SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) August 25, 2000
--------------------------
JAWZ Inc.
------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 7371 98-0167013
------------------------------------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
12 Concorde Gate, Suite 900, Toronto, Ontario Canada M3C 3N6
------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (416) 444-9273
------------------------
JAWS Technologies, Inc.
--------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant hereby amends the following items, financial statements, exhibits or
other portions of its Current Report on Form 8-K, dated September 11, 2000 and
its Current Report on Form 8-K dated September 18, 2000, as set forth in the
pages attached hereto.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) and (b) Financial Statements and Pro Forma Financial Information. The
financial statements and pro forma financial information required as part of
this item are being filed in this amendment to the Current Report on Form 8-K,
dated September 11, 2000 and the Current Report on Form 8-K, dated September 18,
2000. This amendment is being filed within 60 days of the filing of each of the
aforementioned Current Reports on Form 8-K. The financial statements being filed
with this amendment are as follows:
Report of Independent
Auditors............................................................F-1
Balance Sheets of 4COMM.com, Inc., dated as of March 31, 1999 and
March 31, 2000 (Audited) and As of June 30, 2000
(Unaudited).........................................................F-2
Statements of Income (Loss) of 4COMM.com, INC., for the years ended
March 31, 1999 and March 31, 2000 (Audited) and for the three-months
ended June 30, 1999 and June 30, 2000
(Unaudited).........................................................F-3
Statements of Changes in Stockholders' Equity (Deficiency) of
4COMM.com, INC., for the years ended March 31, 1999 and March 31,
2000 (Audited) and for the three-months ended June 30, 1999 and June
30, 2000
(Unaudited).........................................................F-4
Statements of Cash Flows of 4COMM.com, INC., for the years ended
March 31, 1999 and March 31, 2000 (Audited) and for the three-months
ended June 30, 1999 and June 30, 2000
(Unaudited).........................................................F-5
Notes to Financial Statements 4COMM.com, INC........................F-6
Balance Sheet of Betach Advanced Solutions, Inc. as of June 30, 2000
(Unaudited)........................................................F-12
Statements of Income and Comprehensive Income and Retained Earnings
of Betach Advanced Solutions, Inc. for the period from January 1,
2000 (inception) to June 30, 2000
(Unaudited)........................................................F-13
Statement of Income Cash Flows of Betach Advanced Solutions, Inc.,
for the period from January 1, 2000 (inception) to June 30, 2000
(Unaudited)........................................................F-14
Notes to Financial Statements of Betach Advanced Solutions,Inc.....F-15
Report of Independent Auditors.....................................F-19
Balance Sheets of Betach Systems Inc. as of September 30, 1999 and
September 30, 2000 (Audited) and as of June 30, 2000
(Unaudited)........................................................F-20
Statements of Income (Loss) and Comprehensive Income (Loss) and
Retained Earnings (Deficit) of Betach Systems Inc. for the year
ended September 30, 1999 and
<PAGE>
January 26, 1998 (inception) to September 30, 1998 (Audited)
and forthe nine months ended June 30, 1999 and June 30, 2000
(Unaudited)........................................................F-21
Statements of Cash Flows of Betach Systems Inc. for the year ended
September 30, 1999 and January 26, 1998 (inception) to September 30,
1998 (Audited) and for the nine months ended June 30, 1999 and June
30, 2000
(Unaudited)........................................................F-22
Notes to Financial Statements Betach Systems Inc...................F-23
Unaudited Pro Forma Consolidated Balance Sheet of JAWZ Inc. as of
June 30, 2000......................................................F-30
Unaudited Pro Forma Consolidated Statement of Income/(Loss) of JAWZ
Inc. for the six months ended June 30, 2000........................F-31
Notes to Unaudited Pro Forma Consolidated Financial Statements of
JAWZ Inc...........................................................F-32
Unaudited Pro Forma Consolidated Statement of Income of JAWZ Inc.
for the twelve month period ending December 31, 1999...............F-35
Notes to Unaudited Pro Forma Consolidated Statement of
Income/(Loss)......................................................F-36
(c) The exhibits required by Item 601 of Regulations S-K are hereby incorporated
by reference to the Current Report on Form 8-K, filed with the Securities and
Exchange Commission on September 11, 2000 (File No. 720300) and the Current
Report on Form 8-K, filed with the Securities and Exchange Commission on
September 18, 2000 (File No. 724332).
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of 4COMM.com Inc. and Stockholders
We have audited the accompanying balance sheets of 4COMM.com Inc. as of March
31, 2000 and 1999 and the statements of income (loss), changes in stockholders'
equity (deficiency) and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurances about 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. We believe that the audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of March 31,
2000 and 1999 and the results of its operations and its cash flows for the years
then ended in accordance with accounting principles generally accepted in the
United States.
Toronto, Canada, /s/ Ernst & Young LLP
September 22, 2000 Chartered Accountants
F-1
<PAGE>
4COMM.com Inc.
<TABLE>
<CAPTION>
BALANCE SHEETS
[all amounts are expressed in Canadian dollars]
As of
March 31,
June 30, --------------------------------
2000 2000 1999
$ $ $
--------------------------------------------------------------------------------------------------------------
[unaudited]
<S> <C> <C> <C>
ASSETS
Current
Cash and cash equivalents 434,987 344,916 122,551
Accounts receivable [note 2] 393,885 284,631 334,585
Deferred charges 254,621 198,947 197,898
Future income taxes 147,038 63,464 51,543
--------------------------------------------------------------------------------------------------------------
Total current assets 1,230,531 891,958 706,577
--------------------------------------------------------------------------------------------------------------
Capital assets, net [note 3] 72,995 75,777 78,977
--------------------------------------------------------------------------------------------------------------
1,303,526 967,735 785,554
==============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current
Accounts payable and accrued liabilities 810,862 603,913 439,656
Income taxes payable 56,637 24,297 30,996
Current portion of long-term liabilities [note 4] 17,114 17,114 17,114
Due to stockholders [note 5] -- 20,456 399
Deferred revenue 375,686 294,434 243,542
--------------------------------------------------------------------------------------------------------------
Total current liabilities 1,260,299 960,214 731,707
--------------------------------------------------------------------------------------------------------------
Long-term liabilities [note 4] 4,611 8,254 25,368
--------------------------------------------------------------------------------------------------------------
Total liabilities 1,264,910 968,468 757,075
--------------------------------------------------------------------------------------------------------------
Commitment [note 8]
Stockholders' equity (deficiency)
Authorized
Unlimited number of non-voting,
non-cumulative Class A shares
Unlimited number of voting,
non-cumulative Class B shares
Unlimited number of non-voting,
non-cumulative Class C shares
Capital stock issued [note 6] 16,100 28,600 41,100
Additional paid-in capital 900 900 900
Retained earnings (deficit) 21,616 (30,233) (13,521)
--------------------------------------------------------------------------------------------------------------
Total stockholders' equity (deficiency) 38,616 (733) 28,479
--------------------------------------------------------------------------------------------------------------
1,303,526 967,735 785,554
==============================================================================================================
</TABLE>
See accompanying notes
On behalf of the Board:
Director Director
F-2
<PAGE>
4COMM.com Inc.
