UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
Commission File Number 0-29320
ALEXA VENTURES INC.
(Exact name of Registrant as specified in its charter)
British-Columbia
(Jurisdiction of Incorporation or Organization)
818 Erie Street
Stratford, Ontario
N4Z 1A2
(address of principal executive office)
Securities registered or to be registered pursuant to Section 12(b)of
the Act: None
Securities registered or to be registered pursuant to Section
12(g) of the Act:
Common Shares Without Par Value
(Title of Class)
Securities for which there is a reporting obligation pursuant to
Section 45(d) Of the Act: None
Indicate the number of outstanding shares of each of the issuer's classes or
common stock at the close of the period covered by the annual report.
13,815,001 Common Shares Without Par Value
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
|X| Yes |_| No
Indicate by check mark financial statement item the registrant has elected to
follow:
|_| Item 17 |X| Item 18
<PAGE>
TABLE OF CONTENTS Page
EXCHANGE RATE INFORMATION 3
PART I
Item 1 - Description of Business 4
Item 2 - Description of Property 8
Item 3 - Legal Proceedings 8
Item 4 - Control of Registrant 8
Item 5 - Nature of Trading Market 9
Item 6 - Exchange Controls and Other Limitations Affecting
Security Holders 10
Item 7 - Taxation 13
Item 8 - Selected Financial Data 14
Item 9 - Management Discussion and Analysis of Financial Condition
and Results of Operations 16
Item 10 - Directors and Officers of Registrant 20
Item 11 - Compensation of Directors and Officers 22
Item 12 - Options to Purchase Securities form Registrants or
Subsidiaries 23
Item 13 - Interest of Management in Certain Transactions 24
PART II
Item 14 - Description of Securities 24
PART III
Item 15 - Defaults Upon Senior Securities 25
Item 16 - Changes in Securities and Changes in Security for
Registered Securities 25
PART IV
Item 17 - Financial Statements 25
Item 18 - Financial Statements 25
Item 19 - Financial Statements 25
Signatures 44
<PAGE>
EXHIBIT RATE INFORMATION
The Company's accounts are maintained in Canadian dollars. In this Registration
Statement, all dollar amounts are expressed in Canadian dollars except where
otherwise indicated.
The following table sets forth, for the periods indicated, the high and low
rates of exchange of Canadian dollars into United States dollars, the average of
such exchange rates on the last day of each month during the periods, and the
end of period rates. Such rates are shown as, or are derived from, the
reciprocals of the noon buying rates in New York City for cable transfers
payable in Canadian dollars, as certified for customs purposes by the Federal
Reserve Bank of New York.
- --------------------------------------------------------------------------------
Fiscal Year Ended
September 30
- --------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
High 0.7300 0.7513 0.7527 0.7468 0.7731
Low 0.6330 0.7145 0.7236 0.7023 0.7174
Average 0.6840 0.7300 0.7345 0.7272 0.7410
Period End 0.6540 0.7234 0.7342 0.7438 0.7457
- --------------------------------------------------------------------------------
On March 20, 1999 the exchange rate of Canadian dollars into United States,
based upon the noon buying rate in New York City for cable transfers payable in
Canadian dollars as certified for customs purposes by the Federal Reserve Bank
of New York City, was Cdn. $1.00 equals U.S. $0.6598.
<PAGE>
PART I
Item 1. Description of Business
Alexa Ventures Inc. (the "Company" or "Alexa") is a public high technology
manufacturing company established in 1983 and co-listed on the Toronto Stock
Exchange in October 1996 and the Vancouver Stock Exchange in 1991 under the
symbol "AXA". Its four main operating subsidiaries are ADH Custom Metal Inc.
("ADH"), Vision Unlimited Equipment Inc. ("Vision"), K-Troniks Int'l Corp.
("K-Troniks"), and Lexatec Inc. ("Lexatec"). These four operating subsidiaries
are structured into five main operating divisions, namely; ESCO ("Energy Saving
Company") related services (Vision); room sized transformer and switch housings
(ADH), Electronic Data Racks (ADH); electronic ballast distribution
(K-Troniks"); and computer peripheral distribution ("Lexatec"). The Company's
head office and principal place of business is located at 818 Erie Street,
Stratford, ON, N4Z 1A2, Telephone No. (519) 273-0503, and Fax No. (519)273-1684.
The operation at 818 Erie Street is presently based in a 55,000 sq.ft.
manufacturing engineering and office facility - producing high quality products
for the domestic and export market.
During 1996, the Company formed Applied, a joint venture company, to bring ESCO
consulting services to the Canadian marketplace. Applied is owned as to 75% by
the Company and 25% by Harri Makivirta. In May 1997, Mr. Makivirta joined the
Company full-time, and acts as president of Applied. The consulting services
provided by Applied enable the Company to provide ESCO services to its
customers, including supplying fluorescent fixtures and reflectors, electronic
ballasts, energy efficient bulbs, and performing audits and contract services to
the energy efficient fluorescent marketplace.
Applied provides ESCO services to commercial customers. Vision designs and
distributes energy efficient fluorescent light fixtures and reflectors to
customer specifications and requirements. ADH manufactures and distributes
electronic data racks, room sized transformer housings as well as Vision's
fluorescent fixtures and reflectors.
The Company designs and manufactures both Vision and ADH products. The Company
has catalogued the retrofit specifications for more than 1,500 fluorescent
fixtures being used in Canada, as well as the standardization of the electronic
data rack components.
In 1998, Alexa incorporated, and now holds a 60% interest in Lexatec, which
distributes computer peripherals out of Los Angeles, California. Its business is
unrelated to the energy saving products and services otherwise offered by the
Alexa and its subsidiaries. Lexatec's business was acquired through the
acquisition of a 60% interest in Chakers by the Company in April of 1998
pursuant to an agreement between the Issuer and Chakers' shareholders. This
agreement provides, among other things, that Lexatec will, in the future,
distribute all of the products which Chakers distributed in the past.
In April 1998, K-Tronik International was formed for the purpose of
manufacturing electronic ballasts for the international market, and acquired the
existing business of K-Tronik Industries
<PAGE>
Inc., a New Jersey company. K-Tronik International carries on its business in
Hackensack, New Jersey, and its business is unrelated to that of Vision, ADH and
Applied. EPI Energy distributes energy saving lighting products including
K-Tronik International ballasts and Vision and ADH lighting products.
In September 1998, K-Tronik International and Lexatec became joint ventures in
EPI International, a Korean company incorporated for the purpose of
manufacturing, distributing, selling and exporting electronic ballasts, related
energy saving products and other lighting products.
Alexa's real estate interests are held by its wholly-owned subsidiary AXA. The
Company owns the property on which its manufacturing facility is situated, which
includes 26 acres of land available for development or resale. Although it is
the Company's intention to develop or sell the excess 26 acres of land in the
future, there are no specific plans in place to develop or sell all or any
portion of this property at this time.
The Company has seen a significant increase in its revenue in the past year. The
increase is attributable for the most part to the acquisition of the business of
Chakers but was also due to growth in Alexa's other subsidiaries revenues.
The Company's discussion of its anticipated future operations and other forward
looking statements contained in the Form 20-F involve a number of risks and
uncertainties. In addition to the factors specifically discussed in context
hereafter, factors which could cause actual results to differ materially are
changes in economic instability and the Company's ability to obtain financing on
acceptable terms when and as requited.
History of Company and its Subsidiaries
<TABLE>
<S> <C>
Alexa Ventures Inc. Incorporated September 8,1986
Jurisdiction of Incorporation - Province of British
Columbia
Initial Public Offering July 5, 1987
$160,000 for 400,000 shares
to finance the costs of the public registration and
working capital requirements
Acquisition of Vision Unlimited April 3, 1991
Constituted a Reverse Take Over
Incorporated August 25,1983
Jurisdiction of Incorporation - Province of Ontario
Acquisition of ADH Custom September 30, 1992
Metal Fabricators inc. Incorporated June 25,1987
Jurisdiction of Incorporation - Province of Ontario
</TABLE>
<PAGE>
The Business of the Company
Alexa is a public high technology manufacturing company whose business was
established in 1983 and listed on the VSE in 1991 through a RTO. A listing on
the TSE followed in October of 1996. Its four main operating subsidiaries are
ADH Custom Metal Fabricators Inc. (100% owned by Vision) Vision Unlimited
Equipment Inc., K-Troniks Int'l Corp., and Lexatec Inc.. (100% owned by Alexa).
These four subsidiaries are structured into five main operating divisions,
namely; ESCO related services, room sized transformer and switch housings,
Electronic Data Racks, electronic ballast distribution, and computer peripheral
brokerage. The operation is presently based in Stratford, Ontario with a 55,000
sq. ft. manufacturing and engineering facility producing high quality product
for the domestic and export market.
Alexa has developed a line of Electronic Data Racks for the North American
market through ADH. ADH racking is oriented towards the radio communication and
small business marketplace. Alexa currently has distributors that sell the
product to the end user. These include Anicom and Wesco. These two distributors
have significant coverage of the Canadian and U.S. markets and in depth
relationships with the rack populators.
Room sized transformer Enclosures (including the worlds largest in Mexico City)
and switch housings are custom manufactured to the customer's specifications.
Alexa's strengths, in this area, are its engineering expertise and oversize
paint facilities.
Alexa currently employs 46 individuals. Its work force in non-unionized.
Research & Development is a critical component of Alexa's product development
and manufacturing cycle. Using proprietary technology, Alexa designs and
manufactures both Applied, Vision, and ADH products. An expenditure has been
made during the last 13 years to catalogue the retrofit specifications for the
more than 1,500 fluorescent fixtures being used in Canada, as well as, the
standardization of the electronic data rack components. Alexa has also invested
in an oversized paint application facility to permit the manufacture of room
sized transformer and switch housings. all of these efforts have increased
product differentiation and resulted in increased sales and gross margin to
Alexa.
