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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2002
[ ] Transition report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.
For the Transition Period From ______ to ______
COMMISSION FILE NUMBER 000-26867
INFOWAVE SOFTWARE, INC.
(exact name of registrant as specified in its charter)
BRITISH COLUMBIA, CANADA 98 0183915
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
200 - 4664 Lougheed Hwy.
Burnaby, British Columbia
Canada, V5C 5T5
(Address of principal executive offices)
Telephone (604) 473-3600
(Registrant's telephone number, including area code)
Indicate by check mark 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 preceding 12 months (or for such 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
Common shares outstanding at November 6, 2002: 57,686,828
INFOWAVE SOFTWARE, INC.
INDEX to the FORM 10-Q
For the Nine Months Ended September 30, 2002
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
a) Consolidated Balance Sheets
September 30, 2002 and December 31, 2001...........................1
b) Consolidated Statements of Operations and Deficit
For the three months and nine months ended
September 30, 2002 and 2001........................................2
c) Condensed Consolidated Statements of Cash Flows
For the three months and nine months ended
September 30, 2002 and 2001........................................3
d) Notes to Consolidated Financial Statements.........................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................10
Item 3. Quantitative and Qualitative Disclosures About Market Risk............14
Item 4. Controls and Procedures...............................................14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.....................................................15
Item 2. Changes in Securities and Use of Proceeds.............................15
Item 3. Defaults upon Senior Securities.......................................15
Item 4. Submission of Matters to a Vote of Security Holders...................15
Item 5. Other Information.....................................................15
Item 6. Exhibits and Reports on Form 8-K......................................15
Signature
Certificates
Part I. Financial Information
Item 1. Financial Statements
INFOWAVE SOFTWARE, INC.
Consolidated Balance Sheets
(expressed in U.S. dollars)
====================================================================================================
Sept 30, Dec 31,
2002 2001
(unaudited)
- ----------------------------------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 2,794,799 $ 9,087,730
Short term investments 355,946 352,670
Accounts receivable 790,700 1,454,681
Finished goods inventory 5,626 49,710
Prepaid expenses 76,554 181,740
- ----------------------------------------------------------------------------------------------------
4,023,625 11,126,531
Capital assets 642,668 2,531,144
Other assets 25,341 -
- ----------------------------------------------------------------------------------------------------
$ 4,691,634 $13,657,675
====================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 1,034,334 $ 1,568,303
Deferred revenue 260,396 281,420
- ----------------------------------------------------------------------------------------------------
1,294,730 1,849,723
Shareholders' equity
Share capital
Authorized: 100,000,000 voting common shares
Issued: 57,686,828 (2001: 23,440,203) 55,576,063 42,447,141
Special warrants, net of issue costs of $1,882,912 - 13,004,340
Additional paid-in capital 9,019 -
Other equity instruments 1,613,096 1,613,096
Deficit (53,306,224) (44,626,077)
Cumulative translation account (495,050) (630,548)
- ----------------------------------------------------------------------------------------------------
3,396,904 11,807,952
- ----------------------------------------------------------------------------------------------------
$ 4,691,634 $13,657,675
====================================================================================================
See accompanying notes to interim consolidated financial statements
1
INFOWAVE SOFTWARE, INC.
Consolidated Statements of Operations and Deficit
(expressed in U.S. dollars)
- ----------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
Sept 30, 2002 Sept 30, 2001 Sept 30, 2002 Sept 30, 2001
(unaudited) (unaudited) (unaudited) (unaudited)
- ----------------------------------------------------------------------------------------------------------------
Sales $ 676,415 $ 923,282 $ 1,519,653 $ 2,654,386
Cost of goods sold 221,369 161,308 370,110 348,850
- ----------------------------------------------------------------------------------------------------------------
455,046 761,974 1,149,543 2,305,536
Expenses:
Research and development 430,822 1,124,893 2,148,293 4,461,215
Sales and marketing 597,865 2,287,515 3,401,570 7,548,884
Administration 386,442 963,847 1,695,075 3,170,451
Restructuring - 472,954 1,415,380 1,226,695
Depreciation and amortization 273,998 584,757 1,218,066 1,348,149
- ----------------------------------------------------------------------------------------------------------------
1,689,127 5,433,966 9,878,384 17,755,394
- ----------------------------------------------------------------------------------------------------------------
Loss from operations 1,234,081 4,671,992 8,728,841 15,449,858
Other expenses (income)
Interest and other income (13,623) (32,664) (51,118) (246,182)
Financing costs - 666,062 - 666,062
Foreign exchange (150,850) (96,534) 2,424 165,328
- ----------------------------------------------------------------------------------------------------------------
Net loss for the period 1,069,608 5,208,856 8,680,147 16,035,066
Deficit, beginning of period 52,236,616 34,591,851 44,626,077 23,765,641
- ----------------------------------------------------------------------------------------------------------------
Deficit, end of period $53,306,224 $39,800,707 $53,306,224 $39,800,707
- ----------------------------------------------------------------------------------------------------------------
Net loss per share $ 0.02 $ 0.22 $ 0.17 $ 0.70
- ----------------------------------------------------------------------------------------------------------------
Weighted average number of shares
outstanding 57,686,828 23,410,587 50,548,963 22,952,322
- ----------------------------------------------------------------------------------------------------------------
See accompanying notes to interim consolidated financial statements
2
INFOWAVE SOFTWARE, INC.
Condensed Consolidated Statements of Cash Flows
(expressed in U.S. dollars)
- -------------------------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
Sept 30, 2002 Sept 30, 2001 Sept 30, 2002 Sept 30, 2001
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from operations:
Net cash used in operations ($888,042) ($4,286,519) ($6,345,997) ($14,140,197)
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Redemption (purchase) of short term investments (13,087) 1,787,863 (522) 6,079,073
Purchase of capital assets (12,802) (441,401) (106,668) (2,181,341)
Proceeds on disposal of capital assets 4,889 - 4,889 -
Purchase of long term investments (25,604) - (25,604) -
- -------------------------------------------------------------------------------------------------------------------------------
(46,604) 1,346,462 (127,905) 3,897,732
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from operating loan - 1,510,701 - 1,510,701
Deferred financing costs - (249,257) - (249,257)
Issuance of shares and warrants for cash,
net of issue costs 3 (2,263) 72,564 7,328,865
- -------------------------------------------------------------------------------------------------------------------------------
3 1,259,181 72,564 8,590,309
- -------------------------------------------------------------------------------------------------------------------------------
Foreign exchange gain (loss) on cash and cash
equivalents held in a foreign currency (136,092) (60,713) 108,407 (75,060)
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (1,070,735) (1,741,589) (6,292,931) (1,727,216)
Cash and cash equivalents, beginning of period 3,865,534 2,382,465 9,087,730 2,368,092
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $2,794,799 $ 640,876 $2,794,799 $ 640,876
- -------------------------------------------------------------------------------------------------------------------------------
Supplemental information:
Non-cash adjustment to accrued net issue costs of
shares and warrants $ 52,625 - $ 52,625 -
- -------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to interim consolidated financial statements
3
INFOWAVE SOFTWARE, INC.
