Conforce
International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
|
|
1.
|
DESCRIPTION
OF BUSINESS
|
The
Company operates in two reportable business segments; Container Terminal, and
EKO-FLOR. The Container Terminal operations are organized as Conforce 1
Container Terminals, Inc., which is a 50.1% owned subsidiary of the
Company. The remaining 49.9% is owned by Marino Kulas, Conforce International,
Inc President & CEO. The Conforce 1 subsidiary is responsible for all
container terminal operations. EKO-FLOR is organized as Conforce Container
Corporation (“CCC”) a 100% owned subsidiary of the Company. The
CCC subsidiary is responsible for the development, manufacturing and
marketing of the Company’s EKO-FLOR products. Operations for CCC during the
reportable periods to date have been limited to research and development as
the product is in the testing stages. Its EKO-FLOR products have evolved
systematically with various refinements, as previously noted, based on industry
standards and various feedback received.
The
Company was incorporated on May 18, 2004 in the State of Delaware as Now
Marketing Corp. and on May 20, 2005 Conforce Container Corporation was renamed
from First National Preferred Card Service, Inc., which was incorporated under
the laws of the Province of Ontario on February 9, 2001. On May 25,
2005, the Company acquired Conforce Container Corporation in exchange for
120,000,000 shares of the Company’s Common Stock, making Conforce Container
Corporation a wholly owned subsidiary. Immediately prior to the
acquisition, the Company had 1,000 shares of common stock issued and
outstanding. The acquisition was accounted for as a recapitalization
of Conforce Container Corporation, as the shareholders of Conforce Container
Corporation controlled the Company upon completion of the
acquisition. Conforce Container Corporation was treated as the
acquiring entity for accounting purposes. There were no adjustments
to the carrying value of the assets or liabilities of the acquired company or to
the assets and liabilities of the acquiring company. The Company was
then renamed Conforce International Inc. on May 25, 2005.
These
consolidated financial statements have been prepared on the basis of United
States generally accepted accounting principles ("GAAP") applicable to a 'going
concern', which assume that the Company will continue in operation for the
foreseeable future and will be able to realize its assets and discharge its
liabilities in the normal course of operations. As at March 31, 2008 the Company
had a net decrease in cash from operations of 16,706. The
Company has incurred net losses of $147,178 for the year ended March 31, 2008
and has an accumulated deficit of $291,586 as at March 31, 2008. The Company's
ability to continue as a going concern depends on its ability to generate
positive cash flow from operations or secure additional debt or equity
financing.
Management
regularly reviews and considers the current and forecast activities of the
Company in order to satisfy itself as to the viability of operations. These
ongoing reviews include consideration of current orders and future business
opportunities, current development and production activities, customer and
supplier exposure and forecast cash requirements and balances. Based on these
evaluations management concluded that the Company is able to continue as a going
concern.
There can
be no assurances that the Company's activities will be successful or sufficient
and as a result there is doubt regarding the "going concern" assumption and,
accordingly, the use of accounting principles applicable to a going concern.
These consolidated financial statements do not reflect adjustments that would be
necessary if the "going concern" assumption were not appropriate. If the "going
concern" assumption were not appropriate for these consolidated financial
statements, then adjustments to the carrying values of the assets and
liabilities, the reported revenues and expenses and the balance sheet
classifications, which could be material, would be
necessary.
Conforce
International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
|
|
3.
|
SUMMARY
OF SIGNIFICANT ACCOUTING
PRINCIPLES
|
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in accordance
with United States Generally Accepted Accounting Principles
(“GAAP”). All amounts are reported in U.S. dollars unless otherwise
stated.
In
connection with the preparation of the March 31, 2008 financial statements, the
Company noted a number of errors in previously released financial
statements. These errors impacted a number of statements; refer to
note 5 for a summary of the restatement of previously reported financial
statements.
Principles
of Consolidation
The
Consolidated financial statements include the accounts of the Company and its
wholly and partially owned subsidiaries. All intercompany
transactions and balances have been eliminated on
consolidation
Use
of Estimates
The
preparation of consolidated financial statements in accordance with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the year. Actual results could
differ from those estimates.
Significant
estimates made by management of the Company include, an estimate of applicable
interest rate for related party loans payable, uncollectible accounts
receivable, and valuation allowances for deferred income tax
assets.
Cash
Cash
consists of cash on deposit and is designated as held-for-trading and carried at
fair value. Changes in fair value are recorded in earnings.
Trade
Accounts Receivable
The
majority of the Company’s accounts receivable are due from large well
established businesses. Credit is extended based on evaluation of a customer’s
financial condition and accounts receivable are typically due within 30 days and
are stated at amounts due from customers net of any allowances for doubtful
accounts. The Company determines its allowance for doubtful accounts by
considering a number of factors, including the length of time trade accounts
receivable are past due, the Company’s previous loss history, the customer’s
current ability to pay its obligation to the Company, and the condition of the
general economy and the industry as a whole. The Company writes-off accounts
receivable when they become uncollectable, and payments subsequently received on
such receivables are credited to the allowance for doubtful accounts. Interest
is not accrued on past due receivables. As at March 31, 2008 and
2007, none of the accounts receivable were considered at risk, consequently the
allowance for doubtful accounts nil.
Plant
and Equipment
Plant and
equipment are recorded at cost less accumulated amortization and are amortized
from the date of acquisition or, in respect of internally constructed assets,
from the time an asset is substantially completed and ready for
use. Amortization is computed using the declining balance method as
follows:
|
|
Office
equipment
|
|
20%
per annum declining basis
|
|
|
|
Vehicles
|
|
30%
per annum declining basis
|
|
|
|
Machinery
and equipment
|
|
20%
per annum declining basis
|
|
Leasehold
improvements are amortized on a straight-line basis over the term of the
lease.
The
Company reviews the recoverability of the carrying amount of plant and equipment
when events or circumstances indicate that the carrying amounts may not be
recoverable. This evaluation is based on projections of future undiscounted net
cash flows. The total of these projected net cash flows is referred to as the
“net recoverable amount.” If the net recoverable amount is less than the
carrying value, the asset is written down to fair value.
Conforce
International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
Revenue
Recognition
Service
revenues are recognized when there is persuasive evidence of an arrangement,
services rendered, the amount is fixed or determinable, and collection is
reasonably assured. Revenue is recorded net of any applicable sales
and value added taxes and customer discounts.
Research
and Product Development Costs
Research
costs and costs incurred in applying for patents and licenses are expensed as
incurred. Product development costs are expensed as incurred until the product
or process is clearly defined and the associated costs can be identified,
technical feasibility is reached, there is an intention to produce or market the
product, the future market is clearly defined and adequate resources exist or
are expected to be available to complete the project. To date, no product
development costs have been capitalized.
Stock-Based
Compensation
The
Company has agreements in place with certain senior management to compensate
them through the direct issuance of common shares. As at March 31,
2008, 320,000 common shares have been issued or accrued by the current
shareholders to management in satisfaction of these agreements. These
stock based payments have been expensed by the Company over the period in which
service has been rendered.
Income
Taxes
Income
taxes are recorded using the liability method. Deferred income tax
amounts arise due to temporary differences between the accounting and income tax
basis of the Company’s assets and liabilities and the unused tax losses of the
Company. Deferred income tax assets and liabilities are measured using
substantively enacted income tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled. The effect on
deferred income tax assets and liabilities of a change in income tax rates and
laws is recognized in the period that includes the date of substantive
enactment. Deferred income tax assets are recognized to the extent that
realization of such benefits is considered to be more likely than
not.
Foreign
Currency Translation
Transactions
denominated in currencies other than the Canadian functional currency are
translated into Canadian dollars at the average rate of exchange for the
period.
For
reporting purposes, assets and liabilities are translated into US dollars at the
period-end exchange rates, and the results of its operations are translated at
the average rate of exchange for the period. The resulting translation
adjustments are recorded in accumulated other comprehensive
income.
Net
Loss Per Share
Net loss
per common share is presented in accordance with Statement of Financial
Accounting Standards No. 128,
Earnings Per share
(“SFAS 128”). Basic loss per common share
is computed by dividing the net loss attributable to common shareholders by the
weighted average number of common shares outstanding during the
period. Diluted loss per common share is equal to the
basic loss per common share as there are no potentially dilutive securities
outstanding.
Conforce
International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
|
|
4.
|
NEW
ACCOUNTING STANDARDS
|
In
December 2007, the FASB issued FAS No. 160,
"Non-controlling Interests in
Consolidated Financial Statements
-
an amendment of ARB No. 51
",
("FAS No. 160"). FAS No. 160 requires (i) that non-controlling (minority)
interests be reported as a component of shareholders' equity, (ii) that net
income attributable to the parent and to the non-controlling interest be
separately identified in the consolidated statement of operations, (iii) that
changes in a parent's ownership interest while the parent retains its
controlling interest be accounted for as equity transactions, (iv) that any
retained non-controlling equity investment upon the deconsolidation of a
subsidiary be initially measured at fair value, and (v) that sufficient
disclosures are provided that clearly identify and distinguish between the
interests of the parent and the interests of the non-controlling owners. FAS No.
160 is effective for annual periods beginning after December 15, 2008 and should
be applied prospectively. The presentation and disclosure requirements of the
statement shall be applied retrospectively for all periods presented. The
Company adopted FAS No. 160 on April 1, 2009 and there was no impact on its
financial statements. Retroactive application of FAS 160 will have an effect on
the presentation of the Company’s financial statements related to March 31,
2009.
In
December 2007, the FASB issued Statement SFAS No. 141 (revised 2007),
“Business Combinations,” which replaces SFAS No 141. The standard retains
the purchase method of accounting for acquisitions, but requires a number of
changes, including changes in the way assets and liabilities are recognized in
the purchase accounting. It also changes the recognition of assets acquired and
liabilities assumed arising from contingencies, requires the capitalization of
in-process research and development at fair value, and requires the expensing of
acquisition-related costs as incurred. SFAS No. 141R is effective for the
Company beginning April 1, 2009 and will apply prospectively to business
combinations completed on or after that date.
In April
2008, the FASB issued guidance that amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset. The guidance is effective for fiscal years
beginning after December 15, 2008. Early adoption is prohibited. The
adoption of this standard is not expected to have a material effect on the
Company’s results of operations or financial position.
In April
2009, the FASB issued guidance concerning interim disclosures about fair value
of financial instruments requiring publicly traded companies to provide
disclosure about the fair value of financial instruments whenever interim
summarized financial information is reported. Previously, disclosures about the
fair value of financial instruments were only required on an annual basis.
Disclosure shall include the method(s) and significant assumptions used to
estimate the fair value of financial instruments and shall describe changes in
method(s) and significant assumptions, if any, during the period. This guidance
was effective for interim and annual periods ending after June 15, 2009,
and, as such, the Company will include this disclosure with its first quarter
fiscal 2010 financial statements.
In May
2009, the FASB issued guidance regarding the disclosure of subsequent events.
This guidance made no changes to current accounting but added required
disclosures regarding the date through which the Company has evaluated
subsequent events and whether that evaluation date is the date of financial
statement issuance or the date the financial statements were available to be
issued. This guidance was effective, and will be adopted by the Company, for
interim and annual periods ending after June 15, 2009.
In June
2009, the FASB approved the “FASB Accounting Standards Codification” (the
“Codification”) as the single source of authoritative nongovernmental U.S. GAAP
to be launched on July 1, 2009. The codification does not change current
U.S. GAAP, but is intended to simplify user access to all authoritative U.S.
GAAP by providing all the authoritative literature related to a particular topic
in one place. All existing accounting standard documents will be superseded and
all other accounting literature not included in the Codification will be
considered no authoritative. The Codification is effective for interim and
annual periods ending after September 15, 2009. Adoption by the Company is
not expected to have a material impact on its consolidated financial position,
results of operation or cash flows.