In summary, Alexa's products, principal markets and methods of distribution are
as follows:
<TABLE>
<CAPTION>
Products Principal Markets Methods of Distribution
- -------------------------------------------------------------------------------------
<S> <C> <C>
ESCO services Landlords In house direct sales
ESCO Products Other ESCOs In house direct sales and distribution
(Light fixtures, reflectors, & Landlords In house direct sales
electronic ballasts)
Room sized transformer Other manufactures In house direct sales
and switch housings
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Electronic Data Racks Electronic Distributors
Manufactures
</TABLE>
Research & Development
Research expenditures are expensed in the year in which they are incurred.
It is the company's policy to defer costs that relate to the development and
design of new and modified products. These costs are amortized on a
straight-line basis, over their expected future benefit, starting upon
commencement of production. When a project is determined to be unsuccessful or
abandoned, these costs are expensed at that time.
During the last four fiscal years, Alexa has capitalized the following amounts
to Deferred Development costs:
Fiscal 1998 $ 0
Fiscal 1997 $ 0
Fiscal 1996 $ 0
Fiscal 1995 $ 13,343
Sales and Revenue Analysis
During the last three fiscal years, sales and revenue, from the distribution of
the Company's products, have had the following distribution amongst the various
activities:
Fiscal 1998 Fiscal 1997 Fiscal 1996
----------- ----------- -----------
Sales
Computer Peripherals $17,938,000 Nil Nil
Electronic Ballasts 957,000 Nil Nil
Distributed in the U.S.A
Lighting Fixtures & Reflectors
Distributed in the U.S.A Nil $ 11,000 $ 554,000
Distributed in Canada $ 916,000 $ 755,000 $ 738,000
Data Racks
Distributed in the U.S.A 168,000 50,000 265,000
Distributed in Canada 777,000 801,000 409,000
Fabricated Products
Distributed in Canada 1,978,000 2,117,000 2,321,000
----------- ----------- -----------
Total Sales $22,734,000 $ 3,734,000 $ 4,278,000
<PAGE>
Item 2. Description of Property
Industrial Facility
The Company's industrial facility is 55,000 square feet of mixed office,
manufacturing, and engineering space located in an industrial designated area in
Stratford, Ontario. At the time of purchase in October 1994, Alexa renovated the
building upgrading the electrical entrance, lighting fixtures, as well as the
office and paint facility to meet its manufacturing standards. The factory
capacity currently utilizes 40% with presently one work shift. This facility is
situated on 31.8 acres of land of which 26 acres is available for development or
resale.
The land and property are subject to a first mortgage of $1,213,000.
The factory is a light gauge fabrication facility that produces energy efficient
fluorescent lighting fixtures and reflectors, electronic data racks and oversize
custom enclosures for the electrical industry.
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the Company is a party
or of which any of its subsidiaries of properties are the subject.
Item 4. Control of Registrant
The control for the registrant is held by the following three shareholders:
Title of Class Identity of Person or Group Amount Owned % of Class
- --------------------------------------------------------------------------------
Common Gerry A. Racicot 3,250,000 23.5
124 Anderson St., Woodstock, ON
N4S 1B5
Common Ernest Kolenda 3,251,000 23.5
358 Maple Ave., Georgetown, ON
L7G 4S5
Common Hardstone Holdings 1,771,000 12.8
c/o Sid & Tena Harkema, RR #3,
Orillia, ON L3V 6H3
Total Ownership of the Registrant by the above mentioned shareholders is 59.8%
The Company is not directly or indirectly owned or controlled by another
corporation(s) or by any foreign government.
<PAGE>
The total amount of common shares held by officers and directors as a group are
9,051,176 common shares.
Item 5. Nature of Trading Market
The common shares of the Company were listed for trading on the Toronto Stock
Exchange (the "TSE") on October 11, 1996 and, previous to this, on the Vancouver
Stock Exchange (the "VSE") on April 3, 1991 under the symbol "AXA".
The following summarizes the high and low prices and the combined trading volume
of the Company's common shares on the TSE and VSE for the periods indicated:
- --------------------------------------------------------------------------------
Calendar Period High (Cdn$) Low (Cdn$) Volume
- --------------------------------------------------------------------------------
Quarter Ended
September 30, 1998 0.69 0.45 216,500
June 30, 1998 0.95 0.45 739,723
March 31, 1998 0.55 0.25 259,363
December 31,1997 0.75 0.45 290,571
September 30, 1997 0.65 0.40 353,000
June 30, 1997 0.75 0.45 396,600
March 31, 1997 0.65 0.50 209,300
December 31,1996 0.90 0.55 359,400
September 30, 1996 0.90 0.42 514,648
June 30, 1996 0.76 0.52 490,945
March 31, 1996 0.84 0.65 615,716
Year Ended
December 31, 1995 0.92 0.32 2,853,162
December 31, 1994 0.90 0.45 2,218,856
December 31, 1993 0.75 0.36 2,533,758
- --------------------------------------------------------------------------------
Prior to October 11, 1996, all trades were cleared through the VSE and
subsequent to that date all trades were cleared on the TSE.
At September 30, 1998, there is no active trading of the common shares in the
United States. The following table indicates the approximate number of record
holders of common shares with United States Addresses and the portion and
percentage of common shares so held in the United States. On such date,
13,815,001 common shares were outstanding.
<PAGE>
- --------------------------------------------------------------------------------
Total Number Number of U.S. Number of Common Shares Percentage of
of Holders Holders Held in the Common Shares Held
U.S. in the U.S.
- --------------------------------------------------------------------------------
29 6 380,500 2.8%
- --------------------------------------------------------------------------------
The computation of the number and percentage of common shares held in the United
States is based upon the number of common shares held by record holders with
United States addresses and by trusts, estates or accounts with United States
addresses as disclosed to the Company following inquiry to all record holders
known to the trustees, executors, guardians, custodians, or the fiduciaries
holding common shares for one or more trusts, estates or accounts. United States
residents may beneficially own common shares held of record by non-United States
residents.
A substantial number of common shares are held in "Street name" by trustees,
executors, guardians, custodians or other fiduciaries, including depositories,
brokerage firms, and financial institutions. One brokerage house in the U.S. has
holdings of 367,400 common shares. Management is unable to determine the total
number of individual shareholders that this represents.
Volatility of Common Share Price
The market price of the common shares of Alexa Ventures Inc. have historically
not been highly volatile with a trading range between $0.32 (Cdn.) and $0.90
(Cdn.) during the last five years. In the opinion of management, since 1991, any
fluctuations in the stock price is a direct result of its stock being thinly
traded over the years since 1991 and whenever a stock broker has taken an
interest in Alexa and decided to take a position for its clients, the stock
price has fluctuated from $0.32 to 0.90 trading range. Volumes increased when
the position was established and again, if and when the position is eliminated,
it seems that this occurs more rapidly if there is a market when a position is
decreased.
Item 6. Exchange Controls and Other Limitations Affecting Security Holders
Canada has no system of currency exchange controls. There are no exchange
restrictions on borrowing from foreign countries nor on the remittance of
dividends, interest, royalties, and similar payments, management fees, loan
repayments, settlements of trade debts or the repatriation of capital.
The Investment Canada Act (the "ICA"), enacted on June 20,1985, requires prior
notification to the Government of Canada on the "acquisition of control" of
Canadian businesses by non-Canadian, as defined by the ICA. Certain acquisitions
of control, discussed below, are reviewed by the Government of Canada. The term
"acquisition of control" is defined as any or more non-Canadian persons
acquiring all or substantially all of the assets used in the Canadian business,
or the acquisition of the voting shares of a Canadian corporation carrying on
the Canadian business
<PAGE>
or the acquisition of the voting interests of an entity controlling or carrying
on the Canadian business. The acquisition of the majority of the outstanding
shares is deemed to be an "acquisition of control" of a corporation. The
acquisition of less than a majority, but one-third or more, of the voting shares
of a corporation is presumed to be an "acquisition of control" of a corporation
unless it can be established that the purchaser will not control the
corporation.
Investments requiring notification and review are all direct acquisitions of
Canadian business with assets of Cdn. $5,000,000 or more (subject to the
comments below on WTO investors) and all indirect acquisitions of Canadian
businesses (subject to the comments below on WTO investors) with assets of more
than Cdn. $50,000,000 or with assets of between $5,000,000 and Cdn. $50,000,000
which represent more than 50% of the value of the total international
transactions. In addition, specific acquisitions or new business in designated
types of business activities related to Canada's cultural heritage or national
identity could be reviewed if the government of Canada considers that it is in
the public interest to do so.
The ICA was amended with the implementation of the agreement establishing the
World Trade Organization ("WTO") to provide for special review of thresholds for
"WTO investors", as defined in the ICA. "WTO investors" generally means:
(a) an individual, other than a Canadian, who is a member of a WTO member (such
as, for example, the United States), or who has the right of permanent residence
in relation to that WTO member.
(b) governments of WTO members; and
(c) entities that are not Canadian controlled, but which are WTO investor
controlled as determined by the rules specified in the ICA.
The special review thresholds for WTO investors do not apply, and general rules
described above do not apply, to the acquisition of control of certain types of
businesses specified in the ICA, including business that is a "cultural
business". If the WTO investor rules apply, an investment in the shares of the
Company by whom or from a WTO investor will be reviewable only if it is an
investment to acquire control of the Company and the value of the assets of the
Company is equal to or greater than a specified amount (the "WTO Review
Threshold"). The WTO Review Threshold is adjusted annually by formula relating
to increases in the nominal gross domestic product of Canada. The 1996 WTO
Review Threshold is Cdn. $168,000,000.
If any non-Canadian, whether or not a WTO investor, acquires control of the
Company by the acquisition of shares, but the transaction is not reviewable as
described above, the non-Canadian is required to notify the Canadian government
and to provide certain basic information relating to the investment. A
non-Canadian, or not a WTO investor, is required to provide a notice to the
government on the establishment of a new Canadian business. If the business of
the Company is then a prescribed type of business activity related to Canada's
cultural heritage or national identity, and if the Canadian government considers
it in the public interest to do so, then the
<PAGE>
Canadian government may give a notice in writing within 21 days requiring the
investment to be reviewed.
