Condensed Consolidated Interim Financial Statements of
Three and nine months ended June 30, 2015
(Unaudited – in U.S. dollars)
1
RDM CORPORATION
Condensed Consolidated Interim Balance Sheets
(Amounts in thousands of U.S. Dollars)
(Not audited or reviewed by the Company’s external auditor)
June 30, 2015
September 30, 2014
Assets:
Current assets:
Cash and cash equivalents
Accounts receivable
Unbilled revenue
Inventories
Investment tax credit receivable
Prepaid and other assets
Total current assets
$
Investment tax credits
Property and equipment
Intangible assets
Total assets
$
24,677
3,643
121
1,912
100
816
31,269
2,230
748
34,247
$
$
22,422
3,292
124
2,132
188
807
28,965
270
2,504
771
32,510
Liabilities and shareholders’ equity:
Current liabilities:
Accounts payable and accrued liabilities
Deferred revenue
Total current liabilities
$
Shareholders’ equity:
Share capital (note 4)
Contributed surplus
Accumulated other comprehensive income
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
$
2,552
270
2,822
21,106
2,609
7,710
31,425
34,247
See accompanying notes to the condensed consolidated interim financial statements.
2
$
$
3,989
303
4,292
20,512
2,535
5,171
28,218
32,510
RDM CORPORATION
Condensed Consolidated Interim Statements of Income
(Amounts in thousands of U.S. Dollars, except per share data)
(Not audited or reviewed by the Company’s external auditor)
Three months ended
June 30
2014
2015
Revenue:
Payment Processing Services
Digital Imaging Products
$
Cost of revenue
Gross profit
Operating expenses:
Sales and marketing
Research and development
General and administration
Operating income
Other items:
Foreign exchange gain (loss)
Interest income
Other income (expense) (note 6)
3,698
2,113
5,811
2,223
3,588
3,578
1,990
5,568
2,436
3,132
$
10,639
6,776
17,415
6,958
10,457
$
10,718
5,786
16,504
7,196
9,308
729
1,129
576
2,434
807
1,146
462
2,415
2,216
3,435
1,576
7,227
2,295
3,378
1,549
7,222
1,154
717
3,230
2,086
(7)
18
451
462
(17)
12
(153)
(158)
(22)
49
571
598
76
30
(153)
(47)
$
559
24
535
$
3,828
565
3,263
$
2,039
72
1,967
$
0.03
$
0.15
$
0.09
Income before income taxes
Current income tax expense
Net income
$
1,616
265
1,351
Earnings per share – basic and diluted
$
0.06
Weighted average common shares
outstanding during the period
$
Nine months ended
June 30
2015
2014
22,024,976
21,589,226
See accompanying notes to the condensed consolidated interim financial statements.
3
21,836,851
21,485,476
RDM CORPORATION
Condensed Consolidated Interim Statements of Comprehensive Income
(Amounts in thousands of U.S. Dollars)
(Not audited or reviewed by the Company’s external auditor)
Three months ended
June 30
2014
2015
Nine months ended
June 30
2015
2014
Net income
$
1,351
$
535
$
3,263
$
1,967
Other comprehensive income:
Effective portion of changes in fair
value of cash flow hedges
Comprehensive income
$
85
1,436
$
535
$
3,263
$
1,967
See accompanying notes to the condensed consolidated interim financial statements.
4
RDM CORPORATION
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
(Amounts in thousands of U.S. Dollars)
(Not audited or reviewed by the Company’s external auditor)
Balance as at September 30, 2013
Total comprehensive income
for the period:
Net income
Effective portion of changes in fair
value of cash flow hedges
Share
capital
$ 20,100
Contributed
surplus
$
2,445
Accumulated
other
comprehensive
income
$
29
Retained
earnings
$ 2,922
$
Total
25,496
-
-
-
1,967
1,967
-
-
(29)
-
(29)
Stock-based compensation
Balance as at June 30, 2014
383
20,483
$ 20,483
$
(98)
2,347
102
2,449
$
-
$
(395)
4,494
4,494
$
285
(395)
27,324
102
27,426
Balance as at September 30, 2014
$ 20,512
$
2,535
$
-
$
5,171
$
28,218
Issuance of share capital
Dividends paid
Total comprehensive income for the
period:
Net income
Effective portion of changes in fair
value of cash flow hedges
Issuance of share capital
Dividends paid
Stock–based compensation
Balance as at June 30, 2015
-
-
-
3,263
3,263
-
-
-
-
-
594
594
$ 21,106
(241)
(241)
315
2,609
-
(724)
2,539
7,710
353
(724)
2,892
315
31,425
$
$
See accompanying notes to the condensed consolidated interim financial statements.
