UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F/A
MARK ONE
| [ ] | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| OR | ||
| [ X ] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| FOR THE FISCAL YEAR ENDED MARCH 31, 2001 | ||
| OR | ||
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| FOR THE TRANSITION PERIOD FROM ______________ TO _______________ |
COMMISSION FILE NUMBER: 0-30314
Dealcheck.com Inc.
(Exact name of Registrant as specified in its charter)
Province of Ontario, Canada
(Jurisdiction of incorporation or organization)
65 Queen Street West, Suite 1905, Toronto, Ontario M5H 2M5, Canada
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Name of each exchange on | |
| which registered on |
| Not Applicable |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Not Applicable
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Common Shares Without Par Value
(Title of Class)
Indicate the number of outstanding shares of each of the Issuer's classes of capital or common stock as of the close of the period covered by the annual report:
4,619,916 Common shares without par value as at March 31, 2001.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report) and (2) has been subject to such filing requirements for the past 90 days:
Yes X No _____
Indicate by check mark which financial statement item the registrant has elected to follow:
Item 17: _____ Item 18: X
i
| TABLE OF CONTENTS | ||
| Page No. | ||
| INTRODUCTION | 1 | |
| PART I | ||
| Item 8 | Financial Information | 1 |
| PART III | ||
| Item 18 | Financial Statements | 1 |
| SIGNATURES | 1 | |
| AUDITOR'S REPORT | 2 |
ii
INTRODUCTION
The Company hereby amends Items 8(A) and 18 of its Annual Report on Form 20-F for the fiscal year ended March 31, 2001 to read in their entirety as set forth below and such Items supersede the information contained in the Annual Report on Form 20-F which was filed on August 23, 2001. References to all other Items contained herein shall be deemed to be references to Items in the Annual Report on Form 20-F for the fiscal year ended March 31, 2001, as filed with the Commission on August 23, 2001.
Item 8 - FINANCIAL INFORMATION
(A) CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
Information regarding our financial statements is contained under the caption "Item 18. Financial Statements" below.
ITEM 18 - FINANCIAL STATEMENTS
The following documents are filed as part of this Annual Report on Form 20-F/A immediately following the text of this 20-F/A, beginning on page 2.
Audited Consolidated financial statements of the Company for the years ended March 31, 2001 and 2000,
- Auditors Report
- Consolidated Balance Sheet
- Consolidated Statement of Operations and Deficit
- Consolidated Statement of Cash Flows
- Notes to Consolidated Financial Statements
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934, THE COMPANY CERTIFIES THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM 20-F AND HAS DULY CAUSED THIS (REVISED) REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED
/s/ Terence Robinson
Terence Robinson
Chairman & CEO
Dealcheck.com Inc.
December 12, 2001
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DAREN, MARTENFELD, CARR, TESTA AND COMPANY LLP
CHARTERED ACCOUNTANTS
| 20 Eglinton Avenue West | Telephone: 416-480-0160 | |
| Suite 2100 | Facsimile: 416-480-2646 | |
| Toronto, Ontario | ||
| M4R 1K8 |
AUDITOR'S REPORT
To the Shareholders of
Dealcheck.com Inc.
We have audited the consolidated balance sheets of Dealcheck.com Inc. as at March 31, 2001 and 2000 and the consolidated statements of operations and deficit and cash flows for the years then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
With respect to the consolidated financial statements for the year ended March 31, 2001, we conducted our audit in accordance with Canadian generally accepted auditing standards and United States generally accepted auditing standards. With respect to the consolidated financial statements for the year ended March 31, 2000, we conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
This auditors' report has been amended to include references to adherence to United States generally accepted auditing standards. The original auditors' report, dated June 7, 2001, indicated that the audit was conducted in accordance with Canadian generally accepted auditing standards only. Subsequent to the release of the original auditors' report and financial statements, additional procedures were performed in order to comply with United States generally accepted auditing standards and the auditors' report was amended accordingly.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the company as at March 31, 2001 and 2000 and the results of its operations and cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.
Canadian generally accepted accounting principles vary in certain significant respects from accounting principles generally accepted in the United States. Application of accounting principles generally accepted in the United States would have affected results of operations for the year ended March 31, 2001 and the shareholders' equity as at that date to the extent summarised in Note 17 to the consolidated financial statements.
Daren, Martenfeld, Carr, Testa and Company LLP (signed)
DAREN, MARTENFELD, CARR, TESTA AND COMPANY LLP
June 7, 2001
A Member Firm of
Midsnell International
2
DEALCHECK.COM INC.