Notes to Consolidated Financial Statements
(Dollar amounts expressed in U.S. dollars)
(Unaudited)
1. Basis of presentation
The accompanying unaudited consolidated financial statements do not include all
information and footnote disclosures required for an annual set of financial
statements under Canadian or United States generally accepted accounting
principles. In the opinion of management, all adjustments (consisting solely of
normal recurring accruals) considered necessary for a fair presentation of the
financial position, results of operations and cash flows as at September 30,
2002 and for all periods presented, have been included. Interim results for the
three and nine month periods ended September 30, 2002 are not necessarily
indicative of the results that may be expected for the fiscal year as a whole or
for any other interim period.
The unaudited consolidated balance sheets, statements of operations and deficit
and condensed statements of cash flows include the accounts of the Company and
its wholly owned subsidiary, Infowave USA Inc. These financial statements have
been prepared in accordance with Canadian generally accepted accounting
principles for interim financial information. Except as disclosed in note 10,
these financial statements comply, in all material respects, with generally
accepted accounting principles ("GAAP") in the United States. The accounting
principles used in these financial statements are those used in the preparation
of the Company's audited financial statements for the year ended December 31,
2001 except as disclosed in notes 3 and 6(e).
These financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's annual report on Form
10-K for the fiscal year ended December 31, 2001.
2. Continuing Operations
These financial statements have been prepared on a going concern basis
notwithstanding the fact that the Company has experienced operating losses and
negative cash flows from operations during the three-month and nine-month
periods ended September 30, 2002 and in prior periods. To date, the Company has
financed its continuing operations through the issuance of common shares and
special warrants, and more recently from a credit facility provided by the
Company's former Chief Executive Officer. Continued operations of the Company
will depend upon the attainment of profitable operations, which may require the
successful completion of external financing arrangements.
In addition, the Company initiated a restructuring program (note 4) in order to
reduce its expenditures and streamline operations. A lower cost structure,
together with estimated revenue, the exercise of options and warrants and the
debt financing obtained during the nine months ended September 30, 2002 (note
6(b)), is expected to provide the Company with sufficient working capital to
fund the Company's operations for the balance of 2002. However, unanticipated
costs and expenses or lower than anticipated revenues could necessitate
additional financing or reductions in expenditures which may include further
restructuring of the Company. There can be no assurances that such financing, if
required, will be available on a timely or cost effective basis. To the extent
that such financing is not available on terms favorable to the Company, or at
all, or reductions in expenditures are required, the Company may not be able to,
or may be delayed in being able to commercialize its products and services and
to ultimately attain profitable operations. The Company will continue to
evaluate its projected expenditures relative to its available cash and to
evaluate additional means of financing and cost reduction strategies in order to
satisfy its working capital and other cash requirements.
4
INFOWAVE SOFTWARE, INC.
Notes to Consolidated Financial Statements
(Dollar amounts expressed in U.S. dollars)
(Unaudited)
3. Significant Accounting Policies
These interim financial statements follow the same accounting policies and
methods of application as described in Note 2 to our Annual Consolidated
Financial Statements, except for the following:
Stock-based compensation
Effective January 1, 2002, the Company adopted the new Recommendations of the
Canadian Institute of Chartered Accountants Handbook Section 3870, Stock-based
Compensation and Other Stock-based Payments. The Company applies HB 3870
prospectively to all stock-based payments to employees and non-employees granted
on or after January 1, 2002.
The Company accounts for all options granted to employees, including directors,
under the intrinsic value method, whereby the excess, if any, of the quoted
market value of the stock at the date of grant over the exercise price of the
option is recorded as stock based compensation expense. As the exercise price of
the options is equal to the market value on the measurement date, the Company
has determined that this accounting policy has no significant effect with
respect to employee options, on its results of operations for the three and
nine-month periods ended September 30, 2002.
Options granted to non-employees on or after January 1, 2002 are accounted for
under the fair value based method. Under this method, options granted to
non-employees are measured at their fair value and recognized as the options are
earned. Due to the nature of the Company's stock option plans, no transition
adjustments were required to be recognized on adoption of the policies effective
January 1, 2002.
4. Restructuring Expense
During the three months ended June 30, 2002, the Company initiated a
restructuring plan to significantly reduce operating expenses and preserve
capital. The costs resulted from reductions in staff, lease termination costs
and write-down of fixed assets that are either no longer being utilized or the
costs are no longer recoverable as a result of the implementation of the
restructuring plan.
A breakdown of these costs is summarized below:
- --------------------------------------------------------------------------------
Restructuring
Expense
- --------------------------------------------------------------------------------
Employee Severance $354,834
Lease termination costs 282,793
Write-down of fixed assets 777,753
- --------------------------------------------------------------------------------
Total $1,415,380
- --------------------------------------------------------------------------------
5. Capital assets
Accumulated Net Book
September 30, 2002 (unaudited) Cost Depreciation Value
- -----------------------------------------------------------------------------------------------------
Computer equipment and software $3,262,685 $2,842,301 $420,384
Leasehold improvements 102,252 40,730 61,522
Office equipment 174,097 65,532 108,565
Software licenses and purchased source code 60,572 8,375 52,197
- -----------------------------------------------------------------------------------------------------
$3,599,606 $2,956,938 $642,668
- -----------------------------------------------------------------------------------------------------
5
INFOWAVE SOFTWARE, INC.
