IDS Announces Results for Six Month Period Ended June 30, 2000.Business Editors TORONTO--(BUSINESS WIRE)--Aug. 30, 2000 IDS Intelligent Detection Systems Inc. (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :ISD See IDD. .) today announced its results for the six month period ended June June: see month. 30, 2000. The results include a number of adjustments made following a detailed review of accounting records and asset values (excluding goodwill) by the new management team. The Company has determined that some of these adjustments may relate to prior years, in particular 1999 and the quarters thereof. IDS has therefore initiated discussions on certain of these matters with its former auditors AUDITORS, practice. Persons lawfully appointed to examine and digest accounts referred to them, take down the evidence in writing, which may be lawfully offered in relation to such accounts, and prepare materials on which a decree or judgment may be made; and to report the whole, together related to the financial statements for the year ended December December: see month. 31, 1999. Once these discussions and further management reviews are concluded, the Company will reissue re·is·sue v. re·is·sued, re·is·su·ing, re·is·sues v.tr. To issue again, especially to make available again. v.intr. To come forth again. n. 1. its results for each quarter in fiscal 2000 and the comparative quarters and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. 1999 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 on or before September September: see month. 30, 2000. Consequently, comparative results for interim periods have not been reported at this time. Further, management has not yet had an opportunity to determine the impact of the above matters on the first quarter ended March 31, 2000 and, therefore, IDS has presented results for the six month period ended June 30, 2000. IDS reports today that its loss for the six-month period ending June 30, 2000 was $19.2 million or $0.84 per share, which includes a number of unusual items noted below. Financial Highlights (unaudited) Six Months ended June 30, 2000 In thousands of dollars except Per share amounts --------------------------------------------------------------- Revenue $15,096 Loss for the period excluding unusual items ($10,106) Unusual items ($9,093) Loss for the period ($19,199) Loss per share: Basic ($0.84) Cash Flow ($0.08) Weighted average number of shares (000's) 22,820 Summary of Unusual Items Included in the loss for the six-month period ended June 30, 2000 are a number of unusual items totaling approximately $9.093 million. Approximately $4.6 million of these adjustments were solely attributable to Q2 2000. The adjustments relate to an increase in inventory obsolescence ob·so·les·cent adj. 1. Being in the process of passing out of use or usefulness; becoming obsolete. 2. Biology Gradually disappearing; imperfectly or only slightly developed. reserves and a reduction of deferred development costs primarily as a result of the loss of the contract to the U S Federal Aviation Agency (FAA) for the Company's ORION product. Additionally, $0.5 million of these adjustments relate to Q1 2000 as a result of a reduction made to unbilled un·billed adj. 1. Not having been billed or charged for: unbilled medical charges. 2. Appearing, as in a movie, without being credited: an unbilled walk-on. revenue. Finally, approximately $4.0 million of the Q2 2000 loss may be attributable to the prior fiscal year. The nature of these proposed adjustments includes the accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of previously unrecorded liabilities and a reduction of unbilled revenue. The Company believes that the financial statements are now fairly stated and no further adjustments to tangible assets Tangible Asset An asset that has a physical form such as machinery, buildings and land. Notes: This is the opposite of an intangible asset such as a patent or trademark. Whether an asset is tangible or intangible isn't inherently good or bad. are anticipated. Financial Review Income Statement Highlights In the second quarter, revenue was $7.0 million compared to $8.1 million for the first quarter of this year. The decrease primarily relates to weaker second quarter revenues in the Survey and Exploration division as compared to the first quarter. Gross margin for the six month period ended June 30, 2000 was $5.523 million, representing 36.6% of revenues for the period. Selling, general and administration expenses increased in the second quarter due to higher: legal, accounting professional and consulting fees related to key strategic initiatives; fees in connection with business development and communications; and an increase in the bad debt reserves. Balance Sheet Highlights Assets as at June 30, 2000 were lower than the December 31, 1999 assets primarily due to an increased obsolescence reserve in the amount of $3.949 million related to the ORION inventory together with decreases in unbilled revenue and accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying as noted above. Accounts receivable as at June 30, 2000 included a non-trade receivable of $1.875 million related to the sale and lease back of the Company's Concord, Ontario
