<PAGE> 1
Date Filed: July 15, 1996
FORM 10-Q/A
AMENDMENT TO FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------- -----------------
Commission file number 0-24944
THE TRACKER CORPORATION OF AMERICA
----------------------------------
(Exact name of Registrant as specified in charter)
DELAWARE 86-0767918
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180 DUNDAS STREET WEST, TORONTO, ONTARIO, CANADA M5G 1Z8
------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
(602) 265-7100
--------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the Registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of November 10, 1995, the Registrant had outstanding 5,080,906
shares of common stock, par value $0.001 per share, and 7,271,727 shares of the
Registrant's Class B voting common stock, no par value.
<PAGE> 2
PART I
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. FINANCIAL STATEMENTS REQUIRED BY FORM 10-Q
- --------------------------------------------------------------------------------
The Tracker Corporation of America (the "Registrant") files herewith
balance sheets of the Registrant as of September 30, 1995, and March 31, 1995,
and the related statements of operations for the three and six month period
ended September 30, 1995 and September 30, 1994, respectively, and the
shareholders' equity for the six month period ended September 30, 1995, and for
the period from inception (May 6, 1993) through September 30, 1995 and statement
of cash flows for the six month period ended September 30, 1995 and September
30, 1994, respectively, and for the period from inception (May 6, 1993) through
September 30, 1995. In the opinion of management of the Registrant, the
financial statements reflect all adjustments, all of which are normal recurring
adjustments, necessary to fairly present the financial condition of the
Registrant for the interim periods presented. The financial statements included
in this report on Form 10-Q should be read in conjunction with the audited
financial statements of the Registrant and the notes thereto included in the
annual report of the Registrant on Form 10-K for the year ended March 31, 1995.
On July 12, 1994, the Registrant (then called Ultra Capital Corp.)
completed a corporate reorganization with The Tracker Corporation ("Tracker
Canada"), an Ontario corporation, pursuant to which the Registrant, a Delaware
corporation, acquired all voting shares of Tracker Canada in exchange for newly
authorized shares of the Registrant's Class B voting common stock representing
approximately 90% of the total voting power of the Registrant. The corporate
reorganization and several related proposals, including a forward stock split
and change in the domicile of the Registrant, were submitted to and approved by
the Registrant's shareholders at a special shareholders' meeting held June 30,
1994. Information with respect to the reorganization and such proposals is
included in the Registrant's report on Form 10-K filed on July 31, 1995 and in
the Registrant's report on Form 8-K dated July 25, 1994.
2
<PAGE> 3
---------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------------------
OVERVIEW
Prior to the reorganization discussed in Item 1 above, the Registrant
(then Ultra Capital Corp.) had been inactive for the preceding several years and
had conducted no significant operations or activities. Tracker Canada, which
originated the present line of business (i.e., the marketing, sale and
operations of an international personal property identification and recovery
system), was founded in May 1993. During the period from inception to September
30, 1994, the Company was engaged in organizational efforts, including the
hiring of technical and management personnel. During that time, the Company
focused on the research and development of advanced bar code and laser scanning
technology, entered into agreements with key suppliers, prepared the business
and marketing plan, programmed the software and filed for patent and trademark
protection in Canada and the United States. The Registrant is a development
stage company that has developed and has begun to market, sell and operate a
personal property identification and recovery system. In October 1994, the
Company introduced its services in Canada and currently plans to pursue a
similar rollout in the United States beginning in the last quarter of 1995. To
date, the Company has generated modest sales and is anticipating additional
revenues due to the introductory launch in the USA. The Company has been
unprofitable since inception and expects to continue to incur losses for the
next 2 quarters.
As of September 30, 1995, the Company had an accumulated deficit of
$10,245,910 (as at March 31, 1995 the Company had an accumulated deficit of
$7,112,008). The Company has financed its research and development activities
and operations primarily through the sale of two series of private placements of
15% one-year convertible subordinated debentures aggregating a total of
$1,430,000 and total of 1,810,000 shares of authorized but restricted common
stock in two private placement offerings on March 15, 1995 for 500,000 shares
for total gross proceeds to the Registrant of $350,000 and on May 1, 1995 for
250,000 shares for total gross proceeds to the Registrant of $250,000 as well as
offerings pursuant to Regulation S under the Securities Act of 1933 (the
"Securities Act") on September 16, 1994 for 785,000 shares (200,000 shares of
which were returned to the Company, leaving a balance of 585,000 shares) for net
gross proceeds to the Registrant of $2,351,700, in the form of cash and prepaid
media relation services and on February 9, 1995 for 275,000 shares for total
gross proceeds to the Registrant of $550,000 to three separate overseas buyers
and on July 11, 1995 for 200,000 shares for proceeds to the Registrant of
$83,000. Additionally, since March 31, 1995, the Company's wholly-owned
subsidiary (Tracker Canada), has sold a total of 849,803 exchangeable preference
shares for total gross proceeds to Tracker Canada of $619,166. The Company has
introduced its service in a test market in Toronto, Canada and plans to
introduce its service over the next year throughout Canada. Management further
anticipates launching the Company's service into the United States marketplace
during the last quarter of 1995. While management believes there's a substantial
market for its service, no assurance can be given that the Company will achieve
any significant take up rate and revenues therefrom.
3
<PAGE> 4
RESULTS OF OPERATIONS
During the three and six month periods ended September 30, 1995, the
Company incurred a net loss of $1,252,925 and $3,133,902, respectively
($1,283,340 and $2,337,399 for the three and six month periods ended September
30, 1994, respectively), which included developmental costs in the amounts of
$1,271,680 and $3,160,102, respectively ($1,283,340 and $2,337,399 for the three
and six month periods ended September 30, 1994, respectively), consisting of
$154,076 and $335,228, respectively ($143,808 and $292,793 for the three and six
month periods ended September 30, 1994, respectively) for operations, $68,177
and $136,921, respectively ($123,876 and $263,856 for the three and six month
periods ended September 30, 1994, respectively) for information systems,
$299,063 and $103,547, respectively ($488,332 and $835,767 for the three and six
month periods ended September 30, 1994, respectively) for sales and marketing
and $750,364 and $2,584,406, respectively ($527,324 and $944,983 for the three
and six month periods ended September 30, 1994, respectively), for general and
administrative costs.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1995, the Company has received approximately
$8,945,084 in net proceeds from equity financings as noted in Item 2 - Overview.
