2002 Year-End and Fourth Quarter Results Reflect Leaner Organization and Strategic Focus on Norsat OmniLink Family of Portable Terminals.Business Editors/High-Tech Writers BURNABY Burnaby (bûr`nəbē), city (1991 pop. 158,858), eastern suburb of Vancouver, SW B.C., Canada. A transportation, industrial, and distribution center, its products include steel, trucks, telecommunications and electronic equipment, lumber, , British Columbia--(BUSINESS WIRE)--March 13, 2003 Norsat International Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on - NSAT NSAT National Secondary Assessment Test (Philippines) ; TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension - NII (National Information Infrastructure) The U.S. government's policy for managing advanced technology in the country. The Clinton/Gore administration (1993-2001) was very enthusiastic about the Internet and proposed that it should be funded by private industry and be ) today announced its financial results for the fourth quarter and year ended December December: see month. 31, 2002, which reflect a combination of factors: the overall slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in the telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. sector globally, reduced revenues in Norsat's traditional microwave microwave, electromagnetic wave having a frequency range from 1,000 megahertz (MHz) to 300,000 MHz, corresponding to a wavelength range from 300 mm (about 12 in.) to 1 mm (about 0.04 in.). Like light waves, microwaves travel essentially in straight lines. and open systems businesses but better margins overall, a lower underlying cost structure, and promising initial results for the Norsat OmniLink(TM) portable satellite terminal product line. Financial Results Revenues in fiscal 2002 were $14,674,806, down 29% from the $20,598,950 earned in fiscal 2001, primarily due to lower sales of Microwave Products and Open Networks. The lower revenues reflect the continued overall slowdown in world telecommunications markets, which has resulted in on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" delays in satellite infrastructure projects. The revenue decline was partially offset by the first sales of the Company's new portable satellite terminal equipment known as Norsat SecureLink(TM) (previously known as the pico-terminal). Fourth quarter 2002 revenues were $3,432,194, down 41% from the $5,845,998 earned in the same period last year primarily due to a large sale of Open Networks to China in the fourth quarter of 2001. Gross margins in 2002 declined slightly from the previous year, contributing $6,082,180 in 2002, compared to $6,360,232 in fiscal 2001. As a percentage of revenue, margins improved significantly, increasing to 41% in 2002 from 31% in 2001. The improvement was achieved largely by focusing sales activities on higher margin Microwave Products and as a result of the first Norsat SecureLink(TM) sales to a military client. Gross margins in the fourth quarter of 2002 were 33% of revenue, almost identical to that achieved in the same period last year. "As expected, revenues in our traditional business areas have been slow, but we are beginning to see the early success of the Norsat OmniLink(TM) family and in particular, Norsat SecureLink(TM)," said Yutaka For the chef, see Yutaka Ishinabe For the Battle Royale character, see Yutaka Seto For the The Day of Revolution/Princess Princess characters Mikoto Yutaka and Makoto Yutaka, see that article'' for the Suzumiya Haruhi character, see that article. Ueda, Norsat's President and Chief Executive Officer. During 2002, the company continued to restructure its operations, not only to achieve overhead cost reductions, but to also invest in new marketing and sales capabilities required to address the OmniLink(TM) market. As a result, selling, general, and administrative (SG&A) expenses for 2002 declined 4% to $5,830,112 from $6,080,904 in 2001 generating savings that more than offset the significant investments made in new sales and marketing resources. SG&A expenses were $1,411,540 in the fourth quarter, 2% lower than the $1,445,176 in the same period last year. In the past year, the Company has re-focused its product development activities and eliminated non-strategic development projects. Product development expenditures, guided by a disciplined strategy and comprehensive marketing plan, were $5,102,929 in fiscal 2002, a decrease of 29% from $7,137,710 in the same period last year. The 2002 investments in product development, all of which has been expensed, are now solely focused on the new Norsat OmniLink(TM) portable satellite terminals. Product development expenses increased 73% to $1,635,045 in the fourth quarter of 2002, from $947,836 in 2001 due to increased Norsat OmniLink(TM) activity. The two initial applications of Norsat OmniLink(TM) technology - Norsat