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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[_] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to _____________ Commission file
number 0-25963
INFORETECH WIRELESS TECHNOLOGY INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0350120
(State of other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
Suite 214, 5500 - 152nd Street
Surrey, British Columbia V35-8E7
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 604-576-7442
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Class A Common
Equity Voting Stock, par value $.001 per share
Indicate by checkmark 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(s)), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
Revenues for the fiscal year ended December 31, 1999 were [$0].
The aggregate market value of the Class A Common Equity Voting Stock held by
non-affiliates of the registrant as of March 31, 2000 amounted to approximately
$94.41 million.
Registrant had 10,889,522 shares of Class A Common Equity Voting Stock, $.001
par value per share outstanding as of March 31, 2000.
Documents Incorporated by Reference (to the extent indicated herein): None.
Transitional Small Business Disclosure Format: Yes No X
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PART I.
BUSINESS
ITEM 1. DESCRIPTION OF BUSINESS
Overview
The Company is a development stage technology company which has
created a pace-of-play information system, inFOREmer 2000, for golf courses.
The inFOREmer 2000 system uses data from global positioning satellites (GPS),
managed and communicated through a variety of advanced technologies, to provide,
among other things, pace-of-play information to golf course managers and "game
and shot management" to golfers. The Company believes that the inFOREmer 2000
is the only GPS information system which is completely portable, as opposed to
being mounted on a golf cart, and that this will provide a competitive
advantage. The Company intends to install the inFOREmer 2000 system in three to
four North American golf courses on a test basis by the fall of 2000 to enable
it to attempt to fine tune and balance the various components. The Company's
objective is to have the system ready for commercial distribution by the fourth
quarter of 2000.
In the future, the Company hopes to generate revenues from the sale or
lease of the inFOREmer 2000 system and from advertising fees associated with the
transmission of advertising messages to golfers over the inFOREmer 2000 system.
However, at present the Company is a development stage company with no revenues
and an expectation of significant losses for the foreseeable future. The
Company is subject to all of the many risks inherent in starting a new business
in a new and rapidly evolving industry.
Industry
As one of the oldest organized sports in the world, golf is enjoyed by
over 30 million Americans. The game's ongoing vitality is evidenced by its
ability to attract participants from all demographic strata and skill groups.
The game has been transformed from a sport enjoyed by a few, to a sport enjoyed
by a broad cross-section of society. According to the National Golf Foundation's
1999 publication "A Strategic Perspective on the Future of Golf," prepared
---------------------------------------------
collaboratively by the National Golf Foundation and the international management
consulting firm, McKinsey & Company, golf has enjoyed explosive growth over the
last 50 years. Over the more recent past, there has also been a strong growth in
golf course investment.
The number of United States golfers has grown from 3.5 million in 1950
to over 30 million today, making it one of the most widely enjoyed leisure
pastimes. In 1950, nearly two out of three golf courses were restricted to
members and their guests. Today, that ratio has reversed, and public access golf
courses now represent over 70% of all golf facilities in the United States.
According to the National Golf Foundation, North American golfers play
more than 600 million rounds of golf annually on over 18,000 golf courses in
America.
The Company believes that golf is a high growth activity whose
popularity coincides with the affluence of the baby boomer generation, which is
turning to golf as a healthy leisure activity. The National Golf Foundation
believes that over 2,000 new golf courses are being planned or are under
construction in North America. Golf also enjoys significant popularity outside
of North America. Over 50 million golfers play on more than 37,000 courses
worldwide.
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Products
Traditional Attributes of Golf Which Create an Opportunity for GPS Systems Such
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As inFOREmer 2000
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The Company believes that pace-of-play is a major concern for golf
course owners and managers, as it directly impacts on both revenue potential and
bottom line results of golf facilities. Research on golf course operations
undertaken by the National Golf Foundation appears to support the Company's view
of the pace-of-play issue. Simply stated, pace-of-play is shorthand for the
speed by which golf twosomes or foursomes move through the golf course. Because
a foursome cannot proceed to the next hole until the foursome in front of them
has completed the hole, one slow foursome can slow down an entire golf course.
This reduces the number of paying golfers that can work through the course, and
frustrates the vast majority of golfers that wish to play through the course in
a timely fashion.
A major cause of slow foursomes is the time that players take
attempting to eyeball the distance to the flag stick or using course markers to
determine same. Players regularly consult their partners, or walk part way to
the flag stick to locate markers, or to otherwise better judge distance, in
order to select a suitable club. The result is slow play, reduction in paying
golfers working through the course and reduction in golfers' enjoyment and
loyalty which in turn reduces golfer participation at facilities. All of these
result in reduced revenues.
The traditional system of course marshals moving players through a
course is of limited effectiveness, as it is not always immediately apparent
where the slow foursome is located, it is time-consuming for the marshal to
travel from point to point, and the marshal can only be in one place at a time.
Technical Description of inFOREmer 2000
- ---------------------------------------
The inFOREmer 2000 is a comprehensive data network having the ability
to collect data from the global positioning satellites (GPS) and transfer data
between a central computer and a variety of peripherals including base station,
repeater, mobile handsets and charging cradles. The method of data communication
is unique to the inFOREmer 2000 system and is achieved through a combination of
wireless radio and infra red (IR) technologies, as well as hard wired phone and
fiber optic cables all managed by internet protocols. Wireless radio is used to
communicate with the handsets while in operation on the golf course; IR links
fiber optic cabling and a dedicated internet connection is used to communicate
with the handsets while being recharged on the charging cradles.
Transmission Control Protocol/Internet Protocol (TCP/IP) is the
communication protocol used by the pace-of-play system to ensure reliability and
maximum system availability. TCP/IP provides virtually unlimited expandability
and unparalleled reliability and flexibility to meet future technological
enhancements thereby offering a continually advanced, unique and competitive
pace-of-play system. The TCP/IP protocol facilitates remote updating of
Clubhouse Computer and handset software via the internet. Every inFOREmer 2000
system in operation will be updated with the latest software version in a
transparent and trouble free manner for the golf course management and users.
User golf courses will have a custom version of the proprietary
software with maps and information relating to that specific golf course. The
maps are created from digitized, image enhanced aerial photographs.
The core technical features of the system are the ability to
communicate with all the handsets in the field on a regular basis, and provide
an accurate positioning reading at the handset that allows the golfer to read
distances on the golf course. This is done through the use of a GPS device
within
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the handset, working in unison with a radio link that provides error correction
information from the clubhouse computer. This technology is known as
Differential GPS ("DGPS").
Benefits of the inFOREmer 2000 GPS System
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Benefits to Golf Course Owners and Management
---------------------------------------------
The Company believes that the inFOREmer 2000 system will be a valuable
tool for managing a golf course. The system pinpoints course bottlenecks in
real time, and in theory should significantly increase revenues through greater
operational efficiencies and new revenue sources. The inFOREmer 2000 system also
allows course administrators to view and analyze data and statistics relating to
the overall course operation and functionality. In particular, management
benefits from the following:
. increased golf course revenue by increasing pace-of-play,
. increased ability to sell food, beverage and pro shop items to golfers on the
course,
. potential advertising revenues through handset advertising,
. enhanced ability of course marshals/rangers to monitor and manage pace-of-
play in an impersonal and non-offensive manner,
. greater golfer satisfaction and playing enjoyment which enhances golfer
loyalty and attracts new golfers,
. management's ability to interact with all golfers on the course, whether in
carts or walking,
. system is truly portable, provides access to 100% of golf course,
. monitors and manages tournament play and leader board, attracts tournaments
to course,
. provides messaging capability to each handset user from the pro shop (a
prompt to speed up play) or to alert all golfers about an impending storm and
provide emergency response access, and
. provides comprehensive custom prepared management reports.
Benefits to Golfers
-------------------
The Company believes the inFOREmer 2000 will increase golfers'
enjoyment of their golf game by providing them with accurate and real time data
and information displayed by light, portable handsets attached to power carts,
hand carts or carry bags. The handsets provide golfers with instant data
relating to ball position and golf course information which is needed to
facilitate "game and shot management". In particular, the Company believes
golfers will benefit from the following features:
. real time information to 100% of the golf course,
. instant drive measurements from the tee,
. distance measurements to the flagstick, hazards, sand traps and land marks,
constantly updated via DGPS technology,
. detailed LCD screen layout of the entire golf course, each hole and each
green including green contours,
. professional golf tips for each hole and course,
. ability to order food, beverages and pro-shop supplies while on the course,
. receipt of important messages such as weather and storm advisories,
. emergency response access,
. detailed digital score card,
. ability to request attendance of the course marshal/ranger, or notification
of need for medical attention,
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. increased pace-of-play,
. instant access to Professional Golfers Association rules and local rules,
. access to tournament information,
. real time event information, and
. access to promotions and advertisements.
Marketing & Sales
General Business Plan
- ---------------------
The Company currently intends to install its inFOREmer 2000 system in
three to four golf courses in North America, by the fall of 2000. Because these
installations are to test and fine-tune the system, the Company will not receive
any revenues from these installations. The Company is attempting to get the
inFOREmer 2000 system completely fine-tuned and ready for the general golf
course marketplace by the fourth quarter of 2000.
The Company currently hopes to enter the marketplace in the fourth
quarter of 2000, initially targeting high end public courses, resort courses,
semi-private and also some private courses located in North America as described
below:
Private golf courses - focus on quality of service to members. Apart
from visitor fees, revenue is largely derived from membership dues.
Potential course revenue enhancement will likely be less important
than increased golfer satisfaction.
Semi-private courses - are owned by members but open to the public
(revenue subsidizes membership costs) or are owned privately but
offering partial public playing privileges. Golf courses in this
category are expected to be more receptive to increased revenue flows
from additional rounds of golf, increased food and beverage sales, and
from external advertising.
Public golf courses - municipal governments or private ownership. Less
commitment to a fixed clientele and, with generally lower fee
structures, are likely to be more receptive to revenue enhancement
opportunities. Many such courses accept advertising on course
promotional material and scorecards. Payment terms will emphasize no
initial capital outlay. Use of the system by golfers on public courses
may be optional (golfer's choice), or required by course management.