During the six month period ending September 30, 1995, the Company's
cash used in operations was $2,685,785 ($1,871,981 for the six-month ended
September 30, 1994). The cash used in operations was devoted primarily to
funding the development of identification and recovery systems and software,
labels, packaging and marketing and advertising materials and plans as well as
developing the necessary scanning network and initial sales and promotional
commitments leading and subsequent to the Canadian market launch which occurred
in the last quarter of 1994.
As of September 30, 1995, the Company had total current assets of
$1,660,591 ($1,192,783 at March 31, 1995) consisting of cash in the amount of
$177,971 ($107,091 at March 31, 1995), debentures receivable in the amount of
$205,000 ($nil at March 31, 1995), short term investments in the amount of
$222,480 ($nil at March 31, 1995), accounts receivable in the amount of $7,034
($4,981 at March 31, 1995), prepaid expenses and deposits in the amount of
$804,533 ($544,432 at March 31, 1995), inventories in the amount of $186,439
($166,003 at March 31, 1995), a note receivable in the amount of $nil ($178,350
at March 31, 1995), and receivables from stockholders in the amount of $57,134
($191,926 at March 31, 1995). At such date, the Company had net fixed assets
totaling $400,430 ($437,147 at March 31, 1995) and long-term investments in the
amount of $50,451 ($39,522 at March 31, 1995). As of September 30, 1995, the
Company had liabilities of $2,189,139 ($1,446,543 at March 31, 1995), consisting
of accounts payable in the amount of $462,587 ($1,101,424 at March 31, 1995),
accrued liabilities in the amount of $230,311 ($334,121 at March 31, 1995),
deferred revenues in the amount of $66,241 ($10,998 at March 31, 1995) and
convertible subordinated debentures in the amount of $1,430,000 ($nil at March
31, 1995).
For the six month period ended September 30, 1995, the Company raised
capital from the issuance of 849,803 of its wholly-owned subsidiary's (Tracker
Canada's) exchangeable preference shares as a result of the exercising of
849,803 warrants for an amount of $619,166 in cash as through the sale of two
series of private placements of 15% one-year convertible subordinated debentures
aggregating a total of $1,430,000. As inducements to join the
4
<PAGE> 5
Company, Tracker Canada issued, in aggregate, 5,089,286 exchangeable preference
shares at a nominal value to the Registrant's Chairman, key executives,
management and employees.
In October 1994, the Company launched its service in the Canadian
marketplace. The metropolitan area of Toronto was selected as an appropriate
staging ground for the rollout across Canada, which rollout is anticipated to
last through the second quarter of 1996. Management further anticipates
launching the Company's service into the United States marketplace during the
last quarter of 1995. The Company expects to incur substantial additional costs
relating to the implementation of its marketing strategy and its business plan.
No assurance can be given that the Company will generate revenues sufficient to
cover expenses. The Company intends to complete its private placement of 15%
one-year convertible subordinated debentures aggregating to a total of
$2,000,000 and where necessary sell its equity securities in an effort to raise
the required additional funds to meet the Company's operating and capital
requirements. No assurance can be given that such additional funds will be
available on terms acceptable to the Company, if at all. If adequate funds are
not available, the Company's business will be materially and adversely affected.
International operations are subject to inherent risks including
unexpected changes in regulatory requirements, exchange rates, tariffs and other
barriers, difficulties in staffing and managing foreign operations and
potentially adverse tax consequences. There can be no assurance that these
factors will not have a material adverse impact on the Company's ability to
market its system on an international basis and on its future operating results.
CAPITAL REQUIREMENTS
The Company will require substantial additional capital in order to
implement its business plan in the manner contemplated. The acquisition of
equipment, establishment of distribution channels and conduct of a comprehensive
marketing and advertising campaign are considered significant to the Company's
success. The Company will require additional debt or equity funding to conduct
and complete such activities. Although the Company anticipates the need for
substantial additional funding, no assurances can be given that such funding
will be available to the Company on acceptable terms or at all. If the Company
does not receive sufficient funding on acceptable terms, this could prevent or
delay the marketing, sale and operation of the Company's personal property
identification and recovery system and could have a material adverse effect on
the Company's business, operating results and financial condition. The Company
is exploring several equity and debt financing options.
INFLATION
While inflation has not had a material impact on operating results and
management does not expect inflation to have a material impact on operating
results, there can be no assurance the business of the Company, on a
consolidated basis, will not be affected by inflation in the future.
5
<PAGE> 6
----------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
----------------------------------------
EXHIBITS
<TABLE>
<CAPTION>
Exhibit SEC Reference Title of Document Page No.
No. No.
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 2 Reorganization Agreement Incorporated By Reference*
2 10 Share Purchase Agreement between The Tracker Corporation Incorporated By
and Page-Direct Ltd. and Marc Bombenon and Marc Bombenon Reference**
Enterprises Ltd. and 614593 Alberta Ltd., dated July 29, 1994
27 27 Financial Data Schedule Filed herewith
</TABLE>
*Incorporated by reference from the Registrant's report on Form 8-K dated July
12, 1994 (filed on July 25, 1994) (Commission File No. 2-33368-D).
**Incorporated by reference from the Registrant's report on Form 8-K dated July
29, 1994 (filed on August 12, 1994 (Commission File No. 2-33368-D) and report on
Form 8-K dated June 16, 1995 (filed on June 29, 1995 (Commission File No.
2-33368-D).
REPORTS ON FORM 8-K
During the quarter ended September 30, 1995, the Registrant filed one
(1) report on Form 8-K, dated August 12, 1995 (filed August 14, 1995) with
respect to the resignation of senior officer of the Registrant.
6
<PAGE> 7
SIGNATURES
Pursuant to the requirements 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 hereunto duly authorized.
