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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, 2003
[ ] 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.
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(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, including zip code)
Telephone (604) 473-3600
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(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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Common shares outstanding at November 7, 2003: 148,128,239
-----------
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INFOWAVE SOFTWARE, INC.
INDEX to the FORM 10-Q
For the Three Months September 30, 2003
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
a) Consolidated Balance Sheets
September 30, 2003 and December 31, 2002......................1
b) Consolidated Statements of Operations and Deficit
For the three and nine months ended
September 30, 2003 and 2002...................................2
c) Condensed Consolidated Statements of Cash Flows
For the three and nine months ended
September 30, 2003 and 2002...................................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.........15
Item 4. Controls and Procedures............................................15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................16
Item 2. Changes in Securities and Use of Proceeds..........................16
Item 3. Defaults upon Senior Securities....................................18
Item 4. Submission of Matters to a Vote of Security Holders................18
Item 5. Other Information..................................................18
Item 6. Exhibits and Reports on Form 8-K...................................18
PART III. SIGNATURES AND CERTIFICATIONS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INFOWAVE SOFTWARE, INC.
Consolidated Balance Sheets
(expressed in U.S. dollars)
September 30, 2003 December 31, 2002
(unaudited)
------------------ -----------------
ASSETS
Current Assets:
Cash and cash equivalents $ 6,616,124 $ 2,755,929
Short term investments 363,544 355,614
Accounts receivable 314,560 394,712
Finished goods inventory 1,108 951
Prepaid expenses 129,750 135,402
----------- -----------
7,425,086 3,642,608
Capital assets 537,837 490,783
Deferred costs 237,905 --
Other assets (note 4(a)) 2,293,833 25,366
----------- -----------
$10,494,661 $ 4,158,757
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 1,158,470 $ 463,096
Deferred revenue 299,667 364,847
----------- -----------
1,458,137 827,943
Shareholders' equity
Share capital (note 5(a))
Authorized: unlimited voting common shares
Issued: 143,590,366 (December 31, 2002: 66,439,578) 64,685,488 56,539,360
Additional paid-in capital 15,941 15,941
Other equity instruments 2,150,511 1,613,096
Deficit (57,723,220) (54,342,142)
Cumulative translation account (92,196) (495,441)
----------- -----------
9,036,524 3,330,814
----------- -----------
$10,494,661 $ 4,158,757
=========== ===========
Contingency (note 7)
Subsequent Event (note 8)
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
------------------------------- -------------------------------
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------- ------------- ------------- -------------
Sales $ 381,395 $ 676,415 $ 1,298,648 $ 1,519,653
Cost of goods sold 41,535 221,369 160,229 370,110
----------- ----------- ----------- -----------
339,860 455,046 1,138,419 1,149,543
Expenses:
Research and Development 623,476 430,822 1,579,531 2,148,293
Sales and Marketing 628,728 597,865 1,365,457 3,401,570
General and Administrative 436,686 386,442 1,127,374 1,695,075
Restructuring -- -- -- 1,415,380
Depreciation and Amortization 310,813 273,998 519,095 1,218,066
----------- ----------- ----------- -----------
1,999,703 1,689,127 4,591,457 9,878,384
----------- ----------- ----------- -----------
Loss from Operations 1,659,843 1,234,081 3,453,038 8,728,841
Other expenses (income):
Interest and other income (27,042) (13,623) (53,816) (51,118)
Foreign exchange (127,153) (150,850) (18,144) 2,424
----------- ----------- ----------- -----------
Net loss for the period 1,505,648 1,069,608 3,381,078 8,680,147
Deficit, beginning of period 56,217,572 52,236,616 54,342,142 44,626,077
----------- ----------- ----------- -----------
Deficit, end of period $57,723,220 $53,306,224 $57,723,220 $53,306,224
=========== =========== =========== ===========
Net loss per share $ 0.01 $ 0.02 $ 0.04 $ 0.17
=========== =========== =========== ===========
Weighted average number of shares outstanding 137,999,297 57,686,828 90,690,326 50,548,963
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
------------------------------- ------------------------------
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------- ------------- ------------- -------------
Cash flows from operating activities:
Loss for the quarter $(1,505,648) $(1,069,608) $(3,381,078) $(8,680,147)
Depreciation 310,813 273,998 519,095 1,218,066
Stock based compensation 158,236 -- 158,236 --
Change in working capital (721) (92,432) 528,679 1,116,084
----------- ----------- ----------- -----------
(1,037,320) (888,042) (2,175,068) (6,345,997)
Cash flows from investing activities:
