FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, C.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of DECEMBER 31 , 1996
--------------------------- --------------------------------
TURBODYNE TECHNOLOGIES INC.
- -------------------------------------------------------------------------------
(Translation of registrant's name into English)
SUITE 510, 1090 WEST PENDER STREET, VANCOUVER, BC, CANADA, V6E 2N7
- -------------------------------------------------------------------------------
(Address of principal executive offices)
Form 20-F X Form 40-F
--------- ---------
[Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes No X
----------- -----------
[If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):82
---------------------------
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
JULY 8, 1997
- --------------------
Date
/S/LEON E. NOWEK
______________________________
Signature
LEON E. NOWEK
------------------------------
Name
CHIEF FINANCIAL OFFICER
------------------------------
Title
*Print the name and title of the signing officer under his signature
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(Revised)
<PAGE>
AUDITORS' REPORT
To the Shareholders of
Turbodyne Technologies Inc.
We have audited the revised consolidated balance sheets of Turbodyne
Technologies Inc. as at December 31, 1996 and 1995 and the revised
consolidated statements of operations and deficit and cash flows for the
years then ended. These revised consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these revised consolidated financial statements based
on our audits.
We conducted our audits in accordance with 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 consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall revised financial statement presentation.
In our opinion, these revised consolidated financial statements present
fairly, in all material respects, the financial position of the Company as
at December 31, 1996 and 1995 and the results of its operations and the
changes in its cash flows for the years then ended in accordance with
generally accepted accounting principles. As required by the British
Columbia Company Act, we report that, in our opinion, these principles have
been applied on a consistent basis.
In our report dated February 14, 1997, except for the last paragraph of
Note 5(A) which is as of March 12, 1997, we reported that in our opinion
the consolidated financial statements presented fairly, in all material
respects, the financial position of the Company as at December 31, 1996 and
1995 and the results of its operations and the changes in its cash flows
for the years then ended in accordance with generally accepted accounting
principles. Subsequent to March 12, 1997, the Company has revised these
consolidated financial statements as explained in Note 13. Therefore, our
report dated February 14, 1997, except for the last paragraph of Note 5(A)
which is as of March 12, 1997, has been withdrawn.
Vancouver, B.C.
February 14, 1997, except for the Chartered Accountants
last paragraph of Note 5(A) which
is as of March 12, 1997, Note
2, Note 13 and Note 14(a) which are
as of May 14, 1997 and Notes 14(b),
14(c), 14(d), and 14(e), which are
as of June 17, 1997.
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
---------------------------
(In thousands of dollars)
December 31, December 31,
1996 1995
----------- ------------
(revised)
ASSETS
<S> <C> <C>
CURRENT
Cash $ 4,304 $ 309
Accounts receivable 8,161 51
Advances receivable 113 113
Inventories (Note 3) 4,730 -
Prepaid expenses and deposits 1,166 93
Deferred tax asset 341 -
--------- ---------
18,815 566
CAPITAL ASSETS (Note 4) 15,703 638
PRODUCT DEVELOPMENT COSTS 8,705 3,771
GOODWILL (Note 2) 21,234 -
OTHER 38 227
--------- --------
$ 64,495 $ 5,202
========= =========
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 6,169 $ 251
Notes payable (Note 5) 1,286 223
Current portion of long term debt 1,396 9
--------- ---------
8,851 483
LONG TERM DEBT (Note 6) 7,211 20
DEFERRED INCOME TAX 1,455 -
SHARE SUBSCRIPTIONS RECEIVED - 463
--------- ---------
17,517 966
--------- ---------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 7) 30,438 7,139
SPECIAL WARRANTS (Note 8) 21,928 -
DEFICIT (5,461) (2,903)
CUMULATIVE TRANSLATION ADJUSTMENT 73 -
--------- --------
46,978 4,236
--------- --------
$ 64,495 $ 5,202
========= ========
</TABLE>
Approved by the Board of Directors:
