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Previous: QUANTITATIVE METHODS CORP, 10QSB, 2000-03-14 |
Next: NATIONAL MUNICIPAL TRUST SERIES 156, 24F-2NT, 2000-03-14 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Report of Event occurring on March 14, 2000
Commission File No. 33-55254-42
-----------
QUANTITATIVE METHODS CORPORATION
NEVADA 87-0485310
- ------------------------------- ---------------------------
(State or other jurisdiction (I.R.S. Employer Identification of
incorporation or organization) Number)
203-6200 Taschereau Blvd. East
Brossard, (Quebec) Canada J4W 3J8
- -------------------------------------------- ----------------
(Address of principal executive offices) (Postal Code)
Registrant's telephone number, including area code: (888)713-2222
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its CURRENT REPORT on Form 8-K dated
January 12, 1999 as set forth in the pages attached hereto:
Attached are audited financial statements of the registrant's Canadian
Subsidiary as of January 1, 1999 and June 30, 1998 and 1997. The financial
statements are presented in Canadian dollars. Pro forma information is not
presented as it would essentially be the same as the subsidiary's financial
information. The Company had no activity for the periods presented other than
payment of a $75,000 fee (about 115,000 Canadian) in late December 1998 as a
consulting fee.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on behalf by the
undersigned hereunto duly authorized.
Quantitative Methods Corporation
(Registrant)
Date: March 14, 2000 By: _______________________________
Robert L. Seaman
President
<PAGE>
AUDITORS' REPORT
To the Shareholders of
LES ENTREPRISES SOFTGUARD INC.
We have audited the balance sheet of LES ENTREPRISES SOFTGUARD INC. as at
January 1, 1999 and the statement of income and deficit and the statement of
changes in financial position for the 6 month period ended on January 1, 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 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 January 1, 1999, the
results of its operations and the changes in its financial position for the 6
month period then ended in accordance with generally accepted accounting
principles.
Bourassa Boyer
Chartered Accountants
Vaudreuil-Dorion, March 12, 1999
<PAGE>
2
LES ENTREPRISES SOFTGUARD INC.
INCOME AND DEFICIT
6 month period ended on January 1, 1999
<TABLE>
<CAPTION>
January 1 June 30
1 9 9 9 1 9 9 8
(6 months) (12 months)
<S> <C> <C>
SALES $ -- $ --
ADMINISTRATIVE EXPENSES
Professional fees 29,196 20,384
Consulting 27,997 21,202
Salaries and fringe benefits 12,745 69,756
Rent 10,718 26,438
Travelling and business promotion 7,993 19,354
Office expenses 4,998 5,559
Research and development 4,966 25,777
Telephone and communication 4,430 17,593
Insurance, taxes and licences 2,536 1,663
Interest on long-term debt 2,486 4,377
Interest and bank charges 2,018 21,508
Interest on bank loan 1,044 2,347
Car expenses 986 7,003
Loss on disposal of investment 34,845 --
Depreciation of fixed assets 11,865 27,437
Depreciation of deferred expenses 3,720 4,745
Decrease in value of software development costs -- 172,682
---------------- ----------------
162,543 447,825
---------------- ----------------
LOSS BEFORE INCOME TAXES 162,543 447,825
INCOME TAXES
Deferred -- ( 20,000 )
---------------- ----------------
NET LOSS 162,543 427,825
DEFICIT AT BEGINNING 1,159,577 731,752
---------------- ----------------
DEFICIT AT END $ 1,322,120 $ 1,159,577
================ ================
</TABLE>
<PAGE>
3
LES ENTREPRISES SOFTGUARD INC.