Conforce
International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
|
|
5.
|
RESTATEMENT
OF PREVIOUSLY REPORTED FINANCIAL
STATEMENTS
|
In
connection with the preparation of the March 31, 2008 audited financial
statements, the Company noted a number of errors in the previously reported
March 31, 2008 financial statements and the comparative financial statements for
the year ended March 31, 2007. These errors impacted a number of
statements as summarized below:
Consolidated
Balance Sheet
|
|
|
|
|
|
|
As
previously
reported
|
|
|
As
restated
|
|
Current
assets
|
|
|
|
|
|
|
Cash
|
|
$
|
34,801
|
|
|
$
|
84,652
|
|
|
Accounts
receivable
|
|
|
494,184
|
|
|
|
729,375
|
|
|
Total
current assets
|
|
|
528,985
|
|
|
|
814,027
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant
and equipment
|
|
|
96,063
|
|
|
|
111,859
|
|
|
Non-current
assets
|
|
|
14,779
|
|
|
|
4,155
|
|
|
Total
Assets
|
|
$
|
639,827
|
|
|
$
|
930,041
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
115,326
|
|
|
$
|
296,897
|
|
|
Income
taxes
|
|
|
-
|
|
|
|
53,845
|
|
|
Total
current liabilities
|
|
|
115,326
|
|
|
|
350,742
|
|
|
Deferred
rent
|
|
|
-
|
|
|
|
37,283
|
|
|
Related
party loans payable
|
|
|
324,850
|
|
|
|
303,280
|
|
|
Minority
interest
|
|
|
280,525
|
|
|
|
232,792
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder’s
equity
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
9,157
|
|
|
|
9,157
|
|
|
Contributed
surplus
|
|
|
89,900
|
|
|
|
283,259
|
|
|
Accumulated
other comprehensive loss
|
|
|
-
|
|
|
|
5,114
|
|
|
Accumulated
deficit
|
|
|
(179,931
|
)
|
|
|
(291,586
|
)
|
|
|
|
|
(80,874
|
)
|
|
|
5,944
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
shareholder’s equity
|
|
$
|
639,827
|
|
|
$
|
930,041
|
|
|
|
a)
|
Cash
was restated as a result of the transfer of a number of stale dated
cheques that had been issued to a shareholder for payment of services
rendered that were not going to be replaced, but rather constituted a
non-interest bearing amount due to the
shareholder.
|
|
|
b)
|
Accounts
receivable were restated as a result of the incorrect accounting of
invoices which were booked subsequent to the fiscal year but were in
respect of services rendered in the fiscal year ended March 31,
2008. In addition, a tax refund was received subsequent to the
year-end relating to prior periods and refundable Goods and Services Taxes
resulting from errors in the period of recognition of revenues and
expenses.
|
|
|
c)
|
Plant
and equipment was restated as a result of an incorrect exchange rate used
in translating the balances at year end. A historical exchange
rate had been applied rather than the year end exchange
rate.
|
|
|
d)
|
Other
non-current assets were restated to eliminate amounts recorded as deposits
for rental property.
|
|
|
e)
|
Accounts
payable were restated as a result of the incorrect accounting for invoices
that were recorded in the subsequent period but related to services
rendered during the fiscal year ended March 31,
2008.
|
|
|
f)
|
Income
taxes payable has been updated to reflect the changes made to the
financial statements.
|
|
|
g)
|
Deferred
rent has been updated to reflect the straight line rent
calculation.
|
|
|
h)
|
Related
party loans payable was restated to account for the imputed interest
associated with the receipt of non-interest bearing shareholder loans as a
result of cheques that were not
cashed.
|
|
|
i)
|
Minority
interest was restated as a result of the adjustments noted above impacting
the partially owned
subsidiary.
|
|
|
j)
|
Contributed
surplus was restated to reflect the correct stock based compensation
expense incurred in the current and prior periods and to account for the
gain in the fair valuing of the related party loans
payable.
|
|
|
k)
|
Accumulated
deficit was restated as a result of the cumulative errors in the reporting
of revenue and expenses and as a result of errors for the period ended
March 31, 2008 and for errors identified that related to years prior to
March 31, 2008.
|
Conforce
International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
Consolidated
Statement of Operations
|
|
|
March
31, 2008
|
|
|
|
|
As
previously
reported
|
|
|
As
restated
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,364,945
|
|
|
$
|
2,364,335
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
of services and product revenue
|
|
|
1,293,100
|
|
|
|
1,274,111
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
1,071,845
|
|
|
|
1,090,224
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
663,391
|
|
|
|
758,316
|
|
|
Research
and development
|
|
|
209,437
|
|
|
|
178,125
|
|
|
Interest
and bank charges
|
|
|
-
|
|
|
|
685
|
|
|
Stock
based compensation
|
|
|
62,500
|
|
|
|
70,935
|
|
|
Amortization
of property and equipment
|
|
|
30,121
|
|
|
|
29,673
|
|
|
|
|
|
965,449
|
|
|
|
1,037,734
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income and expense
|
|
|
7,285
|
|
|
|
-
|
|
|
Interest
on shareholder loans
|
|
|
-
|
|
|
|
24,599
|
|
|
Income
from before income tax and minority interest
|
|
|
99,111
|
|
|
|
27,891
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
-
|
|
|
|
73,594
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) before minority interest
|
|
|
99,111
|
|
|
|
(45,703
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in consolidated subsidiary
|
|
|
153,965
|
|
|
|
101,475
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(54,854
|
)
|
|
$
|
(147,178
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
Translation
adjustment on foreign exchange
|
|
|
-
|
|
|
|
5,114
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive loss
|
|
$
|
(54,854
|
)
|
|
$
|
(142,064
|
)
|
|
|
a)
|
Revenues
were restated to reflect an error in recording invoices for services
rendered during the year ended March 31, 2008 in the subsequent
year.
|
|
|
b)
|
Costs
of services and product revenue were restated as a result of errors in
recording invoices for services received during the year ended March 31,
2008 in the subsequent fiscal
year.
|
|
|
c)
|
General
and administrative expenses were restated as a result of errors in
recording expenses in the correct accounting period and the
reclassification of expenses between
categories.
|
|
|
d)
|
Research
and development costs were adjusted as a result of the errors in recording
invoices in the correct accounting period and the reclassification of
expenses between categories.
|
|
|
e)
|
Interest
on shareholder loans was restated as a result of the calculation of the
imputed interest applicable to discounting the shareholder loan to fair
value using an estimated interest rate of between 8.25% and
10%.
|
|
|
f)
|
Amortization
of plant and equipment was restated to reflect the average exchange rate
for the year ended March 31, 2008 instead of the historical interest rate
applied at the time the assets were
acquired.
|
|
|
g)
|
Other
income and expenses were restated as a result of an error in the treatment
of the translation of the financial statements from the Canadian
functional currency into a US reporting
currency.
|
|
|
h)
|
Income
tax expense was restated to reflect that tax provision applicable after
the adjustments noted above were made and the applicable tax rate applied
on an entity-by-entity
basis.
|
|
|
i)
|
Minority
interest in the consolidated subsidiary was restated as a result of the
impact of the above-noted restatements to the Statement of Operations of
the consolidated subsidiary.
|
|
|
j)
|
Translation
adjustment to comprehensive income was restated to reflect the accounting
for the translation of the Consolidated Financial Statements from the
Canadian functional currency to the US reporting
currency.
|
Conforce
International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
Consolidated
Statement of Cash Flow
|
|
|
March
31, 2008
|
|
|
|
|
As
previously
reported
|
|
|
As
restated
|
|
|
Operating
Activities
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(54,854
|
)
|
|
$
|
(147,178
|
)
|
|
Items
not affecting cash
|
|
|
|
|
|
|
|
|
|
Minority
interest in consolidated subsidiary
|
|
|
153,965
|
|
|
|
101,475
|
|
|
Amortization
of plant and equipment
|
|
|
30,121
|
|
|
|
29,673
|
|
|
Stock
based compensation
|
|
|
62,600
|
|
|
|
70,935
|
|
|
Imputed
interest on shareholder loan
|
|
|
-
|
|
|
|
24,599
|
|
|
Changes
in non-cash working capital
|
|
|
(229,366
|
)
|
|
|
(96,210
|
)
|
|
Net
cash provided by (used in) operating activities
|
|
|
(37,534
|
)
|
|
|
(16,706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(39,972
|
)
|
|
|
(39,584
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used-in) investing activities
|
|
|
(39,972
|
)
|
|
|
(39,584
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate on cash
|
|
|
37,475
|
|
|
|
15,177
|
|
|
Net
decrease in cash
|
|
|
(40,031
|
)
|
|
|
(41,113
|
)
|
|
Cash,
beginning of year
|
|
|
74,832
|
|
|
|
125,765
|
|
|
Cash,
end of year
|
|
$
|
34,801
|
|
|
$
|
84,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
|
Net
loss was restated to reflect the change in the Statement of Operations
resulting from the errors noted
above.
|
|
|
b)
|
Items
not affecting cash were restated as a result of the errors noted
above.
|
|
|
c)
|
Changes
in the non-cash working capital were restated, primarily as a result of
the errors noted in the timing of the recording or revenues and
expenses.
|
|
|
d)
|
Purchase
of plant and equipment was restated to reflect the errors in translating
into a US reporting
currency.
|
|
|
e)
|
Increase
in loans from related parties is restated to reflect the cash
received.
|
|
|
f)
|
The
effect of the foreign exchange on cash was restated to recognize the use
of an average foreign exchange rate for the preparation of the Statement
of Cash flows and the balance sheet foreign exchange rate for the Balance
sheet translation.
|
Conforce
International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
Consolidated
Balance Sheet
|
|
|
March
31, 2007
|
|
|
|
As
previously
reported
|
|
|
As
restated
|
|
Current
assets
|
|
|
|
|
|
|
Cash
|
|
$
|
74,832
|
|
|
$
|
125,765
|
|
|
Accounts
receivable
|
|
|
228,993
|
|
|
|
382,155
|
|
|
Total
current assets
|
|
|
303,825
|
|
|
|
507,920
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant
and equipment
|
|
|
86,212
|
|
|
|
90,722
|
|
|
Non-current
assets
|
|
|
14,779
|
|
|
|
7,398
|
|
|
Total
Assets
|
|
$
|
404,816
|
|
|
$
|
606,040
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
79,501
|
|
|
$
|
128,836
|
|
|
Shareholders
Loans
|
|
|
287,375
|
|
|
|
-
|
|
|
Total
current liabilities
|
|
|
366,876
|
|
|
|
128,836
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
rent
|
|
|
-
|
|
|
|
35,704
|
|
|
Related
party loans payable
|
|
|
-
|
|
|
|
248,007
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in consolidated subsidiary
|
|
|
126,560
|
|
|
|
116,420
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder’s
equity
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
9,157
|
|
|
|
9,157
|
|
|
Contributed
surplus
|
|
|
27,300
|
|
|
|
212,324
|
|
|
Accumulated
deficit
|
|
|
(125,077
|
)
|
|
|
(144,408
|
)
|
|
|
|
|
(88,620
|
)
|
|
|
(77,073
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
shareholder’s equity
|
|
$
|
404,816
|
|
|
$
|
606,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
|
Cash
was restated as a result of the transfer of a number of stale dated
cheques that had been issued to a shareholder for payment of services
rendered that were not going to be replaced, but rather constituted a
non-interest bearing amount due to the
shareholder.
|
|
|
b)
|
Accounts
receivable were restated as a result of the incorrect accounting of
invoices which were booked subsequent to the fiscal year but were in
respect of services rendered in the fiscal year ended March 31,
2007. In addition, a tax refund was received subsequent to the
year-end relating to prior periods and refundable Goods and Services Taxes
resulting from errors in the period of recognition of revenues and
expenses.
