UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 6-K
Report of Foreign issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
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For the Month of November 2003
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(Commission File. No 0-30718).
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SIERRA WIRELESS, INC., A CANADA CORPORATION
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(Translation of registrant's name in English)
13811 Wireless Way
Richmond, British Columbia, Canada V6V 3A4
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(Address of principal executive offices and zip code)
Registrant's Telephone Number, including area code: 604-231-1100
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F:
Form 20-F X 40-F
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Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934:
Yes: No: X
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COMPILATION REPORT
The Board of Directors
Sierra Wireless, Inc.
We have read the accompanying unaudited pro forma consolidated statements of
operations of Sierra Wireless, Inc. (the "Company") for the nine-month period
ended September 30, 2003 and for the year ended December 31, 2002, and have
performed the following procedures:
1. Compared the figures in the columns "Sierra Wireless US GAAP" to the
unaudited financial statements of the Company for the nine-month period
ended September 30, 2003, and the audited financial statements of the
Company for the year ended December 31, 2002, respectively, and found
them to be in agreement.
2. Compared the figures in the columns captioned "AirPrime US GAAP" to the
unaudited financial statements of AirPrime, Inc. for the period from
January 1, 2003 to August 12, 2003, and the audited financial statements
of AirPrime, Inc. for the year ended December 31, 2002, respectively,
and found them to be in agreement.
3. Made enquiries of certain officials of the Company who have
responsibility for financial and accounting matters about:
(a) The basis for determination of the pro forma adjustments; and
(b) Whether the pro forma consolidated statements of operations comply
as to form in all material respects with National Instrument 44-101
for incorporation by reference in the short form prospectus relating
to the sale and issue of common shares.
The officials:
(a) Described to us the basis for determination of the pro forma
adjustments, and
(b) Stated that the pro forma consolidated statements of operations
comply as to form in all material respects with National Instrument
44-101 for incorporation by reference in the short form prospectus
relating to the sale and issue of common shares.
4. Read the notes to the pro forma consolidated statements of operations,
and found them to be consistent with the basis described to us for
determination of the pro forma adjustments.
5. Recalculated the application of the pro forma adjustments to the
aggregate of the amounts in the columns captioned "Sierra Wireless US
GAAP" and "AirPrime US GAAP", and "Pro Forma Consolidated Statement of
Operations US GAAP" for the nine-month period ended September 30, 2003,
and for the year ended December 31, 2002, and found the amounts in the
column captioned "Pro Forma Consolidated Statement of Operations CDN
GAAP" to be arithmetically correct.
A pro forma financial statement is based on management assumptions and
adjustments which are inherently subjective. The foregoing procedures are
substantially less than either an audit or a review, the objective of which
is the expression of assurance with respect to management's assumptions, the
pro forma adjustments, and the application of the adjustments to the
historical financial information. Accordingly, we express no such assurance.
The foregoing procedures would not necessarily reveal matters of significance
to the pro forma consolidated statements of operations, and we therefore make
no representation about the sufficiency of the procedures for the purposes of
a reader of such statements.
/s/ KPMG LLP
Chartered Accountants
Vancouver, Canada
October 28, 2003
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COMMENTS FOR UNITED STATES READERS ON DIFFERENCES BETWEEN CANADIAN AND
UNITED STATES REPORTING STANDARDS
The above report, provided solely pursuant to Canadian requirements, is
expressed in accordance with standards of reporting generally accepted in
Canada. Such standards contemplate the expression of an opinion with respect
to the compilation of pro forma financial statements. United States standards
do not provide for the expression of an opinion on the compilation of pro
forma financial statements. To report in conformity with United States
standards on the reasonableness of the pro forma adjustments and their
application to the pro forma financial statements requires an examination or
review substantially greater in scope than the review we have conducted.
Consequently, we are unable to express any opinion in accordance with
standards of reporting generally accepted in the United States with respect
to the compilation of the accompanying unaudited pro forma financial
information.