<TABLE>
<CAPTION>
STATEMENTS OF INCOME (LOSS)
[all amounts are expressed in Canadian dollars]
Three months ended Years ended
June 30, March 31,
-------------------------------- -------------------------------
2000 1999 2000 1999
$ $ $ $
--------------------------------------------------------------------------------------------------------------
[unaudited]
<S> <C> <C> <C> <C>
Revenue 990,970 335,763 2,221,160 1,721,865
Cost of sales 766,483 224,968 1,613,070 1,024,744
--------------------------------------------------------------------------------------------------------------
224,487 110,795 608,090 697,121
--------------------------------------------------------------------------------------------------------------
Expenses
Advertising and promotion 11,550 10,409 43,692 16,645
General and administration 206,204 84,371 558,502 548,803
--------------------------------------------------------------------------------------------------------------
217,754 94,780 602,194 565,448
--------------------------------------------------------------------------------------------------------------
Income before the following 6,733 16,015 5,896 131,673
Other income 1,500 93 1,686 2,556
Amortization 5,233 5,329 24,361 24,008
Interest expense on long-term liabilities 495 751 2,492 4,681
--------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 2,505 10,028 (19,271) 105,540
--------------------------------------------------------------------------------------------------------------
Provision for (recovery of) income taxes
Current 33,586 7,837 9,362 30,996
Future (32,582) (6,079) (11,921) (7,947)
--------------------------------------------------------------------------------------------------------------
1,004 1,758 (2,559) 23,049
--------------------------------------------------------------------------------------------------------------
Net income (loss) for the period 1,501 8,270 (16,712) 82,491
==============================================================================================================
</TABLE>
See accompanying notes
F-3
<PAGE>
4COMM.com Inc.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY (DEFICIENCY)
[all amounts are expressed in Canadian dollars]
Three months ended Years ended
June 30, March 31,
-------------------------------- -------------------------------
2000 1999 2000 1999
$ $ $ $
--------------------------------------------------------------------------------------------------------------
[unaudited]
<S> <C> <C> <C> <C>
CAPITAL STOCK
Number of shares:
Class A shares, opening and closing balances 10 10 10 10
==============================================================================================================
Class B shares, opening and closing balances 1,510 1,510 1,510 1,510
==============================================================================================================
Class C shares
Opening balance 125 250 250 250
Redeemed for cash (125) -- (125) --
--------------------------------------------------------------------------------------------------------------
Closing balance -- 250 125 250
==============================================================================================================
CAPITAL STOCK
Amount:
Class A shares, opening and closing balances 1,000 1,000 1,000 1,000
--------------------------------------------------------------------------------------------------------------
Class B shares, opening and closing balances 15,100 15,100 15,100 15,100
--------------------------------------------------------------------------------------------------------------
Class C shares
Opening balance 12,500 25,000 25,000 25,000
--------------------------------------------------------------------------------------------------------------
Redeemed for cash (12,500) -- (12,500) --
--------------------------------------------------------------------------------------------------------------
Closing balance -- 25,000 12,500 25,000
--------------------------------------------------------------------------------------------------------------
Total capital stock 16,100 41,100 28,600 41,100
==============================================================================================================
Additional paid-in Capital,
opening and closing balances 900 900 900 900
--------------------------------------------------------------------------------------------------------------
Retained earnings (deficit)
Opening balance (30,233) (13,521) (13,521) (96,012)
Future income tax adjustment 50,348 -- -- --
Net income (loss) for the period 1,501 8,270 (16,712) 82,491
--------------------------------------------------------------------------------------------------------------
Closing balance 21,616 (5,251) (30,233) (13,521)
--------------------------------------------------------------------------------------------------------------
Total shareholders' equity (deficiency) 38,616 36,749 (733) (28,479)
==============================================================================================================
</TABLE>
See accompanying notes
F-4
<PAGE>
4COMM.com Inc.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
[all amounts are expressed in Canadian dollars]
Three months ended Years ended
June 30, March 31,
-------------------------------- -------------------------------
2000 1999 2000 1999
$ $ $ $
--------------------------------------------------------------------------------------------------------------
[unaudited]
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the period 1,501 8,270 (16,712) 82,491
Add (deduct) items not affecting cash
Amortization 5,233 5,329 24,361 24,008
Future income taxes (32,528) (6,079) (11,921) (7,947)
--------------------------------------------------------------------------------------------------------------
(25,848) 7,520 (4,272) 98,552
Changes in non-cash working capital balances
related to operations
Decrease (increase) in accounts receivable (109,254) 94,354 49,954 (221,247)
Increase in deferred charges (55,674) (765) (1,049) (197,898)
Increase (decrease) in accounts payable
and accrued liabilities 206,949 (175,311) 164,257 230,583
Increase (decrease) in income taxes
payable 32,340 (1,271) (6,699) 30,996
Increase in deferred revenue 81,252 26,428 50,892 145,696
--------------------------------------------------------------------------------------------------------------
Cash flows from (used in) operating
activities 129,765 (49,045) 253,083 86,682
--------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of capital assets (3,095) (515) (21,161) (27,712)
Advances from stockholders (20,456) (2,854) 20,057 (7,955)
--------------------------------------------------------------------------------------------------------------
Cash flows used in investing activities (23,551) (3,369) (1,104) (35,667)
--------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term liabilities (3,643) (4,015) (17,114) (31,238)
Redemption of Class C shares (12,500) -- (12,500) --
--------------------------------------------------------------------------------------------------------------
Cash flows used in financing activities (16,143) (4,015) (29,614) (31,238)
--------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash during the
period 90,071 (56,429) 222,365 19,777
Cash and cash equivalents, beginning of
period 334,916 122,551 122,551 102,774
--------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period 434,987 66,122 344,916 122,551
==============================================================================================================
Supplemental cash flow information
Interest paid 495 751 2,492 4,681
Income taxes paid 691 9,108 16,569 100
==============================================================================================================
</TABLE>
See accompanying notes
F-5
<PAGE>
4COMM.com Inc.
NOTES TO FINANCIAL STATEMENTS
[all amounts are expressed in Canadian dollars]
[Information as at June 30, 2000 and for the three months ended
June 30, 2000 and June 30, 1999 is unaudited.]
March 31, 2000 and 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of 4COMM.com Inc. [the "Company"] have been prepared by
management in accordance with accounting principles generally accepted in the
United States. The more significant accounting policies are summarized below:
Revenue recognition
Revenue earned from product sales is recognized when the product is shipped
provided that future vendor obligations are insignificant and collection is
assured. Revenue from the sale of maintenance and other services is deferred and
recognized as income over the period of the maintenance contract or on the
provision of the services.
Capital assets
Capital assets are recorded at cost less accumulated amortization. Amortization
is provided on a declining balance basis at the following annual rates:
Computer equipment 30%
Furniture and fixtures 20%
Office equipment 20%
Software 100%
Income taxes
Income taxes are accounted for under the liability method. Deferred income taxes
on the balance sheets reflect the cumulative effect of temporary differences
between the carrying amounts of the Company's assets and liabilities and their
tax bases.
Foreign currency translation
The Company's assets and liabilities denominated in foreign currencies are
translated to Canadian dollars at the exchange rates in effect on the balance
sheets dates. Revenue and expenses denominated in foreign currencies are
translated at the exchange rate in effect on the date of the transactions.
Exchange gains and losses arising from foreign currency transactions are
included in income (loss) for the period.
F-6
<PAGE>
4COMM.com Inc.
NOTES TO FINANCIAL STATEMENTS
[all amounts are expressed in Canadian dollars]
[Information as at June 30, 2000 and for the three months ended
June 30, 2000 and June 30, 1999 is unaudited.]
March 31, 2000 and 1999
Financial instruments
The fair values of cash and cash equivalents, accounts receivable, accounts
payable and accrued liabilities and amounts due to stockholders approximate the
carrying values due to their short-term maturity. The fair value of long-term
liabilities, which approximates carrying value, is estimated based on current
market yields.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
which affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses for the reporting periods. Actual
results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents represent cash and short-term investments with periods
to maturity of less than 90 days at the date of acquisition.
Advertising costs
Advertising costs are expensed as incurred. The Company does not incur
significant costs associated with direct response advertising and, as such,
there are no capitalized advertising costs.
2. ACCOUNTS RECEIVABLE
While the Company has many clients, at June 30, 2000, one customer [March 30,
2000 -- two; March 31, 1999 -- three] represents 56% [March 31, 2000 -- 24%;
March 31, 1999 -- 41%] of the period-end accounts receivable balance. In
addition, 11% [March 31, 2000 -- 30%; March 31, 1999 -- 11%] of the Company's
period-end receivables are denominated in U.S. currency and, therefore, the
Company is exposed to fluctuations in exchange rates. The Company currently does
not use any financial instruments to mitigate these risks.
F-7
<PAGE>
4COMM.com Inc.
NOTES TO FINANCIAL STATEMENTS
[all amounts are expressed in Canadian dollars]
[Information as at June 30, 2000 and for the three months ended
June 30, 2000 and June 30, 1999 is unaudited.]
March 31, 2000 and 1999
3. CAPITAL ASSETS
Capital assets consist of the following:
June 30, March 31,
2000 2000 1999
------------------- ------------------- -------------------
Accumulated Accumulated Accumulated
Cost amortization Cost amortization Cost amortization
$ $ $ $ $ $
--------------------------------------------------------------------------------
Computer equipment 147,841 99,226 146,284 95,347 131,847 76,611
Furniture and
fixtures 37,115 21,741 37,115 20,932 32,604 17,450
Office equipment 21,478 13,254 21,478 12,821 19,265 10,934
Software 11,866 11,084 10,972 10,972 10,972 10,716
--------------------------------------------------------------------------------
218,300 145,305 215,849 140,072 194,688 115,711
Less accumulated
amortization 145,305 140,072 115,711
--------------------------------------------------------------------------------
Net book value 72,995 75,777 78,977
================================================================================
4. LONG-TERM LIABILITIES
Long-term liabilities consist of the following:
<TABLE>
<CAPTION>
June 30, March 31, March 31,
2000 2000 1999
$ $ $
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Business improvement loan, bearing interest at prime
[June 30, 2000 - 7.5%; March 31, 2000 - 7%;
March 31, 1999 - 6.75%] plus 1% and secured by
the assets purchased with the loan proceeds 21,725 25,368 42,482
Less current portion 17,114 17,114 17,114
---------------------------------------------------------------------------------------------
4,611 8,254 25,368
=============================================================================================
</TABLE>
5. DUE TO STOCKHOLDERS
The amount due to stockholders is interest free and has no specific terms of
repayment. The amount was repaid in full subsequent to March 31, 2000.
F-8
<PAGE>
4COMM.com Inc.
NOTES TO FINANCIAL STATEMENTS
[all amounts are expressed in Canadian dollars]
[Information as at June 30, 2000 and for the three months ended
June 30, 2000 and June 30, 1999 is unaudited.]
March 31, 2000 and 1999
6. CAPITAL STOCK
Capital stock consists of the following:
Common Amount
shares
# $
--------------------------------------------------------------------------------
Authorized
Unlimited number of non-voting, non-cumulative Class A shares
Unlimited number of voting, non-cumulative Class B shares
Unlimited number of non-voting, non-cumulative Class C shares
Issued - Class A shares
Balance, June 30, 2000; March 31, 2000, 1999 and 1998 10 1,000
================================================================================
Issued - Class B shares
Balance, June 30, 2000; March 31, 2000, 1999 and 1998 1,510 15,100
================================================================================
Issued - Class C shares
Balance, March 31, 1998 250 25,000
Redeemed for cash -- --
--------------------------------------------------------------------------------
Balance, March 31, 1999 250 25,000
Redeemed for cash (125) (12,500)
--------------------------------------------------------------------------------
Balance, March 31, 2000 125 12,500
Redeemed for cash (125) (12,500)
--------------------------------------------------------------------------------
Balance, June 30, 2000 -- --
================================================================================
F-9
<PAGE>
4COMM.com Inc.
