AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 10, 2003
Registration No. 333-110219
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--------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM F-10
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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SIERRA WIRELESS, INC.
(Exact name of registrant as specified in its charter)
BRITISH COLUMBIA, CANADA 3663 98-0163236
(Province or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or organization)
------------------------
13811 WIRELESS WAY
RICHMOND, BRITISH COLUMBIA
CANADA V6V 3A4
(604) 231-1100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
MICHAEL MCARTHUR-PHILLIPS
DAVIS WRIGHT TREMAINE LLP
23RD FLOOR
1300 S.W. FIFTH AVENUE
PORTLAND, OREGON 97201
(503) 241-2300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
Copies to:
PETER C. KALBFLEISCH PETER ROBERTS RICHARD BALFOUR DANIEL CLIVNER
MICHAEL RAVEN CHIEF FINANCIAL OFFICER MICHAEL URBANI YOUNGMI NASH
BLAKE, CASSELS & GRAYDON LLP SIERRA WIRELESS, INC. MCCARTHY TETRAULT LLP SIMPSON THACHER &
SUITE 2600, 13811 WIRELESS WAY SUITE 1300 BARTLETT LLP
THREE BENTALL CENTRE RICHMOND, BRITISH COLUMBIA PACIFIC CENTER 10 UNIVERSAL CITY PLAZA
595 BURRARD STREET CANADA V6V 3A4 777 DUNSMUIR STREET SUITE 1850
VANCOUVER, BRITISH COLUMBIA (604) 231-1100 VANCOUVER, BRITISH COLUMBIA LOS ANGELES,
CANADA V7X 1L3 CANADA V7Y 1K2 CALIFORNIA 91608
(604) 631-3300 (604) 643-7100 (818) 755-7000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
PROVINCE OF BRITISH COLUMBIA
(Principal Jurisdiction regulating this offering)
------------------------------
It is proposed that this filing shall become effective (check appropriate box)
A. /X/ Upon filing with the Commission, pursuant to Rule 467(a) (if in
connection with an offering being made contemporaneously in the
United States and Canada).
B. / / At some future date (check the appropriate box below)
1. / / Pursuant to Rule 467(b) on ( ) at ( ) (designate a time
not sooner than 7 calendar dates after filing).
2. / / Pursuant to Rule 467(b) on ( ) at ( ) (designate a time 7
calendar days or sooner after filing) because the securities
regulatory authority in the review jurisdiction has issued a
receipt or notification of clearance on ( ).
3. / / Pursuant to Rule 467(b) as soon as practicable after
notification of the Commission by the Registration or the
Canadian securities regulatory authority of the review
jurisdiction that a receipt or notification of clearance has
been issued with respect hereto.
4. / / After the filing of the next amendment to this Form (if
preliminary material is being filed).
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to the home jurisdiction's shelf
prospectus offering procedures, check the following box. / /
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PART I
INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS
I-1
The information in this prospectus is not complete and may be changed. Neither
Sierra Wireless nor the Selling Shareholders may sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and we are
not soliciting offers to buy these securities in any state where the offer or
sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 10, 2003
PROSPECTUS
4,000,000 SHARES
[LOGO]
COMMON SHARES
-------------------------------------------------------------------------
This is an offering of common shares of Sierra Wireless, Inc. Of the
4,000,000 common shares being offered, Sierra Wireless is selling
3,842,222 common shares and the selling shareholders are selling 157,778 common
shares. We will not receive any of the proceeds from the sale of common shares
by the selling shareholders.
Our common shares are quoted on the Nasdaq National Market under the symbol
"SWIR" and listed on the Toronto Stock Exchange under the symbol "SW." The TSX
has conditionally approved the listing of the common shares offered by the
Company under this prospectus, subject to compliance with the requirements of
the TSX on or before February 4, 2004. On November 7, 2003, the last reported
sale price of our common shares on the Nasdaq National Market was $17.00 per
share and on the Toronto Stock Exchange was CDN$22.44 per share.
INVESTING IN OUR COMMON SHARES INVOLVES RISKS. SEE THE SECTION TITLED "RISK
FACTORS" BEGINNING ON PAGE 12 OF THIS PROSPECTUS.
WE ARE PERMITTED, UNDER A MULTIJURISDICTIONAL DISCLOSURE SYSTEM ADOPTED BY
THE UNITED STATES, TO PREPARE THIS PROSPECTUS IN ACCORDANCE WITH CANADIAN
DISCLOSURE REQUIREMENTS, WHICH ARE DIFFERENT FROM THOSE OF THE UNITED STATES.
OWNING THE COMMON SHARES MAY SUBJECT YOU TO TAX CONSEQUENCES BOTH IN THE
UNITED STATES AND CANADA. THIS PROSPECTUS MAY NOT DESCRIBE THESE TAX
CONSEQUENCES FULLY. YOU SHOULD READ THE TAX DISCUSSION UNDER "CERTAIN TAX
CONSIDERATIONS FOR U.S. SHAREHOLDERS."
YOUR ABILITY TO ENFORCE CIVIL LIABILITIES UNDER THE UNITED STATES FEDERAL
SECURITIES LAWS MAY BE AFFECTED ADVERSELY BECAUSE WE ARE INCORPORATED IN CANADA,
SOME OF OUR OFFICERS AND DIRECTORS NAMED IN THIS PROSPECTUS ARE CANADIAN
RESIDENTS, AND A MAJORITY OF OUR ASSETS AND THE ASSETS OF THOSE OFFICERS AND
DIRECTORS ARE LOCATED OUTSIDE OF THE UNITED STATES.
PER SHARE TOTAL
---------- ----------
Public Offering Price....................................... $ $
Underwriting Discounts...................................... $ $
Proceeds to Sierra Wireless (before expenses)............... $ $
Proceeds to Selling Shareholders (before expenses).......... $ $
The public offering price for common shares offered under this prospectus is
payable in U.S. dollars.
We have granted the underwriters a 30-day option to purchase up to 600,000
additional common shares to cover over-allotments.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The underwriters expect to deliver the common shares on or about
November 14, 2003.
--------------------------------------------------------------------------------
LEHMAN BROTHERS CIBC WORLD MARKETS
November 2003
TABLE OF CONTENTS
PAGE
--------
PROSPECTUS SUMMARY.......................................... 3
EXCHANGE RATE DATA.......................................... 11
RISK FACTORS................................................ 12
FORWARD-LOOKING STATEMENTS.................................. 19
USE OF PROCEEDS............................................. 20
CAPITALIZATION.............................................. 21
RECENT ACQUISITION OF AIRPRIME.............................. 21
DIRECTORS AND OFFICERS...................................... 22
DESCRIPTION OF SHARE CAPITAL................................ 23
CERTAIN TAX CONSIDERATIONS FOR U.S. SHAREHOLDERS............ 24
SELLING SHAREHOLDERS........................................ 29
UNDERWRITING................................................ 31
LEGAL MATTERS............................................... 34
EXPERTS..................................................... 34
AUDITORS, TRANSFER AGENT AND REGISTRAR...................... 35
DOCUMENTS INCORPORATED BY REFERENCE......................... 35
WHERE YOU CAN FIND ADDITIONAL INFORMATION................... 36
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT....... 37
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not, and the underwriters have not,
authorized anyone, including the selling shareholders, to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We and the selling shareholders are not,
and the underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. The information in this
document may only be accurate as of the date on the front cover of this
prospectus.
This prospectus contains forward looking statements which involve risks and
uncertainties. See the section titled "Forward-Looking Statements."
IN THIS PROSPECTUS, "SIERRA WIRELESS," "COMPANY," "WE," "US" AND "OUR" EACH
REFERS TO SIERRA WIRELESS, INC. AND ITS CONSOLIDATED SUBSIDIARIES UNLESS THE
CONTEXT REQUIRES OTHERWISE.
Certain names used in this prospectus are our trademarks. This prospectus
also includes references to trademarks, product names and company names of other
companies.
2
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS OR IN THE DOCUMENTS INCORPORATED BY REFERENCE. THIS SUMMARY DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER BEFORE INVESTING IN OUR
COMMON SHARES. YOU SHOULD CAREFULLY READ THE ENTIRE PROSPECTUS, INCLUDING THE
SECTION TITLED "RISK FACTORS" AND THE DOCUMENTS AND FINANCIAL STATEMENTS
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS, BEFORE MAKING AN INVESTMENT
DECISION. WE PUBLISH OUR FINANCIAL STATEMENTS IN UNITED STATES DOLLARS IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES,
OR U.S. GAAP, AND IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN
CANADA, OR CANADIAN GAAP. EXCEPT AS OTHERWISE INDICATED, ALL REFERENCES TO "$,"
"US$" OR "DOLLARS" IN THIS PROSPECTUS REFER TO UNITED STATES DOLLARS AND ALL
REFERENCES TO "CDN$" REFER TO CANADIAN DOLLARS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT
OPTION WILL NOT BE EXERCISED.
SIERRA WIRELESS, INC.
We provide highly differentiated wireless solutions worldwide. We develop
and market a broad range of products that include wireless data modems for
portable computers, embedded modules for original equipment manufacturers, or
OEMs, rugged vehicle-mounted modems and mobile phones. Our products permit users
to access wireless data and voice networks using notebook computers, personal
digital assistants, or PDAs, vehicle-based systems or mobile phones.
Wireless data communications is an expanding market positioned at the
convergence of wireless communications, portable computing and the Internet,
each of which represents a growing market. Our products are entirely based on
open standards, including the Internet protocol, and operate on the networks of
major wireless communications service providers.
Our products are primarily used by businesses and government organizations
to enable their employees access to a wide range of wireless data applications
including Internet access, e-mail, messaging, corporate intranet access, remote
database inquiry and computer aided dispatch. We sell our products both directly
to end-users and through indirect channels, including wireless operators,
resellers and OEMs. For the nine months ended September 30, 2003, our top ten
customers included AT&T Wireless, Audiovox, Handspring, Sprint PCS, Verizon
Wireless and Vodafone. We have a global customer base, and 36% of our revenue
for the nine months ended September 30, 2003 was from customers outside of North
America.
On August 12, 2003, we announced the completion of our acquisition of
AirPrime, Inc., a privately-held supplier of high-speed wireless data
communications products. Under the terms of the acquisition, we issued 3,708,521
of our common shares to the shareholders of AirPrime. The acquisition provides
us with additional knowledge and expertise in CDMA technology as well as a staff
of over 70 research and development, engineering, product marketing,
manufacturing and technical sales professionals. We believe that the acquisition
enables us to offer a broader product line of wireless communications products
to a wider range of customers and also strengthens our engineering team to
develop new products.
We continue to focus on creating innovative products and introducing new
products to the market based upon the latest wireless technology. As an example,
approximately 94% of our revenue for the quarter ended September 30, 2003 came
from products that became commercially available since January 2002. On
October 7, 2003, we announced the introduction of our Voq line of professional
wireless mobile phones and value-added software to deliver a converged mobile
telephony and e-mail solution, commonly referred to as a Smartphone, targeted at
business users. Our new Voq Smartphone will be based on Microsoft Windows
Mobile-TM- software for Smartphones and will feature both a familiar mobile
phone keypad and a unique flip-open QWERTY thumbpad. The first Voq-branded
Smartphone is expected to be commercially available in the first half of 2004.
3
OUR PRODUCTS
Our current product line of wireless solutions includes wide area wireless
PC cards, embedded modules that are built into OEMs' computers and other
devices, vehicle-mounted modems and enabling software. In addition, we have a
number of new products under development, including our recently announced Voq
Smartphone product line.
WIDE AREA WIRELESS PC CARDS AND EMBEDDED MODULES
The following table outlines our current product offerings for wireless
network PC cards and embedded modules:
PRODUCT
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TYPE PRODUCT CLASS DESCRIPTION PRODUCTS COMPATIBLE NETWORK/TERRITORY
---------------------------------------------------------------------------------------------------------------
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Wide-area wireless network interface cards, AirCard 750 Tri-band GSM/GPRS
or NICs, providing local area network, or world-wide.
LAN-like connectivity for computer users on
AirCard 700 the GSM/GPRS networks. Using these AirCard 710 Single-band for North
Series modems, mobile computer users have full American GPRS.
access to e-mail, intranet, corporate
applications and full Web browsing where
GPRS network service is available.
-------------------------------------------------------------------------------------------------------
Wide-area wireless NICs, providing LAN-like AirCard 550 Single-band for Sprint PCS
AirCard 500 connectivity for computer users on the AirCard 555 CDMA2000 1X network.
Series CDMA2000 1X networks. Compatible with CDMA Dual-band North American
1S95-A and CDMA 1S95-B networks. and Asia-Pacific cellular
and PCS networks.
-------------------------------------------------------------------------------------------------------
Wide-area wireless modem cards, providing PC3200 Single-band for Sprint PCS
LAN-like connectivity for computer users on PC3220 CDMA2000 1X network.
WIRELESS the CDMA network. Positioned as "value Dual-band cellular and PCS
NETWORK PC 3200 Series priced" alternatives to the AirCard 500 in North America.
CARDS Series and sold under private labels to
channel or wireless operators. Acquired
from AirPrime.
-------------------------------------------------------------------------------------------------------
Wide-area wireless modem card, providing PC5220 Dual-band CDMA2000 1X EV-DO
PC 5200 Series users with access at broadband speeds from networks.
computers to corporate applications, e-mail
and the Internet. Acquired from AirPrime.
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First wireless NIC offering a true AirCard 300 CDPD networks.
AirCard 300 extension of the desktop or LAN work
Series environment while on the road. Compatible
with all major PC and handheld operating
systems.
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Embedded modules deliver wireless data and SB555 CDMA2000 1X.
SB Embedded voice connectivity that OEMs intergrate EM3240 CDMA2000 IX.
EMBEDDED Modules into products ranging from handheld EM3205 CDMA2000 1X.
MODULES computers, PDAs, laptops, Smartphones and
EM Embedded mobile terminals, to fixed terminals
Modules including industrial meters, and monitoring
equipment.
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SIERRA WIRELESS MP MODEM PRODUCT LINE
The Sierra Wireless MP product line consists of a group of rugged, high
powered, vehicle-mounted modems including the MP200 GPS, MP750 GPS and
MP555 GPS. Generally, these products are mounted in a vehicle and are physically
connected to a computer or data terminal. The Sierra Wireless MP product line is
designed to operate in harsh conditions, including extremes of temperature,
humidity, vibration and vehicle ignition noise. All three of our MP products
come with
4
fully integrated global positioning system (or GPS) capability as a standard
feature. The Sierra Wireless MP555 GPS is our newest addition to the MP product
line. The MP555 GPS operates on CDMA2000 1X networks and is designed to
withstand the same harsh conditions as its MP predecessors. The MP750 GPS was
also recently added to the MP product line. The MP750 GPS has capabilities
nearly identical to that of the MP555 GPS and is designed to operate on GSM/GPRS
networks worldwide. Both the MP555 GPS and MP750 GPS commenced commercial
shipments in 2003. These two products are intended to provide our existing
MP200 GPS customers with a migration path to the latest wireless network
technologies. The MP200 GPS commands a strong share of the market for rugged
modems that support CDPD technology and is still offered as part of our MP
product line. Common applications for Sierra Wireless MP products include:
- Police officers looking up license plates, checking criminal databases,
communicating with the dispatcher and other officers and filing service
reports from a patrol car; and
- Utility field service technicians receiving dispatch instructions,
consulting service instructions and diagrams, filing service call reports
and time sheets.
