- -- --
--------- ---------- ---------- ---------- ---------- ----------- ----------
Income (Loss) before Non-recurring Items (446,000) (1,304,000) (1,535,000) (3,068,000) (1,277,000) -- (7,630,000)
Non-recurring Items -- -- -- -- -- -- --
Non-controlling Interest 34,000 443,000 -- 1,915,000 -- -- 2,392,000
--------- ---------- ---------- ---------- ---------- ----------- ----------
Net Income (Loss) for the Year (412,000) (861,000) (1,535,000) (1,153,000) (1,277,000) -- (5,238,000)
========= ========== ========== ========== ========== =========== ==========
Cash Flows:
From Operating Activities (331,000) (147,000) (660,000) (698,000) (1,271,000) 2,441,000 (666,000)
From Investing Activities 144,000 -- (1,380,000) 593,000 (1,622,000) (125,000) (2,390,000)
From Financing Activities 107,000 442,000 1,909,000 323,000 233,000 (2,316,000) 698,000
--------- ---------- ---------- ---------- ---------- ----------- ----------
(80,000) 295,000 (131,000) 218,000 (2,660,000) -- (2,358,000)
Cash and Cash Equivalents:
Beginning of the Year 312,000 147,000 208,000 1,461,000 3,865,000 -- 5,993,000
--------- ---------- ---------- ---------- ---------- ----------- ----------
End of the Year 232,000 442,000 77,000 1,679,000 1,205,000 -- 3,635,000
========= ========== ========== ========== ========== =========== ==========
Expenditures on Capital Assets
and Goodwill during the Year 614,000 -- 794,000 235,000 5,000 -- 1,648,000
========= ========== ========== ========== ========== =========== ==========
Balance of Capital Assets and
Goodwill - End of the Year
- Domestic 2,323,000 -- 2,579,000 -- 107,000 -- 5,009,000
- Foreign -- 1,338,000 -- 1,533,000 -- -- 2,871,000
--------- ---------- ---------- ---------- ---------- ----------- ----------
2,323,000 1,338,000 2,579,000 1,533,000 107,000 -- 7,880,000
========= ========== ========== ========== ========== =========== ==========
Amount of Investment in Investees
Subject to Significant Influence -- -- -- -- -- -- --
========= ========== ========== ========== ========== =========== ==========
Total Assets 3,573,000 7,012,000 3,870,000 8,579,000 34,261,000 (33,537,000) 23,758,000
========= ========== ========== ========== ========== =========== ==========
EIGER TECHNOLOGY, INC.
SEGMENTED INFORMATION
September 30, 2001
Totals per
All Reconciling Financial
ADH K-Tronik Onlinetel Eiger Others Items Statements
--------- ---------- ---------- ---------- ---------- ----------- ----------
$ $ $ $ $ $ $
Sales:
External:
- Domestic 2,301,000 -- 234,000 -- -- -- 2,535,000
- Foreign -- 10,107,000 -- 17,428,000 -- -- 27,535,000
Intersegment -- -- -- -- -- -- --
--------- ---------- --------- ----------- ----------- ----------- -----------
2,301,000 10,107,000 234,000 17,428,000 -- -- 30,070,000
Cost of Sales 2,004,000 7,934,000 -- 17,958,000 -- (185,000) 27,711,000
--------- ---------- --------- ----------- ----------- ----------- -----------
Gross Margin 297,000 2,173,000 234,000 (530,000) -- -- 2,359,000
--------- ---------- --------- ----------- ----------- ----------- -----------
Expenses:
Operations and Administration 509,000 3,014,000 335,000 3,394,000 777,000 (260,000) 7,769,000
Amortization of Capital and Other Assets 210,000 655,000 28,000 676,000 31,000 -- 1,600,000
Interest on Long-term Debt 65,000 -- -- 33,000 -- -- 98,000
Other Interest and Bank Charges 56,000 360,000 -- 61,000 3,000 -- 480,000
--------- ---------- --------- ----------- ----------- ----------- -----------
840,000 4,029,000 363,000 4,164,000 811,000 -- 9,947,000
--------- ---------- --------- ----------- ----------- ----------- -----------
Income (Loss) before Taxes (543,000) (1,856,000) (129,000) (4,694,000) (811,000) -- (7,588,000)
Provision for Income Taxes (72,000) 15,000 -- (20,000) -- 15,000 (62,000)
--------- ---------- --------- ----------- ----------- ----------- -----------
Income (Loss) before Non-recurring Items (471,000) (1,871,000) (129,000) (4,674,000) (811,000) -- (7,526,000)
Non-recurring Items (136,000) (1,048,000) -- (8,691,000) (6,491,000) -- (16,366,000)
Non-controlling Interest 2,000 1,245,000 -- 2,318,000 -- -- 3,565,000
--------- ---------- --------- ----------- ----------- ----------- -----------
Net Income (Loss) for the Year (605,000) (1,674,000) (129,000) (11,047,000) (7,302,000) -- (20,327,000)
========= ========== ========= =========== =========== =========== ===========
Cash Flows:
From Operating Activities (224,000) (1,892,000) (303,000) (1,399,000) (900,000) -- (4,718,000)
From Investing Activities (32,000) (112,000) (158,000) (2,282,000) (10,801,000) 6,805,000 (6,580,000)
From Financing Activities 568,000 1,705,000 669,000 4,205,000 3,135,000 (6,805,000) 3,477,000
--------- ---------- --------- ----------- ----------- ----------- -----------
312,000 (299,000) 208,000 524,000 (8,566,000) -- (7,821,000)
Cash and Cash Equivalents:
Beginning of the Year -- 446,000 -- 937,000 12,431,000 -- 13,814,000
--------- ---------- --------- ----------- ----------- ----------- -----------
End of the Year 312,000 147,000 208,000 1,461,000 3,865,000 -- 5,993,000
========= ========== ========= =========== =========== =========== ===========
Expenditures on Capital Assets
and Goodwill during the Year 32,000 207,000 1,472,000 43,000 38,000 -- 1,792,000
========= ========== ========= =========== =========== =========== ===========
Balance of Capital Assets and
Goodwill - End of the Year
- Domestic 1,803,000 -- 2,037,000 -- 116,000 -- 3,956,000
- Foreign -- 1,596,000 -- 1,477,000 -- -- 3,073,000
--------- ---------- --------- ----------- ----------- ----------- -----------
1,803,000 1,596,000 2,037,000 1,477,000 116,000 -- 7,029,000
========= ========== ========= =========== =========== =========== ===========
Amount of Investment in Investees
Subject to Significant Influence -- -- -- -- -- -- --
========= ========== ========= =========== =========== =========== ===========
Total Assets 4,428,000 8,440,000 2,423,000 14,351,000 35,402,000 (34,323,000) 30,721,000
========= ========== ========= =========== =========== =========== ===========