NOTES TO FINANCIAL STATEMENTS
[all amounts are expressed in Canadian dollars]
[Information as at June 30, 2000 and for the three months ended
June 30, 2000 and June 30, 1999 is unaudited.]
March 31, 2000 and 1999
7. SEGMENTED INFORMATION
The Company carries on business in one reportable segment, being the provision
of software and related services to ensure the security of information
technology systems and data. The Company earns 100% of its revenue from external
customers. The Company allocates sales on a geographic basis based on the
location of the customer, of which substantially all revenue was earned in North
America.
The number of customers who individually account for a significant portion of
the Company's revenue in each period and the approximate revenue from each of
these customers in the specified periods were as follows:
Fiscal Period ended # of customers Revenue
%
---------------------------------------------------------------------
June 30, 2000 2 74
June 30, 1999 4 56
March 31, 2000 4 48
March 31, 1999 4 31
=====================================================================
8. LEASE COMMITMENT
The Company leases office premises under contracts which terminate on July 31,
2000. The future minimum lease payments under such contracts are approximately
$4,000. The Company then made an addendum to the lease agreement on July 18,
2000 which revised the lease term to include an additional 6 months. Therefore
the new lease now terminates on January 31, 2001. The future minimum payments
under such contracts are approximately $25,000.
9. OPERATING LINE OF CREDIT
The Company has an operating line of credit with their bank, CIBC. The credit
limit of this operating line is the lesser of:
[a] $125,000; and
[b] the total of
o 75% of the receivable value; minus
o all prior ranking claims
The interest rate on the operating line is prime plus 1.0% per annum.
F-10
<PAGE>
4COMM.com Inc.
NOTES TO FINANCIAL STATEMENTS
[all amounts are expressed in Canadian dollars]
[Information as at June 30, 2000 and for the three months ended
June 30, 2000 and June 30, 1999 is unaudited.]
March 31, 2000 and 1999
As of March 31, 2000, the Company had not made a drawing from this line of
credit. For periods prior to June 17, 1999 the operating line of credit had a
limit of $75,000. As of March 31, 1999, the Company had not made a drawing from
this line of credit. The facility is secured by a general security agreement
over the Company's assets.
10. RELATED PARTY TRANSACTIONS
The Company enters into transactions of immaterial value with a related party
owned by the Company's stockholders. Amounts due from (to) this related party
resulting from these transactions are as follows:
June 30, March 31, March 31,
2000 2000 1999
$ $ $
---------------------------------------------------------------------
Due from (to) related party (3,751) (3,751) 300
=====================================================================
11. COMPARATIVE FINANCIAL STATEMENTS
The comparative financial statements have been reclassified from statements
previously presented to conform to the presentation of the 2000 financial
statements. These reclassifications related principally to the categories of
expenses reported in the statements of income (loss).
12. SUBSEQUENT EVENT
On August 16, 2000, all of the Company's issued and outstanding shares were
acquired by Jaws' Technologies Inc.
F-11
<PAGE>
Betach Advanced Solutions Inc.
BALANCE SHEET
(all amounts expressed in U.S. dollars)
June 30,
2000
$
-------------------------------------------------------------------------------
(unaudited)
ASSETS [note 5]
Current
Accounts receivable 236,129
Loan receivable [note 3] 84,238
Capital assets [note 4] 12,415
--------------------------------------------------------------------------------
332,782
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Bank indebtedness [note 5] 92,659
Accounts payable and accrued liabilities 228,440
Income taxes payable [note 7] 2,196
-------------------------------------------------------------------------------
323,295
-------------------------------------------------------------------------------
Stockholders' equity
Capital stock [note 6]
Authorized
Unlimited number of Classes A, B, C and I voting common shares
Unlimited number of Classes D, E, and F non-voting common shares
Unlimited number of Classes G and H non-voting preferred shares
Issued and outstanding 405
Cumulative translation adjustment (85)
Retained earnings 9,167
------------------------------------------------------------------------------
9,487
------------------------------------------------------------------------------
332,782
==============================================================================
See accompanying notes
On behalf of the Board:
Director Director
F-12
<PAGE>
Betach Advanced Solutions Inc.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
AND RETAINED EARNINGS
(all amounts expressed in U.S. dollars)
Period from
commencement of
operations
on January
1, 2000 to
June 30,
2000
$
--------------------------------------------------------------------------------
(unaudited)
REVENUE FROM SERVICES AND PRODUCT SALES 574,374
--------------------------------------------------------------------------------
EXPENSES
Wages and benefits 93,465
Management salaries 81,480
Product cost 327,935
Office 9,585
Rent 8,550
Training 9,080
Depreciation and amortization 2,253
Professional fees 989
Travel 5,571
Interest and bank charges 1,757
Miscellaneous 22,346
--------------------------------------------------------------------------------
563,011
--------------------------------------------------------------------------------
Income before income taxes 11,363
Income taxes [note 7] 2,196
================================================================================
Net income 9,167
Other comprehensive loss
Foreign currency translation adjustment (85)
--------------------------------------------------------------------------------
Comprehensive income 9,082
================================================================================
Retained earnings, beginning of period --
Net income 9,167
--------------------------------------------------------------------------------
Retained earnings, end of period 9,167
================================================================================
See accompanying notes
F-13
<PAGE>
Betach Advanced Solutions Inc.
STATEMENTS OF INCOME CASH FLOWS
(all amounts expressed in U.S. dollars)
Period from
commencement of
operations
on January
1, 2000 to
June 30,
2000
$
--------------------------------------------------------------------------------
(unaudited)
CASH WAS PROVIDED BY (USED FOR):
Operating activities
Net income 9,167
Items not affecting cash
Depreciation and amortization 2,253
--------------------------------------------------------------------------------
11,420
Net change in non-cash working capital balances [note 8] (89,326)
--------------------------------------------------------------------------------
(77,906)
--------------------------------------------------------------------------------
Investing activities
Purchase of capital assets (14,753)
--------------------------------------------------------------------------------
Increase in bank indebtedness (92,659)
Bank indebtedness, beginning of period --
--------------------------------------------------------------------------------
Bank indebtedness, end of period (92,659)
================================================================================
See accompanying notes
F-14
<PAGE>
Betach Advanced Solutions Inc.
NOTES TO FINANCIAL STATEMENTS
(all amounts are expressed in U.S. dollars)
June 30, 2000 (unaudited)
1. BASIS OF PRESENTATION
Betach Advanced Solutions Inc. (the "Company") was incorporated under the
Business Corporations Act (Alberta) on December 23, 1997. On January 1, 2000,
the Company assumed the business of a related entity pursuant to a transfer of
the network security and data networking operations from Betach Systems Inc.,
which is a preferred stockholder of the Company and whose stockholders and
parties related to its stockholders effectively control the Company. The Company
provides services exclusively in Canada.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have, in management's opinion, been properly prepared
in accordance with accounting principles generally accepted in the United
States. The Company's functional currency is the Canadian dollar, and its
reporting currency is the U.S. dollar. Translation into U.S. dollars is as
follows:
- for balance sheet items, using the exchange rate at the respective
balance sheet dates.
- for income statement and cash flow items, using the average exchange
rate for the respective reporting periods.
- translation gains and losses are recorded as other comprehensive income
(loss) and shown as a separate component of stockholders' equity.
Transactions denominated in foreign currencies are translated at the exchange
rate on the transaction date. The resulting exchange gains and losses on these
items are included in net earnings.
The accompanying financial statements reflect all adjustments which are, in the
opinion of management, necessary to reflect a fair presentation for the periods
presented.
Capital assets
Capital assets are recorded at cost and amortized based on estimated useful
lives as follows:
Furniture and fixtures 20% declining balance
Computer equipment 30% declining balance
Computer software Straight line over 3 years
Revenue and deferred revenue
Revenue for products and services is recognized over the period of the contract
when the Company performs services under contracts which require performance
over a period of time. The prepaid portion of contracts not yet recognized as
revenue are recorded as deferred revenue.
F-15
<PAGE>
Betach Advanced Solutions Inc.
NOTES TO FINANCIAL STATEMENTS
(all amounts are expressed in U.S. dollars)
June 30, 2000 (unaudited)
Advertising
Advertising costs are expensed as incurred.
Income taxes
The Company follows the liability method of accounting for the tax effect of
temporary differences between the carrying amount and the tax basis of the
company's assets and liabilities. Temporary differences arise when the
realization of an asset or the settlement of a liability would give rise to
either an increase or decrease in the Company's income taxes payable for the
year or later period. Future income taxes are recorded at the income tax rates
that are expected to apply when the future tax liability is settled or the
future tax asset is realized. When necessary, valuation allowances are
established to reduce future income tax assets to the amount expected to be
realized. Income tax expense is the tax payable for the period and the change
during the period in future income tax assets and liabilities.
3. LOAN RECEIVABLE
The Company advanced these amounts with no interest and no fixed repayment terms
to Betach Systems Inc., a related party [see note 1].