ENABLING SOFTWARE
Our line of software allows our modems and devices to work with notebook and
handheld computers and other devices:
- SIERRA WIRELESS WATCHER SOFTWARE is a graphical user interface designed
for everyday use with our modems. While the modem is in use, the Watcher
program provides ongoing information on registration status and signal
strength and allows the user to switch operating modes where applicable.
Sierra Wireless Watcher supports all major PC and handheld operating
systems;
- SIERRA WIRELESS WIRELESSEXPERT SOFTWARE is a utility used for modem
installation and configuration. Sierra Wireless WirelessExpert offers the
end-user an easy and quick path to install our modems by following a short
series of "fill in the blank" screens. This software is bundled with
Sierra Wireless Watcher for notebook PCs and handheld computers; and
- DEVELOPER'S CENTRAL, INCLUDING SIERRA WIRELESS SOFTWARE DEVELOPMENT KITS,
provide tools and information that support developers in their integration
of Sierra Wireless products into applications. Using these tools,
developers can include important modem status information into their own
user interface. This level of integration supports easy-to-use, complete
bundled solutions.
FUTURE PRODUCTS
We continually test and develop new products and technologies that will
allow us to take advantage of the expanding and changing wireless market.
Our new Voq-branded Smartphones will be based on the soon-to-be-released
2003 edition of Microsoft Windows Mobile-TM- software for Smartphones and will
feature both a familiar phone keypad and a unique flip-open QWERTY thumbpad. The
Voq product line also includes other hardware and software innovations for easy
information navigation and retrieval, text entry and e-mail that is
automatically updated. The first Voq product lines operate on global GSM/GPRS
mobile networks and we expect to begin commercial shipments in the first half of
2004.
The following emerging wireless standards are areas of significant new
product development interest for us:
- EDGE is designed to offer packet data communications at speeds of up to
384 kbps over suitably configured networks using the Emerging Data rates
for Global Evolution, or EDGE, standard. This technology is on the
evolution path of several GSM network operators in North America, Europe
and Asia;
5
- UMTS is designed to offer transmission of text, digitized voice, video and
multimedia at broadband speeds. Once fully implemented, it will allow
customers to remain attached to the Internet at high-speeds while on the
move. UMTS is an evolutionary path for GSM, TDMA, GPRS and EDGE
networks; and
- CDMA 1XEV-DO is designed to offer wireless access to e-mail, the Internet
and corporate applications at speeds of up to 2.4 mbps. Our commercially
available PC5220 wireless modem card supports this technology as does our
recently announced AirCard 580, which is expected to be commercially
available in early 2004.
DISTRIBUTION
Our products are used by a variety of end-users, ranging from sales people
and mobile executives, to police officers and utility workers. We have built a
distribution channel that responds to the unique purchasing and usage
requirements of our customer base. Historically, a substantial majority of our
sales have come from North American markets. As our wireless technology
platforms have diversified, we have built sales and distribution teams to focus
on developing our business outside of North America. Currently, we have
dedicated sales and distribution teams for the European, Asia Pacific and North
America regions. Our approach to distribution takes advantage of our existing
relationships with wireless operators, resellers and OEMs in order to maximize
the productivity of our sales team.
WIRELESS OPERATORS
Wireless operators play two key roles in our distribution strategy. First,
wireless operators are often resellers for us, purchasing our products and then
reselling them to end-user customers. Second, the wireless operator sales team
often works with our sales team to jointly sell wireless solutions and our
equipment to the end-user customer. The wireless operator channel provides us
with extended customer reach, while the operators are able to leverage our
wireless data expertise to help sell their products and services. We have
invested a great deal of time and resources in cultivating our relationships
with wireless operators and view these relationships as a critical success
factor and competitive differentiator.
RESELLERS
Resellers purchase our products either directly from us or from a
distributor, and resell them to end-user customers. In order to support
resellers who prefer to purchase through a distributor, we have selectively
formed distribution relationships. Distributors ensure that our products are
available to a large number of resellers that buy products.
Resellers generally combine our modems with other elements of an overall
solution, such as computer hardware and application software, and deliver a
complete solution to the end-user customer. Resellers include computer
resellers, wide area network resellers, application developers, system
integrators, wireless Internet service providers, wireless application service
providers and big box retailers. This channel provides us with direct access to
markets and users that are often not served by the large wireless operators.
ORIGINAL EQUIPMENT MANUFACTURERS
Original equipment manufacturers represent companies that integrate our
modem technology into devices they manufacture and sell to end-user customers
through their own direct sales force and indirect distribution channels. Our
modems are integrated into a range of devices, such as PDAs, Smartphones and
notebook computers.
6
DIRECT SALES
A small percentage of our end-user customers choose to purchase products
directly from us. Typically, these are accounts requiring direct sales and
technical support, or existing customers ordering additional products or
accessories. Direct sales are facilitated through our Web site, inside sales
department and regionally organized sales team.
CUSTOMER SUPPORT
We provide customers, wireless operators and other channel partners with
product and technical support in several languages using telephone, e-mail and
our Web site. Online resources include product documentation, technical
specifications, frequently asked questions, application notes, troubleshooting
notes, troubleshooting tools, and software downloads.
MANUFACTURING
We outsource most of our manufacturing services, including parts
procurement, kitting, assembly and repair. We believe that outsourcing allows us
to:
- Focus on research and development, sales and marketing;
- Participate in contract manufacturer economies of scale;
- Access high quality manufacturing resources;
- Achieve rapid production scalability; and
- Reduce equipment capital costs and equipment obsolescence risk.
In addition, we perform certain manufacturing related functions in-house,
including manufacturing engineering, and development of manufacturing test
procedures and fixtures.
Our products are currently manufactured by Flextronics, Solectron and
Creation Technologies. We use Flextronics as our primary contract manufacturer
to provide an end-to-end supply chain solution. This includes design support,
procurement, low cost manufacturing and repair in China and global fulfillment
services from Memphis, Tennessee. By using their fully integrated supply chain
services, we expect to reduce product costs, improve alignment with our
increasingly international customer base and achieve increased operating
efficiencies and scalability. We expect to continue to have products from the
AirPrime acquisition built at Solectron facilities in Mexico and to continue
this relationship on selected other products. We expect that Creation
Technologies in Canada will continue to build our vehicle-mounted modems.
OUR STRATEGY
Our objective is to be the premier global provider of highly differentiated
wireless solutions. We intend to continue to pursue this objective while
maintaining a profitable business model. Key elements of our strategy include:
EXPAND OUR MARKET POSITION. We believe we can continue to take advantage of
the significant growth opportunities in our business. We intend to maintain and
enhance our market position in North America and continue to grow our market
share in Europe and Asia by delivering reliable, high quality products that
satisfy the needs of our customers and marketing partners. We target broader
market opportunities through increased investment in developing our distribution
channels and sales and marketing resources and systems. By outsourcing most of
our manufacturing processes, we are able to focus on the creation of new
products as well as the improvement of current products through feature
enhancements and the introduction of additional product variants with new
functionality and price point combinations.
7
EXPAND AND DIVERSIFY OUR PRODUCT LINES. We currently offer a broad range of
products targeted for the growth in demand for data access from advanced
wireless networks based on CDMA2000 1X and GSM/GPRS. We plan to further broaden
our product lines in the PC card, embedded module and vehicle-mounted segments
across these wireless communications standards. In addition, we anticipate
developing products for new standards including future generations of CDMA,
EDGE, UMTS and other advanced wireless networks. We also plan to introduce new
products such as our Voq line of Smartphones to continue to meet the wireless
communication needs of our customers. We invest aggressively in our own
intellectual property portfolio and, where appropriate, acquire or license
technologies from third parties. We have 29 U.S. patents issued and other new
patents in process. To ensure that we select the appropriate technology
platforms, we monitor and participate in industry groups, standard-setting
initiatives and the plans and directions of our customers and partners.
CAPITALIZE ON STRATEGIC RELATIONSHIPS WITH WIRELESS INDUSTRY LEADERS. We
view strategic relationships within the wireless communications, portable
computing and Internet industries as critical to maximizing sales opportunities
and optimizing next generation technology investments. In the past, we have been
able to increase market penetration by accessing the resources of our often much
larger channel partners. We have invested significant time in developing
strategic relationships within the wireless data industry. These relationships
provide us with access to distribution resources, increased sales opportunities
and insight into future technology and market opportunities. We have strategic
relationships with several major wireless communications carriers, software
providers and system integrators, many of which are also our customers. By
tapping into the market knowledge, presence and technology plans of our
partners, we select and focus our next generation technology investments to
ensure that they are well aligned with those of other market leaders. It is our
goal to continue to generate new opportunities by further developing our
relationships with wireless industry leaders.
PROVIDE WIRELESS SOLUTIONS FOR MULTIPLE APPLICATIONS. We seek to provide
innovative solutions to address a variety of applications across multiple
technology platforms for different market segments. We are active and will
continue to be active in industry organizations and alliances that will enable
us to develop bundled solutions for a variety of new technology platforms and
industry opportunities. For example, we are the founders of the WirelessReady
Alliance, which unites leading portable computer hardware manufacturers and
vendors, software developers and wireless service providers. The goal of the
WirelessReady Alliance is to deliver complete and compelling wireless solutions.
PURSUE SELECTED STRATEGIC ACQUISITIONS. We believe that growth and market
entry can be accelerated by acquisitions. We will pursue acquisition
opportunities based on criteria such as extending our product line, adding value
by providing a more complete solution, acquiring emerging wireless
communications technologies and accelerating geographic or market segment entry.
For example, in 2000 we acquired the wireless module business of QUALCOMM and in
August 2003 we acquired AirPrime, a leading provider of wireless PC cards and
embedded modules. At the date of this prospectus, we have not entered into any
agreements for additional acquisitions.
ADDITIONAL INFORMATION
We were incorporated in 1993 under the federal laws of Canada. Our principal
executive offices are located at 13811 Wireless Way, Richmond, British Columbia,
V6V 3A4, and our telephone number is (604) 231-1100. We carry on our business
through our wholly-owned subsidiaries, Sierra Wireless Data, Inc. (incorporated
in Delaware), Sierra Wireless America, Inc. (incorporated in Delaware; formerly
AirPrime, Inc.), Sierra Wireless (UK) Limited (incorporated in England and
Wales) and Sierra Wireless (Asia Pacific) Limited (incorporated in Hong Kong).
As of September 30, 2003 we had 231 full-time employees and 22 employees working
under fixed term contracts.
Our Web site address is WWW.SIERRAWIRELESS.COM. Information contained in our
Web site shall not be deemed to be part of, or incorporated by reference in,
this prospectus. Our Web site address is included in this document as an
inactive textual reference only.
------------------------
8
THE OFFERING
Common shares offered by Sierra Wireless..... 3,842,222 common shares
Common shares offered by selling
shareholders............................... 157,778 common shares
Common shares to be outstanding after
this offering.............................. 24,200,366 common shares
Use of proceeds.............................. Product development, working capital and
general corporate purposes, including
acquisitions. See section titled "Use of
Proceeds."
Nasdaq National Market symbol................ SWIR
Toronto Stock Exchange symbol................ SW
We have granted the underwriters an over-allotment option to purchase up to
an aggregate of 600,000 additional common shares. The number of common shares to
be outstanding upon completion of the offering, assuming no common shares are
issued under the over-allotment option, is based on the number of common shares
outstanding as of November 7, 2003 and excludes 1,637,834 common shares issuable
upon the exercise of outstanding stock options at a weighted average exercise
price of $10.82.
------------------------
9
SUMMARY FINANCIAL INFORMATION
The following selected historical financial data as at December 31, 2002,
2001 and 2000 and for each of the years in the three-year period ended
December 31, 2002 have been derived from our audited consolidated financial
statements prepared in accordance with U.S. GAAP. The financial data as of
September 30, 2003 and for each of the nine-month periods ended September 30,
2003 and 2002 have been derived from our unaudited consolidated financial
statements prepared in accordance with U.S. GAAP that include, in management's
opinion, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim periods. The
selected pro forma financial data for the year ended December 31, 2002 and for
the nine month period ended September 30, 2003 have been derived from our
pro forma financial statements prepared in accordance with U.S. GAAP and give
effect to the acquisition of AirPrime, Inc. as if the event had occurred on
January 1, 2002. This data should be read in conjunction with such financial
statements, of which all except for the consolidated balance sheet as at
December 31, 2000 are incorporated by reference into this prospectus, and the
risk factors described in the section titled "Risk Factors" beginning on
page 12. Our consolidated financial statements and pro forma financial
statements are prepared in United States dollars. We also prepare our
consolidated financial statements in accordance with Canadian GAAP, which
statements are also incorporated by reference into this prospectus.
FISCAL YEAR ENDED DECEMBER 31 NINE MONTHS ENDED SEPTEMBER 30
-------------------------------------------- ---------------------------------------
(IN THOUSANDS OF U.S. DOLLARS, PRO FORMA PRO FORMA
EXCEPT PER SHARE AMOUNTS) 2000 2001 2002 2002 2002 2003(1) 2003
------------------------------ -------- -------- -------- ----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
STATEMENT OF OPERATIONS DATA:
Revenue....................... $53,801 $ 62,348 $ 77,130 $ 96,282 $ 54,623 $66,930 $83,735
Cost of goods sold............ 29,067 47,035 69,132 82,133 53,185 39,975 51,566
------- -------- -------- -------- -------- ------- -------
Gross margin.................. 24,734 15,313 7,998 14,149 1,438 26,955 32,169
------- -------- -------- -------- -------- ------- -------
Expenses:
Sales and marketing......... 9,907 12,726 11,564 13,710 8,431 7,972 8,983
Research and development,
net....................... 12,887 16,902 14,896 29,355 12,633 10,373 16,422
Administration.............. 6,097 10,647 4,785 11,298 5,141 4,399 6,211
Restructuring and other
charges................... -- -- 12,869 13,690 13,093 1,220 --
Integration costs........... -- -- -- -- -- 1,026 1,026
Amortization................ 1,754 2,084 2,331 2,499 1,776 1,689 3,136
------- -------- -------- -------- -------- ------- -------
30,645 42,359 46,445 70,552 41,074 26,679 35,778
------- -------- -------- -------- -------- ------- -------
Earnings (loss) from
operations.................. (5,911) (27,046) (38,447) (56,403) (39,636) 276 (3,609)
Other income.................. 4,156 2,504 247 377 98 197 215
------- -------- -------- -------- -------- ------- -------
Earnings (loss) before income
taxes....................... (1,755) (24,542) (38,200) (56,026) (39,538) 473 (3,394)
Income tax expense
(recovery).................. 1,363 (273) 3,463 3,463 3,433 143 143
------- -------- -------- -------- -------- ------- -------
Net earnings (loss)........... $(3,118) $(24,269) $(41,663) $(59,489) $(42,971) $ 330 $(3,537)
======= ======== ======== ======== ======== ======= =======
Earnings (loss) per share for
the period
Basic and diluted........... $ (0.20) $ (1.50) $ (2.56) $ (2.97) $ (2.64) $ 0.02 $ (0.18)
======= ======== ======== ======== ======== ======= =======
Weighted average number of
shares (in thousands)
Basic....................... 15,318 16,129 16,304 20,013 16,294 17,054 20,097
Diluted..................... 15,318 16,129 16,304 20,013 16,294 17,564 20,097
======= ======== ======== ======== ======== ======= =======
AS AT DECEMBER 31 AS AT
------------------------------ SEPTEMBER 30,
2000 2001 2002 2003(1)
-------- -------- -------- --------------
(Unaudited)
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 79,035 $ 43,964 $34,841 $39,443
Total assets................................................ 136,065 110,724 71,089 103,138
Total shareholders' equity.................................. 113,813 90,043 48,754 71,821
---------------
(1) Effective August 12, 2003, our results reflect the acquisition of
AirPrime, Inc.