Notes to Consolidated Financial Statements
(Dollar amounts expressed in U.S. dollars)
(Unaudited)
- -----------------------------------------------------------------------------------------------------
December 31, 2001 Accumulated Net Book
Cost Depreciation Value
- -----------------------------------------------------------------------------------------------------
Computer equipment and software $3,964,196 $2,265,791 $1,698,405
Leasehold improvements 425,590 110,840 314,750
Office equipment 619,634 151,669 467,965
Software licenses and purchased source code 192,895 142,871 50,024
- -----------------------------------------------------------------------------------------------------
$5,202,315 $2,671,171 $2,531,144
- -----------------------------------------------------------------------------------------------------
6. Shareholders' equity
(a) During the year ended December 31, 2001, the Company granted Thomas Koll,
at that time the Chief Executive Officer of the Company, warrants to
purchase up to 3,510,455 common shares at a price of Cdn $1.10, exercisable
for three years. The fair value of these warrants of $1,613,096 was
recognized as a financing cost that was amortized in full in 2001 and
classified as other equity instruments in shareholders' equity. As at
September 30, 2002 none of these warrants had been exercised.
(b) On March 8, 2002, the Company entered into a convertible loan agreement
with a strategic partner, Compaq Computer Corporation (now "Hewlett-Packard
Company" or "HP"), for a convertible-revolving loan of up to $2,000,000.
The principal amount outstanding under the loan bears interest at the prime
rate plus 3.25% and may be converted into common shares of the Company at a
price of US$1.00 per share, which was greater than the market price at that
date, at any time up to March 8, 2005, subject to adjustment in certain
circumstances. The Company may draw down amounts under the loan at any time
provided that certain standard working capital conditions are met. The
convertible loan will be secured by certain assets of the Company,
excluding its intellectual property. As at September 30, 2002, the Company
has not drawn on this loan.
(c) On November 23, 28 and 30, 2001 the Company issued 31,965,319, 1,960,784
and 195,186, special warrants at a price per special warrant of Cdn $0.69,
Cdn $0.81 and Cdn $0.86 respectively, for gross proceeds of $14,887,252
(Cdn $23,812,165) of which $4,475,309 was held in escrow and included in
cash and cash equivalents at December 31, 2001. The special warrants are
exercisable, without payment of additional consideration, for units each
comprised of one common share and one-half of one common share purchase
warrant.
Each whole purchase warrant will entitle the holder to purchase one common
share for a period of three years at a price of $0.56 (Cdn $0.90). The
Company has the right to force conversion of the purchase warrants thirty
days after providing written notice that the closing price for its common
shares has equaled or exceeded Cdn $9.00 for 20 consecutive trading days.
The purchase warrants also contain provisions for cashless exercise.
The agents were paid a cash commission equal to 7% of the gross proceeds of
the private placement and agents' warrants entitling them to purchase
2,386,775 units at a price of $0.51 (Cdn $0.81) until November 23, 2004.
Each unit shall be comprised of one common share and one-half of one common
share purchase warrant.
On February 21, 2002, the Company received final receipt for a prospectus
filed in certain provinces in Canada, qualifying the special warrants for
distribution and releasing the funds held in escrow. The special warrants
were deemed to be
6
INFOWAVE SOFTWARE, INC.
Notes to Consolidated Financial Statements
(Dollar amounts expressed in U.S. dollars)
(Unaudited)
exercised for common shares and purchase warrants freely tradable in Canada
on February 26, 2002.
(d) As at September 30, 2002, the Company had 5,490,247 (2001 - 6,416,689)
stock options outstanding with exercise prices ranging from Cdn $0.15 to
Cdn $64.50 and 24,151,261 (2001 - 25,504,279) warrants outstanding with
exercise prices ranging from Cdn $0.81 to Cdn $1.10. As at September 30,
2002, 2,563,212 (2001 - 2,530,783) stock options were exercisable. Of these
instruments, 2,414,662 options and all warrants were not included in the
diluted per share calculations for the three months ended September 30,
2002 and 1,649,654 options and all warrants for the nine months ended
September 30, 2002 as their exercise prices were greater than or equal to
the average market value of the underlying shares during the respective
period.
(e) Under the intrinsic value method, the Company has not recognized any
compensation expense for options issued to its employees during the three
and nine months ended September 30, 2002. Had the Company determined
compensation expense for option grants made to employees after December 31,
2001 based on the fair values at grant dates of the stock options
consistent with the fair value method, the Company's loss and loss per
share would have been reported as the pro-forma amounts indicated below:
- -------------------------------------------------------------------------------
Three months Nine months
ended ended
Sept 30, 2002 Sept 30, 2002
- -------------------------------------------------------------------------------
Net loss - as reported $1,069,608 $8,680,147
Net loss - pro forma $1,101,660 8,726,487
Net loss per share - as reported $ 0.02 $ 0.17
Net loss per share - pro forma $ 0.02 $ 0.17
- -------------------------------------------------------------------------------
The weighted average estimated fair value at the date of grant for options
granted during the three months ended September 30, 2002 was $0.05 per
share.
The fair value of each options granted was estimated on the date of the
grant using the Black-Scholes option pricing model with the following
assumptions:
- -------------------------------------------------------------------------------
Three months Nine months
ended ended
Sept 30, 2002 Sept 30, 2002
- -------------------------------------------------------------------------------
Risk-free interest rate 2.71% 2.34%
Dividend yield - -
Volatility factor 130% 123%
Weighted average expected life of the options 5 years 5 years
- -------------------------------------------------------------------------------
For the purposes of pro-forma disclosures, the estimated fair value of the
options is amortized to expense on a straight-line basis over the vesting
period.
7. Contingency
As previously disclosed in the prior quarter, the Company had received a
statement of claim from Glenayre Electronics, Inc. ("Glenayre") seeking
indemnity and payment of certain legal and other expenses in connection with a
lawsuit between Glenayre and another third party. The claim comprised of
$608,000 in legal fees and $50,000 in internal
7
INFOWAVE SOFTWARE, INC.
Notes to Consolidated Financial Statements
(Dollar amounts expressed in U.S. dollars)
(Unaudited)
expenses. Negotiations to settle the claim were in process during the quarter,
and a legal expense provision of $100,000 was included in the financial
statements as at September 30, 2002.