- -------------------------------- ---------------------------------
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
-------------------------------------------------
(In thousands of dollars, except per share information)
Year ended Year ended
December 31, December 31,
1996 1995
----------- ----------
(revised)
<S> <C> <C>
NET SALES $ 19,007 $ -
COST OF GOODS SOLD 16,498 -
--------- --------
GROSS PROFIT 2,509 -
OPERATING EXPENSES 5,061 1,528
--------- --------
OPERATING LOSS (2,552) (1,528)
--------- --------
NON OPERATING ITEMS
Interest income 373 -
Interest expense (491) -
Other 56 -
Amortization of goodwill (545) -
--------- --------
(607) -
--------- --------
LOSS BEFORE PROVISION FOR INCOME TAXES (3,159) (1,528)
INCOME TAXES RECOVERED 601 -
--------- --------
<PAGE>
NET LOSS FOR THE PERIOD (2,558) (1,528)
DEFICIT, BEGINNING OF PERIOD (2,903) (1,375)
--------- --------
(5,461) (2,903)
NET ASSET DEFICIENCY OF LEGAL
PARENT AT DATE OF REVERSE TAKE-OVER
TRANSACTION - -
--------- ---------
DEFICIT, END OF PERIOD $ (5,461) $ (2,903)
========= =========
LOSS PER SHARE $ (0.12) $ (0.11)
========= =========
</TABLE>
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(In thousands of dollars, except per share information)
Year ended Year ended
December 31, December 31,
1996 1995
----------- -----------
(revised)
<S> <C> <C>
OPERATING ACTIVITIES
Loss for the period $ (2,558) $ (1,528)
Add non cash items -
Amortization of goodwill 545 -
Depreciation 1,046 6
---------- ----------
(967) (1,522)
Change in non-cash working capital items (4) (338)
---------- ----------
FINANCING ACTIVITIES (971) (1,860)
---------- ----------
Proceeds from debt obligations 4,279 253
Repayment of debt obligations (2,098) (46)
Net borrowings under line of credit arrangements (275) -
Issue of common shares 22,836 4,323
Issue of special warrants 21,928 -
Shares subscriptions received - 462
--------- ---------
46,670 4,992
--------- ---------
INVESTING ACTIVITIES
Acquisition of subsidiary operations (32,370) -
Net asset deficiency of legal parent at
date of reverse take-over transaction - -
Capital assets (net of depreciation
<PAGE>
allocated to product development costs) (4,475) (579)
Product development costs (4,821) (2,017)
Other (38) (227)
-------- --------
(41,704) (2,823)
-------- --------
NET INCREASE IN CASH 3,995 309
CASH, BEGINNING OF PERIOD 309 -
-------- ---------
CASH, END OF PERIOD $ 4,304 $ 309
======== =========
</TABLE>
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(in thousands of dollars)
(revised)
NATURE OF OPERATIONS
The Company was incorporated under the Company Act of the Province of
British Columbia, Canada, and was continued under the Canada Business
Corporations Act on December 3, 1996. The Company is engaged in the
following business operations through its U.S. subsidiaries:
i) the manufacture of aluminum cast automotive products, including engine
components and specialty wheels; and
ii) the development of products to enhance performance and reduce
emissions of internal combustion engines.
1. SIGNIFICANT ACCOUNTING POLICIES
The Company follows accounting principles generally accepted in Canada
when preparing its consolidated financial statements.
a) Consolidation
These financial statements include the accounts of the Company and
its wholly owned U.S. subsidiaries, Turbodyne Systems, Inc. and
Pacific Baja Light Metals Corp. All significant intercompany
accounts and transactions have been eliminated in consolidation.
b) Cash and Cash Equivalents
For the purpose of reporting cash flows, the Company considers all
time deposits, certificates of deposit and highly liquid debt
instruments with original maturities of three months or less to be
cash equivalents.
c) Inventories
Inventories are stated at the lower of cost or market. For the
materials portion of inventories, the cost is determined using the
LIFO (last-in, first-out) method. For the other components of
inventories (labour and overhead) the cost is determined using the
FIFO (first-in, first-out) method.
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(in thousands of dollars)
(revised)
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
d) Depreciation
Property, plant and equipment is recorded at its historical cost
and is being depreciated using the straight-line method over their
estimated useful lives. Leasehold improvements are depreciated
over the lesser of their useful lives or the life of the lease.