Accounts payable as at June 30, 2000 included a non-trade payable in the amount of $3.0 million in connection with the purchase by the Company of all of the issued and outstanding common shares of Micro-g Solutions Inc. This amount is due to be paid in instalments commencing in Q1 2001 unless renegotiated. The increase in goodwill at June 30, 2000 was due to the inclusion of the $3.0 million purchase price for Micro-g common shares less accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. amortization for the period. Additional increases in accounts payable were a result of an increase in aging and the accrual as at June 30, 2000 of the sales commission payable in the amount of $0.663 million previously discussed. The increase in capital lease obligations during the six month period ended June 30, 2000 related primarily to GeoCommerce capital leases for equipment and capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. software development costs. At the end of the quarter, the GeoCommerce related assets included in the consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. totaled $5.041 million. At the end of the second quarter, the ratio of current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. to current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. was 0.98 to 1.0. Operations Scintrex The appointment of Adrian Adrian, Roman emperor Adrian, Roman emperor: see Hadrian. Adrian, city, United States Adrian, city (1990 pop. 22,097), seat of Lenawee co., SE Mich., on the Raisin River; inc. 1836. Beale as COO (Cell Of Origin) See mobile positioning. of IDS/Scintrex in May 2000 and of Dominique Boitier as VP and General Manager of Scintrex Surveys in June 2000, gives the division the operations experience needed to develop and execute the growing business opportunities in the geophysical survey Geophysical survey refers to the systematic collection of geophysical data for spatial studies. Geophysical surveys may use a great variety of sensing instruments, and data may be collected from above or below the Earth's surface or from aerial or marine platforms. and instrumentation instrumentation, in music: see orchestra and orchestration. instrumentation In technology, the development and use of precise measuring, analysis, and control equipment. industry. Survey activity during the period focused on the completion of the PEMEX Pemex officially Petróleos Mexicanos Mexico's state-owned oil company. In 1938 Pres. Lázaro Cárdenas nationalized 17 foreign oil companies to create Pemex, the largest Latin American petroleum company and a major world exporter of fossil fuel. contract. See the financial highlights for a discussion on the results of the PEMEX contract. Analytical analytical, analytic pertaining to or emanating from analysis. analytical control control of confounding by analysis of the results of a trial or test. and Security Total sales for the division have been below expectations due to the failure of the Company to be selected as a supplier to the FAA in May. However, sales of the handheld explosive and narcotics narcotics n. 1) techinically, drugs which dull the senses. 2) a popular generic term for drugs which cannot be legally possessed, sold, or transported except for medicinal uses for which a physician or dentist's prescription is required. detection devices have met expectations. The "IDS Receives US State Department Contract" press release was issued by the Company on March 23, 2000. In the release, a contract value of up to $9.0 million was stated. It has now been determined that the probability of receiving such value, while possible, is difficult to estimate as it is dependent on the success of the currently signed contract valued at $0.2 million which covers the cost of producing three prototype handheld explosive protection devices. Power and Control Power and Control continues to be on schedule to deliver the major components of the Qinshan CANDU CANDU CANada Deuterium Uranium (Atomic Energy of Canada Limited) power generation project in China. P&C continues to seek opportunities in its traditional markets but has also broadened its market outlook and is exploring a number of non-nuclear opportunities. Events Subsequent to June 30, 2000 A number of material events occurred subsequent to the end of the second quarter. On July 19, 2000, IDS received $10 million in proceeds from two new debt financings Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay provided to it by Research Corporation Technologies, Inc. (RCT RCT Randomized Controlled Trial RCT Regimental Combat Team (infantry regiment with their own artillery, engineers, medical and tanks) RCT Rollercoaster Tycoon RCT Randomized Clinical Trial RCT Rhondda Cynon Taff ), a US corporation that is a current IDS shareholder (refer press release dated July 19, 2000 for details). These funds