BROCKER TECHNOLOGY GROUP LTD
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2000
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
CONSOLIDATED BALANCE SHEETS
AS AT JUNE 30, 2000 AND 1999
2000 1999
$ $
ASSETS
Current Assets
Cash 3,668,472 129,160
Accounts receivable 22,398,858 28,923,319
Other receivables 1,597,105 1,277,619
Inventories 15,818,709 15,860,523
Prepaid expenses and deposits 69,874 924,449
Income taxes recoverable 681,163 332,249
Future tax asset 1,039,057 310,270
----------- -----------
45,273,238 47,757,589
Deferred Development Costs 1,597,504 1,322,410
Capital Assets 5,100,881 5,230,026
Investment in Associated Company 849,894 655,730
Other Investments 207,210 --
Goodwill 1,676,896 1,797,700
----------- -----------
54,705,623 56,763,455
=========== ===========
LIABILITIES
Current Liabilities
Accounts payable 19,332,341 42,877,778
Accrued liabilities 2,291,477 4,776,391
Taxation Payable 419,401 --
Financing Facility 10,735,236 --
Current portion of long-term debt 191,116 198,061
----------- -----------
32,969,571 47,852,230
Long-Term Debt 1,742,954 2,240,937
Future Tax Liability 54,805 --
----------- -----------
34,767,330 50,093,167
SHAREHOLDERS' EQUITY
Share Capital 21,762,070 5,761,721
Foreign Currency Translation Reserve (2,302,984) (833,042)
Retained Earnings 479,207 1,741,609
----------- -----------
19,938,293 6,670,288
----------- -----------
54,705,623 56,763,455
=========== ===========
Signed on behalf of the Board
-------------------------------- --------------------------------
Director Director
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
2000 1999
$ $
Revenue 28,525,498 36,320,354
Cost of Goods Sold 25,190,771 31,747,893
----------- -----------
Gross Margin 3,334,727 4,572,461
Operating Expenses
Depreciation and amortisation 373,077 365,218
Net interest expense 123,465 277,847
Salaries and commissions 2,019,947 2,018,039
Other operating expenses 1,724,137 1,764,386
----------- -----------
Total operating expenses 4,240,626 4,425,490
----------- -----------
Operating Income (905,899) 146,971
Equity accounted losses of associated company 13,995 21,655
----------- -----------
Income before Income Tax Provision (919,894) 125,316
Income Tax Provision (274,140) 90,439
----------- -----------
Net Earnings for the period (645,754) 34,877
=========== ===========
Earnings Per Common Share (0.04) 0.00
=========== ===========
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
2000 1999
$ $
Retained Earnings, Beginning of the period 1,124,961 1,706,732
Net Earnings for the period (645,754) 34,877
Discount on redemption of preferred shares --
Preferred dividends paid --
---------- ----------
Retained Earnings, End of the period 479,207 1,741,609
========== ==========
BROCKER TECHNOLOGY GROUP LTD
MOVEMENTS IN FOREIGN CURRENCY TRANSLATION RESERVE
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
2000 1999
$ $
Beginning of the period (1,745,415) (799,084)
Difference arising on the translation of
foreign operations (557,569) (33,958)
---------- ----------
End of the period (2,302,984) (833,042)
========== ==========
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
2000 1999
$ $
Cash flows from operating activities
Receipts from customers 24,563,644 30,291,817
Payments to suppliers and employees (28,526,793) (29,479,531)
Interest paid (123,465) (277,847)
Taxation refunded 16,464 (194,700)
----------- -----------
Cash flows from operating activities (4,070,150) 339,739
Cash flows from investing activities
Proceeds from the sale of Fixed Assets 14,773 --
Purchase of capital assets (288,958) (53,342)
Investment in associated company (58,461) (84,315)
Other Investments (207,210) --
----------- -----------
Cash flows from investing activities (539,856) (137,657)
Cash flows from financing activities
Repayment of mortgage principle (72,982) (18,531)
----------- -----------
Cash flows from financing activities (72,982) (18,531)
----------- -----------
Net Increase in cash equivalents (4,682,988) 183,551
Cash at the beginning of the year 8,637,357 (55,433)
translation of cash equivalents to reporting currency (285,897) 1,042
----------- -----------
Cash at the End of the period 3,668,472 129,160
=========== ===========
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
1 BASIS OF PRESENTATION
a) General
Brocker Technology Group Ltd, ( "the Company" ), was incorporated under the
Business Corporation Act (Alberta) on November 25, 1993, and obtained its
listing on the Alberta Stock Exchange on April 14, 1994.
On February 28, 1998 the Company transferred its listing to the Toronto
Stock Exchange.