BALANCE SHEET
As at January 1, 1999
<TABLE>
<CAPTION>
January 1 June 30
1 9 9 9 1 9 9 8
A S S E T S
CURRENT
<S> <C> <C>
Cash $ 1,395 $ --
Accounts receivable 23,490 --
Income taxes recoverable 355,005 333,638
Prepaid expenses 5,620 8,790
---------------- ---------------
385,510 342,428
FIXED ASSETS (note 3) 66,259 77,334
DEFERRED EXPENSES (note 4) 37,099 16,998
---------------- ---------------
$ 488,868 $ 436,760
================ ===============
L I A B I L I T I E S
CURRENT
Bank indebtedness $ -- $ 20,920
Bank loan (note 5) 25,000 26,000
Accounts payable and accrued liabilities 152,689 191,582
Current portion of long-term debt 33,333 47,222
---------------- ---------------
211,022 285,724
LONG-TERM DEBT (note 6) 133,606 8,716
---------------- ---------------
344,628 294,440
---------------- ---------------
SHAREHOLDERS' EQUITY
CAPITAL STOCK (note 7) 1,466,360 1,301,897
DEFICIT ( 1,322,120 ) ( 1,159,577 )
---------------- ---------------
144,240 142,320
---------------- ---------------
$ 488,868 $ 436,760
================ ===============
</TABLE>
ON BEHALF OF THE BOARD
_____________________________________________, director
_____________________________________________, director
<PAGE>
CHANGES IN FINANCIAL POSITION 4
6 month period ended on January 1, 1999
<TABLE>
<CAPTION>
January 1 June 30
1 9 9 9 1 9 9 8
(6 months) (12 months)
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ ( 162,543) $ ( 427,825 )
Items not affecting cash
Loss on disposal of investment 34,845 --
Depreciation of fixed assets and deferred expenses 15,585 32,182
Decrease in value of software development costs -- 172,682
Deferred income taxes -- ( 20,000 )
---------------- ----------------
( 112,113) ( 242,961 )
Changes in non-cash working capital items ( 80,580) 108,480
---------------- ----------------
( 192,693) ( 134,481 )
---------------- ----------------
INVESTING ACTIVITIES
Acquisition of investment ( 100,747) --
Proceeds of disposal of investment 65,902 --
Acquisition of fixed assets and deferred expenses ( 24,611) ( 23,579 )
---------------- ----------------
( 59,456) ( 23,579 )
---------------- ----------------
FINANCING ACTIVITIES
Variation of advances from a shareholder 133,224 ( 630,319 )
Repayment of long-term debt ( 22,223) ( 79,124 )
Net proceeds on issuance of shares 164,463 860,897
---------------- ----------------
275,464 151,454
---------------- ----------------
INCREASE (DECREASE) IN CASH 23,315 ( 6,606 )
CASH POSITION AT BEGINNING ( 46,920) ( 40,314 )
---------------- ----------------
CASH POSITION AT END $ ( 23,605) $ ( 46,920 )
================ ================
</TABLE>
The cash position is represented by cash and bank loan.
<PAGE>
5
LES ENTREPRISES SOFTGUARD INC.
NOTES TO FINANCIAL STATEMENTS
6 month period ended on January 1, 1999
1. STATUS AND NATURE OF ACTIVITIES
The Company, incorporated under the Canada Business Corporations Act,
is developing computer software and internet services.
2. SIGNIFICANT ACCOUNTING POLICIES
Fixed assets
Fixed assets are accounted for at cost and depreciated according to the
following methods and annual rates :
Computer equipment Declining 30 %
Computer software Declining 30 %
Furniture and fixtures Declining 20 %
Office equipment Declining 20 %
Leasehold improvements Straight-line 33 %
Deferred expenses
Deferred expenses are accounted for at cost and depreciated according
to the straight-line method at an annual rate of 20 %.
3. FIXED ASSETS
<TABLE>
<CAPTION>
January 1 June 30
Accumulated 1 9 9 9 1 9 9 8
Cost depreciation Net value
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Computer equipment $ 111,280 $ 60,997 $ 50,283 $ 58,612
Computer software 8,841 4,989 3,852 4,170
Furniture and fixtures 7,196 3,481 3,715 4,128
Office equipment 14,536 6,127 8,409 9,343
Leasehold improvements 6,487 6,487 -- 1,081
--------------- --------------- --------------- ---------------
$ 148,340 $ 82,081 $ 66,259 $ 77,334
=============== =============== =============== ===============
</TABLE>
<PAGE>
6
LES ENTREPRISES SOFTGUARD INC.
NOTES TO FINANCIAL STATEMENTS
6 month period ended on January 1, 1999
4. DEFERRED EXPENSES
<TABLE>
<CAPTION>
January 1 June 30
Accumulated 1 9 9 9 1 9 9 8
Cost depreciation Net value
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Patent and trademark $ 45,114 $ 10,815 $ 34,299 $ 13,798
Other 4,000 1,200 2,800 3,200
--------------- --------------- --------------- ---------------
$ 49,114 $ 12,015 $ 37,099 $ 16,998
=============== =============== =============== ===============
</TABLE>
5. BANK LOAN
Bank loan authorized at $ 25,000, preferential bank rate plus 1 %.
