UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F- AMENDED ON JUNE 12, 2000
(MARK ONE)
[X] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[_] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to __________________
Commission file number: 0-30314
Dealcheck.com Inc.
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(Exact name of Registrant as specified in its charter)
Inapplicable
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(Translation of Registrant's name into English)
Province of Ontario, Canada
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(Jurisdiction of incorporation or organization)
65 Queen Street West, Suite 1905, Toronto, Ontario M5H 2M5, Canada
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(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each exchange on which
registered
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Inapplicable
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<PAGE>
Securities registered or to be registered pursuant to Section 12(g) of the Act.
COMMON SHARES WITHOUT PAR VALUE
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(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act
Common shares without par value
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(Title of Class)
Indicate the number of outstanding shares of each of the Issuer's classes of
capital or common stock as of the close of the period covered by the annual
report
2,132,616 Common shares without par value as at March 31, 1999
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report) and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
-
Indicate by check mark which financial statement item the registrant has elected
to follow
Item 17: X Item 18
-
Except as otherwise noted, all dollar amounts are presented in Canadian Dollars
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PART I PAGE NO.
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<S> <C> <C>
ITEM 1 DESCRIPTION OF BUSINESS 1
ITEM 2 DESCRIPTION OF PROPERTY 7
ITEM 3 LEGAL PROCEEDINGS 7
ITEM 4 CONTROL OF COMPANY 7
ITEM 5 NATURE OF TRADING MARKET 8
ITEM 6 EXCHANGE CONTROLS AND OTHER LIMITATIONS 10
AFFECTING SECURITY HOLDERS
ITEM 7 TAXATION 11
ITEM 8 SELECTED FINANCIAL DATA 13
Statement of Operations Data
Balance Sheet data
Exchange Rates
ITEM 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF 16
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Results of Operations
Liquidity and Capital Resources
ITEM 10 DIRECTORS AND OFFICERS OF THE COMPANY 24
ITEM 11 COMPENSATION OF DIRECTORS AND OFFICERS 26
ITEM 12 OPTIONS TO PURCHASE SECURITIES FROM 27
COMPANY OR SUBSIDIARY
ITEM 13 INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS 27
<PAGE>
PART II PAGE NO.
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ITEM 14 DESCRIPTION OF SECURITIES TO BE REGISTERED 27
PART IV
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ITEM 17 FINANCIAL STATEMENTS 27
ITEM 18 FINANCIAL STATEMENTS 28
ITEM 19 FINANCIAL STATEMENTS AND EXHIBITS 28
(a) Index to Financial Statements
(b) Exhibits
SIGNATURE 30
</TABLE>
<PAGE>
PART I
ITEM I DESCRIPTION OF BUSINESS
------------------------------------------
COMPANY OVERVIEW
-----------------
Dealcheck.com Inc. ("the Company") is based in Toronto, Ontario, Canada.
The Company had no sales since April 1, 1996 and a history of significant
losses.
The loss from operations during the year ended March 31, 1999 was $477,596 and
an accumulated deficit at March 31, 1999 was about $16 million.
The company's operating cash requirements to date have been funded by
- Snapper Inc., representing a number of individual and corporate investors,
under a consulting contract signed with Snapper Inc., dated April 1, 1997,
in which, Snapper Inc. were to introduce investors to the Company apart
from other services (a copy of the agreement is included in this report -
Item 19-3(ii)) and
- Robox Holdings Limited, owned by a director, John Robinson.
The Company relies on the continuity of such finances to fund its future
business strategy. No commitment has been made in writing from any of the
shareholders or directors.
In the event that such finance is not made available in the future and the
directors of the Company are unable to raise funds from elsewhere, the Company
will be unable to carry out its proposed business strategy.
COMPANY HISTORY
----------------
The Company is listed on OTC Bulletin Board under the symbol "DCHK". The
Company was formerly listed under the symbol "DEAL" but was advised by NASDAQ
that another Issuer had asked for and was granted the use of this symbol. The
Company's symbol was, as a result, changed to "NMBC" on August 13,1999 and
subsequently changed to "DCHK" on November 3, 1999. The Company has a fully
owned subsidiary, Foodquest inc., which has been inactive for the past five
years.
The Company was incorporated as Kamlo Gold Mines Limited under the Business
Corporation act (Ontario) in 1973. From incorporation to 1985, the Company was
an inactive shell.
1
<PAGE>
Between 1986 and 1992, the Company was involved in the development of a patented
new technology for the marine propulsion business. The technology proved not to
be financially feasible and was therefore discontinued.
Between 1993 to 1996, the Company was involved initially in the distribution and
later on in the manufacturing of a snack food originally developed in Australia.
The snack food line proved to be too expensive for the marketplace in North
America and the Company closed the business in November 1996.
MARKET FOR THE COMPANY'S SECURITIES - APPLICABILITY OF PENNY STOCK RULES
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The Company's securities comprise common shares without par value. These shares
are currently traded over the counter on the Electronic Bulletin Board
maintained by NASD and are not listed on any of the national exchanges.
The Company is subject to certain "penny stock" rules promulgated by the
Securities and Exchange Commission. The Commission has adopted regulations that
generally define a "penny stock" to be an equity security that has a market
price of less than $5.00 per share or an exercise price of less than $5.00 per
share The maximum price of the Company's share between April 1, 1997 and
September 30, 199, was $4. Refer to the table of high and low prices for the
Company's common share during the past three years given in Item 5 - Nature of
Trading Market, pages 13 & 14 of this Statement.
Under such rules, brokers-dealers who recommend such securities to persons other
than established customers and accredited investors must make a special written
suitability determination for the purchaser and receive the purchaser's written
agreement to a transaction prior to sale.
The regulations require the delivery, prior to any transaction involving a penny
stock, of a risk of disclosure schedule explaining the penny stock market and
the risks associated therewith.
CURRENT OPERATING ACTIVITIES
------------------------------
The Company has not yet begun any commercial activities. The Company, however,
made new investment In a Private Company, World Vacation Club.com towards the
end of the fiscal year 1999. This is more fully explained below.
OVERVIEW OF THE FISCAL YEAR ENDED MARCH 31, 1999
--------------------------------------------------------
In December 1998, the Board of Directors agreed on a new business strategy. This
strategy included development of Internet oriented projects and equity
investments in Internet oriented businesses
2
<PAGE>
Since that time, the management began evaluating various business proposals.
Towards the end of the fiscal year, the Company short-listed the following
potential business opportunity -
- One consisted of investment in a new company called, World Vacation
Club.com which plans to promote a unique vacation villa ownership
concept primarily through Internet
The further details of the business of World Vacation Club.com and the Company's
financial commitment therein are explained below:
1. WORLD VACATION CLUB.COM (WVC)
The nature and extent of the Company's investment in WVC is summarized below:
<TABLE>
<CAPTION>
Type of Quantity Invested Amount invested
Securities on CDN$ US$
<S> <C> <C> <C> <C>
Common Shares 150,000 March 3, 99 34,503 22,500
Common Shares 200,000 March 19,99 30,411 20,000
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As at March 31, 99 350,000 64,914 42,500
Common shares 100,000 Aug. 20, 99 14,923 10,000
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Total 450,000 79,837 52,500
================================================================================
</TABLE>
The above investment constitutes 11.25% equity interest in WVC (8.75% as at
March 31, 1999)
WVC was incorporated in the State of Nevada in August 1998 as a private limited
Corporation.
The Company, on May 29, 2000, sold its 11.25% equity interest in WVC (8.75% as
of March 31, 1999) to an unaffiliated purchaser, Mr. James Hannah for the sum of
CDN$79,837. The Company determined, as a matter of business judgment and in the
best interest of its shareholders, that the proposed business of WVC may require
certain licenses or other filings to comply with regulatory requirements in
order for WVC to engage in its proposed business. Resultantly, its ownership
interest in WVC would not yield the best return on its investment. The sale of
the Company's interest in WVC has been reflected in a subsequent event note to
the Company's Financial Statements at March 31, 1999 and September 30, 1999,
which are annexed as exhibits in this Statement. A copy of the sale agreement
with Mr. Hannah is included in the exhibits (# 3(b)3(ii)(c) )
3
<PAGE>
PLANS FOR THE FISCAL YEAR ENDING MARCH 31, 2000
-------------------------------------------------------
The company continued to receive loans from various investors through Snapper
Inc. during the period since March 31, 1999. Advances provided between April 1,
1999 and September 30, 1999 from this source totaled approximately $220,000.
These funds were used mainly towards operating costs and also for acquiring
100,000 shares in WVC (see 1 under "Overview of the fiscal year ended March 31,
1999).
The Consulting agreement with Snapper Inc., which expired on September 30, 1999,
was extended by another year on the same terms and conditions. A copy of the
renewed agreement is included I the appendix at the end of this Statement.
Apart from the above, there are no signed agreements for any further funding.
However, the Company, at this time, is negotiating with various parties to
secure additional financing.
The following is a summary of the major development in the investment made
during the late fiscal 1999:
WORLD VACATION CLUB.COM
As explained in the overview of the fiscal year ended March 31, 1999, the above
investment was sold in May 2000 at cost to an unaffiliated purchaser.
IRCHECK.COM
During the early year 2000, the management decided to invest in a new wholly
owned project, IRCheck.com. The project involves developing a web site, which
will offer free memberships to access an on-line database of Investors'
Relations (IR) Firms in North America. IR firms provide communication services
between corporations, investors, and financial communities. The data base for
each IR firm will include information like the firm's profile, their
owners/management profiles, client list, success stories, press releases, links
to their web sites. IRCheck.com will allow users to make informed decisions
about hiring IR firms based on the information that will be available on the Web
site.
IRCheck.com 's primary sources of revenue will be monthly listing fee from the
IR firm desiring to be listed on the Web site and from advertising and
sponsorship from legal firms, CPAs, venture capital companies, book stores
specializing in corporate and legal publications and other companies providing
the relevant products and services. The minimum listing fee will be $100 per
month. the actual fee to be charged will depend on the size of the IR firm
4
<PAGE>
The Company signed a contract with React Digital Arts for design and development
of a Web Site for IRCheck.com. A copy of the contract is included as Exhibit
3(ii)(b). The contract document provides further overview of the project and
details of the rollout phases and of the site map/flow chart. Beta testing is
expected to begin in April 2000 and a roll out of the live site in May 2000. The
management expects the site to begin generating revenue by January 2001,
although no guarantee can be made as to whether or not the Site will be a
successful commercial venture. The main sources of revenue will be advertising
and listing fees to be charged to IR firms.
The initial cost to design, develop and launch the site is $32,000 (See Contract
document included in the Exhibits). Management estimates initial marketing costs
of approximately $50,000
FUTURE BUSINESS STRATEGY
--------------------------
The Company's overall strategy includes the internal development and operation
of majority-owned subsidiaries as well as taking strategic positions in other
Internet companies that may demonstrate synergies with the Company's core
businesses.
Broadly, the plan involves-
- Development of Internet oriented businesses, which have yet to go beyond
the conceptual level and
- Investment in the equity of other companies whose business models require
extensive use of Internet related services i.e. E-commerce, virtual sales
and marketing.
The Company's strategy also envisions and promotes opportunities for synergistic
business relationships among the Internet companies within its portfolio.
RISKS RELATING TO INTERNET INDUSTRY
---------------------------------------
Concerns regarding security of transactions and transmitting confidential
Information over the Internet may have an adverse impact on our proposed
business and on the business of WVC
We believe that concern regarding the security of confidential information
Transmitted over the Internet prevents many potential customers from engaging in
online transactions. If WVC or us that will depend on such transactions do not
add sufficient security features to the future product releases, the products
and services may not gain market acceptance or there may be additional legal
exposure.
5
<PAGE>
The WVC's and our infrastructure, i.e. E-Mail server is potentially vulnerable
to physical or electronic break-ins, viruses or similar problems. If a person
circumvents the security measures imposed, he or she could misappropriate
proprietary information or cause interruption in operations of the Company.
Security breaches that result in access to confidential information could damage
the reputation of the company and expose it to a risk of loss or liability. WVC
and we may be required to make significant investments and efforts to
Protect against or remedy security breaches. Additionally, as e-commerce becomes
more widespread, WVC and our potential customers will become more concerned
about security. Unless their concerns are not adequately addressed,
We or WVC may be unable to sell our goods and services.
Both the Company and WVC plans to operate in markets characterized by rapid
technology change, frequent new product and service introductions and evolving
industry standards. Significant technological changes could render our existing
Web site technology or other products and services obsolete. The e-commerce
market's growth and intense competition may exacerbate these conditions.