were used to pay down the Company's outstanding loans with IDS's Bank and provide some funds for operations. Under the RCT loan agreement, IDS made certain representations, one of these stating that inventory would not be subject to more than a $1.0 million write down in value due to obsolescence. After making the above noted adjustments, IDS has breached this representation, but RCT has waived this breach and indicated that they will continue to support the Company. Also on July 19, 2000 the Company and its subsidiary, Scintrex Limited, entered into an Intercreditor Agreement with the Company's 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. Chartered Bank Chartered Bank A financial institution whose primary roles are to accept and safeguard monetary deposits from individuals and organizations, and to lend money out. The details vary from country to country, but usually a chartered bank in operation has obtained government permission and RCT, IDS's secured lenders. This Agreement covered a number of matters, the more substantial being that the Bank would provide the Company with access to credit, commencing at $2.5 million and increasing in $0.5 million tranches Tranches A piece, portion or slice of a deal or structured financing. This portion is one of several related securities that are offered at the same time but have different risks, rewards and/or maturities. "Tranche" is the French word for "slice". to $4.0 million by October 1, 2000, that certain additional security would be provided, that the Company fully pay out or cash collateralize collateralize To pledge an asset as security for a loan. A loan to a broker is collateralized by pledging securities. its loans with the Bank on or before October 31, 2000, and that no material adverse change occurs. It should be noted that the sum of the downward adjustments to tangible asset values noted above exceeds by $0.783 million the $6.0 million limit set by the Bank for what they would consider to be less than a material adverse change. Discussions have been initiated with other lenders to provide a new line of credit but there is no guarantee that a new lender will be in place by October 31st, 2000. Without a new lender, expanded support by RCT, or 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). of assets, IDS's ability to continue as a going concern may be in substantial doubt. Outlook and Corporate Strategy The IDS board has decided not to proceed with Scintrex acquiring SIAL, Val d'Or Val d'Or (väl dôr), town (1991 pop. 23,842), SW Que., Canada, SE of Rouyn-Noranda. It is a mining center. Gold was discovered in the region in 1909; copper, zinc, lead, and molybdenum are also mined. Sagax, EDCON or Photo Gravity at this time on the terms negotiated by the previous management. Scintrex will continue to work with these companies on a joint venture basis, particularly in bidding for geophysical survey business. Significant survey opportunities are available in the Middle East, South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. and South-East Asia South-East Asia n → le Sud-Est asiatique South-East Asia south n → Südostasien nt South-East Asia n → . The board of IDS has also decided not to proceed with a public offering for Scintrex. Scintrex, which will continue as a core holding of IDS, is held 96% by IDS and currently 4% by the former shareholders of Micro-g. As a result of not taking Scintrex public, IDS is obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to pay Micro-g an amount of $3.0 million in four equal installments of $750,000 in 2001, after which it will again own 100% of Scintrex. In addition to Scotia Scotia (skō`shə), originally the Latin name for Ireland. In the Middle Ages, it was used to refer to Scotland, to which the Scots had migrated from Ireland. Today it is used poetically. Capital, effective August 25th, GeoCommerce has engaged the firm of Capital Canada Limited to raise equity financing Equity Financing The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. . GeoCommerce continues to work with mining companies to provide them with a business to business portal for the purchase of mining supplies. Costs have been considerably reduced by temporary staff lay-offs and cutting overheads. Mr. Roland Horst, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of IDS and Scintrex, has replaced Dr. Mariusz Rybak as Chairman and a board member of GeoCommerce following Dr. Rybak's resignation from the board of directors of GeoCommerce. The activities of Caduceon and ChemiCorp have been reduced to a maintenance basis and essential staff have been seconded to other operating units operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon , and personnel and overheads have been reduced. Houlihan Lokey Howard & Zukin Canada continue to review the business units in IDS and have made recommendations, which could involve a restructuring of these business units including asset sales. IDS's strategy is to increase shareholder value and examine all options to accomplish this objective.