4. CAPITAL ASSETS
June 30, 2000
------------------------------------
Cost Accumulated Net Book
Depreciation Value
$ $ $
-------------------------------------------------------------------------------
Furniture and fixtures 1,011 101 910
Computer equipment 8,223 1,233 6,990
Computer software 5,418 903 4,515
-------------------------------------------------------------------------------
14,652 2,237 12,415
================================================================================
5. BANK INDEBTEDNESS
The Company has a $101,085 ($150,000 Cdn.) revolving loan with its bank of which
$91,398 was drawn at June 30, 2000. This line of credit is repayable on demand
and bears interest at the bank prime rate of 7.5% plus 1.5%. The loan is
collateralized by personal guarantees of the stockholders and a general security
agreement covering all assets of the Company.
F-16
<PAGE>
Betach Advanced Solutions Inc.
NOTES TO FINANCIAL STATEMENTS
(all amounts are expressed in U.S. dollars)
June 30, 2000 (unaudited)
6. CAPITAL STOCK
June 30,
2000
$
-------------
Issued and outstanding
600 Class A voting common shares 404
================================================================================
10,000 Class G non-voting preferred shares 1
================================================================================
The preferred shares are retractable and redeemable for an amount equal to the
fair market value of the property transferred [see note 1].
7. INCOME TAXES
The income tax expense differs from the amount computed by applying the Canadian
federal statutory tax rates to the income before income taxes for the following
reasons:
Six month
period ended
June 30,
2000
$
----------------
Income tax expense at Canadian statutory rate (44.62%) 5,070
Increase (decrease) in taxes resulting from:
Small business deduction (2,897)
None-deductible amounts 23
-------------------------------------------------------------------------------
Income tax expense 2,196
================================================================================
The Company has available undepreciated capital cost of approximately $12,600
for deduction against future taxable income.
8. NET CHANGE IN NON-CASH WORKING CAPITAL
June 30, 2000
$
--------------------------------------------------------------------------------
Accounts receivable (235,724)
Loan receivable (84,238)
Accounts payable and accrued liabilities 228,440
Income taxes payable 2,196
--------------------------------------------------------------------------------
Change relating to operating activities (89,326)
================================================================================
F-17
<PAGE>
Betach Advanced Solutions Inc.
NOTES TO FINANCIAL STATEMENTS
(all amounts are expressed in U.S. dollars)
June 30, 2000 (unaudited)
9. FINANCIAL INSTRUMENTS
Financial instruments comprising accounts receivable, loan receivable, bank
indebtedness, and accounts payable and accrued liabilities, approximate their
fair value. It is management's opinion that the Company is not exposed to
significant currency or credit risks arising from these financial instruments.
10. RECENT PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivatives and Hedging Activities", is effective
for the Company's fiscal year commencing January 1, 2000. The Company does not
acquire derivatives or engage in hedging activities.
The SEC has issued Staff Accounting Bulletin 101, "Revenue Recognition", which
is effective for the Company's fiscal year commencing October 1, 2000. The
guideline is not expected to have a material effect on the Company's revenue
recognition policies.
11. TAXES AND INTEREST PAID
The Company paid $nil in cash income taxes for the period. Cash interest paid
for the period ended June 30, 2000 was $1,650.
12. RELATED PARTY TRANSACTIONS
Included in accounts payable and accrued liabilities is $22,452 relating to
operating expenses paid by Betach Systems Inc. on behalf of the Company.
Included in accounts receivable is $405 relating to amounts due from
shareholders.
13. SUBSEQUENT EVENTS
On September 7, 2000, the Company and Betach Systems Inc. closed an agreement,
dated August 22, 2000, whereby the outstanding shares of both companies were
sold to JAWS Technologies, Inc. ("JAWS") through its wholly-owned subsidiary,
Jaws Acquisition Canada Corp. ("JACC"), in exchange for 1,120,000 shares of JACC
and 400,000 common share purchase warrants of JAWS. Each JACC share is
exchangeable into one common share of JAWS, except for 369,600 of these shares
which have been placed in escrow, to be either released or canceled on September
7, 2001, depending upon whether certain revenue targets are achieved. The common
share purchase warrants are exercisable at $5.07 per share and expire on
September 7, 2005.
F-18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Betach Systems Inc.
We have audited the accompanying balance sheets of Betach Systems Inc. as at
September 30, 1999 and 1998 and the related statements of income (loss) and
comprehensive income (loss) and retained earnings (deficit) and cash flows for
the year ended September 30, 1999 and the period from commencement of operations
on January 26, 1998 to September 30, 1998. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurances about 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. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Betach Systems Inc. as at
September 30, 1999 and 1998 and the results of its operations and its cash flows
for the year ended September 30, 1999 and the period from commencement of
operations on January 26, 1998 to September 30, 1998 in conformity with
accounting principles generally accepted in the United States.
Calgary, Canada, /s/ Ernst & Young LLP
August 9, 2000 Chartered Accountants
F-19
<PAGE>
Betach Systems Inc.
BALANCE SHEETS
(all amounts expressed in U.S. dollars)
June 30, September 30,
2000 1999 1998
$ $ $
-------------------------------------------------------------------------------
(unaudited)
ASSETS [note 5]
Current
Accounts receivable [note 15] 368,503 314,092 161,275
Prepaid expenses and deposits 14,642 14,067 4,294
-------------------------------------------------------------------------------
383,145 328,159 165,569
Investment in Betach Advanced Solutions Inc. 1 -- --
[note 15]
Capital assets [note 3] 105,788 123,281 53,583
-------------------------------------------------------------------------------
488,934 451,440 219,152
===============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Bank indebtedness [note 4] 147,768 89,116 79,926
Accounts payable and accrued liabilities 213,819 270,841 125,872
Deferred revenue 1,121 19,580 1,029
Due to stockholders [note 5] 23,041 27,469 34,982
Income taxes payable (recoverable) [note 8] (12,402) 10,202 --
-------------------------------------------------------------------------------
373,347 417,208 241,809
-------------------------------------------------------------------------------
Loan payable [note 6] 84,238 -- --
-------------------------------------------------------------------------------
Commitments [note 9]
Stockholders' equity (deficiency)
Capital stock [note 7]
Authorized
Unlimited number of Class A voting common shares
Unlimited number of Class B voting common shares
Unlimited number of Class C non-voting preferred shares
Issued and outstanding 3 3 3
Cumulative translation adjustment 1,085 1,428 990
Retained earnings (deficit) 30,261 32,801 (23,650)
-------------------------------------------------------------------------------
31,349 34,232 (22,657)
-------------------------------------------------------------------------------
488,934 451,440 219,152
================================================================================
See accompanying notes
On behalf of the Board:
Director Director
F-20
<PAGE>
Betach Systems Inc.
STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE
INCOME (LOSS) AND RETAINED EARNINGS (DEFICIT)
(all amounts expressed in U.S. dollars)
Period from
commencement of
operations on
January 26,
Nine months ended Year ended 1998 to
June 30, September September
------------------- 30, 30,
2000 1999 1999 1998
$ $ $ $
--------------------------------------------------------------------------------
(unaudited)
REVENUE FROM SERVICES AND
PRODUCT SALES 1,472,448 1,201,920 1,734,132 548,905
--------------------------------------------------------------------------------
EXPENSES
Wages and benefits 699,638 358,934 973,726 304,376
Management salaries 146,664 143,716 207,589 127,174
Product cost 345,350 332,887 137,024 48,520
Office 48,642 32,214 67,658 22,713
Rent 39,680 23,915 37,321 7,653
Training 60,692 25,206 43,861 24,354
Depreciation and amortization 37,932 22,245 77,417 18,965
Professional fees 4,100 1,157 36,599 881
Travel 43,573 10,560 25,038 3,006
Meals and entertainment 9,398 4,745 6,845 3,334
Advertising and promotion 12,139 9,135 16,774 1,176
Insurance 5,672 7,315 5,743 4,363
Interest and bank charges 7,672 4,514 4,766 2,714
Miscellaneous 13,836 9,946 27,352 3,325
--------------------------------------------------------------------------------
1,474,988 986,489 1,667,714 572,555
--------------------------------------------------------------------------------
Income (loss) before income taxes (2,540) 215,431 66,418 (23,650)
Income taxes [note 8] -- 38,233 9,967 --
--------------------------------------------------------------------------------
Net income (loss) (2,540) 177,198 56,451 (23,650)
Other comprehensive income
(loss)
Foreign currency translation (343) 3,786 438 990
adjustment
================================================================================
Comprehensive income (loss) (2,883) 180,984 56,889 (22,660)
================================================================================
Retained earnings (deficit),
beginning of period 32,801 (23,650) (23,650) --
Net income (loss) (2,540) 177,198 56,451 (23,650)
================================================================================
Retained earnings (deficit), 30,261 153,548 32,801 (23,650)
end of period
================================================================================
See accompanying notes
F-21
<PAGE>
Betach Systems Inc.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(all amounts expressed in U.S. dollars)
Period from
commencement of
operations on
January 26,
Nine months ended Year ended 1998 to
June 30, September September
------------------- 30, 30,
2000 1999 1999 1998
$ $ $ $
--------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH WAS PROVIDED BY (USED FOR):
Operating activities
Net income (loss) (2,540) 177,198 56,451 (23,650)
Items not affecting cash
Depreciation and amortization 37,932 22,245 77,417 18,965
Deferred income taxes -- 1,887 -- --
------------------------------------------------------------------------------------
35,392 201,330 133,868 (4,685)
Net change in non-cash working
capital balances [note 10] (68,966) (115,988) 11,132 (38,668)
------------------------------------------------------------------------------------
(33,574) 85,342 145,000 (43,353)
------------------------------------------------------------------------------------
Investing activities
Purchase of capital assets (20,650) (39,750) (147,085) (71,555)
Proceeds from disposal of capital
assets -- -- 408 --
------------------------------------------------------------------------------------
(20,650) (39,750) (146,677) (71,555)
------------------------------------------------------------------------------------
Financing activities
Loans from stockholders (4,428) (42,771) (7,513) 34,982
------------------------------------------------------------------------------------
(4,428) (42,771) (7,513) 34,982
------------------------------------------------------------------------------------
(Increase) decrease in bank
indebtedness (58,652) 2,821 (9,190) (79,926)
Bank indebtedness, beginning of
period (89,116) (79,926) (79,926) --
------------------------------------------------------------------------------------
Bank indebtedness, end of period (147,768) (77,105) (89,116) (79,926)
====================================================================================
</TABLE>
See accompanying notes
F-22
<PAGE>
Betach Systems Inc.