If we are unable to successfully respond to these developments or do not respond
in a cost-effective way, our business, financial condition and operating results
will be adversely affected. To be successful, WVC and we must adapt to the
rapidly changing markets by continually improving the responsiveness, services
and features of our products and services and by developing new features to meet
the needs of our customers. Our success will depend, in part, on our ability to
license leading technologies useful in our businesses, enhance our products and
services and develop new offerings and technology that address the needs of our
customers. we will also need to respond to technological advances and emerging
industry standards in a cost- effective and timely manner.
Government regulations and legal uncertainties may place financial burdens on
our business and the businesses of WVC
As at September 30, 1999, there were few laws or regulations directed
specifically at e-commerce. However, because of the Internet's popularity and
increasing use, new laws and regulations may be adopted. These laws and
regulations may cover issues such as the collection of and use of data from Web
site visitors and related privacy issues, pricing, content, copyrights, online
gambling, distribution and the quality of goods and services. The enactment of
any additional laws or regulations may impede the growth of the Internet and
e-commerce, which could decrease the potential revenue and place additional
financial burdens on our business and the businesses of WVC
6
<PAGE>
Laws and regulations directly applicable to e-commerce or Internet
communications are becoming more prevalent. For example, Congress recently
enacted laws regarding online copyright infringement and the protection of
information collected online from children. Although these laws may not have a
direct adverse effect on our proposed business or those WVC, they add to the
legal and regulatory burden faced by e-commerce companies.
ITEM 2 DESCRIPTION OF PROPERTY
------------------------------------------
The administrative head office of the Company is located in leased premises at
65 Queen Street West, Suite 1905, Toronto, Ontario, Canada.
The office is approximately 1200 square feet and is subleased on a month by
month basis.
ITEM 3 LEGAL PROCEEDINGS
-----------------------------------
There are no material legal proceedings in progress or to the knowledge of the
Company, pending or threatened to which the Company is a party or to which any
of its properties is subject.
ITEM 4 CONTROL OF COMPANY
-------------------------------------
(a) As far as is known to the Company, the Company is not directly or
indirectly owned or controlled by any other corporation or any foreign
government.
(b) The following table sets forth as of March 31, 1999, information with
respect to the total amount of the class of the Company's voting
securities owned by the directors and officers as a group. There is no
person known to the Company to be the beneficial owner of more than 10%
of any class of the Company's voting securities.
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(1) (2) (3) (4)
Identity of person or Percentage
Title of Class Group Amount owned of Class*
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Common shares Officers and 172,380 common 8%
Directors as a shares
Group
* Based upon 2,132,616 common shares issued and outstanding as at March 31, 1999
7
<PAGE>
(c) As of the date hereof, there are no arrangements known to the Company, the
operations of which may result in a future change of control in the
Company.
(d) Approximately 1.7 million of the issued common shares were issued between
the fiscal years 1995 and 1999, mostly in settlement of debts. These debts
represented loans provided by a group of investors represented by Snapper
Inc. The shares were issued to various persons/entities at the instructions
of Snapper Inc. The Company is not aware of any direct or indirect
relationship among these persons/entities and individually none of them
holds more than 10% of the Common shares of the Company, based on the
information provided by our transfer agents, CIBC Mellon Trust Company,
which maintains the shareholders' records of the Company.
(e) On March 31, 1999, the directors of the Company agreed to issue a further
700,000 shares at $0.75 per share to settle various loans and debts
advanced from time to time totaling to $525,000 to three entities at the
instructions of Snapper Inc. These shares have been approved for issuance
by shareholders at the Annual General Meeting of the Company held on
November 15, 1999. The details of the entities are given under "Liquidity
and Capital Resource "section of Item 9, page 27.none of these entities
will have acquired more than 10% of the capital stock of the Company as a
result of this transaction.
(f) None of the directors and officers of the Company owns directly or
indirectly or is related to the owners of Snapper Inc. Snapper Inc. is an
independent privately held Company, which is and has been a shareholder of
Dealcheck.com IncIt has no ownership interest in either Robox Inc. or
Robcorp Inc.nor has it ever had any interest in either of the companies.
Similarly, Neither of the companies has and never had any ownership
interest or control in Snapper Inc. Snapper Inc. currently holds
approximately 2% of the Company's common shares as per the details obtained
from our transfer agents and from Snapper Inc.
ITEM 5 NATURE OF TRADING MARKET
---------------------------------------
The Company's common shares were traded on the Over The Counter Bulletin Board
(OTCBB) and Canadian Dealing Network (CDN) under different symbols ending with
the symbol "FDQI" until January 20, 1999.
Following the name change and 15:1 common shares consolidation in December 1998,
the Company's common shares have been traded primarily on OTCBB under the symbol
"Deal" effective January 21, 1999. The symbol was further changed to "NMBC" on
August 13, 1999 and then to "DCHK" on November 3, 1999 as more fully
explained in Item 1, Part 1 of this Report.
8
<PAGE>
The following table sets forth the reported high and low sale prices and volume
traded for the common shares as quoted on OTCBB on a quarterly basis since April
1, 1997
-----------------------------------------------------
PERIOD (M/D/Y) HIGH LOW
(IN US DOLLAR) VOLUME FOR
QUARTER
-----------------------------------------------------
4/1/97 - 6/30/97 0.08 0.01 100,300
7/1/97 - 9/30/97 0.04 0.01 94,200
10/1/97 - 12/31/97 0.035 0.01 89,300
1/1/98 - 3/31/98 0.04 0.01 189,900
4/1/98 - 6/30/98 0.07 0.01 66,800
7/1/98 - 9/30/98 0.11 0.02 1,227,700
10/1/98 - 12/31/98 0.02 0.01 459,000
1/1/99 - 1/25/99 0.09 0.01 282,200
1/25/99 - 3/31/99* 4.00 0.875 225,700
4/1/99 - 6/30/99* 3.125 1.375 230,700
7/1/99 - 9/30/99* 2.50 1.75 152,700
* Reflects prices after the consolidation of 15 old common shares into 1
new common share.
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The following table sets forth the reported high and low sale prices and average
volume traded for the common shares as quoted on CDN on a quarterly basis since
April 1, 1997
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PERIOD (M/D/Y) HIGH LOW
(IN CANADIAN DOLLAR) VOLUME FOR
QUARTER
4/1/97 - 6/30/97 0.130 0.050 475,932
7/1/97 - 9/30/97 0.090 0.050 574,192
10/1/97 - 12/31/97 0.070 0.050 502,504
1/1/98 - 3/31/98 0.060 0.060 130,067
4/1/98 - 6/30/98 0.080 0.050 112,355
7/1/98 - 9/30/98 0.195 0.050 500,740
10/1/98 - 12/31/98 0.130 0.010 201,252
1/1/99 - 1/25/99 0.080 0.050 156,000
1/25/99 - 3/31/99* x 3.75 1,000
4/1/99 - 6/30/99* x
7/1/99 - 9/30/99* x
* Reflects prices after the consolidation of 15 old common shares into 1 new
common share.
X There was only one transaction - 1,000 shares traded for $3.75 - since
Consolidation date till to date.
9
<PAGE>
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As of June 30, 1999, the Company's share register indicated that 191,440 of the
issued and outstanding common shares were held by 494 shareholders with
addresses in the United States, representing approximately 9% of the issued and
outstanding common shares of the Company.
ITEM 6 EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITIES HOLDERS
--------------------------------------------------------------------
Except as discussed in Item 7, the Company is not aware of any Canadian federal
or provincial laws, decrees, or regulations that restrict the export or import
of capital, including foreign exchange controls, or that affect the remittance
of dividends, interest or other payments to non-Canadian holders of the common
shares. The Company is not aware of any limitations on the right of non-Canadian
owners to hold or vote the common shares imposed by
Canadian federal or provincial law or by the Company.
The Investment Canada Act ( " Act" ) governs acquisitions of Canadian business
by a non-Canadian person or entity . The Act provides, among other things, for a
review of an investment in the event of acquisition of control in certain
Canadian businesses in the following circumstances:
An indirect acquisition of control by an investor who is a World Trade
Organization ("WTO") investor is reviewable unless the value of the assets of
the business located in Canada represents more than 50% of the asset value
of the transaction, or the business is involved in uranium production,
financial services, transportation services or a cultural business.
a. If the investor is a non-Canadian and is not a member of a WTO country, any
direct acquisition having an asset value exceeding $5, 000, 000 and any
indirect acquisition having an asset value exceeding $5,000,000;
b. If the investor is a non-Canadian and is a WTO member, any direct
acquisition having an asset value exceeding $168,000,000, unless the
business is involved in uranium production, financial services,
transportation services or a cultural business.
10
<PAGE>
The Act provides that a non-Canadian investor can hold up to 1/3 of the issued
and outstanding capital of a Canadian corporation without being deemed a
"control person" and that a non-Canadian investor holding greater than 1/3 but
less than of the issued and outstanding capital of a 'Canadian corporation is
deemed to be a control person subject to a rebuttable presumption to the
contrary (i.e. providing evidence of another control or control group holding a
Greater of shares).
The Act provides for notification under the Act where a non-Canadian acquires
control, directly or indirectly, of a Canadian business with assets under the
thresholds for reviewable transactions. The notification process consists of
filing a notification from within 30 days following the implementation of
investment assets under the thresholds for reviewable transaction. The
notification process consists of fling a notification from within 30 days
following the implementation of an investment.
ITEM 7 TAXATION
--------
(a) Canadian Federal Income Taxation
-----------------------------------
The following discussion is a summary of the material Canadian federal income
tax considerations generally applicable to purchasers of the Company's Common
Stock pursuant to this Report who, for purposes of the Income Tax Act (Canada)
and Income Tax Regulations (the "Canadian Act"), deal at arm's length with the
Company, hold shares of Common Stock as capital property, are not residents of
Canada at any time when holding Common Stock and do not use or hold and are not
deemed to use or hold Common Stock in or in the course of carrying on business
in Canada and, in the case of insurers who carry on an insurance business in
Canada and elsewhere, do not hold Common Stock that is effectively connected
with an insurance business carried on in Canada. Such a purchaser is referred to
in this discussion as a "shareholder".
This summary is based on the current provisions of the Canadian Act, the
regulations thereunder and the Canada-United States Income Tax Convention (1980)
(the "Treaty") as amended. This summary takes into account specific proposals to
amend the Canadian Act and the regulations thereunder publicly announced by the
Minister of Finance prior to the date hereof and the Company's understanding of
the current published administrative and assessing Canada, Taxation. This
summary does not take into account Canadian provincial income tax laws or the
income tax laws of any country other than Canada.
A shareholder of the Company will generally not be subject to tax pursuant to
the Canadian Act on a capital gain realized on a disposition of Common Stock
unless the Common Stock is "taxable Canadian property" to the shareholder for
purposes of the Canadian Act and the shareholder is not eligible for relief
pursuant to an applicable bilateral tax treaty. Under proposals to amend the
Canadian Act, the Common Stock will not be taxable Canadian property to a
shareholder provided that the Company is listed on a prescribed Canadian or
foreign stock exchange within the meaning of the Canadian Act and provided that
such shareholder, or persons with whom such shareholder did not deal at arm's
length (within the meaning of the Canadian Act), or any combination thereof, did
not own 25% or more of the issued shares of any class or series of the Company
at any time within five years immediately preceding the date of disposition. In
addition, the Treaty will generally exempt a shareholder who is a resident of
the United States for purposes of the Treaty from tax in respect of a
disposition of Common Stock provided that the value of the shares of the Company
is not derived principally from direct or indirect real property interests
(including resource property) situated in Canada.
11
<PAGE>
Under the Canadian Act, a disposition of shares that constitutes taxable
Canadian property will give rise to a capital gain (or a capital loss) equal to
the amount by which the proceeds of disposition of such shares, net of any cost
of disposition, exceeds (or is less than) the adjusted cost base of such shares
to the shareholder. Generally, three quarters of any capital gain realized by
the shareholder on a disposition or deemed disposition of such shares is
included in computing his Canadian income for that year as a taxable capital
gain. Three quarters of any capital loss realized by a shareholder on a
disposition or deemed disposition of such a share in a taxable year may
generally be deducted from his Canadian taxable capital gains for that year.
Under the Canadian Act, the disposition of a share by a shareholder may occur or
be deemed to occur in a number of circumstances including on sale or gift of
such share or upon the death of the shareholder.