CONSOLIDATED BALANCE SHEETS
(CANADIAN DOLLARS)
MARCH 31, 2001 AND 2000
| Note | 2001 | 2000 | ||
| --------------- | --------------- | --------------- | ||
| ASSETS | ||||
| Current | ||||
| Cash | $ 40,737 | $ 425,968 | ||
| Short-term Investments | 3 | 38,068 | 697,274 | |
| Subscription advance | 4 | - | 489,173 | |
| Amounts receivable | 5 | 584,234 | 91,025 | |
| Prepaid and sundry assets | 12,380 | - | ||
| --------------- | --------------- | |||
| $ 675,419 | $ 1,703,440 | |||
| LONG-TERM INVESTMENTS | 3 | 58,290 | 782,687 | |
| PRODUCT DEVELOPMENT COSTS | 6 | 134,521 | 10,000 | |
| CAPITAL ASSETS | 7 | 40,414 | 46,805 | |
| --------------- | --------------- | |||
| $ 908,644 | $ 2,542,932 | |||
| --------------- | --------------- | |||
| LIABILITIES | ||||
| Current | ||||
| Accounts payable and accrued liabilities | $ 64,803 | $ 40,549 | ||
| Advance from shareholder, non-interest bearing | 84,320 | 179,763 | ||
| --------------- | --------------- | |||
| $ 149,123 | $ 220,312 | |||
| --------------- | --------------- | |||
| SHAREHOLDERS' EQUITY | ||||
| CAPITAL STOCK | 8 | 19,814,829 | 19,660,724 | |
| DEFICIT | (19,055,308) | (17,338,104) | ||
| --------------- | --------------- | |||
| 759,521 | 2,322,620 | |||
| --------------- | --------------- | |||
| $ 908,644 | $ 2,542,932 | |||
| --------------- | --------------- |
RELATED PARTY TRANSACTIONS - NOTE 13
SEE ACCOMPANYING NOTES.
APPROVED BY THE BOARD
/s/ Kam Shah
Director
/s/ Terence Robinson
Director
3
DEALCHECK.COM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(CANADIAN DOLLARS)
FOR THE YEARS ENDED MARCH 31, 2001, 2000 AND 1999
| Note | 2001 | 2000 | 1999 | |
| --------------- | --------------- | --------------- | --------------- | |
| INCOME | ||||
| Operational services | $ 120,000 | $ 10,000 | $ - | |
| Licence and usage fee | 151,508 | - | - | |
| Interest | 15,383 | 20,524 | - | |
| Exchange gain | 49,269 | 5,337 | 12,837 | |
| Other income | 15,082 | - | - | |
| --------------- | --------------- | --------------- | ||
| $ 351,242 | $ 35,861 | $ 12,837 | ||
| --------------- | --------------- | --------------- | ||
| EXPENSES | ||||
| Travel, promotion and consulting | $ 221,960 | $ 467,835 | $ 323,337 | |
| Professional fees | 97,593 | 94,688 | 39,113 | |
| Net loss on investments | 14 | 1,364,812 | 590,709 | - |
| Projects development costs | 15,121 | 155,370 | - | |
| Bank charges and interest | 9,694 | 3,905 | - | |
| Rent | 45,814 | 23,548 | 24,800 | |
| Telephone, Internet and courier | 11,796 | 26,673 | 26,942 | |
| Transfer agents fees | 15,665 | 21,047 | 14,684 | |
| Shareholders information | 204,005 | 6,268 | 11,350 | |
| Amortization | 34,926 | 21,468 | 18,386 | |
| Office and general | 47,060 | 14,807 | 31,821 | |
| --------------- | --------------- | --------------- | ||
| $ 2,068,446 | $ 1,426,318 | $ 490,433 | ||
| --------------- | --------------- | --------------- | ||
| NET LOSS FOR YEAR | (1,717,204) | (1,390,457) | (477,596) | |
| DEFICIT AT BEGINNING OF YEAR | (17,338,104) | (15,947,647) | (15,470,051) | |
| --------------- | --------------- | --------------- | ||
| DEFICIT AT END OF YEAR | $ (19,055,308) | $ (17,338,104) | $ (15,947,647) | |
| --------------- | --------------- | --------------- | ||
| Net loss per share | 10 | $ (0.40) | $ (0.52) | $ (0.35) |
| --------------- | --------------- | --------------- |
SEE ACCOMPANYING NOTES.
4
DEALCHECK.COM INC.