In each case the course owner can look to revenue enhancement from
possible increased fees, additional advertising revenue, and increased
numbers of golfers (the result of improved pace-of- play).
Resort courses - in North America, resort destinations (eventually a
global focus) will be strongly targeted. The trend for these types of
developments is to include full family recreation facilities utilizing
new technology often touted as a drawing card for attendance at the
resort.
In addition, while the Company's primary focus is North American,
international opportunities will be reviewed and monitored as progress is made
domestically. In this regard, the Company will attempt to establish appropriate
and profitable international golfing contacts, and maintain contact with
international firms who indicate an interest in the system. Ultimately, the
Company hopes to establish an international sales network in Europe and Asia.
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Marketing Strategy
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The Company's advertising and promotional strategy will focus on
"brand recognition" of "inFOREmer" 2000 pace-of-play systems, with a focus on
the portable nature of our system and its commitment to 100%-of-course-coverage.
The Company believes branding is a strategic advantage, and the Company hopes to
develop, implement, monitor and strictly enforce graphic design specifications,
including font, color and use of the brand.
The Company's intended marketing activities include:
. direct contact with golf course decision makers at trade shows and by
personal contact, mail, advertising and telephone to inform them of our
product,
. soft-sell opportunities such as speaking at industry related conferences to
establish and help solidify our position as a leader in the field, and
. quality media coverage to promote greater awareness of the our system.
The Company currently intends to implement these activities through a
communications program consisting of the following traditional methodologies:
. brochures and print material
. web site and web site promotion
. trade shows
. trade magazines
. mail-outs
. newsletters
. foundations and associations
. multi-media programs
Manufacturing Process
The Company has a limited in-house manufacturing capability at our
Vancouver BC facility. The Company's manufacturing operation consists primarily
of testing sub-assemblies and components purchased from third parties, the
configuration, final assembly and testing of pre-production units. The Company
also uses this facility for developing the manufacturing process and
documentation in preparation for outsourcing to a turnkey supplier. The
Company's future success will depend in significant part on its ability to
obtain turnkey high volume manufacturing at low costs. The Company is currently
dependent on sole source suppliers for certain key parts used in its product.
The Company does not carry significant inventories of these parts and at this
time does not have long-term supply arrangements.
Competition
GPS based golf management systems installed in North America to date
have been installed predominately at high end resort courses principally by the
suppliers indicated below.
<TABLE>
<CAPTION>
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Company Founded System Mounting
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<S> <C> <C> <C>
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ProShot Golf, Inc. 1994 Omni Cart
Newport Beach, CA
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</TABLE>
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<TABLE>
<CAPTION>
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Company Founded System Mounting
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<S> <C> <C> <C>
ParView, Inc. 1994 ParView Cart
Sarasota, Florida
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PinMark Corporation 1994 PinMark Cart
Dallas, Texas
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Player Systems Corporation 1996 Skylinks Cart
Charlestown, MA
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ProLink, Inc. NA ProLink Cart
Chandler, AZ
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UpLink Corp. 1998 UpLink Cart
Austin, TX
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</TABLE>
The Company has thoroughly investigated each of these companies and
systems at several levels including:
. using competitor systems at golf courses,
. discussions with our Advisory Board, golf course professionals and golfers
about the advantages or disadvantages of these systems,
. discussions with personnel of competitor systems at golf trade shows,
. and actual visits to competitor offices to discuss and review system features
with competitor management and technical personnel.
As a result of our research, the Company believes the inFOREmer 2000
is the most accurate, user friendly system with the most features and innovative
technology available today. Further, the inFOREmer 2000 is the only truly
unrestricted portable system on the market using TCP/IP technology for
transparent, real time service and support.
Accordingly, while there are no assurances that the Company will be
able to effectively compete in this industry, the Company believes that it can
do so.
History of the Company
The Company was incorporated on December 12, 1995 as Diversified
Marketing Services, Inc. On February 2, 2000, pursuant to a Share Exchange and
Finance Agreement dated as of December 16, 1999 (the "Share Exchange Agreement")
by and among the Company, the Founding Shareholders (as described below) of
InFOREtech Golf Technology 2000 Inc., a Canadian federal corporation
incorporated on August 11, 1998 ("inFOREtech 2000") and Mercer Capital Corp.,
the Company acquired InFOREtech 2000.
The Founding Shareholders comprised of Robert Silzer, Sr., his wife
and other members of the Silzer family (collectively, the "Silzer Family"). The
Silzer Family are all citizens and residents of Canada and the exchange of
shares of inFOREtech 2000 for shares of the Company is taxable in Canada in the
year the exchange occurs. Accordingly, to defer any Canadian income tax payable
by the Silzer Family, a Canadian subsidiary of the Company, InFOREtech Holdings
Inc., a British Columbia company ("inFOREtech Holdings") was formed to
facilitate the transaction. Further, to permit the Silzer Family to
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receive voting rights in the Company, the Articles of Incorporation of the
Company were amended to provide for two classes of stock, Class A Common Equity
Voting Stock ("Class A Stock") and Class B Special Voting Non-Equity Stock
("Class B Stock"). The Class A Stock and Class B Stock is voted together as a
single class, except to the extent that separate class voting is specifically
required by the provisions of the corporation laws of the State of Nevada. All
6,156,000 shares of the common stock of the Company issued and outstanding
immediately prior to the closing of the Share Exchange Agreement were converted
automatically into Class A Stock.
In accordance with the Share Exchange Agreement, on February 1, 2000,
the Company completed the following transactions:
(i) issued 7,095,750 shares of Class B Stock to the Silzer Family;
(ii) caused inFOREtech Holdings to issue an aggregate of 7,095,750
shares of Class A and Class B Preference stock of inFOREtech Holdings to the
Silzer Family; and
(iii) entered into certain Put and Call Agreements with the Silzer
Family.
The special rights and restrictions attached to the Class A and Class
B Preference stock of inFOREtech Holdings effectively provide for such
shareholders participating on an equivalent basis as if such shareholders were
holders of the Company's common stock. There are no material differences
between the Class A and Class B Preference stock of inFOREtech Holdings. The
Put Agreements grant the members of the Silzer Family to put a Unit, each Unit
consisting of one share of Class B Stock and one share of Class A or Class B
Preference stock of inFOREtech Holdings to the Company in exchange for one share
of the Company's Class A Stock, from time to time.
The Share Exchange Agreement also requires the Company to grant
certain options to acquire Class A Stock to the directors and employees of
inFOREtech 2000, which include members of the Silzer Family.
On January 3, 2000, the Company changed its name from "Diversified
Marketing Services Inc." to "inFOREtech Wireless Technology Inc."
Employees
The Company and its subsidiaries have approximately 27 full-time
employees. The Company's executive officers and employees are based in the
Company's executive office in Vancouver.
Patents and Trademarks
The Company is seeking patent protection for various proprietary
aspects of its products and technologies. The Company has been issued two U.S.
patents to date and has one U.S. patent application pending. However, even if we
were to be granted all of the patent protection which it seeks, the Company
would be unable to prevent other companies from developing substantially similar
products. Furthermore, there can be no assurance that the Company's pending
patents will be awarded, and litigation may be necessary to protect the
Company's patents, and there can be no assurance that the Company will have the
financial resources to pursue such litigation. In addition to pursuing patent
protection, the Company also relies on various trade secrets for its unpatented
proprietary technology. However, trade secrets are difficult to protect, and
there can be no assurances that other companies will
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not independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets. While the
Company has a policy of having its employees and consultants executed non-
disclosure agreements regarding confidential information, there can be no
assurance that these agreements will be enforceable or will provide meaningful
protection for the Company's trade secrets or other proprietary information.
ITEM 2. PROPERTIES
The principal executive offices of the Company are located in
Vancouver BC Canada in an approximately 8000 square foot facility. The current
lease expires in 2002 and has one three year renewal option. We believe that
our facilities are adequate to meet our current needs and that our future growth
can be accommodated by leasing additional or alternate space near our current
facilities.
ITEM 3. LEGAL PROCEEDINGS
There are no pending proceedings against us or any of our properties
nor, to our knowledge, are any legal proceedings threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 6, 1999 80.8% of the issued and outstanding shares of the
common stock of the Company adopted resolutions (1) authorizing the issuance of
100,000,000 shares of Class A Stock and 10,000,000 shares of Class B Stock and
(2) authorizing the Company to change its name from "Diversified Marketing
Services, Inc." to "InFOREtech Wireless Technologies Inc."
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company was formed on December 12, 1995. Since January 27, 2000,
the Company's Class A Stock has been listed for trading on the OTC Electronic
Bulletin Board under the symbol "WYRE." The trading market is limited and
sporadic and should not be deemed to constitute an "established trading market."
The following table sets forth the range of bid prices of the
Company's common stock as quoted on the OTC Electronic Bulletin Board during the
periods indicated. Such prices reflect prices between dealers in securities and
do not include any retail markup, markdown or commission and may not necessarily
represent actual transactions. The information set forth below was provided by
NASDAQ Trading & Market Services.
Fiscal Year Ending December 31, 2000 High Low
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Period from January 27, 2000 to $10.28 $5.00
March 31, 2000
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On March 31, 2000, the closing bid price for the common stock as
reported by OTC Electronic Bulletin Board was $9.00.
As of March 31, 2000, the number of security holders of record of the
Company's Class A Stock was approximately 106. As of such date, 10,889,522
shares of Class A Stock were outstanding.
