NORTHLAND ICE GEL INCORPORATED
Financial Statements (Unaudited)
Year Ended February 29, 2000
and Review Engagement Report
<PAGE>
REVIEW ENGAGEMENT REPORT
To the Directors of
Cryopak Industries Inc.
We have reviewed the balance sheet of Northland Ice Gel Incorporated as at
February 29, 2000 and the statements of income and retained earnings and of cash
flows for the year then ended. Our review was made in accordance with generally
accepted standards for review engagements and accordingly consisted primarily of
enquiry, analytical procedures and discussion related to information supplied to
us by the company.
A review does not constitute an audit and consequently we do not express an
audit opinion on these financial statements.
Based on our review, nothing has come to our attention that causes us to believe
that these financial statements are not, in all material respects, in accordance
with generally accepted accounting principles.
Vancouver, B.C.
May 25, 2000
<PAGE>
NORTHLAND ICE GEL INCORPORATED
Statement of Income and Retained Earnings
(Unaudited)
Year Ended February 29, 2000
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Sales $ 3,813,614 $ 2,429,647
Cost of Sales (Schedule) 2,406,329 1,471,649
--------- ---------
Gross Profit 1,407,285 957,998
--------- ----------
Expenses
Advertising 72,296 57,277
Amortization 5,097 7,366
Automobile 26,328 13,422
Bad debts (16,599) 61,384
Commissions 82,088 2,361
Insurance 6,762 7,931
Interest and bank charges 24,063 20,727
Salaries
Sales and administration 60,000 45,000
Management 224,000 165,500
Bonuses 416,715 179,000
Office 24,206 13,712
Professional fees 103,525 27,347
Property taxes 16,524 27,333
Rent 64,368 54,201
Repairs and maintenance 9,699 12,814
Telephone and utilities 33,469 27,207
Tools and shop supplies 29,133 9,134
Travel 38,482 36,267
----------- ----------
1,220,156 767,983
--------- ----------
Income Before Income Taxes 187,129 190,015
Income Taxes 39,240 43,969
----------- -----------
Net Income For The Year 147,889 146,046
Retained Earnings, Beginning of Year 278,218 167,172
Dividends Paid - (35,000)
---------------- -----------
Retained Earnings, End of Year $ 426,107 $ 278,218
========== ==========
</TABLE>
<PAGE>
NORTHLAND ICE GEL INCORPORATED
Balance Sheet
(Unaudited)
February 29, 2000
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
ASSETS
Current
Accounts receivable $ 685,383 $ 384,886
Inventory 202,454 41,268
Prepaid expenses and deposits 16,553 7,926
Due from shareholders - 76,181
--------------- --------
904,390 510,261
Due from Northland Custom Packaging Inc. (Note 7) 226,845 91,761
Capital Assets (Note 3) 242,442 247,420
---------- -------
$ 1,373,677 $ 849,442
========= =======
LIABILITIES
Current
Bank indebtedness (Note 4) $ 212,912 $ 199,977
Accounts payable and accrued liabilities 208,491 105,277
Bonus payable 416,715 179,000
Income taxes payable - 11,969
Current portion of long-term debt (Note 5) 27,500 20,000
----------- --------
865,618 516,223
Long-term Debt (Note 5) 74,583 55,000
Loans Payable - Shareholders 7,368 -
------------ -------------
947,569 571,223
---------- -------
SHAREHOLDERS' EQUITY
Share Capital (Note 6) 1 1
Retained Earnings 426,107 278,218
---------- -------
426,108 278,219
---------- -------
$ 1,373,677 $ 849,442
</TABLE>
APPROVED BY THE BOARD
__________________________________Director
__________________________________Director
<PAGE>
NORTHLAND ICE GEL INCORPORATED
Statement of Cash Flows
(Unaudited)
Year Ended February 29, 2000
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash Flows From (Used In) Operating Activities
Net income for the year $ 147,889 $ 146,046
Adjustment for amortization of capital assets 54,429 60,455
-------- --------
202,318 206,501
------- -------
Changes in non-cash working capital
Increase in accounts receivable (300,497) (204,409)
(Increase) decrease in inventory (161,186) 7,098