IDS INTELLIGENT DETECTION SYSTEMS INC.
Consolidated Balance Sheet
As at June 30, 2000
with comparative figures at June 30, 2000 and December 31,
1999
(In thousands of dollars)
---------------------------------------------------------------
June 30 December 31
2000 1999
(Unaudited) Note 1
Assets
Current assets:
Cash $439 $1,383
Accounts receivable 9,057 11,345
Unbilled revenue 4,857 5,407
Investment tax credits recoverable 142 119
Inventory 10,685 13,129
Prepaid expenses 770 483
--------------------------------------------------------------
25,950 31,866
Long-term investments 327 327
Capital assets 15,055 15,226
Deferred development costs 1,640 1,974
Goodwill 20,004 17,509
---------------------------------------------------------------
$62,976 $66,902
---------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Bank loan $8,399 $4,801
Accounts payable and accrued
liabilities 16,687 8,335
Deferred revenue - 99
Income taxes payable 164 194
Current portion of capital lease
obligations 1,196 354
--------------------------------------------------------------
26,446 13,783
Capital lease obligations 573 575
Deferred lease inducement 233 262
Deferred income taxes (3) 179
Shareholders' equity:
Share capital 58,051 55,104
Cumulative translation adjustment (185) (61)
Deficit (22,139) (2,940)
--------------------------------------------------------------
35,727 52,103
---------------------------------------------------------------
$62,976 $66,902
---------------------------------------------------------------
IDS INTELLIGENT DETECTION SYSTEMS INC.
Consolidated Statement of Loss and Deficit
For the six months ended June 30, 2000
(In thousands of dollars)
(Unaudited)
Six Months ended
June 30
2000
---------------------------------------------------------------
Sales $15,096
Cost of Goods Sold 9,573
---------------------------------------------------------------
5,523
Expenses:
Selling, general and administrative 12,008
Amortization of capital assets and deferred
development costs 1,609
Research and development 1,448
Amortization of goodwill 564
Unusual items (note 2) 9,093
---------------------------------------------------------------
24,722
---------------------------------------------------------------
Loss for the period (19,199)
Deficit, beginning of period (2,940)
---------------------------------------------------------------
Deficit, end of period $(22,139)
---------------------------------------------------------------
Net earnings (loss) per share:
Basic $(0.84)
Fully diluted $(0.84)
Cash flow per share $(0.08)
IDS INTELLIGENT DETECTION SYSTEMS INC.
Consolidated Statements of Cash Flows
For the six months ending June 30, 2000
(In thousands of dollars)
(Unaudited)
---------------------------------------------------------------
Six months
June 30
2000
---------------------------------------------------------------
Operations:
Loss for the period $(19,199)
Items not involving cash:
Amortization of capital assets and deferred
development costs 1,609
Amortization of goodwill 564
Unusual items (note 2) 7,465
Changes in non-cash operating working capital balances 7,713
--------------------------------------------------------------
(1,848)
--------------------------------------------------------------
Investments:
Additions to capital assets and deferred development
costs (1,919)
--------------------------------------------------------------
Financing:
Issuance of share capital, net of issuance costs 2,947
Cumulative foreign exchange (124)
---------------------------------------------------------------
2,823
---------------------------------------------------------------
Decrease in cash and cash equivalents (944)
Cash and cash equivalents, beginning of year 1,383
---------------------------------------------------------------
Cash and cash equivalents, end of period $439
---------------------------------------------------------------
IDS INTELLIGENT DETECTION SYSTEMS INC.