Date: July 15, 1996
THE TRACKER CORPORATION OF AMERICA,
a Delaware corporation
By: /s/ Mark J Gertzbein
--------------------------------------------
Mark J. Gertzbein, Secretary and Treasurer
(Principal Accounting and Financial Officer)
7
<PAGE> 8
THE TRACKER
CORPORATION
OF AMERICA
(A DEVELOPMENT
STAGE COMPANY)
CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1995
<PAGE> 9
The Tracker Corporation of America
(A Development Stage Company)
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
September 30, March 31,
1995 1995
------------ ------------
<S> <C> <C>
Assets (Audited)
Current assets
Cash and cash equivalents $ 177,971 $ 107,091
Debentures receivable 205,000 0
Short-term investment 222,480 0
Accounts receivable 7,034 4,981
Prepaid expenses and deposits 804,533 544,432
Inventory 186,439 166,003
Note receivable 0 178,350
Due from shareholders 57,134 191,926
------------ ------------
Total current assets 1,660,591 1,192,783
------------ ------------
Fixed assets (net) 400,430 437,147
Long-term investment 50,451 39,522
------------ ------------
Total assets $ 2,111,472 $ 1,669,452
============ ============
Liabilities & Shareholders' Equity (Deficit)
Current liabilities
Accounts payable $ 462,587 $ 1,101,424
Accrued liabilities 230,311 334,121
Deferred revenue 66,241 10,998
Convertible subordinated debentures 1,430,000 0
------------ ------------
Total liabilities 2,189,139 1,446,543
------------ ------------
Commitments (Note 12)
Shareholders' equity (deficit)
Preferred stock, $.001 par value, 500,000 shares 0 0
authorized, no shares issued and outstanding
Common stock, $.001 par value, 20,000,000 shares
authorized, 3,375,488 shares issued and outstanding 3,376 2,109
Class B Voting Common stock, $0.00000007 par value, 0 0
20,000,000 shares authorized, 7,244,227 issued and
outstanding
Paid-in capital 12,568,975 9,707,617
Other capital (2,148,185) (2,086,685)
Accumulated deficit (10,245,910) (7,112,008)
Cumulative translation adjustment (255,923) (288,124)
------------ ------------
Total shareholders' equity (deficit) (77,667) 222,909
------------ ------------
Total liabilities and shareholders' equity (deficit) $ 2,111,472 $ 1,669,452
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 10
The Tracker Corporation of America
(A Development Stage Company)
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the period
---------------------------------------------------------
3 months ended 6 months ended From inception
September 30, September 30, (May 6, 1993)
--------------------------------------------------------- through
1995 1994 1995 1994 Sept 30,1995
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ 28,361 $ 0 $ 44,266 $ 0 $ 54,453
Cost of Goods Sold 9,606 0 18,066 0 22,095
-------------------------------------------------------------------------
Gross Profit 18,755 0 26,200 0 32,358
-------------------------------------------------------------------------
Development costs
Operational 154,076 143,808 335,228 292,793 1,172,169
Information systems 68,177 123,876 136,921 263,856 760,025
Sales and marketing 299,063 488,332 103,547 835,767 2,447,256
General and administrative 750,364 527,324 2,584,406 944,983 5,898,818
-------------------------------------------------------------------------
Total development costs 1,271,680 1,283,340 3,160,102 2,337,399 10,278,268
-------------------------------------------------------------------------
Net losses applicable to common stock $ (1,252,925) $ (1,283,340) $ (3,133,902) $ (2,337,399) $(10,245,910)
=========================================================================
Loss per share of common stock $ (0.12) $ (0.20) $ (0.31) $ (0.38) $ (1.46)
=========================================================================
Weighted average number of shares outstanding 10,468,060 6,381,047 9,996,777 6,220,656 7,011,825
=========================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 11
The Tracker Corporation of America
(A Development Stage Company)
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For 6 months ended From inception
--------------------------------- (May 6, 1993)
September 30, September 30, through
1995 1994 Sept 30, 1995
----------------------------------------------------
<S> <C> <C> <C>
Cash flows from (used in) operating activities:
Net losses $ (3,133,902) $ (2,337,399) $(10,245,910)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation 60,180 37,017 184,456
Rent, consulting and marketing services, employee
compensation settled via the isuuance of company
shares 1,785,411 30,121 2,909,004
Changes in assets and liabilities:
Prepaid expenses and deposits (260,101) (104,703) (821,806)
Accounts receivable (2,053) 0 (7,034)
Short-term investment (222,480) 0 (222,480)
Debentures receivable (205,000) 0 (205,000)
Inventory (20,436) (20,539) (186,439)
Deferred revenue 55,243 0 66,241
Accounts payable and accrued liabilities (742,647) 523,522 707,543
----------------------------------------------------
Net cash used in operating activities (2,685,785) (1,871,981) (7,821,425)
----------------------------------------------------
Cash flows from (used in) investing activities:
Acquisition of fixed assets (1,271) (285,883) (578,210)
Loan to shareholders (4,164) (183,610) (409,891)
Repayment of loans to shareholders 138,956 42,868 352,757
Note receivable 0 (11,172) (200,317)
Repayment of note receivable 178,350 0 200,317
Long term investment (12,687) (2,030,783) (2,303,130)
Unwind of long term investment 0 0 2,250,921
----------------------------------------------------
Net cash used in investing activities 299,184 (2,468,580) (687,553)
----------------------------------------------------
Cash flows from (used in) financing activities:
Issuance of common shares 1,177,445 2,689,100 8,922,530
Issuance of convertible subordinated debentures 1,430,000 0 1,430,000
Due to a shareholder 0 104,272 108,390
Repayment to shareholder 0 0 (108,390)
Share issue costs (161,809) (385,264) (1,407,446)
----------------------------------------------------
Net cash from financing activities 2,445,636 2,408,108 8,945,084
----------------------------------------------------
Effect of exchange rate changes 11,845 44,074 (258,135)
----------------------------------------------------
Increase (decrease) in cash and cash equivalents during 70,880 (1,888,379) 177,971
the period
Cash and cash equivalents, beginning of period 107,091 2,012,984 0
----------------------------------------------------
Cash and cash equivalents, end of period $ 177,971 $ 124,605 $ 177,971
====================================================
</TABLE>
Supplemental schedule of noncash financing activitites The Company issued
certain shares of its Class B voting common stock for service and for nominal
values. See Consolidated Statement of Shareholders' Equity (Deficit).