Consolidated Statements of Cash Flows
(CANADIAN DOLLARS)
FOR THE YEARS ENDED MARCH 31, 2001, 2000 AND 1999
| 2001 | 2000 | 1999 | |
| --------------- | --------------- | --------------- | |
| Cash flows from operating activities | |||
| Net loss for year | $ (1,717,204) | $ (1,390,457) | $ (477,596) |
| Amortization | 34,926 | 21,468 | 18,386 |
| Write-off of product development costs | 15,121 | 155,370 | - |
| Net loss on investments | 1,364,812 | 590,709 | - |
| --------------- | --------------- | --------------- | |
| (302,345) | (622,910) | (459,210) | |
| --------------- | --------------- | --------------- | |
| Amounts receivable | (268,784) | (28,414) | (62,615) |
| Prepaid and sundry assets | (12,380) | - | - |
| Accounts payable and accrued liabilities | 24,254 | (26,873) | 10,530 |
| --------------- | --------------- | --------------- | |
| (546,873) | (678,197) | (511,295) | |
| --------------- | --------------- | --------------- | |
| Investing Activities | |||
| Purchase of capital assets | (17,850) | (9,896) | (20,921) |
| Settlement of Note payable | - | (23,250) | - |
| Refund of subscription advance | 489,173 | - | - |
| Investments | 18,779 | (2,494,930) | (41,664) |
| Product development costs | (150,327) | (155,935) | (9,435) |
| --------------- | --------------- | --------------- | |
| 339,785 | (2,684,011) | (72,020) | |
| --------------- | --------------- | --------------- | |
| Financing Activities | |||
| Net advances from shareholder | 26,557 | 472,147 | 641,984 |
| Net advances to affiliates | (151,114) | - | - |
| Net advances to directors | (73,311) | - | - |
| Common shares issued | 32,105 | 3,251,661 | - |
| --------------- | --------------- | --------------- | |
| (178,143) | 3,723,808 | 641,984 | |
| INCREASE (DECREASE) IN CASH DURING YEAR | (385,231) | 361,600 | 58,669 |
| CASH AT BEGINNING OF YEAR | 425,968 | 64,368 | 5,699 |
| --------------- | --------------- | --------------- | |
| CASH AT END OF YEAR | $ 40,737 | $ 425,968 | $ 64,368 |
| --------------- | --------------- | --------------- | |
| Supplemental Disclosures | |||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | |||
| Conversion of debts to equity | $ 122,000 | $ 300,000 | $ 1,282,500 |
| Note issued on acquisition of investment | - | - | 23,250 |
| --------------- | --------------- | --------------- |
SEE ACCOMPANYING NOTES.
5
DEALCHECK.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
FOR THE YEARS ENDED MARCH 31, 2001, 2000 AND 1999
1. NATURE OF OPERATIONS
Dealcheck.com Inc. ("the Company") is an Internet development and business services Company. The Company's Internet strategy includes development and operations of wholly owned Internet business concepts as well as investing in new and emerging Internet companies that have demonstrated synergies with the Company's core business. In addition the Company offers business services to its investees and related companies The Company's strategy also envisions and promotes opportunities for synergistic business relationships among the companies within its portfolio.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada and do not materially differ from accounting principles generally accepted in the United States (U.S. GAAP) except as described in Note 17 "Differences from United States Accounting Principles."
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All inter-company balances and transactions have been eliminated on consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
6
INVESTMENTS
Short-term Investments
Short-term investments are investments that are either highly liquid or are to be disposed of within a one year period and are recorded at cost.
Events may occur during the holding period, which may result in the Company having the right exercise control or significant influence. However, such control or significant influence may be waived or rectified and is not intended to continue. Accordingly, the accounts of the investee companies in which the Company holds an interest which allow for control or significant influence are not consolidated or accounted for according to the equity method.
Short-term investments, which have quoted market values and are publicly traded on a recognized exchange, are recorded at a value based on the quoted market price at the balance sheet date. The holding losses of the short-term investment are recorded in the Statement of Operations.
Long-Term Investments
Long-term investments are not highly liquid and management does not intend on disposing of them within one year. The investment is recorded at cost. Management writes down the Company's long-term investments when a permanent impairment occurs.
In order to determine if there has been a permanent impairment in carrying value the Company compares the carrying value of the investment with the financial condition and expected income from the investment.
Where the Company can exert significant influence over the investment the investment is accounted for under the equity method. Under this method, the interest in the investment is carried on the balance sheet at cost plus the company's share of undistributed earnings since acquisition.