For non-Canadian (other than WTO investors), and indirect acquisition of
control, by the acquisition of voting interests of an entity that directly or
indirectly controls the Company, is reviewable if the value of the assets of the
Company is then Cdn. $50,000,000 or more. If the WTO investor rules apply, then
this requirement does not apply to a WTO investor, or to a person acquiring the
entity from a WTO investor. Special rules specified in the ICA apply if the
assets of the Company is more than 50% of the value of the assets of the entity
so acquired. By these special rules, if the non-Canadian (whether or not a WTO
investor) is acquiring control of an entity that directly or indirectly control
the Company, and the value of the assets of the company and all other entities
carrying on business in Canada, calculated in the manner provided by the ICA and
the regulations under the ICA, of the assets of all entities, the control of
which is acquired, directly or indirectly, in the transaction of which the
acquisition of control of the Company forms a part, then the threshold for a
direct acquisition of control as discussed above will apply, that is, a WTO
Review Threshold of Cdn. $168,000,000 (n 1996) for a WTO investor or a threshold
of CDN. $5,000,000 for non-Canadian other than a WTO investor. If the value
exceeds that level the transaction must be reviewed in the same manner as a
direct acquisition of control by the purchase of shares by the Company.
If an investment is renewable, an application for review in the form prescribed
by the regulations is normally required to be filed with the Director appointed
under the ICA (the "Director") prior to the investment taking place and the
investment may not be consummated until the review has been completed. There
are, however, certain exceptions. Applications concerning indirect acquisitions
may be filed up to 30 days after the investment is consummated and applications
concerning reviewable investments in culture-sensitive sectors are required upon
receipt of a notice for review. In addition, the Minister (a person designated
as such under the ICA) may permit an investment to be consummated prior to
completion of the review, if he is satisfied that the delay would cause undue
hardship to the acquirer or jeopardize the operations of the Canadian business
that is being acquired. The Director will submit the application to the
Minister, together with many other information or written undertakings given by
the acquirer and any representation submitted to the Director by a province that
is likely to be of net benefit to Canada, taking into account the information
provided and having regard to certain factors of assessment where they are
relevant. Some of the factors to be considered are:
(a) the effect of the investment on the level and nature of economic activity in
Canada, including the effect on employment, on resource processing, and on the
utilization of parts, components and services produced in Canada;
(b) the effect of the investment on exports from Canada;
(c) the degree and significance of participation by Canadians in the Canadian
business and in any industry in Canada of which it forms a part;
<PAGE>
(d) the effect of the investment on productivity, industrial efficiency,
technological development, product innovation and product variety in Canada;
(e) the effect of the investment on competition within any industry or
industries in Canada;
(f) the compatibility of the investment with national, industrial, economic, and
cultural policies;
(g) the compatibility of the investment with national, industrial, economic, and
cultural policies taking into consideration industrial, economic, and cultural
objectives enunciated by the government of legislature of any province likely to
be significantly affected by the investment; and
(h) the contribution of the investment to Canada's ability to compete in world
markets.
To ensure prompt review, the ICA set certain time limits for the Director and
the Minister. Within 45 days after a completed application has been received,
the minister must notify the acquirer that he is satisfied that the investment
is likely to be of net benefit to Canada, or that he is unable to complete his
review, in which case he shall have 30 additional days to complete his review
(unless the acquirer agrees to longer period), or he is not satisfied that the
investment is likely to be of net benefit to Canada.
Where the Minister has advised the acquirer that he is not satisfied that the
investment is likely to be of net benefit to Canada, the acquirer has the right
to make representations and submit undertakings within 30 day of the date of
notice (or any period that is agreed upon between the acquire and the Minister).
On the expiration of the 30 day period (or the agreed upon extension), the
Minister must quickly notify the acquire that he is not satisfied that the
investment is likely to be of net benefit to Canada. In the latter case, the
acquirer my not proceed with the investment or, if the investment has already
been consummated, must divest itself of control of the Canadian business.
The ICA provides civil remedies for non-compliance with any provision. There are
also criminal penalties for breach of confidentiality or providing false
information.
Except as provided in the ICA, there are no limitations under the laws of
Canada, the Province of British Columbia, or in any constituent documents of the
Company on the right of non-Canadians to hold or vote the common shares of the
Company.
Item 7. Taxation
A brief description of certain provisions of the tax treaty between Canada and
the United Sates is included below, together with a brief outline of certain
taxes, including withholding provisions to which United States security holders
are subject under existing laws and regulations of Canada and the United States.
The consequences, if any, of state and local taxes are not considered. The
<PAGE>
following information is general, and is not intended to be relied upon with
respect to any particular transaction or circumstances.
Canadian federal tax legislation requires a 25% withholding from any dividend
paid or deemed to be paid to the Company's non-resident shareholders. However,
shareholders resident in the United Sates would generally have this rate reduced
to 15% pursuant to the tax treaty between Canada and the United States. The
amount of stock dividends paid to non-residents of Canada would be subject to
withholding tax at the same rate as cash dividends. The amount of stock
dividends (for tax purposes) would generally be equal to the amount by which the
paid up capital of the Company had decreased by reason of the payment of such
dividend. The Company will furnish additional tax information to shareholders in
the event of such dividend. Interest paid or deemed to be paid on the Company's
debt securities held by non-Canadian residents may also be subject to
withholding tax, depending upon the terms and provisions of such securities any
applicable tax treaty.
Gains derived from a disposition of shares of the Company by a non-resident
shareholder will be subject to tax in Canada only if not less than 25% of any
class of shares of the Company were owned by the non-resident shareholder and/or
persons with whom the non-resident did not deal at arm's length at any time
during the five year period immediately preceding the dispositions. In such
cases, gains derived by a U.S. shareholder from a disposition of shares of the
Company would likely be exempt from tax in Canada by virtue of the Canada-U.S.
tax treaty.
Item 8. Selected Financial Data
The table in this section sets forth selected consolidated financial data. Such
data, for and as of the end of the five previous fiscal periods, is derived from
the consolidated financial statements of the Company. The selected financial
data is expressed in Canadian dollars.
It should be noted that during the 1993 fiscal year, the Alexa group purchased
ADH resulting in an increase in sales from 1992 to 1993 of $3,423,000 and a net
income of $266,000. During 1995 fiscal year the financing of the Stratford
facility took place resulting in an increase in long term debt of $1,011,000,
and increase in assets of $992,000 and an increase in working capital of
$196,000.
The selected financial data should be read in conjunction with the Consolidated
Financial Statements of the Company and the Notes contained elsewhere in the
Registration Statement.
The Consolidated Financial Statements of the Company have been prepared in
accordance with Generally Accepted Accounting Principles in Canada ("Canadian
GAAP"). These principles, as applied to the Company, do not differ materially
from those generally accepted in the united States ("U.S. GAAP"), other than as
set out in Note 15 to the Consolidated Financial Statements of the Company.
<PAGE>
The Company's last fiscal period was September 30th of the previous year. The
following is a summary of certain selected financial information for the
Company's most recently completed fiscal period and for the four preceding
fiscal periods of the Company.
The figures below are presented in accordance with Canadian GAAP. All fiscal
periods are for the full year.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Fiscal periods ended
1998 1997 1996 1995 1994
- ------------------------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Working Capital $ 1,169,000 $ 1,228,000 $ 903,000 $ 554,000 $ 484,000
Revenues: 22,734,000 3,734,000 4,278,000 4,611,000 4,480,000
Net Incomes (loss) 84,000 138,000 274,000 301,000 305,000
Earnings (loss) per .01 0.1 0.02 0.02 0.02
share:
Total assets: 9,221,000 5,385,000 5,172,000 5,095,000 3,263,000
Long term debt: 1,477,000 1,326,000 848,000 1,011,000 0
Total liabilities 5,689,000 2,760,000 2,654,000 2,878,000 1,268,000
Share capital: 2,176,000 2,176,000 2,176,000 2,175,000 2,165,000
Retained Earnings 247,000 163,000 25,000 (249,000) (550,000)
(deficit) :
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
Reconciliation to U.S. GAAP
Fiscal periods ended
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income - Cdn. GAAP $ 84,000 $ 138,000 $ 274,000 $ 310,000 $ 305,000
Development Costs nil nil nil (14,000) (132,000)
Capitalized
Amort. of Development nil 24,000 61,000 58,000 40,000
Costs
Negotiated Reduction of Debt 424,000 nil nil nil nil
Computer Equipment nil nil (9,000) (5,000) (5,000)
Deferred Tax Adj nil (11,000) (17,000) (11,000) 29,000
----------------------------------------------------------------------------
Net Income - U.S. GAAP 508,000 151,000 312,000 325,000 237,000
Retained Earnings (Deficit)
Closing balance - Cdn 247,000 163,000 25,000 (249,000) (550,000)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
GAAP
Negotiated Reduction of Debt 424,000 nil nil nil nil
Adj. re: Development Costs nil nil (24,000) (85,000) (129,000)
Adj. re: Depreciation (30,000) (30,000) (30,000) (24,000) (15,000)
Expense
Deferred Tax Adjustment 12,000 12,000 15,000 32,000 43,000
Closing balance - U.S. 653,000 145,000 (14,000) (326,000) (651,000)
GAAP
Total Assets per Cdn 9,221,000 5,385,000 5,172,000 5,095,000 3,262,000
GAAP
Adj. Development Costs nil nil (24,000) (85,000) (129,000)
Adj. Depreciation expense (30,000) (30,000) (30,000) (24,000) (15,000)
Deferred Tax Adjustment 12,000 12,000 15,000 32,000 43,000
Total Assets per US GAAP 9,203,000 5,367,000 5,133,000 5,018,000 3,162,000
</TABLE>
Dividend Policy
The Company has not paid dividends on the common shares in any of its last five
fiscal years. The directors of the Company will determine if and when dividends
should be declared and paid in the future based on the Company's financial
position at the relevant time. All of the common shares of the Company are
entitled to an equal share in any dividends declared and paid.