Dividend Policy
The Company has never paid dividends on its common stock and does not
anticipate paying dividends on its common stock in the foreseeable future. It
is the present policy of the Board of Directors to retain all earnings to
provide for the future growth of the Company. Earnings of the Company, if any,
not paid as dividends are expected to be retained to finance the expansion of
the Company's business. The payment of dividends on its common stock in the
future will depend on the results of operations, financial condition, capital
expenditure plans and other cash obligations of the Company and will be at the
sole discretion of the Board of Directors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview:
The Company is a development stage company, which through its
subsidiary, InFOREtech 2000 (which it acquired through a reverse take-over on
February 2nd, 2000) has created a wireless pace of play information system,
InFOREmer 2000, for golf courses. The inFOREmer 2000 system uses data from
global positioning satellites (GPS) managed and communicated through a variety
of advanced technologies. The company believes that its core competencies
positions it to develop and commercialize a wide range of hand held portable
recreational devices (PRD's) for global sporting applications.
Since inception, InFOREtech 2000 has been engaged in research and
development of its basic system. During the latter half of 1999, InFOREtech
2000 brought in house a considerable portion of the research and development
that it had formerly sub-contracted. This strategic decision enabled the
company to better monitor the integration of the various technologies and to
position itself for the transition from prototype to commercial production.
This decision also resulted in a sharp increase in payroll costs as company
employees replaced sub-contractors.
The Company is currently conducting product evaluations. Early
results from these evaluations indicate that the product is performing well in a
number of respects; the results also indicate the need for further modifications
in order to meet the company's product performance expectations. The Company
anticipates that its product evaluations and modifications will continue into
the fourth quarter of 2000 and intends to commercialize the system following
their successful completion.
These forward looking statements reflect assumptions made by
management and management's beliefs based on information currently available to
it and they will be impacted by the company's ability to timely and successfully
complete product development and testing, the outcome of end-user product
evaluations, the available supply of units to meet anticipated market demand and
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obtaining additional financial resources. As of the date of this report, the
Company believes that it has made significant progress toward identifying and
completing the product refinements.
Inforetech Golf Technology 2000 Inc.
Period August 1, 1999 To December 31, 1999 Compared To The Period August 11,
1998 To July 31, 1999.
Sales Revenue
InFOREtech 2000 had no sales revenue in either period.
Operating expenses increased on a pro-rata basis in the period August
1, 1999 to December 31, 1999 compared to the earlier period August 11, 1998
To July 31, 1999.
$000
<TABLE>
<CAPTION>
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Period August 1, 1999 to
December 31, 1999 on a
pro rata basis to period Period August 1, 1999 to Period August 11, 1998 to
July 31, 1999 December 31, 1999 July 31, 1999
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Administration 1,154 499 627
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Amortization 51 22 11
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Finance costs 641 277 278
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Marketing 571 247 304
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Research and Development 1,788 773 1,154
- -----------------------------------------------------------------------------------------------------------------
Total Expenses 4,205 1,818 2,374
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</TABLE>
Administration Expenses
The increase in administration expenses is attributable to an increase
in legal, audit, and consulting fees as well as employee related costs and lease
costs as the company grew its administration.
Amortization
The increase in amortization is a result of (1) an increase in the
Fixed Asset base and (2) Fixed Assets acquired in the prior period incurred only
half a year's depreciation in that period compared to a full years depreciation
in subsequent years.
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Finance Costs
The increase in finance costs is primarily due to the increase in
finders and other fees incurred in order to obtain financing for InFOREtech
2000.
Marketing
The increase in marketing expenses is attributable to an increase in
salaries, traveling expenses, trade shows and promotional activities.
Research and Development
During the latter period there was a substantial increase on a pro-
rata basis of research and development expenses over the prior period. The
primary reasons for the increase are as follows: (1) corporate decision to
accelerate the completion of the first stage of development; (2) the decision to
bring in house a substantial part of the work that was formerly undertaken by
sub-contractors; (3) a major increase in payroll costs as the company undertook
a major hiring program of engineers and other technical staff.
Scientific Research and Experimental Development Tax Credits
Certain of the InFOREtech 2000's research expenditures may be eligible
for the Canadian Government Scientific Research and Experimental Development
("SR&ED") tax credit. Under this program, Canadian controlled private
corporations (InFOREtech 2000 was a Canadian controlled private corporation up
to February 2, 2000) can receive a refundable tax credit of up to 35% for
qualifying SR&ED expenditures to a maximum limit of $2,000,000 in expenditures.
Companies with expenditures over $2,000,000 can receive an investment tax credit
of up to 20% for qualifying SR&ED expenditures.
No determination has been made as to eligibility or amount of the
investment tax credit. Any amounts received under the program would be applied
against research and development expenditures in the period received.
Liquidity And Capital Resources InFOREtech Golf Technology 2000 Inc.
At December 31, 1999 InFOREtech 2000 had bank indebtedness of $4,214
compared to $156,404 at July 31, 1999. The Working Capital was ($3,703,687)
and ($3,005,204) for the periods August 1, 1999 to December 31, 1999 and August
11, 1998 to July 31, 1999 respectively.
Operating activities used cash of $1,656,305 and $2,037,001 for the
periods August 1, 1999 to December 31, 1999 and August 11, 1998 to July 31, 1999
respectively. The increase in cash usage on a pro-rata basis for the period
August 1, 1999 to December 31, 1999 was principally caused by an increase in
operating losses as the company geared up its administration, marketing and
research and development departments.
Financing for the period August 1, 1999 to December 31, 1999 provided
cash of $1,930,545 consisting primarily of Loans, compared to $3,050,559 for the
period August 11, 1998 to July 31, 1999 where the principal source of finance
was Promissory Notes.
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InFOREtech Wireless Technology Inc.
The Company will require substantial additional financing to complete
current and long-term product development, marketing and working capital. On
February 2, 2000, the Company raised $3,152,000 through a private placement of
common stock of which $2,000,000 was used to repay loans of InFOREtech 2000.
There can be no assurance that any additional financing will take place or, if
so, the terms thereof. To the extent of any shortfall in financing, the
Company's product development and commercialization programs will be delayed,
curtailed or prevented, and the Company may be required to suspend or
substantially modify its operations.
Inflation
Management believes inflation has not had a material effect on the
Company's operations or on its financial condition.
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Act of 1995:
This Annual Report on Form 10-KSB contains "forward-looking"
statements within the meaning of the Federal securities laws. These forward-
looking statements include, among others, statements concerning the Company's
expectations regarding sales trends, gross and net operating margin trends,
political and economic matters, the availability of equity capital to fund the
Company's capital requirements, and other statements of expectations, beliefs,
future plans and strategies, anticipated events or trends, and similar
expressions concerning matters that are not historical facts. Although the
Company believes that the assumptions on which forward-looking statements are
based are reasonable, and the forward-looking statements are within the
definition of the Private Securities Litigation Reform Act of 1995, the forward-
looking statements in this Annual Report on Form 10-KSB are subject to risks and
uncertainties that could cause actual results to differ materially from those
results expressed in or implied by the statements contained herein.
Recent Accounting Pronouncements:
In June 1997, the Financial Accounting Standards Board issued
Statement No. 130, "Reporting Comprehensive Income," ("SFAS No. 130"), which is
effective for financial statements issued for fiscal years beginning after
December 15, 1997. SFAS No. 130 establishes standards for the reporting and
display of comprehensive income, its components and accumulated balances in a
full set of general purpose financial statements. SFAS No. 130 defined
comprehensive income to include all changes in equity except those resulting
from investments by owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that are required to be
recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is presented with the same
prominence as other financial statements. The Company's only current component
of comprehensive income is foreign currency translation adjustment. The Company
adopted SFAS No. 130 for its fiscal year beginning January 1, 1998. Adoption of
SFAS No. 130 did not have a material effect on the Company's financial statement
presentation and disclosures.
In June 1997, the Financial Accounting Standards Board issued
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"), which
13
<PAGE>
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise" and which is effective for financial statements issued for fiscal
years beginning after December 15, 1997. SFAS No. 131 establishes standards for
the way that public companies report information about operating segments in
annual financial statements and requires reporting of selected information about
operating segments in interim financial statements. SFAS No. 131 also
establishes standards for disclosures by public companies regarding information
about their major customers, operating segments, products and services, and the
geographic areas in which they operate. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. SFAS No. 131
requires comparative information for earlier years to be restated. The Company
operates in only one segment, the manufacture and sale of cartonboard packaging
materials. The Company adopted SFAS No. 131 for its fiscal year beginning
January 1, 1998. Adoption of SFAS No. 131 did not have a material effect on the
Company's financial statement presentation and disclosures.
In February 1998, the Financial Accounting Standards Board issued
Statement No. 132, "Employers' Disclosures about Pensions and Other Post
Retirement Benefits" ("SFAS No. 132"), which is effective for financial
statements issued for fiscal years beginning after December 15, 1997. SFAS No.
132 revises employers' disclosures about pension and other post retirement
benefit plans. SFAS No. 132 requires comparative information for earlier years
to be restated. The Company does not have any pension or other post retirement
benefit plans. The Company adopted SFAS No. 132 for its fiscal year beginning
January 1, 1998. Adoption of SFAS No. 132 did not have a material effect on the
Company's financial statement presentation and disclosures.
In June 1998, the Financial Accounting Standards Board issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"), which is effective for financial statements for
all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No.
133 standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value. SFAS No. 133 also addresses the
accounting for hedging activities. The Company will adopt SFAS No. 133 for its
fiscal year beginning January 1, 2001. The Company currently does not have any
derivative instruments nor is it engaged in any hedging activities, thus the
Company does not believe that implementation of SFAS No. 133 will have a
material effect on its financial statement presentation and disclosures.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Filed herewith are the following financial statements:
Consolidated Financial Statements for InFOREtech Golf Technology
2000 Inc. as of December 31, 1999.
Consolidated Financial Statements for InFOREtech Wireless Technology
Inc. (f/k/a Diversified Marketing Services, Inc.)