Change in short term investments (2,474) (13,087) (1,148) (522)
Purchase of capital assets (25,777) (12,802) (492,768) (106,668)
Deferred Charges (233,470) -- (233,470) --
Proceeds on disposal of capital assets -- 4,889 -- 4,889
Purchase of long term investments -- (25,604) -- (25,604)
----------- ----------- ----------- -----------
(261,721) (46,604) (727,386) (127,905)
Cash flows from financing activities:
Issuance of shares and warrants for cash,
net of issue costs 6,297,201 3 6,322,804 72,564
Foreign exchange gain (loss) on cash and cash
equivalents held in a foreign currency 88,040 (136,092) 439,845 108,407
----------- ----------- ----------- -----------
Increase (decrease) in cash and cash equivalents 5,086,200 (1,070,735) 3,860,195 (6,292,931)
Cash and cash equivalents, beginning of period 1,529,924 3,865,534 2,755,929 9,087,730
----------- ----------- ----------- -----------
Cash and cash equivalents, end of period $ 6,616,124 $ 2,794,799 $ 6,616,124 $ 2,794,799
=========== =========== =========== ===========
Three months ended Nine months ended
------------------------------- ------------------------------
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------- ------------- ------------- -------------
Supplementary information:
Non-cash transactions:
Shares issued on asset acquisition (note 4(b)) $1,493,690 -- $1,493,690 --
Warrants issued on asset acquisition (note 4(b)) 537,415 -- 537,415 --
Issuance of share bonus (note 5(a)) 158,236 -- 158,236 --
See accompanying notes to interim consolidated financial statement
3
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,
2003 and for all periods presented, have been included. Interim results for the
three and nine-month periods ended September 30, 2003 are not necessarily
indicative of the results that may be expected for the fiscal year as a whole or
for any 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,
2002. 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, 2002.
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, 2003 and in prior periods. To date, the Company has
financed its continuing operations through the issuance of common shares and
special warrants, and 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.
A lower cost structure, together with estimated revenue, is expected to provide
the Company with sufficient working capital to fund the Company's operations for
the balance of 2003. 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
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.
4. OTHER ASSETS
a) Other Assets as at September 30, 2003 are as follows:
Acquired during the quarter from HiddenMind Technology (note 4(b)) $2,462,825
Investment in Make Technologies 29,551
Less Amortization for the quarter (198,543)
----------
Balance at September 30, 2003 $2,293,833
==========
b) On July 4, 2003, the Company completed the acquisition of substantially
all of the business and assets of HiddenMind Technology, LLC, a wireless
software company based in Cary, North Carolina ("HiddenMind"). Under the
terms of the Asset Purchase Agreement, Infowave acquired substantially all
of the assets of HiddenMind in exchange for 14,966,034 units (the
"Units"), each unit comprising one common share and one-half of a share
purchase warrant (a "Warrant") to be issued to the shareholders of
HiddenMind. Each unit has an estimated fair value of $0.14, giving rise to
an aggregate purchase price of $2,031,105 based on exchange rates in
effect at the date the terms of the arrangement were agreed to and
announced, which amount has been allocated based on fair value estimates
using the Black-Scholes pricing model as to $1,493,690 to the underlying
common shares and $537,415 to the underlying warrants. Each full warrant
entitles HiddenMind to purchase one additional common share of Infowave at
an exercise price of Cdn$0.19 until the second anniversary of the Closing
Date.
The transaction has been accounted for as a business combination by the
purchase method, with Infowave identified as the acquirer. The fair value
of the consideration issued has been assigned to the assets acquired based
on their fair values, as determined through an independent valuation at
the consummation date of the acquisition. Except as indicated in the next
sentence, the fair value of the identifiable assets equaled their carrying
value. The excess of the fair value of the consideration issued over the
identifiable assets acquired has been assigned to intangible assets, as
detailed above.
5
The following table summarizes the estimated fair value of the assets
acquired at the date of acquisition:
As at July 4, 2003
------------------
Intangible Assets $2,381,105
Property, Plant and Equipment 150,000
----------
Net Assets Acquired $2,531,105
==========
Of the $2,381,105 of acquired intangible assets, $2,013,605 was assigned
to HiddenMind proprietary software, $292,500 to employee contracts,
$50,000 to patents and $25,000 to HiddenMind's customer list. The
intangible assets acquired from HiddenMind are being amortized over three
years on a straight-line basis. The difference in the value of intangible
assets at the date of acquisition and September 30, 2003 is due to foreign
exchange.