8. Subsequent Events
The dispute with Glenayre was successfully settled and resolved on October 30,
2002. Under the settlement, Infowave agreed to pay Glenayre $130,000 in cash
plus warrants to purchase up to 20,000 Infowave common shares, exercisable at a
price of Cdn $0.22 per common share for two years from the date of issue, and
Glenayre has agreed to a consent dismissal of its claim. The issuance of the
warrants is subject to receipt of applicable regulatory approval. The difference
between the actual settlement and estimated settlement amount accrued in the
financial statements is insignificant and will be reflected in the financial
statements for the period ending December 31, 2002.
9. Comparative Figures
Certain prior period comparatives have been reclassified to confirm to the
current period presentation.
10. United States generally accepted accounting principles
These interim financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") in Canada. Reference should be
made to note 15 of the Company's annual financial statements filed with the
Securities and Exchange Commission under cover of Form 10-K for a description of
material differences between Canadian and United States GAAP. No additional
reconciling items have been identified in the period ended September 30, 2002.
The following are the material measurement differences from GAAP in the United
States as they relate to the Company's September 30, 2002 financial statements:
(a) Net loss and net loss per share:
===============================================================================================================
Three months ended Nine months ended
Sept 30, Sept 30, Sept 30, Sept 30,
2002 2001 2002 2001
(unaudited) (unaudited) (unaudited) (unaudited)
- ---------------------------------------------------------------------------------------------------------------
Net loss in accordance with Canadian GAAP $1,069,608 $ 5,208,856 $8,680,147 $16,035,066
Adjustment for stock-based compensation relating to
stock options issued to non-employees - - - 123,730
- ---------------------------------------------------------------------------------------------------------------
Net loss in accordance with United States GAAP $1,069,608 $ 5,208,856 $8,680,147 $16,158,796
===============================================================================================================
- ---------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding in 57,686,828 23,410,587 50,548,963 22,952,322
accordance with Canadian and United States GAAP
===============================================================================================================
- ---------------------------------------------------------------------------------------------------------------
Net loss per share in accordance with US GAAP $ 0.02 $ 0.22 $ 0.17 $ 0.70
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Net loss in accordance with United States GAAP $1,069,608 $ 5,208,856 $8,680,147 $16,158,796
Other comprehensive loss (income):
Foreign currency translation adjustment (162,069) 226,180 (134,192) 316,351
- ---------------------------------------------------------------------------------------------------------------
Comprehensive loss: $ 907,539 $ 5,435,036 $8,545,955 $16,475,147
===============================================================================================================
8
INFOWAVE SOFTWARE, INC.
Notes to Consolidated Financial Statements
(Dollar amounts expressed in U.S. dollars)
(Unaudited)
10. United States generally accepted accounting principles (continued)
(b) Balance sheet:
==========================================================================================================
Sept 30, 2002 Dec 31, 2001
(unaudited)
- ----------------------------------------------------------------------------------------------------------
Total Assets
Total assets in accordance with Canadian GAAP, which is
equivalent to total assets in accordance with United
States GAAP $ 4,691,634 $13,657,675
==========================================================================================================
- ----------------------------------------------------------------------------------------------------------
Shareholders' Equity
Share capital in accordance with Canadian GAAP $55,576,063 $42,447,141
Foreign exchange effect on conversion of 1998 and prior
share capital transactions 543,269 543,269
Additional paid in capital relating to stock options issued
to non-employees 520,999 520,999
Additional paid in capital related to escrow shares 107,077 107,077
- ----------------------------------------------------------------------------------------------------------
Share capital in accordance with United States GAAP 56,747,408 43,618,486
- ----------------------------------------------------------------------------------------------------------
Special warrants in accordance with Canadian and United States
GAAP - 13,004,340
- ----------------------------------------------------------------------------------------------------------
Additional paid-in-capital in accordance with Canadian and United
States GAAP 9,019 -
- ----------------------------------------------------------------------------------------------------------
1,613,096 1,613,096
- ----------------------------------------------------------------------------------------------------------
Deficit in accordance with Canadian GAAP (53,306,224) (44,626,077)
Foreign exchange effect on conversion of 1998 and prior
income statements (189,240) (189,240)
Cumulative effect of stock based compensation relating
to stock options issued to non-employees (519,411) (519,411)
Cumulative effect of stock based compensation relating
to escrow shares (101,474) (101,474)
- ----------------------------------------------------------------------------------------------------------
Deficit in accordance with United States GAAP (54,116,349) (45,436,202)
- ----------------------------------------------------------------------------------------------------------
(495,050) (630,548)
Cumulative translation account in accordance with Canadian
GAAP
Foreign exchange
effect on conversion of 1998 and prior
financial statements (341,140) (341,140)
Cumulative foreign exchange effect of US GAAP
adjustments (20,080) (20,080)
- ----------------------------------------------------------------------------------------------------------
Cumulative translation account in accordance with United (856,270) (991,768)
States GAAP
- ----------------------------------------------------------------------------------------------------------
Shareholders' equity in accordance with U.S. GAAP $ 3,396,904 $11,807,952
==========================================================================================================
9
Item 2. Management's Discussion And Analysis Of Financial Condition
And Results Of Operations
Investors should read the following in conjunction with the unaudited financial
statements and notes thereto included in Part I - Item 1 of this Quarterly
Report, and the audited financial statements and notes thereto for the year
ended December 31, 2001 included in the Corporation's annual report on Form
10-K.
Forward-Looking Statements
Statements in this filing about future results, levels of activity, performance,
goals or achievements or other future events constitute forward-looking
statements. These statements involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ materially from
those anticipated in any forward-looking statements. These factors include,
among others, those described in connection with the forward-looking statements,
and the factors listed in Exhibit 99.1 to this report, which is hereby
incorporated by reference in this report.
In some cases, forward-looking statements can be identified by the use of words
such as "may," "will," "should," "could," "expect," "plan," "intend,"
"anticipate," "believe," "estimate," "predict," "potential" or "continue" or the
negative or other variations of these words, or other comparable words or
phrases.
Although the Company believes that the expectations reflected in its
forward-looking statements are reasonable, it cannot guarantee future results,
levels of activity, performance or achievements or other future events.
Moreover, neither the Corporation nor anyone else assumes responsibility for the
accuracy and completeness of forward-looking statements. The Corporation is
under no duty to update any of its forward-looking statements after the date of
this filing. The reader should not place undue reliance on forward-looking
statements.