The initial adjusted cost base of a share to a shareholder will be the cost to
him of that share. Under the Canadian Act, certain addition or reduction
adjustments may be required to be made to the cost base of a share. The adjusted
cost base of each common share of a corporation owned by a shareholder at any
particular time will be the average adjusted cost base to him of all shares of
the same class of that corporation owned by him at that time.
Any dividend, including stock dividends, paid or credited, or deemed to be paid
or credited, by the Company to or for the benefit of a shareholder will be
subject to Canadian withholding tax at the rate of 25% on the gross amount of
the dividend, subject to the provisions of any applicable income tax convention.
Pursuant to the Treaty, the rate of withholding tax generally will be reduced to
15% in respect of dividends paid to a shareholder who is a resident of the
United States for purposes of the Treaty and are further reduced to 5% if die
beneficial owner of the shares is a corporation that is a resident of the United
States for purposes of the Treaty owning at least 10% of the voting shares of
the Company.
12
<PAGE>
(b)) United States Taxation
------------------------
For federal income tax purposes, an individual who is a citizen or resident of
the United States or a domestic corporation ("U.S. Taxpayer") will recognize a
gain or loss on the sale of the Company's Common Stock equal to the difference
between the proceeds from such sale and the adjusted cost basis in the Common
Stock. The gain or loss will be a capital gain or capital loss if the Company's
Common Stock is a capital asset in the hands of the U.S. Taxpayer.
For federal income tax purposes, a U.S. Taxpayer will be required to include in
gross income dividends received on the Company's Common Stock. A U.S. Taxpayer
who pays Canadian tax on a dividend on the Common Stock will be entitled,
subject to certain limitations, to a credit (or alternatively, a deduction)
against federal income tax liability. A domestic corporation that owns at least
10% of the voting stock of the Company should consult its tax advisor as to
applicability of the dividends received deduction or deemed paid foreign tax
credit with respect to dividends paid on the Company's Common Stock.
ITEM 8 SELECTED FINANCIAL DATA
-------------------------
This Report includes consolidated financial statements of the Company for the
years ended March 31, 1999 and 1998.These financial statements were prepared in
accordance with accounting principles generally accepted in Canada, which in
their application to the Company, conform, in all material respects, with
accounting principles generally accepted in the United States.
The following is a selected financial data for the Company for each of the
fiscal years ended March 31, 1995,96,97,98 and 99, on a consolidated basis. The
data is extracted from the audited financial statements of the Company for each
of the said years.
During the period between the discontinuation of snack food business and
commencement of active pursuit of opportunities in Communication and Internet
oriented businesses, the operating requirements of the Company were funded
mainly by loans from shareholders, which were mostly converted to equity.
13
<PAGE>
SUMMARY OF FINANCIAL INFORMATION IN THE COMPANY FINANCIAL STATEMENTS
(CANADIAN $)
Operating data - Fiscal year ended March 31
--------------------------------------------------
1999 1998 1997 1996 1995
Sales/ Gross revenue NIL NIL NIL $83,923 $528,291
Loss from Continuing $477,596 $563,035 $626,488 908,004 $4,125,873
Operations
Loss from discontinued NIL NIL $190,959 446,194 $1,717,143
Operations
Loss per Share $ 0.35 $ 0.51* $ 0.75* 2.55* $17.85*
<TABLE>
<CAPTION>
Balance Sheet Data - As at March 31:
------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Working Capital $ 28,690 ($649,329) ($198,830) ($169,649) ($701,466)
(Deficit)
Investment $ 74,349 NIL $ 10,000 106,593 $232,143
Total Assets $ 259,706 $ 61,541 $ 116,744 134,558 $775,281
Long Term Liabilities NIL NIL NIL NIL NIL
Total Liabilities $ 98,290 $ 705,028 $ 234,596 183,437 $1,147,235
Shareholders' Equity $ 161,416 ($643,487) ($117,852) ($48,879) $371,954)
(Deficit)
Number of Shares 2,832,616xx 1,122,615* 1,086,056* 728,180* 373,106*
Outstanding
<FN>
* Recalculated on the basis of the 15:1 common share consolidation on October 29,
1998 to make them comparable with the fiscal 1999.
xx The number of shares include 700,000 shares to be issued to shareholders in
settlement of their advances of $525,000 at $0.75 per share. Shares are yet
to be issued.
</TABLE>
14
<PAGE>
Exchange rates
---------------
The following table sets forth, for the periods and dates indicated, certain
information concerning exchange rates of United States and Canadian dollars. All
the figures shown represent noon buying rates for cable transfers in New York
City certified for customs purposes by the Federal Reserve Bank of New York. The
source of this data is the Federal Reserve Bank Web Site
----------------------------------------------------------
Period period end high low average
------------------------(US$/CDN$)------
----------------------------------------------------------
March 31,1995 1.3987 1.4238 1.3410 1.3819
March 31,1996 1.3635 1.3990 1.3285 1.3613
March 31,1997 1.3835 1.3835 1.3310 1.3634
March 31,1998 1.4180 1.4637 1.3667 1.4031
March 31,1999 1.5092 1.5745 1.4175 1.5086
July 30, 1999 1.4735 1.5035 1.4512 1.4679
15
<PAGE>
ITEM 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
--------------------------------------------------------------------
RESULTS OF OPERATIONS
-----------------------
The following discussion and analysis should be read in conjunction with the
Financial Statements and Notes thereto and the five-year summary of financial
information appearing elsewhere in this Report
1. RESULTS OF OPERATIONS
-----------------------
-----------------------------------------------------------------
Year ended March 31 1997 1998 1999 2nd Q
2000
-------- in 000" CDN$-----
Net Loss for the year 817 563 478 229
Deficit at end of year 14,907 15,470 15,948 16,176
-----------------------------------------------------------------
PAST PERFORMANCE
-----------------
The Company has a history of losses since inception.
Given below is a brief account of the major activities and nature and extent of
losses sustained since its inception in 1973 to the fiscal 1999:
FISCAL YEARS 1973-1985
Between the years 1973 and 1985, the company, then known as Kamlo Gold Mines
Limited, was an inactive shell and incurred no expense or losses.
FISCAL YEARS 1986-1990
On October 25, 1985, the Corporation changed its name to NRT Research
Technologies Inc. and was involved in various research and development projects
through its subsidiaries between fiscal years 1986 and 1990 , as follows:
- Marine Systems Research Inc. (wholly owned) - research into
Injection molded plastic marine propeller for outboard and inboard
boat market
16
<PAGE>
- NRT Research (B.C.) Ltd. (wholly owned) - research into improving
performance of 12-meter yacht hulls in the areas of both speed and
maneuverability
- Games of Tomorrow Inc.( wholly owned) - research into developing
games, toys and novelty items that incorporate emerging technologies
such as holography.
- PB Yatch Design Inc.(80% owned) - research into developing
cost-effective improvements in the propulsive efficiency and ease of
handling of recreational sailing craft.
None of the above development efforts resulted in any commercial products, which
could create a revenue stream. A total of $5.5 million was spent in acquiring
subsidiaries and in funding the research and development efforts during the
period. The costs were either settled through issuance of common shares or by
cash, which was in turn raised through issuance of shares in private placements.
Roughly half of the cumulative losses of approx. $5.5 million at the end of the
fiscal 1990 resulted from the write off of investments in subsidiaries and
deferred development costs and the remaining half of the losses represented
operating losses.
FISCAL YEARS 1991- 1998
During the fiscal 1991-1992, the Company completely discontinued all research
and development. The board of directors and the officers were replaced and
Terence Robinson, the current director, together with two other independent
directors, came on board. The name of the company changed to Cuda Consolidated
Corp and then in fiscal 1995 to Foodquest International Corp.
During 1993, the Company acquired the exclusive rights to distribute a range of
snack foods produced in Australia. During 1994 and 1995 fiscal years, the
Company sought out appropriate marketing and distribution arrangements. Advances
were made to distributors to allow them to import product for resale, and
expenses were incurred for product testing, marketing and other ancillary costs.
In 1995 fiscal year, the Company determined that the price paid for the imported
snack foods was too high to allow for profitable, high volume distribution. The
company therefore discontinued distribution business and wrote off $ 1.7 million
representing the costs of the Canadian and US rights and net advances given to
distributors, which could not be recovered.
During 1993, the Company made another investment of $2.5 million in a US
Company, whose principal asset consisted of a proprietary olive oil formulation.
In 1995 fiscal year, the US Company disposed of its formulation and the
Company's interest was redeemed for $162,000 being the proportionate share of
the cash received. As a result, the company suffered a redemption loss of $2.3
million.
17
<PAGE>
During the fiscal 1996, the Company entered into a joint venture with a Canadian
company to develop an operational snack food manufacturing plant in Canada. As
part of the agreement, the Company was required to provide financial support.
A total sum of about $200,000 was financed until the middle of fiscal 1997, when
the Company decided to cease further financing due to significant uncertainty
surrounding the viability of the operations. The investment was written down by
$190,000 to its net realizable value of $10,000. However, in the fiscal 1998,
this amount was considered irrecoverable and was written off.
Thus, additional losses of about $10 million were sustained during the above
period. $5.8 million of these losses occurred in the fiscal year 1995 alone -
these loses resulted from writing off of the costs of acquiring distribution
rights and investment in a subsidiary as explained above. The balance of the
losses reflected operating loss.
LOSSES FOR THE PAST THREE FISCAL YEARS 1997-1999
-------------------------------------------------------
There was no revenue during the fiscal years 1997, 1998 and 1999. The new
investments made near the end of the fiscal year 1999 are unlikely to generate
revenue for some time.
Net loss for the fiscal year 1997 was $817,447, which included write down of
investments in snack foods business of $190,959. Net loss for the fiscal 1998
declined to $563,035, which included write down of investments in snack foods of
$10,000. Net loss for fiscal 1999 declined further to $477,596 - there was no
investments write down in this fiscal year. The decline in net loss was entirely
attributed to the decline in general and administrative costs.
General and Administrative expenses declined from $626,488 in the fiscal 1997 by
about 12% to $553,035 in the fiscal 1998 and a further 14% to $477,596 in the
fiscal 1999.
The major components of the general and administrative costs were as follows:
a. TRAVEL PROMOTION AND CONSULTING FEE increased by approx. 4% from $301,461
in fiscal 1997 to $311,955 in fiscal 1998 and by a further 4% to $323,337
in fiscal 1999. This is a major cost component - constituting 48% of the
total costs in fiscal 1997, 56% in fiscal 1998 and 68% in fiscal 1999.
Increase in these costs were attributed to the renewed efforts in making
the Company operative once again and culminating in the two investments by
the end of the fiscal 1999.
18
<PAGE>
b. PROFESSIONAL FEES declined marginally by about 1% from $76,151 in fiscal
1997 to $75,593 in fiscal 1998 but then declined by 48% in the fiscal 1999
to $39,113. The significant reduction reflected the management's efforts in
reducing dependence on outside consultants and lawyers. Many of the tasks
including reviewing a potential investment proposal, which used to be
outsourced in the past, were being handled in-house.
c. OFFICE AND GENERAL EXPENSES declined by 35% from $100,421 in fiscal 1997 to
$65,163 in fiscal 1998 and a further 71% to $18,948 in fiscal 1999.
Discontinuation of snack food business and closure of other offices of
subsidiary and joint venture companies on one hand and conscious efforts by
the management to reduce these costs attributed to the significant
reduction over the three years.
In December 1998, the management finally agreed on a new business strategy. The
Company began looking for Internet oriented businesses, which were at a
conceptual level and required further funds to develop into commercially viable
businesses. The Company would also participate in the equity of other companies
whose business models fit into the ones being developed by the Company. A
detailed description of the new business approach is given under Item 1, Part I
of this Statement.
During March 1999, the Company invested $64,914 ($42,500US), which represented
8.75% equity interest in World Vacation Club.com (WVC).
The above investment was sold in May 2000 at cost to an unaffiliated purchaser
as more fully explained in Part 1, item 1 under overview of the fiscal year
ended March 31, 1999.
SIX MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------
There was no revenue during this period.
Net loss for the period was $228,688 and related entirely to general and
administrative expenses. Overall general and administrative expenses remained,
more or less, at the same level as the ones for the six months ended September
30, 1998, which were $222,486.
If the expenses for the first six months were to be annualized, they would
amount to $$457,376 - which would reflect about 4% reduction over those for
fiscal 1999.