Legal and professional fees incurred in relation to the acquisition
amounted to $500,000 and were allocated as an addition to the aggregate
purchase price of $2,031,105, forming part of the fair value assigned to
the assets acquired.
5. SHAREHOLDERS' EQUITY
Authorized:
Unlimited voting common shares without par value
(a) Issued:
Number
of shares Amount
----------- -----------
Outstanding, January 1, 2003 66,439,578 $56,539,360
Exercise of options 730,833 97,223
Exercise of warrants 646,250 112,451
Exercise of agent warrants 466,873 81,238
Shares issued on the acquisition of HiddenMind 14,966,034 1,493,690
Shares issued for cash in a private placement with
the majority shareholder of HiddenMind 29,473,684 2,950,222
Shares issued for cash in a brokered private
placement 29,942,114 3,253,068
Share bonus 925,000 158,236
----------- -----------
Outstanding, September 30, 2003 143,590,366 $64,685,488
=========== ===========
(b) Share purchase options:
The Company has reserved common shares, to a maximum of 20% of the total
number outstanding from time-to-time, pursuant to an Employee Stock Option
Plan
6
("Plan"). The purpose of the Plan is to assist eligible employees to
participate in the growth and development of the Company. Options to
purchase common shares of the Company under the Plan may be granted by the
Board of Directors to certain full-time employees of the Company. These
options are granted in Canadian dollars, vest over periods from three to
four years and expire five years from the date of grant. All stock options
granted by the Company are exercisable in Canadian dollars.
A summary of the status of the Company's stock option plan as of September
30, 2003 and December 31, 2002, and changes during the periods ended on
those dates is presented below:
September 30, 2003 December 31, 2002
---------------------- --------------------
Weighted Weighted
average average
exercise exercise
price price
Shares US$/Cdn$ Shares US$/Cdn$
--------- ---------- ---------- ----------
Outstanding, beginning of QTR 5,597,333 $1.63/2.44 6,416,689 $3.88/6.18
Granted 3,922,750 0.15/0.22 3,350,400 0.17/0.26
Exercised (510,833) 0.13/0.19 (193,086) 0.23/0.35
Cancelled (528,200) 0.40/0.60 (4,318,820) 3.84/5.99
--------- ---------- ---------- ----------
Outstanding, end of quarter 8,481,050 $1.11/1.66 5,255,183 $1.78/2.77
========= ========== ========== ==========
(c) As at September 30, 2003, the Company had 8,481,050 (December 31, 2002 -
5,255,183) stock options outstanding with exercise prices ranging from
Cdn$0.15 to Cdn$64.50 and 68,619,147 (December 31, 2002 - 29,343,761)
warrants outstanding with exercise prices ranging from Cdn$0.19 to
Cdn$1.10. As at September 30, 2003, 2,635,929 (December 31, 2002 -
2,077,298) stock options were exercisable. Of these instruments, none were
included in the diluted per share calculations for the three months ended
September 30, 2003 as the Company is in a loss position and the
instruments are therefore anti-dilutive.
Under the intrinsic value method of accounting for stock based
compensation applied by the Company, no compensation expense for options
issued to its employees during the three months ended September 30, 2003
was recognized. 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 Three months Nine months
ended ended ended ended
30-Sept-03 30-Sept-03 30-Sept-02 30-Sep-02
------------ ----------- ------------ -----------
Net loss - as reported $1,505,648 $3,381,078 $1,069,608 $8,680,147
Net loss - pro forma $1,590,467 $3,577,089 $1,101,660 $8,726,487
Net loss per share - as reported $0.01 $0.04 $0.02 $0.17
Net loss per share - pro forma $0.01 $0.04 $0.02 $0.17
7
The weighted average estimated fair value at the date of grant for options
granted during the three months ended September 30, 2003 was $0.10 per
share.
The fair value of each option granted was estimated on the date of grant
using the Black-Scholes option pricing model with the following
assumptions:
Three months ended
September 30, 2003
------------------
Risk-free interest rate 2.96%
Dividend yield --
Volatility factor 85%
Weighted average expected life of the options 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.
6. COMPARATIVE FIGURES
Certain prior period comparatives have been reclassified to confirm to the
current period presentation.
