Condensed Consolidated Interim Financial Statements of. Three and six months ended March 31, (Unaudited in U.S. dollars)

Transcription

1 Condensed Consolidated Interim Financial Statements of Three and six months ended, 2016 (Unaudited in U.S. dollars) 1

2 Condensed Consolidated Interim Balance Sheets (Amounts in thousands of U.S. Dollars) Assets:, 2016 September 30, 2015 Current assets: Cash and cash equivalents $ 29,088 $ 26,405 Accounts receivable 2,636 3,598 Unbilled revenue Inventories 2,410 1,821 Investment tax credits receivable Prepaid and other assets Total current assets 35,090 32,838 Investment tax credits 1,197 1,586 Property and equipment 2,028 1,910 Intangible assets Total assets $ 39,056 $ 37,035 Liabilities and shareholders equity: Current liabilities: Accounts payable and accrued liabilities $ 3,036 $ 2,869 Deferred revenue Total current liabilities 3,439 3,151 Deferred income taxes Shareholders equity: Share capital (note 4) 21,960 21,106 Contributed surplus 2,532 2,697 Retained earnings 10,624 9,520 Total shareholders equity 35,116 33,323 Total liabilities and shareholders equity $ 39,056 $ 37,035 2

3 Condensed Consolidated Interim Statements of Income (Amounts in thousands of U.S. Dollars, except per share data) Three months ended Six months ended Revenue: Payment Processing Services $ 3,963 $ 3,544 $ 7,803 $ 6,941 Digital Imaging Products 1,176 2,214 2,765 4,663 5,139 5,758 10,568 11,604 Cost of revenue 1,605 2,322 3,388 4,735 Gross profit 3,534 3,436 7,180 6,869 Operating expenses: Sales and marketing ,359 1,487 Research and development 1,266 1,143 2,251 2,306 General and administration ,195 1,000 2,609 2,377 4,805 4,793 Operating income 925 1,059 2,375 2,076 Other items: Foreign exchange gain (loss) 3 (31) (4) (15) Interest income Other income (note 6) (15) Income before income taxes 955 1,044 2,421 2,212 Income tax expense Current Deferred (129) - (106) Net income $ 669 $ 789 $ 1,695 $ 1,912 Earnings per share basic and diluted $ 0.03 $ 0.04 $ 0.07 $ 0.09 Weighted average common shares outstanding during the period 22,569,351 21,849,351 22,306,851 21,836,851 3

4 Condensed Consolidated Interim Statements of Comprehensive Income (Amounts in thousands of U.S. Dollars) Three months ended Six months ended Net income $ 669 $ 789 $ 1,695 $ 1,912 Other comprehensive income: Effective portion of changes in fair value of cash flow hedges 41 (38) - (85) Comprehensive income $ 710 $ 751 $ 1,695 $ 1,827 4

5 Condensed Consolidated Interim Statements of Changes in Shareholders Equity (Amounts in thousands of U.S. Dollars) Share capital Contributed surplus Accumulated other comprehensive income Retained earnings Total Balance as at September 30, 2014 $ 20,512 $ 2,535 $ - $ 5,171 $ 28,218 Total comprehensive income for the period: Net income ,912 1,912 Effective portion of changes in fair value of cash flow hedges - - (85) - (85) Issuance of share capital 594 (241) Dividends paid (456) (456) 21,106 2,294 (85) 6,627 29,942 Stock-based compensation Balance as at, 2015 $ 21,106 $ 2,506 $ (85) $ 6,627 $ 30,154 Balance as at September 30, 2015 $ 21,106 $ 2,697 $ - $ 9,520 $ 33,323 Total comprehensive income for the period: Net income ,695 1,695 Effective portion of changes in fair value of cash flow hedges Issuance of share capital 854 (308) Dividends paid (591) (591) 854 (308) - 1,104 1,650 Stock based compensation Balance as at, 2016 $ 21,960 $ 2,532 $ - $ 10,624 $ 35,116 5

6 Condensed Consolidated Interim Statements of Cash Flows (Amounts in thousands of U.S. Dollars) Six months ended Cash provided by (used in): Operations: Net income $ 1,695 $ 1,912 Items not involving cash: Current income tax expense Deferred income tax expense (106) - Depreciation of property and equipment Amortization of intangible assets Stock-based compensation Interest earned (50) (31) Change in non-cash operating working capital (note 5) 168 (1,470) Cash provided by operations 3,307 1,442 Interest received Net cash provided by operating activities 3,375 1,473 Financing: Issuance of share capital Dividends paid (591) (456) Cash used in by financing activities (45) (103) Investing: Purchase of property and equipment (415) (126) Additions to intangible assets (232) (230) Cash used in investing activities (647) (356) Increase (decrease) in cash and cash equivalents 2,683 1,014 Cash and cash equivalents, beginning of period 26,405 22,422 Cash and cash equivalents, end of period $ 29,088 $ 23,436 6