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
January 1 June 30
1 9 9 9 1 9 9 8
<S> <C> <C>
Loan, prime rate plus 3 %, payable until September 1999 by monthly
instalments of $ 2,778, secured by equipment, accounts receivable,
patent and trademark
with a net book value of $ 479,053 $ 33,333 $ 55,556
Advances from a shareholder, without interest nor
repayment terms 133,606 382
--------------- --------------
166,939 55,938
Current portion of long-term debt 33,333 47,222
--------------- --------------
$ 133,606 $ 8,716
=============== ==============
</TABLE>
<PAGE>
7
LES ENTREPRISES SOFTGUARD INC.
NOTES TO FINANCIAL STATEMENTS
6 month period ended on January 1, 1999
7. CAPITAL STOCK
Authorized
Unlimited number of Class A common shares, with voting rights,
participating, dividend at directors' discretion, without par value.
Unlimited number of Class B preferred shares, without voting rights,
participating, dividend at directors' discretion, redeemable at paid-up
capital, without par value.
Unlimited number of Class C preferred shares, with voting rights of 100
votes per share, non- participating, without dividend rights,
redeemable at paid-up capital, without par value.
Unlimited number of Class D preferred shares, without voting rights,
non-participating, non- cumulative monthly dividend of 1 % on the
redemption price, redeemable at paid-up capital, without par value.
Unlimited number of Class E preferred shares, without voting rights,
non-participating, non- cumulative monthly dividend of 0.75 % on the
redemption price, redeemable at paid-up capital, without par value.
Unlimited number of Class F preferred shares, without voting rights,
non-participating, cumulative dividend at Canada's Bank prime rate at
the beginning of the fiscal year on the redemption price, redeemable at
paid-up capital, without par value.
<TABLE>
<CAPTION>
January 1 June 30
1 9 9 9 1 9 9 8
Issued and fully paid
<S> <C> <C>
7,650,000 Class A common shares (1,000,000 in 1998) $ 165,463 $ 1,000
1,300,897 Class D preferred shares 1,300,897 1,300,897
--------------- ---------------
$ 1,466,360 $ 1,301,897
=============== ===============
</TABLE>
Issuance of shares
During the year, the Company has issued 6,650,000 Class A shares for a
total consideration of $ 164,463.
<PAGE>
8
LES ENTREPRISES SOFTGUARD INC.
NOTES TO FINANCIAL STATEMENTS
6 month period ended on January 1, 1999
8. INCOME TAXES
The Company has accumulated losses for income tax purposes from which
the tax benefit is not recorded in the financial statements. These
losses are available to reduce income taxes in future years no later
than :
Federal Provincial
--------------- ---------------
January 2003 $ 259,594 $ 259,594
January 2004 491,949 491,949
January 2005 215,730 215,730
January 2006 105,698 105,698
--------------- ---------------
$ 1,072,971 $ 1,072,971
=============== ===============
The Company has also accumulated some scientific research and
experimental development expenditures available to reduce income taxes
in future years for an amount of $ 220,911 at Federal level and $
537,825 at Provincial level.
9. SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT TAX CREDIT
During the year, the Company claimed research and development tax
credit for an amount of $ 21,661, accounted for in reduction of the
research and development expenditures in the income statement. This
amount has yet to be assessed by the fiscal authorities.
10. COMMITMENTS
a) The Company has entered into a sub-lease agreement, expiring
in June 1999, representing a commitment of $ 10,860; and
b) the Company has provided a movable hypothec without delivery
in favour of the lessor for an amount of $ 25,000.
11. CONTINGENCY
The Company is a defendant in a legal action that have occured in the
normal course of its operations for an amount of $ 32,059.
<PAGE>
9
LES ENTREPRISES SOFTGUARD INC.
NOTES TO FINANCIAL STATEMENTS
6 month period ended on January 1, 1999
12. FINANCIAL INSTRUMENT
Interest rate risk
The Company is exposed to interest rate risk on the bank loan and the
long-term debt. Changes in the interest rate of 1 % would not have a
significant effect on the net loss, deficit or financial position of
the Company.