7. CONTINGENCY
On September 24, 2003, the Company was made aware that Visto Corporation, a
private company based in California, issued a press release on September 23,
2003 stating that it had filed complaints alleging patent infringement against
Infowave and against Seven Networks, Inc. in the U.S. District Court for the
Eastern District of Texas. According to Visto's press release, it claims that
Infowave is violating a patent which "relates to the system and method for
synchronizing email." Infowave has been an early developer of wireless data and
email solutions since 1993. Infowave provides wireless data including e-mail
through its wide product offering which has been implemented with various
proprietary and open industry standard technologies and architectures. On
October 3, 2003 the Company was served papers regarding this matter. Currently,
the Company and its counsel are reviewing the matter as well as Infowave's
response. It is not possible for Infowave to comment on the complaint at this
time.
8. SUBSEQUENT EVENT
On September 23, 2003, the Company entered into an agreement to purchase all of
the intellectual property assets of Sproqit Technologies, Inc ("Sproqit"), a
wireless software company based in Kirkland, Washington. Sproqit offers a mobile
application platform that enables users to obtain email and other data via hand
held personal digital assistant ("PDA") and smartphone wireless devices running
various operating systems. Under the terms of the acquisition agreement, the
Company will acquire all of the intellectual
8
property of Sproqit and in consideration will issue to Sproqit 4,038,550 common
shares of Infowave stock with an estimated fair value of Cdn$0.30 per share. The
common shares will be subject to a four month hold period. Sproqit will have an
option for one year to purchase back all of the intellectual property sold to
the Company for cash consideration equal to the original purchase price plus a
premium of 20%, pursuant to the Option Agreement, dated September 23, 2003
between Infowave and Sproqit. Infowave will license Sproqit's email technology
on an exclusive basis in its core markets at preferential royalty rates which
will continue in the event that the purchase option is exercised by Sproqit. In
the event that the option is not exercised by Sproqit, Infowave will retain
ownership with no future royalties payable to Sproqit.
9. RELATED PARTY TRANSACTIONS
On September 23, 2003, the Company entered into a custom development and
services arrangement with Laplink Software Inc., a Washington Corporation owned
by Infowave's Chairman of the Board. In the three month period ended September
30, 2003, $55,800 of revenue was recognized related to this agreement.
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, 2003.
The following are the material measurement differences from GAAP in the United
States as they relate to the Company's September 30, 2003 financial statements:
(a) Net loss and net loss per share:
Three months ended Nine months ended
------------------------------- ------------------------------
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (unaudited)
------------- ------------- ------------- -------------
Loss from continuing operations in accordance with
Canadian GAAP $ 1,505,648 $1,069,608 $3,381,078 $8,680,147
Adjustment for stock-based compensation relating to
stock options issued to non-employees -- -- -- --
----------- ---------- ---------- ----------
Net loss in accordance with United States GAAP $ 1,505,648 $1,069,608 $3,381,078 $8,680,147
=========== ========== ========== ==========
Weighted average number of shares outstanding in
accordance with Canadian and United States GAAP 137,999,297 57,686,828 90,690,326 50,548,963
=========== ========== ========== ==========
Net loss per share in accordance with US GAAP $0.01 $0.02 $0.04 $0.17
=========== ========== ========== ==========
Comprehensive loss:
Net loss in accordance with United
States GAAP $ 1,505,648 $1,069,608 $3,381,078 $8,680,147
Other comprehensive loss (income):
Foreign currency translation adjustment 16,188 (162,069) (403,245) (134,192)
----------- ---------- ---------- ----------
$ 1,521,836 $ 907,539 $2,977,833 $8,545,955
=========== ========== ========== ==========
9
(b) Balance sheet:
September 30, December 31,
2003 2002
(unaudited)
------------ ------------
TOTAL ASSETS
Total assets in accordance with Canadian GAAP, which is
equivalent to total assets in accordance with United
States GAAP $ 10,494,661 $ 4,158,757
============ ============
SHAREHOLDERS' EQUITY
Share capital in accordance with Canadian GAAP $64,685,488 $ 56,539,360
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 65,856,833 57,710,705
------------ ------------
Additional paid-in-capital in accordance with Canadian and United
States GAAP 15,941 15,941
------------ ------------
Other equity instruments in accordance with Canadian and United
States GAAP 2,150,511 1,613,096
------------ ------------
Deficit in accordance with Canadian GAAP (57,723,220) (54,342,142)
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)
Adjustment for impairment of long lived assets to fair value -- (422,762)
------------ ------------
Deficit in accordance with United States GAAP (58,533,345) (55,575,029)
------------ ------------
Cumulative translation account in accordance with Canadian GAAP (92,196) (495,441)
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)
------------ ------------
Accumulated other comprehensive income - Cumulative translation
account in accordance with United States GAAP (453,416) (856,661)
------------ ------------
Shareholders' equity in accordance with United States GAAP $ 9,036,524 $ 2,908,052
============ ============
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
10
audited financial statements and notes thereto for the year ended December 31,
2002 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 that it will 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 and the inherent
uncertainties as to the timing of future income for tax purposes before loss
carry forwards, if any. 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 completion of the contract. Various factors, including
unforeseen complications in the
11
development and availability of key resources, could materially impact these
estimates. A software development contract was entered into between Infowave
Software and Laplink (which is currently wholly owned by an Infowave Software
director) whereby Infowave would provide customization work to Laplink.