Critical Accounting Policies
In preparing the consolidated financial statements, estimates and judgements are
applied that affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities for the
reporting periods. The Company bases its estimates on historical experience and
on various other assumptions that are believed to be reasonable in the
circumstances, the results of which form the basis for making judgements about
the carrying values of assets and liabilities that are not readily available
from other sources. On an on-going basis, the Company evaluates areas of
estimate or judgement to ensure they reflect currently available assessments and
knowledge. Actual results may differ from these estimates under different
assumptions and conditions.
The Company believes that the following critical accounting policies affect the
more significant judgements and estimates.
The consolidated financial statements reflect a full valuation allowance against
the net future income tax assets based on the Company's assessment that it is
not more likely than not to be able to utilize certain deductions before their
expiry. The Company's assessment is based on a judgement of the ongoing
existence of estimated losses before such deductions. Changes in the timing of
the recognition and amount of revenues and expenses in the future may impact the
Company's ability to utilize these deductions.
The Company recognizes revenue on the percentage of completion basis for
software development contracts. The Company assesses the portion of each
contract that is completed based upon estimates of time and resources incurred
and required for
10
completion of the contract. Various factors, including unforeseen complications
in the development and availability of key resources, could materially impact
these estimates. No software development contracts have been signed in the
nine-months ended September 30, 2002.
The Company prepares its financial statements in accordance with Canadian
Generally Accepted Accounting Principals ("GAAP") and subsequently reconciles
them to US GAAP. A detailed description of this reconciliation, and assumptions
therein, is included in Note 10 to the financial statements.
The Company's Significant Accounting Policies are described in Note 2 to the
Consolidated Financial Statements found in Item 8 of the Company's Form 10-K
filed on March 28, 2002, except for the change to the accounting for stock based
compensation that is described in Note 3 to these interim financial statements.
Overview
The Company experienced its second consecutive quarter of revenue growth for the
period ending September 30, 2002. At the same time, the sales environment
remains challenging where corporations continue to be very conservative on IT
spending and have consequently delayed large investments in new technology. In
order to preserve capital, the Company continues to manage its operating
expenses prudently and increase operational efficiencies following the business
restructuring which occurred in the second quarter of 2002. This consisted of a
reduction in headcount, reduction of operations and consolidation of facilities.
Although the company continues to have US operations, the Company terminated its
lease in Bellevue, Washington and amended its lease in Burnaby, British Columbia
in order to reduce its office space. The Company also established a new
management structure called the Office of the President, currently consisting of
CTO Sal Visca, CFO George Reznik, board member Jim McIntosh and recently
appointed EVP Sales & Marketing, Bill Tam. The result of these structural
changes is a more streamlined operation with fewer administrative levels with
continued investment in key areas such as sales and product development.
Third quarter 2002 compared to second quarter of 2002 and to third quarter of
2001.
Revenues for the third quarter of 2002 were $676,415 representing an increase of
31% from $517,977 in the second quarter of 2002 and a decrease of 27% from
$923,282 in the third quarter of 2001. Revenues in the third quarter of 2002
were derived 69% from software license fees, 13% from maintenance and support
fees, and 18% from technical service fees. Gross margins for the third quarter
of 2002 were 67%, compared to 78% in the previous quarter and 76% in the third
quarter of 2001. Gross margin for the current quarter was lower than historical
trend due to the bundling of complementary third-party products during the
period.
Total expenses for the second quarter ended September 30, 2002 were $1,689,127,
which decreased 62% from $4,464,657 in the previous quarter and decreased 69%
from $5,433,966 in the third quarter of 2001. The decrease over the prior
quarter was largely due to the impact of business restructuring and increased
operating efficiencies initiated during the second quarter.
Operating expenses (excluding amortization and restructuring charges) were
$1,415,129 for the third quarter 2002, representing a 45% decrease from
$2,587,613 in the second quarter of 2002 and a 68% decrease from $4,376,255 in
the third quarter of 2001.
Total research and development ("R&D") expenses for the third quarter of 2002
totaled $430,822 representing a decrease of 47% from the prior quarter total of
$815,492 and 62% from $1,124,893 in the third quarter of 2001. The Company
continues to ensure that its
11
investment in R&D is sufficient to support its current product line.
Approximately 50% of the Company's total headcount remains in R&D.
Sales & marketing expenses for the quarter ended September 30, 2002 were
$597,865, compared to $1,179,481 in the second quarter of 2002 and $2,287,515 in
the third quarter of 2001. The decrease of 49% from the previous quarter was due
to reductions in headcount and due to lower spending in areas such as direct
marketing programs and other promotion initiatives.
General and administrative ("G&A") expenses of $386,442 decreased by 35% from
expenses of $592,640 in the prior quarter and 60% from expenses of $963,847 in
the comparable period in 2001. The decrease was primarily attributed to
headcount reduction, lower professional fees and reduced corporate
administrative expenses as a result of the restructuring that took place in the
second quarter of 2002.
Amortization expense totaled $273,998 in the quarter ended September 30, 2002
which is 41% lower than amortization expense of $461,664 in the prior quarter
and 53% lower than $584,757 in the third quarter of 2001. The reduction in
amortization expense reflects the write down of fixed assets and leasehold
improvements as a result of the second quarter 2002 business restructuring.
Foreign exchange gain was $150,850 for the third quarter of 2002, compared to a
loss of $185,910 in the prior quarter and a loss of $2,424 in the third quarter
of 2001. The changes are due to fluctuations in the foreign exchange rate
between the Canadian and US Dollar. The US dollar strengthened approximately 6%
against the Canadian dollar during the quarter that impacted the Company's
results as significant portions of the Company's monetary balances are in US
denomination.
Nine months ended September 30, 2002 compared to Nine months ended September 30,
2001
Total revenues for the nine months ended September 30, 2002 were $1,519,653,
which represents a 43% decrease from $2,654,386 in the comparable period in
2001. The revenue breakdown for the nine-month period ending September 30, 2002
comprised of 68% in license fees, 18% in support and maintenance and 14% in
technical service fees. Gross margins were 76% for the current nine months
compared to 87% in the nine months ended September 30, 2001 due to a write-down
of obsolete inventory in the second quarter of 2002 and the bundling of
complementary third-party products during the third quarter of 2002.
Total operating expenses for the nine months ended September 30, 2002 was
$9,878,384, which is 44% lower than $17,755,394 for the same period in 2001.