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
14
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The following table and text sets forth the names and ages of all
directors and executive officers of the Company and the key management personnel
as of March 31, 2000. The Board of Directors of the Company is comprised of
only one class. All of the directors will serve until the next annual meeting
of stockholders and until their successors are elected and qualified, or until
their earlier death, retirement, resignation or removal. Executive officers
serve at the discretion of the Board of Directors, and are appointed to serve
until the first Board of Directors meeting following the annual meeting of
stockholders. Also provided is a brief description of the business experience
of each director and executive officer and the key management personnel during
the past five years and an indication of directorships held by each director in
other companies subject to the reporting requirements under the Federal
securities laws.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Robert C. Silzer 53 Chairman of the Board, Chief Executive Officer and Director
Robert C. Silzer, Jr. 34 President, Secretary, Treasurer and Director
Jerry L. Smith 59 Director
</TABLE>
Robert C. Silzer, Sr. is CEO and Chairman of the Board of the Company and
InFOREtech 2000. Mr. Silzer founded InFOREtech 2000 in 1997 and is a major
shareholder of the Company. He is a seasoned businessman and successful
entrepreneur with a long history of financing innovative developments in the
recreational arena. Mr. Silzer has extensive experience in managing both
private and public corporations, in raising capital and introducing new
products. In addition, he has considerable experience in marketing and sales,
with numerous business contacts throughout North America, Europe and Asia. Mr.
Silzer was financier and developer of the electronic bingo machine, a wireless
hand-held gaming device. Mr. Silzer was founder and CEO of Supercart
International, a privately held corporation, from 1985 to 1990.
Jerry L. Smith is a Director of the Company and InFOREtech 2000. Mr. Smith
is the Managing Member of Abacus Capital, LLC, a private investment firm. From
1986 to present, Mr. Smith has been President and majority owner of Gateway
Group, Inc., a merger, acquisition, and investment banking firm specializing in
manufacturing, distribution, and service companies. He is a Director of
EndoBiologics, Inc., a protein based anti-microbial therapeutics developer, a
Director of Centurion Technologies, Inc., an on-line web access software
developer for instant data retrieval through "Smart Cards"; and is President and
Director of Iconn Sports International, a manufacturer of high-end wakeboards,
water skis, and accessories. Previously, Mr. Smith was a director of Digital
Data Networks, Inc., a digital information systems operator and developer; a
Director of AskRex.com, an interactive Internet travel service company and has
owned and operated manufacturing, distribution, retail and financial companies.
He was a founding Director of the Western Washington Youth Foundation and is a
Seattle Pacific University Fellow.
Robert C. Silzer, Jr. is President, Secretary, Treasurer and a Director of
the Company and InFOREtech 2000. Mr. Silzer started his relationship with
InFOREtech 2000in early 1996 on a
15
<PAGE>
consulting basis. He started full-time employment with the company in August
1998 as Project Manager and in April 1999 was appointed President. Mr. Silzer
has significant experience in the development, manufacturing, sales and service
of hand held electronic devices. Prior to joining InFOREtech 2000, Mr. Silzer
was employed by AGT Inc. from 1993 to 1998 as Executive Vice President.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid during fiscal
year ended December 31, 1999 to the Company's Chief Executive Officer. No
officer of the Company received annual compensation in excess of US$100,000 per
annum.
Summary Compensation Table
Name and
Principal Position Year Salary
------------------ ---- ------
Robert C. Silzer 1999 $17,700 (1)
Chief Executive Officer
(1) Paid by InFOREtech 2000
Compensation Agreements
There are currently no long-term employment or consulting agreements
between the Company and the executive officers or directors of the Company.
Board of Directors
During the year ended December 31, 1999, 9 meetings of the Board of
Directors were held; certain corporate actions were also conducted by unanimous
written consent of the Board of Directors. Directors receive no compensation
for serving on the Board of Directors, but are reimbursed for any out-of-pocket
expenses incurred in attending board meetings. The Company had no audit,
nominating or compensation committees, or committees performing similar
functions, during the year ended December 31, 1999.
Stock Option Plan
As of December 31, 1999, the Company has not adopted a stock option
plan. Pursuant to the Share Exchange Agreement (as described in Item 1), the
Company agreed to create a stock option plan. As of March 31, 2000, the Company
had not yet completed the Plan. However, as of such date, the Board of
Directors of the Company had agreed that options for 2,000,000 shares of common
stock of the Company be made available for allocation to directors, officers,
employees and consultants of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 31,
2000 with respect to the beneficial ownership of the common stock of the Company
by each beneficial owner of more than 5% of the outstanding shares of common
stock of the Company, each director, each executive officer and all
16
<PAGE>
executive officers and directors of the Company as a group, (i) the number of
shares of common stock owned by each such person and group and (ii) the percent
of the Company's common stock so owned.
As used in this section, the term beneficial ownership with respect to
a security is defined by Rule 13d-3 under the Exchange Act as consisting of sole
or shared voting power (including the power to vote or direct the vote) and/or
sole or shared investment power (including the power to dispose of or direct the
disposition of) with respect to the security through any contract, arrangement,
understanding, relationship or otherwise, subject to community property laws
where applicable. Each person has sole voting and investment power with respect
to the shares of common stock, except as otherwise indicated. Beneficial
ownership consists of a direct interest in the shares of common stock, except as
otherwise indicated. The address of those persons for which an address is not
otherwise indicated is:
Suite 214
550 - 152nd Street
Surrey, British Columbia V35-8E7
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Percentage of Outstanding Common
Number of Shares of Common Stock Stock Beneficially
Name of Beneficial Owner Beneficially Owned Owned (1)
------------------------ -------------------------------- ---------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert Silzer, Sr. 5,581,750 (2) 30.37%
- ---------------------------------------------------------------------------------------------------------------------
Robert C. Silzer, Jr. 850,000 (3) 4.69%
- ---------------------------------------------------------------------------------------------------------------------
Jerry L. Smith 548,000 (4) 3.05%
- ---------------------------------------------------------------------------------------------------------------------
All Officers and Directors 6,979,750 (5) 37.02%
As a Group (three persons)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Common stock subject to options or warrants currently exercisable, or
exercisable within 60 days, is deemed outstanding for purposes of computing the
percentage of the person holding such options or warrants (including the
percentage of all officers and directors as a group), but is not deemed
outstanding for purposes of computing the percentage for any other person.
Percentages based on 10,889,522 shares of Class A Stock and 6,902,030 shares of
Class B Stock outstanding as of March 31, 2000.
(2) Includes (i) 4,470,750 shares of Class B Stock owned of record by
Robert Silzer, Sr., (ii) 525,000 shares of Class B Stock owned of record by
Robert Silzer, Sr.'s wife, Madj Silzer, (iii) 425,000 options owned by Robert
Silzer, Sr. to purchase shares of Class A Stock at $1.00 per share (as to
375,000 options) and $3.00 per share (as to 50,000 options), and (iv) 161,000
shares of Class A Stock which Robert Silzer, Sr. may obtain beneficial ownership
of via the conversion of $161,000 in convertible notes, which notes are
convertible into shares at $1.00 per share, and which notes are owned by RCS
Financial Group, an affiliate of Robert Silzer, Sr.
(3) Includes (i) 525,000 shares of Class B Stock and (ii) 325,000 options
owned by Robert Silzer, Jr. to purchase shares of Class A Stock at $1.00 per
share (as to 275,000 options) and $3.00 per share (as to 50,000 options).
17
<PAGE>
(4) Includes (i) 125,000 options owned by Jerry Smith to purchase shares
of Class A Stock at $1.00 per share (as to 75,000 options) and $3.00 per share
(as to 50,000 options) and (ii) 24,000 warrants owned by Jerry Smith convertible
into shares of Class A Stock at $2.00 per share.
(5) Includes shares described in Notes 2, 3 and 4.
We believe that the beneficial owners of securities listed above,
based on information furnished by such owners, have sole investment and voting
power with respect to such shares, subject to community property laws where
applicable. Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject to
options or warrants currently exercisable, or exercisable within 60 days, are
deemed outstanding for purposes of computing the percentage of the person
holding such options or warrants (including the percentage of all officers and
directors as a group), but are not deemed outstanding for purposes of computing
the percentage of any other person.
CHANGES IN CONTROL
The Company is unaware of any contract or other arrangement, the
operation of which may at a subsequent date result in a change in control of the
Company.
ITEM 12. CERTAIN TRANSACTIONS
Fernando Carranza, a former President and Director of the Company,
received 4,545,000 shares of the Company's common stock for work on the
Company's business plan on March 15, 1999. The shares held by Mr. Carranza were
canceled as of December 10, 1999.
Jackie L. Kruger, a former Secretary, Treasurer and Director of the
Company, received for administrative services 10,000 shares of the Company's
common stock on March 15, 1996, an additional 100 shares were issued to her on
March 15, 1998 as a correction to the issuance of stock dated March 15, 1996.
90,900 shares of the Company's common stock were issued to her per a stock split
on December 31, 1998 and an additional 4,444,000 shares were issued to her per a
stock split on February 8, 1999. The shares held by Ms. Kruger were canceled as
of December 10, 1999.
Pursuant to the Share Exchange Agreement dated as of December 16,
1999, the Company issued to Robert Silzer, Sr., the Chief Executive Officer and
Chairman of the Board of the Company, 4,470,750 shares of Class B Stock and
options to acquire 425,000 shares Class A Stock.
Pursuant to the Share Exchange Agreement dated as of December 16,
1999, the Company issued to Robert C. Silzer, Jr., the President, Secretary,
Treasurer and a Director of the Company, 525,000 Class B Stock and options to
acquire 325,000 shares of Class A Stock.
Pursuant to the Share Exchange Agreement dated as of December 16,
1999, the Company issued to other members of the Silzer family 2,100,000 shares
of Class B Stock and options to acquire 300,000 shares of Class A Stock.
Pursuant to the Share Exchange Agreement dated as of December 16,
1999, the Company entered into certain Put and Call Agreements with members of
the Silzer Family.
18
<PAGE>
Pursuant to the Share Exchange Agreement dated as of December 16,
1999, the Company purchased 67.15% of the issued Class A voting shares of
InFOREtech 2000 Inc. from the Silzer Family.