The Company prepares its financial statements in accordance with Canadian
Generally Accepted Accounting Principles ("GAAP") and reconciles them to US
GAAP. A detailed description of this reconciliation, and assumptions therein, is
included in Note 10 to the unaudited interim 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 26, 2003.
Overview
Infowave Software, Inc. ("Infowave" or the "Company") develops, markets and
sells infrastructure software solutions that facilitate wireless computing for
individuals, workgroups, enterprises and network operators. Focused on enabling
the wireless workplace since 1993, Infowave's product solutions connect workers
wirelessly in real-time to their corporate data, enabling businesses to
communicate more easily, deliver effective customer service and conduct more
business from any location. The Company provides a complete range of wireless
solutions for corporate users, ranging from the individual email service of
Symmetry Pro, to workgroups and enterprises served by Symmetry Pro Workgroup and
Symmetry Pro Enterprise editions. The Company also offers the Wireless Business
Engine(TM), a wireless platform for large corporations that provides access to
email and collaboration tools, corporate intranets, the Internet, Web-enabled
applications and legacy and client/server applications from a wide range of
wireless devices such as handheld computers, laptops, PDAs and emerging
integrated phone devices.
On September 23, 2003, Infowave entered into a development arrangement with
Sproqit to further accelerate Infowave's network operator product road map while
leveraging Sproqit's application framework for US$350,000. To ensure that
Sproqit is adequately financed to provide services outlined in the development
agreement, Infowave provided Sproqit with a line of credit in the amount of
US$400,000 ("Infowave Loan") which is available during the period which the
services will be provided. The line of credit is secured by substantially all of
Sproqit's assets. Other than the development engagement with Sproqit, Infowave
did not enter into any other partnerships in the three-month period ending
September 30, 2003.
The Company is amalgamated under the Company Act (British Columbia). The
Company's head office and development facilities are located at The Infowave
Building, Suite 200, 4664 Lougheed Highway, Burnaby, British Columbia, Canada,
V5C 5T5 (telephone 604.473.3600). The Company's registered office is at Suite
2600, Three Bentall Centre, 595 Burrard Street, PO Box 49314, Vancouver, British
Columbia, Canada, V7X 1L3. The Company's wholly owned subsidiary, Infowave USA
Inc., is incorporated under the laws of the State of Washington at Suite 500,
3535 Factoria Blvd. SE, Bellevue, Washington, 98006. The Company operates a
sales office in London, England at Cardinal Point, Park Road, Rickmansworth,
Hertfordshire WD3 1RE 4JS (telephone + 44 (1923) 432 632). The Company also has
a master reseller agreement with an agency for Continental Europe located at
Dreimuhlenstrasse 27, 80476 Munchen / Munich, Germany (telephone 49 89
767368-94).
12
Third quarter 2003 compared to second quarter of 2003 and to third quarter of
2002.
Revenues for the third quarter of 2003 were $381,395 representing a decrease of
25% from $505,397 in the second quarter of 2003 and a decrease of 44% from
$676,415 in the third quarter of 2002.
Revenue mix for the three months ended September 30, 2003 was attributable to
39% from software license fees, 36% from maintenance and support fees, and 25%
from technical service fees. This compares to 55% and 69% from software license
fees, 20% and 13% from maintenance and support fees, and 25% and 18% from
technical service fees for the three month periods ended June 30, 2003 and
September, 2002, respectively. The decrease in license revenue was due to a
lower volume of sales as compared to the previous quarter.