Product Development
The costs relating to the development of the web site and other technical projects, which are intended to generate revenue in future are deferred and amortized on a straight-line basis over the estimated economic life of the project not exceeding three years. Amortization commences when the project becomes commercially active. The development costs will be written off when it is determined that they are not recoverable or when the project is abandoned.
7
Capital Assets
Capital assets are carried at cost, less accumulated amortization, which is based on management's estimates of the assets' useful lives. Amortization is provided for on a straight-line method at annual rate of 20% for office furniture and equipment. Leasehold improvements are amortized over five years on a straight-line basis.
Foreign Currency Translation
Monetary assets and liabilities are translated at exchange rates in effect at the balance sheet date. Non-monetary assets are translated at exchange rates in effect when they were acquired. Revenue and expenses are translated at the approximate average rate of exchange for the year, except that amortization is translated at the rates used to translate related assets. The resulting gains or losses on translation are included in the consolidated statement of operations.
Financial Instruments
The fair values of amounts receivable, accounts payable and accrued liabilities and advances from shareholder approximate their carrying values due to the short-term maturity of those instruments.
Future Income Taxes
Effective April 1, 2000, the company adopted the new recommendations of the Canadian Institute of Chartered Accountants with respect to accounting for income taxes. Under the new recommendations, the liability method of tax allocation is used in accounting for income taxes. Under this method, future income tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, as well as for the benefit of losses available to be carried forward to future years for tax purposes. Future income tax assets and liabilities are measured using substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse. Future income tax assets are recorded in the financial statements if realization is considered more likely than not.
Prior to the adoption of the new recommendation, income tax expense was determined using the deferral method of tax allocation. This change in reporting was applied retroactively and does not have an impact on net operations for the prior year.
Stock-based Compensation Plan
The Company maintains a stock-based compensation plan, which is described in Note 9. No compensation expense is recognized for this plan when stock options or shares are issued to employees. Any consideration received from
8
plan participants upon exercise of stock options or purchase of shares is credited to share capital.
Research and Development Costs
Research costs are charged to operations when incurred. Development costs are expensed in the year incurred unless they meet the deferral criteria under generally accepted accounting principles for deferral and amortization. Amortization commences with the successful commercial production or use of the product. Deferred development costs are amortized using the straight-line method over the estimated selling life of the product to a maximum of three years.
On an ongoing basis, management reviews the valuation and amortization of deferred development costs. If, in any year, any particular product is found to have insufficient market potential to recover the investment, any unamortized balance in respect of that product will be charged to operations.
Investment Tax Credits
Investment tax credits are accrued when qualifying expenditures are made and there is reasonable assurance that the credits will be realized. The Company accounts for the investment tax credits using the cost reduction method.
2. INVESTMENTS
A. Short-term Investments
| COST | MARKET | |
| VALUE | ||
| ------------ | ------------ | |
| MARCH 31, 2001 | ||
| MARKETABLE TRADING SECURITIES | $ 261,082 | $ 38,068 |
| ------------ | ------------ | |
| MARKETABLE TRADING SECURITIES | $ 261,082 | $ 38,068 |
| ------------ | ------------ | |
| MARCH 31, 2001 | ||
| MARKETABLE TRADING SECURITIES | $ 976,780 | $ 371,918 |
| NON-MARKETABLE TRADING SECURITIES: | ||
| World Vacation Club.com (i) | 288,616 | 288,616 |
| CONVERTIBLE DEBENTURES: | ||
| DevelopersNetwork.com (ii) | 36,741 | 36,740 |
| ------------ | ------------ | |
| $ 1,302,137 | $ 697,274 | |
| ------------ | ------------ |
9
(i) World Vacation Club.Com("WVC")
On May 19, 2000 management decided to dispose of its investment in WVC and sold 450,000 common shares of at cost. The balance of the Company's investment was sold to a non-related person on March 22, 2001, which resulted in the Company realizing a loss of $228,463, which is included in the net loss on investments. A condition of the sale is that in the event that the purchaser is able to sell the shares by March 22, 2006 the Company will be entitled to 80% of the proceeds.
(ii) Developers Network.Com
The Company agreed to provide financing to Developers Network.com Inc., an Ontario private Corporation, up to $ 750,000 in the form of a debenture carrying interest at 5.5% and convertible, at the option of the Company, into the common shares of DevelopersNetwork.com Inc. which would give a maximum of 30% equity interest to the Company under a Memorandum of Agreement dated February 23, 2000.