13. 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.
<PAGE>
AUDITORS' REPORT
To the Shareholders of
LES ENTREPRISES SOFTGUARD INC.
We have audited the balance sheet of LES ENTREPRISES SOFTGUARD INC. as at June
30, 1998 and the statement of income and deficit and the statement of changes in
financial position for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
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 June 30, 1998 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles.
Bourassa Boyer
Chartered Accountants
Vaudreuil-Dorion, March 12, 1999
<PAGE>
2
LES ENTREPRISES SOFTGUARD INC.
INCOME AND DEFICIT
Year ended June 30, 1998
<TABLE>
<CAPTION>
1 9 9 8 1 9 9 7
(unaudited)
<S> <C> <C>
SALES $ -- $ --
---------------- ----------------
ADMINISTRATIVE EXPENSES
Salaries and fringe benefits 69,756 138,888
Rent 26,438 21,720
Research and development 25,777 --
Interest and bank charges 21,508 12,972
Consulting 21,202 124,412
Professional fees 20,384 26,604
Travelling and business promotion 19,354 43,159
Telephone and communication 17,593 19,592
Car expenses 7,003 12,227
Office expenses 5,559 16,832
Interest on long-term debt 4,377 10,966
Interest on bank loan 2,347 1,126
Insurance, taxes and licences 1,663 7,949
Depreciation of fixed assets 27,437 26,803
Depreciation of deferred expenses 4,745 173
Decrease in value of software development costs 172,682 --
---------------- ----------------
447,825 463,423
---------------- ----------------
LOSS BEFORE INCOME TAXES 447,825 463,423
INCOME TAXES
Deferred ( 20,000) --
---------------- ----------------
NET LOSS 427,825 463,423
DEFICIT AT BEGINNING 731,752 268,329
---------------- ----------------
DEFICIT AT END $ 1,159,577 $ 731,752
================ ================
</TABLE>
<PAGE>
3
LES ENTREPRISES SOFTGUARD INC.
BALANCE SHEET
As at June 30, 1998
<TABLE>
<CAPTION>
1 9 9 8 1 9 9 7
(unaudited)
A S S E T S
CURRENT
<S> <C> <C>
Income taxes recoverable $ 333,638 $ 305,453
Prepaid expenses 8,790 4,706
---------------- ---------------
342,428 310,159
FIXED ASSETS (note 3) 77,334 84,264
SOFTWARE DEVELOPMENT COSTS -- 172,682
DEFERRED EXPENSES (note 4) 16,998 18,671
---------------- ---------------
$ 436,760 $ 585,776
================ ===============
L I A B I L I T I E S
CURRENT
Bank indebtedness $ 20,920 $ 11,314
Bank loan (note 5) 26,000 29,000
Accounts payable and accrued liabilities 191,582 70,833
Current portion of long-term debt 47,222 93,013
---------------- ---------------
285,724 204,160
LONG-TERM DEBT (note 6) 8,716 672,368
---------------- ---------------
294,440 876,528
---------------- ---------------
SHAREHOLDERS' EQUITY (DEFICIENCY)
CAPITAL STOCK (note 7) 1,301,897 441,000
DEFICIT ( 1,159,577 ) ( 731,752 )
---------------- ---------------
142,320 ( 290,752 )
---------------- ---------------
$ 436,760 $ 585,776
================ ===============
</TABLE>
ON BEHALF OF THE BOARD
, director
- ---------------------------------------------
, director
- ---------------------------------------------
<PAGE>
4
LES ENTREPRISES SOFTGUARD INC.