10
EXCHANGE RATE DATA
The following table sets out, for each period indicated, the exchange rate
at the end of the period and the average of the exchange rates on each day
during the period for one U.S. dollar expressed in Canadian dollars, based on
the noon exchange rate quoted by the Bank of Canada. As of November 7, 2003 the
rate was US$1.00 equals CDN$1.3237.
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ---------------------
2000 2001 2002 2002 2003
-------- -------- -------- -------- --------
End of period............................. 1.5002 1.5926 1.5796 1.5858 1.3504
Average for period........................ 1.4852 1.5484 1.5704 1.5706 1.4295
11
RISK FACTORS
ANY INVESTMENT IN OUR COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD CONSIDER CAREFULLY THE FOLLOWING INFORMATION ABOUT THESE RISKS, TOGETHER
WITH ALL OF THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE YOU
DECIDE WHETHER TO BUY OUR COMMON SHARES. IF ANY OF THE FOLLOWING RISKS ACTUALLY
OCCUR, OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD BE
HARMED. IN ANY SUCH CASE, THE MARKET PRICE OF OUR COMMON SHARES COULD DECLINE,
AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT IN OUR COMMON SHARES. IN
ASSESSING THESE RISKS, YOU SHOULD ALSO REFER TO THE OTHER INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, INCLUDING OUR FINANCIAL
STATEMENTS AND RELATED NOTES.
RISKS RELATED TO OUR BUSINESS
WE HAVE INCURRED NET LOSSES IN THE PAST THREE FISCAL YEARS AND MAY NOT SUSTAIN
PROFITABILITY.
We have incurred a loss from operations in each of the past three fiscal
years. As of September 30, 2003 our accumulated deficit was approximately
$73.2 million. We incurred losses of approximately $41.7 million for the year
ended December 31, 2002. While we had a profit of $0.3 million for the nine
months ended September 30, 2003, our ability to achieve and maintain
profitability will depend on, among other things, the continued sales of our
products and the successful development and commercialization of new products.
We cannot predict if the current profitability will be sustainable on a
quarterly or an annual basis. As a result, our share price may decline.
If the current profitability does not continue, we may need to raise
additional capital in the future. Additional financing may not be available, and
even if available, may not be on acceptable terms. We may seek to raise
additional capital through an offering of common shares, preference shares or
debt, which may result in dilution, and/or the issuance of securities with
rights senior to the rights, of the holders of common shares.
IF DEMAND FOR OUR CURRENT PRODUCTS DECLINES AND WE ARE UNABLE TO LAUNCH
SUCCESSFUL NEW PRODUCTS, OUR REVENUES WILL DECREASE.
The market for our products may not continue to grow, firms within the
industry may not adopt our technology for integration with their wireless data
communications solutions, and we may be unsuccessful in independently
establishing markets for our products. If the markets in which we compete fail
to grow, or grow more slowly than we currently anticipate, or if we are unable
to establish markets for our new products, it would significantly harm our
business, results of operations and financial condition. In addition, demand for
one or all of our current products could decline as a result of competition,
technological change or other factors. If we are unable to launch successful new
products, reduced demand for our current products would cause our revenues to
decline and harm our financial condition. Significant marketing expenses
associated with the launch of new products could also affect our future
profitability.
IF WE ARE UNABLE TO DESIGN AND DEVELOP NEW PRODUCTS THAT GAIN SUFFICIENT
COMMERCIAL ACCEPTANCE, WE MAY BE UNABLE TO MAINTAIN OUR MARKET SHARE OR TO
RECOVER OUR RESEARCH AND DEVELOPMENT EXPENSES AND OUR REVENUES COULD DECLINE.
We depend on designing and developing new products to achieve much of our
future growth. Our ability to design and develop new products depends on a
number of factors, including, but not limited to the following:
- Our ability to attract and retain skilled technical employees;
- The availability of critical components from third parties;
- Our ability to successfully complete the development of products in a
timely manner; and
- Our ability to manufacture products at an acceptable price and quality.
12
A failure by us, or our suppliers, in any of these areas, or a failure of
new products, such as the Voq Smartphone, to obtain commercial acceptance, could
mean we receive less revenue than we anticipate, we are unable to recover our
research and development expenses and could result in a decrease in the market
price for our shares.
THE LOSS OF ANY OF OUR MATERIAL CUSTOMERS COULD ADVERSELY AFFECT OUR REVENUE AND
PROFITABILITY, AND THEREFORE SHAREHOLDER VALUE.
We depend on a small number of customers for a significant portion of our
revenues. In the last two fiscal years, there have been four different customers
that individually accounted for more than 10% of our revenues. If any of these
customers reduce their business with us or suffer from business failure, our
revenues and profitability could decline, perhaps materially.
WE DO NOT EXPECT TO HAVE SIGNIFICANT LONG TERM CUSTOMER CONTRACTS AND OUR
REVENUES WILL BE NEGATIVELY IMPACTED IF CUSTOMERS DO NOT CONTINUE TO ORDER OUR
PRODUCTS UNDER PURCHASE ORDERS.
In late 1999 and 2000, we entered into significant supply contracts with
AT&T Wireless, Sprint PCS and Verizon Wireless. We expect to substantially
complete volume shipments on all three contracts during the last quarter of
2003. Thereafter, we will rely only on purchase orders with these customers, and
these customers, like our other customers, will be under no contractual
obligation to purchase our products. If they do not make such purchases, our
revenue and our share price may decline.
WE MAY NOT BE ABLE TO SUSTAIN OUR CURRENT GROSS MARGINS AND, AS A RESULT, OUR
PROFITABILITY MAY DECREASE.
We generally price our products based on our estimate of future production
costs. If actual production costs are higher than we anticipate, our gross
margins will decrease. In addition, competitive pressures may force us to lower
our product prices, which will decrease our gross margins if we are unable to
offset that effect by cost reduction measures. If our gross margins are reduced
with respect to an important product line, or if our sales of lower margin
products exceed our sales of higher margin products, our profitability may
decrease and our business could suffer.
OUR REVENUES AND EARNINGS MAY FLUCTUATE FROM QUARTER TO QUARTER, WHICH COULD
AFFECT THE MARKET PRICE OF OUR COMMON SHARES.
Our revenues and earnings may vary from quarter to quarter as a result of a
number of factors, including:
- The timing of releases of our new products;
- The timing of substantial sales orders;
- Possible seasonal fluctuations in demand;
- Possible delays in the manufacture or shipment of current or new
products; and
- Possible delays or shortages in component supplies.
Because our operating expenses are determined based on anticipated sales,
are generally fixed and are incurred throughout each fiscal quarter, any of the
factors listed above could cause significant variations in our revenues and
earnings in any given quarter. Thus, our quarterly results are not necessarily
indicative of our overall business, results of operations and financial
condition. However, quarterly fluctuations in our revenues and earnings may
affect the market price of our common shares.
13
WE DEPEND ON A FEW THIRD PARTIES TO MANUFACTURE OUR PRODUCTS AND SUPPLY KEY
COMPONENTS. IF THEY DO NOT MANUFACTURE OUR PRODUCTS PROPERLY OR CANNOT MEET OUR
NEEDS IN A TIMELY MANNER, WE MAY BE UNABLE TO FULFILL OUR PRODUCT DELIVERY
OBLIGATIONS AND OUR COSTS MAY INCREASE, AND OUR REVENUE AND MARGINS COULD
DECREASE.
We outsource a substantial part of the manufacture of our products to third
parties and depend heavily on the ability of these manufacturers to meet our
needs in a timely and satisfactory manner. Some components used by us may only
be available from a small number of suppliers, in some cases from only one
supplier. Moreover, we currently rely principally on one manufacturer, which may
terminate the manufacturing contract with us at the end of any contract year.
Our reliance on third party manufacturers and suppliers subjects us to a number
of risks, including the following:
- The absence of guaranteed manufacturing capacity;
- Reduced control over delivery schedules, production yields and costs; and
- Inability to control the amount of time and resources devoted to the
manufacture of our products.
If we are unable to successfully manage any of these risks or to locate
alternative or additional manufacturers or suppliers in a timely and
cost-effective manner, we may not be able to deliver products in a timely
manner. In addition, our results of operations could be harmed by increased
costs, reduced revenues and reduced margins.
WE DO NOT HAVE FIXED-TERM EMPLOYMENT AGREEMENTS WITH OUR KEY PERSONNEL AND THE
LOSS OF ANY KEY PERSONNEL MAY HARM OUR ABILITY TO COMPETE EFFECTIVELY.
None of our officers or other key employees has entered into a fixed-term
employment agreement. Our success depends in large part on the abilities and
experience of our executive officers and other key employees. Competition for
highly skilled management, technical, research and development and other key
employees is intense in the wireless communications industry. We may not be able
to retain our current key employees or attract and retain additional key
employees as needed. The loss of key employees could disrupt our operations and
impair our ability to compete effectively.
Our Chief Financial Officer, or CFO, and our Chief Technical Officer, or
CTO, are scheduled to retire in the next several months. We are currently
seeking to identify the CFO's successor. We are not seeking a successor for the
CTO, and we expect that his present duties will be shared among certain of our
existing officers. If we are unable to adequately replace our CFO or if our
other executive officers are unable to adequately undertake our CTO's duties,
our operations may be disrupted or our ability to compete may be impaired.
WE MAY HAVE DIFFICULTY RESPONDING TO CHANGING TECHNOLOGY, INDUSTRY STANDARDS AND
CUSTOMER PREFERENCES, WHICH COULD CAUSE US TO BE UNABLE TO RECOVER OUR RESEARCH
AND DEVELOPMENT EXPENSES AND LOSE REVENUES.
The wireless industry is characterized by rapid technological change. Our
success will depend in part on our ability to develop products that keep pace
with the continuing changes in technology, evolving industry standards and
changing customer and end-user preferences and requirements. Our products embody
complex technology that may not meet those standards, changes and preferences.
In addition, wireless communications service providers require that wireless
data systems deployed in their networks comply with their own standards, which
may differ from the standards of other providers. We may be unable to
successfully address these developments in a timely basis or at all. Our failure
to respond quickly and cost-effectively to new developments through the
development of new products or enhancements to existing products could cause us
to be unable to recover significant research and development expenses and reduce
our revenues.
14
COMPETITION FROM BIGGER MORE ESTABLISHED COMPANIES WITH GREATER RESOURCES MAY
PREVENT US FROM INCREASING OR MAINTAINING OUR MARKET SHARE AND COULD RESULT IN
PRICE REDUCTIONS AND REDUCED REVENUES.
The wireless data industry is intensely competitive and subject to rapid
technological change. We expect competition to intensify. More established and
larger companies with greater financial, technical and marketing resources sell
products that compete with ours. We also may introduce new products that will
put us in direct competition with major new competitors. Existing or future
competitors may be able to respond more quickly to technological developments
and changes or may independently develop and patent technologies and products
that are superior to ours or achieve greater acceptance due to factors such as
more favorable pricing or more efficient sales channels. If we are unable to
compete effectively with our competitors' pricing strategies, technological
advances and other initiatives, our market share and revenues may be reduced.
WE DEPEND ON THIRD PARTIES TO OFFER WIRELESS DATA COMMUNICATIONS SERVICES FOR
OUR PRODUCTS TO OPERATE.
Our products can only be used over wireless data networks operated by third
parties. In addition, our future growth depends, in part, on the successful
deployment of next generation wireless data networks by third parties for which
we are developing products. If these network operators cease to offer effective
and reliable service, or fail to market their services effectively, sales of our
products will decline and our revenues will decrease.
ACQUISITIONS OF COMPANIES OR TECHNOLOGIES, INCLUDING OUR ACQUISITION OF
AIRPRIME, MAY RESULT IN DISRUPTIONS TO OUR BUSINESS OR MAY NOT ACHIEVE THE
ANTICIPATED BENEFITS.
As part of our business strategy, we may acquire additional assets and
businesses principally relating to or complementary to our current operations.
Any other acquisitions and/or mergers by us will be accompanied by the risks
commonly encountered in acquisitions of companies. These risks include, among
other things:
- Exposure to unknown liabilities of acquired companies;
- Higher than anticipated acquisition costs and expenses;
- Effects of costs and expenses of acquiring and integrating new businesses
on our operating results and financial condition;
- The difficulty and expense of integrating the operations and personnel of
the companies;
- Disruption of our ongoing business;
- Diversion of management's time and attention away from our remaining
business during the integration process;
- Failure to maximize our financial and strategic position by the successful
incorporation of acquired technology;
- The inability to implement uniform standards, controls, procedures and
policies;
- The loss of key employees and customers as a result of changes in
management;
- The incurrence of amortization expenses; and
- Possible dilution to our shareholders.
In addition, geographic distances may make integration of businesses more
difficult. We may not be successful in overcoming these risks or any other
problems encountered in connection with any acquisitions. If realized, these
risks could reduce shareholder value.
15
On August 12, 2003, we completed our acquisition of AirPrime. The
integration of AirPrime into our business is ongoing and the acquisition of
AirPrime is subject to all of the risks set out above.
OTHERS COULD CLAIM THAT WE INFRINGE ON THEIR INTELLECTUAL PROPERTY RIGHTS, WHICH
MAY RESULT IN SUBSTANTIAL COSTS, DIVERSION OF RESOURCES AND MANAGEMENT ATTENTION
AND HARM TO OUR REPUTATION.
It is possible that other parties may claim that we have violated their
intellectual property rights. Rights to intellectual property can be difficult
to verify. Competitors could assert, for example, that former employees of
theirs whom we have hired have misappropriated their proprietary information for
our benefit. A successful infringement claim against us could damage us in the
following ways:
- We may be liable for damages and litigation costs, including attorneys'
fees;
- We may be prohibited from further use of the intellectual property;
- We may have to license the intellectual property, incurring licensing
fees; and
- We may have to develop a non-infringing alternative, which could be costly
and delay or result in the loss of sales.
Regardless of the outcome, an infringement claim could result in substantial
costs, diversion of resources and management attention and harm to our
reputation.
MISAPPROPRIATION OF OUR INTELLECTUAL PROPERTY COULD PLACE US AT A COMPETITIVE
DISADVANTAGE.
Our intellectual property is important to our success. We rely on a
combination of patent protection, copyrights, trademarks, trade secrets,
licenses, non-disclosure agreements and other contractual agreements to protect
our intellectual property. Third parties may attempt to copy aspects of our
products and technology or obtain information we regard as proprietary without
our authorization. If we are unable to protect our intellectual property against
unauthorized use by others it could have an adverse effect on our competitive
position.
Our strategies to deter misappropriation could be inadequate due to the
following risks:
- Non-recognition of the proprietary nature or inadequate protection of our
methodologies in the United States, Canada or foreign countries;
- Undetected misappropriation of our intellectual property;
- The substantial legal and other costs of protecting and enforcing our
rights in our intellectual property; and
- Development of similar technologies by our competitors.
In addition, we could be required to spend significant funds and our
managerial resources could be diverted in order to defend our rights, which
could disrupt our operations.
AS OUR BUSINESS EXPANDS INTERNATIONALLY, WE WILL BE EXPOSED TO ADDITIONAL RISKS
RELATING TO INTERNATIONAL OPERATIONS.
Our expansion into international operations exposes us to additional risks
unique to such international markets, including the following:
- Increased credit management risks and greater difficulties in collecting
accounts receivable;
- Unexpected changes in regulatory requirements, wireless communications
standards, exchange rates, trading policies, tariffs and other barriers;
- Uncertainties of laws and enforcement relating to the protection of
intellectual property;
16
- Language barriers; and
- Potential adverse tax consequences.