NOTES TO FINANCIAL STATEMENTS
(all amounts are expressed in U.S. dollars)
(Information as at June 30, 2000 and for the
nine month periods ended June 30,2000 and 1999 is unaudited)
1. BASIS OF PRESENTATION
Betach Systems Inc. (the "Company") was incorporated under the Business
Corporations Act (Alberta) on November 24, 1997. The Company was inactive until
January 26, 1998. The Company provides e-business integration applications and
security and networking services exclusively in Canada.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have, in management's opinion, been properly prepared
in accordance with accounting principles generally accepted in the United
States. The Company's functional currency is the Canadian dollar, and its
reporting currency is the U.S. dollar. Translation into U.S. dollars is as
follows:
- for balance sheet items, using the exchange rate at the respective
balance sheet dates.
- for income statement and cash flow items, using the average exchange
rate for the respective reporting periods.
- translation gains and losses are recorded as other comprehensive income
(loss) and shown as a separate component of stockholders' equity.
Transactions denominated in foreign currencies are translated at the exchange
rate on the transaction date. The resulting exchange gains and losses on these
items are included in net earnings.
The accompanying financial statements reflect all adjustments which are, in the
opinion of management, necessary to reflect a fair presentation for the periods
presented.
Capital assets
Capital assets are recorded at cost and are depreciated at the following annual
rates which are designed to amortize the cost of the assets over their estimated
useful lives:
Furniture and fixtures 20% diminishing balance
Computer hardware 30% diminishing balance
Computer software 50% diminishing balance
Leasehold improvements straight line over the
lease term
F-23
<PAGE>
Betach Systems Inc.
NOTES TO FINANCIAL STATEMENTS
(all amounts are expressed in U.S. dollars)
(Information as at June 30, 2000 and for the
nine month periods ended June 30,2000 and 1999 is unaudited)
Revenue and deferred revenue
Revenue for products and services is recognized over the period of the contract
when the Company performs services under contracts which require performance
over a period of time. The prepaid portion of contracts not yet recognized as
revenue are recorded as deferred revenue.
Advertising
Advertising costs are expensed as incurred.
Income taxes
The Company follows the liability method of accounting for the tax effect of
temporary differences between the carrying amount and the tax basis of the
company's assets and liabilities. Temporary differences arise when the
realization of an asset or the settlement of a liability would give rise to
either an increase or decrease in the Company's income taxes payable for the
year or later period. Future income taxes are recorded at the income tax rates
that are expected to apply when the future tax liability is settled or the
future tax asset is realized. When necessary, valuation allowances are
established to reduce future income tax assets to the amount expected to be
realized. Income tax expense is the tax payable for the period and the change
during the period in future income tax assets and liabilities.
3. CAPITAL ASSETS
June 30, 2000 (unaudited)
-----------------------------------
Accumulated Net Book
Cost Depreciation Value
$ $ $
--------------------------------------------------------------------------
Furniture and fixtures 8,314 2,638 5,676
Computer hardware 127,701 58,935 68,766
Computer software 79,462 56,494 22,968
Leasehold improvements 11,601 3,223 8,378
--------------------------------------------------------------------------
227,078 121,290 105,788
==========================================================================
F-24
<PAGE>
Betach Systems Inc.
NOTES TO FINANCIAL STATEMENTS
(all amounts are expressed in U.S. dollars)
(Information as at June 30, 2000 and for the
nine month periods ended June 30,2000 and 1999 is unaudited)
September 30, 1999
----------------------------------
Accumulated Net Book
Cost Depreciation Value
$ $ $
-----------------------------------------------------------------------
Furniture and fixtures 6,381 1,654 4,727
Computer hardware 112,371 39,385 72,986
Computer software 77,341 43,171 34,170
Leasehold improvements 11,724 326 11,398
-----------------------------------------------------------------------
207,817 84,536 123,281
=======================================================================
September 30, 1998
----------------------------------
Accumulated Net Book
Cost Depreciation Value
$ $ $
-----------------------------------------------------------------------
Furniture and fixtures 4,856 728 4,128
Computer hardware 36,247 8,155 28,092
Computer software 23,086 8,657 14,429
Leasehold improvements 7,564 630 6,934
-----------------------------------------------------------------------
1,753 18,170 53,583
=======================================================================
4. BANK INDEBTEDNESS
The Company has a $168,475 ($250,000 Cdn.) revolving loan with its bank. This
line of credit is repayable on demand and bears interest at the bank prime rate
of 7.5% plus 1.5%. The loan is collateralized by personal guarantees of the
stockholders, at no cost to the Company, and a general security agreement
covering all assets of the Company.
5. DUE TO STOCKHOLDERS
The stockholders' loans are non-interest bearing and have no fixed repayment
terms.
6. LOAN PAYABLE
The Company received these amounts with no interest and no fixed repayment terms
from Betach Advanced Systems Inc., a related party [see note 15].
F-25
<PAGE>
Betach Systems Inc.
NOTES TO FINANCIAL STATEMENTS
(all amounts are expressed in U.S. dollars)
(Information as at June 30, 2000 and for the
nine month periods ended June 30,2000 and 1999 is unaudited)
7. CAPITAL STOCK
June 30, September September
2000 30, 1999 30, 1998
Issued and outstanding $ $ $
---------------------------------
(unaudited)
400 Class A voting common shares, issued upon
incorporation 3 3 3
=================================
8. INCOME TAXES
The income tax expense (benefit) differs from the amount computed by applying
the Canadian federal statutory tax rates to the income (loss) before income
taxes for the following reasons:
Period from
commencement of
operations on
January 26,
Nine months ended Year ended 1998 to
June 30, September September
------------------- 30, 30,
2000 1999 1999 1998
$ $ $ $
--------------------------------------------------
(unaudited)
Income tax expense (benefit)at
Canadian statutory rate
(44.62%) (1,133) 96,125 29,636 (10,553)
Increase (decrease) in taxes
resulting from:
Small business deduction 647 (54,935) (16,937) 6,031
Utilization of unrecognized
loss carryforwards -- (3,386) (3,386) --
Utilization of loss carryback (406) -- -- --
Non-deductible expenses 892 429 654 --
Future tax asset valuation
allowance -- -- -- 4,522
--------------------------------------------------
Income tax expense -- 38,233 9,967 --
==================================================
F-26
<PAGE>
Betach Systems Inc.
NOTES TO FINANCIAL STATEMENTS
(all amounts are expressed in U.S. dollars)
(Information as at June 30, 2000 and for the
nine month periods ended June 30,2000 and 1999 is unaudited)
9. COMMITMENTS
The Company is committed to the following annual minimum lease payments on its
office premises:
$
---------
2000 55,962
2001 55,962
2002 50,175
2003 3,217
2004 and
thereafter nil
---------
165,316
=========
10. NET CHANGE IN NON-CASH WORKING CAPITAL
Period from
commencement of
operations on
January 26,
Nine months ended Year ended 1998 to
June 30, September September
------------------- 30, 30,
2000 1999 1999 1998
$ $ $ $
--------------------------------------------------------------------------------
(unaudited)
Accounts receivable (54,412) (165,888) (152,817) (161,275)
Prepaid expenses and
deposits (575) (21,711) (9,773) (4,294)
Accounts payable and
accrued liabilities (57,022) 36,294 144,969 125,872
Unearned revenue (18,459) (1,029) 18,551 1,029
Income taxes payable (22,736) 36,346 10,202 --
Loan payable 84,238 -- -- --
--------------------------------------------------------------------------------
Change relating to
operating activities (68,966) (115,988) 11,132 (38,668)
================================================================================
F-27
<PAGE>
Betach Systems Inc.
NOTES TO FINANCIAL STATEMENTS
(all amounts are expressed in U.S. dollars)
(Information as at June 30, 2000 and for the
nine month periods ended June 30,2000 and 1999 is unaudited)
11. FINANCIAL INSTRUMENTS
Financial instruments comprising accounts receivable, deposits, bank
indebtedness, accounts payable and accrued liabilities and amounts due to
stockholders, approximate their fair value. It is management's opinion that the
Company is not exposed to significant currency or credit risks arising from
these financial instruments.
12. CONCENTRATION OF CREDIT RISK
Services provided to the Company's recurring customers are generally performed
on an open account. The Company performs periodic credit evaluations of its
ongoing customers and does not require collateral. There is no reserve for
potential credit losses since such losses have not occurred and management
expects this situation to continue.