SecureLink(TM), developed for military and other security-related applications and Norsat NewsLink NewsLink Pty Ltd (or HDS Retail Asia Pacific) is an Australian company responsible for providing convenience items and travel products in airports and train stations in Australia, China, Hong Kong, Singapore, Taiwan, and Fiji. (TM), designed for the satellite news gathering (SNG SNG abbr. 1. substitute natural gas 2. synthetic natural gas ) market - have already been demonstrated and received positively in the market. The Company is working to build and expand on these successes and foresees future applications for the technology, which enables the transmission of high quality voice, video and data signals from remote areas for emergency response, security and resource exploration. In 2002, Technology Partnerships Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of (TPC (Transaction Processing Performance Council, San Francisco, CA, www.tpc.org) An organization devoted to benchmarking transaction processing systems. In order to derive the number of transactions that can be processed in a given time frame, TPC benchmarks measure the total performance of ) contributions totaled $2,829,821, compared to $4,217,012 in 2001. The reduction in TPC finding is proportional proportional values expressed as a proportion of the total number of values in a series. proportional dwarf the patient is a miniature without disproportionate reductions or enlargements of body parts. to the overall reduction in product development expenditures. In the fourth quarter of 2002, TPC contributions were $1,278,838, compared to $1,003,752 in the same period last year. The net effect of the above factors was a reduction in the loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the before amortization, write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. , restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , other expenses and income taxes from $2,641,370 in 2001 to $2,021,040 in 2002, a decline of 23%. The loss in the fourth quarter of 2002 was $625,206 compared to a profit of $594,288 in the same period last year. The 2001 fourth quarter results included the Open Networks sale to China that was previously noted. The loss from continuing operations for the year declined 73% from $22,597,784 in 2001 to $6,181,577 in 2002, due to lower amortization and write-downs of goodwill and intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. . This was partially offset by higher charges for restructuring. In the fourth quarter of 2001, the above costs totaled $14,322,126 compared to just $578,855 in the same period in 2002 resulting in a loss from continuing operations of $13,701,030 in 2001 compared to $1,493,078, in the fourth quarter of 2002. The Company significantly reduced its net loss for fiscal 2002 compared to 2001. The net loss for fiscal 2002 was $6,270,261 or $0.19 per share, compared to a loss of $22,572,460 or $0.71 per share in fiscal 2001. The net loss for the fourth quarter of 2002 was $1,581,762 or $0.05 per share, compared to a net loss of $13,675,706 or $0.41 per share during the same period in 2001. Quarterly Highlights -- Norsat, delivered a broadband open network system to a Singaporean educational institution. -- The Norsat OmniLink(TM) product and engineering team focused on the development, market research, customer needs analysis, and strategic marketing of Norsat OmniLink(TM). The Company participates in many major satellite technology exhibitions worldwide, and will have a major presence at the National Association of Broadcasters (NAB) exhibition and conference in Las Vegas in early April. -- CBS News agreed to purchase two Norsat NewsLink(TM) portable terminals. Subsequent to the year-end, a second major US news network, which requested confidentiality, purchased a NewsLink(TM) unit, also for deployment in Kuwait. Liquidity and Capital Resources The Company's cash balance at December 31, 2002 was $2,907,811, compared to $2,160,678 at December 31, 2001 and $2,390,888 at the end of the previous quarter. The Company had total working capital of $6,903,355 at December 31, 2002, compared to $5,912,142 at December 31, 2001 and $7,298,276 at the end of the previous quarter. This change in the Company's working capital position was a result of financing agreements Financing Agreements In the context of project financing, the documents which provide the project financing and sponsor support for the project as defined in the project contracts. that contributed $3,414,792 during the first half of 2002 and a further $970,386 during the third quarter, which was offset by $3,382,828 used in year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. continuing operations. Accounts payable and accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. decreased by $594,867 from December 31, 2001, as