19
<PAGE>
PART IV
Exhibit Number Title
3.1 Articles of Incorporation as filed with the Nevada Secretary of
State on December 12, 1995 (1)
3.2 Certificate of Amendment to the Articles of Incorporation as filed
with the Nevada Secretary of State on January 3, 2000 *
3.3 Certificate of Amendment to the Articles of Incorporation as filed
with the Nevada Secretary of State on January 20, 2000 *
3.4 Bylaws (1)
10.1 Share Exchange and Finance Agreement dated as of December 16, 1999
(2)
21.1 Subsidiaries of Registrant (1)
27.1 Financial Data Schedule *
(1) Incorporated by reference to the Exhibits to the Registration Statement
on Form 10-SB (file number 000-28819)
(2) Incorporated by reference to the Exhibits to the Form 8-K (file number
000-30104)
* Filed herewith.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
INFORETECH WIRELESS TECHNOLOGY, INC.
By: /s/ Robert C. Silzer, Sr.
-------------------------
Robert C. Silzer, Sr.
Chief Executive Officer
Dated: April 12, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ Robert C. Silzer, Sr. Dated: April 12, 2000
-------------------------------
Robert C. Silzer, Sr.
Chief Executive Officer
By: /s/ Robert C. Silzer, Jr. Dated: April 12, 2000
-------------------------------
Robert C. Silzer, Jr.
President, Secretary, Treasurer
By: /s/ Jerry L. Smith Dated: April 12, 2000
-------------------------------
Jerry L. Smith
Director
21
<PAGE>
INFORETECH GOLF
TECHNOLOGY 2000 INC.
(a development stage company)
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 1999
(U.S.$)
1. Auditors' Report
2. Consolidated Statement of Operations and Deficit
3. Consolidated Balance Sheet
4. Consolidated Statement of Stockholders' Equity
5. Consolidated Statement of Cash Flows
6. Notes to the Consolidated Financial Statements.
F-1
<PAGE>
AUDITORS' REPORT
To the Directors of
InForetech Golf Technology 2000 Inc.
We have audited the consolidated balance sheet of InForetech Golf Technology
2000 Inc. as at December 31, 1999 and the consolidated statements of operations
and deficit, stockholders' equity and cash flows for the period from July 31,
1999 to December 31, 1999. 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.
We conducted our audit in accordance with generally accepted audited standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1999
and the results of its operations and the changes in its cash flows for the
period then ended in accordance with generally accepted accounting principles.
/s/ Lemieux Peck Millard Bond
Chartered Accountants
Langley, British Columbia
January 20, 2000
F-2
<PAGE>
INFORETECH GOLF TECHNOLOGY 2000 INC.
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(U.S.$)
<TABLE>
<CAPTION>
Total from
inception
August 1, (August 11,
1999 to August 11, 1998) to
December 31, 1998 to December 31,
1999 July 31, 1999 1999
-------------------- ------------------- ------------------
EXPENSES
<S> <C> <C> <C>
Administration $ 498,741 $ 626,867 $ 1,125,608
Amortization 21,727 11,099 32,826
Finance costs 277,239 277,995 555,234
Marketing 246,936 303,667 550,603
Research and development 773,266 1,153,966 1,927,232
-------------------- ------------------- ------------------
NET LOSS (1,817,909) (2,373,594) (4,191,503)
DEFICIT, BEGINNING (3,428,712)
Deficiency on acquisition of subsidiary
company acquired in a related party
transaction (Note 3) (1,055,118) (1,055,118)
------------------- ------------------
DEFICIT, ENDING $(5,246,621) $(3,428,712) $(5,246,621)
==================== =================== ==================
</TABLE>
F-3
<PAGE>
INFORETECH GOLF TECHNOLOGY 2000 INC.
(a development stage company)
CONSOLIDATED BALANCE SHEET
(U.S.$)
<TABLE>
<CAPTION>
December 31, July 31,
1999 1999
-------------------- ----------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Accounts receivable $ 83,507 $ 16,641
Prepaid expenses and deposits 47,786 8,557
-------------------- ----------------------
131,293 25,198
PROPERTY AND EQUIPMENT, net (Note 4) 204,068 103,745
-------------------- ----------------------
$ 335,361 $ 128,943
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness (Note 5) $ 4,214 $ 156,404
Accounts payable and accrued liabilities 526,261 350,288
Loans payable (Note 6) 1,500,000 500,000
Convertible promissory notes- Series A (Note 7) 100,000 225,000
- - others (Note 7) 834,759 838,241
Promissory notes payable, related parties (Note 8) 869,746 960,469
-------------------- ----------------------
COMMITMENTS AND CONTINGENCIES (Note 13) 3,834,980 3,030,402
STOCKHOLDERS' EQUITY (Note 9)
Common stock, without par value
Authorized:
50,000,000 Class A, participating shares
50,000,000 Class B, participating shares
50,000,000 Class C, non-participating shares
Issued:
9,269,667 Class A common shares (July 31, 1999;
8,025,000 shares) 1,747,001 527,251
100,000 Class C common shares (July 31, 1999; 225,000
shares) 1 2
Accumulated deficit (5,246,621) (3,428,712)
-------------------- ----------------------
(3,499,619) (2,901,459)
-------------------- ----------------------
$ 335,361 $ 128,943
==================== ======================
</TABLE>
F-4
<PAGE>
INFORETECH GOLF TECHNOLOGY 2000 INC.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(U.S.$)
<TABLE>
<CAPTION>
Class A Class C
Common Stock Common Stock Total
-------------------------------------------------------- Stock-
Number Number Accumulated holders'
of Shares Amount of Shares Amount Deficit Equity
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issue of common stock on $ 1 $ $ $ 1
organization of the Company 1
Issue of common shares for
purchase of InForetech Golf 5,250,000 1 1
Technology Inc.
Issue of common stock for 404,250 404 404
services
Issue of common stock for cash 2,070,749 226,845 226,845
Issue of convertible 525,000 5 5
promissory notes
Conversion of $300,000 of
promissory notes 300,000 300,000 (300,000) (3) 299,997
Deficiency on acquisition of (1,055,118) (1,055,118)
subsidiary company
Net loss (2,373,594) (2,373,594)
- --------
------------------ -------------
Balance, July 31, 1999 8,025,000 $ 527,251 225,000 $ 2 $(3,428,712) $(2,901,459)
Issue of common stock for 40,000 40,000 40,000
services
Issue of common stock for cash 399,667 324,750 324,750
Exercise of stock purchase 50,000 100,000 100,000
warrants
Conversion of $125,000 of
promissory notes 125,000 125,000 (125,000) (1) 124,999
Issue of common stock to 600,000 600,000 600,000
settle debt
Issue of common stock for 30,000 30,000 30,000
interest
Net loss (1,817,909) (1,817,909)
- -------- m ------------------ -------------
Balance, December 31, 1999 9,269,567 $1,747,001 100,000 $ 1 $(5,246,621) $(3,499,619)
============ ============= ========== ======== ============= =============
</TABLE>
F-5
<PAGE>
INFORETECH GOLF TECHNOLOGY 2000 INC.
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
(U.S.$)
<TABLE>
<CAPTION>
Total from
inception
August 1, August 11, (August 11,
1999 to 1998 to 1998) to
December 31, July 31, December 31,
1999 1999 1999
------------------- ------------------- --------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,817,909) $(2,373,594) $(4,191,503)
Adjustment to reconcile net loss to cash used
in operating activities:
Amortization 21,727 11,099 32,826
Expenses paid by issuance of stock 70,000 404 70,404
Changed in operating assets and liabilities:
Accounts receivable (66,866) (16,641) (83,507)
Prepaid expenses (39,229) (8,557) (47,786)
Accounts payable 175,972 350,288 526,260
------------------- ------------------- --------------------
(1,656,305) (2,037,001) (3,693,306)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (122,050) (114,844) (236,894)
Deficiency on acquisition of subsidiary
company (1,055,118) (1,055,118)
------------------- ------------------- --------------------
(122,050) (1,169,962) (1,292,012)
CASH FLOWS FROM FINANCING ACTIVITIES 424,750 226,849 651,599
Common stock issued for cash 1,700,000 500,000 2,200,000
Loan proceeds (100,000) (100,000)
Loan repayments (94,205) 2,323,710 2,229,505
Promissory Notes 1,930,545 3,050,559 4,981,104
INCREASE (DECREASE) IN CASH 152,190 (156,404) (4,214)
CASH (DEFICIENCY), BEGINNING (156,404)
------------------- ------------------- --------------------
CASH (DEFICIENCY), ENDING $ (4,214) $ (156,404) $ (4,214)
=================== =================== ====================
NON-CASH FINANCING AND INVESTING ACTIVITIES
Common stock issued on conversion of
convertible notes $ 125,000 $ 300,000 $ 425,000
Common stock issued to settle debt 600,000 600,000
Common stock issued for interest 30,000 30,000
Common stock issued for services 40,000 404 40,404
------------------- ------------------- --------------------
$ 795,000 $ 300,404 $ 1,095,404
=================== =================== ====================
</TABLE>
F-6
<PAGE>
INFORETECH GOLF TECHNOLOGY 2000 INC.
(a development stage company)
NOTES TO THE FINANCIAL STATEMENTS
(U.S.$)
DECEMBER 31, 1999
- -----------------
1. NATURE OF OPERATIONS
InForetech Golf Technology 2000 Inc. ("InForetech") is involved in the
development of golf course management technology. The Company is in the process
of developing the technology and has not yet determined the ultimate economic
viability of the technology. Commercial operations have not yet commenced.
The continuation of the Company's research and development activities and
the commercialization of the technology is dependent upon the Company's ability
to successfully complete its research and development programs and finance its
cash requirements through a combination of equity financings and payments from
potential strategic partners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting 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
reporting period. Actual results could differ from those estimates.
Consolidation
These consolidated financial statements include the accounts of InForetech
Golf Technology 2000 Inc. and its wholly-owned inactive subsidiary, InForetech
Golf Technology Inc.
Cash equivalents
Cash equivalents include holdings of highly liquid investments with
maturities of three months or less when purchased.