Furthermore, if we are unable to further develop distribution channels in
Europe and the Asia-Pacific region we may not be able to grow our international
operations and our ability to increase our revenue will be negatively impacted.
GOVERNMENT REGULATION COULD RESULT IN INCREASED COSTS AND INABILITY TO SELL OUR
PRODUCTS.
Our products are subject to certain mandatory regulatory approvals in the
United States, Canada and other countries in which we operate. In the
United States, the Federal Communications Commission regulates many aspects of
communications devices. In Canada, similar regulations are administered by the
Ministry of Industry, through Industry Canada. Although we have obtained all the
necessary Federal Communications Commission, Industry Canada and other required
approvals for the products we currently sell, we may not obtain approvals for
future products on a timely basis, or at all. In addition, regulatory
requirements may change or we may not be able to obtain regulatory approvals
from countries other than the United States and Canada in which we may desire to
sell products in the future.
FLUCTUATIONS IN EXCHANGE RATES BETWEEN THE UNITED STATES DOLLAR AND THE CANADIAN
DOLLAR MAY AFFECT OUR OPERATING RESULTS.
We are exposed to fluctuations in the exchange rate between the
United States dollar and the Canadian dollar through our operations in Canada.
To reduce our risk because of currency fluctuations, we purchase inventory,
other costs of sales items and many of our services in United States dollars. If
the Canadian dollar rises relative to the United States dollar, our operating
results may be impacted. To date, we have not entered into any foreign currency
futures contracts as part of a hedging policy, but we have purchased Canadian
currency to cover our Canadian currency requirements for the next several fiscal
quarters. We have entered into distribution agreements in Europe and the
Asia-Pacific region that are denominated primarily in U.S. dollars. We expect
that as our business expands in Europe and the Asia-Pacific region, we will also
be exposed to additional foreign currency transactions and to the associated
currency risk. To date, we have not entered into any futures contracts.
RISKS RELATING TO THE OFFERING
OUR STOCK PRICE HAS BEEN VOLATILE, IS LIKELY TO CONTINUE TO BE VOLATILE AND
COULD DECLINE SUBSTANTIALLY.
Our common shares have been, and are likely to continue to be, highly
volatile. For example, in the last 12 months, shares of our common stock traded
on the Nasdaq National Market and the Toronto Stock Exchange have closed at a
high of $19.10 and CDN$25.25 respectively, and at a low of $3.00 and CDN$4.40,
respectively. Our share price could fluctuate significantly in the future for
various reasons, including the following:
- Quarterly variations in operating results;
- Changes in earnings estimates by analysts;
- Future announcements concerning us or our competitors;
- The introduction of new products or changes in product pricing policies by
us or our competitors;
- An acquisition or loss of significant customers, distributors and
suppliers;
- A failure to successfully achieve the desired benefits of the acquisition
of AirPrime, Inc.;
17
- Regulatory developments;
- Intellectual property developments;
- The commencement of material litigation against us or our collaborators;
- Fluctuations in the economy or general market conditions; or
- The other risk factors set forth in this prospectus.
In addition, stock markets in general, and the market for shares of
communications companies in particular, have experienced extreme price and
volume fluctuations in recent years that may be unrelated to the operating
performance of the affected companies. These broad market fluctuations may cause
the market price for our common shares to decline. The market price of our
common shares could decline below its current price and may fluctuate
significantly in the future. These fluctuations may or may not be related to our
performance or prospects.
In the past, market investors have often instituted securities class action
litigation after periods of volatility in the market price of a company's
securities. If one of our shareholders files a securities class action suit, we
could incur substantial legal fees and our management's attention and resources
could be diverted from operating our business in order to respond to the
litigation.
U.S. INVESTORS MAY NOT BE ABLE TO OBTAIN ENFORCEMENT OF CIVIL LIABILITIES
AGAINST US.
We were formed under the federal laws of Canada. A majority of our assets
are located outside the United States. In addition, a majority of the members of
our board of directors and our officers are residents of countries other than
the United States. As a result, it may be impossible for U.S. investors to
affect service of process within the United States upon us or these persons or
to enforce against us or these persons any judgments in civil and commercial
matters, including judgments under U.S. federal securities laws. In addition, a
Canadian court may not permit U.S. investors to bring an original action in
Canada or to enforce in Canada a judgment of a court in the United States based
upon civil liability provisions of the U.S. federal securities laws.
LAWS AND PROVISIONS IN OUR ARTICLES, BY-LAWS AND SHAREHOLDER RIGHTS PLAN COULD
DELAY OR DETER A CHANGE IN CONTROL.
Our articles and by-laws allow the issuance of preference shares. The board
of directors may set the rights and preferences of any series of preference
shares in its sole discretion without the approval of the holders of our common
shares. The rights and preferences of the preference shares may be superior to
those of the common shares. Accordingly, the issuance of preference shares also
could have the effect of delaying or preventing a change of control of our
company. There are at present no preference shares outstanding. In addition,
under our governing statute, the CANADA BUSINESS CORPORATIONS ACT (Canada), some
business combinations, including a merger or reorganization or the sale, lease
or other disposition of all or a substantial part of our assets, must be
approved by at least two-thirds of the votes cast by our shareholders or,
sometimes, holders of each class of shares. In some cases shareholders may have
a right to dissent from the transaction, in which case we would be required to
pay dissenting shareholders the fair value of their common shares provided they
have followed the required procedures.
In addition, we adopted a shareholder rights plan which provides for
substantial dilution to an acquiror unless either the acquiror makes a bid to
all shareholders, which is held open for at least 45 days and is accepted by
shareholders holding at least 50% of the outstanding common shares, or the bid
is otherwise approved by our board of directors. This could discourage a
potential acquiror from making a take-over bid and make it more difficult for a
third party to acquire control of us.
18
Furthermore, all of our executive officers have contractual rights under
employment agreements to have their stock options vest immediately and obtain
18 months' severance pay in the event of their termination without cause within
12 months following a change of control of the Company.
Limitations on the ability to acquire and hold our common shares may be
imposed by the COMPETITION ACT (Canada). This legislation permits the
Commissioner of Competition to review any acquisition of a significant interest
in our company. This legislation grants the Commissioner jurisdiction to
challenge such an acquisition before the Competition Tribunal if the
Commissioner believes that it would, or would be likely to, result in a
substantial lessening or prevention of competition in any market in Canada. The
INVESTMENT CANADA ACT (Canada) subjects an acquisition of control of a company
by a non-Canadian to government review if the value of our assets as calculated
pursuant to the legislation exceeds a threshold amount. A reviewable acquisition
may not proceed unless the relevant minister is satisfied or is deemed to be
satisfied that there is likely to be a net benefit to Canada from the
transaction.
Each of these matters could delay or deter a change in control that would be
attractive to, and provide liquidity for, shareholders, and could limit the
price that investors are willing to pay in the future for our common shares.
YOU WILL INCUR SUBSTANTIAL AND IMMEDIATE DILUTION IF YOU PURCHASE SHARES IN THIS
OFFERING.
The offering price of our common shares will significantly exceed the net
tangible book value of our common shares. Accordingly, if you purchase common
shares in this offering, you will incur immediate and substantial dilution of
your investment. If outstanding options and warrants to purchase, or rights to
acquire, our common shares are exercised, you will incur additional dilution.
MANAGEMENT HAS BROAD DISCRETION AS TO THE USE OF THE PROCEEDS FROM THIS
OFFERING.
We intend to use the proceeds from this offering for research and product
development, working capital and general corporate purposes, including possible
future acquisitions. Our management will have broad discretion with respect to
the use of proceeds from this offering. You will be relying on the judgment of
our management about these uses. If we do not allocate the proceeds of this
offering effectively or use the proceeds beneficially, our prospects, business,
financial condition and results of operations could be harmed. See the section
titled "Use of Proceeds."
FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this prospectus and in the documents
incorporated by reference contain forward-looking statements, which provide our
current expectations or forecasts of future events. Forward-looking statements
include, without limitation:
- Information concerning possible or assumed future results of operations,
trends in financial results and business plans;
- Statements about our product development activities and schedules;
- Statements about our expectations for regulatory approvals for any of our
product candidates;
- Statements about our potential or prospects for future product sales and
royalties;
- Statements about the level of our costs and operating expenses relative to
our revenues, and about the expected composition of our revenues;
- Statements about our future capital requirements and the sufficiency of
our cash, cash equivalents, investments and other sources of funds to meet
these requirements;
- Statements about the outcome of contingencies such as legal proceedings;
19
- Other statements about our plans, objectives, expectations and
intentions; and
- Other statements that are not historical fact.
In some cases, you can identify forward-looking statements by words such as
"anticipate," "believe," "plan," "expect," "intend" or similar expressions, but
the absence of those words does not necessarily mean that a statement is not
forward-looking. Forward-looking statements are subject to known and unknown
risks and uncertainties and are based on potentially inaccurate assumptions that
could cause actual results to differ materially from those expected or implied
by the forward-looking statements. Our actual results could differ materially
from those anticipated in the forward-looking statements for many reasons,
including the factors described in the section titled "Risk Factors" in this
prospectus. Other factors besides those described in this prospectus could also
affect actual results. You should carefully consider the factors described in
the section titled "Risk Factors" in evaluating our forward-looking statements.
You should not unduly rely on these forward-looking statements, which speak
only as of the date of this prospectus. We undertake no obligation to publicly
update any forward-looking statements to reflect circumstances or events after
the date of this prospectus, or to reflect the occurrence of unanticipated
events. You should, however, review the factors and risks we describe in the
reports we file from time to time with the applicable Canadian securities
commissions or similar regulatory authorities or the Securities and Exchange
Commission after the date of this prospectus.
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of common shares we
are offering will be $ million after deducting underwriting discount and
estimated offering expenses. We estimate that the net proceeds will be
approximately $ million if the over-allotment option is exercised in full.
We will not receive any of the proceeds from the sale of the common shares by
the selling shareholders.
We currently expect to use the net proceeds of this offering for product
development, working capital and general corporate purposes. In addition, we may
use a portion of the net proceeds to fund acquisitions of, or investments in,
businesses, products or technologies that expand, complement or are otherwise
related to our current business. However, we have no present agreements or
commitments with respect to any acquisition or investment and we may not
successfully complete any future acquisitions or investments. The amount of
proceeds expended for any particular purpose also may vary based on a number of
factors including the timing, extent, cost and progress of our research and
product development, opportunities for strategic alliances and collaborations,
and our other operational needs. We reserve the right to reallocate the proceeds
of this offering in response to these and other contingencies. Pending these
uses, we expect to invest the net proceeds in short-term, interest-bearing
investment grade securities.
In addition to the funds raised under this prospectus, we may need to raise
additional capital subsequent to this offering in order to meet our ongoing
operations and business requirements.
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CAPITALIZATION
The following table sets forth our capitalization as at September 30, 2003
on an actual basis and as adjusted to give effect to the application of the
estimated net proceeds of this offering. The September 30, 2003 capitalization
reflects the acquisition of AirPrime for which we issued 3,708,521 of our
common shares.
(IN THOUSANDS OF U.S. DOLLARS) ACTUAL AS ADJUSTED
------------------------------ ----------- -----------
(Unaudited) (Unaudited)
Cash and cash equivalents................................... $ 30,690 $
Short-term investments...................................... 8,753
-------- --------
$ 39,443 $
======== ========
Long-term liabilities, including current portion............ $ 5,367 $ 5,367
Shareholders' equity:
Preference shares (authorized -- unlimited;
outstanding -- none).................................... -- --
Common shares (authorized -- unlimited; outstanding,
actual -- 20,197,960; outstanding, as
adjusted -- 24,180,182)(1)(2)........................... 145,784
Deficit................................................... (73,234) (73,234)
Cumulative translation adjustments........................ (729) (729)
-------- --------
Total shareholders' equity.................................. 71,821
-------- --------
Total capitalization........................................ $ 77,188 $
======== ========
------------
(1) Reflects the receipt of the net proceeds from the sale of 3,842,222 common
shares offered by us at a price of $ per common share, after deducting
underwriting discount and estimated offering expenses. Excludes any common
shares issued under the over-allotment option.
(2) Excludes 1,637,834 common shares reserved with a weighted average exercise
price of $10.82, for issuance upon the exercise of options.
RECENT ACQUISITION OF AIRPRIME
On August 12, 2003 we acquired all of the outstanding securities of
AirPrime, Inc. (now called Sierra Wireless America, Inc.). AirPrime is a
supplier of high-speed CDMA wireless products with a customer base that includes
Sprint PCS, Audiovox, Hitachi and Handspring. The acquisition provides us with
AirPrime's knowledge and expertise in CDMA technology as well as a staff of over
70 research and development, engineering, product-marketing, manufacturing and
technical sales professionals. We expect that AirPrime's CDMA expertise will
strengthen our existing infrastructure portfolio and enable us to provide our
customers with leading edge solutions that increase our efficiency and quality.
In addition, the acquisition has positioned us to offer our CDMA solutions to
the expanding telecommunications market and other emerging markets requiring
excellent systems performance.
The aggregate purchase price was $23.7 million, including common shares
valued at $22.4 million and costs related to the acquisition of $1.3 million.
The fair value of the 3,708,521 common shares issued was determined based on the
average market price of our 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. AirPrime and its affiliates, associates and insiders were all
at arm's length to us and our affiliates, associates and insiders. The
acquisition was accounted for using the purchase method of accounting. The
assets, liabilities, revenue and expenses of AirPrime are included in our
interim unaudited consolidated financial statements since August 12, 2003, which
was the closing date of acquisition. Since the date of the acquisition, AirPrime
has affected our operating results by increasing
21
our operating losses by $0.2 million for the period from August 12, 2003 to
September 30, 2003. For more detailed information regarding the financial
aspects of the AirPrime acquisition and its impact on us, see our pro forma
financial statements incorporated by reference into this prospectus.
Under the terms of an escrow and stock deposit agreement, 927,024 of the
shares issued as consideration in the AirPrime acquisition are being held in
escrow and 2,597,426 shares are subject to lock-up provisions. The escrow shares
are available to pay any claims made by us arising out of or in connection with,
among other things, any breach by AirPrime of any representation or warranty
made in connection with the acquisition. Subject to any claims we may make,
one-third of the escrow shares will be released in August 2004, with the
remainder to be released in February 2005. The lock-up shares will be
automatically released on a quarterly basis commencing February 2004, with the
balance of the lock-up shares being released by February 2005.
DIRECTORS AND OFFICERS
The following table sets forth the name, age, position and principal
occupation and prior experience of each of our executive officers and directors.
Each director holds office until the next annual general meeting of Sierra
Wireless. Each officer holds office at the pleasure of our board of directors.
NAME AGE POSITION PRINCIPAL OCCUPATION/PRIOR EXPERIENCE
---- -------- -------- -------------------------------------
David Sutcliffe........ 44 Chairman, CEO and Chief Executive Officer since May 1995
Director and Director since June 1995
Peter Ciceri(1)........ 48 Lead Independent Director since February 2000 and
Director executive in residence at the Faculty of
Commerce and Business Administration at
the University of British Columbia from
September 2001 to present
Gregory Aasen(2)....... 48 Director Director since December 1997 and Chief
Operating Officer of PMC-Sierra, Ltd., a
wholly-owned subsidiary of
PMC-Sierra, Inc.