19
<PAGE>
Office and general overheads continued to decline. They were $7,926 compared to
$19,641 for the same period in the fiscal 1999. Professional fees have
increased to $36,398 compared to $16,419 for the same period in fiscal 1999. The
increase is due to the management actively pursuing new business proposals and
retaining services of lawyers and financial professionals during the current
period. No such activity existed during the previous period.
The company exercised its options to acquire more shares in World Vacation
Club.com and purchased 100,000 shares at a cost of $14,923. However, in MAY
2000, this investment was sold at cost as explained on page 19 under Losses for
the past three fiscal years 1997-1999 section.
2 LIQUIDITY AND CAPITAL RESOURCE
---------------------------------
(a) ACCUMULATED DEFICIT AND THE COMPANY'S ABILITY TO OPERATE IN FUTURE
The Company has experienced recurring net losses since inception and has an
accumulated deficit of about $16 million at March 31, 1999. Travel,
promotion and consulting expenses, professional fees, occupancy costs and
other general expenses will be incurred, which in the absence of any
income, will produce continuing net losses and an increase in accumulated
deficit annually. These matters raise substantial doubt about the Company's
ability to continue as a going concern. The Company's ability to continue
operations as a going concern and to realize its assets and to discharge
its liabilities is dependent upon obtaining additional financing sufficient
for continued operations as well as the achievement and maintenance of a
level of profitable operations.
The Company has and is pursuing aggressive costs cutting programs. Since
fiscal 1997, office and general expenses declined by 35% in fiscal 1998 and
a further 71% in fiscal 1999.
During the fiscal 1999, the management agreed on a new business strategy
and in March 1999 made investments towards the objective of generating
operational income in the future. The management was also successful in
securing equity financing to fund its operations and its investments in new
projects. During the six months to September 30, 1999, the company received
additional interest free funding of $212,898 under a consulting agreement
with Snapper Inc. towards its operating costs. The said agreement was
extended for another year up to September 30, 2000. The Company has no
other borrowing.
Management believes that the actions that are being taken and planned to
revise the Company's operations provide for the opportunity for the Company
to continue as a going concern.
20
<PAGE>
Almost all the investments and operating costs had to be funded by equity
financing. The Company's issued capital increased from about $2.3 million in the
fiscal 1987 to $16 million in the fiscal 1999.
The dependence of equity financing was mainly due to the fact that the
alternative debt financing was significantly expensive. Cheaper financing from
bank or other financial institutions was hard to come due to unfavorable
financial history of the Company.
(b) CASH AND WORKING CAPITAL
The Company had a net working capital surplus of $28.690 at March 31, 1999
compared to a deficit of $699,329 at March 31, 1998 and a deficit of $198,830
at March 31, 1997. However, as at September 30, 1999, the company had a net
negative working capital of $207,200 which included advances from shareholders
of $220,514 at September 30, 1999.
The fiscal 1997 and 1998 liabilities included advances from shareholders of
$103,284 and $648,133 respectively. Of this amount, $505,000 was settled in
fiscal 1999 by issuance of about 673,333 common shares at $0.75 per share.
During the fiscal year 1999, additional advances of $525,000 provided by three
independent entities, as detailed below, were approved by the directors to be
settled through issuance of 700,000 common shares at $0.75 per share. The annual
general meeting of the shareholders held on November 15, 1999 approved the
issuance of the shares as negotiated by the directors:
Astrid Willemsen 270,000 shares
Lincoln Development Corporation 230,000 shares
Riviera Investments 200,000 shares
These parties are not related to each other or to any of the existing directors
or to Snapper Inc., based on our inquires and representation received from
Snapper Inc. and each of the above entities.
The net cash spent on operations during the fiscal 99 was $511,295 compared to
$600,411 during the fiscal 98 and $768,681 during the fiscal 1997. Overall
decline in general and administrative expenses through fiscal years 1997 to 1999
resulting in reduction in the operating cash requirement. The trend of reduced
expenses continued during the next six months to September 30, 1999 during which
the net cash spent on operations was down by about 6% to $239,570 or $479,000 on
an annualized basis.
21
<PAGE>
(c) CAPITAL EXPENDITURE
The Company spent $72,020 on new investments and capital assets during the
fiscal 99 compared to $1,164 in the fiscal 98 and $64,551 in fiscal 1997.
1997 and 1998 capital expenditure comprised office equipment.
1999 expenditure included $20,921 towards computers, $ 41,664($27,500 US)
invested in World Vacation Club.com and $9,435($7,000US) paid towards the
development of Shellfn.com web site.
During the six months to September 30, 1999, the company spent a total of
$17,543 consisting of $2,620 on computers and the balance $14,923 on acquisition
of additional 100,000 shares in World Vacation Club.com - see (d) below. No
capital expenditure was incurred during the same period in fiscal 1999.
(d) INVESTMENT IN WORLD VACATION CLUB.COM (WVC)
The investment in WVC constitutes about 25% of the total assets of the Company
as at March 31, 1999 and 37% of the total assets of the company as at September
30, 1999.
In MAY 2000, this investment was sold to an unaffiliated purchaser at cost, as
more fully explained in Part 1, item 1 under overview of the fiscal year ended
March 31, 1999.
(e) CAPITAL REQUIREMENTS
The management has estimated the Company's operating cash requirement for the
next eighteen months to be around $600,000, which includes budgeted expenses
relating to IRCheck.com Web Site development, launch and maintenance.
The revenue stream that may be generated from the IRCheck.com web site after its
launch cannot, at the present time, be reasonably estimated. The Company does
not expect any significant revenue from this source within the next eighteen
months.
The company sold its investment in WVC in MAY 2000 for $79,837. these funds will
be used towards the promotion of IRCheck.com business
Meanwhile, the Company hopes to fund its working capital and investment
requirements from convertible debts or equity investments from the existing
shareholders and private placements. While, no firm commitment for further funds
have been provided by the shareholders, the management believes that Snapper
Inc. will continue to secure investors/lenders for the Company given the new
business strategy. This is evidenced by the fact that loans of $212,000 were
secured by Snapper Inc. for the Company between April 1, 1999 and September 30,
1999. These funds were in addition to $525,000 secured during the fiscal 1999,
as explained under section (b) Cash and working capital above.
22
<PAGE>
If additional funds are raised through the issuance of equity or convertible
debt securities, the percentage ownership of the existing shareholders will be
reduced, shareholders may experience additional dilution and such securities may
have rights, preferences or privileges senior to those of the rights of the
company's Common Stock. There can be no assurance that additional financing
will be available on terms favorable to the Company, or at all. If adequate
funds are not available or not available on acceptable terms, the Company will
not be able to fund its future operations, promote its shellfn.com site as it
desires, take advantage of unanticipated acquisition opportunities, develop or
enhance services or respond to competitive pressures. Any such inability could
have a material adverse effect on the Company's business, results of operations
and financial condition.
(f) YEAR 2000 COMPLIANCE
Many computer Systems identify dates using only the last two digits of the year.
These systems are unable to distinguish between dates in the year 2000 and dates
in the year 1900. That inability (referred to as the '1year 2000 issue"), if not
addressed, could cause these systems to fail or provide incorrect information
after December 31, 1999 or when using dates after December 31, 1999.
In March 1999, the directors of the Company asked the Chief Technology Officer
to review the year 2000 issue in respect of the following three areas:
1. Review the equipment, software and systems inventories at the
Company's office to ensure they are year 2000 compliant.
2. With respect to external contacts, to establish a formal
communications process with its financial institutions, programming
providers, vendors, service providers and other third party contacts
to determine the extent to which such parties are addressing Year 2000
issues. In connection with the process, the Company sent approximately
20 questionnaires requesting information regarding the Year 2000
compliance status of these parties.
3. With respect to the investments of the Company, to establish a formal
communications process with the developer of Shellfn.com web site and
World Vacation Club.com to determine the extent to which they are
addressing Year 2000 issues.
23
<PAGE>
As regards, the first matter, the Company switched from WINDOWS 3.1 operating
system to the year 2000 compliant WINDOWS NT system in February 1999. The cost
of this change is included in the capital expenditure for the fiscal 1999. the
company uses Microsoft office and an accounting software both of which are year
2000 compliant.
As regards the other two matters, The Company has received responses from all
such parties indicating that all are Year 2000 compliant or expect to be Year
2000 compliant on a timely basis.
Given the limited nature of the Company's current operations, no further action
or expenditure is planned in connection with the year 2000 issue. The Company
does not anticipate any significant financial loss or exposure in the matter.
3. FACTORS THAT MAY AFFECT FUTURE RESULTS
-------------------------------------------
This report contains various forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, including financial,
operating and other projections. These statements are based on current plans and
expectations of the Company and involves risks and uncertainties that could
cause actual future activities and results of operations to be materially
different from those set forth in the forward looking statements.
Important factors that could cause actual results to differ include, among
others, risks associated with acquisitions, fluctuations in operating results
because of acquisitions and variations in stock prices, changes in applicable
government regulations and competition. As a result of these factors, the
Company's revenue and income could vary significantly from quarter to quarter,
and past financial performance should not be considered a reliable indicator of
future performance.
ITEM 10 DIRECTORS AND OFFICERS OF THE COMPANY
------------------------------------------
The following table sets forth all current directors and executive officers of
the Company, with each position and office held by them in the Company, and the
period of service as such:
--------------------------------------------------------------------------------
Name and Position Commencement of
With the Company age Service
--------------------------------------------------------------------------------
Terence Edward Robinson 40 October 1, 1991
Chairman and
Chief Executive Officer
John David Robinson 39 June 5, 1992
Director and President
Kam Shah 49 January 3, 1999
Director and
Chief Financial Officer
--------------------------------------------------------------------------------
24
<PAGE>
TERENCE ROBINSON is Chairman of the Board and Chief Executive Officer of the
Company. Mr. Robinson is responsible for raising the required financing,
reviewing investment opportunities and overall operating strategies for the
Company. He has over 18 years of experience as merchant banker and venture
capitalist and has successfully secured financing for a number of start up and
small cap companies.
During the last five years, Mr. Robinson acted as a CEO of Dealcheck.com Inc and
an executive officer of Current Capital Corp., having its head office in
Toronto. CCC provides venture capital financing to start up companies and
investors' relations services to public companies.
Mr. Robinson was also an executive producer of a children's film , "Beethoven
Lives Upstairs" which won him an Emmy Award in 1992.
JOHN ROBINSON is a director and president of the Company. Mr. Robinson is
responsible for day to day operations of the Company and administration of its
business plans. He has over fifteen years of experience as venture capitalist.
Mr. Robinson is a graduate of University of Toronto and Toronto French School.
During the past five years, Mr. Robinson acted as a president of Dealcheck.com
Inc. and as an executive officer of Current Capital Corp . John can fluently
communicate in French, Italian and Russian apart from English.
Mr. Terence Robinson and Mr. John Robinson are related to each other as
brothers.
KAM SHAH joined the Company as a Chief Financial Officer and was appointed to
the Board on January 3, 1999. He worked with Pricewaterhouse Coopers LLP and
Ernst & Young. He is a US Certified Public Accountant and a Canadian Chartered
Accountant. He has over fifteen years of international experience in corporate
financial analysis, mergers & acquisitions. Mr. Shah is responsible for the
financial and statutory matters of the Company and will also assist the Chairman
in reviewing investment opportunities and strategic planning.
Directors may be appointed at any time in accordance with the by-laws of the
Company and then re-elected annually by the shareholders of the Company.
Directors receive no compensation for serving as such, other than stock option
and reimbursement of direct expenses. Officers are elected annually by the Board
of Directors of the Company and serve at the discretion of the Board of
Directors.
25
<PAGE>
The Company has not set aside or accrued any amount for retirement or similar
benefits to the directors.
MANAGEMENT TEAM
The Company 's current management team consists of the following individuals:
Mr. Terence Robinson - see above for his background
Mr. John Robinson - see above for his background
Mr. Kam Shah - see above for his background
MR. ED ALVES is the Chief Technology Officer and has over five years of
experience in Network set up and systems configuration. He worked as an
Information Technology Placement Consultant for two years specializing in small
network, personal computing area. He also worked as Network administrator for a
small family run business and began a consulting company working with small
businesses setting up network and hardware, software configuration.
The Company presently has no permanent employees. It uses the services of
consultants from time to time. No formal consulting contracts have been signed
for such services.
