For the quarter and six months ended October 31, 2006, 15,000 options were excluded from the calculation of diluted earnings per share as the exercise price of these options exceeded the average market price of the Company's common stock during this period and were therefore anti-dilutive.
For the quarter and six months ended October 31, 2005, 16,000 options were excluded from the calculation of diluted earnings per share as the exercise price of these options exceeded the average market price of the Company's common stock during this period and were therefore anti-dilutive.
There were 647,948 and 810,941 options issued and outstanding as at October 31, 2006 and October 31, 2005 respectively.
5. Stock-based Compensation
The Company has an Employee Stock Purchase Plan (ESPP) whereby employees may elect to designate up to 5% of their annual salary to purchase common shares of the Company (Shares). For two six month periods commencing on the second business day after the Company's second quarter or fiscal year end financial results are publicly announced (each an "Offering Period"), eligible employees are given an opportunity to request that a percentage of their salary be deducted each pay period for the purpose of acquiring Shares. The purchase price under the ESPP is the lesser of 90% of the fair market value of the Shares, as determined by calculating the weighted average sale price for board lots as posted on the TSX the ten trading days immediately preceding (i) the first day of the Offering Period in which the purchase date falls or (ii) the purchase date. The Shares are not considered to be issued by the Company until the end of the six month period.
Also, the Company has an Employee and Director Stock Option Plan. The exercise price is no lower than the market price on the date of grant. Options granted under the Plan expire within a period of six years of granting, with vesting periods determined by the Human Resource Committee.
The Company employs a fair value method of accounting for all options issued to employees or directors on or after April 27, 2002. The fair value of options issued in the quarter was calculated using the Black-Scholes option pricing model and the following assumptions:
Quarter Quarter
ended ended
October 31, October 31,
2006 2005
------------------------
Risk free interest rate 3.95% 3.41%
Expected life in years 5.5 5.5
Expected dividend yield 3.7% 2.4%
Volatility 59.57% 78.69%
6. Business Segment Information
Based upon the Company's internal reporting structure, the following operating segments have been assigned:
Intellectual Property (IP): A developer and licensor of semiconductor
intellectual property.
Systems: A supplier of engineering memory test and
analysis systems.
The significant accounting policies of the above segments are the same as those described in Note 1. Intersegment sales are recorded at cost. General and administrative costs are allocated to the operating segments based upon estimates of usage. The Company has not included net interest income, foreign exchange gains or losses, unusual items, gains or losses of long-term assets or income tax expense in the determination of operating segment profit.
Segment information
(in thousands of Canadian Dollars)
Unal-
Six months ended IP Systems located
October 31, 2006 Division Division amounts Totals
-------------------------------------------------------------------------
Revenues from external
customers $ 36,470 $ 6,103 $ - $ 42,573
Segment profit (loss) $ 21,066 $ (1,825) $ (7,869) $ 11,372
Segment assets (x) $ 18,197 $ 2,146 $ 6,692 $ 27,035
Expenditure on segment
assets (x) $ 13,491 $ 540 $ 191 $ 14,222
Amortization and
write-down of segment
assets (x) $ 1,137 $ 500 $ 263 $ 1,900
Goodwill $ 1,786 $ - $ - $ 1,786
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-------------------------------------------------------------------------
Unal-
Six months ended IP Systems located
October 31, 2005 Division Division amounts Totals
-------------------------------------------------------------------------
Revenues from external
customers $ 19,687 $ 10,799 $ - $ 30,486
Segment profit (loss) $ 11,992 $ 1,638 $ (4,905) $ 8,725
Segment assets (x) $ 6,303 $ 1,792 $ 7,088 $ 15,183
Expenditure on segment
assets (x) $ 6,085 $ 500 $ 138 $ 6,723
Amortization and
write-down of segment
assets (x) $ 222 $ 459 $ 277 $ 958
Goodwill $ 1,767 $ - $ - $ 1,767
-------------------------------------------------------------------------
Unal-
Quarter ended IP Systems located
October 31, 2006 Division Division amounts Totals
-------------------------------------------------------------------------
Revenues from external
customers $ 16,518 $ 3,076 $ - $ 19,594
Segment profit (loss) $ 8,228 $ (717) $ (2,796) $ 4,715
Segment assets (x) $ 18,197 $ 2,146 $ 6,692 $ 27,035
Expenditure on segment
assets (x) $ 11 $ 273 $ 18 $ 302
Amortization and
write-down of segment
assets (x) $ 736 $ 254 $ 135 $ 1,125
Goodwill $ 1,786 $ - $ - $ 1,786
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Unal-
Quarter ended IP Systems located
October 31, 2005 Division Division amounts Totals
-------------------------------------------------------------------------
Revenues from external
customers $ 10,399 $ 5,854 $ - $ 16,253
Segment profit (loss) $ 6,056 $ 852 $ (2,616) $ 4,292
Segment assets (x) $ 6,303 $ 1,792 $ 7,088 $ 15,183
Expenditure on segment
assets (x) $ 6,032 $ 98 $ 118 $ 6,248
Amortization and
write-down of segment
assets (x) $ 139 $ 227 $ 140 $ 506
Goodwill $ 1,767 $ - $ - $ 1,767
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(x) Capital assets includes acquired intangibles but not goodwill