These financial statements have been prepared in accordance with the
generally accepted accounting principles of Canada.
b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
2 SIGNIFICANT ACCOUNTING POLICIES
a) Principles of Consolidation
The consolidated financial statements include the financial statements of
the Company and all of its subsidiary companies since the dates of their
acquisition. Its wholly owned subsidiaries, all of which are consolidated
using the purchase method, are as follows:
Brocker Technology Group (NZ) Limited
Brocker Investments (Australia) Pty Limited
Brocker Financial Limited
Easy PC Computer Rentals Limited
Image Craft Australia Pty Limited
Industrial Communications Service Limited
Powercall Technologies Limited
Pritech Australia Pty Limited
Pritech Corporation Limited
Sealcorp Australia Pty Limited
Sealcorp Computer Products Limited
Sealcorp Telecommunications Group Limited
1World Systems Limited
Tech Support Limited
At March 31,2000 the operations of Image Craft Limited, Northmark
Technologies Limited, and Photo Magic Limited were amalgamated with Brocker
Technology Group (NZ) limited.
During the 1998 Brocker Technology Group Ltd took a 20% founding
shareholding in Highway Technologies Limited. This investment has been
recorded using the equity method.
b) Goodwill
The excess of cost over the fair value of identifiable net assets of
subsidiaries acquired is recorded as goodwill and is amortised on a
straight-line basis over its estimated useful life, considered to be three
to ten years. On an ongoing basis, management reviews the valuation and
amortisation of goodwill taking into consideration any events and
circumstances which might have impaired the fair value.
Where an acquisition price is contingent on a future event or events, no
goodwill is recognised until the final acquisition price can be reasonably
determined.
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
c) Foreign Currency
Foreign currency transactions are recorded at the exchange rates in effect
at the date of settlement. Monetary assets and liabilities arising from
trading are translated at closing rates. Gains and losses due to currency
fluctuations on these items are included in the statement of earnings.
The financial statements of foreign operations are translated to Canadian
dollars using weighted average exchange rates for the period for items
included in the statement of earnings, period end rates for assets and
liabilities included in the balance sheet and historical rates for equity
transactions. The cumulative translation adjustment represents the deferred
foreign exchange gain or loss on the translation of the financial
statements.
d) Inventories
Inventories principally comprise finished goods and are carried at the
lower of cost and net realisable value. Cost is determined on a weighted
average or first in first out basis.
e) Capital Assets
Capital assets are recorded at cost. Depreciation is calculated on a
declining balance basis (except for leasehold improvements where a straight
line basis is used) using the following rates:
Land 0%
Buildings 2%
Office equipment 20%
Vehicles 20 and 26%
Furniture and fixtures 20%
Computer hardware 20 to 30%
Computer software 30 - 40%
Plant and Equipment 20 - 26%
Leasehold improvements 1 to 4 years
Computer hardware held for rental 2 to 3 years
f) Revenue recognition
The Company earns substantially all of its revenue for the sale and
delivery of products to its customers. Revenue is recorded when the
products are shipped to customers.
g) Research and development expenditures
Research costs, other than capital expenditures, are expensed as incurred.
Development costs are expensed as incurred unless they meet the criteria
under generally accepted accounting principles for deferral and
amortisation. Deferred development costs are amortised over the life of the
developed product, currently a maximum of three years.
h) Future Income Taxes
Income taxes are accounted for under the asset and liability method. Under
this method, future tax assets and liabilities are recognised for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Future tax assets and liabilities are measured using
enacted or substantively enacted tax rates expected to apply when the asset
is realized or the liability settled. The effect on future tax assets and
liabilities of a change in tax rates is recognised in income in the period
that substantive enactment or enactment occurs.
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
i) Earnings Per share
Earnings per share have been calculated based on the weighted average
number of common shares outstanding. The fully diluted earnings per share
have been calculated on the assumptioin that all vested options have been
exercised.
In both cases, common shares to be issued, or held in escrow, in respect of
the settlement of earn-out consideration in relation to acquisitions are
only taken into account in the calculation of earnings per share once the
number of shares can be reasonably determined.
j) Stock Options
The company has a stock option plan. When stock options are issued, the
value of the option is not determined or recorded. Any consideration
received on the exercise of the stock option is credited to share capital.
k) Cash and cash Equivalents
Cash and cash equivalents consist of cash on hand and balances with banks,
and investments in money market instruments. Cash and cash equivalents
included in the cash flow statement are comprised solely of balances with
banks.
3 ACQUISITIONS
During the period the company invested $207,210 (NZ$300,000) in Communica
Limited. Communica Limited is involved in the provision of Toll and
Cellular Services to its customers. This investment is secured by way of a
charge over the assets of Communica Limited.
4 CAPITAL ASSETS
During the 1998 Brocker Investments (NZ) Limited have acquired new premises
in Auckland, New Zealand. The $2.350M purchase price of this property has
been settled by way of mortgage finance of $2,103,000
5 DEFERRED DEVELOPMENT COSTS
As at June 30, 2000 development costs of $1,597,504 have been capitalised.
These costs principally relate to the development of software applications.