/s/ KPMG LLP
Chartered Accountants
Vancouver, Canada
October 28, 2003
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SIERRA WIRELESS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
(Expressed in thousands of United States dollars, except per share amounts)
(Unaudited)
Pro Forma Pro Forma
Consolidated Consolidated
Sierra Statement of CDN GAAP Statement of
Wireless AirPrime Pro Forma Operations Adjustments Operations
US GAAP US GAAP Adjustments Note (2) US GAAP Note (3) CDN GAAP
-------- -------- ----------- -------- ------------ ----------- ------------
Revenue............................. $ 77,130 $ 19,152 $ -- $ 96,282 $ -- $ 96,282
Cost of goods sold.................. 69,132 13,055 (54) (d) 82,133 -- 82,133
-------- -------- ------- -------- ----- --------
Gross margin........................ 7,998 6,097 54 14,149 -- 14,149
-------- -------- ------- -------- ----- --------
Expenses
Sales and marketing............... 11,564 2,472 (326) (d) 13,710 -- 13,710
Research and development, net..... 14,896 13,115 1,520 (b) 29,355 395 29,750
(176) (d)
Administration.................... 4,785 6,778 (265) (d) 11,298 -- 11,298
Restructuring and other charges... 12,869 -- 821 (d) 13,690 -- 13,690
Amortization...................... 2,331 -- 168 (b) 2,499 -- 2,499
-------- -------- ------- -------- ----- --------
46,445 22,365 1,742 70,552 395 70,947
-------- -------- ------- -------- ----- --------
Loss from operations................ (38,447) (16,268) (1,688) (56,403) (395) (56,798)
Other income (expense).............. 247 (453) 583 (c) 377 -- 377
-------- -------- ------- -------- ----- --------
Loss before income taxes............ (38,200) (16,721) (1,105) (56,026) (395) (56,421)
Income tax expense.................. 3,463 -- -- 3,463 -- 3,463
-------- -------- ------- -------- ----- --------
Net loss............................ $(41,663) $(16,721) $(1,105) $(59,489) $(395) $(59,884)
-------- -------- ------- -------- ----- --------
-------- -------- ------- -------- ----- --------
Loss per share for the period....... $ (2.56) $ (2.97) $ (2.99)
-------- -------- --------
-------- -------- --------
Weighted average number of shares
(in thousands).................... 16,304 3,709 (a) 20,013 20,013
-------- ------- -------- --------
-------- ------- -------- --------
See accompanying notes to the unaudited pro forma consolidated statements of
operations.
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SIERRA WIRELESS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
(Expressed in thousands of United States dollars, except per share amounts)
(Unaudited)
Pro Forma Pro Forma
Consolidated Consolidated
Sierra Statement of CDN GAAP Statement of
Wireless AirPrime Pro Forma Operations Adjustments Operations
US GAAP US GAAP Adjustments Note (2) US GAAP Note (3) CDN GAAP
-------- -------- ----------- -------- ------------ ----------- ------------
Revenue.............................. $66,930 $16,805 $ -- $83,735 $ -- $83,735
Cost of goods sold................... 39,975 11,591 -- 51,566 -- 51,566
------- ------- ------- ------- ----- -------
Gross margin......................... 26,955 5,214 -- 32,169 -- 32,169
------- ------- ------- ------- ----- -------
Expenses
Sales and marketing................ 7,972 1,011 -- 8,983 -- 8,983
Research and development, net...... 10,373 5,099 950 (b) 16,422 109 16,531
Administration..................... 4,399 1,812 -- 6,211 -- 6,211
Restructuring and other charges.... 1,220 1,680 (2,900) (e) -- -- --
Integration costs ................. 1,026 -- -- 1,026 -- 1,026
Amortization....................... 1,689 1,342 105 (b) 3,136 -- 3,136
------- ------- ------- ------- ----- -------
26,679 10,944 (1,845) 35,778 109 35,887
------- ------- ------- ------- ----- -------
Earnings (loss) from operations...... 276 (5,730) 1,845 (3,609) (109) (3,718)
Other income (expense)............... 197 (3,100) 3,118 (c) 215 -- 215
------- ------- ------- ------- ----- -------
Earnings (loss) before income taxes.. 473 (8,830) 4,963 (3,394) (109) (3,503)
Income tax expense................... 143 -- -- 143 -- 143
------- ------- ------- ------- ----- -------
Net earnings (loss).................. $ 330 $(8,830) $ 4,963 $(3,537) $(109) $(3,646)
------- ------- ------- ------- ----- -------
------- ------- ------- ------- ----- -------
Earnings (loss) per share for the
period:
Basic.............................. $ 0.02 $ (0.18) $ (0.18)
Diluted............................ $ 0.02 $ (0.18) $ (0.18)
------- ------- -------
------- ------- -------
Weighted average number of shares
(in thousands)
Basic.............................. 17,054 3,043 (a) 20,097 20,097
Diluted............................ 17,564 20,097 20,097
------- ------- -------
------- ------- -------
See accompanying notes to the unaudited pro forma consolidated statements of
operations.