Current R&D expenses decreased 52% to $2,148,293 in the 2002 period as compared
to $4,461,215 in the 2001 period, due to a lower headcount and reduced usage of
contractors. Sales and marketing expenses of $3,401,570 for 2002 decreased by
55% from $7,548,884 for 2001 largely attributed to headcount reductions and
conservative spending in marketing programs, advertising and public relations
campaigns. G&A costs of $1,695,075 for the current period represented a decrease
of 47% from $3,170,451 from last year and resulted from a smaller operating
structure and reduced overhead. Total operating expenses also included
$1,415,380 current year restructuring charges compared to $1,226,695 in the
prior year, which reflects a more aggressive and prudent financial management
initiative in the current year.
Amortization expense decreased to $1,218,066 in the first nine months of 2002
from $1,348,149 in the same period of 2001. The decline in amortization expenses
is related to
12
one time write-down of fixed assets from the second quarter restructuring,
eliminating future depreciation on those assets that are no longer in use, along
with nominal purchases of new assets in the current year.
Interest & other income for the nine months ended September 30, 2002 were
$51,118 compared to $246,182 in the comparable period in 2001. The Company had a
higher average balance of interest bearing amounts in the prior year, as a
result of financing that closed during the first quarter of 2001.
Foreign exchange loss at the end of September 30, 2002, decreased to $2,424 from
a loss of $165,328 over the same period in the prior year. Similarly, the
Comparing had a higher average balance of accounts in foreign currencies, which
were affected by market changes in foreign exchange rates during the year.
Liquidity and Capital Resources
The Company's cash, cash equivalents and short-term investments at September 30,
2002 totaled $3,150,745. Included in this total amount is security of $150,000
held in short term investments to support a lease obligation. Also included in
this total amount is $350,000 being held as allocated funds for potential
severance, as related to previously initiated business restructuring during the
current year.
Company had total working capital of $2,728,895 at September 30, 2002, compared
to $9,276,808 at December 31, 2001 and negative working capital of 469,604 at
September 30, 2001.
Capital assets decreased significantly from $2,531,144 at December 31, 2001 to
$642,668 at September 30, 2002, primarily due to a one-time write-down of fixed
assets related to the exit of lease facilities from the recent corporate
restructuring during the second quarter. Under prudent financial management,
only a nominal amount of capital asset purchases were made during the quarter
ending September 30, 2002.
On August 14, 2002, the Company made a minority equity investment in a software
sub-developer company based in Vancouver, Canada, who has provided services to
the Company in the past year. The strategic investment strengthens that
relationship and provides the Company an allowance against future contract
services, software licenses for development tools. The value of the investment
is reflected as other assets on the balance sheet for the third quarter of 2002.
At September 30, 2002 the Company's primary sources of liquidity consisted of
cash and short-term investments, an operating loan facility, and a convertible
loan agreement. The operating loan facility has a credit limit of Cdn $100,000,
secured by short-term investments. The convertible loan agreement, signed on
March 8, 2002 with HP, provides the Company with access to funds under a
convertible revolving loan of up to $2,000,000. The principal amount outstanding
under the loan may be converted into Common Shares at a price of $1.00 per
share, at any time up to March 8, 2005, subject to adjustment in certain
circumstances. The Company may draw down amounts under the loan provided it
meets certain standard working capital conditions. Until December 31, 2002, the
Company may draw down amounts not to exceed 150% of the total amount of the
Company's cash, cash equivalents and net accounts receivable from HP. During the
remainder of the term of the HP loan, the Company may draw down amounts not to
exceed the Company's working capital (as described in the loan agreement) from
time to time. The principal amount outstanding bears interest at prime plus
3.25%. Certain assets of the Company, excluding its intellectual property,
secure the loan. At September 30, 2002, no amounts were outstanding on the
operating line or the convertible loan.
13
The Company initiated a restructuring plan during the second quarter of 2002 in
order to meet its aggressive cost reduction initiatives. As a result of the
plan, the Company believes that the total amount of cash, cash equivalents and
short-term investments will be sufficient to ensure that the Company remains
funded through 2002. Thereafter, the Company may need to raise additional
capital for working capital or expenses. The Company may also encounter
opportunities for acquisitions or other business initiatives that require
significant cash commitments, or unanticipated problems or expenses that could
result in a requirement for additional cash before that time. There can be no
assurance that additional financing will be available on terms favorable to the
Company or its shareholders, or on any terms at all. The inability to obtain
such financing would have a material adverse impact on the Corporation's
operations. To the extent that such financing is available, it may result in
substantial dilution to existing shareholders.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company conducts the majority of its transactions in Canadian dollars and,
therefore, uses the Canadian dollar as its base currency of measurement.
However, most of the Company's revenues and some of its expenses are denominated
in United States dollars which results in an exposure to foreign currency gains
and losses on the resulting US dollar denominated cash, accounts receivable, and
accounts payable balances. As of September 30, 2002, the Company has not engaged
in derivative hedging activities on foreign currency transactions and/or
balances. Although realized foreign currency gains and losses have not
historically been material, fluctuations in exchange rates between the United
States dollar and other foreign currencies and the Canadian dollar could
materially affect the Company's results of operations. To the extent that the
Company implements hedging activities in the future with respect to foreign
currency exchange transactions, there can be no assurance that the Company will
be successful in such hedging activities.
While the Company believes that inflation has not had a material adverse effect
on its results of operations, there can be no assurance that inflation will not
have a material adverse effect on the Company's results of operations in the
future.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures
Under the supervision and with the participation of the Company's management,
including the members of its Office of the President and Chief Financial
Officer, the Company evaluated the effectiveness of the design and operation of
its disclosure controls and procedures (as defined in Rule 13a-14(c) and
15d-14(c) under the Securities Exchange Act of 1934, as amended) as of a date
(the "Evaluation Date") within 90 days prior to the filing date of this report.
Based upon that evaluation, the members of the Office of the President and Chief
Financial Officer concluded that, as of the Evaluation Date, the Company's
disclosure controls and procedures were effective in timely alerting them to the
material information relating to the Company (or its consolidated subsidiaries)
required to be included in the Company's periodic SEC filings.
(b) Changes in internal controls
There were no significant changes made in the Company's internal controls or, to
its knowledge, in other factors that could significantly affect these controls
subsequent to the date of their evaluation.