Item 9. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity
Since 1993, Alexa has stabilized its current ratio from 1.38 on September 30,
1994 to 1.28 on September 30, 1998. The Company's long term debt has also
increased from $1,011,000 on September 30, 1995 to $1,477,000 on September 30,
1998. The Company's debt to equity ratio has increased from 0.69 on September
30, 1994 to 1.86 on September 30, 1998. This increase was due to the purchase of
the manufacturing facilities in Stratford, Ontario and the subsequent
refinancing of long term debt, as well as the computer peripheral division of
Lexatec Inc. having high balances of Accounts Receivable and Accounts Payable.
The Company generates profits from operations since September 30, 1993. The
Company has also had positive cash flow from operation since September 30, 1993,
with the exception of fiscal year 1995, where an increase in accounts receivable
caused a cash outflow from operations of $435,000.
<PAGE>
Alexa's internal and external sources of liquidity includes unused portion of
operating line of credit, refinancing of property and building, possible sale
lease back of equipment and an equity issue of share capital. On August 12,1997,
Alexa refinanced its building, increasing its mortgage on the property and land
from $513,000 to $1,300,000. As well, the operating line was increased from
$1,250,000 to $1,750,000. Alexa has no immediate or intermediate plans to
refinance its equipment through a sale leaseback, refinance property and
building or raise capital through an equity issue.
The Company does not foresee any known demands, commitments, events or
uncertainties that will result in a significant change in the registrant's
liquidity in the near term.
Capital Resources
The Company does not have any material commitments for capital expenditures as
of the end of the last fiscal period or at any subsequent interim period.
The Company does not foresee any material change in the mix between equity,
debt, of off balance sheet financing arrangements. The Company expects to
arrange financing prior to any future acquisitions, of which, none is currently
committed or in the negotiation phase.
Results of Operations
During the year, Sales and Net Income have increased from $3,292,000 and
$138,000 to $22,734,000 and $84,000, respectively as a result of the Company's
restructuring. The cash flow from operations have increased from $57,000 to
$175,000 as a result of an increase in ballast inventory to support the new
ballast business. The increase in sales was a result of the purchase of Lexatec
Inc..
The Company's investing activities remain high in 1998 amounting to $1,359,000
versus $468,000 in 1997 as a result of actively pursuing corporate acquisition
targets. Financing activities increased from a negative $592,000 to a positive
$598,000 as a result of refinancing the long term debt. The increase in long
term debt was based on 60% of value as determined by a fair market valuation of
the land and building in Stratford being $1,975,000, an unrealized increase in
shareholder's equity of approximately $1,200,000.
Expanded Corporate Mission
Alexa's mission to date has encompassed designing and manufacturing high
technology, specialty manufactured products engineered and produced on a custom
basis as a supplier to the ESCO market. It has significant experience and
relationships in the ESCO market and considerable engineering and manufacturing
knowledge and capability.
Alexa believes that it can grow faster and more profitably by becoming an
integrated North American ESCO, with the ability to control the entire product
process through production,
<PAGE>
marketing and installation. In this way it can also better leverage its light
fixtures and reflector capabilities through the rapidly growing fluorescent
lighting retrofit market.
Background
The Company is a public high technology manufacturing company established in
1983 and listed on the VSE in 1991 and a Toronto Stock Exchange listing in 1996.
Gerry Racicot look over as President in 1991. Keith Attoe joined Alexa as CFO
and Director in 1995 and Walter A Keyser (a director of AGF Management) joined
as Chairman of the Board of Directors and a Director in 1996. The operations
recently relocated to Stratford, Ontario in a 55,000 square foot manufacturing
and engineering facility that Alexa acquired in 1995, producing a high quality
product for the domestic and export market.
Its five main operating subsidiaries are:
o Vision Unlimited Inc.;
o Applied Lighting Technologies Inc.; and
o ADH Custom Metal Fabricators Inc.
o Lexatec Inc.
o K-Tronik Int'l Corp.
ADH was purchased in 1993, and the unprofitable operations were turned around in
six months. The work-force, totaling about 45, is non-unionized.
ESCO Services - Vision Unlimited and Applied Lighting
An energy saving corporation (ESCO) seeks to reduce operating costs for its
mainly commercial customers. by carefully analyzing its lighting needs and
coming up with a lower cost solution. Alexa is not only a supplier to ESCO's but
has a long term strategy to become a fully-integrated ESCO itself and in
conjunction with its current customer base, specializing in fluorescent
lighting. Some of Alexa's customers include Honeywell, Johnson Controls, Landis
& Gyr, and other ESCO's throughout North America.
Vision's products offer up to 95% efficiency compared to 60% - 65% efficiency in
conventional fixtures, according to the Company. They were the first products of
their type that have received accreditation by Powersmart, the international
organization governing energy efficient technologies, and which is used by many
local utilities in developing their approved supplier lists. As part of its
inventory of skills, a significant expenditure has been made during the past 13
years to catalogue the retrofit specifications for the more than 1,500
fluorescent fixtures being used in North America.
For a typical contract, Alexa, through the Applied Joint venture, performs a
lighting "audit" and through Vision Unlimited provides high energy ballasts,
reflectors, and bulbs. ADH may provide reflectors, ballasts, and other
components according to the nature of the contract.
<PAGE>
ADH Custom Metal Fabricators
ADH manufactures a range of electronic data racks, electrical switch boxes and
transformer housings.
Electronic data racks are manufactured for C-Can Power Systems Inc., Texan Cable
and Wesco Inc.. Transformer enclosures are manufactured for Hammond
Manufacturing Inc.. Switch enclosures are manufactured for ABB Canada, Automatic
Switch co., and Lumacel Inc..
Growth Strategy - Vision and Implementation
Alexa is an ESCO (Energy Saving Company) and technology manufacturing company
established in 1983, listed on the TSE in 1996 and on the VSE in 1991. Its four
main divisions are ADH Custom Metal Fabricators Inc., Lexatec Inc., K-Tronik
Int'l Corp., and Vision Unlimited Equipment Inc.. Vision Unlimited designs
energy efficient fluorescent lighting products. Alexa has a joint venture
subsidiary known as Applied Lighting Technology Inc.. Applied provides a
lighting audit services, ballasts, and bids on lighting retrofit contracts. ADH
manufactures a range of products such as electronic data racks, ticket event
dispensers and Vision Unlimited's products.
The growth in sales from 1992 to 1997 was 1,769% with sales increasing from
$211,000 to $3,734,000. This sales figure also includes a planned reduction in
low margin custom fabrication and an increase in standard product lines that
have higher margin and a stable distributor base. Alexa is continuing to pursue
increased distribution of current standard products and to build other standard
lines within the parameters of its positive operating cash flow. The integration
of its ESCO services is an important part of Alexa's strategy to increase market
penetration into the energy efficient lighting area and to also stabilize sales
growth in the future.
Outlook
The potential market for energy efficient lighting is about $3 billion annually.
The potential retrofit market, whereby existing building built before high
energy efficient components were developed in the early-mid 1980's could have
their lighting made more efficient, is in excess of $100 billion in the US
alone, and the annual market in Canada exceeds several billion dollars,
according to the company. This retrofit market is driven by four factors:
1. The desire of landlords to upgrade older buildings and regional shopping
centers in order to stave off declining occupancy rates. A significant
factor in attracting quality tenants to commercial office and industrial
space is a reduced common area charge to the tenants. This is currently a
driving factor of the retrofit industry as buildings continue to have
their lighting design and total fixtures retrofitted.
2. The energy crisis of the 1970's and 1980's, which increased energy prices
many-fold, squeezed traditionally low profit margins in the commercial
real-estate rental/lease market.
<PAGE>
3. The desire of public sector buildings, such as universities, schools, and
hospitals to reduce costs and improve efficiency. The cash-strapped nature
of this sector has met with a creative solution whereby many of Alexa's
larger customer's finance the costs of the retrofit against a
participation in the ongoing savings. This stretches out slightly the
typical 2.2 year pay-back on these projects, but sill leaves them well
within an election mandate period.
4. The development in the early-mid 1980's of high energy efficient lighting
components (ballasts, tubes, reflectors) opened the door to retrofitting
as a viable strategy for commercial landlords.
Effects of Inflation
In the Company's view, at no time during any of the last five fiscal years have
inflation or changing prices had a material impact on the Company's sales,
earnings or losses from operations, or net income.
U.S. Generally Accepted Accounting Principles
U.S. GAAP principles do not differ materially from Canadian GAAP principles, as
applied to the Company, other than as set forth in Note 15 to the Audited
Consolidated Financial Statements of the Company.
Item 10. Directors and Officer of Registrant
The directors of the Company are elected by the shareholders at each Annual
General Meeting and typically hold office until the next Annual General Meeting
at which time they may re-elect or be replaced.
The articles of the Company permit the directors to appoint directors to fill
any casual vacancies that may occur on the board. The articles of the Company
also permit the directors to add additional directors of the board between
successive Annual General Meeting so long as the number appointed does not
exceed more than one third of the number of directors appointed at the last
Annual General Meeting. Individuals appointed as directors to fill casual
vacancies on the board or added a s additional directors hold office like any
other director until the next Annual General Meeting at which time they may be
re-elected or replaced.
Other than receiving stock options from time to time, the directors of the
Company are not compensated for serving as directors (see "options to Purchase
Securities from Registrant or Subsidiaries - Stock Options").
The following is a list of the current directors and senior officers of the
Company, their municipalities of residence, their current position with the
Company and their principal occupations:
<PAGE>
Name Address Office Held Number of shares of
each class of the
applicant beneficially
owned
- -------------------------------------------------------------------------------
Ernest A. Kolenda 358 Maple Ave. Secretary & 3,251,000
Georgetown, ON Director
L7G 4S5
Director since March 28, 1991. Earnest Kolenda has extensive experience in
sales, communication and administration through the marketing of products and
services in industrial, manufacturing, building and retail Industries (K10
Enterprise Inc. family owned security mirror business). Ernest formed Vision
Unlimited Equipment Inc., in 1982 to market MorVue fluorescent reflectors and
provide research for further development of the product line.
Gerry A. Racicot 124 Anderson St. President, C.E.O., 3,250,676
Woodstock, ON & Director
N4V 1B5
Director Since August 21, 1992. Gerry Racicot has a long career in
administration, management, and self employment. The majority of these years
were spent as an Investment Account Executive at a major Canadian brokerage
house (Burns Fry), import/export wholesale distribution (coast to coast
distribution) and retail business (Red Mountain Holdings Inc. - Stedmans).
