Unaudited Pro Forma Financial Statements of
SOFTQUAD SOFTWARE, LTD.
December 31, 1999
(IN U.S. DOLLARS)
BASIS OF PRESENTATION
The unaudited pro forma financial statements of the Company give effect
to the following series of transactions as if they had occurred on the
close of business on December 31, 1999.
On January 17, 2000, the securityholders of SoftQuad Software Inc
("SoftQuad Canada") entered into agreements with a company that had been
formed to facilitate certain financing of SoftQuad Canada ("FinanceCo")
for FinanceCo to acquire all of the outstanding securities of SoftQuad
Canada through FinanceCo's subsidiary, SoftQuad Acquisition Corp.
Although the acquisition was not formally completed until April 5, 2000,
it has been deemed effective for financial accounting purposes as of
January 17, 2000, the date on which it became irrevocable by the SoftQuad
Canada securityholders. On March 2, 2000, FinanceCo merged with and into
The American Sports Machine, Inc. Upon consummation of the merger, the
former securityholders of SoftQuad Canada and the former securityholders
of FinanceCo owned approximately 91% of the common stock of the Company
and, accordingly, the merger was accounted for as a reverse takeover
transaction.
Under the principles of reverse takeover accounting, the financial
statements of the Company, the legal parent, are presented as a
continuation of the financial position and results from operations of
SoftQuad Canada, the legal subsidiary.
Application of reverse takeover accounting results in the following:
(i) The financial statements of the combined entity are issued under
the name of the legal parent SoftQuad Software, Ltd. but are
considered a continuation of the financial statements of the
legal subsidiary, SoftQuad Canada;
(ii) As SoftQuad Canada is deemed to be the acquirer for accounting
purposes, its assets and liabilities are included in the
financial statements at their historical carrying values; and
(iii)Control of the net assets and operations of the Company is
deemed to be acquired by SoftQuad Canada effective January 17,
2000. For purposes of this transaction, the deemed consideration
is the $1,081 ascribed to the net assets of the Company
immediately prior to the business combination.
These unaudited pro forma financial statements should be read in
conjunction with the audited consolidated financial statements of The
American Sports Machine, Inc. for the year ended September 30, 1999 and
the unaudited interim financial statements for the three-month period
ended December 31, 1999 and the audited consolidated financial statements
of SoftQuad Canada for the year ended September 30, 1999 and the
unaudited consolidated financial statements for the three-month period
ended December 31, 1999 and the notes thereto.
The unaudited pro forma financial statements may not necessarily be
indicative of the results of operations and financial position which
would have been achieved if the transactions had occurred on the dates
noted above.
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<TABLE>
SOFTQUAD SOFTWARE, LTD.
PRO FORMA BALANCE SHEET
DECEMBER 31, 1999
(IN U.S. DOLLARS)
(UNAUDITED)
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
The
American SoftQuad
Sports Software Pro Forma
Machine, Inc. Inc. Adjustments Pro Forma
------------- ---- ----------- ---------
ASSETS
<S> <C> <C> <C>
CURRENT
Cash $ 1,081 $ 2,969,280 $ $ 2,970,361
Accounts receivable - 647,102 - 647,102
Inventory - 57,365 - 57,365
Prepaid expenses and deposits - 61,447 - 61,447
----------------------------------------------------------------------------------------------------------------------
1,081 3,735,194 3,736,275
DEFERRED FINANCING COSTS - 37,681 - 37,681
CAPITAL ASSETS - 234,029 - 234,029
GOODWILL - 36,174 - 36,174
----------------------------------------------------------------------------------------------------------------------
$ 1,081 $ 4,043,078 $ - $ 4,044,159
----------------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ - $ 977,000 $ - $ 977,000
Deferred revenue - 33,410 - 33,410
Current portion of notes payable - 756,254 756,254
----------------------------------------------------------------------------------------------------------------------
- 1,766,664 1,766,664
NOTES PAYABLE - 2,629,933 - 2,629,933
----------------------------------------------------------------------------------------------------------------------
- 4,396,597 - 4,396,597
----------------------------------------------------------------------------------------------------------------------
CAPITAL DEFICIENCY
SHARE CAPITAL 140 3,336,185 - 3,336,325
ADDITIONAL PAID-IN CAPITAL 45,860 - (44,919) 941
ACCUMULATED OTHER
COMPREHENSIVE INCOME - 19,233 - 19,233
DEFICIT (44,919) (3,708,937) 44,919 (3,708,937)
----------------------------------------------------------------------------------------------------------------------
1,081 (353,519) - (352,438)
----------------------------------------------------------------------------------------------------------------------
$ 1,081 $ 4,043,078 $ (2,629,933) $ 4,044,159
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SOFTQUAD SOFTWARE, LTD.