The following is a summary of depreciable life by asset type:
Building 30 years
Furniture and fixtures 5 - 10 years
Machinery and equipment 7 - 15 years
Transportation equipment 5 years
Leasehold improvements 8 - 10 years
e) Product Development Costs
The Company is deferring all engineering, design consulting and
other costs directly related to the ongoing development and
commercialization of its Turbodyne System to be amortized against
related revenues when production commences.
f) Goodwill
Goodwill, representing the excess of acquisition costs of shares
over the assigned value of net assets acquired, is being amortized
on a straight line basis over 20 years. On an annual basis, using
estimated future net cash flows as a measure of recoverability, the
Company evaluates whether there is a permanent impairment in the
value of the unamortized portion of goodwill. Any impairment in
the value of goodwill is written off against earnings.
g) Leases
Leases are classified as capital or operating leases. Leases which
transfer substantially all of the benefits and risks incident to
ownership of property are accounted for as capital leases. Assets
acquired under capital leases are amortized on a straight-line
method over five years. All other leases are accounted for as
operating leases and the related lease payments are charged to
expense as incurred.
h) Fair Value of Financial Instruments
The respective carrying value of certain on-balance-sheet financial
instruments, approximate their fair values. These financial
instruments include cash, accounts receivable, advances receivable,
accounts payable and accrued liabilities, bank credit lines and
other conventional debt financing.
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(in thousands of dollars)
(revised)
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
i) Non-Monetary Transactions
Shares of common stock of the Company issued for non-monetary
consideration are valued at the quoted market price per share at
the close of trading on the day of completion of the transaction
except for those circumstances where, in the opinion of the Company
and due to the nature of the transaction, the trading price does
not fairly represent the value of the transaction. In such
circumstances, the value of the shares is determined based on the
estimated fair value of the consideration received.
j) Foreign Currency Translation
The financial statements of Pacific Baja Light Metals Corp., a
self-sustaining foreign subsidiary, are translated using the
current method whereby the balance sheet is translated at year end
exchange rates and revenues and expenses at the average exchange
rate for the period. Adjustments arising from the translation of
the subsidiary's financial statements are included as a separate
component of shareholders' equity.
The financial statements of Turbodyne Systems, Inc., a fully
integrated foreign subsidiary, are translated using the temporal
method whereby monetary assets and liabilities are translated at
year end rates, nonmonetary items at historical rates and expenses
at the average rate for the year. Gains or losses from exchange
translations are included in the results of operations.
2. BUSINESS ACQUISITION
Effective July 2, 1996, the Company acquired all the issued and
outstanding shares of Pacific Baja Light Metals Corp. ("Pacific
Baja"). This acquisition has been accounted for using the purchase
method with the results of operations of Pacific Baja Light Metals
Corp. for the period subsequent to July 2, 1996 being included in
these consolidated financial statements. Pacific Baja is a
manufacturer and distributor of after-market automotive wheels,
compressor housings and manifolds, to wholesale
<PAGE>
distributors and original equipment manufacturers in the
United States and abroad.
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(in thousands of dollars)
(revised)
2. BUSINESS ACQUISITION (Continued)
Details of this acquisition are as follows:
Fair value of net assets acquired:
Net working capital $ 2,098
Capital assets 11,749
Long term debt (1,635)
Deferred income taxes (1,394)
--------
Net tangible assets 10,818
Goodwill 20,887
--------
Cost of the acquisition $ 31,705
========
Consideration:
Cash resources $ 16,320
Common shares issued (3,076,923 common shares
with a deemed fair market value of $5.00 per
share) 15,385
--------
$ 31,705
========
3. INVENTORIES
1996 1995
------- -------
Finished goods $ 1,794 $ -
Work in progress 893 -
Raw materials 2,043 -
--------- ---------
$ 4,730 $ -
========= =========
4. CAPITAL ASSETS
1996 1995
------- ---------
Land $ 95 $ -
Buildings 25 -
Furniture and fixtures 343 149
<PAGE>
Machinery and equipment 12,542 241
Transportation equipment 618 91
Leasehold improvements 2,642 116
--------- ---------
16,265 597
Less accumulated depreciation (1,280) (73)
--------- ---------
14,985 524
Machinery under construction 469 --
Patents and trademarks 249 114
--------- ---------
$ 15,703 $ 638
========= =========
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(in thousands of dollars)
(revised)
4. CAPITAL ASSETS (Continued)
The Company was committed to purchase manufacturing machinery at December
31, 1996 of $195.
Of the property, plant and equipment listed above, the assets located at
the production facility in Ensenada, Mexico have a net book value of
approximately $5,108 (1995 - $4,678).