cash was used to reduce amounts owing to owing to prep. Because of; on account of: I couldn't attend, owing to illness. owing to prep → debido a, por causa de key suppliers and fund restructuring costs incurred previously. Property and equipment decreased from $4,262,206 at December 31, 2001 to $2,696,490 at December 31, 2002, as a result of amortization and disposal of certain assets. This was partially offset by capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. of $228,479 primarily relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the buyout Buyout The purchase of a company or a controlling interest of a corporation's shares. Notes: A leveraged buyout is accomplished with borrowed money or by issuing more stock. of equipment lease agreements. Significant Accounting Policies and Estimates Significant accounting policies are described in note 2 to the Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge included in Norsat's 2001 Annual Report. A discussion of the critical accounting policies and the related estimates, are included in Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Results of Operations and Financial Condition in the 2001 Annual Report. There were no significant changes in accounting policies or estimates since the fiscal year ended December 31, 2001, other than those discussed in note 2 of the following unaudited financial statements for the period ended December 31, 2002. Quantitative quantitative /quan·ti·ta·tive/ (kwahn´ti-ta?tiv) 1. denoting or expressing a quantity. 2. relating to the proportionate quantities or to the amount of the constituents of a compound. and Qualitative qualitative /qual·i·ta·tive/ (kwahl´i-ta?tiv) pertaining to quality. Cf. quantitative. qualitative pertaining to observations of a categorical nature, e.g. breed, sex. Disclosures About Market Risk The Company has operations in Canada and a number of countries outside of North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and therefore is subject to risks typical of an international business including, but not limited to differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions and foreign exchange rate volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the . Accordingly, the future results could be materially adversely affected by changes in these or other factors. The Company's sales and corresponding receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed are substantially in U.S. dollars. However, the Company incurs the majority of its research and development, customer support costs and administrative expenses in Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. and other local currencies. Norsat is exposed, in the normal course of business, to foreign currency risks on these expenditures. The Company has evaluated its exposure to these risks and has determined that its only significant foreign currency exposure at this time is to the U.S. dollar. At this time, the Company does not believe its exposure to other currencies is material. The Company does not engage in hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. transactions as historically its gains and losses on foreign currency transactions have not been significant. Forward Looking Statements Statements in this report relating to matters that are not historical fact are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. Factors that could cause or contribute to such differences include, but are not limited to general economic conditions, changes in technology, reliance on third party manufacturing, managing rapid growth, global sales risks, limited intellectual property protection and other risks and uncertainties described in Norsat's public filings with securities regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities . Conference Call Please join Norsat CFO See Chief Financial Officer. Mr. Troy Troy, ancient city, Asian Turkey Troy, ancient city made famous by Homer's account of the Trojan War. It is also called Ilion or, in Latin, Ilium. Its site is almost universally accepted as the mound now named Hissarlik, in Asian Turkey, c.4 mi (6. Bullock bullock a mature castrated male cattle destined for meat production or draft. on Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , March 14, 2003 at 1:00 pm (Eastern Time) for a live conference call to discuss fourth quarter results. For those participants in the 604 area, dial 604.630.1131; in North America, dial 1.866.613.5220; for International calls, dial +1.604.630.1131. With a touch-tone The common system for pressing a button and entering a telephone number into a telephone. The first such phones were installed in two Pennsylvania towns in the early 1960s. See DTMF. phone, press 8310916 #. A taped replay will be available on Norsat's corporate website on March 17, 2003.
Financial Statements
Norsat International Inc.