Gross margins for the third quarter of 2003 were 89%, compared to 88% in the
previous quarter ended June 30, 2003 and 67% in the quarter ended September 30,
2002. The increase in gross margins in the quarter as compared to the quarter
ended September 30, 2002 is due to the bundling of complementary third-party
products during the period being lower.
Total expenses for the third quarter ended September 30, 2003 were $1,999,703
which increased 52% from $1,319,580 in the previous quarter and increased 18%
from $1,689,127 in the third quarter of 2002. This increase over the three-month
period ended September 30, 2002 is primarily due to the amortization of
intangible assets that were acquired by Infowave Software as part of the
Hiddenmind transaction, development work provided by Sproqit and share bonuses
paid to senior management.
Operating expenses (excluding amortization) were $1,688,890 for the third
quarter 2003, representing a 38% increase from $1,219,608 in the second quarter
of 2003 and a 19% increase from $1,415,129 in the third quarter of 2002. This
increase over the three-month period ended September 30, 2002 is attributable to
the development work provided by Sproqit and share bonuses paid to senior
management.
Total research and development ("R&D") expenses for the third quarter of 2003
totaled $623,476 representing an increase of 34% from the prior quarter total of
$466,252 and 45% increase from $430,822 in the third quarter of 2002. The
Company believes that its investment in R&D is sufficient to support its current
product line. Approximately 50% of the Company's total headcount remains in R&D.
This increase over the three-month period ended September 30, 2002 is primarily
attributable to the development work provided by Sproqit and a non-cash bonus to
management.
Sales & marketing expenses for the quarter ended September 30, 2003 were
$628,728 compared to $380,455 in the second quarter of 2003 and $597,865 in the
third quarter of 2002. The increase of 65% from the previous quarter and 5% over
the three-month period ended September 30, 2002 is attributable to an increase
in headcount and a non-cash bonus to management.
General and administrative ("G&A") expenses of $436,686 increased by 17% from
expenses of $372,901 in the prior quarter and increased by 13% from expenses of
$386,442 in the comparable period in 2002. The increase over the prior quarter
was due to a non-cash bonus to management.
Amortization expense totaled $310,813 in the quarter ended September 30, 2003
which is 211% higher than amortization expense of $99,972 in the prior quarter
and 13% higher than $273,998 in the third quarter of 2002. This increase over
the three months ended
13
September 30, 2002 is attributable to the amortization of intangible assets that
were acquired by Infowave Software as part of the Hiddenmind transaction in July
2003.
Foreign exchange gain was $127,153 for the third quarter of 2003, compared to a
loss of $55,919 in the prior quarter and a gain of $150,850 in the third quarter
of 2002. The changes are due to fluctuations in the foreign exchange rate
between the Canadian and US Dollar. The Canadian dollar strengthened
approximately 6% against the US 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, 2003 compared to nine months ended September 30,
2002:
Total revenues for the nine months ended September 30, 2003 were $1,298,648,
which represented a 15% decrease over revenues of $1,519,653 from the comparable
period in 2002. The revenue breakdown for the nine-month period ending September
30, 2003 comprised of 59% in license fees, 26% in support and maintenance and
15% in technical service fees. Gross margins were 88% for the current nine-month
period compared to 76% in the nine months ended September 30, 2002 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, 2003 were $4,591,457
versus $9,878,384 for the same period in 2002. R&D expenses decreased by 26%
from $2,148,293 in the 2002 period to $1,579,531 in 2003 due to a lower
headcount and reduced usage of contractors. Sales and marketing expenses of
$1,365,457 decreased by 60% from $3,401,570, largely attributed to headcount
reductions and reduced spending in marketing programs, advertising and public
relations campaigns. G&A costs decreased by 33% from $1,695,075 to $1,127,374
largely due to a smaller operating structure and reduced overhead.
Amortization expense decreased from $1,218,066 in the first nine months of 2002
to $519,095 in the same period of 2003. The decrease of 57% is due to the
significant reduction of the capital asset base in 2002 due to restructuring in
the second quarter of 2002. These additions in the prior year consisted
primarily of purchases of computer equipment and software.
Interest & other income for the nine months ended September 30, 2003 was
$53,816, compared to $51,118 in the comparable period in 2002.
Foreign exchange increased from a loss of $2,424 for the nine-month period ended
September 30, 2002 to a gain of $18,144 for the nine-month period ended
September 30, 2003. The fluctuation is due to the movement in the price of the
US dollar as the Canadian dollar strengthened.