5. NOTES PAYABLE
1996 1995
---------- ----------
(A) Lines of credit $ 6,080 $ -
Less amounts reclassified
as long-term debt
4,794 -
---------- ----------
1,286 -
(B) Promissory note - 11
(C) Short term interest free loan - 212
---------- ----------
$ 1,286 $ 223
========== ==========
(A) The Company's subsidiary, Pacific Baja, has an $8,000 U.S. line of
credit agreement with a bank, secured by all receivables, inventory and
equipment. The borrowings bear interest at LIBOR (5.55% at December 31,
1996) plus 2% or prime (8.25% at December 31, 1996). The note is due
November 1998 and is annually reviewed for a continuing two year
commitment. Advances are limited to 30% of eligible inventory (up to a
maximum of $2,500) and 80% of eligible accounts receivable and contains a
seasonal over advance up to $500 from April through July each year.
Management has classified the portion of the lines of credit that are not
expected to be repaid during 1997 as long-term.
At December 31, 1996, the Company was in violation of certain liquidity
ratios and net worth covenants. Subsequent to December 31, 1996, the bank
waived these violations through June 30, 1997, and the bank has
<PAGE>
agreed to amend the covenants so that the Company is anticipated to be in
compliance with all covenants through at least January 1, 1998.
(B) Promissory note, repayable at $517 per month, including interest at 10%
per annum.
(C) Short term interest free loan, secured by the personal guarantee of two
of the Company's directors. As additional consideration for the loan, the
Company issued 233,333 shares at a deemed value of $0.36 per share and
agreed to pay a royalty of $5 U.S. on each Turbodyne unit sold to a
maximum of $1 million U.S. A finder's fee of 116,667 common shares at a
deemed value of $0.36 per share was issued in connection with the loan.
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(in thousands of dollars)
(revised)
6. LONG TERM DEBT
1996 1995
---------- ----------
Notes payable to a bank, interest at prime rate
(8.25% at December 31, 1996) plus 1% with
monthly installments of $49, including
interest, secured by equipment,
maturing September 1997. $ 1,372 $ -
Notes payable, interest ranging from 7% to 15%,
with monthly instalments of $106, including
interest, secured by equipment, maturing at
various dates through 1999. 2,252 -
Long-term portion of lines of credit 4,794 -
Other 22 29
Capital lease obligations 167 -
---------- ----------
8,607 29
Less: current portion 1,396 9
---------- ----------
$ 7,211 $ 20
========== ==========
Aggregate maturities of long-term debt for the years ending December 31, are as
follows:
1997 $1,510
1998 $5,898
1999 $ 863
2000 $ 85
2001 $ 251
The Company leases various equipment under the terms of a capital lease.
The following is a schedule of future minimum lease payments over the life
of the lease:
1997 $ 54
1998 59
<PAGE>
1999 45
2000 32
2001 15
--------
205
Less amount representing interest
ranging from 9.3% to 11.3% 38
--------
Balance of obligation $167
========
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(in thousands of dollars, except share amounts)
(revised)
7. SHARE CAPITAL
a) Authorized
100,000,000 Common shares without par value
100,000,000 Class A preference shares with a par value of $10
(none issued)
100,000,000 Class B preference shares with a par value of $50
(none issued)
b) Issued and Outstanding Common Shares
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
Number of Amount Number of Amount
Shares Shares
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Balance, beginning of
the year 16,542,121 $ 7,139 10,663,052 $ 2,816
Issued for cash
Private placements
(net of share issue
costs and finder's fees
of $164,060 (1995 -
$400,318) 469,497 2,252 3,367,213 2,680
Exercise of warrants 2,840,557 3,464 666,423 481
Exercise of incentive
stock options 651,000 2,198 1,168,500 869
Issued on acquisition of
subsidiary (Note 2) 3,076,923 15,385 -- --
Issued for loan bonus -- -- 258,333 394
Issued for debt settlement -- -- 301,933 157
Issued for finder's fees -- -- 116,667 42
--------- -------- ---------- --------
<PAGE>
Balance, end of the year 23,580,098 $ 30,438 16,542,121 $ 7,139
========== ========= ========== ========
c) Of the Company's issued and outstanding shares 4,150,000 are held in
escrow to be released in accordance with a formula basedon cumulative
cash flow of the Company.