6 INVESTMENT IN ASSOCIATED COMPANY
During 1998 Brocker Investments (NZ) Limited took a 20% founding
shareholding in Highway Technologies Limited. This Company has developed
new technology capable of providing transport and highway management,
operation and funding solutions.
In addition to the investment, Brocker Technolgy Group (NZ) Limited has
entered an agreement to loan Highway Technologies Limited funds during the
Company's establishment phase up to a maximum of NZ$1,036,050. Interest is
payable on these funds at 30% per annum. As at June 30, 2000 amounts
advanced to Highway Technologies Limited amounted to NZ$1,099,436
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
7 INDEBTEDNESS
(a) The components of indebtedness are follows
Mortgage finance liability 1,845,705
Less current portion (166,897)
----------
1,678,808
Capital lease obligations payable in New Zealand
dollars, with interest rates ranging from 6.6% to
14.5% per annum, collateralised by related assets,
payable over 1 to 3 years. 40,016
Less current portion (24,219)
----------
15,797
An unsecured term liability repayable in NZ$ 48,349
----------
1,742,954
==========
(b)
During the year ended March 31, 2000 Sealcorp Computer Products Limited,
Sealcorp Telecommunications Group Limited and Selacorp Australia Pty
Limited (all subsidiaries of the company) have successfully renegotiated
their financing arrangements. A new $20 million financing facility, secured
by a registered first debenture on the assets and undertakings of these
companies, replaces the previous facility of similar terms, which was
terminated during the period. The current interest rate on this facility is
7.15%.
8 SHARE CAPITAL
Authorised
Unlimited number of common shares
Unlimited number of Preferred Shares
10,000,000 Series A Preferred Shares 6 1/2% cumulative
Issued and outstanding 2000 1999
$ $
Common shares 7,580,710 3,353,490
Series A Preferred -- 2,450,000
Warrants 16,110,000 --
Shares to be issued 207,411 (41,769)
Less: Share issue costs (2,136,051) --
----------- -----------
21,762,070 5,761,721
As at June 30, 2000 1,015,421 shares are being held in escrow pursuant to
Escrow Agreements which provide for the release of such shares on a
performance basis.
<PAGE>
BROCKER TECHNOLOGY GROUP LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
Earnings Per Common Share
Earnings per share has been calculated on the basis of the weighted average
number of common shares outstanding for the period.
2000 1999
Weigthed average number of shares 18,178,624 11,469,101
Net Profit after tax (645,755) 34,877
----------- -----------
Basic Earnings per share ($ 0.04) $ 0.00
=========== ===========
For the current quarter and previous financial year the effect on earnings
per share of the exercise of outstanding options and conversion of prefered
shares, for the calculation of fully diluted earnings per share, is
anti-dilutive.
9 SEGMENTAL OPERATIONS
The group operates in two geographical segments, New Zealand and Australia.
The Canadian opertaions shown relate to administrative items only.
The reporting of business segments is consistent with those reported in the
prior year, including Vendor Services and Application Hosting which have
been renamed to better reflect the opertaions of the segments.
<TABLE>
<CAPTION>
2000 ($) Canada New Zealand Australia Total
<S> <C> <C> <C> <C>
Sales -- 22,253,064 6,272,434 28,525,498
Net Profit /(loss) -- (633,089) (12,655) (645,744)
Depreciation & amortisation -- 331,316 41,761 373,077
Net Interest Expense (43,346) 95,286 71,525 123,465
Identifiable Assets 10,242,927 35,551,960 8,910,736 54,705,623
Capital Asset Expenditure -- 288,958 -- 288,958
</TABLE>
The Group principally operates in four industry segments, being divisons by
which the Group is managed, as follows:
* Distribution and sale of computer and telecommunicatioins hardware and
software ("Vendor Services")
* The hosting of client hardware and software services including technical
support and services for the Technology Industry ("Application Hosting")
* Software application design and development ("Application Development")
* Provision of professional consulting services ("Professional Services")
The Corporate Services operation shown relates to the Group's
administrative functions in New Zealand, Australia, and Canada.
<TABLE>
<CAPTION>
Vendor Application Application Professional Corporate
2000 ($) Services Hosting Development Services Services Total
<S> <C> <C> <C> <C> <C> <C>
Sales 27,029,133 40,797 259,854 1,195,714 -- 28,525,498
Intersegment Revenue 52,118 (1,182) (177) (50,759) -- 0
Net Profit /(loss) (105,769) (51,823) (565,280) (73,260) 150,378 (645,754)
Depreciation & amortisation 57,847 -- 51,554 98,223 165,453 373,077
Net Interest Expense 183,000 -- 66,521 33,376 (159,432) 123,465
Identifiable Assets 25,356,899 18,455 1,179,889 1,346,852 26,803,528 54,705,623
Capital Asset Expenditure 1,120 -- 39,315 -- 248,523 288,958
</TABLE>