(Increase) decrease in income taxes recoverable (11,969) 31,309
(Increase) decrease in prepaid expenses and deposits (8,627) 185
(Increase) decrease in due from Northland Custom
Packaging Inc. (135,084) 9,343
Increase (decrease) in accounts payable 103,214 (22,648)
Increase in bonus payable 237,715 179,000
------- -------
(276,434) (122)
------- ----------
Cash flows (used in) from operating activities (74,116) 206,379
-------- -------
Cash Flows Used In Investing Activities
Purchases of equipment, net (49,451) (24,121)
-------- --------
Cash flows (used in) investing activities (49,451) (24,121)
-------- ---------
Cash Flows From (Used In) Financing Activities
Increase (decrease) in term loans 27,083 (20,000)
Loans from (to) shareholders 83,549 (80,114)
Dividends paid - (35,000)
------------- -------
Cash flows from (used in) financing activities 110,632 (135,114)
------- -------
Net (Decrease) Increase in Cash (12,935) 47,144
Bank Indebtedness, Beginning of Year (199,977) (247,121)
------- -------
Bank Indebtedness, End of Year $(212,912) $(199,977)
======= =======
</TABLE>
<PAGE>
NORTHLAND ICE GEL INCORPORATED
Notes to Financial Statements
(Unaudited)
February 29, 2000
1. OPERATIONS
The company was incorporated on February 9, 1988 under the laws of the
Province of British Columbia and began operations in October 1989. The company's
primary business includes the manufacturing of ice gel and gel products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
The company considers all highly liquid investments with original
maturities of less than ninety days to be cash equivalents. Cash equivalents are
recorded at cost, including accrued interest, which approximates market value.
Financial Instruments
The fair values of the financial instruments approximate their carrying
value except as otherwise disclosed in the financial statements.
Foreign Currency Translation
Monetary items denominated in foreign currencies are translated into
Canadian dollars using exchange rates in effect at the balance sheet date. All
other assets and liabilities are translated at rates prevailing when the asset
was acquired or liabilities incurred. Income and expense items are translated at
the exchange rates in effect on the date of the transaction. Resulting exchange
gains and losses are included in the determination of loss for the period.
Revenue Recognition
Revenue is recognized when an invoice is prepared.
Income Taxes
The company uses the deferred tax allocation method in accounting for
income taxes.
Inventory
Inventory is valued at the lower of cost and net realizable value.
<PAGE>
NORTHLAND ICE GEL INCORPORATED
Notes to Financial Statements
(Unaudited)
February 29, 2000
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Capital Assets
Capital assets are recorded at cost. Amortization has been provided
over the estimated useful lives of the assets using the following method:
Machinery and equipment 20% Declining balance
Office furniture and equipment 20% Declining balance
Assets acquired during the year are amortized at one-half the above
rates.
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
2000 1999
Accumulated Net Book Net Book
Cost Amortization Value Value
<S> <C> <C> <C> <C>
Machinery and equipment $ 607,236 $ 387,246 $ 219,990 $ 223,996
Office furniture and equipment 39,792 17,340 22,452 23,424
------ ------ ------ ------
$ 647,028 $ 404,586 $ 242,442 $ 247,420
======= ======= ======= =======
</TABLE>
4. BANK INDEBTEDNESS
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash $ 16,972 $ 26,705
Demand loan (233,884) (226,682)
------- -------
$ (216,912) $ (199,977)
======= =======
</TABLE>
Bank indebtedness is secured by an unlimited personal guarantee of a
shareholder supported by a second mortgage, limited personal guarantee of
$300,000 of another shareholder, security over personal property, equipment,
fixtures and inventory.