PRO FORMA STATEMENT OF OPERATIONS
THREE-MONTH PERIOD ENDED DECEMBER 31, 1999
(IN U.S. DOLLARS)
(UNAUDITED)
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
The
American SoftQuad
Sports Software
Machine, Inc. Inc. Pro Forma
------------- ---- ---------
<S> <C> <C> <C>
REVENUE
Licenses $ - $ 846,086 $ 846,086
Services - 14,185 14,185
----------------------------------------------------------------------------------------------------------------------
- 860,271 860,271
----------------------------------------------------------------------------------------------------------------------
COST OF REVENUE
Licenses - 105,880 105,880
Services - 81,852 81,852
----------------------------------------------------------------------------------------------------------------------
- 187,732 187,732
----------------------------------------------------------------------------------------------------------------------
- 672,539 672,539
----------------------------------------------------------------------------------------------------------------------
EXPENSES
Selling and marketing - 662,281 662,281
Research and development - 273,105 273,105
General and administrative 1,630 341,401 343,031
----------------------------------------------------------------------------------------------------------------------
1,630 1,276,787 1,278,417
----------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (1,630) (604,248) (605,878)
OTHER EXPENSES
Interest - 21,060 21,060
----------------------------------------------------------------------------------------------------------------------
NET LOSS $ (1,630) $ (625,308) $ (626,938)
----------------------------------------------------------------------------------------------------------------------
LOSS PER SHARE $ (0.00) $ (0.07) $ (0.08)
----------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,400,000 9,050,000 7,643,000
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SOFTQUAD SOFTWARE, LTD.
PRO FORMA STATEMENT OF OPERATIONS
TWELVE-MONTH PERIOD ENDED SEPTEMBER 30, 1999
(IN U.S. DOLLARS)
(UNAUDITED)
----------------------------------------------------------------------------------------------------------------------
<CAPTION>
The
American SoftQuad
Sports Software
Machine, Inc. Inc. Pro Forma
------------- ---- ---------
<S> <C> <C> <C>
REVENUE
Licenses $ - $ 3,291,335 $ 3,291,335
Services - - -
----------------------------------------------------------------------------------------------------------------------
- 3,291,335 3,291,335
----------------------------------------------------------------------------------------------------------------------
COST OF REVENUE
Licenses - 572,167 572,167
Services - 63,494 63,494
----------------------------------------------------------------------------------------------------------------------
- 635,661 635,661
----------------------------------------------------------------------------------------------------------------------
- 2,655,674 2,655,674
----------------------------------------------------------------------------------------------------------------------
EXPENSES
Selling and marketing - 2,052,983 2,052,983
Research and development - 1,069,449 1,069,449
General and administrative 42,289 1,093,730 1,136,019
----------------------------------------------------------------------------------------------------------------------
42,289 4,216,162 4,258,451
----------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (42,289) (1,560,488) (1,602,777)
----------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES
Interest - 14,063 14,063
Other expenses - 54,226 54,226
----------------------------------------------------------------------------------------------------------------------
- 68,289 68,289
----------------------------------------------------------------------------------------------------------------------
NET LOSS (42,289) (1,628,777) (1,671,066)
VALUE OF SHARE CAPITAL ISSUED
ON ACQUISITION OF WARRANTS - (1,387,647) (1,387,647)
----------------------------------------------------------------------------------------------------------------------
NET LOSS ATTRIBUTABLE
TO SHAREHOLDERS $ (42,289) $ (3,016,424) $ (3,058,713)
----------------------------------------------------------------------------------------------------------------------
LOSS PER SHARE $ (0.03) $ (0.37) $ (0.30)
----------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,250,000 4,377,000 5,627,000
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