Walter A. Keyser 56 Clarendon Ave. Director 418,500
Toronto, ON
M4V 1J1
Director since February 23,1996. Walter Keyser is a principal of W.A. Keyser
Associates and a director of AGF Management Inc., the management arm of the AGF
group of mutual funds. Walter is also very involved in project financing for
real estate, as well as founding Canada's first real estate mutual fund in the
mid 1970's.
Sydney S. Harkema R.R. # 3 Director 1,771,000
Orillia, ON
L3V 6H3
Director since August 21, 1992. Sydney Harkema founded and built one of Canada's
largest privately owned transport and express companies (Harkema Trucking
Group). He served as President and Chairman of the Board for 27 years. He has
since sold the entire trucking operation, cartage equipment and all 18 terminals
located throughout the country and has devoted his time to public service
organizations (principally as Chairman of the Huntley St. Group of Ministries).
<PAGE>
Keith Attoe 23 Prince George C.F.O. & Director 350,000
Islington, ON
M9A 1X9
Director since February 23, 1996. Keith Attoe is a Chartered Accountant
Practicing in the City of Toronto for the previous 11 years. Keith's expertise
extends to corporate financing, project financing, portfolio management, US/CDA
tax planning, investment strategy and treasury management. Keith's clients have
included CN, Deloitte Touche and the Mondev group of companies, a major real
estate developer in Montreal.
Robert Hoegler Suite 604 Director nil
7040 Granville Ave.
Richmond, B.C.
V6Y 3W5
Director since February 23, 1996. Robert Hoegler is an independent businessman
residing in Vancouver, B.C.. Robert's operates a successful public relations
firm in the junior industrial sector group of companies under his own name.
Paul Bates 243 Alscot Cres. Director 10,000
Oakville, ON
L6J 4R5
Director since December 1996. Paul Bates is Founder and President of Priority
Brokerage and Porthmeor Securities Inc. and a Governor of the Toronto Stock
Exchange.
There are no arrangements of understandings between any of the officers of
directors of the Company as to their election or employment, and no family
relationships.
Item 11. Compensation of Directors and Officers
Gerry A. Racicot, Ernest A. Kolenda and Keith Attoe (President, Secretary, and
C.F.O. respectively of the Company and all are Directors) are paid an annual
aggregate remuneration of $138,000.
There was no difference between the fair value of the stock on the date of the
grant of the options and the exercise price of the options for any options
issued to officers or directors.
There are no other arrangements in addition to or in lieu of any standard
arrangement under which Directors of the Company were compensated by the Company
during the most recently completed financial year for their services in the
capacity as Directors of the Company.
No options were exercised during the Company's most recently completed financial
year by any named Executive Officers.
<PAGE>
No plan exists, and no amount has been set aside or accrued by the Company or
nay of its subsidiaries, to provide pension, retirement or similar benefits for
directors and officers of the Company, or any of its subsidiaries.
Item 12. Options to purchase Securities from Registrant of Subsidiaries
<TABLE>
<CAPTION>
Number of common shares Purpose of Description
authorized for issuance as at Authorization
date of application @ strike price
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
50,000 common shares Stock Option By agreement dated September 17, 1996,
@ $0.85 per share James Edward Lalonde was Granted Options
to purchased 50,000 shares, exercisable
until April 17, 1999
50,000 common shares Stock Option By agreement dated September 15, 1995
@ $0.60 per share Keith Attoe was granted an option to
purchase 50,000 shares exercisable until
September 8, 2000
100,000 common shares Stock Option By agreement dated November 13, 1995,
@ $0.90 per share Keith Attoe was granted an option to
purchase 100,000 shares exercisable until
November 11, 2000
50,000 common shares Stock Option By agreement dated October 3, 1995, Walter
@ $0.70 per share Keyser was granted an option to purchase
50,000 shares exercisable until September
30, 2000
15,000 common shares Stock Option By agreement date November 7, 1995,
@ $0.85 per share Beverly Boorsma was granted an option to
purchase 15,000 shares exercisable until
November 7, 2000
50,000 common shares Stock Option By agreement dated April 18, 1997, Ken
@ $0.55 per share Rampersad was granted an option to
purchase 50,000 shares exercisable until
May 1, 2000
100,000 common shares Stock Option By agreement dated April 18,1997, Keith
@ $0.85 per share Attoe was granted an option to purchase
100,000 shares exercisable until April 17,
2000
10,000 common shares Stock Option By agreement dated December 13, 1996, Paul
@ $0.75 per share Bates was granted an option to purchase
10,000 shares exercisable until December
13, 1998
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
100,000 common shares Stock Option By agreement dated April 18, 1997, Walter
@ $0.85 per share A. Keyser was granted an option to
purchase 100,000 shares exercisable until
April 17, 2000
50,000 common shares Stock Option By agreement dated April 17, 1997, Ken
@ $0.85 per share Rampersad was granted an option to
purchase 50,000 shares exercisable until
April 17, 2000
30,000 common shares Stock Option By agreement dated April 17, 1997,
@ $0.85 per share Dingeman Kleppe was granted an option to
purchase 30,000 shares exercisable until
April 17, 2000
200,000 common shares Stock Option By agreement dated April 2, 1998, Robert
@ $0.60 per share Kim was granted an option to purchase
200,000 shares exercisable until April 17,
2000.
50,000 common shares Stock Option By agreement dated April 2, 1998, Steve
@ $0.60 per share Kim was granted an option to purchase
50,000 shares exercisable until April 17,
2000.
50,000 common shares Stock Option By agreement dated August 6, 1998, Philip
@ $0.80 per share Cassis was granted an option to purchase
50,000 shares exercisable until April 17,
2000.
25,000 common shares Stock Option By agreement dated June 25, 1998, Cheon
@ $0.80 per share Hong Kim was granted an option to purchase
25,000 shares exercisable until April 17,
2000.
25,000 common shares Stock Option By agreement dated May 6, 1998, Robert
@ $0.75 Hoegler was granted an option to purchase
25,000 shares exercisable until April 17,
2000.
</TABLE>
The Company has granted stock options officers and directors for a total of
905,000 common shares.
1,933,000 common shares Shares reserved pursuant under the
Stock Plan for which options have
not been granted.
Item 13. Interest of Management in Certain Transactions
No director, executive officer nor any of their associates or affiliates is or
as had an interest in material transactions of the Company.
Item 14. Description of Securities
Not Applicable
<PAGE>
Item 15. Defaults Upon Senior Securities
Not Applicable
Item 16. Changes in Securities and Changes in Security for Registered Securities
Not Applicable
PART IV
Item 17. Financial Statements
Not Applicable
Item 18. Financial Statements and Exhibits
Financial Statements
The following financial statements are attached to and form part of the
Registration Statement:
Management Review
Auditors Report
Audited Consolidated Financial Statements of the Company
For the year ended September 30,1998
Signatures
<PAGE>
MANAGEMENT REVIEW
As announced mid-year (2nd quarter) 1998, Alexa purchased a 53 % interest
in K-Tronik Int'l Corporation, and 60 % interest in Chakers, Inc.
During the third quarter, Alexa continued to manage its high growth
through acquiring North American distribution and facilitating the
implementation of in-house manufacturing, K-Tronik, a North American distributor
of electronic ballasts, continued to implement the commencement of it's
manufacturing facility in South Korea. During the third quarter, K-Tronik
received UL, CSA, and KO certification for it's complete line of electronic
ballasts. Sales remain strong and distribution continues to grow with a broad
customer base.
Robert Kim, the president of K-Tronik, has enjoyed success for previous
ballast manufacturing building their sales to $15,000,000,000 US within 24
months and is well regarded in the industry.
During the year, Alexa consolidated two of it's Korean divisions. Energy
Products Inc. (manufacturer of electronic ballasts) and Energy Products
International Corp. (Korean sales arm of energy saving products) under Energy
Products International Corp. and changed the name of K-Troniks Inc. to K-Tronik
Int'l Corporation to better amplify it's international electronic ballast sales
criteria.
During the third quarter, Alexa's involvement with Chakers Inc. was
restructured. The business of Chakers, Inc. now operates as Lexatec VR systems,
Inc. and Alexa's ownership interest remains 60%. Lexatec VR Systems, Inc.
continues distribution of computer peripherals throughout the USA fro it's Los
Angeles, CA base. Lexatec's year end will now correspond with Alexa's year end.
To maintain sales growth obtained in 1998 and enhance future profitability
Alexa, in the fourth quarter, (August 11, 1998) announced it had entered into an
agreement engaging CM Oliver & Company Ltd. as agent for a public offering by
ways of a prospectus to raise a minimum $ 2,000,000 to a maximum $ 3,000,000.
The offering shall be of units comprised of one common share and one share
purchase warrant entitling the holder to purchase one additional common share of
the company for a period of 18 months from the date of closing of the offering.
Alexa is currently waiting for the final prospectus clearance from the
appropriate regulatory bodies.
During the 1998 year, revenue increased 508% from $ 3,734,000 to $
22,734,000. Cash flow from operations increased 207% from $ 57,000 to $ 175,000.
Net income before provisions for income tax increased 40% from $ 164,000 to $
230,000 with net income for the year at $84,000 vis a vis of $ 138,000 in 1997.
The corporations debt/equity ratio is 1.86:1. Shareholders equity increased 20%
from $ 2,556,000 to $ 3,064,000.
ALEXA VENTURES INC.
/s/ G.A. Racicot /s/ K. Attoe, C.A.
G.A. Racicot K. Attoe, C.A.
Chief Executive Officer Chief Financial Officer
<PAGE>
[LETTERHEAD OF MONTEITH, MONTEITH & CO.]
AUDITORS' REPORT
To the Shareholders of
Alexa Ventures Inc.
We have audited the consolidated balance sheets of Alexa Ventures Inc. as
at September 30th, 1998 and 1997 and the consolidated statements of operations
and retained earnings, and changes in cash position 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.
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 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.