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 12
The Tracker Corporation of America
(A Development Stage Company)
Consolidated Statement of Shareholders' Equity (Deficit)
(Unaudited)
<TABLE>
<CAPTION>
SHARES AMOUNTS
--------------------- ------------------------
Paid in
Class B Capital in
Common Common Common Excess
Stock Stock Stock of Par
--------------------- ------------------------
<S> <C> <C> <C> <C>
Shares issued to officers at inception (Cash - $Nil) 5,089,286
Shares issued for cash (Cash - $4,714,188) 884,729 $ 4,714,188
Shares issued in lieu of rent (note 11-viii) (Cash - $Nil) 60,871 324,344
Share issue costs (466,142)
Translation adjustment
Net loss
--------------------- ------------------------
Balance at March 31, 1994 6,034,886 $ 4,572,390
--------------------- ------------------------
Shares issued for cash (Cash - $1,175,797) 234,517 1,175,797
Shares issued in lieu of rent (note 11-viii) (Cash - $Nil) 5,777 30,121
Reverse merger with The Tracker Corporation
on July 12, 1994 (Cash - $100) 739,219 739 (639)
Shares issued from Regulation S offering (including 79,658 shares at $7 per
share for consulting services and 3,571 shares at $5.50
per share for the purchase of fixed assets) (Cash - $1,505,000) 860,000 860 2,900,840
Share proceeds to be received subsequent to March 31, 1995 (819,459)
Shares issued for consulting and marketing services (note 12) (Cash-$Nil) 825,000 78,005 825 2,204,153
Less: consulting and marketing services not yet received (814,583)* (815)
Shares proceeds received from private placement on March 15, 1995
(Cash - $350,000) 500,000 500 349,500
Shares issued to employees for employment services (note 11-viii) (Cash-$Nil) 25,063 74,409
Share issue costs (779,495)
Translation adjustment
Net loss
--------------------- ------------------------
Balance at March 31, 1995 2,109,636 6,378,248 $ 2,109 $ 9,707,617
--------------------- ------------------------
AMOUNTS
---------------------------------------------------------
Deficit Accumulated
Cumulative During
Other Translation Development
Capital Adjustment Stage Total
---------------------------------------------------------
Shares issued to officers at inception (Cash - $Nil)
Shares issued for cash (Cash - $4,714,188) $ 4,714,188
Shares issued in lieu of rent (note 11-viii) (Cash - $Nil) 324,344
Share issue costs (466,142)
Translation adjustment (129,098) (129,098)
Net loss (2,043,425) (2,043,425)
---------------------------------------------------------
Balance at March 31, 1994 $ 0 $ (129,098) $(2,043,425) $ 2,399,867
---------------------------------------------------------
Shares issued for cash (Cash - $1,175,797) 1,175,797
Shares issued in lieu of rent (note 11-viii) (Cash - $Nil) 30,121
Reverse merger with The Tracker Corporation
on July 12, 1994 (Cash - $100) 100
Shares issued from Regulation S offering (including 79,658 shares
at $7 per share for consulting services and 3,571 shares
at $5.50 per share for the purchase of fixed assets)
(Cash - $1,505,000) 2,901,700
Share proceeds to be received subsequent to March 31, 1995 (819,459)
Shares issued for consulting and marketing services (note 12)
(Cash-$Nil) 2,204,978
Less: consulting and marketing services not yet received (2,086,685) (2,087,500)
Shares proceeds received from private placement on March 15, 1995
(Cash - $350,000) 350,000
Shares issued to employees for employment services (note 11-viii)
(Cash-$Nil) 74,409
Share issue costs (779,495)
Translation adjustment (159,026) (159,026)
Net loss (5,068,583) (5,068,583)
---------------------------------------------------------
Balance at March 31, 1995 $(2,086,685) $ (288,124) $(7,112,008) $ 222,909
---------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 13
The Tracker Corporation of America
(A Development Stage Company)
Consolidated Statement of Shareholders' Equity (Deficit) (Cont'd)
(Unaudited)
<TABLE>
<CAPTION>
SHARES AMOUNTS
---------------------- ------------------------
Paid in
Class B Capital in
Common Common Common Excess
Stock Stock Stock of Par
---------------------- ------------------------
<S> <C> <C> <C> <C>
Share proceeds received re Regulation S offering (Cash - $225,280) 819,459
made before March 31, 1995
Consulting services received re shares issued before March 31, 1995 6,250 * 6
(note 11-viii) (Cash - $Nil)
Share proceeds received from private placement (Cash-$250,000) 250,000 250 249,750
Shares issued upon exercise of warrants at Canadian $1 per share 849,803 619,166
(Cash - $619,166)
Shares issued to officers (note 11-iv) (Cash - $Nil) 630,000 630 826,245
Shares issued to a consultant (note 11-viii) (Cash - $Nil) 7,500 8 9,836
Shares issued for investor relation services
(note 11-vi) (Cash - $Nil) 200,000 200 262,300
Less: services not yet received (200,000)* (200)
Share issue cost from April 01, 1995 to June 30, 1995 (100,989)
Translation adjustment
Net loss from April 01, 1995 to June 30, 1995
---------------------- -----------------------
Balance at June 30, 1995 3,003,386 7,228,051 $3,003 $12,393,384
Consulting services received re shares issued
(note 11-viii) (Cash -$Nil) 2,083 * 2
before March 31, 1995
Shares issued to R. Zuk (Cash -$83,000) 200,000 200 199,800
Less: shares proceeds to be received (117,000)
Share issue cost from July 01, 1995 to July 31, 1995 (27,238)
Translation adjustment
Net loss from July 01, 1995 to July 31, 1995
---------------------- -----------------------
Balance at July 31, 1995 3,205,469 7,228,051 $3,205 $12,448,946
AMOUNTS
-------------------------------------------------------------
Deficit Accumulated
Cumulative During
Other Translation Development
Capital Adjustment Stage Total
-------------------------------------------------------------
Share proceeds received re Regulation S offering (Cash - $225,280) 819,459
made before March 31, 1995
Consulting services received re shares issued before March 31, 1995 37,494 37,500
(note 11-viii) (Cash - $Nil)
Share proceeds received from private placement (Cash-$250,000) 250,000
Shares issued upon exercise of warrants at Canadian $1 per share 619,166
(Cash - $619,166)
Shares issued to officers (note 11-iv) (Cash - $Nil) 826,875
Shares issued to a consultant (note 11-viii) (Cash - $Nil) 9,844
Shares issued for investor relation services
(note 11-vi) (Cash - $Nil) 262,500
Less: services not yet received (262,300) (262,500)
Share issue cost from April 01, 1995 to June 30, 1995 (100,989)
Translation adjustment 1,488 1,488
Net loss from April 01, 1995 to June 30, 1995 (1,880,977) (1,880,977)
-------------------------------------------------------------
Balance at June 30, 1995 $(2,311,491) $(286,636) $(8,992,985) $805,275
Consulting services received re shares issued
(note 11-viii) (Cash -$Nil) 12,498 12,500
before March 31, 1995
Shares issued to R. Zuk (Cash -$83,000) 200,000
Less: shares proceeds to be received (117,000)
Share issue cost from July 01, 1995 to July 31, 1995 (27,238)
Translation adjustment 5,541 5,541
Net loss from July 01, 1995 to July 31, 1995 (339,087) (339,087)
-------------------------------------------------------------
Balance at July 31, 1995 $(2,298,993) $(281,095) $(9,332,072) $539,991
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 14
The Tracker Corporation of America
(A Development Stage Company)
Consolidated Statement of Shareholders' Equity (Deficit) (Cont'd)
(Unaudited)
<TABLE>
<CAPTION>
SHARES AMOUNTS
----------------------- ------------------------
Paid in
Class B Capital in
Common Common Common Excess
Stock Stock Stock of Par
---------------------- ------------------------
<S> <C> <C> <C> <C>
Shares issued to employees for employment services (note 11-viii) (Cash-$Nil) 3,580 $7,000
Shares exchanged as per exchange agreement (Cash - $Nil) 500 (500) 1 (1)
Consulting services received re shares issued (note 11-viii) (Cash-$Nil) 2,083 * 2
Marketing services received re shares issued to LL Knickerbocker Co. 33,333 * 33
(note 12) (Cash - $Nil)
Shares issued to Directors as compensation (note 11-viii) (Cash - $Nil) 72,572 73 63,427
Share issue cost from Aug 01, 1995 to Aug 31, 1995 (13,306)
Translation adjustment
Net loss from Aug 01, 1995 to Aug 31, 1995
---------------------- -----------------------
Balance at Aug 31, 1995 3,313,957 7,231,131 $3,314 $12,506,066
Shares issued for compensation to employees (note 11-viii) (Cash-$Nil) 10,596 15,716
Consulting services received re shares issued (note 11-viii) (Cash-$Nil) 2,083 * 2
Shares issued to Amerasia for marketing services (note 11-viii) (Cash-$Nil) 30,000 44,496
Less: services not yet received (27,500)*
Marketing services received re shares issued (note 12) (Casn - $Nil) 33,333 * 33
to LL Knickerbocker Co.