The Company called its debentures in DevelopersNetwork.com Inc. as a result of a decision by all the related parties to cancel the Memorandum of Understanding. The Company's investment with interest was fully refunded on May 29, 2000. The Company also received an option to acquire 50,000 common shares in DevelopersNetwork.com Inc. at $1 each exercisable within two years.
B. Long-term Investments
| March 31, 2000 | March 31, 2001 | |
| -------------------- | --------------------- | |
| Hotlamp Interactive Inc. (i) | $ 55,802 | $ 55,802 |
| Dataloom Inc. (ii) | 726,885 | - |
| XLoom (ii) | - | 2,488 |
| -------------------- | --------------------- | |
| $ 782,687 | $ 58,290 | |
| -------------------- | --------------------- |
(i) Hotlamp Interactive Technologies Inc.
The Company's investment represents less than 1% of the equity interest in Hotlamp Interactive Technologies Inc., a private
10
Nevada Corporation. It is a software development company focused on multimedia products.
As at March 31, 2001, the carrying value approximates the fair value of this investment.
(ii) Dataloom Inc.
Dataloom Inc., a Seattle, Washington based private company, in which the company invested $500,000US representing about 5% of the equity of that company, restructured its operations on March 31, 2001 by transferring its intellectual properties and certain assets to a newly formed Seattle, Washington based private company, XLoom Holdings Inc.(XLoom). The Company was offered and has subscribed to 165,921 common shares of XLoom representing approximately 5% of the issued shares at a price of $.01US.
XLoom is engaged in development and marketing of the xLoom Application Framework software (xFrame).
However, since the restructure resulted in Dataloom Inc. becoming an inactive shell company, the management decided to write off its investment in Dataloom Inc. in full.
4. SUBSCRIPTION ADVANCE
The Company agreed to purchase shares in Idealab.com from an individual shareholder. Funds were forwarded to and were held by the seller's lawyer in escrow pending the completion of the paperwork. The Company cancelled its subscription in the common shares of Idealab.com on April 17, 2000 and received the full refund of funds invested of $489,173.
5. AMOUNTS RECEIVABLE
| ----------- | ---------- | |
| 2001 | 2000 | |
| ----------- | ---------- | |
| Secured receivable (i) | $ 295,549 | $ - |
| Convertible loans (ii) | 205,479 | 54,365 |
| Due from directors | 73,311 | - |
| Other receivables | 9,895 | 36,660 |
| ----------- | ---------- | |
| $ 584,234 | $ 91,025 | |
| ----------- | ---------- |
11
- Amounts are due from a related corporation, bear interest at 5% per annum and are due on demand. The amounts are fully secured against marketable securities owned by the related corporation.
- Convertible loans are funds advanced to a related public corporation, bearing interest at 5% per annum and payable on demand. The advances are convertible, at the option of the Company into the common shares of the related entity at $0.05 per share.
6. PRODUCT DEVELOPMENT COSTS
| ------------ | ------------ | ------------ | ------------ | ------------ | |
| Balance At | Incurred | Written | Amortized | Balance At | |
| MARCH 31, | DURING | OFF DURING | DURING | MARCH 31, | |
| 2000 | YEAR | YEAR | YEAR | 2001 | |
| ------------ | ------------ | ------------ | ------------ | ------------ | |
| Shellfn.com (a) | $ - | $ 111 | $ (111) | $ - | $ - |
| IRCheck.com (b) | 10,000 | 2,055 | - | (10,685) | 21,370 |
| Dealcheck.com(c) | - | 15,010 | (15,010) | - | - |
| Biochex.com (d) | - | 113,151 | - | - | 113,151 |
| ------------ | ------------ | ------------ | ------------ | ------------ | |
| $ 10,000 | $ 150,327 | $ (15,121) | $ (10,685) | $ 134,521 | |
| ------------ | ------------ | ------------ | ------------ | ------------ | |
| Balance At | Incurred | Written | Amortized | Balance At | |
| MARCH 31, | DURING | OFF DURING | DURING | MARCH 31, | |
| 1999 | YEAR | YEAR | YEAR | 2000 | |
| ------------ | ------------ | ------------ | ------------ | ------------ | |
| Shellfn.com | $ 9,435 | $ 68,149 | $ (77,584) | $ - | $ - |
| IRCheck.com | - | 10,000 | - | - | 10,000 |
| EduVu.com | - | 33,500 | (33,500) | - | - |
| Dealcheck.com | - | 44,286 | (44,286) | - | - |
| ------------ | ------------ | ------------ | ------------ | ------------ | |
| $ 9,435 | $ 155,935 | $ (155,370) | $ - | $ 10,000 | |
| ------------ | ------------ | ------------ | ------------ | ------------ |
- SHELLFN.COM web site was intended to become an electronic advertising medium for shell companies to attract prospective buyers. During fiscal 2000, the management decided to put a hold on this project for an indefinite period of time. The costs incurred to date were therefore fully written off.