Consolidated Balance Sheets
(Expressed in Canadian Dollars)
----------------------------------------------------------------------
----------------------------------------------------------------------
December 31, December 31,
2002 2001
(Unaudited) (Audited)
----------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $2,907,811 $2,160,678
Short-term investment 71,965 -
Accounts receivable 4,314,419 4,761,064
Inventories 5,488,813 5,969,642
Prepaid expenses and other 419,927 401,220
Current assets from
discontinued operations 504,364 1,268,030
----------------------------------------------------------------------
13,707,299 14,560,634
Property and equipment 2,696,490 4,262,206
Goodwill 440,095 440,095
Other assets 182,017 761,986
----------------------------------------------------------------------
$17,025,901 $20,024,921
----------------------------------------------------------------------
----------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $1,989,818 $2,391,282
Accrued liabilities 3,211,479 3,404,882
Current liabilities from
discontinued operations 1,268,805 2,281,710
Deferred revenue 333,842 570,618
----------------------------------------------------------------------
6,803,944 8,648,492
Long-term debt (note 3(b)) 1,251,442 -
Shareholders' Equity:
Share capital (note 4) 34,715,368 32,974,213
Contributed surplus 1,188,741 1,000,000
Equity component of
long-term debt 1,909,127 -
Deficit (28,842,721) (22,572,460)
Cumulative translation
adjustment - (25,324)
----------------------------------------------------------------------
8,970,515 11,376,429
----------------------------------------------------------------------
$17,025,901 $20,024,921
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----------------------------------------------------------------------
Norsat International Inc.
Consolidated Statements of Operations and Deficit
(Expressed in Canadian Dollars)
(Unaudited)
----------------------------------------------------------------------
----------------------------------------------------------------------
Three months ended Year ended
December 31, December 31,
2002 2001 2002 2001
----------------------------------------------------------------------
Sales $3,432,194 $5,845,998 $14,674,806 $20,598,950
Cost of Sales 2,289,653 3,862,450 8,592,626 14,238,718
----------------------------------------------------------------------
1,142,541 1,983,548 6,082,180 6,360,232
Expenses
Selling,
general and
administrative 1,411,540 1,445,176 5,830,112 6,080,904
Product
development 1,635,045 947,836 5,102,929 7,137,710
Technology
Partnerships
Canada
funding (1,278,838) (1,003,752) (2,829,821) (4,217,012)
----------------------------------------------------------------------
1,767,747 1,389,260 8,103,220 9,001,602
(Loss) income
from continuing
operations
before amortization,
write-down,
restructuring,
other
expenses and
income taxes (625,206) 594,288 (2,021,040) (2,641,370)
Write-down of
goodwill - 10,896,486 - 10,896,486
Amortization and
write-down of
other
intangibles 299,536 3,022,636 1,766,507 7,426,838
Restructuring
charge 279,319 413,004 1,658,858 1,274,004
----------------------------------------------------------------------
578,855 14,332,126 3,425,365 19,597,328
Loss from
continuing
operations before
other expenses
and income
taxes (1,204,061) (13,737,838) (5,446,405) (22,238,698)
Other
expenses
(earnings)
(note 5) 283,517 (71,808) 729,672 324,086
----------------------------------------------------------------------
Loss from
continuing
operations
before income
taxes (1,487,578) (13,666,030) (6,176,077) (22,562,784)
Income taxes 5,500 35,000 5,500 35,000
----------------------------------------------------------------------
Loss from
continuing
operations (1,493,078) (13,701,030) (6,181,577) (22,597,784)
(Loss) recovery
from
discontinued
operations (88,684) 25,324 (88,684) 25,324
----------------------------------------------------------------------
Net loss (1,581,762) (13,675,706) (6,270,261) (22,572,460)
----------------------------------------------------------------------
Deficit,
beginning
of period (27,260,959) (54,186,827) (22,572,460) (45,290,073)
Reduction in
deficit
upon
recapitali-
zation - 45,290,073 - 45,290,073
----------------------------------------------------------------------
Deficit, end
of period $(28,842,721) $(22,572,460) $(28,842,721) $(22,572,460)
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Basic and
fully diluted
net loss
per common
share $(0.05) $(0.41) $(0.19) $(0.71)
----------------------------------------------------------------------
----------------------------------------------------------------------
Norsat International Inc.