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SIERRA WIRELESS, INC.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in thousands of United States dollars, except per share amounts)
(Unaudited)
1. BASIS OF PRESENTATION
On August 12, 2003, we acquired 100 percent of the outstanding securities of
AirPrime, Inc. ("AirPrime"), a privately-held supplier of high-speed CDMA
wireless products located in Carlsbad, California. We subsequently changed
the name of AirPrime to Sierra Wireless America, Inc. The results of
AirPrime's operations have been included in our consolidated financial
statements since that date.
The aggregate purchase price was $23,743, including common shares valued at
$22,377 and costs related to the acquisition of $1,366. The value of the
3,708,521 common shares issued was determined based on the average market
price of Sierra Wireless, Inc.'s common shares over the two day period before
and after June 16, 2003, which was the date the terms of the acquisition were
agreed to and announced.
The accompanying unaudited pro forma consolidated statement of operations for
the year ended December 31, 2002 has been prepared by management in
accordance with United States and Canadian generally accepted accounting
principles ("GAAP") and is derived from the audited consolidated financial
statements of Sierra Wireless, Inc. ("Sierra Wireless") for the year ended
December 31, 2002 and the audited financial statements of AirPrime for the
year ended December 31, 2002.
The accompanying unaudited pro forma consolidated statement of operations for
the nine month period ended September 30, 2003 has been prepared by
management in accordance with United States and Canadian GAAP and is derived
from the unaudited consolidated financial statements of Sierra Wireless for
the nine months ended September 30, 2003 (which includes the results of
AirPrime since August 12, 2003), and the unaudited financial statements of
AirPrime for the period from January 1, 2003 to June 30, 2003, plus financial
information in the unaudited accounting records of AirPrime for the period
from July 1, 2003 to August 12, 2003.
The unaudited pro forma consolidated statements of operations are presented
as if the transaction discussed above had taken place on January 1, 2002. The
accounting policies used in the preparation of the unaudited pro forma
consolidated statements of operations are those disclosed in Sierra
Wireless's audited consolidated financial statements for the year ended
December 31, 2002. Management has determined that no adjustments are
necessary to conform AirPrime's audited and unaudited financial information
with the accounting policies used by Sierra Wireless.
The unaudited pro forma consolidated statements of operations are not
necessarily indicative of the results that actually would have been achieved
if the transaction reflected therein had been completed on the date indicated
or the results which may be obtained in the future. In preparing the
unaudited pro forma consolidated statements of operations, no adjustments
have been made to reflect the operating benefits and general and
administrative cost savings expected to result from combining the operations
of Sierra Wireless and AirPrime.
The unaudited pro forma consolidated statements of operations should be read
in conjunction with the audited consolidated financial statements of Sierra
Wireless and AirPrime for the year ended December 31, 2002 and the unaudited
consolidated financial statements of Sierra Wireless for the nine months
ended September 30, 2003, including the notes thereto.
A pro forma consolidated balance sheet is not provided as the transaction is
reflected in the unaudited consolidated balance sheet of Sierra Wireless as
at September 30, 2003.
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2. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS
The acquisition was accounted for using the purchase method of accounting.
The assets, liabilities, revenue and expenses of AirPrime have been included
in our consolidated financial statements from August 12, 2003, the date of
acquisition. The following table summarizes the estimated fair value of the
assets acquired and liabilities assumed at the date of acquisition. We are in
the process of obtaining third party valuations of certain intangible assets,
thus the allocation of the purchase price is subject to change.
Current assets................................................... $ 4,716
Property and equipment........................................... 1,352
Acquired in-process R&D.......................................... 290
Intangible assets................................................ 8,760
Goodwill......................................................... 16,057
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Total assets acquired.......................................... 31,175
Current liabilities.............................................. 7,432
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Net assets acquired.............................................. $23,743
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Consideration:
Common shares (3,708,521 Sierra Wireless shares)................. $22,377
Acquisition costs................................................ 1,366
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$23,743
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Description of acquisition:
AirPrime was a privately-held supplier of high-speed CDMA wireless products.
Located in Carlsbad, California, AirPrime was focused on the development of
wireless CDMA modules and software, for original equipment manufacturers,
that enable faster wireless transmission of data and voice across worldwide
cellular and PCS networks. AirPrime provided wireless access solutions for
use in handheld computers, notebook PCs and a variety of other mobile
computing products.
AirPrime's product line included a full suite of high-speed CDMA wireless
access solutions and products including the Helium 1x family of wireless
embedded modules for CDMA2000 1X and 1xEVDO.