- IRCHECK.COM web site is developed to provide a comprehensive database
of investors relation firms to facilitate an informed decision for the
prospective public companies desiring to outsource its investors
relation and media relation work to an independent firm. The costs
incurred to date represent costs towards web site design and
development. The Web site development work was completed and the site was launched on March 5, 2001. The company negotiated licensing of its
database to a related company for a fee (see Note 13). Accordingly,
one third of the costs were amortized during the year. All future on
going costs will be expensed as incurred.
12
- DEALCHECK.COM web site is a corporate web site, which provides information about the Company, its management, its investments, press release and other corporate information useful for investors, shareholders and other. While the basic design and development work of the site was completed in fiscal 2000, the site is being continually updated. The costs relating to this site are expensed as incurred.
BIOCHEX.COM is a project initiated by the Company's subsidiary, 1388755 Ontario Inc. The project involves the design and development of a prototype of a wireless and portable Internet appliance for medical data logging system.
7. CAPITAL ASSETS
| ---------------- | ---------------- | ---------------- | |
| Accumulated | Net | ||
| Cost | Amortization | 2001 | |
| ---------------- | ---------------- | ---------------- | |
| Office furniture | $ 56,190 | $ 40,740 | $ 15,450 |
| Office equipment | 63,946 | 41,661 | 22,285 |
| Leasehold improvements | 10,000 | 7,321 | 2,679 |
| ---------------- | ---------------- | ---------------- | |
| $ 130,136 | $ 89,722 | $ 40,414 | |
| ---------------- | ---------------- | ---------------- | |
| ---------------- | ---------------- | ---------------- | |
| Accumulated | Net | ||
| Cost | Amortization | 2000 | |
| ---------------- | ---------------- | ---------------- | |
| Office furniture | $ 47,378 | $ 30,383 | $ 16,995 |
| Office equipment | 57,007 | 29,567 | 27,440 |
| Leasehold improvements | 7,900 | 5,530 | 2,370 |
| ---------------- | ---------------- | ---------------- | |
| $ 112,285 | $ 65,480 | $ 46,805 | |
| ---------------- | ---------------- | ---------------- | |
| ---------------- | ---------------- | ---------------- |
8. CAPITAL STOCK
A. Authorized
Unlimited number of common shares
13
B. Issued
| 2001 | 2000 | |||
| --------------- | --------------- | ---------------- | --------------- | |
| Common | Common | |||
| Shares | Amount | Shares | Amount | |
| ---------- | ---------- | ----------- | ---------- | |
| Beginning of year | 4,117,616 | $ 19,660,724 | 2,832,616 | $ 16,109,064 |
| On conversion of debt B (i) | 400,000 | 122,000 | 400,000 | 300,000 |
| Issued for cash on conversion of Warrants C (i) | 101,700 | 32,105 | 885,000 | 3,251,660 |
| --------------- | --------------- | ---------------- | --------------- | |
| 4,619,916 | $ 19,814,829 | 4,117,616 | $ 19,660,724 | |
| --------------- | --------------- | ---------------- | --------------- | |
- In the Annual and special meeting of the shareholders held on November 13, 2000, the shareholders approved to extend the expiry date of the warrants attached to the private placement completed in fiscal 2000 by one year and authorize the directors to revise the exercise price at their discretion. The directors in their meeting on January 17, 2001 approved revision of the exercise price to US$0.20 per warrant and set the expiry date to March 12, 2001. The directors also resolved to initiate further revisions in the expiry date within the time limit mandated by the shareholders should they consider it necessary. Two of the private placees exercised their warrants, resulting in issuance of 101,700 shares for US$20,340 (CDN$32,105).
At the end of the year, there are 783,300 warrants which are exercisable at a price of US$0.20 per warrant and expired on March 12, 2001 however the expiry date of these warrants may be extended by the Company to any other date up to November 13, 2002.
No further revision has been proposed to date.
9. STOCK OPTION PLAN
In the Annual General Meeting held on November 15, 1999, the shareholders approved the creation of the "1999 Stock Option Plan" pursuant to which the directors were authorized to issue stock options from time to time to employees, officers, consultants and directors of the Company up to 10% of the issued and outstanding common shares of the Company at the time of such issue, at a minimum price allowed under the applicable securities laws. In
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the Annual general and special meeting held on November 13, 2000, the shareholders approved an increase in the limit of maximum number of stock options to 25% of the issued and outstanding common shares of the corporation at the time of such issue.