|
|
|
c)
|
Plant
and equipment was restated as a result of using the correct year end
exchange rate for reporting translation into
USD
|
|
|
d)
|
Other
assets were restated as a result of cumulative errors from prior years and
some amounts were expensed when
incurred.
|
|
|
e)
|
Accounts
payable was restated as a result of correcting the timing of the
recognition of certain expenses that were recorded in subsequent
periods.
|
|
|
f)
|
Income
taxes payable has been updated to reflect the changes made to the
financial statements.
|
|
|
g)
|
Deferred
rent has been updated to reflect the straight line rent
calculation.
|
|
|
h)
|
Related
party loans payable was restated due to the cumulative effect of prior
year’s errors and calculation of fair value with the associated imputed
interest for related party loans (now recorded in contributed surplus)
entered into during the
year.
|
|
|
i)
|
Minority
interest was restated as a result of the correction of prior period errors
and adjustments reflecting errors noted in the current year statement of
operations for the consolidated
subsidiary.
|
|
|
j)
|
Contributed
surplus was restated to reflect the correct stock based compensation
expense incurred in prior periods and to account for the fair valuing of
related party loans payable.
|
|
|
k)
|
Accumulated
other comprehensive income was restated to reflect the correct accounting
for the translation of the financial statements from the Canadian
functional currency to the US reporting
currency.
|
|
|
l)
|
Accumulated
deficit was restated as a result of the cumulative errors in the reporting
of revenue and expenses for the period ended March 31, 2007 and due to
errors relating to years prior to March 31,
2007.
|
Conforce
International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
Condensed
Consolidated Statement of Operations
|
|
|
March
31, 2007
|
|
|
|
|
As
previously
reported
|
|
|
As
restated
|
|
|
|
|
|
|
|
|
|
|
Container
services revenues
|
|
$
|
1,567,187
|
|
|
$
|
1,583,662
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
of services
|
|
|
893,908
|
|
|
|
1,009,784
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
673,279
|
|
|
|
573,878
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
597,713
|
|
|
|
622,728
|
|
|
Research
and development
|
|
|
252,143
|
|
|
|
214,790
|
|
|
Interest
and bank charges
|
|
|
-
|
|
|
|
189
|
|
|
Stock
based compensation
|
|
|
-
|
|
|
|
51,668
|
|
|
Amortization
of plant and equipment
|
|
|
20,955
|
|
|
|
20,947
|
|
|
Gain
on foreign exchange
|
|
|
558
|
|
|
|
-
|
|
|
|
|
|
871,369
|
|
|
|
910,322
|
|
|
Income
(loss) before income tax and minority interest
|
|
|
(198,090
|
)
|
|
|
(336,444
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on related party loans payable
|
|
|
-
|
|
|
|
15,804
|
|
|
|
|
|
(198,090
|
)
|
|
|
(352,248
|
)
|
|
Income
tax expense
|
|
|
-
|
|
|
|
-
|
|
|
Net
income (loss) before minority interest in consolidated
subsidiary
|
|
|
(198,090
|
)
|
|
|
(352,248
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in consolidated subsidiary
|
|
|
26,972
|
|
|
|
(42,809
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(225,062
|
)
|
|
$
|
(309,439
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
|
Revenues
were restated as a result of the errors noted in the March 31, 2007 year
end, caused by the incorrect timing of the recognition of invoices and by
recording foreign currency transactions in the nominal functional
currency.
|
|
|
b)
|
Cost
of services and product revenue were restated as a result of errors noted
in the prior year, misclassification of invoices to expenses other than
costs of services and product revenue and errors in capitalizing costs of
sales or expensing items that should have otherwise been
expensed.
|
|
|
c)
|
General
and administrative expenses were restated as a result of errors in
recording expenses in the applicable accounting period, or
misclassification of
expenses.
|
|
|
d)
|
Research
and development costs were adjusted as a result of the erroneous expensing
of certain items that were capital in nature, such as the acquisition of
equipment.
|
|
|
e)
|
Amortization
of plant and equipment was restated to correctly calculate the appropriate
amortization expense, in accordance with the stated amortization policies,
after reflecting the errors noted in calculating the cost of capital
equipment.
|
|
|
f)
|
Gain
on foreign exchange was restated as a result of an error in the treatment
of the translation of the financial statements from the Canadian
functional currency into a US reporting
currency.
|
|
|
g)
|
Interest
on related party loans payable was restated as a result of the calculation
of the imputed interest applicable to discounting the loan to fair value
using an estimated interest rate of between 8.25% and
10%.
|
|
|
h)
|
Interest
and bank charges was restated as a result of the erroneous classification
of this expense as General and Administrative
expenses.
|
|
|
i)
|
Income
tax expense was restated to reflect the tax provision applicable following
the adjustments noted above and the applicable tax rate applied on an
entity-by-entity basis.
|
|
|
j)
|
Minority
interest in consolidated subsidiary was restated as a result of the impact
of the above-noted restatements on the statement of operations of the
consolidated subsidiary.
|
Conforce
International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
Consolidated
Statement of Cash Flow
|
|
|
March
31, 2007
|
|
|
|
|
As
previously
reported
|
|
|
As
restated
|
|
|
Operating
Activities
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(225,062
|
)
|
|
$
|
(309,439
|
)
|
|
Items
not affecting cash
|
|
|
|
|
|
|
|
|
|
Minority
interest in consolidated subsidiary
|
|
|
26,972
|
|
|
|
(42,809
|
)
|
|
Amortization
of plant and equipment
|
|
|
20,955
|
|
|
|
20,947
|
|
|
Stock
based compensation
|
|
|
27,300
|
|
|
|
51,668
|
|
|
Imputed
interest on related party loans payable
|
|
|
-
|
|
|
|
15,804
|
|
|
Changes
in non-cash working capital
|
|
|
69,648
|
|
|
|
241,696
|
|
|
Net
cash provided by operating activities
|
|
|
(80,187)
|
|
|
|
(22,133
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
Purchase
of plant and equipment
|
|
|
(17,574
|
)
|
|
|
(17,456
|
)
|
|
Purchase
of deposits
|
|
|
(4,813
|
)
|
|
|
-
|
|
|
Net
cash used in investing activities
|
|
|
(22,387
|
)
|
|
|
(17,456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
Advances
from related parties
|
|
|
-
|
|
|
|
145,442
|
|
|
Net
cash provided by financing activities
|
|
|
-
|
|
|
|
145,442
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate on cash
|
|
|
2,888
|
|
|
|
(1,055
|
)
|
|
Net
increase (decrease) in cash
|
|
|
(99,686
|
)
|
|
|
104,798
|
|
|
Cash,
beginning of year
|
|
|
174,521
|
|
|
|
20,967
|
|
|
Cash,
end of year
|
|
$
|
74,835
|
|
|
|
125,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
|
Net
loss was restated to reflect the change in the Statement of operations
resulting from the errors noted
above.
|
|
|
b)
|
Items
not affecting cash were restated as a result of the errors noted
above.
|
|
|
c)
|
Changes
in the non-cash working capital were restated, primarily as a result of
the errors noted in the timing of the recording of revenues and
expenses.
|
|
|
d)
|
Purchase
of plant and equipment was restated to correct the erroneous expensing of
items that should have been capitalized and capitalizing of items that
should have been expensed.
|
|
|
e)
|
Increases
in other assets was adjusted to reflect the cumulative effect of prior
years adjustments and the additional deposit for a facility the Company
occupied during the last half of the fiscal
year.
|
|
|
f)
|
Proceeds
from related party loans payable was adjusted to reflect the receipt of
the cash amount, net of any gain on imputed
interest.
|
|
|
g)
|
The
effect of the foreign exchange on cash was restated to recognize the use
of an average foreign exchange rate for the preparation of the Statement
of Cash Flows and the balance sheet foreign exchange rate for the Balance
sheet translation.
|
Conforce
International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
Accounts
receivable for the year ended March 31:
|
|
|
2008
|
|
|
2007
|
|
|
Trade
accounts receivable
|
|
$
|
692,008
|
|
|
$
|
332,922
|
|
|
Goods
and services tax receivable
|
|
|
37,367
|
|
|
|
49,233
|
|
|
|
|
$
|
729,375
|
|
|
$
|
382,155
|
|
Within
the trade accounts receivable balances for 2008, 98% of the balance is due from
four customers. Within the trade receivable balance for 2007, 98% of
the balance due is from three customers.
As at
March 31, 2008 the net book value of the plant and equipment is as
follows:
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Cost
|
|
|
amortization
|
|
|
Net book Value
|
|
|
Office
equipment
|
|
$
|
23,728
|
|
|
$
|
4,746
|
|
|
$
|
18,982
|
|
|
Vehicles
|
|
|
21,958
|
|
|
|
11,562
|
|
|
|
10,396
|
|
|
Machinery
and equipment
|
|
|
120,239
|
|
|
|
58,708
|
|
|
|
61,531
|
|
|
Leasehold
improvements
|
|
|
27,155
|
|
|
|
6,205
|
|
|
|
20,950
|
|
|
|
|
$
|
193,080
|
|
|
$
|
81,221
|
|
|
$
|
111,859
|
|
As at
March 31, 2007, the net book value of the plant and equipment is as
follows:
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Cost
|
|
|
amortization
|
|
|
Net book Value
|
|
|
Vehicles
|
|
$
|
12,178
|
|
|
$
|
6,210
|
|
|
$
|
5,968
|
|
|
Machinery
and equipment
|
|
|
107,056
|
|
|
|
38,679
|
|
|
|
68,377
|
|
|
Leasehold
improvements
|
|
|
17,239
|
|
|
|
862
|
|
|
|
16,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
136,473
|
|
|
$
|
45,751
|
|
|
$
|
90,722
|
|
|
|
8.
|
RELATED
PARTY LOAN PAYABLE AND RELATED PARTY
TRANSACTIONS
|
|
|
|
2008
|
|
|
2007
|
|
|
Due
to shareholder
|
|
$
|
426,347
|
|
|
$
|
379,604
|
|
|
Less:
discount to fair value
|
|
|
(123,067
|
)
|
|
|
(131,597
|
)
|
|
|
|
$
|
303,280
|
|
|
$
|
248,007
|
|
The
amounts due to shareholder are unsecured, non-interest bearing with no specific
terms of repayment. The amounts due to related parties arise from
cash advances the shareholder and other related parties made to the Company for
the purchase of machinery and equipment, primarily relating to the development
of the composite flooring product and to fund ongoing operating
activities.
The loans
have been advanced at different increments depending on the needs of the Company
and repayment is not expected to occur until 2012. Given the long
term nature of these loans, each time an amount is advanced by a related party,
a fair value calculation has been recorded with the discount on the loan being
charged to contributed surplus. The discount to fair value
assumes repayment will be made on March 31, 2012 with imputed interest charged
at rates between 8.25% and 10%. Imputed interest was $24,599 (2007:
$15,804).
The
Company rents three pieces of equipment on a month to month basis from a company
owned by a relative of the CEO. Rent expense for the year ended March
31, 2007 was $10,562. Management considers the rental rate paid
by the Company to the related party to be at market rates.
The CEO
is the 49.9 % minority shareholder of Conforce 1 Container Terminals,
Inc.
Conforce
International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
Preferred
Shares
At March
31, 2008 and 2007, the Company had authorized 5,000,000 preferred shares with a
par value of $.0001 per share and may be issued in designated series from time
to time by one or more resolutions adopted by the Board of
Directors.
As at
March 31, 2008 and 2007 no preferred shares were issued and
outstanding.
Common
Stock
At March
31, 2008 and 2007, the Company had authorized 250,000,000 shares of Common Stock
at a par value of CAD $.0001 per share.
As at
March 31, 2008 and 2007 there were 120,001,000 shares issued and
outstanding.