As at June 30, 2000, accounts receivable from three customers were,
respectively, $139,211, $64,104 and $53,643. Management's opinion is that no
provision is necessary for any of these balances.
13. RECENT PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivatives and Hedging Activities", is effective
for the Company's fiscal year commencing October 1, 2000. The Company does not
acquire derivatives or engage in hedging activities.
The SEC has issued Staff Accounting Bulletin 101, "Revenue Recognition", which
is effective for the Company's fiscal year commencing October 1, 2000. The
guideline is not expected to have a material effect on the Company's revenue
recognition policies.
14. TAXES AND INTEREST PAID
The Company paid $22,736 in cash income taxes during the period ended June 30,
2000. (during periods ended September 30, 1999 and 1998 -- $nil). Cash interest
paid for 1999 was $4,114 (1998 -- $2,166).
15. RELATED PARTY TRANSACTIONS
Pursuant to a reorganization which occurred on January 1, 2000, the network
security and data networking operations were transferred to Betach Advanced
Solutions Inc., an entity effectively controlled by the stockholders of the
Company and parties related to the stockholders of the Company. In exchange, the
Company received 10,000 preferred non-voting shares with an elected paid up
value of $1.
F-28
<PAGE>
Betach Systems Inc.
NOTES TO FINANCIAL STATEMENTS
(all amounts are expressed in U.S. dollars)
(Information as at June 30, 2000 and for the
nine month periods ended June 30,2000 and 1999 is unaudited)
Included in accounts receivable is $22,452 relating to operating expenses paid
by the Company for Betach Advanced Solutions Inc.
16. SUBSEQUENT EVENTS
On September 7, 2000, the Company and Betach Advanced Solutions Inc. closed an
agreement, dated August 22, 2000, whereby the outstanding shares of both
companies were sold to JAWS Technologies, Inc. ("JAWS") through its wholly-owned
subsidiary, Jaws Acquisition Canada Corp. ("JACC"), in exchange for 1,120,000
shares of JACC and 400,000 common share purchase warrants of JAWS. Each JACC
share is exchangeable into one common share of JAWS, except for 369,600 of these
shares which have been placed in escrow, to be either released or canceled on
September 7, 2001, depending upon whether certain revenue targets are achieved.
The common share purchase warrants are exercisable at $5.07 per share and expire
on September 7, 2005.
F-29
<PAGE>
JAWZ Inc
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(All amounts stated in $U.S.)
<TABLE>
<CAPTION>
As at June 30, 2000
JAWZ Inc. - Pro
Note Pro Forma Forma
JAWZ Inc. BSI & BASI 4Com.Com Reference Adjustments Consolidated
Unaudited Unaudited Unaudited Unaudited
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and short term deposits $5,653,340 $604,632 $293,157 2.0 ($218,867) $6,332,262
Term deposits $28,494 $0 $0 -- $28,494
Accounts receivable $1,197,922 $0 $265,457 -- $1,463,379
Due from Related Parties $1,324,273 $0 $0 -- $1,324,273
Prepaid expenses $323,534 $14,642 $0 -- $338,176
Deferred Charges $0 $0 $171,601 -- $171,601
Future Income Taxes $0 $0 $99,096 -- $99,096
--------------------------------------------------------------------------
$8,527,563 $619,274 $829,311 ($218,867) $9,757,281
Equipment and Leasehold Improvements (net) $2,235,224 $118,203 $49,195 -- $2,402,622
Intangible Assets - Goodwill $17,757,075 $0 $0 2.1 $4,319,693 $24,000,047
2.2 $1,923,279
Investment $20,000 $0 $0 -- $20,000
--------------------------------------------------------------------------
Total Assets $28,539,862 $737,477 $878,506 $6,024,105 $36,179,949
==========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Bank Indebtedness $0 $240,427 $0 -- $240,427
Accounts payable and accrued liabilities $2,943,472 $442,259 $546,477 2.0 $200,000 $4,132,208
Current portion of capital leases $63,213 $0 $0 -- $63,213
Deferred Revenue $0 $1,121 $253,192 -- $254,313
Due to related parties $306,777 $0 $0 -- $306,777
Due to stockholders $2,816 $23,041 $0 -- $25,857
Income Tax Payable $0 ($10,206) $38,170 -- $27,964
Current portion of long term liabilities $0 $0 $11,534 -- $11,534
--------------------------------------------------------------------------
$3,316,278 $696,642 $849,373 $200,000 $5,062,293
Long term liabilities $0 $0 $3,108 $3,108
Obligations under capital leases $244,656 $0 $0 -- $244,656
--------------------------------------------------------------------------
Total Liabilities $3,560,934 $696,642 $852,481 $200,000 $5,310,056
Stockholders Equity
Share capital $46,639,047 $408 $11,457 2.0 ($11,865) $52,530,012
2.1 $3,804,528
2.1 $456,000
2.2 $1,630,437
Cumulative translation adjustment ($264,374) $1,000 $0 2.0 ($1,000) ($264,374)
(Deficit) / Retained Earnings ($21,395,745) $39,427 $14,568 2.0 ($53,995)($21,395,745)
--------------------------------------------------------------------------
$24,978,928 $40,835 $26,025 $5,824,105 $30,869,893
--------------------------------------------------------------------------
Total Liabilities & Stockholders Equity $28,539,862 $737,477 $878,506 $6,024,105 $36,179,949
==========================================================================
</TABLE>
See accompanying notes to the unaudited pro forma
consolidated financial statements.
F-30
<PAGE>
<TABLE>
<CAPTION>
JAWZ Inc
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME/(LOSS)
(All amounts stated in $U.S.)
Six Month Period ending June 30, 20000
Offsite Data Nucleus
JAWZ Inc. Storage Inc. * Consulting, Inc.** BSI & BASI
Unaudited Unaudited Unaudited Unaudited
<S> <C> <C> <C> <C>
Revenue $2,944,343 $31,177 $403,521 $1,530,391
Cost of sales $880,111 $22,573 $0 $498,095
Expenses
Advertising & Promotion $1,091,712 $55,726 $0 $0
General & Administration $9,089,266 $139,160 $337,412 $1,027,859
-----------------------------------------------------------------------------------------------------------
Loss before Interest, Financing
Fees, Depreciation & Amortization,
& Provision for Income Taxes ($8,116,746) ($186,281) $66,109 $4,437
Interest Expense & Amortization
of Deferred Financing Fees & Debt
Discount 14,789 $0 $0 $8,747
Foreign Exchange (Gain)/Loss ($69,618) $0 $0 $0
Depreciation $208,828 $0 $0 $27,541
Amortization $2,744,083 $0 $0 $0
Provision for Income Taxes $0 $0 $23,000 $2,196
-----------------------------------------------------------------------------------------------------------
Net Income/(Loss) for the period ($11,014,828) ($186,282) $43,109 ($34,047)
Net loss per common stock ($0.35) -- -- --
Weighted avg number of shares
outstanding 31,077,935 -- -- --
</TABLE>
<TABLE>
<CAPTION>
Six Month Period ending June 30, 20000
Note Pro Forma JAWZ Inc. Pro
4Comm.Com Reference Adjustments Forma Consolidated
Unaudited Unaudited
<S> <C> <C>
Revenue $1,183,867 -- $6,093,299
Cost of sales $872,742 -- $2,273,522
Expenses
Advertising & Promotion $11,816 -- $1,159,254
General & Administration $243,721 -- $10,837,417
------------------------------------------------------------------------------------------------
Loss before Interest, Financing
Fees, Depreciation & Amortization,
& Provision for Income Taxes $55,588 ($8,176,893)
Interest Expense & Amortization
of Deferred Financing Fees & Debt
Discount $689 -- $24,225
Foreign Exchange (Gain)/Loss $0 -- ($69,618)
Depreciation $7,631 -- $244,000
Amortization $0 3.0 $1,596,604 $4,340,687
Provision for Income Taxes $18,908 -- $44,104
------------------------------------------------------------------------------------------------
Net Income/(Loss) for the period $28,360 ($1,596,604) ($12,760,292)
Net loss per common stock -- -- ($0.39)
Weighted avg number of shares
outstanding -- 2.1 750,400 32,330,008
2.2 501,673
</TABLE>
* Numbers for Offsite represent results only for the period of January 1, 2000
to January 29, 2000.
** Numbers for Nucleus represent results only for the period of January 1, 2000
to April 20, 2000.
See accompanying notes to the unaudited pro forma
consolidated financial statements.
F-31
<PAGE>
JAWZ Inc
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in $U.S.)
June 30, 2000
1. The accompanying unaudited pro forma consolidated financial statements have
been prepared by management from the unaudited financial statements as at
June 30, 2000 and for the 6 month period then ended of JAWZ Inc. (a Delaware
corporation) ("JAWZ"), and the unaudited financial statements of Offsite Data
Services ("Offsite"), Nucleus Consulting Inc ("Nucleus"), Betach Systems Inc
("BSI"), Betach Advanced Systems Inc ("BASI"), and 4COMM.com Inc ("4Comm") as
at June 30, 2000 and for the 6 month period ended June 30, 2000, together
with other information available to the companies. In the opinion of the
management of JAWZ, these unaudited pro forma consolidated financial
statements include all adjustments necessary for fair presentation in
accordance with generally accepted accounting principles in the United
States. These unaudited pro forma consolidated financial statements may not
be indicative of the financial position or the results of operations that
actually would have occurred if the events reflected therein had been in
effect on the dates indicated nor of the financial position or the results of
operations which may be obtained in the future.