No options were allowed under the Plan during the year and no options are outstanding at the year end.
10. LOSS PER SHARE
Loss per share is calculated on the weighted average number of post-consolidated common shares outstanding during the year, which were 4,259,424 shares for the year ended March 31, 2001 (2000 - 2,690,266).
Fully diluted earnings per share information has not been presented as potential conversions are anti dilutive.
11. INCOME TAXES
The effective tax rate of nil (2000 - nil) for income taxes varies from the statutory income tax rate of 44% (2000 - 45%) due to the fact that no tax recoveries have been recorded for losses incurred, as management has not determined it is more likely than not that the losses will be utilized before they expire.
The temporary differences that give rise to future income tax assets and future income tax liabilities are presented below:
| --------------- | --------------- | |
| 2001 | 2000 | |
| --------------- | --------------- | |
| Amounts related to tax loss and credit carry forwards | $ 4,152,000 | $ 4,033,000 |
| Unrealized and holding losses on investments | 421,000 | 266,000 |
| Capital assets | 39,000 | 28,000 |
| --------------- | --------------- | |
| Net future tax assets | 4,612,000 | 4,327,000 |
| Less: valuation allowance | (4,612,000) | (4,327,000) |
| --------------- | --------------- | |
| $ - | $ - | |
| --------------- | --------------- |
The Company has carry forward tax losses of approximately $9.4 million, which may be applied against future taxable income and expire as detailed below. The benefit arising from these losses has not been included in the financial statements.
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| 2002 | 5,036,000 | ||
| 2003 | 1,133,000 | ||
| 2004 | 617,000 | ||
| 2005 | 536,000 | ||
| 2006 | 460,000 | ||
| 2007 | 683,000 | ||
| 2008 | 970,000 | ||
| ------------- | |||
| $ 9,435,000 | |||
| ------------- |
12. COMMITMENTS
- The Company entered into a consulting agreement with a related corporation on April 1, 2000. The agreement requires the corporation to provide investors relations services. The consulting fee is US $10,000 per month payable in advance. The agreement expires on March 31, 2002.
- Rental payable under operating leases for premises, net of expected recoveries is $45,000 for each of the years ending March 31, 2002, 2003, 2004, 2005 and $7,500 for the year ending March 31, 2006.
13. RELATED PARTY TRANSACTIONS
Transactions with related parties are incurred in the normal course of business and are measured at the exchange amount. Related party transactions and balances have been listed below, unless they have been disclosed elsewhere in the financial statements.
- Licence and usage fee income of $151,508 (2000 - Nil; 1999 - Nil) and consulting service fee income of $120,000 (2000 - $10,000; 1999 - Nil) were earned from a corporation which has common management.
- Included in shareholders information expense is $180,425 (2000 - Nil; 1999 - Nil) to a corporation which has common management.
- Rent and telephone expense are net of recoveries of $110,587 (2000 - $43,106; 1999 - Nil) from corporations which share common management and directors.
- Interest earned from related corporations amounts to $8,458 (2000 - $1,669; 1999 - Nil).
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- Included in professional and consulting fees is $150,400 (2000 - $114,592; 1999 - $36,390) paid to directors of the Company.
- Business expenses of $55,959 (2000 - $108,249; 1999 - $36,144) were reimbursed to directors of the corporation.
- Consulting fees include amounts to a shareholder corporation of $90,482 (2000 - $176,550; 1999 - $177,972)
14. NET LOSS ON INVESTMENTS
| 2001 | 2000 | 1999 | |
| ------------ | ------------ | ------------ | |
| Holding losses | $ - | $ - | $ - |
| Provision for non-temporary Impairment in value | 789,200 | 72,470 | - |
| Realized loss (gains) | 575,612 | (94,555) | - |
| ------------ | ------------ | ------------ | |
| $ 1,364,812 | $ 590,709 | $ - | |
| ------------ | ------------ | ------------ |
15. COMPARATIVE FIGURES
Certain figures presented for comparative purposes have been reclassified to conform to the current year's method of presentation.