<PAGE>
NORTHLAND ICE GEL INCORPORATED
Notes to Financial Statements
(Unaudited)
February 29, 2000
5. LONG-TERM DEBT
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
IWA and Community Credit Union term loan, secured by a charge against
certain machinery and equipment, a charge against personal property of
one of the shareholders, an assignment of accounts receivable, a
limited guarantee of $100,000 and postponement of claim by the
shareholders and affiliated company and an assignment of insurance,
repayable by monthly payments of $1,667 plus interest calculated
monthly at prime plus 1.5% per
annum, due June 1, 2004 $ 88,333 $ 75,000
IWA and Community Credit Union term loan, secured by certain equipment
repayable by monthly payments $625 plus interest calculated monthly at
prime plus 1.5% per annum, due
December 21, 2002 13,750 -
------- ------------
102,083 75,000
Current portion (27,500) (20,000)
------- ------
$ 74,583 $ 55,000
======== ======
</TABLE>
The remaining principal payments for each of the next five years are as
follows:
<TABLE>
<CAPTION>
<S> <C>
2001 $ 27,500
2002 26,250
2003 20,000
2004 20,000
2005 8,333
--------
$ 102,083
</TABLE>
6. SHARE CAPITAL
Authorized
10,000,000 common shares without par value
10,000,000 Class A preference shares with a par value of $0.00001
each 1,000,000 Class B preference shares with a par value of $0.01
each 1,000,000 Class C preference shares with a par value of
$100.00 each
<PAGE>
NORTHLAND ICE GEL INCORPORATED
Notes to Financial Statements
(Unaudited)
February 29, 2000
6. SHARE CAPITAL (continued)
Issued and outstanding
<TABLE>
<CAPTION>
Number of
Shares Amount
------ ------
<S> <C> <C>
Common shares
Balance, February 28, 1998 and 1999 100 $ 1
Issued during year 199,900 -
Repurchased during the year (91,324) -
------- ----
Balance, February 29, 2000 108,676 1
======= ---
Class A preferred shares
Balance, February 28, 1998 and 1999 - -
Issued during the year 1,000 -
-------- ----
Balance, February 29, 2000 1,000 -
======== ----
Total, February 29, 2000 1
===
</TABLE>
Stock Split
During the year the company issued 199,900 common shares on the basis
of one thousand shares for each common share held.
Repurchase of Common Shares and Issuance of Preferred Shares
During the year the company repurchased 91,324 common shares for cash
of $0.90 and the issuance of 1,000 Class A preferred shares. The Class A
preferred shares are non-voting, not entitled to dividends, retractable and
redeemable at any time , by the company only, at a price equal to $1,000 per
share.
<PAGE>
NORTHLAND ICE GEL INCORPORATED
Notes to Financial Statements
(Unaudited)
February 29, 2000
7. RELATED PARTY TRANSACTIONS
The company received the following amounts from Northland Custom
Packaging Inc. (N.C.P.) A company owned 100% by one of the
shareholders of the company:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Rent $ 20,370 $ 30,000
Machinery 24,000 24,000
Administration 12,000 24,000
Labour 435,132 89,713
Supplies 20,495 3,633
Taxes 40,502 40,502
-------- -------
$ 552,499 $ 211,848
======= =======
</TABLE>
The amount due from N.C.P. is without interest or fixed terms of repayment.
The above amounts represent intercompany billings for cost recovery for
expenses the company paid on behalf of N.C.P. and have been netted with the
appropriate expense accounts in these financial statements.
8. LEASE COMMITMENT
The company's lease for its office and warehouse space which expires
January 31, 2005 requires minimum annual payments of $132,230 from February 1,
2000 to July 31, 2002 and $137,693 from August 1, 2002 to January 31, 2005, plus
operating costs.
9. COMPARATIVE FIGURES
The prior year's figures were prepared by another firm of chartered
accountants without audit or review.
Certain of the prior year's figures were reclassified for comparative
purposes.
<PAGE>
NORTHLAND ICE GEL INCORPORATED
Schedule of Cost of Sales
(Unaudited)
Year Ended February 29, 2000
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Inventory, Beginning of Year $ 41,268 $ 48,367
Purchases 1,955,147 961,302
--------- ----------
1,996,415 1,009,669
Less Inventory, End of Year 202,454 41,268
---------- ----------
1,793,961 968,401
Amortization 49,332 53,089
Repairs and maintenance 33,192 19,267
Utilities 26,519 12,555
Wages and benefits 503,325 418,337
---------- --------
Cost of Sales $ 2,406,329 $ 1,471,649
========= =========
</TABLE>