Stock
Transactions
On
October 26, 2006, the Company entered into an employment agreement (the “VP
Employment Agreement”) with its Vice-President, Product
Development. The initial term of the VP Employment Agreement was
twelve months. Pursuant to the terms of the VP Employment Agreement,
a founding shareholder of Conforce agreed to provide 10,000 shares of his
personal Common stock per month for a twelve month period. In
addition, a founding shareholder of Conforce agreed to provide 200,000 of his
personal shares of Common Stock at the end of the employment term (i.e. October
26, 2007) Shares provided under the VP Employment Agreement during the year
ended March 31, 2008 totaled 270,000 and were valued at $70,935 and shares
provided during the year ended March 31, 2007 totaled 50,000 and were valued at
$50,665. These valuations were based on the trading value of shares
of the Common Stock on the date the shares were provided which in all cases
occurred on the same day.
On
October 31, 2007, the Company entered into an extension of the VP Employment
Agreement for a period of twelve months, through October 31, 2008. In
accordance with this extension, additional compensation in the form of common
stock of the Company would be granted if certain performance criteria were
satisfied in connection with the development of the EKO-FLOR
products. A founding shareholder of Conforce agreed to provide the
common shares required under the terms of this extension. As at March
31, 2008 none of the performance criteria were met, consequently, no additional
shares of Common Stock were provided under the VP Employment
Agreement.
The
Company leases office space under a five year lease which runs through April
2012. Monthly lease payments are $2,883.
The
Company leases container terminal site space under a lease which originally ran
from April 2004 to March 2007. The lease was renewed in April 2007 for an
additional five year term to March 2012 with monthly lease payments increasing
by $3,514 to $14,641 per month.
Future
lease commitments are as follows:
|
2009
|
|
$
|
294,094
|
|
|
2010
|
|
|
294,094
|
|
|
2011
|
|
|
293,085
|
|
|
2012
|
|
|
153,619
|
|
|
2013
|
|
|
8,820
|
|
|
|
|
$
|
1,043,712
|
|
Conforce
International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
The
provision for income taxes for the years ended March 31 consists of the
following:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Income
tax
|
|
$
|
73,594
|
|
|
$
|
-
|
|
|
Deferred
income tax expense (benefit)
|
|
|
|
|
|
|
93,976
|
|
|
Change
in valuation allowance
|
|
|
|
|
|
|
(93,976)
|
|
|
Provision
for income taxes
|
|
$
|
73,594
|
|
|
$
|
-
|
|
The reconciliation of income tax
expense (benefit) for the years ended March 31 computed combined federal and
provincial statutory rate to income tax expense (benefit) is as
follows:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Income
tax expense (benefit) at combined statutory tax of
33%
|
|
$
|
9,204
|
|
|
|
102,114
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent
differences, net
|
|
|
72,992
|
|
|
|
(8,138)
|
|
|
Adjustment
of temporary differences to income tax returns
|
|
|
(8,602)
|
|
|
|
-
|
|
|
Change
in valuation allowance
|
|
|
-
|
|
|
|
(93,976)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
$
|
73,594
|
|
|
$
|
-
|
|
The
significant components of the deferred tax accounts recognized for financial
reporting purposes are as follows:
|
|
|
2008
|
|
|
2007
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
|
Net
operating loss and other carry forwards
|
|
$
|
-
|
|
|
$
|
93,976
|
|
|
Property
and equipment amortization
|
|
|
-
|
|
|
|
-
|
|
|
Intangible
asset amortization
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
deferred tax assets
|
|
|
-
|
|
|
|
93,976
|
|
|
|
|
|
|
Valuation
allowance
|
|
|
-
|
|
|
|
(93,976
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
As at
March 31, 2008 the Company had net operating loss carry forwards of
approximately $125,824 for both Federal and Provincial tax purposes, which
expire in varying amounts between 2018 and 2019. The Company’s net
deferred tax asset has been offset by a valuation allowance of the same amount.
The valuation allowance has been recorded due to the uncertainty of realization
of the deferred tax asset.
Conforce International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
|
|
12.
|
FINANCIAL
INSTRUMENTS
|
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value
Measurements” (“SFAS 157”). SFAS 157 establishes a framework for measuring the
fair value of assets and liabilities. This framework is intended to provide
increased consistency in how fair value determinations are made under various
existing accounting standards that permit, or in some cases require, estimates
of fair market value. SFAS 157 also expands financial statement disclosure
requirements about a corporation’s use of fair value measurements, including the
effect of such measures on earnings. This standard is effective for fiscal years
beginning after November 15, 2007. The Company adopted this new guidance
effective April 1, 2008. This standard did not change the Company’s consolidated
financial position, results of operations or cash flows. For non-financial
assets and non-financial liabilities, the standard is effective for financial
statements issued for fiscal years beginning after November 15, 2008. The
Company plans to adopt this guidance effective April 1, 2009. Conforce is
currently assessing the effect this standard may have on the Company’s results
of operations and consolidated financial position.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities - Including an Amendment of FASB
Statement No. 115” (“SFAS 159”). SFAS 159 is expected to expand the use of
fair value accounting but does not affect existing standards which require
certain assets or liabilities to be carried at fair value. The objective of SFAS
159 is to improve financial reporting by providing companies the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. Under SFAS 159, a corporation may choose, at specified election
dates, to measure eligible items at fair value and report unrealized gains and
losses on items for which the fair value option has been elected in earnings at
each subsequent reporting date. SFAS 159, for financial assets and financial
liabilities, is effective for financial statements issued for fiscal years
beginning after November 15, 2007. The Company adopted this new guidance
effective April 1, 2008. This standard did not have a material effect on
the Company’s consolidated financial position, results of operations or cash
flows.
Fair
Values
Generally
accepted accounting principles require that the Company disclose information
about the fair value of its financial assets and liabilities. Fair
value estimates are made at the balance sheet date based on relevant market
information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties in significant
matters of judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect these
estimates.
The
carrying value of cash, accounts receivable, accounts payable and accrued
liabilities approximates fair value due to the immediate or short-term maturity
of these instruments.
The fair
value of the related party loans payable is calculated assuming the amounts
outstanding will be repaid on March 31, 2012 and have imputed interest of
between 8.25% and 10%.
The fair
value of term loans is calculated based on interest rates that are consistent
with the current rates offered to the Company for debt with similar
terms.
Credit
Risk
Credit
risk arises from the potential that a counter party will fail to perform its
obligations. The Company is exposed to credit risk from both customers and on
amounts held on deposit in financial institutions. In order to reduce its credit
risk, the Company reviews a new customer's credit history before extending
credit and conducts regular reviews of its existing customers' credit
performance. An allowance for doubtful accounts may be established based upon
factors surrounding the credit risk of specific accounts, historical trends and
other information.
Conforce International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
Currency
Risk
Currency
risk is the risk to the Company's earnings that arise from fluctuations of
foreign exchange rates and the degree of volatility of these rates. For the
container operations the customers and suppliers are located in Canada and there
is limited exposure to currency risk. The EKO-FLOR operations will
have international customers and the sale of product may be negotiated in a
currency other than the Canadian functional currency. Purchase of
equipment and supplies will also be sourced from foreign
sources. Because of current limited activity in the EKO-FLOR
operations fluctuations in the foreign exchange rates will not be
significant.
Interest
Rate Risk
The
Company has almost ten years remaining on a term loan which is variable based on
current prime rate An increase/decrease of 3% in the interest rates
would increase/decrease the annual interest expense by approximately
$5,800.
Liquidity
Risk
The
Company manages its liquidity risk by preparing and reviewing actual and
forecasted cash flows. There are no assurances the sources of funds
will be available to satisfy current obligations as noted in Note 2 Going
Concern.
The
Company operated in two reportable business segments; Container Terminal, and
EKO-FLOR. The Container Terminal operations are organized as Conforce
1 Container Terminals, Inc., a 50.1% owned subsidiary of the
Company. The subsidiary is responsible for all container terminal
operations. EKO-FLOR is organized as Conforce Container Corporation a
100% owned subsidiary of the Company. This subsidiary is responsible
for the development, manufacturing and marketing of the Company’s EKO-FLOR
product. Operations to date have been research and development and an
order from one customer.
Business
Segments –For the Year Ended March 31, 2008 (restated)
|
|
|
Container
|
|
|
|
|
|
|
|
|
|
|
Terminals
|
|
|
EKO-FLOR
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,364,335
|
|
|
$
|
-
|
|
|
$
|
2,364,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of services and product revenue
|
|
|
1,274,111
|
|
|
|
-
|
|
|
|
1,274,111
|
|
|
Interest
expense
|
|
|
25,284
|
|
|
|
-
|
|
|
|
25,284
|
|
|
Amortization
of long lived assets
|
|
|
29,673
|
|
|
|
-
|
|
|
|
29,673
|
|
|
Income
tax expense
|
|
|
73,594
|
|
|
|
-
|
|
|
|
73,594
|
|
|
Other
expenses
|
|
|
758,316
|
|
|
|
249,060
|
|
|
|
1,007,376
|
|
|
Minority
interest
|
|
|
101,475
|
|
|
|
-
|
|
|
|
101,475
|
|
|
Income
(Loss)
|
|
$
|
101,882
|
|
|
$
|
(249,060
|
)
|
|
$
|
(147,178
|
)
|
Total
Assets, March 31, 2008
|
Container
Terminals
|
|
$
|
930,041
|
|
|
EKO-FLOR
|
|
|
-
|
|
|
|
|
|
|
|
|
Consolidated
Total
Assets
|
|
$
|
930,041
|
|
For the
year ended March 31, 2008, 95% of the Container Terminal revenue was generated
by three major customers.
Conforce International, Inc.
–NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
For the
years ended March 31, 2008 and 2007
Business
Segments –For the Year Ended March 31, 2007 (restated)
|
|
|
Container
|
|
|
|
|
|
|
|
|
|
|
Terminals
|
|
|
EKO-FLOR
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,583,662
|
|
|
$
|
-
|
|
$
|
1,583,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of services
|
|
|
1,009,784
|
|
|
|
-
|
|
|
1,009,784
|
|
|
Interest
expense
|
|
|
15,993
|
|
|
|
-
|
|
|
15,993
|
|
|
Amortization
of long lived assets
|
|
|
20,947
|
|
|
|
-
|
|
|
20,947
|
|
|
Income
tax expense
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
Other
expenses
|
|
|
674,396
|
|
|
|
214,790
|
|
|
889,186
|
|
|
Minority
interest
|
|
|
(42,809)
|
|
|
|
-
|
|
|
(42,809
|
)
|
|
Income
(Loss)
|
|
$
|
(94,649)
|
|
|
$
|
(214,790
|
)
|
$
|
(309,439
|
)
|
Total
Assets, March 31, 2007
|
Container
Terminals
|
|
$
|
606,040
|
|
|
EKO-FLOR
|
|
|
-
|
|
|
|
|
|
|
|
|
Consolidated
Total
Assets
|
|
$
|
606,040
|
|
For the
year ended March 31, 2007, 95% of the Container Terminal revenue was generated
by three customers.
|
|
14.
|
CHANGES IN NON-CASH WORKING
CAPITAL
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
(restated)
|
|
|
(restated)
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
(332,171
|
)
|
|
$
|
89,650
|
|
|
Non-current
assets
|
|
|
4,132
|
|
|
|
-
|
|
|
Accounts
payable and accrued liabilities
|
|
|
148,558
|
|
|
|
152,046
|
|
|
Income
taxes payable
|
|
|
53,550
|
|
|
|
-
|
|
|
Deferred
Rent
|
|
|
29,721
|
|
|
|
-
|
|
|
|
|
$
|
(96,210
|
)
|
|
$
|
241,696
|
|
|
|
15.
|
COMPARATIVE
STATEMENTS
|
The
restated comparative figures have been reclassified to conform to the current
year’s presentation.
Conforce International Inc.
UNAUDITED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the three and nine months (restated) ended December 31,
2008 and 2007
Conforce International, Inc.