ITEM 11 COMPENSATION OF DIRECTORS AND OFFICERS
------------------------------------------
The compensation payable to directors and officers of the Company and its
subsidiary is summarized below:
1. GENERAL
-------
The Company does not compensate directors for acting solely as directors. Except
as described below, the Company does not have any arrangements pursuant to which
directors are remunerated by the Company or its subsidiary for their services in
their capacity as directors, other than options to purchase shares of the
Company which may be granted to the Company's directors from time to time and
the reimbursement of direct expenses.
The Company does not have any pension plans
26
<PAGE>
2. DIRECTORS AND OFFICERS OF THE COMPANY
------------------------------------------
During the fiscal year ended March 31, 1999, the aggregate cash remuneration
paid or payable by the Company and its subsidiary to its directors and executive
officers for services rendered was $36,390 and total expenses reimbursed were
$36,144.
ITEM 12 OPTIONS TO PURCHASE SECURITIES FROM COMPANY OR SUBSIDIARY
----------------------------------------------------------------
As at June 30, 1999, there were no outstanding options or warrants to purchase
common shares of the Company.
ITEM 13 INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
---------------------------------------------------
Management has no interest in any material transactions of the Company or its
subsidiary during the last three fiscal years and the presently proposed
transactions.
PART II
ITEM 14 DESCRIPTION OF SECURITIES TO BE REGISTERED
-----------------------------------------------
Common shares without par value
Each common share entitles the holder to one vote. Joint holders are considered
to be one holder for this purpose.
The holders of the common shares shall be entitled to receive dividend as and
when approved and declared by the Board of Directors.
In the event of liquidation, the net proceeds after settling all the debts of
the Company shall be distributed among the common shareholders on a pro-rata
basis.
PART IV
ITEM 17 FINANCIAL STATEMENTS
---------------------
See "Item 19. Financial Statements and Exhibit" for a list of those financial
statements of the Company which follows.
27
<PAGE>
ITEM 18 FINANCIAL STATEMENTS
---------------------
Inapplicable
ITEM 19 FINANCIAL STATEMENTS AND EXHIBIT
-----------------------------------
(a) Financial Statements
--------------------
1. Audited Consolidated financial statements of the Company for the
years ended March 31, 1999 and 1998
- Auditors Report
- Consolidated Balance Sheet
- Consolidated Statement of Operations and Deficit
- Consolidated Statement of Cash Flows
- Notes to Consolidated Financial Statements
2. Unaudited Consolidated financial statements of the Company for
six months ended September 30, 1999 and 1998
- Consolidated Balance Sheet
- Consolidated Statement of Operations and Deficit
- Consolidated Statement of Cash Flows
3. Audited Consolidated financial statements of the Company for the
years ended March 31, 1998 and 1997
- Auditors Report
- Consolidated Balance Sheet
- Consolidated Statement of Operations and Deficit
- Consolidated Statement of Cash Flows
- Notes to Consolidated Financial Statements
(b) Exhibits
--------
1(i) Summary of the history of name changes since inception of the Company
1(ii) Certificate of Incorporation of Kamlo Gold Mines Limited
1(iii) Certificate of name change from Kamlo Gold Mines Limited to NRT
Research Technologies Inc.
1(iv) Certificate of name change from NRT Research Technologies Inc.
to NRT Industries Inc.
28
<PAGE>
1(v) Certificate of name change from NRT Industries Inc. to CUDA
Consolidated Inc.
1(vi) Certificate of name change from CUDA Consolidated Inc. to
Foodquest Corp.
1(vii) Certificate of name change from Foodquest Corp. to Foodquest
International Corp.
1(viii) Certificate of name change from Foodquest International Corp. to
Dealcheck.com Inc.
1(ix) Articles of Incorporation of the Company
1(xi) By-Laws of the Company
2(i) Specimen Common Share certificate
3(ii)(a) A consulting agreement with Snapper Inc. dated April 1, 1997
together with a letter dated October 1, 1999 extending the term by
another year
3(ii)(b) IRCheck.com web site development contract with React Digital Arts
dated February 25, 2000
3(ii)(c) An agreement dated May 29, 2000 with Mr. Hannah regarding sale
of WVC investment
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Company certifies that it meets all of the requirements for filing on
Form 20-F and has duly caused this (Revised) registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized
/s/ Terence Robinson
-------------------------------
(Dealcheck.com Inc.)
Terence Robinson
-----------------
Chairman & CEO
DATE: MAY 30, 2000
30
<PAGE>
DEALCHECK.COM INC.
(FORMERLY FOODQUEST INTERNATIONAL INC.)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<PAGE>
DAREN, MARTENFELD, CARR, TESTA AND COMPANY LLP
CHARTERED ACCOUNTANTS
20 Eglinton Avenue West Telephone: 416-480-0160
Suite 2100 Facsimile: 416-480-2646
Toronto, Ontario
M4R 1K8
AUDITORS' REPORT
To the Shareholders of
DEALCHECK.COM INC.
We have audited the consolidated balance sheet of DEALCHECK.COM INC. (FORMERLY
FOODQUEST INTERNATIONAL INC.) as at MARCH 31, 1999 and the consolidated
statement of operations and deficit and cash flow for the year 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 audit. The financial statements of Dealcheck.com (Formerly Foodquest
International Inc.) as of March 31, 1998, were audited by other auditors whose
report dated August 7, 1998, expressed an unqualified opinion on these
statements.
We conducted our audit in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at MARCH 31, 1999
and the results of its operations and cash flows for the year then ended in
accordance with accounting principles generally accepted in Canada which also
conform in all material respects with accounting principles generally accepted
in the United States.
DAREN, MARTENFELD, CARR, TESTA AND COMPANY LLP (Signed)
DAREN, MARTENFELD, CARR, TESTA AND COMPANY LLP
June 2, 1999, except for Note 17 which is dated May 29, 2000
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADIAN U.S. REPORTING CONFLICT
In the United States, reporting standards for auditors require the expression on
a qualified opinion when the consolidated financial statements are affected by
significant uncertainties and contingencies such as those referred to in Note 2
to these financial statements. The above opinion in our report to the
shareholders dated June 2, 1999, except for Note 17 which is dated May 29, 2000
is not qualified with respect to, and provides no reference to, these
uncertainties since such an opinion would not be in accordance with Canadian
reporting standards for auditors when the uncertainties are adequately disclosed
in the consolidated financial statements.
1.
<PAGE>
DEALCHECK.COM INC.
(FORMERLY FOODQUEST INTERNATIONAL CORP.)
CONSOLIDATED BALANCE SHEET
(CANADIAN DOLLARS)
MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
===========================================================================
NOTE 1999 1998
---------------------------------------------------------------------------
ASSETS
CURRENT
<S> <C> <C> <C>
Cash $ 64,368 $ 5,699
Amounts receivable and prepaid expenses 62,612 -
----------------------------------------------------------------------------
126,980 5,699
INVESTMENT 4 64,914 -
SHELLFN.COM WEB SITE 5 9,435 -
CAPITAL ASSETS 6 58,377 55,842
----------------------------------------------------------------------------
$ 259,706 $ 61,541
============================================================================
LIABILITIES
CURRENT
Accounts payable
and accrued liabilities $ 67,423 $ 56,895
Note payable 7 23,250 -
Advance from shareholder, non-interest
bearing 7,617 648,133
----------------------------------------------------------------------------
98,290 705,028
----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY (DEFICIENCY)
CAPITAL STOCK 8 16,109,063 14,826,564
DEFICIT (15,947,647) (15,470,051)
----------------------------------------------------------------------------
161,416 (643,487)
----------------------------------------------------------------------------
$ 259,706 $ 61,541
============================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
APPROVED BY THE BOARD Terence Robinson Director Kam Shah Director
----------------- ----------
2.
<PAGE>
DEALCHECK.COM INC.
(FORMERLY FOODQUEST INTERNATIONAL CORP.)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(CANADIAN DOLLARS)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
=====================================================================
NOTE 1999 1998
---------------------------------------------------------------------
EXPENSES
<S> <C> <C>
Travel, promotion and consulting $ 323,337 $ 311,955
Professional fees 39,113 75,593
Rent 24,800 43,163
Telephone, internet and courier 26,942 24,244
Transfer agents fees 14,684 10,757
Shareholders information 11,350 5,860
Amortization 18,386 16,300
Office and general 18,948 65,163
---------------------------------------------------------------------
477,596 553,035
---------------------------------------------------------------------
LOSS BEFORE UNDERNOTED ITEM (477,596) (553,035)
WRITE OFF OF INVESTMENT 4(ii) - 10,000
---------------------------------------------------------------------
NET LOSS FOR YEAR (477,596) (563,035)
DEFICIT AT BEGINNING OF YEAR (15,470,051) (14,907,016)
---------------------------------------------------------------------
DEFICIT AT END OF YEAR $(15,947,647) $(15,470,051)
---------------------------------------------------------------------
NET LOSS PER SHARE 9 $ (0.35) $ (0.51)
=====================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
3.
<PAGE>
DEALCHECK.COM INC.
(FORMERLY FOODQUEST INTERNATIONAL CORP.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(CANADIAN DOLLARS)
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
======================================================================
1999 1998
----------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (487,031) $(563,035)
Amortization 18,386 16,300
Write-off of investment - 10,000
Amounts receivable and prepaid expenses (62,615) 10,741
Accounts payable and accrued liabilities 10,530 (74,417)
----------------------------------------------------------------------
(520,730) (600,411)
----------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (20,921) (1,164)
Investment in World Vacation Club.com (41,664) -
----------------------------------------------------------------------
(62,585) (1,164)
----------------------------------------------------------------------
FINANCING ACTIVITIES
Advances from shareholder 641,984 582,249
----------------------------------------------------------------------
INCREASE (DECREASE) IN CASH DURING YEAR 58,669 (19,326)
CASH AT BEGINNING OF YEAR 5,699 25,025
----------------------------------------------------------------------
CASH AT END OF YEAR $ 64,368 $ 5,699
----------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES
NON-CASH INVESTING AND FINANCING ACTIVITIES
Conversion of debts to equity $1,282,500 $ 37,400
Note issued on acquisition of investment 23,250 -
======================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
4.
<PAGE>
DEALCHECK.COM INC.
(FORMERLY FOODQUEST INTERNATIONAL INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
MARCH 31, 1999 AND 1998
--------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
Dealcheck.com Inc. ("the Company") is an internet marketing and development
company, developing business strategies in wholly owned internet sites or
concepts, or companies in which it has an investment interest.
The Company changed its name from Foodquest International Corp. effective
December 31, 1998.
2. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation
of the Company as a going concern. However the Company has experienced
recurring net losses and has an accumulated deficit of about $16 million at
March 31, 1999. Travel, promotion and consulting expenses, professional
fees, occupancy costs and other general expenses will be incurred, which in
the absence of any income, will produce continuing net losses and an
increase in accumulated deficit annually. These matters raise substantial
doubt about the Company's ability to continue as a going concern. The
Company's ability to continue operations as a going concern and to realize
its assets and to discharge its liabilities is dependent upon obtaining
additional financing sufficient for continued operations as well as the
achievement and maintenance of a level of profitable operations.
The Company has and is pursuing aggressive costs cutting programs. Since
fiscal 1997, office and general expenses declined by 35% in fiscal 1998 and
a further 71% in fiscal 1999.
During fiscal 1999, the management agreed on a new business strategy and in
March 1999 made investments towards the objective of generating operational
income in the future.
Management believes that the actions that are being taken and planned to
revise the Company's operations provide for the opportunity for the Company
to continue as a going concern.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Canada and do not
materially differ from accounting principles generally accepted in the
United States (U.S. GAAP) except for:
Shellfn.com Web Site Costs
The costs of developing the commercial web site are allowed to be deferred
under the Canadian Generally Accepted Accounting Principles. However, these
costs should be expensed under US GAAP. Accordingly, under the US GAAP, net
loss for year would be $487,031. Total assets would be $250,271 and deficit
would be $15,957,082.
5.
<PAGE>
DEALCHECK.COM INC.
(FORMERLY FOODQUEST INTERNATIONAL INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
MARCH 31, 1999 AND 1998
--------------------------------------------------------------------------------
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Foodquest International Inc. All
intercompany balances and transactions have been eliminated on
consolidation.
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
INVESTMENT
Investees which the Company does not control or have significant influence
over are accounted for by the cost method of accounting which recognizes
income only to the extent of dividends received.
Investments with an other than temporary impairment in carrying value are
written-down to fair value. In order to determine if there is an other than
temporary impairment in carrying value the company compares the carrying
value of the investment with the financial condition and expected income
from the investment.