CHANGES IN FINANCIAL POSITION
Year ended June 30, 1998
<TABLE>
<CAPTION>
1 9 9 8 1 9 9 7
(unaudited)
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ ( 427,825) $ ( 463,423 )
Items not affecting cash
Depreciation of fixed assets and deferred expenses 32,182 26,976
Decrease in value of software development costs 172,682 --
Deferred income taxes ( 20,000) --
---------------- ----------------
( 242,961) ( 436,447 )
Changes in non-cash working capital items 108,480 ( 188,595 )
---------------- ----------------
( 134,481) ( 625,042 )
---------------- ----------------
INVESTING ACTIVITIES
Acquisition of fixed assets ( 23,579) ( 48,593 )
Investment tax credit -- 3,000
Increase of software development cost -- ( 97,881 )
Increase of deferred expenses -- ( 4,000 )
---------------- ----------------
( 23,579) ( 147,474 )
---------------- ----------------
FINANCING ACTIVITIES
Variation of advances from a shareholder ( 630,319) 607,920
Addition to long-term debt -- 134,680
Repayment of long-term debt ( 79,124) --
Net proceeds on issuance of shares 860,897 --
---------------- ----------------
151,454 742,600
---------------- ----------------
DECREASE IN CASH ( 6,606) ( 29,916 )
CASH POSITION AT BEGINNING ( 40,314) ( 10,398 )
---------------- ----------------
CASH POSITION AT END $ ( 46,920) $ ( 40,314 )
================ ================
</TABLE>
The cash position is represented by bank indebtedness and bank loan.
<PAGE>
5
LES ENTREPRISES SOFTGUARD INC.
NOTES TO FINANCIAL STATEMENTS
Year ended June 30, 1998
1. STATUS AND NATURE OF ACTIVITIES
The Company, incorporated under the Canada Business Corporations Act,
is developing computer software and internet services.
2. SIGNIFICANT ACCOUNTING POLICIES
Fixed assets
Fixed assets are accounted for at cost and depreciated according to the
following methods and annual rates :
Computer equipment Declining 30 %
Computer software Declining 30 %
Furniture and fixtures Declining 20 %
Office equipment Declining 20 %
Leasehold improvements Straight-line 33 %
Deferred expenses
Deferred expenses are accounted for at cost and depreciated according
to the straight-line method an annual rate of 20 %.
<TABLE>
<CAPTION>
3. FIXED ASSETS (unaudited)
Accumulated 1 9 9 8 1 9 9 7
Cost depreciation Net value
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Computer equipment $ 110,816 $ 52,204 $ 58,612 $ 59,423
Computer software 8,515 4,345 4,170 4,558
Furniture and fixtures 7,196 3,068 4,128 5,425
Office equipment 14,536 5,193 9,343 11,615
Leasehold improvements 6,487 5,406 1,081 3,243
--------------- --------------- --------------- ---------------
$ 147,550 $ 70,216 $ 77,334 $ 84,264
=============== =============== =============== ===============
</TABLE>
<PAGE>
6
LES ENTREPRISES SOFTGUARD INC.
NOTES TO FINANCIAL STATEMENTS
Year ended June 30, 1998
<TABLE>
<CAPTION>
(unaudited)
4. DEFERRED EXPENSES
Accumulated 1 9 9 8 1 9 9 7
Cost depreciation Net value
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Patent and trademark $ 21,293 $ 7,495 $ 13,798 $ 14,671
Other 4,000 800 3,200 4,000
--------------- --------------- --------------- ---------------
$ 25,293 $ 8,295 $ 16,998 $ 18,671
=============== =============== =============== ===============
</TABLE>
5. BANK LOAN
Bank loan authorized at $ 25,000, preferential bank rate plus 1 %,
renewable in October 1998.
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
1 9 9 8 1 9 9 7
<S> <C> <C>
Loan, prime rate plus 3 %, payable until September 1999 by monthly
instalments of $ 2,778, secured by equipment, accounts receivable,
patent and trademark
with a net book value of $ 424,770 $ 55,556 $ 75,000
Loan, prime rate plus 2 %, paid-off during the year -- 59,680
Advances from a shareholder, without interest nor
repayment terms 382 630,701
--------------- --------------
55,938 765,381
Current portion of long-term debt 47,222 93,013
--------------- --------------
$ 8,716 $ 672,368
=============== ==============
</TABLE>
Instalments on long-term debt due in each of the next two years are as
follows :
1999 $ 47,222
2000 $ 8,716
<PAGE>
7
LES ENTREPRISES SOFTGUARD INC.
NOTES TO FINANCIAL STATEMENTS
Year ended June 30, 1998
7. CAPITAL STOCK
Authorized
Unlimited number of Class A common shares, with voting rights,
participating, dividend at directors' discretion, without par value.
Unlimited number of Class B preferred shares, without voting rights,
participating, dividend at directors' discretion, redeemable at paid-up
capital, without par value.
Unlimited number of Class C preferred shares, with voting rights of 100
votes per share, non- participating, without dividend rights,
redeemable at paid-up capital, without par value.