UNAUDITED CONSOLIDATED BALANCE SHEETS
For the periods ended December 31, 2008 and March 31,
2009
|
|
|
December 31 2008
|
|
|
March 31, 2008
|
|
|
|
|
(unaudited) (restated)
|
|
|
(restated)
|
|
|
|
|
(see note 5)
|
|
|
(see note 5)
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
-
|
|
|
$
|
84,652
|
|
|
Accounts receivable
|
|
|
315,490
|
|
|
|
729,375
|
|
|
|
|
|
315,490
|
|
|
|
814,027
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment
|
|
|
566,250
|
|
|
|
111,859
|
|
|
Intangible assets
|
|
|
11,741
|
|
|
|
-
|
|
|
Non-current assets
|
|
|
11,746
|
|
|
|
4,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
905,227
|
|
|
$
|
930,041
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
$
|
18,566
|
|
|
$
|
-
|
|
|
Accounts payable and accrued
liabilities
|
|
|
262,677
|
|
|
|
296,897
|
|
|
Income taxes payable
|
|
|
80,607
|
|
|
|
53,845
|
|
|
Short term related party loan payable (note
6)
|
|
|
122,489
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
484,339
|
|
|
|
350,742
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred rent
|
|
|
36,923
|
|
|
|
37,283
|
|
|
Related party loans payable (note
6)
|
|
|
371,226
|
|
|
|
303,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
892,488
|
|
|
|
691,305
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in consolidated
subsidiary
|
|
|
191,976
|
|
|
|
232,792
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder's equity
(deficiency)
|
|
|
|
|
|
|
|
|
|
Share capital (note 7)
|
|
|
9,157
|
|
|
|
9,157
|
|
|
Contributed surplus
|
|
|
321,293
|
|
|
|
283,259
|
|
|
Accumulated other comprehensive
income
|
|
|
27,281
|
|
|
|
5,114
|
|
|
Accumulated deficit
|
|
|
(536,968
|
)
|
|
|
(291,586
|
)
|
|
|
|
|
(179,237
|
)
|
|
|
5,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
905,227
|
|
|
$
|
930,041
|
|
|
Going concern (note 2)
Commitment (note 8)
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Conforce International, Inc.
UNAUDITED CONSOLIDATED BALANCE SHEETS
For the
periods ended December 31, 2008 and March 31,
2009
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
|
December
|
|
|
December
|
|
|
December
|
|
|
December
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
(restated)
|
|
|
2007
(restated)
|
|
|
|
|
|
|
|
|
|
|
(see note 5)
|
|
|
(see note 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Container service revenue
|
|
|
327,785
|
|
|
|
681,102
|
|
|
$
|
1,333,772
|
|
|
$
|
1,636,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
|
|
|
181,116
|
|
|
|
385,219
|
|
|
|
697,091
|
|
|
|
878,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
146,669
|
|
|
|
295,883
|
|
|
|
636,681
|
|
|
|
757,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
|
297,734
|
|
|
|
179,570
|
|
|
|
683,949
|
|
|
|
586,692
|
|
|
Research and development
|
|
|
28,541
|
|
|
|
44,833
|
|
|
|
56,327
|
|
|
|
101,072
|
|
|
Interest and bank
charges
|
|
|
350
|
|
|
|
100
|
|
|
|
515
|
|
|
|
530
|
|
|
Stock based compensation
|
|
|
1,990
|
|
|
|
10,270
|
|
|
|
1,796
|
|
|
|
70,401
|
|
|
Amortization of plant and
equipment
|
|
|
71,450
|
|
|
|
7,518
|
|
|
|
114,371
|
|
|
|
22,087
|
|
|
Amortization of intangible
assets
|
|
|
1,138
|
|
|
|
-
|
|
|
|
2,429
|
|
|
|
-
|
|
|
Gain on foreign exchange
|
|
|
(500
|
)
|
|
|
-
|
|
|
|
(558
|
)
|
|
|
-
|
|
|
|
|
|
400,703
|
|
|
|
242,291
|
|
|
|
858,829
|
|
|
|
780,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before non-operating
item
|
|
|
(254,034
|
)
|
|
|
53,592
|
|
|
|
(222,148
|
)
|
|
|
(23,097
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on related party loans
payable
|
|
|
8,011
|
|
|
|
6,232
|
|
|
|
20,903
|
|
|
|
18,310
|
|
|
Income (loss) before income tax and minority
interest
|
|
|
(262,045
|
)
|
|
|
47,360
|
|
|
|
(243,051
|
)
|
|
|
(41,407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (recovery)
|
|
|
(44,134
|
)
|
|
|
35,870
|
|
|
|
5,885
|
|
|
|
48,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority
interest
|
|
|
(217,911
|
)
|
|
|
11,490
|
|
|
|
(248,936
|
)
|
|
|
(90,371
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in consolidated
subsidiary
|
|
|
(48,227
|
)
|
|
|
33,230
|
|
|
|
(3,554
|
)
|
|
|
40,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(169,684
|
)
|
|
|
(21,740
|
)
|
|
|
(245,382
|
)
|
|
|
(130,841
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive income
(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustment on foreign
exchange
|
|
|
18,785
|
|
|
|
-
|
|
|
|
22,167
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
(150,899
|
)
|
|
$
|
(21,740
|
)
|
|
$
|
(223,215
|
)
|
|
$
|
(130,841
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and
diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
Weighted average number of shares
outstanding
|
|
|
120,001,000
|
|
|
|
120,001,000
|
|
|
|
120,001,000
|
|
|
|
120,001,000
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Conforce International, Inc.
UNAUDITED CONSOLIDATED BALANCE SHEETS
For the
periods ended December 31, 2008 and March 31,
2009
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
|
December
|
|
|
December
|
|
|
December
|
|
|
December
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
(restated)
|
|
|
2007
(restated)
|
|
|
|
|
|
|
|
|
|
|
(see note 5)
|
|
|
(see note 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(169,684
|
)
|
|
$
|
(21,740
|
)
|
|
$
|
(245,382
|
)
|
|
$
|
(130,841
|
)
|
|
Items not affecting cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of plant and
equipment
|
|
|
71,450
|
|
|
|
7,518
|
|
|
|
114,371
|
|
|
|
22,087
|
|
|
Amortization of intangible
assets
|
|
|
1,138
|
|
|
|
-
|
|
|
|
2,429
|
|
|
|
-
|
|
|
Imputed interest on related party loans
payable
|
|
|
8,011
|
|
|
|
6,232
|
|
|
|
20,903
|
|
|
|
18,310
|
|
|
Stock based compensation
|
|
|
1,990
|
|
|
|
10,270
|
|
|
|
1,796
|
|
|
|
70,401
|
|
|
Minority interest in consolidated
subsidiary
|
|
|
(48,227
|
)
|
|
|
33,230
|
|
|
|
(3,554
|
)
|
|
|
40,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in non-cash working
capital
|
|
|
(26,793
|
)
|
|
|
(83,369
|
)
|
|
|
394,898
|
|
|
|
(114,674
|
)
|
|
Net cash provided by (used in ) operating
activities
|
|
|
(162,115
|
)
|
|
|
(47,859
|
)
|
|
|
285,461
|
|
|
|
(94,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of plant and
equipment
|
|
|
(292,028
|
)
|
|
|
-
|
|
|
|
(646,179
|
)
|
|
|
(39,286
|
)
|
|
Investment in intangible
assets
|
|
|
(1,806
|
)
|
|
|
-
|
|
|
|
(15,644
|
)
|
|
|
-
|
|
|
Increase in non-current assets
|
|
|
(10,308
|
)
|
|
|
-
|
|
|
|
(9,301
|
)
|
|
|
4,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(304,142
|
)
|
|
|
-
|
|
|
|
(671,124
|
)
|
|
|
(35,185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in bank indebtedness
|
|
|
23,157
|
|
|
|
-
|
|
|
|
20,897
|
|
|
|
-
|
|
|
Short term advance from related
parties
|
|
|
122,489
|
|
|
|
-
|
|
|
|
122,489
|
|
|
|
-
|
|
|
Advances from related parties
|
|
|
126,514
|
|
|
|
-
|
|
|
|
162,411
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by financing
activities
|
|
|
272,160
|
|
|
|
-
|
|
|
|
305,797
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange on
cash
|
|
|
14,303
|
|
|
|
(978
|
)
|
|
|
(4,786
|
)
|
|
|
14,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash during the
period
|
|
|
(179,794
|
)
|
|
|
(48,837
|
)
|
|
|
(84,652
|
)
|
|
|
(115,255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
179,794
|
|
|
|
59,347
|
|
|
|
84,852
|
|
|
|
125,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
-
|
|
|
$
|
10,510
|
|
|
$
|
-
|
|
|
$
|
10,510
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Conforce International, Inc.
UNAUDITED CONSOLIDATED BALANCE SHEETS
For the
periods ended December 31, 2008 and March 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Contributed
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Total
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Surplus
|
|
|
Deficit
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at March 31, 2007
|
|
|
120,001,000
|
|
|
$
|
9,157
|
|
|
$
|
27,300
|
|
|
$
|
(125,077
|
)
|
|
$
|
-
|
|
|
$
|
(88,620
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior period adjustment
|
|
|
|
|
|
|
-
|
|
|
|
185,024
|
|
|
|
(19,331
|
)
|
|
|
-
|
|
|
|
165,693
|
|
|
Restated balance March 31,
2007
|
|
|
120,001,000
|
|
|
|
9,157
|
|
|
|
212,324
|
|
|
|
(144,408
|
)
|
|
|
-
|
|
|
|
77,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation
(restated)
|
|
|
|
|
|
|
-
|
|
|
|
70,935
|
|
|
|
-
|
|
|
|
-
|
|
|
|
70,935
|
|
|
Net loss (restated)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(147,178
|
)
|
|
|
-
|
|
|
|
(147,178
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustments
(restated)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,114
|
|
|
|
5,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at March 31, 2008
(restated)
|
|
|
120,001,000
|
|
|
|
9,157
|
|
|
|
283,259
|
|
|
|
(291,586
|
)
|
|
|
5,114
|
|
|
|
5,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation
(restated)
|
|
|
|
|
|
|
-
|
|
|
|
1,796
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,796
|
|
|
Gain on imputed interest (restated) (note
10)
|
|
|
|
|
|
|
-
|
|
|
|
36,238
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,238
|
|
|
Net loss (restated)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(245,382
|
)
|
|
|
-
|
|
|
|
(245,382
|
)
|
|
Translation adjustment
(restated)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,167
|
|
|
|
22,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2008
(restated)
|
|
|
120,001,000
|
|
|
$
|
9,157
|
|
|
$
|
321,293
|
|
|
$
|
(536,968
|
)
|
|
$
|
27,281
|
|
|
$
|
(179,237
|
)
|
The accompanying notes are an integral part of these
consolidated financial statements.
|
|
1.
|
DESCRIPTION OF
BUSINESS
|
The Company operates in two reportable business segments;
Container Terminal, and EKO-FLOR. The Container Terminal operations are
organized as Conforce 1 Container Terminals, Inc., which is a 50.1% owned
subsidiary of the Company. The remaining 49.9% is owned by Marino Kulas,
Conforce International, Inc President & CEO. The Conforce 1 subsidiary is
responsible for all container terminal operations. EKO-FLOR is organized as
Conforce Container Corporation (“CCC”) a 100% owned subsidiary of the Company.
The CCC subsidiary is responsible for the development, manufacturing and
marketing of the Company’s EKO-FLOR products. Operations for CCC during the
reportable periods to date have been limited to research and development as
the product is in the testing stages. Its EKO-FLOR products have evolved
systematically with various refinements, as previously noted, based on industry
standards and various feedback received.