CAPITAL ASSETS
Capital assets are carried at cost, less accumulated amortization, which is
based on management's estimates of the assets' useful lives. Amortization
is provided for on a straight line method at annual rate of 20% for
furniture, computer equipment and other office equipment. Leasehold
improvements are amortized over five years on a straight line basis.
Amortization on the assets acquired during year is calculated at half the
applicable rate. No amortization is charged on assets disposed of during
year.
FOREIGN CURRENCY TRANSLATION
Monetary assets and liabilities are translated at exchange rates in effect
at the balance sheet date. Non-monetary assets are translated at exchange
rates in effect when they were acquired. Revenue and expenses are
translated at the approximate average rate of exchange for the year, except
that amortization is translated at the rates used to translate related
assets. The resulting gains or losses on translation are included in the
consolidated statement of operations.
6.
<PAGE>
DEALCHECK.COM INC.
(FORMERLY FOODQUEST INTERNATIONAL INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
MARCH 31, 1999 AND 1998
--------------------------------------------------------------------------------
4. INVESTMENT
On March 3, 1999, the Company subscribed for 150,000 common shares of World
Vacation Club.com, a private Nevada corporation at a price of $0.15 US per
share. The total subscription price of $22,500 US was satisfied with the
payment of $7,500 US and the issuance of a $15,000 US promissory note (see
Note 6).
On March 19, 1999, the Company subscribed for an additional 200,000 common
shares of World Vacation Club.com at a price of $0.10 US per share. The
above investment results in the Company owing 8.75% of the outstanding
voting common shares of World Vacation Club.com. As the Company holds an
8.75% interest in this private Nevada Corporation management has determined
that the investment will be accounted for under the cost method of
accounting.
As at March 31, 1999 the carrying value approximates the fair value of this
investment.
The Company was granted an option until July 31, 1999 to purchase an
additional 200,000 common shares at $0.10 US per share. No value has been
ascribed to the options.
ii) YEAR ENDED MARCH 31, 1998
The Company has been unable to realize its investment in a snack
Food manufacturing plant. Accordingly this investment has been
written off.
During the 1997 fiscal year, the Company ceased financial support
to the joint venture which was developing the snack food
manufacturing plant due to significant uncertainty surrounding
the viability of the operation.
5. SHELLFN.COM WEB SITE
The Company is developing a web site from which it intends to earn fees by
facilitating the trading of public shell companies. The costs relating to
the development of the web site have been deferred and will be amortized on
a straight-line basis over the estimated economic life of the web site not
exceeding three years. Amortization commences when the web site becomes
commercially active. The development costs will be written off when it is
determined that they are not recoverable or when the project is abandoned.
6. CAPITAL ASSETS
------------------------------------------------------
ACCUMULATED NET
COST AMORTIZATION 1998
------------------------------------------------------
Office furniture $45,289 $21,116 $24,173
Office equipment 49,199 18,945 30,254
Leasehold improvements 7,900 3,950 3,950
------------------------------------------------------
$102,388 $44,011 $58,377
======================================================
7.
<PAGE>
DEALCHECK.COM INC.
(FORMERLY FOODQUEST INTERNATIONAL INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
MARCH 31, 1999 AND 1998
6. CAPITAL ASSETS (Cont'd.)
------------------------------------------------------
ACCUMULATED NET
COST AMORTIZATION 1998
------------------------------------------------------
Office furniture $42,271 $12,360 $29,911
Office equipment 31,296 10,895 20,401
Leasehold improvements 7,900 2,370 5,530
------------------------------------------------------
$ 81,467 $25,625 $55,842
------------------------------------------------------
7. NOTE PAYABLE
On March 3, 1999, the Company issued a promissory note for $15,000 US to
World Vacation Club.com to satisfy the subscription amount owed (see Note
4). The note principal together with interest at 6% per annum is due and
payable July 31, 1999.
The Note is secured by 150,000 common shares of World Vacation Club.com
held by the Company.
8. SHARE CAPITAL
AUTHORIZED
Unlimited number of common shares
<TABLE>
<CAPTION>
ISSUED 1999 1998
----------------------------------------------------------------------------------
COMMON Common
SHARES AMOUNT Shares Amount
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning of year 1,122,615 $14,826,564 16,290,838 $14,789,164
On conversion of debt 1,010,000 757,500 548,393 37,400
Consolidation of capital stock
on a 15:1 basis (i) - - (15,716,616) -
On conversion of debt (ii) 700,000 525,000 - -
----------------------------------------------------------------------------------
2,832,616 $16,109,064 1,122,615 $14,826,564
----------------------------------------------------------------------------------
</TABLE>
i) On October 29, 1998, a special resolution was passed to amend the
Articles of Incorporation to give effect to a 15:1 common share
consolidation. The consolidation took place on January 25, 1999.
Under SAB.4(c) the reverse split is required to be retroactively
applied to 1998. The result of applying the reverse split
retroactively is that at March 31, 1998 the number of common
shares is reduced by 15,716,616 leaving 1,122,615 issued
and outstanding.
8.
<PAGE>
DEALCHECK.COM INC.
(FORMERLY FOODQUEST INTERNATIONAL INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
MARCH 31, 1999 AND 1998
--------------------------------------------------------------------------------
8. SHARE CAPITAL (Cont'd.)
ii) On March 31, 1999, the Company converted $525,000 of shareholder
advances into 700,000 post-consolidated common shares. The shares were
issued subsequent to the end of the year. The issuance of the shares
has been approved by directors.
9. LOSS PER SHARE
Loss per share is calculated on the weighted average number of
post-consolidated common shares outstanding during the year, which was
1,435,949 shares for the year ended March 31, 1999 (1998 - 1,107,382).
10. INCOME TAXES
Management estimates that the Company has carry forward tax losses of
approximately $9,170,000, which may be applied against future taxable
income and expire as detailed below. The benefit arising from these losses
has not been included in the financial statements.
-----------------------
2000 $437,800
2001 697,800
2002 5,036,800
2003 1,271,200
2004 730,800
2005 536,000
2006 459,600
-----------------------
9,170,000
-----------------------
11. COMMITMENTS AND CONTINGENCIES
The Company entered into a consulting agreement with a corporate
shareholder on April 1, 1997. The agreement requires the shareholder to
source new business opportunities and perform general public relations and
financial consulting work for the Company. The consulting fee is US $10,000
per month payable in advance. The agreement expires on September 30, 1999
unless renewed in writing by both the parties.
In addition, the shareholder is also entitled to a success fee equal to 10%
of the new investment introduced into the Company. No such fee was charged
during the year.
9.
<PAGE>
DEALCHECK.COM INC.
(FORMERLY FOODQUEST INTERNATIONAL INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
MARCH 31, 1999 AND 1998
--------------------------------------------------------------------------------
12. RELATED PARTY TRANSACTIONS
A consulting fee was charged by a significant shareholder under an
agreement dated April 1, 1997 (Note 11) of $227,972 (1998 - $168,000) of
which $177,972 related to fiscal 1999 and the remaining amount represents a
prepayment for fiscal 2000, accordingly the prepaid amount has been
reflected as a current asset.
During the year, the Company reimbursed $36,144 in expenses and paid
$36,390 in consulting fees to directors.
13. COMPARATIVE FIGURES
Certain figures presented for comparative purposes have been reclassified
to conform to the current year's method of presentation.
14. YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems, which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure, which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the company,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
15. STATEMENT OF CASH FLOW
S.1540 of the CICA Handbook requires the statement of changes in financial
position to be replaced with the statement of cash flow for fiscal years
beginning after August 1, 1998. The Company has adopted this requirement in
fiscal 1999 and thus has restated the prior year's calculation of cash
flow.
The application of this new requirement did not result in any change to the
net cash flow of the Company in fiscal 1998.
16. ACCOUNTING PRONOUNCEMENTS
i. In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities." SOP 98-5 requires that all start-up costs
related to new operations must be expensed as incurred. In addition,
all start-up costs that were capitalized in the past must be written
off when SOP 98-5 is adopted. The Company will be required to
implement SOP 98-5 for its fiscal year ended March 31, 2000. The
Company expects that the adoption of SOP 98-5 will have no material
impact on its financial position, results of operations or cash flows.
10.
<PAGE>
DEALCHECK.COM INC.
(FORMERLY FOODQUEST INTERNATIONAL INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
MARCH 31, 1999 AND 1998
--------------------------------------------------------------------------------
16. ACCOUNTING PRONOUNCEMENTS (Cont'd.)
ii. In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the
Cost of Computer Software Developed or Obtained for Internal Use". SOP
98-1 requires that entities capitalize certain costs related to
internal-use software once certain criteria have been met. The Company
will be required to implement SOP 98-1 for its fiscal year ended March
31, 2000. The Company expects that the adoption of SOP 98-1 will have
no material impact on its financial position, results of operations or
cash flows.
17. POST BALANCE SHEET EVENT
The Company, on May 29, 2000, sold its 8.75% equity interest in World
Vacation Club.com (Note 4) to an unaffiliated purchaser for the sum of
$64,914.
11.
<PAGE>
DEALCHECK.COM INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<PAGE>
DEALCHECK.COM INC.
CONSOLIDATED BALANCE SHEET
(CANADIAN DOLLARS)
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
NOTE 1999 1998
-------------------------------------------------------------------------------------
ASSETS
CURRENT
<S> <C> <C> <C>
Cash $ 20,153 $ 27,748
Amounts receivable and prepaid expenses 52,991 -
-------------------------------------------------------------------------------------
73,114 27,748
INVESTMENT 4 79,837 -
SHELLFN. COM WEB SITE 5 9,435 -
CAPITAL ASSETS 6 50,626 48,651
-------------------------------------------------------------------------------------
$ 213,042 $ 76,399
-------------------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 36,550 $ 42,848
Note payable 7 23,250 -
Advance from shareholder, non-interest
bearing 220,514 194,524
-------------------------------------------------------------------------------------
280,314 237,372
-------------------------------------------------------------------------------------
SHAREHOLDERS' DEFICIENCY
CAPITAL STOCK 8 16,109,063 15,531,564
DEFICIT (16,176,335) (15,692,537)
-------------------------------------------------------------------------------------
(67,272) (160,973)
-------------------------------------------------------------------------------------
$ 213,042 $ 76,399
-------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
2.
<PAGE>
DEALCHECK.COM INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(CANADIAN DOLLARS)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
NOTE 1999 1998
-------------------------------------------------------------------------------------
EXPENSES
<S> <C> <C> <C>
Travel, promotion and consulting $ 134,799 $ 146,599
Professional fees 36,398 16,419
Rent 15,452 15,305
Telephone, internet and courier 14,444 24,244
Transfer agents fees 3,122 1,072
Shareholders information 6,176 3,265
Amortization 10,370 7,191
Office and general 7,926 19,641
228,688 222,486
NET LOSS FOR PERIOD (228,688) (222,486)
DEFICIT AT BEGINNING OF PERIOD (15,947,647) (14,470,051)
-------------------------------------------------------------------------------------
DEFICIT AT END OF PERIOD $(16,176,335) $(15,692,537)
-------------------------------------------------------------------------------------
NET LOSS PER SHARE 9 $ (0.11) $ (0.15)
-------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
3.
<PAGE>
DEALCHECK.COM INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(CANADIAN DOLLARS)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
---------------------------------------------------------------------
1999 1998
---------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $(228,688) $(222,486)
Amortization 10,370 7,191
Amounts receivable and prepaid expenses 9,621
Accounts payable and accrued liabilities (30,873) (14,047)
---------------------------------------------------------------------
(239,570) (229,342)
---------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (2,620)
Investment in World Vacation Club.com (14,923) -
---------------------------------------------------------------------
(17,543) (1,164)
---------------------------------------------------------------------
FINANCING ACTIVITIES
Advances from shareholder 212,898 251,391
---------------------------------------------------------------------
INCREASE (DECREASE) IN CASH DURING PERIOD (44,215) 22,049
CASH AT BEGINNING OF PERIOD 64,368 5,699
---------------------------------------------------------------------
CASH AT END OF PERIOD $ 20,153 $ 27,748
---------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES
NON-CASH INVESTING AND FINANCING ACTIVITIES
Conversion of debts to equity $ 704,999
---------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
4.