Liquidity and Capital Resources
The Company's cash, cash equivalents and short-term investments at September 30,
2003 totaled $6,979,668. Included in this total amount is security of $150,000
held in short term investments to support a lease obligation and $350,000 being
held as allocated funds for potential severance related to previously initiated
business restructuring during the prior year.
The Company had total working capital of $5,966,949 at September 30, 2003,
compared to $2,814,665 at December 31, 2002 and $2,728,895 at September 30,
2002.
14
Capital assets increased from $490,783 at December 31, 2002 to $537,837 at
September 30, 2003.
As at September 30, 2003, the Company's primary sources of liquidity consisted
of cash and short-term investments, an operating loan facility, a convertible
loan agreement and proceeds from financing. 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 Hewlett Packard ("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 could draw
down amounts under the loan up to a maximum of the lesser of $2.0 million or the
adjusted net working capital of the Company. Until December 31, 2002, the
Company could draw down amounts not to exceed $2.0 million or 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 lesser of $2.0 million or the Company's adjusted net
working capital (as described in the loan agreement). 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, 2003, no
amounts were outstanding on the operating line or the convertible loan.
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, 2003, 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 our management,
including the Office of the President and Chief Financial Officer, we
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934 (the "Exchange Act")). Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that, as
of the end of the period covered by this report, our disclosure controls
and procedures were effective in timely alerting them to the material
information relating to us (or our consolidated
15
subsidiaries) required to be included in the reports we file or submit
under the Exchange Act.
(b) Changes in internal controls
During the fiscal quarter ended September 30, 2003, there has been no
change in our internal control over financial reporting (as defined in
Rule 13a-15(f) under the Exchange Act) that has materially affected, or is
reasonably likely to materially affect, our internal control over
financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 24, 2003, the Company was made aware that Visto Corporation,
a private company based in California, issued a press release on September
23, 2003 stating that it had filed complaints alleging patent infringement
against Infowave and against Seven Networks, Inc. in the U.S. District
Court for the Eastern District of Texas. According to Visto's press
release, it claims that Infowave is violating a patent which "relates to
the system and method for synchronizing email." Infowave has been an early
developer of wireless data and email solutions since 1993. Infowave
provides wireless data including e-mail through its wide product offering
which has been implemented with various proprietary and open industry
standard technologies and architectures. On October 3, 2003 the Company
was served papers regarding this matter. Currently, the Company and its
counsel are reviewing the matter as well as Infowave's response. It is not
possible for Infowave to comment on the complaint at this time.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
a) On July 4, 2003, the Company issued 29,473,684 units at a price of
Cdn$0.1425 per unit for gross proceeds of $3,000,000 to Gerald
Trooien, the majority shareholder of HiddenMind. Each Unit consisted
of one common share and one-half of one common share purchase
warrant of the Company. Each whole warrant entitles the holder to
purchase one common share for a period of two years from the closing
date at a price of Cdn$0.19 per common share. The common shares and
warrants comprising the units are subject to a four month hold
period.
b) On July 4, 2003, the Company completed the acquisition of
substantially all of the business and assets of HiddenMind
Technology, LLC, a wireless software company based in Cary, North
Carolina ("HiddenMind"). HiddenMind offers a mobile application
platform that enables companies to extend existing date and
applications to mobile devices. Under the terms of the Acquisition
Agreement dated July 4, 2003, the Company acquired such business and
assets in consideration for US$2,031,105. The purchase price was
paid by the Company through the issuance to HiddenMind of 14,966,034
units (the "Units") of the Company having a fair value of Cdn$0.19
per Unit. Each Unit consists of one common share and one half of one
warrant (a "Warrant"). Each whole Warrant entitles the holder to
purchase an additional common share of the Company at an exercise
price of Cdn$0.19 until July 4, 2005. The transaction was accounted
for under the purchase method of accounting.
16
c) On July 4, 2003 and July 14, 2003, the Company issued 22,785,882
units and 6,856,232 respectively for a total of 29,642,114 at a
price of Cdn$0.16125 per unit for gross proceeds of $3,566,999
(Cdn$4,779,778). Each unit consisted of one common share and
one-half of one common share purchase warrant of the Company. Each
whole warrant entitles the holder to purchase one common share for a
period of two years from the closing date at a price of Cdn$0.215
per common share. The common shares and warrants comprising the
units are subject to a four month hold period. The agent was paid a
cash commission equal to 7.5% of the gross proceeds from the
offering and 2,964,203 warrants (the "Agents' Warrants"). Each
Agents' Warrant entitles the agent to purchase one common share and
one-half of one common share purchase warrant for two years from the
closing date at a price of Cdn$0.215 per common share. In addition,
the Company issued 300,000 units to the agent as a corporate finance
fee.