These financial statements have been prepared in accordance with
accounting principles generally accepted in Canada. For a reconciliation to
financial results expressed in accordance with accounting principles generally
accepted in the United State of America, see Note 15.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of Alexa Ventures Inc. as at September 30th,
1998 and 1997 and the results of its operations and the changes in its cash
position for the years then ended in accordance with generally accepted
accounting principles.
/s/ Monteith, Monteith & Co
CHARTERED ACCOUNTANTS
Stratford, Ontario,
February 9th, 1999.
<PAGE>
[LETTERHEAD OF MONTEITH, MONTEITH & CO.]
March 19th, 1999
The Securities and Exchange Commmission,
455th Street, North West,
Washington, D.C. 20549
U.S.A.
Dear Sirs:
We hereby consent to the use of our audit opinion, dated February 9th,
1999 and appended to the consolidated financial statements of Alexa Ventures
Inc. for the year ended September 30th, 1998, as an inclusion in an exhibit in
Form 20-F.
Sincerely,
/s/ Monteith, Monteith & Co
MONTEITH, MONTEITH & CO
RBL:klp
<PAGE>
ALEXA VENTURES INC.
CONSOLIDATED FINANCIAL STATEMENTS
September 30th 1998
<PAGE>
ALEXA VENTURES INC.
INDEX
September 30th 1998
Auditor's Report
Consolidated Financial Statements
Balance Sheet
Statement of Operations and Retained Earnings
Statement of Changes in Financial Position
Notes to Financial Statements
<PAGE>
Statement # 1
ALEXA VENTURES
CONSOLIDATED BALANCE SHEET
for the year ended September 30th 1998
<TABLE>
<CAPTION>
ASSETS
1998 1997
---- ----
$ $
<S> <C> <C>
Current Assets: 146,000 2,000
Cash 2,093,000 774,000
Accounts Receivable 2,969,000 1,843,000
Prepaid Expenses 43,000 25,000
Due from Related Parties (Note 2) 130,000 18,000
---------- ----------
Total Current Assets: 5,381,000 2,662,000
Long-term Investments (Note 3) 342,000 192,000
Capital (Note 4) 2,877,000 2,002,000
Other (Note 5) 621,000 529,000
---------- ----------
Total Assets: 9,221,000 5,385,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current:
Bank Indebtedness (Note 6) 1,448,000 718,000
Accounts Payable and
Accrued Liabilities 2,362,000 476,000
Income Taxes Payable 72,000 45,000
Current Portion of Long-term Debt (Note 7) 227,000 87,000
Current Portion of Capital lease
Obligation (Note 8) 103,000 108,000
---------- ----------
Total Current Liabilities: 4,212,000 1,434,000
---------- ----------
Long-term:
Long-term Debt (Note 7) 1,460,000 1,206,000
Obligation under Capital Lease (Note 8) 17,000 120,000
---------- ----------
Total Long-term Liabilities: 1,477,000 1,326,000
---------- ----------
Deferred Income Taxes (Note 9) 176,000 143,000
---------- ----------
Non-controlling Interest (Deficit) 292,000 (74,000)
---------- ----------
Shareholders' Equity:
Share Capital (Note 10) 2,176,000 2,176,000
Contributed Surplus (Note 11) 641,000 217,000
Retained Earnings (Statement 2) 247,000 163,000
---------- ----------
Total Shareholders' Equity 3,064,000 2,556,000
---------- ----------
Total Liabilities and Shareholders' Equity 9,221,000 5,385,000
========== ==========
</TABLE>
On Behalf of the Board:
/s/ K. Attoe, C.A. Director
- -----------------------
/s/ G.A. Racicot Director
- -----------------------
(SEE ACCOMPANYING NOTES)
<PAGE>
ALEXA VENTURES INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
for the year ended September 30th 1998
Statement # 2
1998 1997
$ $
Sales 22,734,000 3,734,000
Cost of Sales 19,442,000 2,565,000
---------- ----------
Gross Margin 3,292,000 1,169,000
---------- ----------
Expenses:
Operations and Administrative 2,482,000 642,000
Amortization of Capital Assets 191,000 143,000
Amortization of Goodwill and Other 51,000 39,000
Interest of Long-term Debt 109,000 73,000
Other Interest and Bank Charges 108,000 108,000
Management Fees Paid by Subsidiaries 121,000 --
---------- ----------
3,062,000 1,005,000
---------- ----------
Income before Provision for Income Taxes 230,000 164,000
---------- ----------
Provision for Income Taxes: (Note 12)
Current 71,000 49,000
Deferred 34,000 51,000
---------- ----------
105,000 100,000
---------- ----------
Income before Non-controlling Interest 125,000 64,000
Non-controlling Interest 41,000 (74,000)
---------- ----------
Net Income for the Year 84,000 138,000
Retained Earnings - Beginning of the Year 163,000 25,000
---------- ----------
Retained Earnings - End of Year (Statement 1) 247,000 163,000
========== =========
Earnings per share:
Basic .01 .01
========== =========
Fully Diluted .00 .01
========== =========
(SEE ACCOMPANYING NOTES)
<PAGE>
ALEXA VENTURES INC.
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
for the year ended September 30th 1998
Statement # 3
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C>
Cash Provided by (Used In) Operating Activities:
Net Income for the Year 84,000 138,000
Items not Involving Cash:
Amortization 242,000 208,000
Deferred Income Taxes 34,000 51,000
Changes in Non-cash Working Capital
Balances:
Accounts Receivable (1,319,000) 283,000
Inventory (1,126,000) (648,000)
Prepaid Expenses (18,000) 46,000
Accounts Payable and Accrued liabilities 1,886,000 16,000
Income Taxes Payable 27,000 45,000
Deferred Income Taxes (1,000) (8,000)
Non-controlling Interest 366,000 (74,000)
---------- ----------
175,000 57,000
---------- ----------
Investing Activities:
Purchase of Capital Assets (1,066,000) (26,000)
Long-term Investments (150,000) 000
Purchase of Other Assets (143,000) (442,000)
---------- ----------
(1,359,000) (468,000)
---------- ----------
Financing Activities:
Increase (decrease) in Long-term Debt 394,000 515,000
Advances from (Repayments to) Related Parties (112,000) 86,000
Increase (decrease) in Capital Lease Obligation (108,000) (9,000)
Contributed Surplus 424,000 --
Issuance of Share Capital -- --
---------- ----------
598,000 592,000
---------- ----------
Increase (decrease) in Cash during the Year (586,000) 181,000
Cash Position - beginning of the Year (716,000) (897,000)
---------- ----------
Cash Position - End of the Year (1,302,000) (716,000)
========== ==========
Analysis of Cash Position:
Cash 146,000 2,000
bank Indebtedness (1,448,000) (718,000)
---------- ----------
(1,302,000) (716,000)
========== ==========
</TABLE>
(SEE ACCOMPANYING NOTES)
<PAGE>
ALEXA VENTURES INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30th 1998
1. Significant Accounting Policies:
(a) Nature of Business:
The company is incorporated under the laws of British Columbia and
is engaged in the manufacture and/or distribution of
energy-efficient lighting fixtures and electronic ballasts, computer
peripherals and custom fabricated metal products.
(b) Principles of Consolidation:
The accompanying consolidated financial statements include the
accounts of Alexa Ventures Inc. and its subsidiary companies listed
in Note 2. All significant intercompany transactions and balances
have been eliminated upon consolidation.
(c) Inventory:
Inventory is valued at the lower of cost and net realizable value
determined on a first-in, first-out basis.
(d) Capital Assets:
Capital assets are recorded at cost. Amortization is calculated on
the declining-balance basis at the following annual rates:
Building - 4%
Machinery and Equipment - 5 - 10%
Automotive Equipment - 30%
Computer Hardware - 20% (Previously 10%)
Computer Software - 20% (Previously 10%)
Deferred Factory Startup Costs - 20% straight line basis
Leasehold Improvements - 10% straight line basis
The change in the rate of depreciation of computer equipment has
been treated prospectively.
(e) Income Taxes:
Income taxes are provided for using the taxes payable method of tax
deferral which relates the tax provision to the accounting income
for the year based on the tax rates expected to be in effect at the
time of realization.
<PAGE>
ALEXA VENTURES INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30th 1998
1. Significant Accounting Policies: (Continued)
(f) Long-term Investments:
The company's 50% equity in 1034005 Ontario Limited is accounted for
at cost as active operations have not yet commenced.
The company's portfolio interest in Uniqrypt Technologies Inc. is
accounted for at cost.
The company's 33% interest in Cognitive Finance Inc. is accounted
for at cost as the company is closely held and Alexa Ventures Inc.
does not have significant influence.
(g) Other Assets:
Goodwill is amortized on a straight-line basis for ten years. (Forty
years for acquisitions prior to 1997).
Deferred finance charges relating to a pending issue of share
capital will be amortized over three years once the issue is
complete.
The initial listing fee for the Toronto Stock Exchange is recorded
at cost and is being amortized over 10 years on a straight-line
basis.
Franchise and manufacturing rights will be amortized on a
straight-line basis over 10 years once active manufacturing and
franchising operations commence.
(h) Revenue Recognition:
Sales are recorded upon shipment to customers. Fees are recognized
as services are rendered
(I) Consolidated Statement of Changes in Financial Position:
This financial statement complies with International Accounting
Standard No. 7.
<PAGE>
ALEXA VENTURES INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30th 1998
2. Related Party Transactions:
Alexa Ventures Inc. is related to the following corporations:
Name of Corporation Nature of Relationship
- --------------------------------------------------------------------------------
Vision Unlimited Equipment 100% Subsidiary
ADH Custom Metal Fabricators Inc. 100% Subsidiary of Vision
Unlimited Equipment Inc.
Alexa Properties Inc. 100% subsidiary
Applied Lighting Technology Inc. 75% Subsidiary
Energy Products International Inc. 75% Subsidiary
International Ballast Corp. 100% Subsidiary
K-Tronik Int'l Corp. 53% Subsidiary
Lexatec VR Systems Inc. 60% Subsidiary
(formerly Chakers, Inc.)