</TABLE>
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(in thousands of dollars, except share amounts)
(revised)
7. SHARE CAPITAL (Continued)
d) As at December 31, 1996, the Company had outstanding share purchase
warrants entitling the holders to acquire 339,730 common shares at
exercise prices of $4.35 to $9.50 per share.
e) As at December 31, 1996, the Company had outstanding directors and
employees incentive stock options to acquire 2,300,500 common shares at
exercise prices of $1.65 to $9.00 per share.
8. SPECIAL WARRANTS
On July 2, 1996 the Company completed a private placement of 3,750,000
Series "A" special warrants at a price of $5.00 per special warrant for
net proceeds of $17,976,595 after deducting costs of the issue.
Commission paid to the brokers was 10% of the gross proceeds and the
brokers elected to receive the commission in special warrants (375,000
Series "A" Special Warrants issued). Each Series "A" special warrant can
be exercised into one unit of the Company for no additional consideration.
Each unit consists of one common share and one non transferable share
purchase warrant. The share purchase warrant will entitle the holder to
purchase one common share at $5.50 per share until July 2, 1997.
On December 7, 1996 the Company completed a brokered private placement of
500,000 Series "C" special warrants at a price of $9.00 per special
warrant for net proceeds of $3,951,196 after deducting costs of the issue.
Each "C" special warrant can be exercised into one unit of the Company for
no additional consideration. Each unit consists of one common share and
one-half of one non-transferable share purchase warrant. Each whole
Series "C" share purchase warrant will entitle the holder to purchase one
common share at $9.50 per share for a period of one year. Commissions
paid to the broker was 10% of the gross proceeds and the broker elected to
receive the commission in cash.
The Company has undertaken to use its best efforts to file and obtain a
receipt for a prospectus qualifying the distribution of the Series "A" and
"C" units on the exercise of the Series "A" and "C" special warrants, within
<PAGE>
90 days following the closing date of the Series "C" special
warrants. In the event that the prospectus is not receipted in the 90 day
period, then the Series "C" units will consist of one common share and one
share purchase warrant.
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(in thousands of dollars)
(revised)
9. INCOME TAXES
At December 31, 1996, the Company has approximately $11,750 in net
operating loss carryforwards available to offset future taxable income.
These carryforwards, if unused, will expire from 2001 to 2010. The
potential income tax benefits related to these items have not been
reflected in the accounts.
10. COMMITMENTS
a) Consulting Commitments
The Company has entered into consulting commitments for assistance in
management development, international marketing, licensing and
financing, technical and educational services.
The commitment under these contracts for the next five years is as
follows:
1997 $ 429
1998 $ 199
1999 $ 180
2000 $ 180
2001 $ 180
Certain of the consulting agreements are payable for a total of $16
U.S. per month and continue indefinitely until either party terminates
the agreement in writing with advance notice ranging from two to three
months.
b) Lease Commitments
The Company's subsidiaries lease certain factory and office premises in
California, U.S.A. and Ensenada, Mexico until September, 2006. The
annual rents of the premises consist of a minimum rent plus realty
taxes and utilities. Minimum rents payable for the premises for the
next five years is as follows:
1997 $ 646
1998 $ 717
<PAGE>
1999 $ 736
2000 $ 750
2001 $ 457
The Company's head office and Turbodyne development factory premises
are rented on a month to month basis.
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(in thousands of dollars)
(revised)
11. RELATED PARTY TRANSACTIONS
a) The Company made payments to related parties as follows:
1996 1995
---------- ----------
Project management fees $ 82 $ 80
Consulting fees $ 86 $ -
Management fees $ 30 $ 30
Rent and administrative services $ 176 $ 30
b) The following amounts are due from (to) related parties:
1996 1995
---------- ----------
Advances receivable from a director,
interest free and payable on demand $ 113 $ 113
========== ==========
12. SEGMENTED INFORMATION
The Company manufactures and distributes, on credit terms determined for
each customer, after-market automotive wheels, compressor housings, and
manifolds to wholesale distributors and original equipment manufacturers
and castings prepared to customer specifications on a contract basis.
Operations are considered to be in one geographical area - North America.