d) On September 23, 2003, The Company entered into an agreement to
purchase all of the intellectual property assets of Sproqit
Technologies, Inc ("Sproqit"), a wireless software company based in
Kirkland, Washington. Sproqit offers a mobile application platform
that enables users to obtain email and other data via hand held
personal digital assistant ("PDA") and smartphone wireless devices
running various operating systems. Under the terms of the
acquisition agreement, the Company will acquire all of the
intellectual property of Sproqit and in consideration will issue to
Sproqit 4,038,550 common shares of Infowave with an estimated fair
value of Cdn$0.30 per share. The common shares are subject to a four
month hold period. Sproqit will have an option for one year to
purchase back all of the intellectual property sold to the Company
for cash consideration equal to the original purchase price plus a
premium of 20%, pursuant to the Option Agreement, dated September
23, 2003, between Infowave and Sproqit. Infowave will license
Sproqit's email technology on an exclusive basis in its core markets
at preferential royalty rates which will continue in the event that
the purchase option is exercised by Sproqit. In the event that the
option is not exercised by Sproqit, Infowave will retain ownership
with no future royalties payable to Sproqit.
The sales and issuances of the shares and warrants described in Item
2(a) and 2(b) were exempt from Securities Act registration pursuant
to Rule 506 under Regulation D under the Securities Act, as all
investors were "accredited investors", as such term in defined in
Rule 501(a) of Regulation D. The sales and issuances of the
securities described in Item 2(c) were excluded from Securities Act
registration pursuant to Rule 903(b)(1) of Regulation S under the
Securities Act. The Company was a "foreign issuer", as such term is
defined in Regulation S, and it issued such securities outside the
United States and not for the account or benefit of any "U.S.
Person", as such term is defined in Regulation S. The sales and
issuances of the shares described in Item 2(d) were exempt from
Securities Act registration pursuant to Rule 506 under Regulation D
under the Securities Act, as all investors were either "accredited
investors", as such term in defined in Rule 501(a) of Regulation D,
or Infowave reasonably believed had knowledge and experience in
financial and business matters such that the purchaser was capable
of evaluating the merits and risks of the investment.
17
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 15, 2003 Bill Tam, EVP of Sales and Marketing, and member of the
Office of the President resigned.
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.
2.2(1) Asset Purchase Agreement with HiddenMind Technology LLC dated
May 28, 2003
20.3(1) Option Agreement with Sproqit dated September 23, 2003
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
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
18
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
*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.
19
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
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
20
*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
*10.49(13) Employment Agreement between the Corporation and William
"Butch" Winters dated June 18, 2003.
99.1 Private Securities Litigation Reform Act of 1995 - Safe Harbor
for Forward-Looking Statement
* 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
(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.
21
(a) Reports on Form 8-K
On July 21, 2003, the Company filed a for 8-K with a press release
attached thereto announcing that the Company had completed the first
tranche of US$2.8 million of brokered private placement units, the second
tranche of US$1.1 million of brokered private placement units, the
acquisition of Hiddenmind Technology, LLC ("Hiddenmind"), completed the
US$3.0 million private placement of units to Gerald Trooien and appointed
Bill Weiss of the Promar Group to its board of Directors.
22
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 7, 2003
INFOWAVE SOFTWARE, INC.
/s/ George Reznik
-------------------------------------------
George Reznik
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
SECTION 302 CERTIFICATION
I, George Reznik, certify that:
1. I have reviewed this Form 10-Q of Infowave Software, Inc.;
2. Based on my knowledge, this 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 7, 2003 /s/ George Reznik
-----------------------------------------
George Reznik
Office of the President
(Principal Executive Officer)
SECTION 302 CERTIFICATION
I, Sal Visca, certify that:
1. I have reviewed this Form 10-Q of Infowave Software, Inc.;
2. Based on my knowledge, this 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 7, 2003 /s/ Sal Visca
-----------------------------------------
Sal Visca
Office of the President
(Principal Executive Officer)
SECTION 302 CERTIFICATION
I, Jim McIntosh, certify that:
1. I have reviewed this Form 10-Q of Infowave Software, Inc.;
2. Based on my knowledge, this 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 7, 2003 /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, 2003 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 7, 2003
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, 2003 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 7, 2003
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, 2003 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 7, 2003