14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company received a letter dated September 17, 2001 from Glenayre
Electronics, Inc. ("Glenayre") informing the Company that Glenayre requires
indemnity for certain legal and other costs associated with a lawsuit between
Glenayre and another third party, pursuant to agreements between Glenayre and
the Company. The Company was previously only one of a number of suppliers that
developed and supplied technology to Glenayre for the products and services
which were part of the claims made by the third party. On June 24, 2002, the
Company received a statement of claim from Glenayre seeking indemnity and
payment of legal and other expenses in connection with its lawsuit with the
third party. The claim comprised of $608,000 in legal fees and $50,000 in
internal expenses.
Ultimately, the dispute with Glenayre was successfully settled and resolved on
October 30, 2002. Under the settlement, Infowave agreed to pay Glenayre $130,000
in cash plus warrants to purchase up to 20,000 Infowave common shares,
exercisable at a price of Cdn $0.22 per common share for two years from the date
of issue, and Glenayre has agreed to a consent dismissal of its claim. The
issuance of the warrants is subject to receipt of applicable regulatory
approval. The difference between the actual settlement and estimated settlement
amount accrued in the financial statements is insignificant and will be
reflected in the financial statements for the period ending December 31, 2002.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On August 30, 2002, the Company announced that both Travis L. Provow (Lee) and
Phil Ladouceur have resigned from Infowave's board of directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1(1) Asset Purchase Agreement dated September 8, 2000 between the
Corporation and Strydent Software Inc.
3.1(2) Memorandum and Articles of registrant
*4.1(2) Employee Incentive Plan dated April 28, 1997, as
supplemented September 25, 1997
4.2(2) Special Warrant Indenture dated April 20, 1998 between the
Corporation and Montreal Trust Company of Canada
15
4.3(3) Special Warrant Indenture dated June 30, 1999 between the
Corporation and Montreal Trust Company of Canada
4.4(4) Special Warrant Indenture dated April 13, 2000 between the
Corporation and Montreal Trust Company
*4.5(5) Stock Option Plan, as amended
4.6(6) Form of Shareholders Rights Plan Agreement dated as of June
5, 2000 between the Corporation and Montreal Trust Company
of Canada
4.7(10) Warrant Certificate dated July 24, 2001 issued to Thomas
Koll
10.1(2) Investor Relations Agreement dated September 1, 1998 between
the Corporation and IRG Investor Relations Group Ltd.
10.2(2) Investor Relations Agreement dated September 1, 1998 between
the Corporation and Staff Financial Group Ltd. and 549452 BC
Ltd.
10.3(2) Loan Facility dated October 29, 1998 with a Canadian
chartered bank
10.4(3) Lease Agreement dated February 12, 1998 between Riocan
Holdings Inc. and the Corporation
10.5(3) Lease Agreement dated November 23, 1999 between Bedford
Property Investors, Inc. and the Corporation
*10.6(2) Corporate Development Agreement dated October 26, 1998
between the Corporation and Capital Ridge Communications
Inc. (formerly "Channel One Systems Corp.")
10.7(2) Strategic Partnership Agreement dated March 6, 1998 between
the Corporation and BellSouth Wireless Data
10.8(2) Development Agreement dated March 4, 1998 between the
Corporation and Hewlett-Packard
10.9(2) Source Code License Agreement dated March 31, 1998 between
the Corporation and DTS
10.10(2) Source Code License Agreement dated June 9, 1998 between the
Corporation and Wynd Communications Corporation
10.11(2) Source Code License Agreement dated November 13, 1997
between the Corporation and Apple Computers
10.12(2) OEM License Agreement dated December 5, 1997 between the
Corporation and Certicom Corp.
10.13(2) Letter Agreement dated April 20, 1998 between the
Corporation and Lexmark International, Inc.
*10.14(2) Employment Agreement dated May 2, 1991 between the
Corporation and Jim McIntosh
*10.15(2) Employment Agreement dated May 23, 1997 between the
Corporation and Bijan Sanii
16
*10.16(3) Employment Agreement dated September 16, 1999 between the
Corporation and Todd Carter
10.17(2) Agency Agreement dated March 31, 1998 between the
Corporation, Canaccord Capital Corporation and Yorkton
Securities Inc.
10.18(2) Consulting Agreement dated July 4, 1997 between the
Corporation and GWM Enterprises Ltd.
10.19(3) Agency Agreement dated June 18, 1999 between the
Corporation, Canaccord Capital Corporation, Yorkton
Securities , Inc., Sprott Securities Limited and Taurus
Capital Markets Ltd.
10.20(4) Letter of Intent dated May 8, 2000 among the Corporation,
Kevin Jampole and Robert Heath
10.21(7) Lease Agreement dated April 26, 2000 between the Corporation
and Tonko-Novam Management Ltd.
*10.22(8) Employment Agreement dated December 14, 2000 between the
Corporation and Thomas Koll
10.23(8) Lease dated December 7, 2000 between the Corporation and
Principal Development Investors, L.L.C.
10.24(9) Employment Agreement dated April 16, 2001 between the
Corporation and Jeff Feinstein
10.25(9) Lease Agreement between the Corporation and Sterling Realty
Organization Co.
10.26(9) Lease Termination Agreement dated May 24, 2001 between the
Corporation and Principal Development Investors, LLC
10.27(10) Loan Agreement dated July 24, 2001 between the Corporation
and Thomas Koll
10.28(10) Security Agreement dated July 24, 2001 made by the
Corporation in favor of Thomas Koll
10.29(10) Intellectual Property Security Agreement dated July 24, 2001
made by the Corporation in favor of Thomas Koll
10.30(10) Loan Agreement dated August 10, 2001 between the Corporation
and Sal Visca
10.31(10) Promissory Note dated August 10, 2001 between the
Corporation and Sal Visca
10.32(10) Employment letter dated August 10, 2001 between the
Corporation and Sal Visca
*10.33(11) Employment letter dated March 8, 2002 between the
Corporation and George Reznik
10.34(11) Convertible loan agreement dated March 8, 2002 between the
Corporation and Compaq
17
10.35(12) Lease Termination Agreement dated May 25, 2002 between the
Corporation and Sterling Realty Organization Co.
10.36(12) Lease Agreement dated June 18, 2002 between the Corporation
and Tonko Realty Advisors (B.C.) Ltd.
10.37(12) Surrender of Lease Agreement dated June 18, 2002 between the
Corporation and Tonko Realty Advisors (B.C.) Ltd.