The Company was incorporated on May 18, 2004 in the State
of Delaware as Now Marketing Corp. and on May 20, 2005 Conforce Container
Corporation was renamed from First National Preferred Card Service, Inc., which
was incorporated under the laws of the Province of Ontario on February 9,
2001. On May 25, 2005, the Company acquired Conforce Container
Corporation in exchange for 120,000,000 shares of the Company’s Common Stock,
making Conforce Container Corporation a wholly owned
subsidiary. Immediately prior to the acquisition, the Company had
1,000 shares of common stock issued and outstanding. The acquisition
was accounted for as a recapitalization of Conforce Container Corporation, as
the shareholders of Conforce Container Corporation controlled the Company upon
completion of the acquisition. Conforce Container Corporation was
treated as the acquiring entity for accounting purposes. There were
no adjustments to the carrying value of the assets or liabilities of the
acquired company or to the assets and liabilities of the acquiring
company. The Company was then renamed Conforce International Inc. on
May 25, 2005.
These consolidated financial statements have been prepared
on the basis of United States generally accepted accounting principles ("GAAP")
applicable to a 'going concern', which assume that the Company will continue in
operation for the foreseeable future and will be able to realize its assets and
discharge its liabilities in the normal course of operations. As at December 31,
2008 the Company will require additional funding which, if not raised, may
result in the curtailment of activities. The Company has incurred net losses
including $245,382 for the nine month period ended December 31, 2008 and has an
accumulated deficit of $536,968 as at December 31, 2008. The Company's ability
to continue as a going concern depends on its ability to generate positive cash
flow from operations or secure additional debt or equity
financing.
Management regularly reviews and considers the current and
forecast activities of the Company in order to satisfy itself as to the
viability of operations. These ongoing reviews include consideration of current
orders and future business opportunities, current development and production
activities, customer and supplier exposure and forecast cash requirements and
balances. Based on these evaluations management concluded that the Company is
able to continue as a going concern.
There can be no assurances that the Company's activities
will be successful or sufficient and as a result there is doubt regarding the
"going concern" assumption and, accordingly, the use of accounting principles
applicable to a going concern. These consolidated financial statements do not
reflect adjustments that would be necessary if the "going concern" assumption
were not appropriate. If the "going concern" assumption were not appropriate for
these consolidated financial statements, then adjustments to the carrying values
of the assets and liabilities, the reported revenues and expenses and the
balance sheet classifications, which could be material, would be
necessary.
The accompanying unaudited interim consolidated financial
statements of the Company have been prepared in accordance with GAAP for interim
financial information and are presented in US dollars, unless otherwise noted.
Accordingly, they do not include all of the information and footnotes required
by GAAP for annual consolidated financial statements.
The accompanying financial information reflects all
adjustments, consisting primarily of normal recurring adjustments, which are, in
the opinion of management, necessary for a fair presentation of results for
interim periods. Operating results for the three months and nine month periods
ended December 31, 2008 are not necessarily indicative of the results that may
be expected for the fiscal year ending March 31, 2009. The accounting policies
used in the preparation of these interim consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
and notes to the financial statements. These interim consolidated
financial statements follow the same accounting policies audited consolidated
financial statements for the year ended March 31, 2008.
|
|
4.
|
NEW ACCOUNTING
STANDARDS
|
In December 2007, the FASB issued FAS No. 160,
"Non-controlling Interests in
Consolidated Financial Statements
-
an amendment of ARB No. 51
",
("FAS No. 160"). FAS No. 160 requires (i) that non-controlling (minority)
interests be reported as a component of shareholders' equity, (ii) that net
income attributable to the parent and to the non-controlling interest be
separately identified in the consolidated statement of operations, (iii) that
changes in a parent's ownership interest while the parent retains its
controlling interest be accounted for as equity transactions, (iv) that any
retained non-controlling equity investment upon the deconsolidation of a
subsidiary be initially measured at fair value, and (v) that sufficient
disclosures are provided that clearly identify and distinguish between the
interests of the parent and the interests of the non-controlling owners. FAS No.
160 is effective for annual periods beginning after December 15, 2008 and should
be applied prospectively. The presentation and disclosure requirements of the
statement shall be applied retrospectively for all periods presented. We adopted
FAS No. 160 on April 1, 2009.
In December 2007, the FASB issued Statement SFAS
No. 141 (revised 2007), “Business Combinations,” replacing SFAS No
141. The standard retains the purchase method of accounting for acquisitions,
but requires a number of changes, including the way assets and liabilities are
recognized in the purchase accounting. It also changes the recognition of assets
acquired and liabilities assumed arising from contingencies, requires the
capitalization of in-process research and development at fair value, and
requires the expensing of acquisition-related costs as incurred. SFAS
No. 141R is effective for the Company beginning April 1, 2009 and
applies prospectively to business combinations completed on or after that
date.
In April 2008, the FASB issued guidance that amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset. The guidance
is effective for fiscal years beginning after December 15, 2008. Early
adoption is prohibited. The adoption of this standard is not expected to have a
material effect on the Company’s results of operations or financial
position.
In April 2009, the FASB issued guidance concerning interim
disclosures about fair value of financial instruments requiring publicly traded
companies to provide disclosure about the fair value of financial instruments
whenever interim summarized financial information is reported. Previously,
disclosures about the fair value of financial instruments were only required on
an annual basis. Disclosure shall include the method(s) and significant
assumptions used to estimate the fair value of financial instruments and shall
describe changes in method(s) and significant assumptions, if any, during the
period. This guidance was effective for interim and annual periods ending after
June 15, 2009.
In May 2009, the FASB issued guidance regarding the
disclosure of subsequent events. This guidance made no changes to current
accounting but added required disclosures regarding the date through which the
Company has evaluated subsequent events and whether that evaluation date is the
date of financial statement issuance or the date the financial statements were
available to be issued. This guidance was effective, and will be adopted by the
Company, for interim and annual periods ending after June 15,
2009.
In June 2009, the FASB approved the “FASB Accounting
Standards Codification” (the “Codification”) as the single source of
authoritative nongovernmental U.S. GAAP to be launched on July 1, 2009. The
codification does not change current U.S. GAAP, but is intended to simplify user
access to all authoritative U.S. GAAP by providing all the authoritative
literature related to a particular topic in one place. All existing accounting
standard documents will be superseded and all other accounting literature not
included in the Codification will be considered not authoritative. The
Codification is effective for interim and annual periods ending after
September 15, 2009. Adoption by the Company is not expected to lead to any
material impact on its consolidated financial position, results of operation or
cash flows.
|
|
5.
|
RESTATEMENT OF PREVIOUSLY REPORTED FINANCIAL
STATEMENT
|
In connection with the preparation of the March 31, 2009
and 2008 audited financial statements, the Company noted a number of errors in
the previously reported financial statements and the comparative financial
statement for the nine month period ended December 31, 2008. These
errors impacted a number of statements as summarized below:
Consolidated Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
As previously
reported
|
|
|
As restated
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Accounts receivable
|
|
|
200,996
|
|
|
|
315,490
|
|
|
Other receivables
|
|
|
32,569
|
|
|
|
-
|
|
|
Total current assets
|
|
|
233,565
|
|
|
|
315,490
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment
|
|
|
537,049
|
|
|
|
566,250
|
|
|
Intangible assets
|
|
|
-
|
|
|
|
11,741
|
|
|
Non-current assets
|
|
|
23,829
|
|
|
|
11,746
|
|
|
Total Assets
|
|
$
|
794,443
|
|
|
$
|
905,227
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
$
|
3,357
|
|
|
$
|
18,566
|
|
|
Accounts payable and accrued
liabilities
|
|
|
164,013
|
|
|
|
262,677
|
|
|
Income taxes payable
|
|
|
-
|
|
|
|
80,607
|
|
|
Short term related party loan
payable
|
|
|
-
|
|
|
|
122,489
|
|
|
Total current liabilities
|
|
|
167,370
|
|
|
|
484,339
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred rent
|
|
|
-
|
|
|
|
36,923
|
|
|
Related party loans payable
|
|
|
450,114
|
|
|
|
371,226
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in consolidated
subsidiary
|
|
|
312,431
|
|
|
|
191,976
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder’s equity
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
9,157
|
|
|
|
9,157
|
|
|
Contributed surplus
|
|
|
91,767
|
|
|
|
321,293
|
|
|
Accumulated other comprehensive
loss
|
|
|
-
|
|
|
|
27,281
|
|
|
Accumulated deficit
|
|
|
(236,396
|
)
|
|
|
(536,968
|
)
|
|
|
|
|
(135,472
|
)
|
|
|
(179,237
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholder’s equity
|
|
$
|
794,443
|
|
|
$
|
905,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
|
Cash was restated as a result of the reversal of
stale dated cheques and holding of USD
balances.
|
|
|
b)
|
Accounts receivable was restated as a result of an
error in accounting for refundable goods and service taxes resulting from
the correction to purchases and
payments.
|
|
|
c)
|
Plant and equipment was restated as a result of
correcting certain items incorrectly capitalized or incorrectly expensed
and the use of an incorrect exchange rate in translating the balances at
year end.
|
|
|
d)
|
Intangibles assets were restated as a result of
incorrectly expensing the items during the
period.
|
|
|
e)
|
Other assets were restated as a result of cumulative
errors from prior year and some amounts were expensed when
incurred.
|
|
|
f)
|
Accounts payable were restated as a result correcting
the timing of the recognition of certain expenses that were recorded in
subsequent periods.
|
|
|
g)
|
Income taxes payable were not
calculated.
|
|
|
h)
|
Deferred rent was not
calculated.
|
|
|
i)
|
Related party loans payable was restated due to the
cumulative effect of prior year’s errors and calculation of fair value
with the associated imputed interest for related party loans entered into
during the year.
|
|
|
j)
|
Minority interest was restated as a result of the
correction of prior period errors and adjustments reflecting errors noted
in the current year statement of operations for the consolidated
subsidiary.
|
|
|
k)
|
Contributed surplus was restated to reflect the
correct stock based compensation expense incurred in prior periods and to
account for the fair valuing of related party loans
payable.
|
|
|
l)
|
Accumulated other comprehensive income was restated
to reflect the correct accounting for the translation of the financial
statements from the functional Canadian currency to the US reporting
currency.
|
|
|
m)
|
Accumulated deficit was restated as a result of the
cumulative errors in the revenue and expenses and as a result of errors
for the period ended December 31, 2008 and for errors identified that
related to years prior to March 31,
2009.
|
Consolidated Statement of Operations
|
|
|
Nine months ended December 31,
2008
|
|
|
|
As previously
reported
|
|
|
As restated
|
|
Container service revenues
|
|
$
|
1,575,118
|
|
|
$
|
1,333,772
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of services
|
|
|
893,329
|
|
|
|
697,091
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
681,789
|
|
|
|
636,681
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
585,536
|
|
|
|
683,949
|
|
|
Research and development
|
|
|
88,498
|
|
|
|
56,327
|
|
|
Interest and bank charges
|
|
|
-
|
|
|
|
515
|
|
|
Stock based compensation
|
|
|
-
|
|
|
|
1,796
|
|
|
Amortization of plant and
equipment
|
|
|
32,314
|
|
|
|
114,371
|
|
|
Amortization of intangible
asset
|
|
|
-
|
|
|
|
2,429
|
|
|
Gain on foreign exchange
|
|
|
-
|
|
|
|
(558
|
)
|
|
|
|
|
706,348
|
|
|
|
858,829
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before non-operating
items
|
|
|
(24,559
|
)
|
|
|
(222,148
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Interest on related party loans
payable
|
|
|
-
|
|
|
|
20,903
|
|
|
|
|
|
(24,559
|
)
|
|
|
(243,051
|
)
|
|
Income tax expense (recovery)
|
|
|
-
|
|
|
|
5,885
|
|
|
Loss before minority interest in consolidated
subsidiary
|
|
|
(24,559
|
)
|
|
|
(248,936
|
)
|
|
Minority interest in consolidated
subsidiary
|
|
|
31,906
|
|
|
|
(3,554
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(56,465
|
)
|
|
$
|
(245,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive loss
|
|
|
|
|
|
|
|
|
|
Translation adjustment on foreign
exchange
|
|
|
-
|
|
|
|
22,167
|
|
|
Total comprehensive loss
|
|
$
|
(56,465
|
)
|
|
$
|
(223,215
|
)
|
|
|
a)
|
Revenues were restated as a result of the errors
noted in the nine months ended December 31, 2008 and the year ended March
31, 2008 caused by cut off errors noted in the
recording invoices.