Unlimited number of Class D preferred shares, without voting rights,
non-participating, non- cumulative monthly dividend of 1 % on the
redemption price, redeemable at paid-up capital, without par value.
Unlimited number of Class E preferred shares, without voting rights,
non-participating, non- cumulative monthly dividend of 0.75 % on the
redemption price, redeemable at paid-up capital, without par value.
Unlimited number of Class F preferred shares, without voting rights,
non-participating, cumulative dividend at Canada's Bank prime rate at
the beginning of the fiscal year on the redemption price, redeemable at
paid-up capital, without par value.
<TABLE>
<CAPTION>
1 9 9 8 1 9 9 7
(unaudited)
Issued and fully paid
<S> <C> <C>
1,000,000 Class A common shares $ 1,000 $ 1,000
1,300,897 Class D preferred shares (440,000 in 1997) 1,300,897 440,000
--------------- --------------
$ 1,301,897 $ 441,000
=============== ==============
</TABLE>
Issuance of shares
During the year, the Company has issued 860,897 Class D shares for a
total consideration of $ 860,897.
<PAGE>
8
LES ENTREPRISES SOFTGUARD INC.
NOTES TO FINANCIAL STATEMENTS
Year ended June 30, 1998
8. INCOME TAXES
The Company has accumulated losses for income tax purposes from which
the tax benefit is not recorded in the financial statements. These
losses are available to reduce income taxes in future years no later
than :
Federal Provincial
--------------- --------------
June 2003 $ 259,594 $ 259,594
June 2004 491,949 491,949
June 2005 215,730 215,730
--------------- --------------
$ 967,273 $ 967,273
=============== ==============
The Company has also accumulated some scientific research and
experimental development expenditures available to reduce income taxes
in future years for an amount of $ 265,816 at Federal level and $
572,122 at Provincial level.
9. SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT TAX CREDIT
During the year, the Company claimed research and development tax
credit for an amount of $ 119,831, accounted for in reduction of the
research and development expenditures in the income statement. This
amount has yet to be assessed by the fiscal authorities.
10. COMMITMENT
The Company has provided a movable hypothec without delivery in favour
of a supplier for an amount of $ 25,000.
11. FINANCIAL INSTRUMENT
Interest rate risk
The Company is exposed to interest rate risk on the bank loan and the
long-term debt. Changes in the interest rate of 1 % would not have a
significant effect on the net loss, deficit or financial position of
the Company.
<PAGE>
9
LES ENTREPRISES SOFTGUARD INC.
NOTES TO FINANCIAL STATEMENTS
Year ended June 30, 1998
12. COMPARATIVE FIGURES
Certain comparative figures of the preceeding year have been
reclassified in order to be conform with the basis of presentation
adopted in the current year.
The financial statements for the year ended June 30, 1997 have been
prepared by other chartered accountants, who signed a notice to reader
on September 25, 1998.
13. 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.
<PAGE>
AUDITORS' REPORT
To the Shareholders of
LES ENTREPRISES SOFTGUARD INC.
We have audited the statement of income of LES ENTREPRISES SOFTGUARD INC. for
the year ended on June 30, 1997. This statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
statement 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 statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in this statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statement presentation.
In our opinion, this statement present fairly, in all material respects, on June
30, 1997 the results of its operations for the year then ended in accordance
with generally accepted accounting principles.
Bourassa Boyer
Chartered Accountants
Vaudreuil-Dorion, March 12, 1999
<PAGE>
LES ENTREPRISES SOFTGUARD INC.
INCOME
Year ended June 30, 1997
SALES $ --
----------------
ADMINISTRATIVE EXPENSES
Salaries and fringe benefits 138,888
Consulting 124,412
Travelling and business promotion 43,159
Professional fees 26,604
Rent 21,720
Telephone and communication 19,592
Office expenses 16,832
Interest and bank charges 12,972
Car expenses 12,227
Interest on long-term debt 10,966
Insurance, taxes and licences 7,949
Interest on bank loan 1,126
Depreciation of fixed assets 26,803
Depreciation of deferred expenses 173
----------------
463,423
----------------
LOSS BEFORE INCOME TAXES 463,423
INCOME TAXES --
----------------
NET LOSS $ 463,423
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