Paul Cataford(1)(3).... 39 Director Director since July 1998 and Managing
Partner of HorizonOne Asset Management
from December 2002 to present
Charles Levine(2)...... 50 Director Director since May 2003, President and
Chief Operating Officer of Sprint PCS
from 2000 to 2002 and retired since 2002
Nadir Mohamed(3)....... 47 Director Director since March 2003 and President,
Chief Executive Officer and Director of
Rogers Wireless Communications Inc.
S. Jane Rowe(3)........ 44 Director Director since March 1998 and Senior
Vice-President, Global Risk Management
Division of Scotiabank from 2002 to
present
Peter Roberts(4)....... 60 Chief Financial Officer Chief Financial Officer and Secretary
and Secretary since February 1999
22
NAME AGE POSITION PRINCIPAL OCCUPATION/PRIOR EXPERIENCE
---- -------- -------- -------------------------------------
Norman Toms(4)......... 59 Chief Technical Officer President and Chief Executive Officer
from May 1993 to May 1995 and Chief
Technical Officer since June 1995
Jason Cohenour......... 42 Senior Vice-President, Vice-President, Sales, July 1996 to
Worldwide Sales February 2000, Senior Vice-President,
Distribution, from February 2000 to
August 2003 and Senior Vice-President,
World Wide Sales, since August 2003
Bill Dodson............ 40 Vice-President, Vice-President of Global Operations of
Manufacturing and Gateway Computers from September 2000
Supply to April 2002 and Vice-President,
Manufacturing and Supply, since
April 2002
Andrew Harries......... 41 Senior Vice-President, Vice-President, Marketing, July 1993 to
Marketing February 2000, Senior Vice-President,
Corporate Development from
February 2000 to August 2003 and Senior
Vice-President, Marketing, since
August 2003
James Kirkpatrick...... 40 Senior Vice-President, President and Chief Executive Officer of
Engineering AirPrime from July 2002 to August 2003
and Senior Vice-President, Engineering,
since August 2003
------------
(1) Member of the Governance and Nominating Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
(4) Expected to retire in the next several months.
DESCRIPTION OF SHARE CAPITAL
Our authorized capital consists of an unlimited number of common shares, of
which, at November 7, 2003, 20,218,144 are issued and outstanding, and an
unlimited number of preference shares, issuable in series, of which none are
issued and outstanding. Our board of directors is authorized to determine the
designation, rights and restrictions to be attached to the preference shares
upon issuance.
Holders of common shares are entitled to receive notice of any meeting of
shareholders and to attend and vote at those meetings, except those meetings at
which only the holders of shares of another class or of a particular series are
entitled to vote. Each common share entitles its holder to one vote. Subject to
the rights of the holders of preference shares, the holders of common shares are
entitled to receive on a proportionate basis such dividends as our board of
directors may declare out of funds legally available therefor. In the event of
the dissolution, liquidation, winding up or other distribution of our assets,
the holders of the common shares are entitled to receive on a proportionate
basis all of our assets remaining after payment of all of our liabilities,
subject to the rights of holders of preference shares.
23
The common shares carry no pre-emptive or conversion rights other than
rights granted to holders of common shares under the Shareholders Rights Plan
implemented and ratified by our shareholders on April 27, 2000 and re-adopted by
our shareholders on April 28, 2003. The Shareholder Rights Plan is designed to
encourage the fair treatment of our shareholders in connection with any
take-over offer for our outstanding common shares. The Shareholder Rights Plan
provides our board of directors and shareholders with 45 days, which is longer
than provided by applicable laws, to fully consider any unsolicited take-over
bid without undue pressure, to allow our board of directors, if appropriate, to
consider other alternatives to maximize shareholder value and to allow
additional time for competing bids to emerge. If a bid is made to all
shareholders, is held open for at least 45 days and is accepted by shareholders
holding more than 50% of the outstanding common shares, or is otherwise approved
by our board of directors, then the Shareholder Rights Plan will not affect the
rights of shareholders. Otherwise, all shareholders, except the parties making a
take-over bid, will be able to acquire a number of additional common shares
equal to 100% of their existing outstanding holdings at half the market price.
Thus, any party making a take-over bid not permitted by the Shareholder Rights
Plan could suffer significant dilution. The Shareholder Rights Plan will expire
in accordance with its terms upon the termination of our 2006 annual meeting of
shareholders.
CERTAIN TAX CONSIDERATIONS FOR U.S. SHAREHOLDERS
The following discussion generally summarizes certain material Canadian and
U.S. federal income tax consequences of the acquisition, ownership and
disposition of common shares purchased pursuant to this prospectus by certain
U.S. purchasers. This discussion is not intended to be, nor should it be
construed to be, legal or tax advice to any particular prospective purchaser.
This discussion does not take into account Canadian provincial or territorial
tax laws, U.S. state or local tax laws, or tax laws of jurisdictions outside of
Canada and the United States. The following is based upon the tax laws of Canada
and the United States as in effect on the date of this prospectus, which are
subject to change with possible retroactive effect. Prospective purchasers
should consult their own tax advisors with respect to their particular
circumstances.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS FOR UNITED STATES
HOLDERS
The following is a general discussion of the material U.S. federal income
tax consequences of the acquisition, ownership and disposition of our common
shares by U.S. Holders (as defined below). This discussion is based on current
provisions of the Internal Revenue Code of 1986 (the "Code"), current
U.S. Treasury Regulations promulgated under the Code, and administrative and
judicial interpretations of the Code and U.S. Treasury Regulations, all as in
effect on the date of this prospectus and all of which are subject to change,
possibly on a retroactive basis.
This discussion considers only U.S. Holders who will own common shares as
capital assets, that is, generally as investments. For purposes of this
discussion a U.S. Holder is: (i) an individual citizen or resident of the
United States; (ii) a corporation or other entity organized in or under the laws
of the United States or of any political subdivision thereof; (iii) an estate,
the income of which is subject to U.S. federal income taxation regardless of the
source; or (iv) a trust, if (1) a court within the United States is able to
exercise primary jurisdiction over the administration of the trust and one or
more U.S. persons (within the meaning of Section 7701(a)(30) of the Code) have
the authority to control all substantial decisions of the trust or (2) it has a
valid election in effect under applicable U.S. Treasury regulations to be
treated as a U.S. person. If a partnership, including any entity that is treated
as a partnership for U.S. federal income tax purposes, holds common shares, the
treatment of a partner in the partnership will generally depend upon the status
of the partner and the activities of the partnership. A prospective purchaser of
common shares that is a partnership, and the partners in such partnership,
should consult their tax advisors about the U.S. federal income tax consequences
of holding and disposing of common shares.
24
This discussion does not address all aspects of U.S. federal income taxation
that may be relevant to any particular holder based on the holder's individual
circumstances. In particular, not addressed are the potential applications of
the alternative minimum tax or the U.S. federal income tax consequences to
holders that are subject to special treatment, including (by way of example
only): (i) broker-dealers in securities or currencies; (ii) life insurance
companies, regulated investment companies or real estate investment trusts;
(iii) banks, thrifts or other financial institutions or "financial services
entities"; (iv) taxpayers who have elected mark-to-market accounting;
(v) tax-exempt entities; (vi) taxpayers who hold common shares as a position in
a "straddle," or as part of a "synthetic security" or "hedge," "conversion
transaction" or other integrated investment; (vii) holders owning directly,
indirectly or by attribution at least 10% of the voting power in the Company;
and (viii) U.S. Holders whose functional currency is not the U.S. dollar.
In addition, this discussion does not address any aspect of U.S. federal
gift or estate tax, or state, local or non-U.S. tax laws. Prospective investors
are advised to consult their own tax advisors with respect to the specific tax
consequences to them of purchasing, holding or disposing of common shares.
DISTRIBUTIONS ON COMMON SHARES
Subject to the discussion of the passive foreign investment company rules
below, a U.S. Holder will be required to include in gross income as ordinary
income the amount of any distribution paid on common shares, including any
Canadian taxes withheld from the amount paid, on the date the distribution is
received to the extent the distribution is paid out of our current or
accumulated earnings and profits as determined for U.S. federal income tax
purposes. Distributions in excess of these earnings and profits will be applied
against and will reduce the U.S. Holder's tax basis in the common shares and, to
the extent that basis is exceeded, will be treated as capital gain from the sale
or exchange of the common shares. Consequently, such distributions in excess of
our current and accumulated earnings and profits would not give rise to foreign
source income and a U.S. Holder would not be able to use the foreign tax credit
arising from any Canadian withholding tax imposed on such distribution unless
such credit can be applied (subject to applicable limitations) against U.S. tax
due on other foreign source income in the appropriate category for foreign tax
purposes. Distributions paid on common shares will not be eligible for the
dividends received deduction available in certain cases to U.S. corporations.
The amount of any distribution paid in Canadian dollars that is includable in a
U.S. Holder's income will be equal to the U.S. dollar value of the gross amount
of the payment determined at the spot rate on the date of the distribution,
regardless of whether the payment, in fact, is converted into U.S. dollars on
such date. In the case of a distribution paid in Canadian dollars that is not
converted by the U.S. Holder into U.S. dollars on the date of receipt, the
U.S. Holder will have a tax basis in the Canadian dollars equal to their
U.S. dollar value on the date of receipt. Any gain or loss recognized upon a
subsequent sale or other disposition of such Canadian dollars, including an
exchange for U.S. dollars, will be ordinary income or loss.
With respect to U.S. Holders who are individuals, certain dividends received
during a tax year beginning before January 1, 2009 from a qualified foreign
corporation may be eligible for a reduced maximum federal tax rate of 15%. A
qualified foreign corporation includes a foreign corporation that is eligible
for the benefits under a comprehensive income tax treaty to which the
United States is a party which the United State Treasury Department has
determined to be satisfactory for these purposes and which includes an exchange
of information program. United States Treasury Department guidance indicates
that the current income tax treaty between Canada and the United States meets
these requirements and we believe we are eligible for the benefits of that
treaty. In addition, dividends paid with respect to stock of a foreign
corporation that is readily tradable on an established securities market in the
United States are treated as paid by a qualified foreign corporation.
United States Treasury Department guidance indicates that our common shares,
which are listed on the Nasdaq National Market, are readily tradable on an
established securities market in the United States. Even if
25
paid by a qualified foreign corporation, dividends paid with respect to stock as
to which an individual does not meet a minimum holding period requirement during
which he or she is not protected from the risk of loss are not eligible for the
reduced rate. Similarly, dividends that the U.S. Holder elects to treat as
"investment income" pursuant to section 163(d)(4) of the Code will not be
eligible for the reduced tax rate. Nor will the reduced rate apply to a dividend
if the U.S. Holder receiving it is obligated to make related payments with
respect to positions in substantially similar or related property. This
disallowance applies even if the minimum holding period has been met.
U.S. Holders should consult their own tax advisors regarding the application of
these rules in light of their particular circumstances.
In general, a U.S. Holder may elect to claim either a deduction or, subject
to certain limitations, a foreign tax credit in computing its U.S. federal
income tax liability for Canadian income tax withheld from dividends paid on
common shares. For purposes of calculating the limitations on the use of the
foreign tax credit, dividends paid on our common shares will be treated as
income from sources outside the United States and generally will constitute
"passive income" or, in the case of certain U.S. Holders, "financial services
income." However, limitations on the use of foreign tax credits generally will
not apply to an electing individual U.S. Holder whose creditable foreign taxes
during a tax year do not exceed US$300 (US$600 for joint filers) if such
individual's gross income for the tax year from non-U.S. sources consists solely
of certain items of "passive income" reported on a "payee statement" furnished
to the U.S. Holder. If a non-corporate U.S. Holder is subject to the foreign tax
credit limitation, then the amount of the qualified dividend income paid by us
to such U.S. Holder that is subject to the reduced dividend income tax rate
(described above) and that is taken into account for the purposes of calculating
the U.S. Holder's U.S. foreign tax credit limitation must be reduced by the
"rate differential portion" of such dividend. Each prospective purchaser of
common shares should consult its own tax advisor regarding the implication of
the new U.S. tax legislation on the calculation of U.S. foreign tax credits.
TAXATION OF THE DISPOSITION OF COMMON SHARES
Subject to the discussion of the passive foreign investment company rules
below, upon the sale, exchange or other disposition of common shares, a
U.S. Holder will recognize capital gain or loss in an amount equal to the
difference between the U.S. Holder's tax basis in the common shares, which is
usually the cost of the common shares, and the amount realized on the
disposition. Capital gain from the sale, exchange or other disposition of common
shares held more than one year is long-term capital gain and is eligible for a
reduced rate of taxation for non-corporate U.S. Holders. Gain or loss recognized
by a U.S. Holder on a sale, exchange or other disposition of common shares
generally will be treated as U.S. source income or loss for U.S. foreign tax
credit purposes. The deductibility of a capital loss recognized on the sale,
exchange or other disposition of common shares is subject to limitations.
PASSIVE FOREIGN INVESTMENT COMPANY STATUS
For U.S. federal income tax purposes, a foreign corporation generally will
be classified as a passive foreign investment company, or PFIC, for any taxable
year during which either (i) 75% or more of its gross income is passive income
(as defined for U.S. federal income tax purposes), such as dividends, interest
and royalties or (ii) on average for such taxable year, 50% or more of its
assets (by value) produce or are held for the production of passive income. For
purposes of applying the foregoing tests, the assets and gross income of any
corporation in which we are considered to own 25% or more of the shares (by
value) will be proportionately attributed to us.
Based on our current and projected income, assets and activities, we believe
that we will not be classified as a PFIC currently or in the future. This
conclusion is a factual determination made annually
26
and, thus, subject to change. In reaching this determination, we are relying on
our projected capital expenditure plans and projected revenue for the current
year and for future years. Moreover, we have valued our assets based on the
price per share of the common shares. Such a valuation method results in
substantial value being given to intangible assets, including goodwill, that are
considered neither to produce nor to be held for the production of passive
income for purposes of the PFIC rules. In addition, we have made a number of
assumptions regarding the amount of this value allocable to goodwill. Although
we believe that this is a reasonable method of valuing our non-passive assets,
the Internal Revenue Service has neither approved nor disapproved of this
valuation method. For this reason and because (i) the determination of whether
or not we are a PFIC will be based on the composition of our income and assets
and can be definitively made only after the end of each taxable year; (ii) the
value of our assets may vary significantly following the offering; (iii) we will
own a substantial amount of passive assets after the offering; and (iv) the
application of the relevant rules is not entirely clear in all respects, there
can be no assurance that we are not or will not become a PFIC.
If we are a PFIC for any taxable year during which a U.S. Holder owns common
shares, the U.S. Holder will be subject to special U.S. federal income tax
rules, set forth in Sections 1291 to 1298 of the Code, with respect to the
common shares. If a U.S. Holder does not make a "qualified electing fund," or
"QEF," election, or a "mark-to-market" election, then a U.S. Holder of common
shares who has held such shares would be required to report any gain on
disposition of any common shares as ordinary income rather than capital gain and
to compute the tax liability on such gain and on certain distributions as if the
items had been earned rateably by the U.S. Holder over each day in the
U.S. Holder's holding period (or a certain portion thereof) for the common
shares and would be subject to the highest ordinary income tax rate for each
taxable year other than the current year of the U.S. Holder in which the items
were treated as having been earned regardless of the rate otherwise applicable
to the U.S. Holder. Such U.S. Holder would also be liable for interest (which
may be non-deductible by certain U.S. Holders) on the tax liability attributable
to income allocable to prior years as if such liability had been due with
respect to each such prior year. For purposes of these rules, gifts, exchanges
pursuant to corporate reorganizations and use of the common shares as security
for a loan may be treated as a taxable disposition. In addition, dividends from
the Company would not be eligible for the 15% tax rate described above and a
stepped-up basis in the common shares upon the death of an individual
U.S. Holder may not be available.