Identifiable intangible assets:
The following table presents details of the purchased intangible assets:
Estimated Useful
Life (in years) Amount
---------------- ------
Intellectual property............................ 5 $7,600
Customer relationships........................... 5 690
Licenses......................................... 5 320
Databases........................................ 5 150
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Total purchased intangible assets.............. $8,760
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At the acquisition date, AirPrime had several developed products that
provided a stream of identifiable benefits from the sale of these products.
The existing intellectual property was valued using a discounted cash flow
approach using a discount rate of 22%, resulting in an allocated fair value
of $7,600 at the date of acquisition. AirPrime had also developed customer
relationships that are expected to provide a stream of identifiable benefits
from the sale of products to these customers. The customer relationships were
valued using a discounted cash flow approach using a discount rate of 22%,
resulting in an allocated fair value of $690 at the date of acquisition. In
addition, Sierra Wireless acquired in-process research and development
("IPR&D") that was valued using a discounted cash flow approach using a
discount rate of 27%, resulting in an allocated fair value of $290 at the
date of acquisition. It was determined that the acquired IPR&D projects had
not yet reached technological feasibility and had no alternative future use.
Accordingly, this amount was immediately expensed in restructuring and other
charges in Sierra Wireless's consolidated statements of operations and
deficit prepared in accordance with United States GAAP at the acquisition
date.
The following adjustments have been made to reflect the transaction described
above:
(a) The pro forma loss per share has been calculated based on the total
weighted average number of common shares held by shareholders of Sierra
Wireless during the period and 3,708,521 common shares assumed to be
issued to effect the acquisition at January 1, 2002.
For the year ended December 31, 2002, the pro forma adjustment of
3,708,521 shares is added to United States GAAP shares because none of
the 3,708,521 shares had been included in the United States GAAP
calculation of shares.
For the nine months ended September 30, 2003, the pro forma adjustment
of 3,042,889 shares represents the 3,708,521 common shares assumed
to be issued, less the 665,632 shares already included in Sierra
Wireless's calculation of the weighted average number of shares
outstanding due to their inclusion from August 12, 2003.
(b) To adjust the amortization of intangible assets acquired from AirPrime
based on their estimated fair market value and estimated useful lives.
For purposes of these unaudited pro forma consolidated financial
statements of operations, the intangible assets are being amortized
to income on a rational and systematic basis over their useful lives
which have been determined to be five years. The five year amortization
period is management's estimate of the expected useful life of the
assets and is consistent with our accounting policies disclosed in
our annual consolidated financial statements.
(c) To eliminate interest expense and financing costs of convertible debt,
incurred by AirPrime prior to a capital reorganization immediately
prior to the acquisition, that would not have existed if Sierra
Wireless had acquired AirPrime as of January 1, 2002.
(d) To reclassify specific AirPrime restructuring costs to conform to
Sierra Wireless's historical basis of financial statement presentation.
(e) To eliminate restructuring costs in both Sierra Wireless and AirPrime
which were related to the AirPrime acquisition. For pro forma purposes,
these restructuring costs would have been incurred immediately prior to
the date of acquisition of AirPrime.
3. RECONCILIATION OF U.S. GAAP PRO FORMA TO CANADIAN GAAP PRO FORMA
We prepare the pro forma consolidated statements of operations in accordance
with United States and Canadian GAAP. These pro forma consolidated statements
of operations prepared in accordance with United States GAAP conform in all
material respects to Canadian GAAP, except with respect to the treatment of
IPR&D projects. Under United States GAAP, IPR&D projects that have not yet
reached technological feasibility and have no alternative future use are
expensed. Under Canadian GAAP, the IPR&D projects are recorded as an
intangible asset and amortized over their useful life. We have estimated the
useful life to be two years.
As disclosed in note 2, IPR&D projects were acquired as a result of the
AirPrime acquisition. Under Canadian GAAP, the intangible asset is being
amortized in both pro forma consolidated statements of operations presented.
In addition, for the year ended December 31, 2002, under Canadian GAAP, IPR&D
is being amortized related to the June 2000 acquisition of the CDMA modules
business from QUALCOMM Inc. ("QUALCOMM"). At December 31, 2002, the IPR&D
related to the QUALCOMM acquisition had been fully amortized.
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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.
Sierra Wireless, Inc.
By: /s/ Peter W. Roberts
-----------------------------------------
Peter W. Roberts, Chief Financial Officer
Date: November 4, 2003
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