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
(Unaudited)
----------------------------------------------------------------------
----------------------------------------------------------------------
Three months ended Year ended
December 31, December 31,
2002 2001 2002 2001
----------------------------------------------------------------------
Cash provided by
(used in):
Operations:
Loss from
continuing
operations $(1,493,078) $(13,701,030) $(6,181,577) $(22,597,784)
Items not
involving
cash:
Write-down
of investment - - - 609,477
Amortization
and write-down
of other
intangibles 299,536 13,919,122 1,766,507 18,323,324
Issuance of
common
shares for
services - 67,500 259,845 67,500
Loss on
disposal of
property and
equipment 197,753 - 197,753 -
Restructuring 131,586 - 131,586 -
Interest
expense 16,380 - 322,325 -
Loss on
conversion of
promissory
note 43,609 - 43,609 -
Changes in
non-cash
working
capital
(note 7) 1,787,996 159,181 77,124 (3,889,916)
----------------------------------------------------------------------
Cash provided
by (used
in) continuing
operations 983,782 444,773 (3,382,828) (7,487,399)
(Loss) recovery
from
discontinued
operations (88,684) 25,324 (88,684) 25,324
Items not
involving
cash:
Other 25,324 - 25,324 -
Changes in
non-cash
working
capital (198,129) (721,824) 93,968 4,314,547
----------------------------------------------------------------------
Cash (used in)
provided
by continuing
operations (261,489) (696,500) 30,608 4,339,871
722,293 (251,727) (3,352,220) (3,147,528)
Investments:
Net purchase of
property and
equipment (66,518) (82,628) (228,479) (641,590)
Purchase of
short-term
investment (71,965) - (71,965) -
----------------------------------------------------------------------
(138,483) (82,628) (300,444) (641,590)
Financing:
Issue of common
shares 18,513 (442,457) 970,386 4,573,517
Issue of
promissory
note (83,161) - 2,953,188 -
Issue of
long-term
debt (16,858) - 461,604 -
Decrease in
bank
indebtedness - - - (2,903,047)
----------------------------------------------------------------------
(81,506) (442,457) 4,385,178 1,670,470
Effect of change
in exchange rates
on cash 14,619 49,152 14,619 49,152
----------------------------------------------------------------------
Increase (decrease)
in cash and
cash equivalents 516,923 (727,660) 747,133 (2,069,496)
Cash and cash
equivalents,
beginning
of period 2,390,888 2,888,338 2,160,678 4,230,174
Cash and cash
equivalents,
end of
period $2,907,811 $2,160,678 $2,907,811 $2,160,678
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Supplemental cash flow disclosure (note 7)
Norsat International Inc.
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited)
----------------------------------------------------------------------
1 Continuing operations: These interim consolidated financial statements (the "financial statements") have been prepared on the going concern basis, which presumes the realization (specification) realization - A UML semantic relationship between a classifier that specifies a contract and another classifier that guarantees to carry it out. [Handout by Mr. David Gillibrand]. of assets and the settlement of liabilities in the normal course of operations. The application of the going concern basis is dependent upon the Company achieving profitable operations to generate sufficient cash flows to fund continued operations, or, in the absence of adequate cash flows from operations, obtaining additional financing. The Company has reported losses and negative cash flows from operations for the three months and year ended December 31, 2002 and in prior periods. Management has undertaken to significantly reduce costs through a series of actions including, but not limited to, reducing the number of employees and reducing operating costs operating costs npl → gastos mpl operacionales . Management is also pursuing additional revenue sources from its portable terminals and is considering other financing alternatives for its operations. There can be no assurances that such financing, if required, will be available on a timely or cost effective basis. 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. 2 Significant accounting policies: (a) Basis of presentation: These financial statements have been prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ") for interim financial reporting, and the accounting polices used, except as noted, are consistent with the most recent annual financial statements. These financial statements do not contain all disclosures required by Canadian GAAP for annual financial statements, and accordingly, should be read together with the audited annual consolidated financial statements, accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. notes and management discussion and analysis included in the Company's 2001 Annual Report. (b) Goodwill and other intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. : Effective January January: see month. 