A U.S. Holder who makes a QEF election generally would not be subject to the
special rules applicable to shareholders of passive foreign investment companies
described above, but, rather, generally would pay tax on his or her pro rata
share of the PFIC's ordinary earnings and net capital gains for each year the
U.S. Holder held the shares, regardless of whether such income or gain was
actually distributed. Alternatively, in certain circumstances a U.S. Holder,
again in lieu of being subject to the rules discussed in the preceding
paragraph, may make an election under a mark-to-market regime, provided that the
PFIC stock held by the U.S. Holder is regularly traded on a qualified exchange.
Under current law, the mark-to-market election may be available to U.S. Holders
because the shares will be listed on The Nasdaq National Market which
constitutes a qualified exchange as designated in the Code, although there can
be no assurance that the shares will be "regularly traded." Under this election,
the U.S. Holder would be required to recognize as ordinary income each year an
amount equal to the excess of the fair market value over the adjusted basis of
his or her shares in the PFIC, calculated as of the close of such year. If the
adjusted basis of the shares were to exceed their fair market value, and an
election to have this regime apply were in effect, the U.S. Holder would be
entitled to deduct the amount of such excess, but only to the extent of amounts
included in ordinary income in prior taxable years pursuant to the election.
Both a QEF election and a mark-to-market election are subject to complex and
specific rules and requirements. In particular, a QEF election requires that the
PFIC agree to provide certain information to shareholders and meet certain other
requirements. We make no representation that we will be
27
willing or able to provide this information or meet these requirements if we are
classified as a PFIC. U.S. Holders are strongly urged to consult their own tax
advisors concerning the QEF election and the mark-to-market election if we are
classified as a PFIC.
A U.S. Holder who beneficially owns shares of a PFIC must file an annual
return with the U.S. Internal Revenue Service on U.S. Internal Revenue Service
Form 8621.
INFORMATION REPORTING AND BACK-UP WITHHOLDING
Payments in respect of common shares may be subject to information reporting
to the U.S. Internal Revenue Service and to a 28% U.S. back-up withholding tax.
Back-up withholding may apply unless the payee (i) is a corporation or other
exempt recipient and, if required, demonstrates its status as such, or
(ii) provides a U.S. taxpayer identification number, or TIN, which, for an
individual, is usually his or her social security number, certifies that the TIN
provided is correct and that the holder has not been notified by the
U.S. Internal Revenue Service that it is subject to back-up withholding due to
the under-reporting of interest or dividends, the U.S. Internal Revenue Service
has not notified the payor that the TIN provided by the payee is incorrect, and
otherwise complies with the applicable requirements of the back-up withholding
rules. Back-up withholding is not an additional tax; rather, any amounts
withheld under the back-up withholding rules will be allowed as a refund or
credit against such payee's U.S. federal income tax liability provided that the
required information is furnished to the U.S. Internal Revenue Service. A
U.S. Holder who or that fails to provide a correct TIN, when requested, may also
be subject to penalties. U.S. Holders should consult with their own tax advisors
as to the application of the U.S. information reporting and back-up withholding
rules.
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS FOR U.S. RESIDENTS
The following is a general summary of the principal Canadian federal income
tax considerations generally applicable to a U.S. Resident who acquires common
shares ("Common Shares") pursuant to this prospectus. As used in this summary of
Canadian federal income tax considerations, the term "U.S. Resident" means a
holder of Common Shares who: (A) for the purposes of the INCOME TAX ACT (Canada)
(the "Tax Act") (i) is not, has not been and will not be or be deemed to be,
resident in Canada at any time while he or she holds or held Common Shares,
(ii) deals at arm's length with the Company, (iii) holds the Common Shares as a
capital property and (iv) does not use or hold (and has never used or held) the
Common Shares in carrying on a business in Canada; and (B) for the purposes of
the CANADA-UNITED STATES INCOME TAX CONVENTION, (1980), (the "Convention"), is
at all relevant times a resident of the United States. Common Shares will
generally be considered to be capital property to a U.S. Resident unless the
shares are held as inventory in the course of carrying on a business or in a
transaction considered to be an adventure in the nature of trade. Common Shares
held by certain "financial institutions", as defined in the Tax Act, will
generally not be capital property to such holders and will be subject to special
"mark-to-market rules" contained in the Tax Act. This summary does not take into
account these mark-to-market rules. U.S. holders which are financial
institutions for the purposes of these rules or which otherwise do not hold
their Common Shares as capital property should consult their own tax advisors.
This summary is based upon the current provisions of the Tax Act and the
regulations thereunder (the "Regulations"), all specific proposals to amend the
Tax Act and the Regulations announced by the Minister of Finance (Canada) prior
to the date of this prospectus, counsel's understanding of the current published
administrative policies and assessing practices of the Canada Customs and
Revenue Agency ("CCRA") and the current provisions of the Convention. This
summary is not exhaustive of all potential Canadian tax consequences to a
U.S. Resident and does not take into account or anticipate any other changes in
law, whether by judicial, governmental or legislative decision or action, nor
does it take into account any provincial, territorial or foreign tax
considerations.
28
TAXATION OF DIVIDENDS ON COMMON SHARES
Under the Tax Act, dividends on Common Shares paid or credited to a
non-resident of Canada will normally be subject to Canadian withholding tax at
the rate of 25% of the gross amount of such dividends. This withholding tax may
be reduced pursuant to the terms of the Convention. Under the Convention, the
rate of Canadian withholding tax which will apply on dividends paid by the
Company to a U.S. Resident that beneficially owns such dividends is generally
15% unless the beneficial owner is a company which owns at least 10% of the
voting stock of the Company at that time in which case the rate is reduced to
5%. In addition, under the Convention and the administrative practices of CCRA,
dividends may be exempt from Canadian withholding tax if paid to certain
U.S. Residents that have complied with administrative conditions and that are
qualifying religious, scientific, literary, educational or charitable tax-exempt
organizations or that are qualifying trusts, companies, organizations or
arrangements operated exclusively to administer or provide pension, retirement
or employee benefits that are exempt from tax in the United States.
DISPOSITION OF COMMON SHARES
A U.S. Resident will not be subject to tax under the Tax Act in respect of
any capital gain realized by such U.S. Resident on a disposition of a Common
Share provided that such Common Share does not constitute "taxable Canadian
property", as defined in the Tax Act, of the U.S. Resident at the time of
disposition. Assuming the Common Shares are then listed on a prescribed stock
exchange, which currently includes the Toronto Stock Exchange and the Nasdaq
National Market, the Common Shares generally will not constitute taxable
Canadian property of a U.S. Resident unless, at any time during the 60-month
period immediately preceding the disposition, the U.S. Resident, persons with
whom the U.S. Resident did not deal at arm's length, or the U.S. Resident
together with all such persons, owned or had an interest or an option in respect
of 25% or more of the issued shares of any class or series of shares of our
capital stock.
If the Common Shares are taxable Canadian property to a U.S. Resident at the
time of disposition, any capital gain realized on the disposition or deemed
disposition of such Common Shares will, according to the Convention, generally
not be subject to Canadian federal income tax unless the value of the shares of
the Company at the time of the disposition of the Common Shares is derived
principally from "real property situated in Canada" within the meaning set out
in the Convention. U.S. Residents whose Common Shares are taxable Canadian
property should consult their own advisors regarding filing and other Canadian
federal tax considerations.
SELLING SHAREHOLDERS
The following table provides information concerning the beneficial ownership
of our common shares by each of the selling shareholders. Unless otherwise
indicated, the selling shareholders are the legal and beneficial owners of the
shares they are selling and have sole voting and investment power over such
shares. In determining the number and percentage of shares beneficially owned by
each person, shares that may be acquired by such selling shareholder under
options exercisable within 60 days of November 7, 2003 are deemed beneficially
owned by such selling shareholder and are deemed outstanding for purposes of the
total number of outstanding shares for such selling
29
shareholder. Except as described in the previous sentence, the following table
does not give effect to common shares that may be acquired pursuant to options
outstanding as of November 7, 2003.
NUMBER OF COMMON SHARES
NUMBER OF COMMON SHARES NUMBER OF COMMON SHARES TO BE OWNED AFTER
SELLING SHAREHOLDER BENEFICIALLY OWNED TO BE SOLD IN THE OFFERING THE OFFERING
------------------- ----------------------- -------------------------- -----------------------
Peter Roberts............. 145,791(1) 100,000 45,791(3)
Norman Toms............... 90,783(2) 57,778 33,005(4)
------------
(1) Includes 143,291 common shares issuable upon exercise of options exercisable
within 60 days of November 7, 2003. The selling shareholder acquired the
securities on the following dates: 120,000 options on January 29, 1999;
2,500 shares on June 17, 1999; 8,750 options on June 16, 2000; 5,781 options
on December 5, 2000; 4,333 options on October 22, 2001; and 4,427 options on
July 26, 2002. Of the 145,791 securities held by the selling shareholder,
4,427 were acquired within the past twelve months when 4,427 options to
purchase common shares were granted on July 26, 2002 at an exercise price of
CDN$3.50 per common share. The selling shareholder is expected to exercise
120,000 options at a price of CDN$5.63 per share, for an aggregate cost of
CDN$675,600, on or before closing of the offering.
(2) Includes 53,005 common shares issuable upon exercise of options exercisable
within 60 days of November 7, 2003. The selling shareholder acquired the
securities on the following dates: 20,000 options on June 5, 1997; 28,578
options on July 22, 1999; 35,556 shares on July 21, 2000; 2,222 shares on
July 24, 2000; and 4,427 options on July 26, 2002. Of the 90,783 securities
held by the selling shareholder, 4,427 were acquired within the past twelve
months when 4,427 options to purchase common shares were granted on
July 26, 2002 at an exercise price of CDN$3.50 per common share. The selling
shareholder is expected to exercise 20,000 options at a price of CDN$0.90
per share, for an aggregate cost of CDN$18,000, on or before closing of
the offering.
(3) Represents 0.0019% of the total common shares that will be outstanding after
the offering.
(4) Represents 0.0014% of the total common shares that will be outstanding after
the offering.
30
UNDERWRITING
Under the underwriting agreement dated November - , 2003, each of the
underwriters named below has severally agreed to purchase from us and from the
selling shareholders the number of common shares shown opposite its name below:
UNDERWRITER NUMBER OF SHARES
----------- ----------------
Lehman Brothers Inc......................................... 2,000,000
CIBC World Markets Inc...................................... 2,000,000
---------
Total....................................................... 4,000,000
=========
The underwriting agreement provides that the underwriters' obligations to
purchase shares are several and depend on the satisfaction of the conditions
contained in the underwriting agreement, including:
- the obligation to purchase all of the common shares offered hereby if any
of the shares are purchased;
- the representations and warranties made by us and the selling shareholders
to the underwriters are true;
- there is no material change in the financial markets; and
- we deliver customary closing documents to the underwriters.
The obligations of the underwriters may be terminated upon the occurrence of
certain stated events.
OVER-ALLOTMENT OPTION
We have granted to the underwriters an option to purchase up to an aggregate
of 600,000 additional common shares, exercisable to cover over-allotments, and
for market stabilization purposes, at the public offering price less the
underwriting discount shown on the cover page of this prospectus. The
underwriters may exercise this option at any time, and from time to time, until
30 days after the date of the closing of this offering. To the extent the
underwriters exercise this option, each underwriter will be committed, so long
as the conditions of the underwriting agreement are satisfied, to purchase a
number of additional common shares proportionate to that underwriter's initial
commitment as indicated in the preceding table, and we will be obligated to sell
the additional common shares to the underwriters.
DISCOUNT AND EXPENSES
The following table summarizes the underwriting discount that we and the
selling shareholders will pay. The amounts are shown assuming both no exercise
and full exercise of the underwriters' option to purchase up to an additional
600,000 common shares. The underwriting fee is the difference between the public
offering price and the amount the underwriters pay to purchase the shares.
NO EXERCISE FULL EXERCISE
----------- -------------
Per share...................................................
Total.......................................................
The underwriters have advised us and the selling shareholders that they
propose to offer the common shares directly to the public at the public offering
price presented on the cover page of this
31
prospectus, and to selected dealers, who may include the underwriters, at the
public offering price less a selling concession not in excess of $ per
share. The underwriters may allow, and the selected dealers may reallow, a
concession not in excess of $ per share to brokers and dealers. After the
offering, the underwriters may change the offering price and other selling
terms.
We estimate that the total expenses of this offering, including
registration, filing and listing fees, printing fees and legal and accounting
expenses, but excluding underwriting discounts, will be approximately
$1.2 million. We will pay all costs and expenses of this offering, including
those of the selling shareholders.
LOCK-UP AGREEMENTS
We have agreed that, without the prior written consent of the underwriters
and except as disclosed in the financial statements incorporated by reference
into this prospectus, we will not, directly or indirectly, offer, sell or
dispose of any common shares or any securities which may be converted into or
exchanged for any common shares for a period of 90 days from the date of this
prospectus. The selling shareholders, our executive officers and directors and
certain other officers, holding in the aggregate 552,722 common shares, have
agreed under lock-up agreements not to, without the prior written consent of the
underwriters, directly or indirectly, offer, sell or otherwise dispose of any
common shares or any securities which may be converted into or exchanged or
exercised for any common shares for a period of 90 days from the date of this
prospectus.
U.S. AND CANADIAN OFFERING
This offering is being made concurrently in the United States and each of
the provinces of Canada pursuant to the multijurisdictional disclosure system
implemented by the securities regulatory authorities in the United States and
Canada. Subject to applicable law and certain restrictions, the underwriters may
offer the common shares outside the United States and Canada. Broker-dealer
affiliates of the underwriters may sell the common shares in the United States,
Canada or elsewhere, in each case pursuant to applicable law.
INDEMNIFICATION
We and the selling shareholders have agreed to indemnify the underwriters
against liabilities relating to the offering, including liabilities under U.S.
and Canadian securities laws and liabilities arising from breaches of the
representations and warranties contained in the underwriting agreement, and to
contribute to payments that the underwriters may be required to make for these
liabilities.
STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
The underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, and penalty bids or purchases for the purpose
of pegging, fixing or maintaining the price of our common shares, in accordance
with Regulation M under the United States Securities Exchange Act of 1934, as
amended, or the 1934 Exchange Act:
- Over-allotment involves sales by the underwriters of shares in excess of
the number of shares the underwriters are obligated to purchase, which
creates a syndicate short position. The short position may be either a
covered short position or a naked short position. In a covered short
position, the number of shares over-allotted by the underwriters is not
greater than the number of shares that they may purchase in the
over-allotment option. In a naked short position, the number of shares
involved is greater than the number of shares in the over-allotment
option. The underwriters may close out any short position by either
exercising their over-allotment option and/or purchasing shares in the
open market.
32
- Stabilizing transactions permit bids to purchase common shares so long as
the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common shares in
the open market after the distribution has been completed in order to
cover syndicate short positions. In determining the source of shares to
close out the short position, the underwriters will consider, among other
things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through the
over-allotment option. If the underwriters sell more shares than could be
covered by the over-allotment option, creating a naked short position, the
position can only be closed out by buying shares in the open market. A
naked short position is more likely to be created if the underwriters are
concerned that there could be downward pressure on the price of the shares
in the open market after pricing that could adversely affect investors who
purchase in the offering.