16. SEGMENTED INFORMATION
The Company's operations include three reportable operating segments -
Business services: this segment includes management and operational services to investee companies and others
Product development: This segment includes revenue from the Company's own web sites and technical projects
Incubation: This segment includes dividend and/or capital gains earned through long-term investments in start-ups and emerging companies
The accounting policies of the segments are same as those described in Note 2. The Company evaluates each segment's performance based on its contribution to consolidated net earnings. There are no inter-segmental charges or transactions. The following table presents summarised financial information for the fiscal years ended March 31, 2001 and 2000.
Geographic Information
The Company operates from one location in Canada. All its assets are located at this location.
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Business Segments| Business | Product | ||
| Services | Development | Incubation | |
| ------------ | ------------ | -------------- | |
| 2001 | |||
| Total revenue | 120,000 | 151,508 | - |
| Earnings (Losses) from operations | 120,000 | 136,387 | (1,589,772) |
| Total assets | - | 134,521 | 58,920 |
| Total liabilities | - | - | 64,803 |
| ------------ | ------------ | -------------- | |
| 2000 | |||
| Total revenue | 10,000 | - | - |
| Earnings (Losses) from operations | 10,000 | (155,370) | (1,058,544) |
| Total assets | - | 10,000 | 782,687 |
| Total liabilities | - | - | 40,549 |
| ------------ | ------------ | -------------- |
| 2001 | 2000 | |
| ------------- | ------------ | |
| Revenues | ||
| Total revenue from reportable segments | 271,508 | 10,000 |
| Other | 79,734 | 25,861 |
| ------------- | -------------- | |
| 351,242 | 35,861 | |
| ------------- | -------------- | |
| Net Loss | ||
| Total earnings (Losses) from continuing operations for | ||
| Reportable segments | (1,333,385) | (1,203,914) |
| Other | (383,819) | (186,543) |
| ------------- | -------------- | |
| (1,717,204) | (1,390,457) | |
| ------------- | -------------- | |
| Assets | ||
| Total assets used for reportable segments | 193,441 | 792,687 |
| Other | 715,203 | 1,750,245 |
| ------------- | -------------- | |
| 908,644 | 2,542,932 | |
| ------------- | -------------- | |
| Liabilities | ||
| Total liabilities used for reportable segments | 64,803 | 40,549 |
| Other | 84,320 | 179,763 |
| ------------- | -------------- | |
| 149,123 | 220,312 | |
| ------------- | -------------- |
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17. CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES
Product Development Costs
The costs of developing the commercial web sites and technical projects are allowed to be deferred under the Canadian Generally Accepted Accounting Principles. However, these costs should be expensed under US GAAP. Accordingly, under the US GAAP, net loss for year would be $1,851,725 (2000 - $ 1,400,457). Total assets would be $774,123 (2000 - $2,532,932) and deficit would be $19,189,829 (2000 - $17,348,104).
Investments
Investments in marketable equity securities that are classified as short-term investments under Canadian GAAP, are grouped into trading and available-for-sale categories and accounted for at fair value under the US GAAP. Unrealised holding gains or losses on trading securities are included in the income. Unrealised holding gains and losses on available-for-sale securities are included in shareholders' equity.
Investments in equity securities that are classified as long term investments under the Canadian GAAP, are accounted for at fair value under the US GAAP. Unrealised holding gains and losses are included in shareholders' equity.
No significant adjustment would be required in the net loss for year, total assets and deficit under the US GAAP.
Stock-Based Compensation
The Company accounts for common stock purchase options and warrants granted to non-employees pursuant to Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (FAS No.123) and Emerging Issues Task Force ("EITF") No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services." These standards require that the fair value of equity instruments, including options and warrants, be recognized in the financial statements. FAS No. 123 permits a company to account for employee stock options under the method specified by the previous standard, Accounting Principles Board Opinion No. 25 ("APB No.25"), "Accounting for Stock Issued to Employees." Under APB No.25, if the exercise price of fixed employee stock options equals or exceeds the market price of the underlying stock on the date of grant, no compensation expense is recorded. For such options, FAS No.123 requires disclosure of, among o ther things, the fair value of options granted, the assumptions used in determining the fair value and the pro-forma effect on earnings as if measurement provisions of FAS No. 123 had been applied. The Company will apply the measurement principles of APB No.25, supplemented by the required FAS No.123 disclosures, for any stock options it grants to employees in the future.
Recent Accounting Development
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued and, as amended by SFAS No. 137, was adopted by the Company on July 1, 2000. This statement requires that an entity recognize all derivatives as either assets or liabilities and measure those instruments at fair value. The accounting for changes in fair value of a derivative instrument depends on its intended use and the resulting designation. The adoption of this statement does not impact the Company's historical financial statements, as the Company currently does not use derivative instruments.