Financial instruments
The fair value of the financial instruments approximates their carrying
value except as otherwise disclosed in the financial statements.
Property and equipment is recorded at cost less depreciation. Depreciation
is provided in amounts sufficient to relate the cost of depreciable assets to
operations over their estimated useful lives.
F-7
<PAGE>
Research and Development
Research costs are expensed as incurred. Development costs are deferred if
they meet all criteria under generally accepted accounting principles. All
development costs have been expensed as incurred.
Government assistance
Government assistance towards current expenses is included as a reduction
of those expenses when there is a reasonable assurance that the Company has
complied with all conditions necessary to receive the assistance.
Foreign currency translation
The Company follows the temporal method of accounting for the translation
of foreign currency amounts into U.S. dollars. Under this method, monetary
assets and liabilities in foreign currencies are translated at the exchange
rates in effect at the year end. All other assets and liabilities are
translated at rates prevailing when the asset was acquired or the liability
incurred. Income and expense items are translated at the exchange rates in
effect on the date of the transaction. Resulting exchange gains or losses are
included in the determination of loss for the year.
3. ACQUISITION
In August 1998, the Company acquired all of the issued and outstanding
shares of InForetech Golf Technology Inc. ("IGTI") by issuing 5,250,000 Class A
shares to the shareholders of IGTI. IGTI was wholly-owned by the president and
other family members of the Company prior to the purchase.
The acquisition has been recorded using the purchase method of accounting
and includes the operating results of IGTI in the financial statements from the
date of acquisition, August 11, 1998.
Net assets acquired at carrying value at acquisition dates:
<TABLE>
<S> <C>
Current assets $ 72,821
Current liabilities (1,165,171)
Capital assets 37,232
-----------
Deficiency on acquisition $(1,055.118)
===========
</TABLE>
F-8
<PAGE>
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
December 31, July 31,
1999 1999
-------------------- ----------------------
<S> <C> <C>
Office equipment and furnishings $135,645 $ 70,307
Computer software 37,435
Leasehold improvements 64,259 44,982
-------------------- ----------------------
237,339 115,289
Less: accumulated amortization (33,271) (11,544)
-------------------- ----------------------
$204,068 103,745
==================== ======================
</TABLE>
5. BANK INDEBTEDNESS
The bank line of credit is secured by: the personal guarantee of the
principal shareholder, an assignment of book debts and a general security
agreement and bears interest at bank prime plus 3%, and is repayable on demand.
Current account overdrafts bear interest at 21 %.
6. LOANS PAYABLE
<TABLE>
<CAPTION>
December 31, July 31,
1999 1999
-------------------- ----------------------
<S> <C> <C>
Base Capital LLC
The loan payable is secured by the Company's
intellectual property and guaranteed by the majority
shareholder. The loan bears interest at bank prime
plus 4%. $ 500,000
Mercer Capital Corp.
The loan bears interest at 12% per annum, is secured
by a general security agreement and is repayable from
private placement proceeds as set out in Note 14.
The loan grants Mercer Capital Corp. the right to
convert the debt into Class A shares of the Comfy at
a ice of $1.00 per share. $1,500,000
-------------------- --------------------
$1,500,000 $ 500,000
==================== ====================
</TABLE>
F-9
<PAGE>
7. CONVERTIBLE PROMISSORY NOTES
(a) Series A
Under the terms of a private placement offering memorandum, the Company
issued $525,000 Series A convertible notes.
The holders of the convertible notes also received 525,000 Class C shares
of the Company. The Class C shares are surrendered to the Company upon
conversion of the notes.
The convertible notes bear interest at 10% per annum, mature two years from
issuance and are convertible into units of the Company. Each unit consists of
one Class A share and one share purchase warrant to purchase one Class A share
at $2.00. To December 31, 1999, $425,000 of the notes have been converted to
units.
(b) Others
Promissory notes payable to others are unsecured, repayable on demand and
are non-interest bearing. These notes may be converted into Class A shares of
the Company at the price of $1.00 per Class A share.
8. PROMISSORY NOTES PAYABLE, RELATED PARTIES
<TABLE>
<CAPTION>
December 31, July 31,
1999 1999
-------------------- ----------------------
<S> <C> <C>
Related parties $869,746 $960,469
</TABLE>
Promissory notes payable to officers and directors or companies controlled
by officers and directors of the Company are unsecured and repayable on demand.
$850,210 (July 31, 1999; $941,751) of these notes bear interest at 10%. The
note holders have waived their interest for the period August 1, 1999 to
December 31, 1999.
9. STOCKHOLDERS' EQUITY
Pursuant to a special resolution dated September 3, 1998, the authorized
common stock of the Company was increased from 10,000 Class A voting common
shares without par value to 150,000,000 shares without par value divided as
follows:
. 50,000,000 Class A voting common shares without par value
. 50,000,000 Class B voting common shares without par value
. 50,000,000 Class C voting, non-participating common shares without par value
F-10
<PAGE>
10. PRIVATE PLACEMENTS
(a) On April 30, 1999, the Company completed a private placement of
$525,000 of Series A convertible notes. The notes bear interest at 10% per
annum, mature two years from issuance and are convertible into units of the
Company.
Each unit comprises one Class A common share and one Class A share purchase
warrant. Each share purchase warrant entitles the holder to acquire one Class A
share at $2.00 at any time within two years of date of issuance.
The holders of the notes also received Class C shares. The Class C shares
are to be surrendered to the Company upon conversion of the notes. To December
31, 1999, $425,000 of the notes have been converted into 425,000 units.
(b) Under the terms of a private placement offering, the Company has sold
225,000 units at $1.00 per unit for gross proceeds of $225,000.
Each unit comprises one Class A common share and one Class A share purchase
warrant. Each share purchase warrant entitles the holder to acquire one Class A
share at $2.00 at any time within two years of date of issuance.
11. OTHER COMMITMENTS TO ISSUE SHARES
Under the terms of two consulting agreements the Company agreed to issue
200,000 Class A shares. At December 31, 1999, 170,750 shares remain to be
issued.
12. STOCK PURCHASE WARRANTS
At December 31, 1999, Class A share purchase warrants were outstanding as
follows:
<TABLE>
<CAPTION>
Number of Class A
Shares Issuable Exercise Price Month of Expiry
------------------ ----------------- ----------------
<S> <C> <C>
175,000 $2.00 January 2001
150,000 2.00 February 2001
150,000 2.00 March 2001
100,000 2.00 May 2001
125,000 2.00 June 2001
120,000 2.00 October 2001
530,000 2.00 December 2001
--------------
1,350,000
==============
</TABLE>
During the period ended December 31, 1999, 50,000 warrants were exercised.
F-11
<PAGE>
13. COMMITMENTS AND CONTINGENCIES
Lease commitments
The Company leases office premises and certain of its office equipment for
use in its operations. Rent expense was $23,409 for the period. This table
shows future minimum lease commitments under the leases at December 31, 1999.
2000 2001 2002 2003 2004
---- ---- ---- ---- ----
Lease commitments $59,637 $57,712 $23,064 $3,837 $2,476
Consulting agreement
The Company has entered into a consulting services agreement with a company
with a common director. Under the terms of the agreement, the Company will pay
a fee of 10% of any equity financing, convertible debt financing, merger or
business combination or sale. The fee for non-convertible debt. is 2%.
Contingencies
The holder of patents for a "golf distance measuring system and method" has
licensed non-exclusive rights to several of the Company's competitors. The
patents are currently subject to litigation with respect to their validity. If
the patents are upheld, the Company may be required to become a licensee. There
is no assurance that if the patents are upheld, a license would be available to
the Company.
14. SHARE EXCHANGE AND FINANCE AGREEMENT
Pursuant to the terms of a Share Exchange and Finance Agreement dated
December 16, 1999, between the Company, its founding shareholders, Diversified
Marketing Services, Inc. ("Diversified"), an inactive U.S. public company, and
Mercer Capital Corp. ("Mercer"), the founding shareholders have agreed to
exchange their shares of the Company for shares of Diversified, or shares that
are convertible into shares of Diversified. Shareholders who are not founding
shareholders are also requested to exchange their shares under the agreement.
Upon closing, the founding shareholders of the Company who exchanged their
shares will hold a controlling interest in Diversified and the transaction will
be accounted for as a reverse takeover.
Under the terms of the agreement, Diversified will create a stock option
plan for the directors, officers and employees of the Company.
Mercer has agreed to complete two private placements of Diversified shares
to raise a minimum of $3,150,000. Funds from the first private placement of a
minimum of $1,500,000 are to be advanced to the Company as an intercompany loan
which is to be used to repay the $1,500,000 loan from Mercer (see Note 6.)
Proceeds from the second private placement of a minimum $1,650,000 are also to
be advanced to the Company as an intercompany loan. Up to
F-12
<PAGE>
$1,000,000 of the second intercompany loan is to be used to repay amounts owing
to a director of the Company.
The director has agreed to defer repayment of amounts owing to him until
such time as the working capital of the Company is sufficient to allow for
repayment.
15. INCOME TAXES
The Company has accumulated losses for tax purposes which may be carried
forward and used to reduce taxable income otherwise calculated. The benefit of
these available carry forwards has not been recorded in the accounts. '
16. SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT TAX CREDITS
Certain of the Company's research expenditures may be eligible for the
Canadian Government Scientific Research and Experimental Development ("SR&ED")
tax credit. Under this program Canadian controlled private corporations can
receive a refundable tax credit of up to 35% for qualifying SR&ED expenditures
to a maximum limit of $2,000,000 in expenditures. Companies with expenditures
over $2,000,000 can receive an investment tax credit of up to 20% for qualifying
SR&ED expenditures.
No determination has been made as to eligibility or amount of the
investment tax credit. Any amounts received under the program would be applied
against research and development expenditures in the period received.