1, 2002, the Company adopted the Canadian Institute of Chartered Accountants The Canadian Institute of Chartered Accountants (CICA) is the umbrella body for the Chartered Accountant profession in Canada and Bermuda. Membership of the CICA totals 70,000 Chartered Accountants and 8,500 students. ("CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) ") section 1581, "Business Combinations" and CICA section 3062, "Goodwill and Other Intangible Assets". The Business Combinations section addresses, in part, the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. The Goodwill and Other Intangible Assets section addresses the continuing measurement and valuation of intangible assets and goodwill. Under this section, goodwill and intangible assets with indefinite INDEFINITE. That which is undefined; uncertain. INDEFINITE, NUMBER. A number which may be increased or diminished at pleasure. 2. When a corporation is composed of an indefinite number of persons, any number of them consisting of a majority of those lives are not amortized but are tested for impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. annually, or more frequently if events or changes in circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or indicate that the asset might be impaired See assistive technology. . Intangibles with finite finite - compact lives, continue to be amortized over their estimated useful lives, which are reviewed annually. Previously the Company recognized assembled as·sem·ble v. as·sem·bled, as·sem·bling, as·sem·bles v.tr. 1. To bring or call together into a group or whole: assembled the jury. 2. workforce, which represented the estimated value of a trained workforce obtained as part of a business combination, as an intangible asset that was amortized on a straight- line basis over its estimated useful life of two years. Under the new sections, this would not be recognized as an intangible asset apart from goodwill. In accordance with the sections, these changes are not applied retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin and the amounts presented for prior periods have not been restated.
If goodwill amortization had not been recorded, net loss and loss
per share would be as follows:
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Three months ended Year ended
December 31, December 31,
2002 2001 2002 2001
----------------------------------------------------------------------
Reported net
loss $(1,581,762) $(13,675,706) $(6,270,261) $(22,572,460)
Goodwill
amortization - 855,795 - 3,423,180
----------------------------------------------------------------------
Adjusted net
loss $(1,581,762) $(12,819,911) $(6,270,261) $(19,149,280)
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----------------------------------------------------------------------
----------------------------------------------------------------------
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Basic and
fully diluted
adjusted net
loss per
common share: $(0.05) $(0.39) $(0.19) $(0.60)
----------------------------------------------------------------------
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Had amortization of goodwill not been recorded during these periods, an additional write-down of goodwill of the same amount would have been required. Accordingly, this change has had no effect on prior periods financial statements presented. (C) Stock-based compensation: Effective January 1, 2002, the Company adopted CICA section 3870, "Stock-Based Compensation and Other Stock-Based Payments". This section establishes standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. . The standard requires the fair value based method of accounting for certain, but not all, stock-based transactions. The standard permits, and the Company has elected e·lect v. e·lect·ed, e·lect·ing, e·lects v.tr. 1. To select by vote for an office or for membership. 2. To pick out; select: elect an art course. for stock option grants to employees and directors to be accounted for using the intrinsic value Intrinsic Value 1. The value of a company or an asset based on an underlying perception of the value. 2. For call options, this is the difference between the underlying stock's price and the strike price. method. Accordingly, no compensation cost has been recognized in 2002 for such grants beginning on or after January 1, 2002 as the exercise price is equal to the market price of the stock on the date of grant. During the three months ended December 31, 2002 no options were granted. During the year ended December 31, 2002 the Company granted options to purchase 1,312,450 common shares with an average exercise price of $1.60 per common share. If compensation cost for the Company's employee stock options issued on or after January 1, 2002 had been determined based on the fair value method at the applicable grant dates, the Company's pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net loss would have increased by $144,000 to $1,725,762 and loss per common share of $0.05 would remain unchanged for the three months ended December 31, 2002. For the year ended December 31, 2002 the Company's pro forma net loss would have increased by $245,000 to $6,515,261 and loss per common share of $0.19 would remain unchanged. The weighted average fair value of options granted during 2002 was $0.90. The fair value of options was determined using the Black-Scholes valuation model assuming an average option life of three years, no dividends, average expected volatility of 90%, and risk-free interest rates Risk-Free Interest Rate Describes return available to an investor in a security somehow guaranteed to produce that return. The risk-free interest rate compensataes the investor for the temporary sacrifice of consumption. of 3%. 