EPI International Corporation (Korea) 57% owned through
K-Tronik and Lexatec
VR Systems Inc.
All transactions within the corporate group are in the normal course of
business, are transacted at fair market value, are recorded at the carrying
value at the time, and are eliminated upon consolidation. Intercompany balances
at the financial statement date are also eliminated upon consolidation.
Service fees paid to corporations owned by four Alexa Ventures Inc. management
personnel during the period totaled $159,500 (1997: $159,500).
Balances receivable from related parties at year end are comprised of loans to
officers of Lexatec VR Systems Inc. ($122,500; repayable within one year without
interest) and advances of Richfield Black SA, a presently inactive joint venture
($17,900; without interest or specific terms of repayment).
3. Long-term Investments:
1998 1997
----------- ------------
$ $
Investment in 1 of 2 outstanding common shares 175,000 175,000
and 175,000 of 300,000 outstanding special shares
of 1034005 Ontario Limited
Portfolio Investment in Uniqrypt Technologies Inc. 17,000 17,000
33 % Equity Investment in Cognitive Finance Inc. 150,000 --
----------- ------------
342,000 192,000
=========== ============
<PAGE>
ALEXA VENTURES INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30th 1998
4. Capital Assets:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------------------------------------------
Cost Accumulated Net Book Net Book
Amortization Value Value
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ $ $ $
Land 159,000 -- 159,000 159,000
Building 556,000 74,000 482,000 502,000
Deferred Factory Startup Costs 763,000 -- 763,000 --
Machinery and Equipment 1,836,000 807,000 1,029,000 1,088,000
Furniture and Fixtures 161,000 97,000 64,000 14,000
Automotive Equipment 148,000 19,000 129,000 1,000
Leasehold Improvements 253,000 89,000 164,000 185,000
Computer Hardware 136,000 68,000 68,000 45,000
Computer Software 52,000 33,000 19,000 8,000
-------------------------------------------------------------------------------
4,064,000 1,187,000 2,877,000 2,002,000
===============================================================================
</TABLE>
The following assets held under capital lease are included in capital assets as
described above. This equipment is amortized at rates equal to rates for similar
equipment.
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------------------------------------------
Cost Accumulated Net Book Net Book
Amortization Value Value
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ $ $ $
Machinery and Equipment 324,000 62,000 262,000 277,000
Computer Hardware 33,000 16,000 17,000 22,000
Leasehold Improvements 79,000 28,000 51,000 60,000
-------------------------------------------------------------------------------
436,000 106,000 330,000 359,000
===============================================================================
</TABLE>
5. Other:
1998 1997
--------------------------
$ $
Goodwill 471,000 324,000
Deferred Finance Charges 20,000 --
Deferred Charges - Pre-acquisition Costs -- 133,000
Initial Listing Fee - T.S.E. 20,000 22,000
Franchise and Manufacturing Rights 50,000 50,000
Long-term Deposits 35,000 --
Other Deferred Financing and Organization Costs 25,000 --
--------------------------
621,000 529,000
==========================
<PAGE>
ALEXA VENTURES INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30th 1998
6. Bank Indebtedness:
The bank overdraft bears interest at prime plus 0.75%, is due on demand,
and is secured by a general security agreement which covers an assignment
of inventory, equipment, and accounts receivable.
7. Long-term Debt:
<TABLE>
<CAPTION>
1998 1997
---------------------------------------------
<S> <C> <C>
$ $
Term loan, K-Tronik Industries Inc., Secured by inventory 450,000 --
of K-Tronik Int'l Inc., payable in monthly installments of
$22,500 commencing April, 1999; non-interest bearing
Term loan, Hongkong Bank of Canada; secured by assignment 1,213,000 1,293,000
of book debts and deposit balances, trade finance agreement
and general security agreement; repayable in monthly
installments of $7,223 plus interest calculated at prime
plus 1.25%; final payment due August 15th, 2012.
Lien note payable; secured by automobile; repayable in 24,000 --
monthly installments of $555 including interest calculated
at 5.9%; due February 2001
---------------------------------------------
1,687,000 1,293,000
Less: Current Portion (227,000) (87,000)
---------------------------------------------
1,460,000 1,206,000
=============================================
</TABLE>
Principal payments required on long-term debt for the next five years are as
follows:
Year Amount
-----------------------------------
$
1999 227,000
2000 362,000
2001 144,000
2002 87,000
2003 87,000
-------------
907,000
=============
<PAGE>
ALEXA VENTURES INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30th 1998
8. Obligations Under Capital Lease:
The following is a schedule of future minimum lease payments under the
capital leases existing at year end:
$
1999 110,000
2000 18,000
--------------------
Total Minimum Lease Payments 128,000
Less: Amounts Representing Interest 8,000
--------------------
Balance of the Obligation 120,000
Less: Current Portion 103,000
--------------------
17,000
====================
9. Deferred Income Taxes:
Significant components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------
<S> <C> <C>
$ $
Excess of net book value of capital assets over tax value 254,000 237,000
Total deferred tax liabilities 254,000 237,000
-----------------------------------
Operating losses carried forward (--) (6,000)
"Canadian Exploration Expenses" carried forward (69,000) (80,000)
Other (9,000) (8,000)
-----------------------------------
Total Deferred Tax Assets (78,000) (94,000)
-----------------------------------
Net Deferred Tax Liability 176,000 143,000
===================================
</TABLE>
<PAGE>
ALEXA VENTURES INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30th 1998
10. Share Capital:
Authorized: 100,000,000 Common Shares
Issued:
1998 1997
-------------------------------
$ $
13,815,001 Common Shares 2,176,000 2,176,000
===============================
Stock Options;
The following stock options have been granted unconditionally:
Number of Price $ Expiry
Shares Date
Ken Rampersad Management 50,000 0.55 05/01/00
Keith Attoe Management 50,000 0.60 09/08/00
Keith Attoe Management 100,000 0.90 11/11/00
Walter Keyser Director 50,000 0.70 09/30/00
Beverly Boorsma Management 15,000 0.85 11/07/00
James Lalonde Unrelated 50,000 0.85 09/17/99
Paul Bates Director 10,000 0.75 12/13/98
Ken Rampersad Management 50,000 0.85 04/17/00
Keith Attoe Management 100,000 0.85 04/17/00
Dingeman Kleppe Employee 30,000 0.85 04/17/00
Walter Keyser Director 100,000 0.85 04/17/00
Robert Kim K-Tronik 200,000 0.60 04/02/01
Steve Kim K-Tronik 50,000 0.60 04/02/01
Philip Cassis Unrelated 50,000 0.80 08/06/00
Cheon Hong Kim Unrelated 25,000 0.80 06/25/00
Robert Hoegler Director 25,000 0.75 05/01/00
<PAGE>
ALEXA VENTURES INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30th 1998
10. Share Capital - continued:
Stock options have been granted to Robert Kim contingent upon meeting sales
quotas for K-Tronik Int'l Inc. as tabled below:
<TABLE>
<CAPTION>
Monthly Sales for Six Consecutive Months Number of Total Exercise Price
Units of Ballasts Options Cumulative
Exercisable
Per Plateau
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
50,000 per month for 6 consecutive months 70,000 70,000 0.60
60,000 per month for 6 consecutive months 70,000 140,000 0.60
70,000 per month for 6 consecutive months 70,000 210,000 0.60
80,000 per month for 6 consecutive months 70,000 280,000 0.60
90000 per month for 6 consecutive months 70,000 350,000 0.60
</TABLE>
As part of the agreement by Alexa Ventures Inc. to purchase 60% of the shares of
Chakers, Inc. (now Lexatec VR Systems Inc.), 2,000,000 shares of Alexa will be
issued over the next five years contingent upon sales and profitability targets
being met as follows:
Net Profit % Pre-tax Net
Year Sales Target of Sales Income Common Shares
-------------------------------------------------------------------------------
1998 $30 million U.S. 0.1 % $30,000 U.S. 400,000
1999 $40 million U.S. 0.2 % $80,000 U.S. 400,000
2000 $50 million U.S. 0.3 % $150,000 U.S. 400,000
2001 $60 million U.S. 0.4 % $240,000 U.S. 400,000
2002 $70 million U.S. 0.5 % $350,000 U.S. 400,000
11. Contributed Surplus:
1998 1997
---------------- -------------
$ $
Balance - beginning of the year 217,000 217,000
Addition re K-Tronik Int'l Inc. 424,000 --
---------------- -------------
Balance - end of the year 641,000 217,000
================ =============
<PAGE>
ALEXA VENTURES INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30th 1998
12. Provision for Income Taxes:
1998 1997
-------------------
$ $
Current Provision: 71,000 49,000
-------------------
Deferred Provision:
Utilization of losses carried forward 6,000 37,000
Net book value of capital assets 17,000 18,000
Deferred development costs -- (11,000)
Canadian Exploration Express 11,000 --
Other -- 7,000
-------------------
34,000 51,000
-------------------
Total Provision 105,000 100,000
===================
The 1998 provision for income taxes equals 46% of pre-tax, financial statement
income. This is the average statutory rate for the Alexa group of companies.
The company has non-capital losses carried forward in the amount of $73,560
available to reduce taxable income in the future. The potential future tax
benefit of these losses (approximately $34,000) has not been recognized in these
financial statements. The ability to utilize these losses expires in the year
2004.
<PAGE>
ALEXA VENTURES INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30th 1998
13. Acquisitions of Subsidiary Companies:
During the year, the company acquired 53% of the common shares of K-Tronik Int'l
Inc. , a distributor of electronic ballasts located in Hackensack, New Jersey.
The acquisition was accounted for using the purchase method. The company was
newly incorporated, with no assets or liabilities. Alexa Ventures contributed
$53,000 U.S., or $79,500 Cdn. for its 53% interest, plus costs of $195,400 were
capitalized to the cost of the investment and treated as goodwill upon
consolidation. Under the terms of the agreement with the other shareholder,
Alexa Ventures Inc. has granted stock options for 250,000 common shares, plus
performance-based stock options for an additional 350,000 shares as disclosed in
Note 10. This acquisition took place on April 29,1998, and operating results are
included in these financial statements from that point on.