These unaudited pro forma consolidated financial statements should be read in
conjunction with the audited and unaudited financial statements of the
companies included elsewhere in this filing.
2. The unaudited pro forma consolidated balance sheet as at June 30, 2000 gives
effect to the following assumptions and transactions outlined in this filing
as if the effective dates of those transactions were June 30, 2000:
2.1 On August 22, 2000 the Company purchased 100% of the outstanding common
shares of Betach Systems Inc. and Betach Advanced Solutions Inc. (the
Betach companies), incorporated in Alberta, Canada, in exchange for
750,400 exchangeable shares of the Company with an ascribed value of
$3,804,528. Exchangeable shares have economic rights, including the
right to any dividend and voting attributes equivalent to the Company's
common stock. The holders of the exchangeable shares have the right to
receive Company common stock on a one for one basis. In addition,
400,000 warrants with an ascribed value of $1.14 were released on
closing. The warrants include cashless exercise provisions and each
warrant is exercisable into one share of common stock. These warrants
expire on August 22, 2005.
There is contingent share consideration of 369,600 exchangeable shares
of the Company to be released on the 12 month anniversary date. The
contingent consideration is subject to the continued employment of
certain key individuals and meeting the 12 month revenue target of
$4,000,000. The contingent consideration has not been reflected in
these unaudited pro forma consolidated financial statements, as the
outcome of the contingent share consideration cannot be reasonably
determined at this time. The acquisition has been accounted for using
the purchase method. The purchase price has been allocated to the net
assets based on their estimated fair values as follows:
F-32
<PAGE>
JAWZ Inc
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in $U.S.)
June 30, 2000
----------------------------------------------------------------
Purchase Price Allocation
----------------------------------------------------------------
Net assets acquired $ 40,835
----------------------------------------------------------------
Goodwill $ 4,319,693
----------------------------------------------------------------
Purchase Price $ 4,360,528
----------------------------------------------------------------
----------------------------------------------------------------
Consideration:
----------------------------------------------------------------
Common Stock of JAWZ $ 3,804,528
----------------------------------------------------------------
Warrants $ 456,000
----------------------------------------------------------------
Acquisition Costs $ 100,000
----------------------------------------------------------------
Total Consideration $4,360,528
----------------------------------------------------------------
2.2 On August 15, 2000, the Company purchased 100% of the outstanding
common shares of 4COMM.com Inc, a company incorporated in Ontario,
Canada in exchange for $218,867 and 140,618 exchangeable shares of the
Company with an ascribed value of $457,037. In addition, 361,055
exchangeable shares with an ascribed value of $1,173,502 representing
the first installment of contingent consideration was paid on closing.
Exchangeable shares have economic rights, including the right to any
dividend and voting attributes equivalent to the Company's common
stock. The holders of the exchangeable shares have the right to receive
Company common stock on a one for one basis.
There is contingent consideration of 1,444,220 exchangeable shares of
the Company. As described above, 361,055 exchangeable shares were
issued on closing. The remainder will be issued at the 12, 24 and 36
month anniversary dates. This exchangeable share consideration will be
released if the 12, 24, 36 month targets for gross revenue and earnings
before interest and taxes are met. These targets are gross revenues of
$3,500,000, $5,500,000 and $8,400,000 respectively and earnings before
interest and tax of $600,000, $1,000,000 and $1,800,000 respectively.
The contingent consideration has not been reflected in these unaudited
pro forma consolidated financial statements, as the outcome of the
contingent share consideration cannot be reasonably determined at this
time. The acquisition has been accounted for using the purchase method.
The purchase price has been allocated to the net assets based on their
estimated fair values as follows:
F-33
<PAGE>
JAWZ Inc
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in $U.S.)
June 30, 2000
----------------------------------------------------------------
Purchase Price Allocation
----------------------------------------------------------------
Net assets acquired $ 26,025
----------------------------------------------------------------
Goodwill $ 1,923,279
----------------------------------------------------------------
Purchase Price $ 1,949,304
----------------------------------------------------------------
----------------------------------------------------------------
Consideration:
----------------------------------------------------------------
Common Stock of JAWZ $ 1,630,437
----------------------------------------------------------------
Cash $ 218,867
----------------------------------------------------------------
Acquisition Costs $ 100,000
----------------------------------------------------------------
Total Consideration $1,949,304
----------------------------------------------------------------
3. The unaudited pro forma consolidated statement of income for the six
month period ended June 30, 2000 gives effect to the acquisitions by
JAWZ as described in 2.0 above as if the transactions had occurred
January 1, 2000. The following adjustments are reflected:
The amortization of goodwill attributable to the allocation of the
purchase price of Offsite, Nucleus, Betach (see 2.1 above), and 4Comm
(see 2.2 above) in excess of the carrying value of the net assets
acquired, calculated on a straight-line basis over a period of three
years.
4. The amounts shown in these unaudited pro forma consolidated financial
statements have been translated into United States dollars from
Canadian dollars at the period end rate for the balance sheet and the
period average rate for the income statement.
F-34
<PAGE>
JAWZ Inc
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(All amounts stated in $U.S.)
<TABLE>
<CAPTION>
Twelve Month Period ending December 31, 1999*
Pace Systems Offsite Data Nucleus Betach Systems
JAWZ Inc. Group Inc. Storage Consulting, Inc. Inc (BSI)
Audited Audited Audited Audited Audited
12 Month Period 12 Month Period 12 Month Period
ending July 31, ending June 30, ending Sept 30,
1999 1999 1999
<S> <C> <C> <C> <C> <C>
Revenue $592,046 $1,261,989 $161,811 $3,434,719 $1,734,132
Cost of sales $0 $0 $146,903 $0 $0
Expenses
Advertising & Promotion $363,916 $0 $63,877 $0 $16,774
General & Administration $5,577,447 $1,203,473 $190,509 $2,854,913 $1,568,757
Technical Services $0 $0 $80,279 $0 $0
------------------------------------------------------------------------------------------------------------------------------------
Loss before Interest, Financing Fees,
Depreciation & Amortization, & Provision for
Income Taxes. ($5,349,317) $58,516 ($319,757) $579,806 $148,601
Interest Expense & Amortization of Deferred
Financing Fees & Debt Discount $1,140,050 $0 $0 $6,587 $4,766
Financing Fees $447,187 $0 $0 $0 $0
Depreciation & Amortization $231,222 $1,207 $0 $0 $77,417
Provision for Income Taxes $0 $0 $0 $169,000 $9,967
------------------------------------------------------------------------------------------------------------------------------------
Net Income / (Loss) for the period ($7,167,776) $57,309 ($319,757) $404,219 $56,451
Net loss per common share ($0.50) -- -- -- --
Weighted avg number of shares outstanding 14,342,053 -- -- -- --
</TABLE>
*Except where specifically identified otherwise.
<TABLE>
<CAPTION>
Twelve Month Period ending December 31, 1999*
Note Pro Forma JAWZ Inc. Pro
4Comm.com Inc Reference Adjustments Forma Consolidated
Audited Unaudited
12 Month Period
ending Mar 31,
2000
<S> <C> <C> <C>
Revenue $1,527,834 -- $8,712,531
Cost of sales $1,108,715 -- $1,255,618
Expenses
Advertising & Promotion $30,031 -- $474,598
General & Administration $383,877 -- $11,778,976
Technical Services $0 -- $80,279
-----------------------------------------------------------------------------------------------------------------------------
Loss before Interest, Financing Fees,
Depreciation & Amortization, & Provision for
Income Taxes. $5,211 ($4,876,940)
Interest Expense & Amortization of Deferred
Financing Fees & Debt Discount $1,713 -- $1,153,116
Financing Fees $0 -- $447,187
Depreciation & Amortization $16,744 3.0 $8,706,617 $9,033,207
Provision for Income Taxes ($1,759) -- $177,208
-----------------------------------------------------------------------------------------------------------------------------
Net Income / (Loss) for the period ($11,487) ($8,706,617) ($15,687,658)
Net loss per common share -- -- ($0.73)
Weighted avg number of shares outstanding -- 2.1 588,238 21,578,737
2.2 5,253,786
2.3 142,587
2.4 750,400
2.5 501,673
</TABLE>
*Except where specifically identified otherwise.
See accompanying notes to the unaudited pro forma
consolidated statement of income/(loss).
F-35
<PAGE>
JAWZ Inc
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF INCOME/(LOSS)
(All amounts stated in $U.S.)
December 31, 1999
1. The accompanying unaudited pro forma consolidated financial statements have
been prepared by management from the audited financial statements as at
December 31, 1999 and for the 12 month period then ended of JAWZ Inc. (a
Delaware corporation) ("JAWZ") and the audited financial statements of Pace
Systems Group Inc. ("Pace"), Offsite Data Services Ltd. ("Offsite"), Nucleus
Consulting Inc ("Nucleus"), Betach Systems Inc. ("BSI"), and 4COMM.com Inc
("4Comm"), together with other information available to the companies. In the
opinion of the management of JAWZ, this unaudited pro forma consolidated
statement of income includes all adjustments necessary for fair presentation
in accordance with generally accepted accounting principles in the United
States. This unaudited pro forma consolidated statement of income may not be
indicative of the financial position or the results of operations that
actually would have occurred if the events reflected therein had been in
effect on the dates indicated nor of the financial position or the results of
operations which may be obtained in the future.