3 Promissory note promissory note, unconditional written promise to pay a certain sum of money at a definite time to bearer or to a specified person on his order. Promissory notes are generally used as evidence of debt. and long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. : (a) Promissory note: On January 28, 2002, the Company issued an unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. promissory note for net cash proceeds of $461,604 (US$300,000) repayable re·pay v. re·paid , re·pay·ing, re·pays v.tr. 1. To pay back: repaid a debt. 2. on January 29, 2003, that bears interest at 8% per annum Per annum Yearly. . The interest is payable by issuing 13,333 common shares of the Company at maturity. The promissory note also included 35,334 share purchase warrants. The warrants expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. after five years, and entitle en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: the holder of each warrant to purchase one common share of the Company for US$2.01. A financing fee was paid consisting of US$7,500 cash, 4,167 common shares of the Company and 17,667 share purchase warrants with similar terms. The proceeds of the financing allocated to the interest component and also the fair value of the detachable de·tach tr.v. de·tached, de·tach·ing, de·tach·es 1. To separate or unfasten; disconnect: detach a check from the checkbook; detach burs from one's coat. 2. share purchase warrants was recorded as an equity component of the note financing, reducing the amount assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. to the debt component. The debt component is accreted to its fair value over the term to maturity as a non-cash interest expense charge. On September September: see month. 24, 2002, a commitment was reached under which the promissory note including all interest obligations, was to be settled by the Company issuing 324,000 common shares, which had a fair value of $498,960, resulting in a loss on debt settlement of $43,609. At December 31, 2002 the share purchase warrants remain unexercised.
(b) Long-term debt:
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December 31, 2002
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Face value of long-term debt $3,188,403
Less: Fair value of conversion option 2,123,584
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1,064,819
Add: Accretion to December 31, 2002 186,623
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Carrying value of long-term debt $1,251,442
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On March 28, 2002, the Company completed a financing agreement (US$2,000,000) for net cash proceeds of $2,953,188. The financing consisted of 8% per annum unsecured convertible notes maturing March 31, 2007. The notes are convertible into common shares of the Company at a price of US$1.70 per share at the holder's option at any time. The Company is allowed to force the conversion of the notes into common shares of the Company, if the shares trade above US$3.40 for two consecutive days over the term to maturity of the notes. The cost of the financing totaled $307,966 and included cash, 50,000 share purchase warrants with a fair value of $72,751 determined using the Black-Scholes valuation model. The share purchase warrants expire after three years, and entitle the holder to purchase one common share of the company for US$1.70. Financing costs of $93,509 were recorded as deferred financing costs on the balance sheet, with the balance of $214,457 recorded as a charge on the equity component of long-term debt. The net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of the financing allocated to the estimated fair value of the conversion option of $1,909,127 have been recorded as equity component of long-term debt. The carrying amount of the debt is being accreted to its face value over the term to maturity through charges to non-cash interest expense. At December 31, 2002 the share purchase warrants remain unexercised. 4 Share capital: On August 8, 2002, the Company entered into private placement agreements totaling 657,667 units at $1.50 per unit, for proceeds of $970,386, net of share issue costs of $16,114. Each unit consisted of one common share of the Company and one share purchase warrant. The warrants expire after three years, and entitle the holder to purchase one additional common share of the Company for $1.50. At December 31, 2002 the share purchase warrants remain unexercised.