Shares issued to Director as compensation (note 11-viii) (Cash- $Nil) 26,286 26 22,974
Shares cancelled (Cash-$Nil) (171) 1 (1)
Share issue cost from Sept 01, 1995 to Sept 30, 1995 (20,276)
Translation adjustment
Net loss from Sept 01, 1995 to Sept 30, 1995
---------------------- -----------------------
Balance at Sept 30, 1995 3,375,488 7,244,227 $3,376 $12,568,975
---------------------- -----------------------
AMOUNTS
---------------------------------------------------
Deficit Accumulated
Cumulative During
Other Translation Development
Capital Adjustment Stage Total
---------------------------------------------------
Shares issued to employees for employment services (note 11-viii) (Cash-$Nil) $7,000
Shares exchanged as per exchange agreement (Cash - $Nil) 0
Consulting services received re shares issued (note 11-viii) (Cash-$Nil) 12,498 12,500
Marketing services received re shares issued to LL Knickerbocker Co. 83,300 83,333
(note 12) (Cash - $Nil)
Shares issued to Directors as compensation (note 11-viii) (Cash - $Nil) 63,500
Share issue cost from Aug 01, 1995 to Aug 31, 1995 (13,306)
Translation adjustment 21,053 21,053
Net loss from Aug 01, 1995 to Aug 31, 1995 (441,307) (441,307)
---------------------------------------------------
Balance at Aug 31, 1995 $(2,203,195) $(260,042) $(9,773,379) $272,764
Shares issued for compensation to employees (note 11-viii) (Cash-$Nil) 15,716
Consulting services received re shares issued (note 11-viii) (Cash-$Nil) 12,498 12,500
Shares issued to Amerasia for marketing services (note 11-viii) (Cash-$Nil) 44,496
Less: services not yet received (40,788) (40,788)
Marketing services received re shares issued (note 12) (Casn - $Nil) 83,300 83,333
to LL Knickerbocker Co.
Shares issued to Director as compensation (note 11-viii) (Cash- $Nil) 23,000
Shares cancelled (Cash-$Nil)
Share issue cost from Sept 01, 1995 to Sept 30, 1995 (20,276)
Translation adjustment 4,119 4,119
Net loss from Sept 01, 1995 to Sept 30, 1995 (472,531) (472,531)
---------------------------------------------------
Balance at Sept 30, 1995 $(2,148,185) $(255,923) $(10,245,910) $(77,667)
---------------------------------------------------
</TABLE>
(*) 935,418 common shares and 27,500 Class B common shares have been subscribed
for but remain unissued as at September 30, 1995.
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 15
THE TRACKER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF BUSINESS/CORPORATE HISTORY:
The Tracker Corporation of America (the "Company"), through a wholly-owned
subsidiary, The Tracker Corporation ("Tracker Canada"), is engaged in the
development, marketing and operation of a unique system to aid in the recovery
of lost or stolen items using advanced bar code and laser scanning technologies.
The Company was formed under the name Ultra Capital Corp. ("Ultra") in February
1986 under the laws of the State of Nevada to serve as a vehicle to acquire or
merge with an operating company. The Company changed its name from Ultra on July
1, 1994 when, as more fully discussed below, Ultra merged with Tracker Canada.
The Company was reincorporated in Delaware on July 1, 1994. Effective July 12,
1994, the Company merged with Tracker Canada. Concurrent with the merger
effective date, Ultra changed its name to The Tracker Corporation of America and
changed its year end from December 31 to March 31. In conjunction with the
merger, the common stock of Tracker Canada was reclassified as exchangeable
preference stock which is exchangeable on a one-for-one basis for shares of the
common stock of the Company beginning July 12, 1995 through July 12, 2002. An
equal number of Class B voting common stock ("Class B shares") is held in trust
for exchangeable preference shareholders who can direct the voting of the Class
B shares. The Class B shares will be cancelled upon the exchange of the
exchangeable preference shares for the Company's common stock.
For accounting purposes, the merger was treated as a reverse merger/acquisition
with recapitalization of Tracker Canada as the acquirer because, among other
factors, the assets and operations of Tracker Canada significantly exceed those
of Ultra and the shareholders of Tracker Canada control the Company after the
merger. The merger was treated for accounting and financial reporting purposes
as an issuance of shares by Tracker Canada and, accordingly, pro forma
information is not presented as the merger is not a business combination. The
historical consolidated financial statements prior to July 12, 1994 are those of
Tracker Canada. The merger has been recorded at the value of Ultra's net
tangible assets as of the effective date. The accumulated deficit of Tracker
Canada is carried forward and the common stock and paid-in capital of Tracker
Canada prior to the merger have been retroactively restated for the equivalent
number of shares received in the merger and carried forward.