<PAGE>
DEALCHECK.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
--------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
Dealcheck.com Inc. ("the Company") is an internet marketing and development
company, developing business strategies in wholly owned internet sites or
concepts, or companies in which it has an investment interest.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (all of which were normal recurring
adjustments) necessary to present fairly the consolidated financial
position of the Company at September 30, 1999 and 1998 and the results of
its operations and its cash flows for the six months then ended. The
results of operations for the six months ended September 30, 1999 are not
necessarily indicative of the results to be expected for the full year.
2. GOING CONCERN
The Company has experienced recurring net losses since inception and has an
accumulated deficit of about $16 million at September 30, 1999. Travel,
promotion and consulting expenses, professional fees, occupancy costs and
other general expenses will be incurred , which in the absence of any
income, will produce continuing net losses and an increase in accumulated
deficit annually. These matters raise substantial doubt about the Company's
ability to continue as a going concern. The Company's ability to continue
operations as a going concern and to realize its assets and to discharge
its liabilities is dependent upon obtaining additional financing sufficient
for continued operations as well as the achievement and maintenance of a
level of profitable operations.
The Company has and is pursuing aggressive costs cutting programs. Since
fiscal 1997, office and general expenses declined by 35% in fiscal 1998 , a
further 71% in fiscal 1999 and a further 16% during the six months to
September 30, 1999.
During the fiscal 1999, the management agreed on a new business strategy
and in March 1999 made investments towards the objective of generating
operational income in the future. The management was also successful in
securing equity financing to fund its operations and its investments in new
projects. During the first six months of fiscal year 2000, the company
received additional interest free funding of $212,000 under a consulting
agreement with a shareholder (Note 11) towards its operating costs. The
said agreement expired on September 30, 1999 and was renewed for another
year. The Company has no other borrowing.
Management believes that the actions that are being taken and planned to
revise the Company's operations provide for the opportunity for the Company
to continue as a going concern.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation
of the Company as a going concern.
<PAGE>
DEALCHECK.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
--------------------------------------------------------------------------------
3. SUMMARY OF SIGNFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These consolidated financial statements have been prepared by management in
accordance with accounting principles generally accepted in Canada and do
not differ from accounting principles generally accepted in the United
States (US GAAP) except for:
Shellfn.com Web Site Costs
Under the Canadian GAAP, development costs should be deferred and amortized
over their estimated useful life if certain criteria are met. The cost
should be expensed if one of the criteria is not met or the product or
process is permanently abandoned
Under the US GAAP, development costs are expensed.
Accordingly, under the US GAAP, net loss for period would be $238,123,
total assets would be $203,607 and deficit would be $16,185,770
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Foodquest International Inc. All
intercompany balances and transactions have been eliminated on
consolidation.
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
INVESTMENT
Investments in which the Company does not exercise significant influence
are accounted for by the cost method. Income is recognized only to the
extent of dividend received.
Investments with an other than temporary impairment in carrying value are
written down to their estimated realizable value. In order to determine if
there is an other than temporary impairment in carrying value, the company
compares the carrying value of the investment with the financial condition
and expected income from the investment
5
<PAGE>
DEALCHECK.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
--------------------------------------------------------------------------------
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
CAPITAL ASSETS
Capital assets are carried at cost, less accumulated amortization, which is
based on management's estimates of the assets' useful lives. Amortization
is provided for on a straight line method at annual rate of 20% for
furniture, computer equipment and other office equipment. Leasehold
improvements are amortized over five years on a straight line basis.
Amortization on the assets acquired during year is calculated at half the
applicable rate. No amortization is charged on assets disposed of during
year.
FOREIGN CURRENCY TRANSLATION
Monetary assets and liabilities are translated at exchange rates in effect
at the balance sheet date. Non-monetary assets are translated at exchange
rates in effect when they were acquired. Revenue and expenses are
translated at the approximate average rate of exchange for the year, except
that amortization is translated at the rates used to translate related
assets. The resulting gains or losses on translation are included in the
consolidated statement of operations.
4. INVESTMENT
The following investment has been recognized at cost
WORLD VACATION CLUB.COM (WVC)
<TABLE>
<CAPTION>
Common % Cost
Shares Ownership
<S> <C> <C> <C>
At beginning of period 350,000 8.75% 64,914
Exercise of options for 100,000 common shares 100,000 2.5% 14,923
at US$0.10 per share
-----------------------------------------------------------------------
At end of period $450,000 11.25% 79,837
=======================================================================
</TABLE>
WVC is a private corporation and its securities are not traded on the open
market. Since the company held under 20% of nonmarketable voting stock of
WVC, the investment is accounted for at cost. The management has concluded
that there has been no permanent impairment in the carrying value of this
investment
The above investment was subsequently sold at cost - see Note 16.
6
<PAGE>
DEALCHECK.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
--------------------------------------------------------------------------------
5. SHELLFN.COM WEB SITE
The Company is developing a web site from which it intends to earn fees by
facilitating the trading of public shell companies. The costs relating to
the development of the web site have been deferred and will be amortized on
a straight-line basis over the estimated useful economic life of the web
site not exceeding three years. Amortization commences when the web site
becomes commercially active. The development costs will be written off when
it is determined that they are not recoverable or when the project is
abandoned.
6. CAPITAL ASSETS
===========================================================================
ACCUMULATED NET
COST AMORTIZATION 1999
Office furniture $ 45,289 $21,116 $24,173
Office equipment 49,199 18,945 30,254
Leasehold improvements 7,900 3,950 3,950
---------------------------------------------------------------------------
$ 102,388 $44,011 $58,377
===========================================================================
===========================================================================
ACCUMULATED NET
COST AMORTIZATION 1998
Office furniture $ 42,271 $12,360 $29,911
Office equipment 31,296 10,895 20,401
Leasehold improvements 7,900 2,370 5,530
---------------------------------------------------------------------------
$ 81,467 $25,625 $55,842
===========================================================================
7. NOTE PAYABLE
On March 3, 1999, the Company issued a promissory note for $15,000 US to
World Vacation Club.com to satisfy the subscription amount owed (see Note
4). The note principal together with interest at 6% per annum was due and
payable July 31, 1999, this period has now been extended to December 31,
1999.
The Note is secured by 150,000 common shares of World Vacation Club.com
held by the Company.
7.
<PAGE>
DEALCHECK.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
===============================================================================
8. SHARE CAPITAL
AUTHORIZED
Unlimited number of common shares
ISSUED
=========================================================================
1999 1998
-------------------------------------------------------------------------
COMMON Common
SHARES AMOUNT Shares Amount
-------------------------------------------------------------------------
Beginning of period 2,832,615 $16,109,063 1,122,615 $14,826,564
On conversion of debt 940,000 705,000
--------------------------------------------------------------------------------
2,832,615 $16,109,063 2,062,615 $15,531,564
--------------------------------------------------------------------------------
On October 29, 1998, a special resolution was passed to amend the Articles
of Incorporation to give effect to a 15:1 common share consolidation. The
consolidation took place on January 25, 1999. Under SAB.4(c) the reverse
split is required to be retroactively applied to 1998. The result of
applying the reverse split retroactively is that at March 31, 1998 the
number of common shares is reduced by 15,716,616 leaving 1,122,615 issued
and outstanding.
9. LOSS PER SHARE
Loss per share is calculated on the weighted average number of common
shares outstanding during the period, which was 2,832,616 shares for the
six months ended March 31, 1999 (1998 - 1,,817,048).
10. INCOME TAXES
Management estimates that the Company has carry forward tax losses of
approximately $9,170,000, which may be applied against future taxable
income and expire as detailed below. The benefit arising from these losses
has not been included in the financial statements.
-----------------------
2000 $ 437,800
2001 697,800
2002 5,036,800
2003 1,271,200
2004 730,800
2005 536,000
2006 459,600
-----------------------
9,170,000
-----------------------
8.
<PAGE>
DEALCHECK.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
--------------------------------------------------------------------------------
11. COMMITMENTS AND CONTINGENCIES
The Company entered into a consulting agreement with a corporate
shareholder on April 1, 1997. The agreement requires the shareholder to
source new business opportunities and perform general public relations and
financial consulting work for the Company. The consulting fee is US $10,000
per month payable in advance. The agreement expired on September 30, 1999
and has subsequently been renewed for another year
In addition, the shareholder is also entitled to a success fee equal to 10%
of the new investment introduced into the Company. No such fee was charged
during the period.
12. RELATED PARTY TRANSACTIONS
A consulting fee was charged by a significant shareholder under an
agreement dated April 1, 1997 (Note 11) of $88,764 (1998 - $88,986)
During the period, the Company reimbursed $6,055 in expenses and paid
$22,021 in consulting fees to directors.
13. YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems, which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure, which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the company,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
14. STATEMENT OF CASH FLOW
S.1540 of the CICA Handbook requires the statement of changes in financial
position to be replaced with the statement of cash flow for fiscal years
beginning after August 1, 1998. The Company has adopted this requirement in
fiscal 1999 and thus has restated the prior period's calculation of cash
flow.
9.
<PAGE>
DEALCHECK.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CANADIAN DOLLARS)
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
--------------------------------------------------------------------------------
15. ACCOUNTING PRONOUNCEMENTS
i. In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities." SOP 98-5 requires that all start-up costs
related to new operations must be expensed as incurred. In addition,
all start-up costs that were capitalized in the past must be written
off when SOP 98-5 is adopted. SOP 98-5 became applicable to the
Company for its fiscal year ending March 31, 2000. The adoption of SOP
98-5 had no material impact on its financial position, results of
operations or cash flows for the six months ended September 30, 1999.
ii. In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the
Cost of Computer Software Developed or Obtained for Internal Use". SOP
98-1 requires that entities capitalize certain costs related to
internal-use software once certain criteria have been met. SOP 98-1
became applicable to the Company for its fiscal year ending March 31,
2000. The adoption of SOP 98-1 had no material impact on its financial
position, results of operations or cash flows for the six months ended
September 30, 1999.
16 POST BALANCE SHEET EVENT:
The Company, on May 29, 2000, sold its 11.25% equity interest in World
Vacation lub.com to an unaffiliated purchaser for the sum of $79,837
10.
<PAGE>
FOODQUEST INTERNATIONAL CORP.
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
--------------------------------------------------------------------------------
THOMAS N. WRIGHT, CHARTERED ACCOUNTANT
--------------------------------------------------------------------------------
<PAGE>
FOODQUEST INTERNATIONAL CORP.
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
INDEX PAGE
Auditor's Report 1
Consolidated Balance sheet 2 - 3
Consolidated Statement of Operations and Deficit 4
Schedules to the Consolidated Statement of Operations and Deficit 5
Consolidated Statement of Changes in Financial Position 6
Notes to the Consolidated Financial Statements 7 - 12
<PAGE>
--------------------------------------------------------------------------------
THOMAS N. WRIGHT, CHARTERED ACCOUNTANT
--------------------------------------------------------------------------------
2005 Sheppard Avenue East, Suite 503 Telephone: (416) 496-1234
North York, Ontario, Canada M2J 5B4 Fax: (416) 496-0125
Page 1
AUDITOR'S REPORT
To the Shareholders of
FOODQUEST INTERNATIONAL CORP.
I have audited the consolidated balance sheets of Foodquest International Corp.
as at March 31, 1998 and 1997 and the consolidated statements of operations and
deficit and changes in financial position for the years then ended. These
consolidated financial statements are the responsibility of the company's
management. My responsibility is to express an opinion on these financial
statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform an audit to obtain reasonable
assurance whether the consolidated 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.
In my opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at March 31, 1998
and 1997 and the results of its operations and the changes in its financial
position for the years then ended in accordance with accounting principles
generally accepted in Canada.
THOMAS N. WRIGHT
SIGNED BY "THOMAS N. WRIGHT"
CHARTERED ACCOUNTANT
NORTH YORK, Canada
August 7, 1998
COMMENTS BY AUDITOR FOR U.S. READERS
ON CANADA-U.S. REPORTING DIFFERENCE
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the Company's ability to continue as a going concern, such as those described in
Note 1 to the financial statements. My report to the shareholders dated August
7, 1998 is expressed in accordance with Canadian reporting standards which do
not permit a reference to such events and conditions in the Auditors' Report
when these are adequately disclosed in the financial statements.