F-13
<PAGE>
17. RELATED PARTY TRANSACTIONS
<TABLE>
<CAPTION>
December 31, July 31,
1999 1999
-------------------- ----------------------
<S> <C> <C>
(a) Consulting fees paid to officers of the Company $ $ 34,598
(b) Commissions and consulting fees paid to a company
with a common director $ 32,500 $ 62,875
(c) Interest paid or payable to officers and/or
directors $ $ 98,738
(d) Included in the balance sheet are the following
amounts due to directors and officers and/or
companies controlled by officers and directors of the
Company:
Promissory notes payable $1,024,505 $1,118,710
Accounts payable $ 24,944 $
(e) Included in the balance sheet are the following
amounts due from directors and officers and/or
companies controlled by officers and directors of the
Company:
Accounts receivable $ 15,393 $
</TABLE>
18. SUBSEQUENT EVENTS
Subsequent to December 31, 1999, the Company received $2,050,959 pursuant
to the Share Exchange and Finance Agreement as set out in Note 14. $1,550,959
was used to repay the Mercer Capital loan (Notes 6 and 14) and accrued interest
on the loan.
19. UNCERTAINTY DUE TO THE 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
entity, including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
F-14
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(formerly Diversified Marketing Services, Inc.)
(a development stage company)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
1 Independent Auditors' Report
2 Statement of Operations and Deficit
3 Balance Sheet
4 Statement of Stockholders' Equity
5 Statement of Cash Flows
6 Notes to the Financial Statements
F-15
<PAGE>
[LETTERHEAD OF LEMIEUX DECK MILLARD BOND]
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
INFORETECH WIRELESS TECHNOLOGY INC.
(formerly Diversified Marketing Services, Inc.)
We have audited the accompanying balance sheet of Inforetech Wireless Technology
Inc. (a development stage company), (formerly Diversified Marketing Services,
Inc.) as at December 31, 1999 and the related statements of operations and
deficit, stockholders' equity and changes in cash flows for the year then ended
in conformity with generally accepted accounting principles in the United States
of America. 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.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1999 and the
results of its operations and cash flows for the year then ended in accordance
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. The company is in the development
stage and will need additional working capital for its planned activities which
raises substantial doubts about its ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 8. These
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
The financial statements for the years ended December 31, 1998 and December 31,
1997 were audited by other auditors who expressed an opinion without reservation
on those statements in their report dated March 10, 1999.
/s/ Lemieux Deck Millard Bond
Chartered Accountants
Langley, British Columbia
April 6, 2000
F-16
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(formerly Diversified Marketing Services, Inc.)
(a development stage company)
STATEMENT OF OPERATIONS AND DEFICIT
(U.S.$)
<TABLE>
<CAPTION>
Total from
inception
(December 12,
1995) to
December 31,
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE $ $ $ $
- -----------------------------------------------------------------------------------------
EXPENSES
General, selling and administrative 1,004 2 1,165
Legal and accounting 10,170 10,170
Listing and share transfer fees 1,126 1,126
2
- -----------------------------------------------------------------------------------------
LOSS BEFORE OTHER ITEMS (12,300) (2) (12,461)
- -----------------------------------------------------------------------------------------
NET LOSS (12,300) (2) (12,461)
DEFICIT, BEGINNING (202) (200) (200)
- -----------------------------------------------------------------------------------------
DEFICIT, ENDING $(12,502) $(202) $(200) $(12,461)
- -----------------------------------------------------------------------------------------
LOSS PER COMMON SHARE (Note 4) $ $ $
=========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(formerly Diversified Marketing Services, Inc.)
(a development stage company)
BALANCE SHEETS
(U.S.$)
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash $ $4,800
==============================================================================================
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities $ 7,500 $
- ---------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (Note 3)
Common stock, $.001 par value.
Authorized 100,000,000 Class A, voting, participating shares;
Issued: 1999-6,156,000; 1998-250,000 6,156 250
Special voting stock, $.001 par value.
Authorized 100,000,000 Class B, voting, non-participating shares;
Issued: 1999-NIL; 1998-NIL
Additional paid-in capital (1,154) 4,752
Accumulated deficit (12,502) (202)
- ---------------------------------------------------------------------------------------------
(7,500) 4,800
- ---------------------------------------------------------------------------------------------
$ $4,800
==============================================================================================
</TABLE>
Approved by the Directors:
___________________ Director
___________________ Director
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(formerly Diversified Marketing Services, Inc.)
(a development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
(U.S.$)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Common Stock Additional Total
Number paid-in Accumulated stockholders'
of shares Amount capital deficit equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 and 1997 24,800 $ 5,000 $ $ (200) $ 4,800
March 15, 1998 stock issued for services 200 2 2
December 15, 1998 changed par value no par value to $0.001 (4,977) 4,977
December 31, 1998 forward stock split 10:1 225,000 225 (225)
Net loss (2) (2)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31,1998 250,000 250 4,752 (202) 4,800
February 8, 1999 forward stock split 45:1 11,000,000 11,000 (11,000)
December 10, 1999 common stock cancelled (9,090,000) (9,090) 9,090
December 13, 1999 forward stock split 2.85:1 3,996,000 3,996 (3,996)
Net loss (12,300) (12,300)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 6,156,000 $ 6,156 $ (1,154) $(12,502) $ (7,500)
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(formerly Diversified Marketing Services, Inc.)
(a development stage company)
STATEMENT OF CASH FLOWS
(U.S.$)
<TABLE>
<CAPTION>
Total from
inception
(December 12,
1995) to
December 31,
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997 1999
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(12,300) $ (2) $ $(12,502)
Adjustment to reconcile net loss to cash used in operating activities:
Expenses paid by issuance of stock 2 202
Changes in operating assets and liabilities:
Accounts payable 7,500 7,500
- ---------------------------------------------------------------------------------------------------------------------------
Net decrease in cash (4,800) (4,800)
Cash, beginning 4,800 4,800 4,800
- ---------------------------------------------------------------------------------------------------------------------------
Cash, ending $ $4,800 $4,800 $ (4,800)
- ---------------------------------------------------------------------------------------------------------------------------
Non-cash financing and investing activities
Common stock issued for services $ $ 2 $ $ 202
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(formerly Diversified Marketing Services, Inc.)
(a development stage company)
NOTES TO THE FINANCIAL STATEMENTS
(U.S.$)
DECEMBER 31, 1999
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was incorporated December 12, 1995, under the laws of the State
of Nevada as Diversified Marketing Services, Inc. Pursuant to a Director's
resolution dated December 6, 1999, the Company changed its name from
Diversified Marketing Services, Inc. to Inforetech Wireless Technology Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern which assume
that the Company will realize its assets and discharge its liabilities in the
normal course of business. Realization values may be substantially different
from the carrying values as shown in these financial statements should the
Company be unable to continue as a going concern. The Company's ability to
meet its obligations and maintain its operations is contingent upon
successful completion of additional financial arrangements and the continuing
support of its creditors.
(a) Accounting 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 reporting period. Actual results could differ from those
estimates.
(b) Cash equivalents
Cash equivalents include holdings of highly liquid investments with
maturities of three months or less when purchased.
(c) Earnings per common share
Statement of Financial Accounting Standards No. 128, "Earnings per
Share", which became effective in 1997, requires presentation of two
calculations of earnings per common share. "Basic" earnings per common
share equals net income divided by weighted average number of common
shares outstanding during the period. "Diluted" earnings per common
share equal net income divided by the sum of weighted average common
shares outstanding during the period plus common stock equivalents.
Common stock equivalents are shares assumed to be issued if outstanding
stock options were exercised and are only considered if their effect on
earnings per common share is dilutive.
(d) Comprehensive income
The Company has adopted Statement of Financial Accounting Standard
("SFAS") No. 130, "Reporting Comprehensive Income". SFAS 130 establishes
standards for the reporting of comprehensive income and its components.
As defined in SFAS 130, the Company has no comprehensive income items.
F-21
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(formerly Diversified Marketing Services, Inc.)
(a development stage company)
NOTES TO THE FINANCIAL STATEMENTS
(U.S.$)
DECEMBER 31, 1999
3. STOCKHOLDERS' EQUITY
On March 15, 1996, the Company issued 20,000 shares of its no par value
common stock in consideration of $200.00 to its directors.
On September 30, 1996, the Company issued 4,800 shares of its no par value
common stock for cash of $4,800 to investors.
On March 15, 1998, the Company issued 200 shares of its no par value common
stock to its directors as a correction to the original issuance of stock
dated March 15, 1996, to equal the authorized number of shares per the board
of directors meeting dated March 15, 1996.
On December 15, 1998, the State of Nevada approved the Company's restated
Articles of Incorporation, which changed the par value from no par value to
$0.001, and increased its Authorized Common Stock from 25,000 shares to
50,000,000 shares.
On December 31, 1998, the Company approved a forward stock split on the basis
of 10:1 increasing the outstanding common stock from 25,000 shares to 250,000
shares.
On February 8, 1999, the Company approved a forward stock split on the basis
of 45:1 increasing the outstanding common stock from 250,000 shares to
11,250,000 shares.
On December 10, 1999, the directors approved the cancellation of 9,090,000
common shares previously issued to two directors.
On December 13, 1999, the Directors authorized a forward stock split on the
basis of 2.85:1 increasing the outstanding common stock from 2,160,000 shares
to 6,156,000 shares.
On December 6, 1999, the directors amended the Articles of Incorporation to
increase the authorized share capital to 110,000,000 shares, $0.001 par value
per share, of which 100,000,000 shares are Class A common, voting
participating shares and 10,000,000 are Class B Special, voting, non-
participating shares.
4. LOSS PER COMMON SHARE
Loss per common share is computed by dividing the net loss by the average
number of common shares and common stock equivalents outstanding during the
year. The weighted average number of common shares outstanding during the
years ended December 31, 1999, 1998 and 1997 were approximately 9,778,871.
5. INCOME TAXES
The Company has accumulated losses for tax purposes which may be carried
forward and used to reduce taxable income otherwise calculated. The benefit
of these available carry forwards has not been recorded in the accounts.
F-22
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(formerly Diversified Marketing Services, Inc.)