Year ended Year ended
December 31, December 31,
1996 1995
---------- ----------
NET SALES
After-market automotive wheels $ 9,799 $ -
Compressor housings and manifolds 9,208 $ -
---------- ----------
$ 19,007
========== ==========
GROSS PROFIT
After-market automotive wheels $ 1,309 $ -
Compressor housings and manifolds 1,200 $ -
---------- ----------
<PAGE>
$ 2,509 $ -
========== ==========
GENERAL OPERATING COSTS
Manufacture of aluminum cast
automotive products 2,666 -
Development of Turbodyne products 3,002 1,528
---------- ----------
$ 5,668 $ 1,528
========== ==========
LOSS BEFORE PROVISION FOR INCOME TAXES (3,159) (1,528)
INCOME TAXES RECOVERED 601 -
--------- ----------
NET LOSS $ (2,558) $ (1,528)
========== ==========
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(in thousands of dollars)
(revised)
12. SEGMENTED INFORMATION (Continued)
Year ended Year ended
December 31, December 31,
1996 1995
---------- ----------
DEPRECIATION
After-market automotive wheels $ 348 $ -
Compressor housings and manifolds 630 -
Turbodyne products 68 6
---------- ----------
$ 1,046 $ 6
========== ==========
IDENTIFIABLE ASSETS
After-market automotive wheels $ 21,996 $ -
Compressor housings and manifolds 26,779 -
Turbodyne products 15,720 5,202
---------- ----------
$ 64,495 $ 5,202
========== ==========
13. REVISION TO FINANCIAL STATEMENTS
The Company has revised the accounting for the acquisition of Pacific Baja
Light Metals Holding Inc. ("Pacific Baja") by increasing the value
assigned to the common share component of the consideration paid by the
Company in connection with this acquisition. This revision, which is in
accordance with generally accepted accounting principles, reflects the
fair market value of the shares issued as consideration for the Company's
acquisition of Pacific Baja. The Company had previously accounted for the
acquisition using a purchase price of $20,400 based on the fair market
value of the net assets of Pacific Baja resulting in the assignment of
$4,080 to the common share component of the consideration paid by the
Company. The effect of using the fair market value of the Company's
common shares issued results in the assignment of $15,385 to the common
share component of the consideration paid by the Company. This revision
results in an increase in goodwill and share capital in the amount of
$11,305 and an increase in amortization of goodwill and net loss for the
year, and deficit of $262.
<PAGE>
14. SUBSEQUENT EVENTS
Subsequent to December 31, 1996:
a) The Company has withdrawn its originally issued December 31, 1996
consolidated financial statements and has issued revised December 31,
1996 consolidated financial statements as detailed in Note 13.
<PAGE>
TURBODYNE TECHNOLOGIES INC.
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
(in thousands of dollars)
(revised)
14. SUBSEQUENT EVENTS (Continued)
b) The Company has issued 297,014 common shares for cash consideration
of $1,801,680 as a result of the exercise of share purchase warrants.
c) The Company has issued 520,000 common shares for cash consideration
of $2,164,395 as a result of the exercise of incentive stock options.
d) The Company has granted the following incentive stock options:
NUMBER OF SHARES EXERCISE PRICE EXPIRY DATE
---------------- -------------- -----------
480,000 $ 9.85 January 6, 1999
1,511,500 $10.15 March 3, 1999
e) The Company has entered into a private placement engagement
agreement, subject to the agent's due diligence and the preparation of
acceptable documentation, which proposes the issue of up to U.S.
$5,000,000 of convertible preferred shares in two tranches, with the
first tranche of U.S. $2,500,000 expected to close by July 15, 1997, and
the second tranche of U.S. $2,500,000 to close within 120 days of the
first closing. The convertible preferred shares will have a dividend
rate of 7% per annum payable in cash or common shares (at the Company's
option) at the time of conversion. The convertible preferred shares are
convertible into common shares at any time during the period commencing
four months from closing and ending three years from closing at the
lessor of, a fixed price equal to 110% of the market price of the common
shares at the time of closing, or a floating price varying from 80% to
90% (depending on time outstanding) of the 10 day average price of the
Company's common shares at the time of conversion. In conjunction with
the issue of the preferred shares, the Company will issue warrants
entitling the holders to purchase, for a period of three years, at the
fixed price described above, common shares having a value of 33 1/3% of
the convertible preferred shares issued.