THOMAS N. WRIGHT
SIGNED BY "THOMAS N. WRIGHT"
CHARTERED ACCOUNTANT
NORTH YORK, Canada
August 7, 1998
<PAGE>
FOODQUEST INTERNATIONAL CORP. Page 2
CONSOLIDATED BALANCE SHEET
AS AT MARCH 31
================================================================================
1998 1997
$ $
================================================================================
ASSETS
CURRENT
Cash 5,699 25,025
Prepaid expenses - 10,741
---------- --------
5,699 35,766
INVESTMENT IN snack food manufacturing (Note 3) - 10,000
OFFICE EQUIPMENT, at cost less accumulated
amortization of $25,625 (1997 - $9,325) 55,842 70,978
61,541 116,744
========== ========
APPROVED ON BEHALF OF THE BOARD:
JOHN ROBINSON, Director
--------------
TERENCE ROBINSON, Director
-----------------
<PAGE>
FOODQUEST INTERNATIONAL CORP. Page 3
CONSOLIDATED BALANCE SHEET
AS AT MARCH 31
================================================================================
1998 1997
$ $
================================================================================
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 56,895 131,312
Advances from shareholders, officers and directors,
non-interest bearing and unsecured (Note 10) 648,133 103,284
---------- ----------
705,028 234,596
---------- ----------
CAPITAL STOCK AND DEFICIT
CAPITAL STOCK (Note 4) 14,826,564 14,789,164
(DEFICIT) (15,470,051)(14,907,016)
----------- ----------
(643,487) (117,852)
----------- ----------
61,541 116,744
=========== ==========
<PAGE>
FOODQUEST INTERNATIONAL CORP. Page 4
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE YEARS ENDED MARCH 31
================================================================================
1998 1997
$ $
================================================================================
GENERAL AND ADMINISTRATIVE EXPENSES
(Schedule) 553,035 626,488
------------ ------------
Loss on continuing operations 553,035 626,488
DISCONTINUED OPERATIONS
Write down of investments in snack foods 10,000 190,959
------------ ------------
NET (LOSS) for the year (563,035) (817,447)
(Deficit), beginning of year (14,907,016) (14,089,569)
------------ ------------
(Deficit), end of year (15,470,051) (14,907,016)
============ ============
<PAGE>
FOODQUEST INTERNATIONAL CORP. Page 5
SCHEDULE TO CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE YEARS ENDED MARCH 31
================================================================================
1998 1997
$ $
================================================================================
GENERAL AND ADMINISTRATIVE EXPENSES
Travel, promotion and public relations 311,955 301,461
Professional fees 75,593 76,151
Office and general 43,619 50,259
Rent 43,163 74,572
Telephone, telex, courier 24,244 42,533
Management fees and office staff 21,544 50,162
Transfer agent fees 10,757 7,314
Shareholders information 5,860 16,286
Amortization of office equipment 16,300 7,750
--------- --------
553,035 626,488
========= ========
<PAGE>
FOODQUEST INTERNATIONAL CORP. Page 6
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEARS ENDED MARCH 31
================================================================================
1998 1997
$ $
================================================================================
CASH WAS PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net (loss) for the year (563,035) (817,447)
Charges to income not involving cash:
Amortization of goodwill and capital assets 16,300 7,750
Write downs 10,000 96,593
(Increase) decrease in current assets 10,741 (3,452)
Increase (decrease) in accounts payable (74,417) (52,125)
--------- ---------
Cash (used in) operations (600,411) (768,681)
========= =========
FINANCING ACTIVITIES
Issuance of common shares 37,400 748,474
Advances from shareholders and related parties 544,849 103,284
--------- ---------
582,249 851,758
--------- ---------
INVESTING ACTIVITIES
Purchase of capital assets (1,164) (64,551)
--------- ---------
Increase (decrease) in cash (19,326) 18,526
Cash, beginning of year 25,025 6,499
--------- ---------
Cash, end of year 5,699 25,025
========= =========
<PAGE>
FOODQUEST INTERNATIONAL CORP. Page 7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
================================================================================
1. ONGOING OPERATIONS
As shown in the accompanying financial statements, the company incurred a
loss of $563,035 and its current liabilities exceed current assets by
$699,329. These factors and the company's lack of a source of commercial
income create uncertainty about the company's ability to continue as a
going concern. The company's ability to continue operations as a going
concern and to realize its assets and to discharge its liabilities is
dependent upon obtaining additional financing sufficient for continued
operations as well as the achievement and maintenance of a level of
profitable operations. These consolidated financial statements have been
prepared on the basis that the company will receive additional financing
and will be able to achieve and maintain profitable operations. However,
there is no assurance that these conditions will be achieved.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the company are in accordance with generally
accepted accounting principles in Canada and their basis of application is
consistent with that of the previous year. Outlined below are those
policies considered particularly significant.
Long-term Investments:
Investments in companies and joint ventures in which the company has
significant influence are accounted for by the equity method, by which
the original cost of the shares is adjusted for the company's share of
earnings or losses less dividends since significant influence was
acquired. Portfolio investments are carried at cost. All long-term
investments are written down to their estimated inherent worth when
there is evidence of a permanent decline below their carried value.
Principles of Consolidation:
The consolidated balance sheet includes the accounts of the company's
wholly owned subsidiary, Foodquest Inc. All material intercompany
transactions and balances have been eliminated.
Capital Assets and Amortization:
Office equipment is recorded at cost. Amortization is calculated over
5 years on the straight-line method.
Use of Estimates:
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results could differ from those
reported.
Continued...
<PAGE>
FOODQUEST INTERNATIONAL CORP. Page 8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
================================================================================
3. INVESTMENT IN SNACK FOOD MANUFACTURING
The company has been unable to realize any recovery on its investment in
snack food manufacturing. Accordingly this investment has been written off.
During the 1997 fiscal year, the company ceased financial support to the
joint venture which was developing a snack food manufacturing plant, due to
significant uncertainty surrounding the viability of the operation. The
investment was then written down to estimated salvage value.
4. CAPITAL STOCK
The share structure of the company is as follows:
(a) Authorized
An unlimited number of common shares
(b) Issued
16,839,231 Common shares
(c) The changes in capital stock in the years ended March 31, 1998 and
March 31, 1997 are as follows:
Shares Amount
------ ------
# $
Balance, March 31, 1996 10,922,695 14,040,690
Shares issued on exercise of options 2,065,000 253,000
Shares issued on exercise of warrants 2,975,500 446,324
Shares issued on debt cancellation 327,643 49,150
---------- -------------
Balance, March 31, 1997 16,290,838 14,789,164
Shares issued on debt cancellation 548,393 37,400
---------- -------------
Balance, March 31, 1998 16,839,231 14,826,564
=========== =============
Continued...
<PAGE>
FOODQUEST INTERNATIONAL CORP. Page 9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
================================================================================
4. CAPITAL STOCK (Continued)
(d) Share Purchase Warrants
As at March 31, 1998, there were no warrants outstanding;
(1997 - 132,836 at $0.25, expiring February 13, 1998)
(e) Share Purchase Options
As at March 31, 1998, there were no share options outstanding;
(1997 - 315,482 at $0.35, expiring February 13, 1998)
(f) Net Loss Per Common Share
1998 1997
----------------- ------------------
$ Per Share $ Per Share
----------------- ------------------
(Loss) from continuing operations (553,035) (0.04) (626,488) (0.05)
(Loss) from discontinued operations (10,000) - (190,959) (0.01)
--------- ------- --------- ------
(Loss) for the year (563,035) (0.04) (817,447) (0.06)
========= ======= ========= ======
Weighted average number of shares 16,670,630 11,684,116
========== ==========
Per share amounts are calculated using the weighted average number of shares
outstanding. The existence of warrants and options (Notes 4(d) and (e)) issued
by the company affect the calculation of loss per share on a fully diluted
basis. As the effect of this dilution is to reduce the reported loss per share,
the fully diluted loss per share has not been presented. Under U.S.GAAP, there
is no material difference in the weighted average number of common shares used
to calculate the loss per share amounts.
5. COMMITMENTS
(a) The company entered into a consulting agreement with a shareholder.
The agreement terminates September 30, 1999, unless mutually agreed by
the parties. Under the terms of the agreement, the contractor is to be
paid $10,000 monthly in United States currency. In addition, the
contractor is to be paid a fee for the successful introduction of
investors or investment opportunities to the company.
(b) The company has a consulting agreement with a corporation controlled
by a significant shareholder and director. The agreement commenced
April 1, 1996 and has an indefinite term, cancellable by either party
on sixty days' notice. Under the terms of the agreement, the company
pays $5,000 per month for public relations and administrative costs.
Continued...
<PAGE>
FOODQUEST INTERNATIONAL CORP. Page 10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
================================================================================
5. COMMITMENTS (Continued)
(c) The company has consulting agreements with two corporations controlled
by the company's officers and directors. These contracts are renewable
annually and call for payments of $6,000 per month each. Payments
under these contracts were waived by the contractors for the 1998
fiscal year.
6. RELATED PARTY TRANSACTIONS
Related parties are directors, officers and significant shareholders of
the company.
(a) Consulting fees of approximately $168,000 were paid to a company which
held 8% of the company's shares at March 31, 1998. These payments were
made under the agreement referenced in Note 5(b).
(b) Management fees of $13,000 were paid to the president.
(c) Occupancy costs and marketing fees of $12,500 were paid to a
corporation in which a shareholder has an interest. In addition, that
corporation was reimbursed $15,000 for travel costs. These payments
were made under the agreement referenced in Note 5(c).
These transactions were in the normal course of operations and are measured
at the exchange amount, which is the amount of consideration established
and agreed to by the related parties.
7. LOSS CARRY-FORWARDS
The company and its subsidiary have loss carry-forwards for income tax
purposes in the approximate amount of $7,890,000, which expire as
follows:
1999 $ 200,000
2000 440,000
2001 450,000
2002 4,300,000
2003 1,200,000
2004 700,000
2005 600,000
----------
$7,890,000
==========
Continued . . .
<PAGE>
FOODQUEST INTERNATIONAL CORP. Page 11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
================================================================================
8. CONTINGENCIES
The company is defending a number of lawsuits in the aggregate amount of
approximately $40,000, of which $25,000 has been accrued in the accounts.
Management believes that these claims will be settled without further
significant cost to the company.
9. FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, accounts payable and
advances from related parties reflected in the balance sheets approximate
their respective fair values due to the short-term maturities of these
financial instruments.
10. DIFFERENCES FROM UNITED STATES ACCOUNTING PRINCIPLES
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Canada and do not
materially differ from accounting principles generally accepted in the
United States (U.S.GAAP) except for:
INCOME TAXES
In February 1992, the U.S. Financial Accounting Standards No. 109,
Accounting for Income Taxes ("SFAS 109'). SFAS 109 requires that deferred
tax balances be based on current tax rates. In addition, SFAS 109 requires
that deferred tax assets be recorded when, in the opinion of management, it
is more than likely (than not) that losses will be recovered in future
years through profits. Management is of the opinion that this corporation
has no history of profits and, therefore, management cannot determine
whether it is more likely than not that some portion or all of the deferred
tax assets will be realized.
SHARE PURCHASES OPTIONS
The company applies APB Opinion 25 in accounting for common share options
granted to officers. For the fiscal year ended March 31, 1997, the exercise
price of all stock options was equal to or greater than the market price on
the date of grant and the compensation cost under U.S.GAAP would be $Nil.
Continued . . .
<PAGE>
FOODQUEST INTERNATIONAL CORP. Page 12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
================================================================================
10. DIFFERENCES FROM UNITED STATES ACCOUNTING PRINCIPLES (Continued)
STATEMENT OF CHANGES IN FINANCIAL POSITION
The U.S. Financial Accounting Standards Board (FASB) issued its Statement
of Financial Accounting Standards No. 95 (SFAS No. 95) effective for years
ending after July 15, 1988. SFAS No. 95, which is entitled "Statement of
Cash Flows", established standards for cash flow reporting with its primary
purpose being to provide information about the cash receipts and cash
payments of an entity during the period. Canadian Generally Accepted
Accounting Principles (GAAP) dealing with the statement of changes in
financial position is based on a broad concept embracing all changes in
financial position.
As a result under U.S.GAAP, the issuance of common shares for debt
cancellation would not be shown as a financing activity and the related
debt cancellation would not be shown as an operating activity.
Under United States GAAP, subtotals for operating and investing activities
would be as follows:
1998 1997
---- ----
$ $
Cash was provided by used in:
Operating activities (563,011) (719,531)
Financing activities 544,849 802,608
11. SUBSEQUENT EVENTS
At March 31, 1998, the company owed $505,000 to a particular shareholder.
Subsequent to the year end, the company issued 10,100,000 common shares in
satisfaction of this debt.
A further 4,000,000 shares were issued to the same shareholder in
satisfaction of loans totalling $200,000 received by the company after the
year end.
<PAGE>