The Company utilizes state of the art proprietary technology providing a service
to aid in the recovery of lost or stolen possessions. The Company's members
receive a series of individualized, digitally-encoded labels that can be applied
to personal belongings. In the event a labelled item is recovered, the Company's
technology allows for the identification of the item's owner. After
identification, the Company's 24-hour service network coordinates the return of
the item to its owner via an international courier network. The Company's
Worldwide Identification & Recovery Service is endorsed by the International
Association of Chiefs of Police.
<PAGE> 16
THE TRACKER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 2 - GOING CONCERN:
The Company has been in a development stage since May 6, 1993, its inception.
The Company's successful launch to the marketplace, and ultimately to the
attainment of profitable operations, is dependent on its ability to obtain
adequate sources of financing and revenue generation. Management is currently
working to secure adequate sources of capital through private placements of
securities. The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of The Tracker
Corporation of America and its wholly-owned subsidiary, The Tracker Corporation.
All significant intercompany accounts and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers liquid investments with an original maturity of three
months or less to be cash equivalents.
DEVELOPMENT COSTS
Development costs are expensed as incurred.
INVENTORY
The inventory is stated at the lower of cost or market value with cost being
determined by the average cost method. Inventory predominantly consists of raw
materials as the Company fulfills its sales orders on a just in time basis, when
received. No significant work-in-progress or finished goods were held by the
Company at the period or year end.
REVENUE RECOGNITION AND DEFERRED REVENUE
Revenue for Company services is recognized on a straight-line basis over the
term of the services offered and is shown net of sales discounts and allowances.
Amounts received for which service has not yet been provided, are recorded as
deferred revenue. The average length of the membership agreement varies from
monthly to a five-year period.
<PAGE> 17
THE TRACKER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
FIXED ASSETS
Fixed assets are stated at cost less accumulated depreciation. Depreciation is
determined using the straight-line method over the estimated useful lives of the
related assets as follows:
Scanning equipment and computer hardware 5 years
Computer software 1 year
Office furniture and equipment 5 years
Leasehold improvements term of the lease
Kiosk equipment 5 years
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's wholly-owned Canadian subsidiary are
translated at the September 30, 1995 exchange rate while revenues, expenses and
cash flows are translated at average rates in effect for the period.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments are carried in the accompanying consolidated financial
statements at amounts that approximate fair value unless separately disclosed.
EARNINGS PER SHARE
Primary earnings per share are calculated based on net profit (loss) divided by
the weighted average number of shares of common stock and Class B voting common
stock outstanding.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the period reported. Actual results could differ
from those estimates. Estimates are used when accounting for inventory
obsolescence, depreciation and amortization, taxes, and contingencies.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year balances to conform to
the current period presentation.
<PAGE> 18
THE TRACKER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
ACCOUNTING FOR STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", establishes financial and reporting standards for stock-based
employee compensation plans. This statement defines the fair value based method
of accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for those plans using the intrinsic value based
method of accounting prescribed by APB Opinion No. 25, Accounting for Stock
Issued to Employees. The accounting requirements are effective for transactions
entered into in fiscal years beginning after December 15, 1995. The disclosure
requirements are effective for fiscal years beginning after December 31, 1995.
Pro forma disclosures required for entities that elect to continue to measure
compensation cost using APB Opinion No. 25 must include the effects of all
awards granted in fiscal years that begin after December 15, 1994. The Company
has not completed an evaluation of the effect of this statement.
NOTE 4 - SHORT-TERM INVESTMENT:
The amount of $222,480 represents a short-term investment in 288,462 shares of
Stratcomm Media Ltd., which is a publicly traded company on the Vancouver Stock
Exchange, and represents less than a 4% interest in the company. The common
shares owned by the Company were restricted from trading for a period of 12
months starting May 30, 1995. The investment, which is carried as available for
sale, is carried at cost which approximates fair value.
NOTE 5 - PREPAID EXPENSES AND DEPOSITS:
Prepaid expenses and deposits comprise the following:
<TABLE>
<CAPTION>
Sept 30, March 31,
1995 1995
------------- ------------
<S> <C> <C>
Investor relations $ 445,635 $ 325,267
Marketing and celebrity 260,812 0
Rent 39,949 115,147
Other 58,137 104,018
------------- ------------
$ 804,533 $ 544,432
============= ============
</TABLE>
<PAGE> 19
THE TRACKER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 6 - NOTE RECEIVABLE:
At March 31, 1995, the Company had advanced $178,350 to Page-Direct Ltd. (a
wireless communications company for which the Company had entered into an
agreement to purchase). The related note receivable bore interest at the Royal
Bank of Canada prime rate plus 2% and was payable on demand. The note was repaid
in June 1995 in conjunction with the cancellation of the subject agreement.
Subsequent to March 31, 1995, the owner of Page-Direct Ltd. exercised its option
under the agreement to reacquire its interest in Page-Direct Ltd. Prior to the
exercise of this option, the Company had issued 271,052 exchangeable preference
shares in its Canadian subsidiary to the owner of Page-Direct Ltd. for 46.2% of
the outstanding shares of Page-Direct Ltd. Such exchangeable preference shares
were returned to the Company in June 1995. The Company has recorded the exercise
of the reversionary option by the owner of Page-Direct Ltd. as if it had
occurred as of March 31, 1995.
NOTE 7 - DUE FROM SHAREHOLDERS:
Promissory notes held on loans made to shareholders bear interest at 5% per
annum and are due on demand.
NOTE 8 - FIXED ASSETS:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
Sept 30, March 31,
1995 1995
--------- --------
<S> <C> <C>
Scanning equipment $ 103,292 $ 99,364
Computer equipment 255,179 250,152
Computer software 32,175 30,845
Office furniture and equipment 63,144 54,950
Leasehold improvements 67,230 64,674
Kiosk equipment 63,866 61,438
--------- --------
Total original cost 584,886 561,423
Less: Accumulated depreciation 184,456 124,276
--------- --------
$400,430 $437,147
========= ========
</TABLE>
Depreciation expense for the six months ended September 30, 1995 was $60,180 and
was $94,161 for the year ended March 31, 1995.