|
|
|
b)
|
Cost of sales were restated as a result of errors
noted in cut-off errors, misclassification of invoices to expenses other
than costs of sales and errors in capitalizing costs of sales or expensing
items that should have otherwise been
expensed.
|
|
|
c)
|
General and administrative expenses were restated as
a result of errors in recording expenses in the correct accounting period,
or misclassification of expenses into the incorrect
category.
|
|
|
d)
|
Research and development costs were adjusted as a
result of the errors in expensing items that were capital in nature, such
as the acquisition of
equipment.
|
|
|
e)
|
Interest on term loan was reclassified as a separate
item, where it had been incorrectly classified as General and
administrative costs.
|
|
|
f)
|
Amortization of plant and equipment was restated to
correctly calculate the appropriate amortization expense, in accordance
with the stated amortization policies, after the reflecting the errors
noted in calculating the cost of capital
equipment.
|
|
|
g)
|
Amortization of intangible assets was restated to
reflect the calculation of amortization of intangible
assets.
|
|
|
h)
|
Gain on foreign exchange was not previous
reported.
|
|
|
i)
|
Interest on related party loans payable was restated
as a result of the calculation of the imputed interest applicable to
discounting the loan to fair value using an estimated interest rate of
between 8.25% and 10%.
|
|
|
j)
|
Interest and bank charges was restated as a result of
the mis-classification of the expense in General and administrative
expenses.
|
|
|
k)
|
Income tax expense was restated to reflect the tax
provision applicable after the adjustments noted above were made and the
applicable tax rate applied on an entity-by-entity
basis.
|
|
|
l)
|
Minority interest in consolidated subsidiary was
restated as a result of the impact of the above restatements on the
statement of operations of the consolidated
subsidiary.
|
|
|
m)
|
Translation adjustment to comprehensive income was
restated to reflect the correct accounting for the translation of the
consolidated financial statements from the functional Canadian currency to
the US reporting currency.
|
Consolidated Statement of Cash Flow
|
|
|
Nine months ended December 31,
2008
|
|
|
|
|
As previously
reported
|
|
|
As restated
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(56,465
|
)
|
|
$
|
(245,382
|
)
|
|
Items not affecting cash
|
|
|
|
|
|
|
|
|
|
Minority interest
in consolidated subsidiary
|
|
|
31,906
|
|
|
|
(3,554
|
)
|
|
Amortization of
plant and equipment
|
|
|
32,314
|
|
|
|
114,371
|
|
|
Amortization of
intangible assets
|
|
|
-
|
|
|
|
2,429
|
|
|
Stock based
compensation
|
|
|
1,867
|
|
|
|
1,796
|
|
|
Imputed interest
on related party loans payable
|
|
|
-
|
|
|
|
20,903
|
|
|
Changes in non-cash working
capital
|
|
|
309,306
|
|
|
|
394,898
|
|
|
Net cash provided by operating
activities
|
|
|
318,928
|
|
|
|
285,461
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Purchase of plant and
equipment
|
|
|
(473,300
|
)
|
|
|
(646,179
|
)
|
|
Investment in intangible
assets
|
|
|
-
|
|
|
|
(15,644
|
)
|
|
Increase in Other assets
|
|
|
(9,050
|
)
|
|
|
(9,301
|
)
|
|
Net cash used in investing
activities
|
|
|
(482,350
|
)
|
|
|
(671,124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Increase in bank indebtedness
|
|
|
3,357
|
|
|
|
20,897
|
|
|
Short term advance from related
parties
|
|
|
-
|
|
|
|
122,489
|
|
|
Advances from related parties
|
|
|
125,264
|
|
|
|
162,411
|
|
|
Net cash provided by financing
activities
|
|
|
128,621
|
|
|
|
305,797
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate on
cash
|
|
|
-
|
|
|
|
(4,786
|
)
|
|
Decrease in cash during the
period
|
|
|
(34,801
|
)
|
|
|
(84,652
|
)
|
|
Cash, beginning of period
|
|
|
34,801
|
|
|
|
84,652
|
|
|
Cash, end of period
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
h)
|
Net loss was restated to reflect the change in the
Statement of operations resulting from the errors noted
above.
|
|
|
i)
|
Items not affecting cash were restated as a result of
the errors noted above.
|
|
|
j)
|
Changes in the non-cash working capital were
restated, primarily as a result of the errors noted in the timing of the
recording or revenues and
expenses.
|
|
|
k)
|
Purchase of plant and equipment was restated to
reflect the errors in expensing items that should have been capitalized
and capitalizing items that should have been
expensed.
|
|
|
l)
|
Purchase of intangible assets was restated as a
result of the error noted in expensing an item that should have been
capitalized.
|
|
|
m)
|
Increases in other assets was adjusted to reflect the
cumulative effect of prior years adjustments and the additional deposit
for a facility the Company occupied during the last half of the fiscal
year.
|
|
|
n)
|
Proceeds from related party loans payable was
adjusted to reflect the receipt of the cash amount, net of any gain on
imputed interest.
|
|
|
o)
|
The effect of the foreign exchange on cash was
restated to recognize the use of an average foreign exchange rate for the
preparation of the Statement of Cash flows and the balance sheet foreign
exchange rate for the Balance sheet
translation.
|
Consolidated Balance Sheet
|
|
|
|
|
|
|
|
As previously
reported
|
|
|
As restated
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
34,801
|
|
|
$
|
84,652
|
|
|
Accounts receivable
|
|
|
494,184
|
|
|
|
729,375
|
|
|
Total current assets
|
|
|
528,985
|
|
|
|
814,027
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment
|
|
|
96,063
|
|
|
|
111,859
|
|
|
Non-current assets
|
|
|
14,779
|
|
|
|
4,155
|
|
|
Total Assets
|
|
$
|
639,827
|
|
|
$
|
930,041
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
|
$
|
115,326
|
|
|
$
|
296,897
|
|
|
Income taxes payable
|
|
|
-
|
|
|
|
53,845
|
|
|
Total current liabilities
|
|
|
115,326
|
|
|
|
350,742
|
|
|
Deferred rent
|
|
|
-
|
|
|
|
37,283
|
|
|
Related party loan payable
|
|
|
324,850
|
|
|
|
303,280
|
|
|
Minority interest
|
|
|
280,525
|
|
|
|
232,792
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder’s equity
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
9,157
|
|
|
|
9,157
|
|
|
Contributed surplus
|
|
|
89,900
|
|
|
|
283,259
|
|
|
Accumulated other comprehensive
loss
|
|
|
-
|
|
|
|
5,114
|
|
|
Accumulated deficit
|
|
|
(179,931
|
)
|
|
|
(291,586
|
)
|
|
|
|
|
(80,874
|
)
|
|
|
5,944
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholder’s equity
|
|
$
|
639,827
|
|
|
$
|
930,041
|
|
|
|
l)
|
Cash was restated as a result of the transfer of a
number of stale dated cheques that had been issued to a shareholder that
were not going to be replaced, but rather constituted a non-interest
bearing amount due to the
shareholder.
|
|
|
m)
|
Accounts receivable were restated as a result of the
incorrect accounting of invoices which were booked subsequent to the
fiscal year but were for services rendered in fiscal year ended March 31,
2008. In addition, a tax refund was received subsequent to the
year-end relating to prior periods and refundable goods and services taxes
resulting from errors in the period of recognition of revenues and
expenses.
|
|
|
n)
|
Plant and equipment was restated as a result of an
incorrect exchange rate used in translating the balances at year
end. A historical exchange rate had been applied rather than
the applicable year end exchange
rate.
|
|
|
o)
|
Other assets were restated to eliminate amounts
recorded as deposits for rental
property.
|
|
|
p)
|
Accounts payable were restated as a result of the
incorrect accounting for invoices that were recorded in the subsequent
period but related to services rendered during the fiscal year ended March
31, 2008.
|
|
|
q)
|
Related party loans payable was restated to account
for the imputed interest associated with the receipt of non-interest
bearing shareholder loans as a result of cheques that were not
cashed.
|
|
|
r)
|
Minority interest was restated as a result of the
adjustments noted above impacting the partially owned
subsidiary.
|
|
|
s)
|
Contributed surplus was restated to reflect the
correct stock based compensation expense incurred in the current and prior
periods and to account for the gain in the fair valuing of the related
party loans payable.
|
|
|
t)
|
Accumulated deficit was restated as a result of the
cumulative errors in the revenue and expenses and as a result of errors
for the period ended March 31, 2008 and for errors identified that related
to years prior to March 31,
2008.
|
Condensed Consolidated Statement of
Operations
|
|
|
Nine months ended December 31,
2007
|
|
|
|
|
As previously
reported
|
|
|
As restated
|
|
|
|
|
|
|
|
|
|
|
Container service revenues
|
|
$
|
1,586,689
|
|
|
$
|
1,636,194
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of services
|
|
|
952,436
|
|
|
|
878,509
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
634,253
|
|
|
|
757,685
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
580,608
|
|
|
|
586,692
|
|
|
Research and development
|
|
|
124,304
|
|
|
|
101,072
|
|
|
Interest and bank charges
|
|
|
-
|
|
|
|
530
|
|
|
Stock based compensation
|
|
|
-
|
|
|
|
70,401
|
|
|
Amortization of plant and
equipment
|
|
|
25,863
|
|
|
|
22,087
|
|
|
|
|
|
730,775
|
|
|
|
780,782
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before non-operating
items
|
|
|
(96,522
|
)
|
|
|
(23,097
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Interest on related party loans
payable
|
|
|
-
|
|
|
|
18,310
|
|
|
|
|
|
(96,522
|
)
|
|
|
(41,407
|
)
|
|
Income tax expense
|
|
|
-
|
|
|
|
48,964
|
|
|
Net loss before minority interest in consolidated
subsidiary
|
|
|
(96,522
|
)
|
|
|
(90,371
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in consolidated
subsidiary
|
|
|
13,863
|
|
|
|
40,470
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(110,385
|
)
|
|
$
|
(130,841
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive loss
|
|
|
|
|
|
|
|
|
|
Translation adjustment on foreign
exchange
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
$
|
(110,385
|
)
|
|
$
|
(130,841
|
)
|
|
|
a)
|
Revenues were restated as a result of the errors
caused by the incorrect timing of the recognition of
invoices.
|
|
|
b)
|
Cost of sales were restated as a result of errors
noted in the prior year, misclassification of invoices to expenses other
than costs of sales and errors in capitalizing costs of sales or expensing
items that should have otherwise been
expensed.
|
|
|
c)
|
General and administrative expenses were restated as
a result of errors in recording expenses in the correct accounting period,
or misclassification of expenses into the incorrect
category.
|
|
|
d)
|
Research and development costs were adjusted as a
result of the errors in expensing items that were capital in nature, such
as the acquisition of
equipment.
|
|
|
e)
|
Interest on term loan was reclassified as a separate
item, where it had been incorrectly classified as General and
administrative costs.
|
|
|
f)
|
Amortization of plant and equipment was restated to
correctly calculate the appropriate amortization expense, in accordance
with the stated amortization policies, after the reflecting the errors
noted in calculating the cost of capital
equipment.
|
|
|
g)
|
Interest on related party loans payable was restated
as a result of the calculation of the imputed interest applicable to
discounting the loan to fair value using an estimated interest rate of
between 8.25% and 10%.Interest and bank charges was restated as a result
of the mis-classification of this expense as General and Administrative
expenses.