10.38(12) Surrender of Lease Agreement dated June 18, 2002 between the
Corporation and Tonko Realty Advisors (B.C.) Ltd.
10.39(12) Modification and Partial Surrender of Lease Agreement dated
June 18, 2002 between the Corporation and Tonko Realty
Advisors (B.C.) Ltd.
*10.40(13) Employment Agreement between the Corporation and Sal Visca
dated November 26, 1999
*10.41(13) Amendment to Employment Agreement between the Corporation
and Sal Visca dated February 1, 2002
*10.42(13) Amendment to Employment Agreement between the Corporation
and Sal Visca dated July 9, 2002
*10.43(13) Amendment to Employment Agreement between the Corporation
and Sal Visca dated September 5, 2002
*10.44(13) Employment Agreement between the Corporation and Thomas Koll
dated April 23, 2002
*10.45(13) Employment Agreement between the Corporation and Ron Jasper
dated October 10, 1997
*10,46(13) Amendment to Employment Agreement between the Corporation
and Ron Jasper dated July 9, 2002
*10.47(13) Employment Agreement between the Corporation and Bill Tam
dated July 9, 2002
*10.48(13) Employment Agreement between the Corporation and George
Reznik dated July 9, 2002
99.1 Private Securities Litigation Reform Act of 1995 - Safe
Harbor for Forward-Looking Statements
- ----------------------
* Indicates management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the Corporation's Form 8-K filed on
September 25, 2000.
(2) Incorporated by reference to the Corporation's Registration Statement
on Form 20-F (No. 0-29944).
(3) Incorporated by reference to the Corporation's Annual Report on Form
10-K for the year ended December 31, 1999.
(4) Incorporated by reference to the Corporation's Annual Report on Form
10-Q for the period ended March 31, 2000.
(5) Incorporated by reference to the Corporation's Registration Statement
on Form S-8 (Registration No. 333-39582) filed on June 19, 2000
18
(6) Incorporated by reference to the Corporation's Registration Statement
on Form 8-A filed on July 13, 2000
(7) Incorporated by reference to the Corporation's Quarterly Report on
Form 10-Q for the period ended June 30, 2000.
(8) Incorporated by reference to the Corporation's Annual Report on Form
10-K for the year ended December 31, 2000.
(9) Incorporated by reference to the Corporation's Quarterly Report on
Form 10-Q for the period ended June 30, 2001.
(10) Incorporated by reference to the Corporation's Quarterly Report on
Form 10-Q for the period ended September 30, 2001.
(11) Incorporated by reference to the Corporation's Annual Report on Form
10-K for the year ended December 31, 2001.
(12) Incorporated by reference to the Corporation's Quarterly Report on
Form 10-Q for the period ended June 30, 2002.
(13) Incorporated by reference to the Corporation's Form 8-K filed on
September 26, 2002.
(b) Reports on Form 8-K
On September 26, 2002, the Company filed a form 8-K with several material
agreements attached as exhibits thereto and furnished the certification of Jim
McIntosh, who is a member of the Company's Office of the President, made
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 in connection with the
Company's quarterly report on Form 10-Q filed on August 14, 2002. The
information in a Form 8-K furnished pursuant to Item 9 shall not be deemed filed
under the Securities Exchange Act of 1934, as amended.
19
PART III. SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 14, 2002
INFOWAVE SOFTWARE, INC.
/s/ George Reznik
--------------------------------------------
George Reznik
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
20
CERTIFICATION
I, George Reznik, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Infowave Software,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002 /s/ George Reznik
-----------------------------------------
George Reznik
Chief Financial Officer, Office of the
President
(Principal Financial and Accounting Officer
and Principal Executive Officer)
CERTIFICATION
I, Bill Tam, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Infowave Software,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002 /s/ Bill Tam
-----------------------------------------
Bill Tam
Office of the President
(Principal Executive Officer)
CERTIFICATION
I, Sal Visca, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Infowave Software,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002 /s/ Sal Visca
-----------------------------------------
Sal Visca
Office of the President
(Principal Executive Officer)
CERTIFICATION
I, Jim McIntosh, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Infowave Software,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002 /s/ Jim McIntosh
-----------------------------------------
Jim McIntosh
Office of the President
(Principal Executive Officer)
CERTIFICATION OF GEORGE REZNIK AS CHIEF FINANCIAL OFFICER AND
A MEMBER OF THE CORPORATION'S OFFICE OF THE PRESIDENT
PURSUANT TO
18 U.S.C. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Infowave Software Inc. (the
"Company") on Form 10-Q for the period ended September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I
George Reznik, Chief Financial Officer and a member of the Office of the
President of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The report fully complies with the requirements of the Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly represents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ George Reznik
----------------------------------------
George Reznik
Chief Financial Officer,
Office of the President
(Principal Financial and
Accounting Officer and
Principal Executive
Officer)
November 14, 2002
CERTIFICATION OF BILL TAM AS A MEMBER OF THE CORPORATION'S
OFFICE OF THE PRESIDENT PURSUANT TO
18 U.S.C. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Infowave Software Inc. (the
"Company") on Form 10-Q for the period ended September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I Bill
Tam, a member of the Office of the President of the Company, certify, pursuant
to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) The report fully complies with the requirements of the Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly represents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Bill Tam
----------------------------------------
Bill Tam
Office of the President
(Principal Executive Officer)
November 14, 2002
CERTIFICATION OF SAL VISCA AS A MEMBER OF THE CORPORATION'S
OFFICE OF THE PRESIDENT PURSUANT TO
18 U.S.C. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Infowave Software Inc. (the
"Company") on Form 10-Q for the period ended September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I Sal
Visca, a member of the Office of the President of the Company, certify, pursuant
to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) The report fully complies with the requirements of the Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly represents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Sal Visca
----------------------------------------
Sal Visca
Office of the President
(Principal Executive Officer)
November 14, 2002
CERTIFICATION OF JIM MCINTOSH AS A MEMBER OF THE CORPORATION'S
OFFICE OF THE PRESIDENT PURSUANT TO
18 U.S.C. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Infowave Software Inc. (the
"Company") on Form 10-Q for the period ended September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I, Jim
McIntosh, a member of the Office of the President of the Company, certify,
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The report fully complies with the requirements of the Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly represents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Jim McIntosh
----------------------------------------
Jim McIntosh
Office of the President
(Principal Executive Officer)
November 14, 2002