- Penalty bids permit the underwriters to reclaim a selling concession from
a syndicate member when the common shares originally sold by the syndicate
member is purchased in a stabilizing or syndicate covering transaction to
cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may raise or maintain the market price of our common shares or prevent or
slow a decline in the market price of our common shares. As a result, the price
of our common shares may be higher than the price that might otherwise exist in
the open market. These transactions may be effected on the Nasdaq National
Market or otherwise and, if commenced, may be discontinued at any time. Neither
we, the selling shareholders, nor either of the underwriters make any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of our common shares. In
addition, neither we, the selling shareholders, nor the underwriters make any
representation that the underwriters will engage in these stabilizing
transactions or that any transaction, once commenced, will not be discontinued
without notice.
Pursuant to policy statements of the Ontario Securities Commission and the
Commission des valeurs mobilieres du Quebec, the underwriters may not,
throughout the period of distribution under this prospectus, bid for or purchase
any common shares. The foregoing restriction is subject to certain exceptions,
on the condition that the bid or purchase not be engaged in for the purpose of
creating actual or apparent active trading in, or raising the price of, the
common shares. These exceptions include a bid or purchase permitted under the
by-laws and rules of the Toronto Stock Exchange relating to market stabilization
and passive market making activities and a bid or purchase made for and on
behalf of a customer where the order was not solicited during the period of
distribution. Pursuant to the first mentioned exception, in connection with this
offering the underwriters may over-allot or effect transactions which stabilize
or maintain the market price of the common shares at levels other than those
which otherwise might prevail on the open market. Such transactions, if
commenced, may be discontinued at any time. If the underwriters create a short
position in common shares in connection with this offering, the underwriters may
reduce that short position by purchasing common shares in the open market. The
underwriters may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.
PASSIVE MARKET MAKING
In connection with this offering, the underwriters and selling group members
may engage in passive market making transactions in our common shares on the
Nasdaq National Market in accordance with Rule 103 of Regulation M under the
1934 Exchange Act during a period before the commencement of offers or sales of
common shares and extending through completion of the distribution. A passive
market maker must display its bid at a price, not in excess of the highest
33
independent bid of that security. However, if all independent bids are lowered
below the passive market maker's bid, that bid must then be lowered when
specified purchase limits are exceeded.
STAMP TAXES
If you purchase common shares offered in this prospectus, you may be
required to pay stamp taxes and other charges under the laws and practices of
the country of purchase, in addition to the offering price listed on the cover
page of this prospectus.
OTHER RELATIONSHIPS
Some of the underwriters have performed and may in the future perform
investment banking and advisory services for us from time to time for which they
have received or may in the future receive customary fees and expenses.
LEGAL MATTERS
Certain Canadian legal matters in connection with the offering will be
passed upon on our behalf by Blake, Cassels & Graydon LLP and on behalf of the
underwriters by McCarthy Tetrault LLP. Certain U.S. legal matters in connection
with the offering will be passed upon on our behalf by Davis Wright
Tremaine LLP and on behalf of the underwriters by Simpson Thacher &
Bartlett LLP. As of the date hereof, partners and associates of Blake,
Cassels & Graydon LLP and McCarthy Tetrault LLP own beneficially, directly and
indirectly, less than 1% of the common shares.
EXPERTS
KPMG LLP, independent chartered accountants, have audited our consolidated
financial statements as at December 31, 2002 and 2001, and for each of the years
in the three-year period ended December 31, 2002 as set forth in their reports,
which are incorporated by reference in this prospectus and elsewhere in the
registration statement. Our consolidated financial statements are incorporated
by reference herein in reliance on KPMG LLP's reports, and upon the authority of
KPMG LLP as experts in accounting and auditing.
With respect to the pro forma consolidated statements of operations for the
year ended December 31, 2002 and for the nine-month period ended September 30,
2003 incorporated by reference herein, the independent chartered accountants
have reported that they applied limited procedures in accordance with Canadian
professional standards for preparation of a compilation report. However, their
separate compilation report incorporated by reference herein states that they
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. Accordingly, the degree
of reliance on their report on such information should be restricted in light of
the limited nature of the review procedures applied. The accountants are not
subject to the liability provisions of Section 11 of the United States
Securities Act of 1933 for their report on the pro forma financial information
and the related comments for the United States readers on differences between
Canadian and United States reporting standards because that report is not a
"report" or a "part" of the registration statement prepared or certified by the
accountants within the meaning of Sections 7 and 11 of the United
States Securities Act of 1933.
34
AUDITORS, TRANSFER AGENT AND REGISTRAR
Our auditors are KPMG LLP, Chartered Accountants, 777 Dunsmuir, Vancouver,
BC V7Y 1K3.
The registrar and transfer agent for the common shares in Canada is
Computershare Trust Company of Canada, 510 Burrard Street, Vancouver, British
Columbia and in the United States is Computershare Trust Company, Inc., 12039
West Alameda Parkway, Suite Z-2, Lakewood, Colorado. These offices and the
principal offices of Computershare Trust Company of Canada in the city of
Toronto can effect transfers and make deliveries of certificates for common
shares.
DOCUMENTS INCORPORATED BY REFERENCE
Information that is incorporated by reference is an important part of this
prospectus. We incorporate by reference the documents listed below, which were
filed with the securities commission or similar authority in each of the
provinces of Canada where this short form prospectus is being filed:
- Our Annual Information Form dated May 14, 2003, including management's
discussion of operating results;
- Our audited consolidated financial statements as at December 31, 2002 and
2001, and for each of the years in the three-year period ended
December 31, 2002, together with the notes thereto and the auditors'
report thereon;
- Our unaudited consolidated financial statements as at September 30, 2003
and for the nine-month periods ended September 30, 2003 and 2002, together
with the notes thereto and including management's discussion and analysis
of financial condition and results of operations;
- Our unaudited pro forma consolidated statements of operations for the year
ended December 31, 2002 and for the nine-month period ended September 30,
2003, including the compilation report thereon;
- The financial statements for AirPrime, Inc. as at December 31, 2002 and
2001, and for the years ended December 31, 2002 and 2001, together with
the notes thereto and the auditors' report thereon;
- The unaudited financial statements of AirPrime, Inc. as at June 30, 2003
and for the six-month periods ended June 30, 2003 and 2002, together with
the notes thereto;
- The Information Circular dated March 19, 2003 relating to our Annual and
Special Meeting of shareholders held on April 28, 2003, except for any
information set out therein relating to the composition of the
compensation committee of the board of directors and its report on
executive compensation and corporate governance and any performance graph
therein;
- A Material Change Report dated January 30, 2003 pertaining to the results
for the fourth quarter of 2002 and the 2002 fiscal year;
- A Material Change Report dated March 26, 2003 pertaining to the
appointment of Nadir Mohamed to the Board of Directors;
- A Material Change Report dated April 24, 2003 pertaining to the results
for the first quarter of 2003;
- A Material Change Report dated June 16, 2003 pertaining to the
announcement of the acquisition of AirPrime, Inc.;
- A Material Change Report dated July 17, 2003 pertaining to the results for
the second quarter of 2003;
35
- A Material Change Report dated August 13, 2003 pertaining to the
completion of the acquisition of AirPrime, Inc.;
- A Material Change Report dated October 8, 2003 pertaining to the launch of
the Voq line of professional phones;
- A Material Change Report dated October 22, 2003 pertaining to the results
for the third quarter of 2003; and
- A Material Change Report dated November 4, 2003 pertaining to the filing
of a preliminary short form prospectus in all Canadian provinces and the
filing of a registration statement on Form F-10 relating to the offering
of 4,000,000 common shares in Canada and the United States.
Any documents of the type referred to above and any material change report,
excluding confidential reports, filed by us with a securities commission or
similar regulatory authority in Canada after the date of this short form
prospectus and prior to the termination of any offering hereunder shall be
deemed to be incorporated by reference into this short form prospectus.
ANY STATEMENT CONTAINED IN THIS SHORT FORM PROSPECTUS OR IN A DOCUMENT
INCORPORATED OR DEEMED TO BE INCORPORATED BY REFERENCE HEREIN SHALL BE DEEMED TO
BE MODIFIED OR SUPERSEDED, FOR PURPOSES OF THIS SHORT FORM PROSPECTUS, TO THE
EXTENT THAT A STATEMENT CONTAINED IN THIS SHORT FORM PROSPECTUS OR IN ANY OTHER
SUBSEQUENTLY FILED DOCUMENT THAT ALSO IS OR IS DEEMED TO BE INCORPORATED BY
REFERENCE HEREIN MODIFIES OR SUPERSEDES SUCH STATEMENT. THE MODIFYING OR
SUPERSEDING STATEMENT NEED NOT STATE THAT IT HAS MODIFIED OR SUPERSEDED A PRIOR
STATEMENT OR INCLUDE ANY OTHER INFORMATION SET FORTH IN THE DOCUMENT THAT IT
MODIFIES OR SUPERSEDES. THE MAKING OF A MODIFYING OR SUPERSEDING STATEMENT IS
NOT TO BE DEEMED AN ADMISSION FOR ANY PURPOSES THAT THE MODIFIED OR SUPERSEDED
STATEMENT, WHEN MADE, CONSTITUTED A MISREPRESENTATION, AN UNTRUE STATEMENT OF A
MATERIAL FACT OR AN OMISSION TO STATE A MATERIAL FACT THAT IS REQUIRED TO BE
STATED OR THAT IS NECESSARY TO MAKE A STATEMENT NOT MISLEADING IN LIGHT OF
CIRCUMSTANCES IN WHICH IT WAS MADE. ANY STATEMENT SO MODIFIED OR SUPERSEDED
SHALL NOT BE DEEMED IN ITS UNMODIFIED OR SUPERSEDED FORM TO CONSTITUTE A PART OF
THIS SHORT FORM PROSPECTUS.
All disclosure contained in a supplemented PREP prospectus that is not
contained in the base PREP prospectus will be incorporated by reference into the
base PREP prospectus as of the date of the supplemented PREP prospectus.
INFORMATION HAS BEEN INCORPORATED BY REFERENCE IN THIS PROSPECTUS FROM
DOCUMENTS FILED WITH THE SECURITIES COMMISSIONS OR SIMILAR AUTHORITIES IN
CANADA. Copies of the documents incorporated herein by reference may be obtained
on request without charge from the Corporate Secretary, at Sierra
Wireless, Inc., 13811 Wireless Way, Richmond, British Columbia, V6V 3A4. You may
call us at (604) 231-1100. For the purpose of the Province of Quebec, this short
form prospectus contains information to be completed by consulting the permanent
information record, a copy of which permanent information record may also be
obtained from the Corporate Secretary at the address noted above. Copies of
documents incorporated by reference or forming part of the permanent information
record may also be obtained by accessing the Web site located at www.sedar.com.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the U.S. Securities and Exchange Commission a
registration statement on Form F-10, which together with all amendments and
supplements thereto, we refer to as the Registration Statement, under the
United States Securities Act of 1933, with respect to the common shares offered
hereby. This prospectus, which forms a part of the Registration Statement, does
not contain all the information set forth in the Registration Statement, certain
parts of which have been omitted in accordance with the rules and regulations of
the Securities and Exchange Commission. For further information with respect to
us, and the common shares offered hereby, reference is made to the Registration
Statement and to the schedules and exhibits filed therewith. Statements
contained in this
36
prospectus as to the contents of certain documents are not necessarily complete
and, in each instance, reference is made to the copy of the document filed as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such reference.
We are subject to the informational requirements of the 1934 Exchange Act
and in accordance therewith file periodic reports and other information with the
Securities and Exchange Commission. Under a multi-jurisdictional disclosure
system adopted by the United States, such reports and other information may be
prepared in accordance with the disclosure requirements of Canada, which
requirements are different from those of the United States. We are exempt from
the rules under the 1934 Exchange Act prescribing the furnishing and content of
proxy statements, and its officers, directors and principal shareholders are
exempt from the reporting and short-swing profit recovery provisions contained
in Section 16 of the 1934 Exchange Act. Under the 1934 Exchange Act, we are not
required to publish financial statements as frequently or as promptly as
U.S. companies. Any information filed with the Securities and Exchange
Commission can be inspected and copied at the public reference facilities
maintained by the Securities and Exchange Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of such material can also be
obtained from the Securities and Exchange Commission at prescribed rates through
its Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549.
Information on the operation of the public reference facilities may be
obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330.
The Securities and Exchange Commission maintains a Web site at WWW.SEC.GOV that
contains certain reports and information filed by registrants, like us, who file
documents electronically with the Securities and Exchange Commission. Our common
shares are quoted on the Nasdaq National Market and reports and other
information concerning us may be inspected at the offices of the Nasdaq National
Market at 1735 K Street, N.W., Washington, D.C. 20006-1500.
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT
The following documents have been filed with the Securities and Exchange
Commission as part of the Registration Statement of which this prospectus
forms a part: the documents referred to under the heading "Documents
Incorporated by Reference"; Consent of KPMG LLP; Consent of Deloitte &
Touche LLP; Consent of Blake, Cassels & Graydon LLP; Consent of McCarthy
Tetrault LLP; Consent of Davis Wright Tremaine LLP; Consent of Simpson
Thacher & Bartlett LLP; Powers of Attorney; the underwriting agreement; and
Pro Forma Awareness Letter of KPMG LLP.
37
PART II
INFORMATION NOT REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS
INDEMNIFICATION
Section 124 of the Canada Business Corporations Act, or the CBCA, provides:
(1) A corporation may indemnify a director or officer of the corporation, a
former director or officer of the corporation or another individual who acts
or acted at the corporation's request as a director or officer, or an
individual acting in a similar capacity, of another entity, against all
costs, charges and expenses, including an amount paid to settle an action or
satisfy a judgment, reasonably incurred by the individual in respect of any
civil, criminal, administrative, investigative or other proceeding in which
the individual is involved because of that association with the corporation
or other entity.
(2) A corporation may advance moneys to a director, officer or other individual
for the costs, charges and expenses of a proceeding referred to in
subsection (1). The individual shall repay the moneys if the individual does
not fulfil the conditions of subsection (3).
(3) A corporation may not indemnify an individual under subsection (1) unless
the individual:
(a) acted honestly and in good faith with a view to the best interests of
the corporation, or, as the case may be, to the best interests of the
other entity for which the individual acted as director or officer or in
a similar capacity at the corporation's request; and
(b) in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, the individual had reasonable grounds for
believing that the individual's conduct was lawful.
(4) A corporation may with the approval of a court, indemnify an individual
referred to in subsection (1), or advance moneys under subsection (2), in
respect of an action by or on behalf of the corporation or other entity to
procure a judgment in its favor, to which the individual is made a party
because of the individual's association with the corporation or other entity
as described in subsection (1) against all costs, charges and expenses
reasonably incurred by the individual in connection with such action, if the
individual fulfils the conditions set out in subsection (3).
(5) Despite subsection (1), an individual referred to in that subsection is
entitled to indemnity from the corporation in respect of all costs, charges
and expenses reasonably incurred by the individual in connection with the
defence of any civil, criminal, administrative, investigative or other
proceeding to which the individual is subject because of the individual's
association with the corporation or other entity as described in
subsection (1), if the individual seeking indemnity:
(a) was not judged by the court or other competent authority to have
committed any fault or omitted to do anything that the individual ought
to have done; and
(b) fulfils the conditions set out in subsection (3).
(6) A corporation may purchase and maintain insurance for the benefit of an
individual referred to in subsection (1) against any liability incurred by
the individual:
(a) in the individual's capacity as a director or officer of the
corporation; or
(b) in the individual's capacity as a director or officer, or similar
capacity, of another entity, if the individual acts or acted in that
capacity at the corporation's request.