Notes to Consolidated Financial Statements
For the six months ending June 30, 2000
(In thousands of dollars)
(Unaudited)
--------------------------------------------------------------
1. The December 31, 1999 financial statements may be subject to
restatement as described in note 2.
2. All of the adjustments noted below have been recorded in the
consolidated financial statements for the six month period
ended June 30, 2000, subject to resolution of the period to
which the items relate:
Nature of Item Dollar Amount
---------------------------------------------------------------
Items which related to Q2 2000
Increase in inventory obsolescence reserve primarily $3,949
related to Analytical and Security division. This
arises from a US Federal Aviation Agency (FAA) decision
in May 2000 to suppliers to provide alternatives to the
Company's ORION
product
Decrease in deferred development costs related to ORION 671
Item which relates to Q1 2000
Arises from an overstatement of unbilled revenue at
the end of Q1. 456
Adjustments recorded in Q2 that may relate to 1999
Increase in cost of goods sold. These costs relate to 1,628
the PEMEX survey contract and were paid in the first
and second quarters of this year. However, the
corresponding PEMEX revenues were recorded in fiscal
1999 but such costs were not accrued at year end.
Reduction of unbilled revenue. This amount may have 750
been overstated at December 31, 1999 as it appears that
the amount may have been collected prior to December 31,
1999.
Accounts payable not previously recorded. Amounts 976
have been recorded as liabilities in June 2000,
however, the amounts appear to relate to sales
recorded in 1999.
Sales commission payable. This amount has now been 663
recorded as a liability at June 30, 2000, however, the
majority of these commissions relate to sales recorded
in 1999.
$9,093
Summarized financial information covering the Company's
reportable segments in the table below. The following unaudited
industry segment information is presented as an aid to better
understand the Company's operating results:
IDS INTELLIGENT DETECTION SYSTEMS INC.
Operating Segments
For the six months ending June 30, 2000
(in thousands of dollars)
(Unaudited)
For the six months
ending June 30,
2000 ESID Power Security Survey
Control
---------------------------------------------------------------
Net Sales 4,273 3,602 4,654 2,567
Loss for the period (2,734) (1,918) (6,718) (3,330)
Loss excluding unusual
items (1,300) (729) (3,064) (896)
IDS INTELLIGENT DETECTION SYSTEMS INC.
Operating Segments
For the six months ending June 30, 2000
(in thousands of dollars)
(Unaudited)
For the six months
ending June 30,
2000 Geo Caduceon Other Total
Commerce
---------------------------------------------------------------
Net Sales - - - 15,096
Loss for the period (3,764) (601) (19,199)
Loss excluding unusual
items (3,764) (353) - (10,106)
About IDS: IDS is an innovative developer, manufacturer and marketer of proprietary sensory sensory /sen·so·ry/ (sen´sor-e) pertaining to sensation. sen·so·ry adj. 1. Of or relating to the senses or sensation. 2. technology. The company operates through seven business units: Analytical & Security, IDS Power Control Systems, Scintrex Earth Science Instrumentation, Survey & Exploration Technology Services, ChemiCorp International and Caduceon Inc. Its more than 70 products range from drug and explosives detectors to power generation safety control instruments, mineral and petroleum exploration instrumentation and services, and developing technologies for industrial process control and point-of-care health analysis. IDS's business-to-business eCommerce company, GeoCommerce Inc., provides centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. online trading Online Trading Making trades via the Internet. Notes: The use of online trading increased dramatically in the mid to late 1990's with the advent of high-speed computers and Internet connections. Stocks, bonds, options, futures, and currencies can all be traded online. and information exchanges for the global mining, exploration, and geophysics geophysics, study of the structure, composition, and dynamic changes of the earth, its atmosphere, hydrosphere and magnetosphere, based on the principles of physics. communities through: www.MineOnline.com and www.GeophysicsOnline.com. IDS operates worldwide in Canada, the US, France, UK, Australia and Brazil, and is publicly traded on The Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. (symbol: ISD). |
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