<PAGE> 20
THE TRACKER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 9 - LONG-TERM INVESTMENT:
The amount of $50,451 represents the original cost to acquire 633,002 common
shares of C.E.M. Centry Electronic Monitoring Corporation ("Centry"), a publicly
listed Canadian company trading on the Vancouver Stock Exchange, which
approximates fair value. This investment, which is carried as available for
sale, represents approximately 11.96% of Centry's total common shares issued.
NOTE 10 - ACCRUED LIABILITIES:
Accrued liabilities comprise the following:
<TABLE>
<CAPTION>
Sept 30, March 31,
1995 1995
------------- ---------
<S> <C> <C>
Payroll and employee benefits $ 78,213 $ 178,980
Director fees 11,500 44,500
Others 140,598 110,641
------------- - -------
$ 230,311 $ 334,121
============= =========
</TABLE>
NOTE 11 - CAPITAL STOCK:
(i) The common stock and Class B voting common stock share ratably as to
dividends. The Class B voting common stock is held in trust pursuant to the
terms of an exchange agency and voting trust agreement with holders of
exchangeable preference shares in the Canadian subsidiary. The agreement permits
the persons holding the exchangeable shares to direct the voting of the Class B
common shares and provides a mechanism for the exchange of exchangeable shares
for a like number of common shares.
(ii) At September 30, 1995, outstanding warrants had been issued and were
outstanding to acquire 30,920 exchangeable preference shares (1,185,880 at March
31, 1995) of the Canadian subsidiary at Canadian $14 per share. These warrants
expire two years after the date of issuance.
(iii) On March 15, 1995, the Company entered into an agreement and sold, for net
proceeds of $350,000, 500,000 units comprised of 500,000 restricted common
shares and 500,000 warrants to purchase 500,000 restricted common shares to
Kuplen Group Investment ("KGI"). The warrants are exercisable during the
one-year period commencing July 12, 1995 to July 12, 1996 at a price of $5.00
per share. In the event that the common stock underlying the warrants cannot be
purchased legally on margin at a marginable price, then the exercise period will
be extended until the first day that the common stock becomes marginable. In
order to secure registration rights of the restricted shares, KGI must exercise
the warrants on a 1:1 basis with the common shares.
(iv) (a) During the year ended March 31, 1995, the Company adopted a plan that
allows for the granting of options, appreciation rights, restricted stock and
certain other stock-based performance incentives to certain officers as
determined at the discretion of the compensation committee of the board of
directors. On April 11, 1995, the Company issued stock, pursuant to stock
grants, of 630,000 shares of common stock, restricted as to transferability, to
certain officers of the Company.
<PAGE> 21
THE TRACKER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - CAPITAL STOCK (CONT'D):
(iv) (b) The Company issued the following options and warrants:
<TABLE>
<CAPTION>
SIX MONTHS EXERCISE MARCH 31, EXERCISE
ENDED PRICE 1995 PRICE
SEPT 30,
1995
------------------------------------------------
<S> <C> <C> <C> <C>
OPTIONS:
Opening 40,000 $7.95 0 n/a
Granted during the period (*) 10,000 $1.81 40,000 $7.95
Exercised during the period 0 n/a 0 n/a
Expired/cancelled during period (10,000) $7.95 0 n/a
------- ------
Closing 40,000 40,000
======= ======
</TABLE>
(*) : 40,000 options were issued in July 1994 and 10,000 options were issued
in September 1995 to non-employee directors and vest proportionately
over a period of three years.
<TABLE>
<CAPTION>
SIX MONTHS EXERCISE MARCH 31, EXERCISE
ENDED PRICE 1995 PRICE
SEPT 30,
1995
------------------------------------------------
<S> <C> <C> <C> <C>
WARRANTS (COMMON STOCK AND CLASS B):
Opening 1,685,880 n/a 0 n/a
Issued during the period 250,000 $5.00 500,000 $5.00
Issued during the period 0 n/a 1,185,880 Cdn$14.00
Exercised during the period (849,803) Cdn$1.00 0 n/a
Expired during the period (305,157) Cdn$14.00 0 n/a
-------- ---------
Closing 780,920 1,685,880
======== =========
</TABLE>
(v) On May 1, 1995, the Company entered into an agreement and sold, for net
proceeds of $250,000, 250,000 units comprised of 250,000 restricted common
shares and 250,000 warrants to purchase 250,000 restricted common shares to
Reynold Kern. The warrants are exercisable during the one-year period commencing
July 12, 1995 to July 12, 1996 at a price of $5.00 per share. In the event that
the common stock underlying the warrants cannot be purchased legally on margin
at a marginable price, then the exercise period will be extended until the first
day that the common stock becomes marginable.
(vi) In June 1995, the Company issued 200,000 shares of common stock, restricted
as to transferability for a period of two years from date of issuance, to Robert
Zuk for certain investor relations services for the Company.
<PAGE> 22
THE TRACKER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 11 - CAPITAL STOCK (CONT'D):
(vii) Other capital
As at September 30, 1995, 935,418 common shares and 27,500 Class B common shares
have been subscribed for but remain unissued as the service for which these
shares were subscribed for have yet to be received.
<TABLE>
<CAPTION>
FOR THE PERIOD
-------------------------------------------------------------
3 MONTHS ENDED SEPT 30, 6 MONTHS ENDED SEPT 30, FROM INCEPTION
(MAY 6, 1993)
--------------------------- --------------------------------- THROUGH SEPT 30,
1995 1994 1995 1994 1995
------------ -------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
OPENING,
Marketing services not yet received $ 1,999,200 $ 0 $ 1,999,200 $ 0 $ 0
Deferred compensation costs 0 0 0 0 0
Deferred consulting costs 312,291 0 87,485 0 0
Rent 0 0 0 0 0
------------------------------------------------------------------------------
2,311,491 0 2,086,685 0 0
SHARES SUBSCRIBED BUT NOT ISSUED,
Marketing services not yet received 0 0 0 0 1,999,200
Deferred compensation costs 109,216 0 936,091 0 1,010,500
Deferred consulting costs 44,496 0 910,820 0 1,693,024
Rent 0 30,121 0 30,121 354,465
------------------------------------------------------------------------------
153,712 30,121 1,846,910 30,121 5,057,189
CHARGED TO EXPENSE AS SERVICES ARE
RECEIVED,
Marketing services not yet received 166,600 0 166,600 0 166,600
Deferred compensation costs 109,216 0 936,091 0 1,010,500
Deferred consulting costs 41,202 0 682,720 0 1,377,439
Rent 0 30,121 0 30,121 354,465
------------------------------------------------------------------------------
317,018 30,121 1,785,411 30,121 2,909,004
CLOSING,
Marketing services not yet received 1,832,600 0 1,832,600 0 1,832,600
Deferred compensation costs 0 0 0 0 0
Deferred consulting costs 315,585 0 315,585 0 315,585
Rent 0 0 0 0 0
------------------------------------------------------------------------------
$ 2,148,185 $ 0 $ 2,148,185 $ 0 $ 2,148,185
==============================================================================
</TABLE>
(viii) The Company has, from inception to present, issued shares in exchange
for: (a) employment services, (b) consulting and marketing services, and (c)
consideration in lieu of rental payments.