7 Notes to Consolidated Financial Statements (Amounts in thousands of U.S. Dollars, Except Share and Per Share Amounts) 1) Reporting Entity RDM Corporation ( RDM or the Company ), a company with its principal place of business and registered head office in Canada, was incorporated on January 23, 1987 under the Canada Business Corporations Act and is listed under the symbol RC on the Toronto Stock Exchange. The condensed consolidated interim financial statements of the Company as at and for the three and six months ended, 2016 and 2015 comprise the accounts of the Company and its subsidiaries (together referred to as the Company ). RDM is a provider of solutions for the electronic commerce and payment processing industries. RDM provides remote check deposit systems and web-based image management and transaction processing services for retailers, banks, small businesses, independent sales organizations, payment processors and government agencies, as well as print quality control and image quality systems for a variety of global customers. 2) Basis of Preparation These condensed consolidated interim financial statements have been prepared by the Management of RDM Corporation and have not been audited or reviewed by the Company s external auditors. These condensed consolidated interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting. These condensed consolidated interim financial statements follow the same accounting policies and methods of application as set out in the consolidated financial statements for the year ended September 30, These statements should be read in conjunction with the consolidated financial statements for the year ended September 30, ) Foreign Exchange Management The functional and presentation currency is the U.S. dollar. The Company generates the majority of its revenues in U.S. dollars. A portion of the Company s expenses are incurred in Canadian dollars. The Company often enters into U.S. dollar forward contract as hedges against foreign currency exposure. At, 2016, the Company had no outstanding U.S. dollar forward contracts. At December 31, 2015, the Company had outstanding U.S. dollar forward contracts totaling U.S. $1,650 at a rate of Canadian $1.35 to U.S. $ ) Share Capital, Stock Options and Cash-Settled Restricted Share Units, 2016 September 30, 2015 Authorized: Unlimited number of voting common shares Unlimited number of non-voting preferred shares Issued and outstanding: 22,588,726 common shares (September 30, ,024,976) $ 21,960 $ 21,106 a) Three months ended, 2016 transactions: During the second quarter of fiscal 2016, 38,750 options were exercised for common shares for total proceeds of $30. In addition, 35,000 options were granted and 60,000 cancelled. No shares were repurchased or cancelled. b) Three months ended, 2015 transactions: During the second quarter of fiscal 2015, 351,250 options were exercised for common shares for total proceeds of $326. No shares were repurchased or cancelled. c) The Company maintains Stock Option Plans ( the Plans ) to encourage ownership of the Company by Directors, Officers and employees of the Company. The maximum number of shares issuable under the Plans is equal to 10% of the Company s issued and outstanding common shares plus an additional 375,000 pursuant to an exemption under Section 613(c) of the Toronto Stock Exchange Manual. d) At, 2016, 1,378,500 options to purchase common shares were outstanding (2015 1,847,250). e) On February 24, 2016 the Company established a new Cash-Settled Restricted Share Unit Plan ( CRSU ). 7

8 A summary of activity under CRSU is as follows: Number of CRSUs Outstanding Weighted Average Remaining Contractual Life (years) Balance at December 31, Granted 262,920 Vested and settled in cash - Balance at, , Non-vested at, , The compensation cost of the CRSUs are recognized ratably over the service/vesting period relating to the grant. A total of 112,680 CRSUs vest based on satisfying certain performance conditions. Vesting on the remaining 150,240 is time based. The last tranche vests on February 25, An aggregate accrued liability of $136 has been recorded at, The unrecognized aggregate liability for the unvested CRSUs was $709 at, The fair value of the CRSU liability is based on the closing price of common shares at the balance sheet date. The total compensation cost related to CRSUs recognized in the Condensed Consolidated Interim Statement of Income for the three months ended, 2016 was $136. 5) Change in non-cash working capital The change in non-cash working capital is composed of the following: Six months ended Accounts receivable $ 944 $ (463) Unbilled revenue (14) 1 Inventory (589) 388 Investment tax credits (421) (60) Prepaid and other assets Accounts payable and accrued liabilities 31 (1,347) Deferred revenue 121 (15) $ 168 $ (1,470) 6) Other income Three months ended Six months ended Other income $ - $ - $ - $ 120 Change in settlement of claim In fiscal 2013 the Company recorded other expense of $2,240 as an estimate of the full cost of a settlement of a claim by PPS Data, LLC for alleged patent infringement. The Company s estimate included $600 payable in the future. In the first quarter of 2015 the final amount payable was determined to be $480. The difference of $120 was recorded in other income. 8