These unaudited pro forma consolidated financial statements should be read in
conjunction with the audited and unaudited financial statements of the
companies included elsewhere in this filing.
2. The unaudited pro forma consolidated balance sheet as at December 31, 1999
gives effect to the following assumptions and transactions outlined in this
filing as if the effective dates of those transactions were December 31,
1999:
2.1 On February 23, 2000, JAWZ issued 588,238 shares under a private
placement to a group of investors for net cash of $2,234,510. This cash
will be used to fund operational commitments in the year 2000.
2.2 The acquisition of all of the outstanding common shares of Offsite
(including common shares of Offsite issuable on the exercise of all of
the outstanding Offsite A warrants) for 5,253,786 exchangeable shares
of JAWZ with an ascribed value of $14,162,599.
Pursuant to this Offer, JAWZ issued 1,389,800 warrants in exchange for
the outstanding Offsite warrants. 889,800 of these warrants entitle the
holder thereof to acquire .3524 of a JAWZ common share upon payment of
Cdn $0.40 ($0.28 USD) which expired March 15, 2000; the remaining
500,000 warrants entitle the holder to acquire .3524 of a JAWZ common
share for prices ranging from Cdn $0.50 ($0.34 USD) to Cdn $0.55 ($0.38
USD) up to September 29, 2001. Pursuant to this Offer, 910,584 stock
options of Offsite are exchanged for stock options of JAWZ, which
entitle the holder of each to purchase .3524 of an exchangeable share
of JAWZ, at a price of Cdn $0.25 ($0.17 USD) which expire on March 15,
2004. A value of $1,649,625 has been ascribed to the warrants and
options acquired on the acquisition.
The acquisition has been accounted for in these unaudited pro forma
consolidated financial statements using the purchase method. The
aggregate purchase price of $15,934,200 has been allocated to the net
assets acquired based on their estimated fair values, as follows:
F-36
<PAGE>
JAWZ Inc
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF INCOME/(LOSS)
(All amounts stated in $U.S.)
December 31, 1999
----------------------------------------------------------------
Purchase Price Allocation
----------------------------------------------------------------
Net assets acquired $ 329,951
----------------------------------------------------------------
Goodwill $ 15,604,249
----------------------------------------------------------------
Purchase Price $ 15,934,200
----------------------------------------------------------------
----------------------------------------------------------------
Consideration:
----------------------------------------------------------------
Common Stock of JAWZ $ 14,162,599
----------------------------------------------------------------
Value of Warrants & Options Exchanged $ 1,649,625
----------------------------------------------------------------
Acquisition Costs $ 121,976
----------------------------------------------------------------
Total Consideration $ 15,934,200
----------------------------------------------------------------
2.3 JAWZ acquired all of the outstanding shares of Nucleus for a closing
payment of $250,000 in cash and 142,857 shares of JAWZ with an ascribed
value of $1,000,000. The Company paid additional consideration of
$750,000 into a trust, which will be released on the third, sixth and
nine month anniversary of the closing of the transaction. In addition
there is contingent consideration payable of 285,714 commons shares of
the Company at an ascribed value of $7.00 per share or $2,000,000 in
total. Half of the common share consideration will be released if the
actual revenues and earnings before interest and taxes for the year
ended April 20, 2001 equal or exceed $3,500,000 and $800,000
respectively and the remaining share consideration will be released if
actual revenues and earnings for the year ended April 20, 2002 equal or
exceed $5,250,000 and $1,200,000 respectively. The contingent
consideration has not been reflected in these unaudited pro forma
consolidated financial statements, as the outcome of the contingent
share consideration cannot be reasonably determined at this time.
The acquisition has been accounted for in these unaudited pro forma
consolidated financial statements using the purchase method. The
aggregate purchase price of $2,300,000 has been allocated to the net
assets acquired based on their estimated fair values, as follows:
----------------------------------------------------------------
Purchase Price Allocation
----------------------------------------------------------------
Net assets acquired $ 92,172
----------------------------------------------------------------
Goodwill $ 2,207,828
----------------------------------------------------------------
Purchase Price $ 2,300,000
----------------------------------------------------------------
----------------------------------------------------------------
Consideration:
----------------------------------------------------------------
Common Stock of JAWZ $ 1,000,000
----------------------------------------------------------------
Cash $ 1,000,000
----------------------------------------------------------------
Acquisition Costs $ 300,000
----------------------------------------------------------------
Total Consideration $2,300,000
----------------------------------------------------------------
2.4 On August 22, 2000 the Company purchased 100% of the outstanding common
shares of Betach Systems Inc. and Betach Advanced Solutions Inc. (the
Betach companies),
F-37
<PAGE>
JAWZ Inc
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF INCOME/(LOSS)
(All amounts stated in $U.S.)
December 31, 1999
incorporated in Alberta, Canada, in exchange for 750,400 exchangeable
shares of the Company with an ascribed value of $3,804,528.
Exchangeable shares have economic rights, including the right to any
dividend and voting attributes equivalent to the Company's common
stock. The holders of the exchangeable shares have the right to receive
Company common stock on a one for one basis. In addition, 400,000
warrants with an ascribed value of $1.14 were released on closing. The
warrants include cashless exercise provisions and each warrant is
exercisable into one share of common stock. These warrants expire on
August 22, 2005.
There is contingent share consideration of 369,600 exchangeable shares
of the Company to be released on the 12 month anniversary date. The
contingent consideration is subject to the continued employment of
certain key individuals and meeting the 12 month revenue target of
$4,000,000. The contingent consideration has not been reflected in
these unaudited pro forma consolidated financial statements, as the
outcome of the contingent share consideration cannot be reasonably
determined at this time. The acquisition has been accounted for using
the purchase method. The purchase price has been allocated to the net
assets based on their estimated fair values as follows:
----------------------------------------------------------------
Purchase Price Allocation
----------------------------------------------------------------
Net assets acquired $ 9,487
----------------------------------------------------------------
Goodwill $ 4,351,041
----------------------------------------------------------------
Purchase Price $ 4,360,528
----------------------------------------------------------------
----------------------------------------------------------------
Consideration:
----------------------------------------------------------------
Common Stock of JAWZ $ 3,804,528
----------------------------------------------------------------
Warrants $ 456,000
----------------------------------------------------------------
Acquisition Costs $ 100,000
----------------------------------------------------------------
Total Consideration $4,360,528
----------------------------------------------------------------
2.5 On August 15, 2000, the Company purchased 100% of the outstanding
common shares of 4COMM.com Inc, a company incorporated in Ontario,
Canada in exchange for $218,867 and 140,618 exchangeable shares of the
Company with an ascribed value of $457,037. In addition, 361,055
exchangeable shares with an ascribed value of $1,173,502 representing
the first installment of contingent consideration was paid on closing.
Exchangeable shares have economic rights, including the right to any
dividend and voting attributes equivalent to the Company's common
stock. The holders of the exchangeable shares have the right to receive
Company common stock on a one for one basis.
There is contingent consideration of 1,444,220 exchangeable shares of
the Company. As described above, 361,055 exchangeable shares were
issued on closing. The remainder will be issued at the 12, 24 and 36
month anniversary dates. This exchangeable share consideration will be
released if the 12, 24, 36 month targets for gross revenue and earnings
before interest and taxes are met. These targets are gross revenues of
F-38
<PAGE>
JAWZ Inc
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF INCOME/(LOSS)
(All amounts stated in $U.S.)
December 31, 1999
$3,500,000, $5,500,000 and $8,400,000 respectively and earnings before
interest and tax of $600,000, $1,000,000 and $1,800,000 respectively.
The contingent consideration has not been reflected in these unaudited
pro forma consolidated financial statements, as the outcome of the
contingent share consideration cannot be reasonably determined at this
time. The acquisition has been accounted for using the purchase method.
The purchase price has been allocated to the net assets based on their
estimated fair values as follows:
----------------------------------------------------------------
Purchase Price Allocation
----------------------------------------------------------------
Net assets acquired $ (504)
----------------------------------------------------------------
Goodwill $ 1,949,910
----------------------------------------------------------------
Purchase Price $ 1,949,406
----------------------------------------------------------------
----------------------------------------------------------------
Consideration:
----------------------------------------------------------------
Common Stock of JAWZ $ 1,630,539
----------------------------------------------------------------
Cash $ 218,867
----------------------------------------------------------------
Acquisition Costs $ 100,000
----------------------------------------------------------------
Total Consideration $1,949,406
----------------------------------------------------------------
3. The unaudited pro forma consolidated statement of income for the twelve
month period ended December 31, 1999 gives effect to the acquisitions
by JAWZ as described in 2.0 above as if the transactions had occurred
January 1, 1999. The following adjustments are reflected:
The amortization of goodwill attributable to the allocation of the
purchase price of PACE, Offsite (see 2.2 above), Nucleus (see 2.3
above), Betach (see 2.4 above), and 4Comm (see 2.5 above) in excess of
the carrying value of the net assets acquired, calculated on a
straight-line basis over a period of three years.
4. The amounts shown in these unaudited pro forma consolidated financial
statements for Pace and for Offsite have been translated into United
States dollars from Canadian dollars at the period end rate for the
balance sheet and the period average rate for the income statement.
F-39
<PAGE>
SIGNATURES
Pursuant to the requirements set forth in the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: November 1, 2000 JAWZ INC.
By: /s/ Riaz Mamdani
Name: Riaz Mamdani
Title: Chief Financial Officer
S-1