<PAGE> 23
THE TRACKER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 12 - COMMITMENTS:
LEASES
The Company has a lease agreement for its current office premises. The term of
the lease is ten years which commenced January 1, 1994 and requires payment of
an annual base rent of $22,000 for the first five years and thereafter market
value less 20%. In addition, the Company is required to pay its share of
property taxes and all operating costs.
Rental expense for the six month period ended September 30, 1995 amounted to
$129,099 and $219,183 for the year ended March 31, 1995.
EXCLUSIVE DISTRIBUTION RIGHTS
The Company amended its arrangement with Symbol Technologies Inc. for the
exclusive right to use its PDF bar code scanning technology in Canada, the
United States and Europe. The commitment under this arrangement is as follows:
<TABLE>
<CAPTION>
Units Amount
----------------------- ------------------------
<S> <C> <C>
1996 830 $554,000
</TABLE>
MARKETING AGREEMENT
On March 15, 1995, the Company entered into an agreement with The L.L.
Knickerbocker Company, Inc., of California ("Knickerbocker"), which provides for
a television and radio marketing campaign to be initially launched in the
California marketplace. As part of the compensation for services to be performed
by Knickerbocker, the Company has paid Knickerbocker a fee of $212,975 and
issued 800,000 restricted common shares, valued at $2.50 per share based on the
trading price of the Company's shares on the date of the agreement. These common
shares bear a legend restricting Knickerbocker from selling them for two years
from March 15, 1995, without the prior written consent of the Company.
NOTE 13 - RELATED PARTY TRANSACTIONS:
Prior to the date of incorporation (May 6, 1993), the founder and other key
members of management agreed to receive 5,089,286 exchangeable preference shares
in consideration for the assignment of international patents covering the
Tracker Canada system and as inducements to join the Company, respectively.
The Company currently retains certain key management personnel under contract
through their respective management or consulting companies. Included in
development costs are consulting and management fees paid under the
aforementioned contracts totaling, in the aggregate, $290,034 for the six month
period ended September 30, 1995 and $737,462 for the year ended March 31, 1995.
<PAGE> 24
THE TRACKER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 13 - RELATED PARTY TRANSACTIONS (CONT'D):
Placement commissions amounting to $0 for the six month period ended September
30, 1995 and $115,282 for the year ended March 31, 1995 paid to related parties
in connection with the Company's private equity placement are included as a
reduction in paid-in capital.
See also Note 11(iv).
NOTE 14 - INCOME TAXES:
The estimated deferred tax asset of $2,970,000 and $2,290,000, representing
benefit for the income tax effects of the accumulated losses for the period from
inception (May 6, 1993) to September 30, 1995 and March 31, 1995, respectively,
has not been recognized due to the uncertainty of future realization of such
benefits. Estimated net operating losses aggregating $8,500,000 expire starting
in 2001; the benefit of these losses has not been reflected in these
consolidated financial statements.
<TABLE>
<CAPTION>
Sept 30, March 31,
1995 1995
---------------- ---------------
<S> <C> <C>
Deferred tax liabilities $ 0 $ 0
Deferred tax assets
Net operating losses 2,970,000 2,290,000
---------------- ---------------
2,970,000 2,290,000
Valuation allowance (2,970,000) (2,290,000)
---------------- ---------------
$ 0 $ 0
================ ===============
</TABLE>
The valuation allowance increased by $680,000 during the six months ended
September 30, 1995.
NOTE 15 - CONVERTIBLE SUBORDINATED DEBENTURES:
The Company has outstanding at September 30, 1995 convertible subordinated
debentures in the amount of $1,430,000 bearing interest at 15% annually, which
are repayable within one year. The interest payments are payable monthly in
advance. The principal amount may be converted, at the holder's option, into
shares of the Company's common stock, in whole or in part, beginning on October
1, 1995 at a conversion price as shown below. The debentures are subordinated to
all other indebtedness incurred by the Company. The following lists the
conversion rates:
<TABLE>
<CAPTION>
No. of shares
Principal Conversion rate on conversion
--------- --------------- -------------
<S> <C> <C>
$1,000,000 $0.4375 per share of common stock 2,285,714
350,000 $0.9375 per share of common stock 373,333
30,000 $1.06 per share of common stock 28,302
50,000 $1.0625 per share of common stock 47,059
---------- ---------
$1,430,000 2,734,408
========== =========
</TABLE>
Total interest paid and included in general and administrative expenses
is $22,500 for the six month period ended September 30, 1995 and $Nil for the
year ended March 31, 1995.
<PAGE> 25
THE TRACKER CORPORATION OF AMERICA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 16 - SUBSEQUENT EVENTS:
As at November 10, 1995, the Company issued additional convertible subordinated
debentures in the amount of $175,000 bearing interest at 15% annually and are
repayable within one year. The interest payments are payable monthly in advance.
The principal amount may be converted into shares of the Company's common stock,
in whole or in part, beginning on October 1, 1995. The following lists the
conversion rates:
<TABLE>
<CAPTION>
Principal Conversion rate
--------- ---------------
<S> <C>
$ 50,000 - $0.9375 per share of common stock
$ 20,000 - $1.0625 per share of common stock
$ 30,000 - $1.10 per share of common stock
$ 75,000 - $1.25 per share of common stock
----------
$ 175,000
----------
</TABLE>
In October 1995, the Company issued 770,000 shares of common stock pursuant to
the registration statement on S-8 to six key employees and one director as
payment in lieu of prior accrued salaries and fees and as an advance of their
salaries and fees up to September 30, 1996. The shares were all valued at $1.00
per share.
On November 1, 1995, at its annual general meeting the shareholders approved the
increase of the authorized number of common shares from 20,000,000 to 30,000,000
shares.
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<S> <C>
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<PERIOD-START> APR-01-1995
<PERIOD-END> SEP-30-1995
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0
0
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