On January 1,1998, the company acquired 60% of the common shares of Chakers,
Inc., a California-based distributor of computer peripherals. All of the assets,
liabilities, and operations of that company were then transferred to a new
company, Lexatec VR Systems Inc., with the shareholdings remaining the same.
These shares were acquired for $1, plus a commitment to issue up to 2,000,000
common shares, contingent upon performance and profitability as described in
Note 10. The acquisition was accounted for using the purchase method as follows:
$
Total assets acquired 68,719,057
Total liabilities acquired (68,694,419)
Non-controlling interest (24,637)
-----------
Investment 1
===========
Operating results from January 1st, 1998 to September 30th, 1998 are included in
these consolidated financial statements.
14. Contractual Obligations:
Pursuant to the terms of the agreement governing the company's acquisition of
53% of Chakers, Inc. (now Lexatec VR Systems Inc.), Alexa Ventures Inc. is
committed to issuing up to 2,000,000 additional common shares contingent upon
certain conditions being met as described in Note 10.
<PAGE>
ALEXA VENTURES INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30th 1998
15. Reconciliation to U.S. GAAP :
These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada ("Cdn. GAAP"). During the year, the
company negotiated a $424,000 reduction of debt arising out of the acquisition
of K-Tronik Int'l Inc. This amount was credited to Contributed Surplus (Note
11). According to accounting principles generally accepted in the United States
("U.S. GAAP"), the amount should be recognized as income. As this would
represent a permanent difference, no deferred tax provision has been included in
the reconciliation below:
1998 1997
------------------------
$ $
Net Income per Cdn. GAAP 84.000 138,000
Negotiated reduction of debt 424,000 --
Amortization of Development Costs -- 24,000
Deferred Tax Adjustment -- (11,000)
------------------------
Net Income Per U.S. GAAP 508,000 151,000
========================
Retained Earnings:
- End of Year per Cdn. GAAP 247,000 163,000
Negotiated reduction of debt 424,000 --
Adjustment re Depreciable Life of Computer Equipment (18,000) (18,000)
equipment net of deferred tax adjustment
------------------------
- End of Year per U.S. GAAP 653,000 145,000
========================
Total Assets per Cdn. GAAP 9,221,000 5,385,000
Adjustment re Depreciable Life of Computer Equipment (18,000) (18,000)
equipment net of deferred tax adjustment
------------------------
Total Assets per U.S. GAAP 9,203,000 5,367,000
========================
<PAGE>
ALEXA VENTURES INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30th 1998
16. Uncertainty due to Year 2000 Issue:
The year 2000 Issue arises because many computerized systems use two digits
rather then four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1st, 2000.
If the Year 2000 Issue is not addressed by the company, suppliers and other
third party business associates, the impact on the company's operations and
financial reporting may range from minor errors to significant systems failures
which could affect the company's ability to conduct normal business operations.
It is not possible to be certain that all aspects of the Year 2000 Issue
affecting the company, including those related to the efforts of suppliers, or
other third parties, will be fully resolved.
17. Segmented Information:
Management has identified four reportable segments: "ADH", "Vision", "K-Tronik"
and "Lexatec".
"ADH" consists of A.D.H. Custom Metal Fabricators Inc. and Alexa Properties
Inc.. A.D.H. Custom Metal Fabricators Inc. is a manufacturer of fluorescent
light fixtures, data racks and other metal cabinetry. Alexa Properties Inc. owns
the land and manufacturing facility in Stratford, Ontario.
"Vision" includes Vision Unlimited Equipment Inc., Energy Products International
Inc., International Ballast Corp., and Applied Lighting Technology Inc.. All of
these companies are involved in the energy-efficient fluorescent lighting
industry.
"K-Tronik" includes K-Tronik Int'l Inc., a distributor of electronic ballasts
based in Hackensack, New Jersey, and EPI International Corporation, a
manufacturer of electronic ballasts operating in Korea.
"Lexatec" consists of Lexatec VR Systems Inc. (formerly Chakers Inc."), a
distributor of computer peripherals operating out of Cerritos, California.
Financial information, segmented according to the above, is presented in the
form of schedules over the next three pages.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this annual report to be signed on its behalf
by the undersigned, duly authorized.
Date ________________________ Alexa Ventures Inc.
by ________________________________
Mr. Gerry A. Racicot
President and Director
<PAGE>
ALEXA VENTURES INC.
SEGMENTED INFORMATION
for the year ended September 30th 1998
<TABLE>
<CAPTION>
ADH Vision K-Tronik Lexatec All Others Reconciling Totals per
Items Financial
Statements
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $ $ $ $ $ $ $
External Customers
- Domestic 2,768,000 765,000 0 0 0 0 3,533,000
- Foreign 305,000 2,000 956,000 17,938,000 0 0 19,201,000
----------------------------------------------------------------------------------------------
3,073,000 767,000 956,000 17,938,000 0 0 22,734,000
Intersegment 196,000 0 0 0 0 (196,000) 0
----------------------------------------------------------------------------------------------
Total 3,269,000 767,000 956,000 17,938,000 0 (196,000) 22,734,000
Cost of Sales 2,075,000 631,000 663,000 16,269,000 0 (196,000) 19,442,000
----------------------------------------------------------------------------------------------
Gross Margin 1,194,000 136,000 293,000 1,669,000 0 0 3,292,000
----------------------------------------------------------------------------------------------
Expenses:
Interest on Long-term Debt 108,000 0 0 1,000 0 0 109,000
Other interest and Bank Charges 68,000 10,000 1,000 8,000 21,000 0 108,000
Amortization of Capital and 127,000 5,000 0 60,000 2,000 48,000 242,000
Intangible Assets
Intersegment Management Fees 325,000 (160,000) (165,000) 0
Operations and Administration 390,000 178,000 273,000 1,655,000 107,000 0 2,603,000
----------------------------------------------------------------------------------------------
1,018,000 33,000 274,000 1,724,000 (35,000) 48,000 3,062,000
----------------------------------------------------------------------------------------------
Income before Taxes 176,000 103,000 19,000 (55,000) 35,000 (48,000) 230,000
Provision for Income Taxes 73,000 11,000 0 4,000 17,000 0 105,000
----------------------------------------------------------------------------------------------
103,000 92,000 19,000 (59,000) 18,000 (48,000) 125,000
Non-controlling Interest 0 56,000 9,000 (24,000) 0 0 41,000
----------------------------------------------------------------------------------------------
Net Income for the Period 103,000 36,000 10,000 (35,000) 18,000 (48,000) 84,000
==============================================================================================
</TABLE>
<PAGE>
ALEXA VENTURES INC.
SEGMENTED INFORMATION
for the year ended September 30th 1998
(with comparative figures as at September 30th 1997)
<TABLE>
<CAPTION>
ADH Vision K-Tronik Lexatec All Others Reconciling Totals per
Items Financial
Statements
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ $ $ $ $ $ $
Expenditures on Capital Assets and 21,000 0 1,044,000 144,000 0 0 1,209,000
Goodwill During the Year
----------------------------------------------------------------------------------------------
1997 26,000 258,000 0 0 0 0 284,000
----------------------------------------------------------------------------------------------
Balance of Capital Assets and
Goodwill
as at September 30th 1998
- Domestic 1,906,000 281,000 0 0 0 0 2,187,000
- Foreign 0 0 1,024,000 137,000 0 0 1,161,000
----------------------------------------------------------------------------------------------
1,906,000 281,000 1,024,000 137,000 0 0 3,348,000
----------------------------------------------------------------------------------------------
1997 2,014,000 312,000 0 0 0 0 2,326,000
----------------------------------------------------------------------------------------------
Amount of Investment in Investees
Subject to Significant Influence 0 0 0 0 175,000 0 175,000
----------------------------------------------------------------------------------------------
1997 0 0 0 0 175,000 0 175,000
----------------------------------------------------------------------------------------------
Total Assets 3,595,000 1,414,000 2,772,000 1,411,000 4,599,000 (4,570,000) 9,221,000
----------------------------------------------------------------------------------------------
1997 3,684,000 1,489,000 0 0 3,275,000 (3,063,000) 5,385,000
----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ALEXA VENTURES INC.
SEGMENTED INFORMATION
for the year ended September 30th 1997
<TABLE>
<CAPTION>
ADH Vision K-Tronik Lexatec All Others Reconciling Totals per
Items Financial
Statements
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $ $ $ $ $ $ $
External Customers
- Domestic 2,892,000 756,000 0 0 0 0 3,648,000
- Foreign 76,000 10,000 0 0 0 0 86,000
---------------------------------------------------------------------------------------------
2,968,000 766,000 0 0 0 0 3,734,000
Intersegment 356,000 0 0 0 0 (356,000) 0
---------------------------------------------------------------------------------------------
Total 3,324,000 766,000 0 0 0 (356,000) 3,734,000
Cost of Sales 2,303,000 618,000 0 0 0 (356,000) 2,565,000
Gross Margin 1,021,000 148,000 0 0 0 0 1,169,000
---------------------------------------------------------------------------------------------
Expenses:
Interest on Long-term Debt 73,000 0 0 0 0 0 73,000
Other interest and Bank Charges 63,000 0 0 0 45,000 0 108,000
Amortization of Capital and 148,000 5,000 0 0 0 29,000 182,000
Intangible Assets
Intersegment Management Fees 35,000 150,000 0 0 (185,000)
Operations and Administration 477,000 55,000 0 0 110,000 0 642,000
---------------------------------------------------------------------------------------------
796,000 210,000 0 0 (30,000) 29,000 1,005,000
---------------------------------------------------------------------------------------------
Income before Taxes 225,000 (62,000) 0 0 30,000 (29,000) 164,000
Provision for Income Taxes 80,000 5,000 0 0 15,000 0 100,000
---------------------------------------------------------------------------------------------
145,000 (67,000) 0 0 15,000 (29,000) 64,000
Non-controlling Interest 0 (74,000) 0 0 0 0 (74,000)
---------------------------------------------------------------------------------------------
Net Income for the Period 145,000 7,000 0 0 15,000 (29,000) 138,000
=============================================================================================
</TABLE>