5 Other expenses (earnings):
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Three months ended Year ended
December 31, December 31,
2002 2001 2002 2001
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Net interest - cash $(8,856) $(34,067) $182,179 $(22,745)
Interest - non-cash 16,380 - 322,325 -
Foreign currency gain (loss) 34,631 (37,741) (16,194) (262,646)
Loss on disposal of
property and
equipment 197,753 - 197,753 -
Loss on conversion of debt 43,609 - 43,609 -
Write-down of investment - - - 609,477
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$283,517 $(71,808) $729,672 $324,086
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6 Segmented information: At December 31, 2001, the Company had two business segments: Microwave and Open Networks. For the fiscal year 2002, the Company's two business segments are: Microwave and Norsat OmniLink(TM). The Microwave segment supplies satellite signal receivers, transmitters and other ground station products. During 2002, the Open Networks segment expanded from delivering open standard Digital Video Broadcasting ("DVB (Digital Video Broadcasting) An international digital television (DTV) standard that is the European and Far Eastern counterpart of the North American ATSC standard. ") Data Hubs for the broadband Internet See broadband. Protocol ("IP") market to also include delivery of high-speed high-speed adj. 1. Operated or designed for operation at high speed: a high-speed food processor. 2. Taking place at high speed: a high-speed chase. 3. data through portable satellite terminals. The segment was renamed to Norsat OmniLink(TM). The following tables set fourth information by operating segments from continuing operations for the three months and year ended December 31, 2002 and 2001 respectively.
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Three months ended Norsat
December 31, 2002 Microwave OmniLink(TM) Consolidated
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Sales $3,057,030 $375,164 $3,432,194
Gross profit $845,067 $297,474 $1,142,541
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Three months ended Open
December 31, 2001 Microwave Networks Consolidated
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Sales $3,845,683 $2,000,315 $5,845,998
Gross Profit $1,186,521 $797,027 $1,983,548
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Year ended December Norsat
31, 2002 Microwave OmniLink(TM) Consolidated
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Sales $10,793,669 $3,881,137 $14,674,806
Gross profit $4,096,227 $1,985,953 $6,082,180
Total assets related
to continuing
operations $9,531,006 $6,959,227 $16,490,233
Property and
equipment $298,274 $2,398,216 $2,696,490
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Year ended December Open
31, 2001 Microwave Networks Consolidated
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Sales $15,200,333 $5,398,617 $20,598,950
Gross profit $4,501,828 $1,858,404 $6,360,232
Total assets related
to continuing
operations $10,283,617 $8,084,144 $18,367,761
Property and
equipment $544,129 $3,718,077 $4,262,206
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7 Supplemental cash flow disclosures:
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Three months ended Year ended
December 31, December 31,
2002 2001 2002 2001
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Changes in non-cash
operating working
capital:
Accounts receivable $103,426 $(1,513,695) $446,645 $79,500
Inventories 617,913 1,976,086 480,829 469,253
Prepaid expenses and
other 133,394 144,023 (18,707) (151,726)
Accounts payable and
accrued liabilities 730,049 (172,670) (594,867) (4,857,561)
Deferred revenue 203,214 (274,563) (236,776) 570,618
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$1,787,996 $159,181 $77,124 $(3,889,916)
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Three months ended Year ended
December 31, December 31,
2002 2001 2002 2001
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Supplementary
information:
Interest paid - - 126,400 182,997
Income taxes paid - - 5,500 -
Non-cash
transactions:
Value assigned to
common shares and
warrants issued, net
of cash acquired:
Issue of common
shares for
settlement of
debt 498,960 - 498,960 430,982
Issue of common
shares and warrants
for financing
services - - 200,705 -
Reclassification of
certain inventory to
property and
equipment - 41,348 - 258,446
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About Norsat International Inc. Norsat International Inc. designs and markets satellite products for high-speed data transmission, including the Norsat OmniLink(TM) group of portable satellite terminals for application in remote or hostile environments See: operational environment. . |
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