II-1
(7) A corporation, an individual or an entity referred to in subsection (1) may
apply to a court for an order approving an indemnity under this section and
the court may so order and make any further order that it sees fit.
(8) An applicant under subsection (7) shall give the Director notice of the
application and the Director is entitled to appear and be heard in person or
by counsel.
(9) On an application under subsection (7) the court may order notice to be
given to any interested person and the person is entitled to appear and be
heard in person or by counsel.
In accordance with the CBCA, the Bylaws of the Company provide that:
Subject to the provisions of the CBCA, the Company shall indemnify a
director or officer, a former director or officer, or a person who acts or acted
at the Company's request as a director or officer of a body corporate of which
the Company is or was a shareholder or creditor, and his heirs and legal
representatives, against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment, reasonably incurred by him in
respect of any civil, criminal or administrative action or proceeding to which
he is made a party by reason of being or having been a director or officer of
the Corporation or such body corporate, if (a) he acted honestly and in good
faith with a view to the best interests of the Corporation; and (b) in the case
of a criminal or administrative action or proceeding that is enforced by a
monetary penalty, he had reasonable grounds for believing that his conduct was
lawful. The Company shall also indemnify such person in such other circumstances
as the CBCA or law permits or requires. Nothing in the by-laws of the Company
shall limit the right of any person entitled to indemnity to claim indemnity
apart from the provisions of the by-laws.
A policy of directors' and officers' liability insurance is maintained by
the Company which insures directors and officers for certain losses as a result
of claims, other than those excluded by the insurance policy, against the
directors and officers of the Company in their capacity as directors and
officers and also reimburses the Company for payments made pursuant to the
indemnity provisions under the articles and the CBCA. The Company has also
entered into indemnity agreements with its directors and certain executive
officers which require the Company to indemnify the director or executive
officer and his or her heirs or legal representatives against all costs, charges
and expenses actually and reasonably incurred by the indemnified person arising
out of or relating to any civil, criminal or administrative action or proceeding
to which the indemnified person is or was made a party or is or was threatened
to be made a party, by reason of having been a director or officer of the
Company or any subsidiary of the Company, including without limitation any
action brought by the Company or any subsidiary of the Company. The Company is
not required to indemnify the indemnified person pursuant to the indemnity
agreement if the indemnified person did not with respect to the act or matter
giving rise to the proposed indemnification:
- act honestly and in good faith with a view to the best interests of the
Company or the subsidiary of the Company, or
- in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, have reasonable grounds for believing that
his or her conduct was lawful.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
REGISTRANT PURSUANT TO THE FOREGOING PROVISIONS, THE REGISTRANT HAS BEEN
INFORMED THAT IN THE OPINION OF THE U.S. SECURITIES AND EXCHANGE COMMISSION SUCH
INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS
THEREFORE UNENFORCEABLE.
II-2
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------
3.1 Form of Underwriting Agreement
4.1 Annual Information Form dated May 14, 2003, including
Management's Discussion and Analysis of Financial Condition
and Results of Operations, which is contained in the
Registrant's 2002 Annual Report on Form 20-F/A for the year
ended December 31, 2002, filed on May 20, 2003 with the
Securities and Exchange Commission and is incorporated by
reference
4.2 Audited consolidated financial statements as at
December 31, 2002 and 2001, and for each of the years in the
three year period ended December 31, 2002, together with the
notes thereto and the auditors' report thereon included in
Management's Discussion and Analysis of Financial Condition
and Results of Operations for the years so indicated, which
are contained in the Registrant's 2002 Annual Report on
Form 20-F/A for the year ended December 31, 2002, filed on
May 20, 2003 with the Securities and Exchange Commission and
are incorporated by reference
4.3 Unaudited consolidated financial statements as at
September 30, 2003 and for the nine-month periods ended
September 30, 2003 and 2002, together with the notes
thereto, including Management's Discussion and Analysis of
Financial Condition and Results of Operations, which are
contained in the Registrant's Form 6-K filed on October 24,
2003 with the Securities and Exchange Commission and are
incorporated by reference
4.4 Unaudited pro forma consolidated statements of operations
for the year ended December 31, 2002 and for the nine-month
period ended September 30, 2003, including the compilation
report thereon, which is contained in the Registrant's
Form 6-K filed on November 4, 2003 with the Securities and
Exchange Commission and are incorporated by reference
4.5 The financial statements for AirPrime, Inc. as at
December 31, 2002 and 2001, and for the years ended
December 31, 2002 and 2001, together with the notes thereto
and the auditors' report thereon, which are contained in the
Registrant's Form 6-K filed on November 4, 2003 with the
Securities and Exchange Commission and are incorporated by
reference
4.6 The unaudited financial statements of AirPrime Inc. as at
June 30, 2003 and the six-month periods ended
June 30, 2003 and 2002, together with the notes thereto,
which are contained in the Registrant's Form 6-K filed on
November 4, 2003 with the Securities and Exchange Commission
and are incorporated by reference
4.7 The Information Circular dated March 19, 2003 relating to
the Registrant's Annual and Special Meeting of shareholders
held on April 28, 2003, except for any information set out
therein relating to the composition of the compensation
committee of the board of directors and its report on
executive compensation and corporate governance and any
performance graph therein, which is contained in the
Registrant's Report on Form 6-K, filed on April 4, 2003 with
the Securities and Exchange Commission and is incorporated
by reference
4.8 A Material Change Report dated January 30, 2003 pertaining
to the results for the fourth quarter of 2002 and the 2002
fiscal year, which is contained in the Registrant's Report
on Form 6-K, filed on February 4, 2003 with the Securities
and Exchange Commission and is incorporated by reference
4.9 A Material Change Report dated March 26, 2003 pertaining to
the appointment of Nadir Mohamed to the Board of Directors,
which is contained in the Registrant's Report on
II-3
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------
Form 6-K, filed on March 27, 2003 with the Securities and
Exchange Commission and is incorporated by reference
4.10 A Material Change Report dated April 24, 2003 pertaining to
the results for the first quarter of 2003, which is
contained in the Registrant's a Report on Form 6-K, filed on
April 25, 2003 with the Securities and Exchange Commission
and is incorporated by reference
4.11 A Material Change Report dated June 16, 2003 pertaining to
the announcement of the acquisition of AirPrime, Inc., which
is contained in the Registrant's Report on Form 6-K, filed
on June 17, 2003 with the Securities and Exchange Commission
and is incorporated by reference
4.12 A Material Change Report dated July 17, 2003 pertaining to
the results for the second quarter of 2003, which is
contained in the Registrant's Report on Form 6-K, filed on
July 18, 2003 with the Securities and Exchange Commission
and is incorporated by reference
4.13 A Material Change Report dated August 13, 2003 pertaining to
the completion of the acquisition of AirPrime, Inc., which
is contained in the Registrant's Report on Form 6-K, filed
on August 14, 2003 with the Securities and Exchange
Commission and is incorporated by reference
4.14 A Material Change Report dated October 8, 2003 pertaining to
the launch of the Voq line of professional phones, which is
contained in the Registrant's Report on Form 6-K, filed on
October 9, 2003 with the Securities and Exchange Commission
and is incorporated by reference
4.15 A Material Change Report dated October 22, 2003 pertaining
to the results for the third quarter of 2003, which is
contained in the Registrant's Report on Form 6-K, filed on
October 23, 2003 with the Securities and Exchange Commission
and is incorporated by reference
4.16 A Material Change Report dated November 4, 2003 pertaining
to the filing of a preliminary short form prospectus in all
Canadian provinces and the filing of a registration
statement on Form F-10 relating to the offering of
4,000,000 common shares in Canada and the United States,
which is contained in the Registrant's Report on Form 6-K,
filed on November 5, 2003 with the Securities and Exchange
Commission and incorporated by reference
5.1 Consent of KPMG LLP
5.2 Consent of Deloitte & Touche LLP
5.3 Consent of McCarthy Tetrault LLP
5.4 Consent of Blake, Cassels & Graydon LLP
5.5 Consent of Davis Wright Tremaine LLP
5.6 Consent of Simpson Thacher & Bartlett LLP
5.7 Pro forma awareness letter of KPMG LLP
6.1* Powers of Attorney
------------
* Previously filed.
II-4
PART III
UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
ITEM 1. UNDERTAKING
The Registrant undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the Commission staff, and to
furnish promptly, when requested to do so by the Commission staff, information
relating to the securities registered pursuant to Form F-10 or to transactions
in said securities.
ITEM 2. CONSENT TO SERVICE OF PROCESS
The Registrant has filed with the Commission a written irrevocable consent
and power of attorney on Form F-X.
III-1
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form F-10 and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Vancouver, Province of British Columbia, Country of Canada, on this 10th day
of November, 2003.
SIERRA WIRELESS, INC.
By: /s/ DAVID SUTCLIFFE
-----------------------------------------
David Sutcliffe
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
--------------------------------------------- ---------------------------------- -----------------
/s/ DAVID SUTCLIFFE
------------------------------------ Chairman and Chief Executive November 10, 2003
David Sutcliffe Officer
/s/ PETER W. ROBERTS Chief Financial Officer (Principal
------------------------------------ Financial and Accounting November 10, 2003
Peter W. Roberts Officer)
*
------------------------------------ Director November 10, 2003
Peter Ciceri
*
------------------------------------ Director November 10, 2003
Gregory Aasen
*
------------------------------------ Director November 10, 2003
Paul Cataford
*
------------------------------------ Director November 10, 2003
Charles Levine
III-2
SIGNATURE CAPACITY DATE
--------------------------------------------- ---------------------------------- -----------------
*
------------------------------------ Director November 10, 2003
Nadir Mohamed
*
------------------------------------ Director November 10, 2003
S. Jane Rowe
*By: /s/ PETER W. ROBERTS
-------------------------------
Peter W. Roberts
ATTORNEY-IN-FACT
Pursuant to the requirements of the Securities Act of 1933, the undersigned
has signed this registration statement solely in the capacity of the duly
authorized representative of Sierra Wireless, Inc. in the United States, in the
City of Portland, State of Oregon, on this 10th day of November, 2003.
By: /s/ MICHAEL MCARTHUR-PHILLIPS
-----------------------------------------
Michael McArthur-Phillips, Esq.
DAVIS WRIGHT TREMAINE LLP
III-3
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------
3.1 Form of Underwriting Agreement
4.1 Annual Information Form dated May 14, 2003, including
Management's Discussion and Analysis of Financial Condition
and Results of Operations, which is contained in the
Registrant's 2002 Annual Report on Form 20-F/A for the year
ended December 31, 2002, filed on May 20, 2003 with the
Securities and Exchange Commission and is incorporated by
reference
4.2 Audited consolidated financial statements as at
December 31, 2002 and 2001, and for each of the years in the
three year period ended December 31, 2002, together with the
notes thereto and the auditors' report thereon included in
Management's Discussion and Analysis of Financial Condition
and Results of Operations for the years so indicated, which
are contained in the Registrant's 2002 Annual Report on
Form 20-F/A for the year ended December 31, 2002, filed on
May 20, 2003 with the Securities and Exchange Commission and
are incorporated by reference
4.3 Unaudited consolidated financial statements as at
September 30, 2003 and for the nine-month periods ended
September 30, 2003 and 2002, together with the notes
thereto, including Management's Discussion and Analysis of
Financial Condition and Results of Operations, which are
contained in the Registrant's Form 6-K filed on October 24,
2003 with the Securities and Exchange Commission and are
incorporated by reference
4.4 Unaudited pro forma consolidated statements of operations
for the year ended December 31, 2002 and for the nine-month
period ended September 30, 2003, including the compilation
report thereon, which is contained in the Registrant's
Form 6-K filed on November 4, 2003 with the Securities and
Exchange Commission and are incorporated by reference
4.5 The financial statements for AirPrime, Inc. as at
December 31, 2002 and 2001, and for the years ended
December 31, 2002 and 2001, together with the notes thereto
and the auditors' report thereon, which are contained in the
Registrant's Form 6-K filed on November 4, 2003 with the
Securities and Exchange Commission and are incorporated by
reference
4.6 The unaudited financial statements of AirPrime Inc. as at
June 30, 2003 and the six-month periods ended
June 30, 2003 and 2002, together with the notes thereto,
which are contained in the Registrant's Form 6-K filed on
November 4, 2003 with the Securities and Exchange Commission
and are incorporated by reference
4.7 The Information Circular dated March 19, 2003 relating to
the Registrant's Annual and Special Meeting of shareholders
held on April 28, 2003, except for any information set out
therein relating to the composition of the compensation
committee of the board of directors and its report on
executive compensation and corporate governance and any
performance graph therein, which is contained in the
Registrant's Report on Form 6-K, filed on April 4, 2003 with
the Securities and Exchange Commission and is incorporated
by reference
4.8 A Material Change Report dated January 30, 2003 pertaining
to the results for the fourth quarter of 2002 and the 2002
fiscal year, which is contained in the Registrant's Report
on Form 6-K, filed on February 4, 2003 with the Securities
and Exchange Commission and is incorporated by reference
4.9 A Material Change Report dated March 26, 2003 pertaining to
the appointment of Nadir Mohamed to the Board of Directors,
which is contained in the Registrant's Report on Form 6-K,
filed on March 27, 2003 with the Securities and Exchange
Commission and is incorporated by reference
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------
4.10 A Material Change Report dated April 24, 2003 pertaining to
the results for the first quarter of 2003, which is
contained in the Registrant's a Report on Form 6-K, filed on
April 25, 2003 with the Securities and Exchange Commission
and is incorporated by reference
4.11 A Material Change Report dated June 16, 2003 pertaining to
the announcement of the acquisition of AirPrime, Inc., which
is contained in the Registrant's Report on Form 6-K, filed
on June 17, 2003 with the Securities and Exchange Commission
and is incorporated by reference
4.12 A Material Change Report dated July 17, 2003 pertaining to
the results for the second quarter of 2003, which is
contained in the Registrant's Report on Form 6-K, filed on
July 18, 2003 with the Securities and Exchange Commission
and is incorporated by reference
4.13 A Material Change Report dated August 13, 2003 pertaining to
the completion of the acquisition of AirPrime, Inc., which
is contained in the Registrant's Report on Form 6-K, filed
on August 14, 2003 with the Securities and Exchange
Commission and is incorporated by reference
4.14 A Material Change Report dated October 8, 2003 pertaining to
the launch of the Voq line of professional phones, which is
contained in the Registrant's Report on Form 6-K, filed on
October 9, 2003 with the Securities and Exchange Commission
and is incorporated by reference
4.15 A Material Change Report dated October 22, 2003 pertaining
to the results for the third quarter of 2003, which is
contained in the Registrant's Report on Form 6-K, filed on
October 23, 2003 with the Securities and Exchange Commission
and is incorporated by reference
4.16 A Material Change Report dated November 4, 2003 pertaining
to the filing of a preliminary short form prospectus in all
Canadian provinces and the filing of a registration
statement on Form F-10 relating to the offering of
4,000,000 common shares in Canada and the United States,
which is contained in the Registrant's Report on Form 6-K,
filed on November 5, 2003 with the Securities and Exchange
Commission and incorporated by reference
5.1 Consent of KPMG LLP
5.2 Consent of Deloitte & Touche LLP
5.3 Consent of McCarthy Tetrault LLP
5.4 Consent of Blake, Cassels & Graydon LLP
5.5 Consent of Davis Wright Tremaine LLP
5.6 Consent of Simpson Thacher & Bartlett LLP
5.7 Pro forma awareness letter of KPMG LLP
6.1* Powers of Attorney
------------
* Previously filed.