(a development stage company)
NOTES TO THE FINANCIAL STATEMENTS
(U.S.$)
DECEMBER 31, 1999
6. SHARE EXCHANGE AND FINANCE AGREEMENT
Pursuant to the terms of a Share Exchange and Finance Agreement dated
December 16, 1999, between the Company, InForetech Golf Technology 2000 Inc.
("IGTI"), its founding shareholders, and Mercer Capital Corp., the founding
shareholders have agreed to exchange their shares of IGTI for shares of the
Company, or shares that are convertible into shares of the Company.
Shareholders who are not founding shareholders are also requested to exchange
their shares under the agreement.
Upon closing, the founding shareholders of IGTI who exchanged their shares
will hold a controlling interest in the Company and the transaction will be
accounted for as a reverse takeover.
Under the terms of the agreement, the Company will create a stock option plan
for its directors, officers and employees.
Mercer Capital Corp. has agreed to complete two private placements of the
Company's shares to raise a minimum of $3,150,000. Funds from the first
private placement of a minimum of $1,500,000 are to be advanced to IGTI as an
inter-company loan which is to be used to repay a previous $1,500,000 loan
from Mercer Capital Corp. Proceeds from the second private placement of a
minimum of $1,650,000 are also to be advanced to IGTI as an inter-company
loan. See Note 8.
7. UNCERTAINTY DUE TO THE 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.
Although the change in date has occurred, it is not possible to conclude that
all aspects of the Year 2000 Issue that may affect the Company, including
those related to customers, suppliers, or other third parties, have been
fully resolved.
8. SUBSEQUENT EVENTS
(a) Private Placements
Subsequent to December 31, 1999, the Company sold 775,000 shares in two
private placements to net the treasury $3,152,000. As set out in Note 6
"Share Exchange and Finance Agreement", these funds were loaned to
InForetech Golf Technology 2000 Inc.
(b) Incorporation of Subsidiary Company
On January 12, 2000, the Company formed a wholly-owned Canadian
subsidiary company, Inforetech Holdings Inc.
(c) Reverse Takeover
Subsequent to December 31, 1999, the Company issued 7,095,750 Class B
Special Rights shares, and Inforetech Holdings Inc. issued 7,095,750
Class A preferred shares to the founding shareholders of Inforetech Golf
Technology 2000 Inc. ("IGTI") for their shares of IGTI as required under
the Share Exchange and Finance Agreement. The issue of these shares
results in the shareholders of IGTI acquiring control of the Company and
is therefore accounted for as a reverse takeover.
F-23
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(formerly Diversified Marketing Services, Inc.)
(a development stage company)
NOTES TO THE FINANCIAL STATEMENTS
(U.S.$)
DECEMBER 31, 1999
8. SUBSEQUENT EVENTS (Continued)
Reverse takeovers are accounted for as a continuation of the legal
subsidiary. Future consolidated financial statements will be issued under
the Company's name but will be a continuation of the financial statements
of IGTI, not the Company.
(d) Other Stock Transactions
Subsequent to December 31, 1999, the Company had the following
additional stock transactions:
i) 100,000 Class A shares were issued as consideration for a placement
fee.
ii) 193,720 Class A shares were issued to settle $193,720 of IGTI debt.
iii) 162,500 Class A shares were issued as consideration for legal fees.
iv) 193,720 Class A shares were issued on the exercise of 193,720 puts.
v) 1,658,332 Class A shares were issued to IGTI shareholders pursuant
to an exchange offer and letter of transmittal forwarded to non-
founding shareholders of IGTI which offered to exchange their
shares of IGTI for shares of the Company.
F-24
<PAGE>
Exhibit 3.2
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
DIVERSIFIED MARKETING SERVICES, INC.
The undersigned certifies that, pursuant to the provisions of the Nevada Revised
Statutes, the shareholders of DIVERSIFIED MARKETING SERVICES, INC., a Nevada
corporation, adopted the following resolutions to amend its Articles of
Incorporation on December 6, 1999.
1. All of the directors consented in writing to the following resolutions dated
December 6, 1999;
RESOLVED, that the Secretary of the Corporation is directed to obtain from
the shareholders owning at least a majority of the voting power of the
outstanding stock of the Corporation their written consent to the amendment
of Article One of the Articles of Incorporation to change the name of the
Corporation from DIVERSIFIED MARKETING SERVICES, INC. to INFORETECH
WIRELESS TECHNOLOGY INC.
2. A majority of the shareholders holding 80.8% of the common shares
outstanding of Diversified Marketing Services, Inc. consented in writing to
the following resolution dated December 6, 1999:
"1. The name of the Corporation is: INFORETECH WIRELESS TECHNOLOGY INC".
Dated this 6th day of December, 1999.
DIVERSIFIED MARKETING SERVICES, INC.
/s/ Jackie Kruger
- ------------------------------------------
Jackie Kruger, Secretary and Director
/s/ Fernando Carranza
- -------------------------------------------
Fernando Carranza, President and Director
<PAGE>
Exhibit 3.3
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
INFORETECH WIRELESS TECHNOLOGY INC.
The undersigned certifies that, pursuant to the provisions of the Nevada Revised
Statutes, the shareholders of INFORETECH WIRELESS TECHNOLOGY INC., a Nevada
corporation, adopted the following resolution to amend its Articles of
Incorporation on December 6, 1999.
3. All of the directors consented in writing to the following resolutions
dated December 6, 1999;
RESOLVED, that the Secretary of the Corporation is directed to obtain from
the shareholders owning at least a majority of the voting power of the
outstanding stock of the Corporation their written consent to the amendment
of Article 4 of the Articles of Incorporation to read as follows:
The Corporation shall have the authority to issue one hundred ten million
(110,000,000) shares, $0.001 par value per share, of which one hundred
million (100,000,000) shares shall be class A Common Equity Voting Stock
("Common Stock"), and ten million (10,000,000) shares shall be Class B
Special Voting Non-Equity Stock ("Special Voting Stock"). Shares of any
class of stock may be issued, within stockholder action, from time to time
in one or more series as may from time to time be determined by the Board
of Directors. The Board of Directors of this Corporation is hereby
expressly granted authority, without stockholder action, and within the
limits set forth in the Nevada Revised Statutes, to:
(a) designate in whole or in part, the voting power, preferences,
limitations, restrictions and relative rights, of any class of shares
before the issuance of any shares of that class;
(b) create one or more series within a class of shares, fix the number of
shares of each such series, and designate, in whole or part, the
voting powers, preferences, limitations, restrictions, and relative
rights of the series, all before the issuance of any shares of that
series; or
(c) alter or revoke the preferences, limitations and relative rights
granted to or imposed upon any wholly unissued class of shares or any
wholly unissued series of any class of shares.
The allocation between the classes, or among the series of each class, of
unlimited voting rights and the right to receive the net assets of the
Corporation upon dissolution, shall be as designated by the Board of
Directors. All rights accruing to the outstanding shares of the
Corporation not expressly provided for to the contrary herein or in the
Corporation's bylaws or in any amendment hereto or thereto shall be vested
in the Common Stock. Accordingly, unless and until otherwise designated by
the Board of Directors of the
2
<PAGE>
Corporation, and subject to any superior rights as so designated, the
Common Stock shall have unlimited voting rights and be entitled to receive
the net assets of the Corporation upon dissolution.
4. A majority of the shareholders holding 80.8% of the common shares
outstanding of Inforetech Wireless Technology Inc. consented in writing to
the following resolution dated December 6, 1999:
"The Corporation shall have the authority to issue one hundred ten million
(110,000,000) shares, $0.001 par value per share, of which one hundred
million (100,000,000) shares shall be Class A Common Equity Voting Stock
("Common Stock"), and ten million (10,000,000) shares shall be Class B
Special Voting Non-Equity Stock ("Special Voting Stock"). Shares of any
class of stock may be issued, within stockholder action, from time to time
in one or more series as may from time to time be determined by the Board
of Directors. The Board of Directors of this Corporation is hereby
expressly granted authority, without stockholder action, and within the
limits set forth in the Nevada Revised Statutes, to:
(a) designate in whole or in part, the voting power, preferences,
limitations, restrictions and relative rights, or any class of shares
before the issuance of any shares of that class;
(b) create one or more series within a class of shares, fix the number of
shares of each such series, and designate, in whole or part, the
voting powers, preferences, limitations, restrictions, and relative
rights of the series, all before the issuance of any shares of that
series; or
(c) alter or revoke the preferences, limitations and relative rights
granted to or imposed upon any wholly unissued class of shares or any
wholly unissued series of any class of shares.
the allocation between the classes, or among the series of each class, of
unlimited voting rights and the right to receive the net assets of the
Corporation upon dissolution, shall be as designated by the Board of
Directors. All rights accruing to the outstanding shares of the
Corporation not expressly provided for to the contrary herein or in the
Corporation's bylaws of in any amendment hereto or thereto shall be vested
in the Common Stock. Accordingly, unless and until otherwise designated by
the Board of Directors of the Corporation, and subject to any superior
rights as so designated, the Common Stock shall have unlimited voting
rights and be entitled to receive the net assets of the Corporation upon
dissolution."
3
<PAGE>
Dated this 6th day of December, 1999.
INFORTECH WIRELESS TECHNOLOGY INC.
/s/ Jackie Kruger
- ----------------------------------------
Jackie Kruger, Secretary and Director
/s/ Fernando Carranza
- ----------------------------------------
Fernando Carranza, President and Direct
4
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<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 0 4,800
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 4,800
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 0 4,800
<CURRENT-LIABILITIES> 7,500 0
<BONDS> 0 0
0 0
0 0
<COMMON> 6,156 250
<OTHER-SE> (1,154) 4,752
<TOTAL-LIABILITY-AND-EQUITY> 0 4,800
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 12,300 2
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (12,300) (2)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (12,300) (2)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (12,300) (2)
<EPS-BASIC> (0.00) (0.00)
<EPS-DILUTED> (0.00) (0.00)
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