5
-
$
$
RDM CORPORATION
Condensed Consolidated Interim Statements of Cash Flows
(Amounts in thousands of U.S. Dollars)
(Not audited or reviewed by the Company’s external auditor)
Nine months ended June 30
2015
2014
Cash provided by (used in):
Operations:
Net income
Items not involving cash:
Current income tax expense
Depreciation of property and equipment
Amortization of intangible assets
Write-down of property and equipment
Stock-based compensation
Interest earned
Change in non-cash operating working capital (note 5)
Cash provided by operations
Interest received
Net cash provided by operating activities
$
3,263
$
1,967
565
514
264
315
(49)
(1,805)
3,067
40
3,107
72
567
352
7
102
(12)
(1,733)
1,322
9
1,331
Financing:
Issuance of share capital
Dividends paid
Cash used in by financing activities
353
(724)
(371)
285
(395)
(110)
Investing:
Purchase of property and equipment
Additions to intangible assets
Cash used in investing activities
(240)
(241)
(481)
(1,278)
(537)
(1,815)
2,255
22,422
24,677
(594)
20,126
19,532
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
$
See accompanying notes to the condensed consolidated interim financial statements.
6
$
RDM CORPORATION
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 nine months ended June 30, 2015 and 2014 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, 2014. These statements
should be read in conjunction with the consolidated financial statements for the year ended September 30, 2014.
3)
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 enters into U.S. dollar
forward contract as hedges against foreign currency exposure.
At June 30, 2015, the Company had no outstanding U.S. dollar forward contracts. At March 31, 2015, the Company had
outstanding U.S. dollar forward contracts totaling U.S. $1,500 at a rate of Canadian $1.19 to U.S. $1.00.
4)
Share Capital and Stock Options
June 30, 2015
Authorized:
Unlimited number of voting common shares
Unlimited number of non-voting preferred
shares
Issued and outstanding:
22,024,976 common shares
(September 30, 2014 – 21,648,726)
a)
b)
c)
d)
$
21,106
September 30, 2014
$
20,512
Three months ended June 30, 2015 transactions:
During the third quarter of fiscal 2015, no options were exercised for common shares. In addition, 120,000 options
were granted. No shares were repurchased or cancelled.
Three months ended June 30, 2014 transactions:
During the third quarter of fiscal 2014, 79,000 options were exercised for common shares for total proceeds of
$75,000. In addition, 600,000 options were granted. No shares were repurchased or cancelled.
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 575,000 pursuant to an exemption
under Section 613(c) of the Toronto Stock Exchange Manual.
At June 30, 2015, 1,967,250 options to purchase common shares were outstanding (2014 – 2,068,500).
7
5)
Change in non-cash working capital
The change in non-cash working capital is composed of the following:
Nine months ended June 30
Accounts receivable
Unbilled revenue
Inventory
Investment tax credits
Prepaid and other assets
Accounts payable and accrued liabilities
Deferred revenue
$
$
6)
2015
(342)
3
220
(207)
(9)
(1,437)
(33)
(1,805)
$
$
2014
(1,574)
(11)
(236)
75
(114)
141
(14)
(1,733)
Other income
Change in estimated royalties
Recognition of investment tax credits
Obligation for future payments
Change in settlement claim
Other income
a)
$
$
Three months ended
June 30
2015
2014
266
$
185
(153)
451
$
(153)
$
$
Nine months ended
June 30
2015
2014
266
$
185
(153)
120
571
$
(153)
Change in estimated royalties
The Company pays fees to third parties related to the licensing of patents for technology used in its products and
services. Estimated costs of $266 recorded as liability in periods prior to 2015 were reversed in 2015 to reflect a
settlement between one of its customers and a third party and recorded in other income.
b)
Recognition of Investment Tax Credits
The Company has recorded investment tax credits of $185 which had been earned in periods prior to 2015 but not
recognized. The Company has determined that there is reasonable assurance, based on estimated taxable income,
that these credits will be realized in 2015.
c)
Obligation for future payments
In fiscal 2014 the Company entered into a lease for office space and consolidated its corporate staff in this new
facility. As a result, the Company ceased to use one of its rented facilities on April 25, 2014. Efforts to sublet and
offset the ongoing lease contract have been unsuccessful. The obligation for future payments of $153 was charged
to other expense in 2014.
d)
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 has
been recorded in other income.
8