|
|
|
h)
|
Income tax expense was restated to reflect the tax
provision applicable following the adjustments noted above and the
applicable tax rate applied on an entity-by-entity
basis.
|
|
|
i)
|
Minority interest in consolidated subsidiary was
restated as a result of the impact of the above-noted restatements on the
statement of operations of the consolidated
subsidiary.
|
Consolidated Statement of Cash Flow
|
|
|
Nine months ended December 31,
2007
|
|
|
|
|
As previously
reported
|
|
|
As restated
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(110,385
|
)
|
|
$
|
(130,841
|
)
|
|
Items not affecting cash
|
|
|
|
|
|
|
|
|
|
Minority interest
in consolidated subsidiary
|
|
|
13,863
|
|
|
|
40,470
|
|
|
Amortization of
plant and equipment
|
|
|
25,863
|
|
|
|
22,087
|
|
|
Stock based
compensation
|
|
|
62,600
|
|
|
|
70,401
|
|
|
Imputed interest
on related party loans payable
|
|
|
-
|
|
|
|
18,310
|
|
|
Changes in non-cash working
capital
|
|
|
(146,688
|
)
|
|
|
(114,674
|
)
|
|
Net cash provided by operating
activities
|
|
|
(154,747
|
)
|
|
|
(94,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Purchase of plant and
equipment
|
|
|
(39,972
|
)
|
|
|
(39,286
|
)
|
|
Change in Other assets
|
|
|
-
|
|
|
|
4,101
|
|
|
Net cash used in investing
activities
|
|
|
(39,972
|
)
|
|
|
(35,185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Increase in bank indebtedness
|
|
|
157,244
|
|
|
|
-
|
|
|
Net cash provided by financing
activities
|
|
|
157,244
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate on
cash
|
|
|
37,475
|
|
|
|
14,177
|
|
|
Decrease in cash during the
period
|
|
|
-
|
|
|
|
(115,255
|
)
|
|
Cash, beginning of period
|
|
|
-
|
|
|
|
125,765
|
|
|
Cash, end of period
|
|
$
|
-
|
|
|
$
|
10,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
|
Net loss was restated to reflect the change in the
Statement of operations resulting from the errors noted
above.
|
|
|
b)
|
Items not affecting cash were restated as a result of
the errors noted above.
|
|
|
c)
|
Changes in the non-cash working capital were
restated, primarily as a result of the errors noted in the timing of the
recording or revenues and
expenses.
|
|
|
d)
|
Purchase of plant and equipment was restated to
reflect minor differences in translation to the USD reporting
currency.
|
|
|
e)
|
Change in other assets was adjusted to reflect the
cumulative effect of prior years’ adjustments and the additional deposit
for a facility the Company occupied during the last half of the fiscal
year.
|
|
|
f)
|
The effect of the foreign exchange on cash was
restated to recognize the use of an average foreign exchange rate for the
preparation of the Statement of Cash flows and the balance sheet foreign
exchange rate for the Balance sheet
translation.
|
|
|
6.
|
RELATED PARTY LOAN PAYABLE AND RELATED PARTY
TRANSACTIONS
|
|
|
|
December 31, 2008
|
|
|
March 31, 2008
|
|
|
Due to shareholder
|
|
$
|
488,009
|
|
|
$
|
426,347
|
|
|
Less: discount to fair value
|
|
|
(116,783
|
)
|
|
|
(123,067
|
)
|
|
|
|
$
|
371,226
|
|
|
$
|
303,280
|
|
The amounts due to shareholder are unsecured, non-interest
bearing with no specific terms of repayment. The amounts due to
related parties arise from cash advances the shareholder made to the Company for
the purchase of machinery and equipment, primarily relating to the development
of the composite flooring product and to fund ongoing operating
activities.
The loans have been advanced at different increments
depending on the needs of the Company and repayment is not expected to occur
until 2012. Given the long term nature of these loans, each time an
amount is advanced by a related party, a fair value calculation has been
recorded with the discount on the loan being charged to contributed
surplus. The discount to fair value assumes repayment will be
made on March 31, 2012 with imputed interest charged at rates between 8.0% and
10%. Imputed interest was $30,010 (2008:
$24,599)
The short term related party loan payable is unsecured,
non-interest bearing and is to be repaid from the proceeds of a
Canada Small Business Financing Loan
that was approved in November 2008 and funded in January 2009. The fair
value of the short term loan is considered equal to the carrying value due to
the short term nature of this specific advance.
The Company rents three pieces of equipment on a month to
month basis from a company owned by a relative of the CEO. Rent
expense for the year ended March 31, 2009 was $66,927 (2008:
$10,562). The rental rate paid by the Company to the
related party is felt by management to be at market rates.
The CEO is the 49.9 % minority shareholder of Conforce 1
Container Terminals, Inc.
Preferred Shares
At December 31, 2008, the Company had authorized 5,000,000
preferred shares with a par value of $.0001 per share and may be issued in
designated series from time to time by one or more resolutions adopted by the
Board of Directors.
As at December 31, 2008 no preferred shares were issued and
outstanding.
Common Stock
At December 31, 2008, the Company had authorized
250,000,000 shares of Common Stock at a par value of CAD $.0001 per
share.
As at December 31, 2008 there were 120,001,000 shares
issued and outstanding.
Stock Transactions
On October 26, 2006, the Company entered into an employment
agreement (the “VP Employment Agreement”) with its Vice-President, Product
Development. The initial term of the VP Employment Agreement was
twelve months. Pursuant to the terms of the VP Employment Agreement,
a founding shareholder of Conforce agreed to provide 10,000 shares of Common
stock per month for a twelve month period. In addition, a founding
shareholder of Conforce agreed to provide 200,000 shares of Common Stock at the
end of the employment term (i.e. October 26, 2007) Shares provided under the VP
Employment Agreement during the year ended March 31, 2008 totaled 320,000 and
were valued at $121,600 and shares provided during the year ended March 31, 2007
totaled 50,000 and were valued at $50,665. These valuations were
based on the trading value of shares of the Common Stock on the date the shares
were provided which in all cases occurred on the same day.
On October 31, 2007, the Company entered into an extension
of the VP Employment Agreement for a period of twelve months, through October
31, 2008. In accordance with this extension, additional compensation
in the form of common stock of the Company would be granted if certain
performance criteria were satisfied in connection with the development of the
EKO-FLOR products. A founding shareholder of Conforce agreed to
provide the common shares required under the terms of this
extension. As at December 31, 2008 none of the performance criteria
were met, consequently, no additional shares of Common Stock were provided under
the VP Employment Agreement.
On October 31, 2008, the Company further extended its VP
Employment Agreement for an additional twelve months to October 31, 2009.
Under this extension, the Company agreed to provide 320,000 shares of common
stock at the end of the period provided certain performance criteria were
satisfied in connection with the development and commercialization of Eko-Flor
products. If required, a founding shareholder of Conforce has agreed
to provide the common shares in satisfaction of this
agreement. As at December 31, 2008, the performance criteria
were not satisfied in connection with the development of the Eko-Flor products
and as such, no common stock was transferred to the VP Product
Development. The agreement also provided for the granting
of an additional 80,000 shares of common stock at the end of the renewal period
(October 31, 2009) from a previous agreement for which the performance criteria
has been met. A founding shareholder agreed to provide these
additional common shares. As at December 31, 2008, a total of
13,334 common shares were expensed under this provision with a fair value of
$1,796.
The Company leases office space under a five year lease
which runs through April 2012. Monthly lease payments are
$2,883.
The Company leases container terminal site space under a
lease which originally ran from April 2004 to March 2007. The lease was renewed
in April 2007 for an additional five year term to March 2012 with monthly lease
payments increasing by $3,514 to $14,641 per
month.
In December 2008, the Company entered into a three year
lease for its production and development centre site space. The monthly payments
are $9,350 and will commence in January 2009 and run until December
2011.
Future lease commitments are as
follows:
|
2009
|
|
$
|
304,663
|
|
|
2010
|
|
|
304,663
|
|
|
2011
|
|
|
293,085
|
|
|
2012
|
|
|
153,619
|
|
|
2013
|
|
|
8,820
|
|
|
|
|
$
|
1,064,850
|
|
In September 2006, the Financial Accounting Standards
Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”)
No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 establishes a
framework for measuring the fair value of assets and liabilities. This framework
is intended to provide increased consistency in how fair value determinations
are made under various existing accounting standards that permit, or in some
cases require, estimates of fair market value. SFAS 157 also expands financial
statement disclosure requirements about a corporation’s use of fair value
measurements, including the effect of such measures on earnings. This standard
is effective for fiscal years beginning after November 15, 2007. The
Company adopted this new guidance effective April 1, 2008. This standard did not
change the Corporation’s consolidated financial position, results of operations
or cash flows. For non-financial assets and non-financial liabilities, the
standard is effective for financial statements issued for fiscal years beginning
after November 15, 2008. The Company plans to adopt this guidance effective
April 1, 2009. The Company is currently assessing the effect
this standard may have on the Corporation’s results of operations and
consolidated financial position.
In February 2007, the FASB issued SFAS No. 159,
“The Fair Value Option for Financial Assets and Financial Liabilities -
Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 is
expected to expand the use of fair value accounting but does not affect existing
standards which require certain assets or liabilities to be carried at fair
value. The objective of SFAS 159 is to improve financial reporting by providing
companies the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. Under SFAS 159, a Company may
choose, at specified election dates, to measure eligible items at fair value and
report unrealized gains and losses on items for which the fair value option has
been elected in earnings at each subsequent reporting date. SFAS 159, for
financial assets and financial liabilities, is effective for financial
statements issued for fiscal years beginning after November 15, 2007.
The Company adopted this new guidance effective April 1, 2008.
This standard did not have a material effect on the Company’s
consolidated financial position, results of operations or cash
flows.
Fair Values
Generally accepted accounting principles require that the
Company disclose information about the fair value of its financial assets and
liabilities. Fair value estimates are made at the balance sheet date
based on relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties in significant matters of judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly
affect these estimates.
The carrying value of accounts receivable, accounts payable
and accrued liabilities and the short term related party loan payable
approximate fair value due to the immediate or short-term maturity of these
instruments.
The fair value of the related party loans payable is
calculated assuming the amounts outstanding will be repaid on March 31, 2012 and
have imputed interest of between 8.0% and 10%.
The carrying value of term loans the fair value as the
interest rates are consistent with the current rates offered to the Company for
debt with similar terms.
Credit Risk
Credit risk arises from the potential that a counter party
will fail to perform its obligations. The Company is exposed to credit risk from
both customers and on amounts held on deposit in financial institutions. In
order to reduce its credit risk, the Company reviews a new customer's credit
history before extending credit and conducts regular reviews of its existing
customers' credit performance. An allowance for doubtful accounts may be
established based upon factors surrounding the credit risk of specific accounts,
historical trends and other information.
Currency Risk
Currency risk is the risk to the Company's earnings that
arise from fluctuations of foreign exchange rates and the degree of volatility
of these rates. For the container operations the customers and suppliers are
located in Canada and there is limited exposure to currency risk. The
EKO-FLOR operations will have international customers and the sale of product
may be negotiated in a currency other than the Canadian functional
currency. Purchase of equipment and supplies will also be sourced
from foreign sources. Because of current limited activity in the
EKO-FLOR operations fluctuations in the foreign exchange rates will not be
significant.
Interest rate risk
The Company has almost ten years remaining on a term loan
which is variable based on current prime rate An increase of 3% in
the interest rates would increase the annual interest expense by approximately
$5,800.
Liquidity risk
The Company manages its liquidity risk by preparing and
reviewing actual and forecasted cash flows. There are no assurances
the sources of funds will be available to satisfy current obligations as noted
in Note 2 Going concern.
The Company operated in two reportable business segments;
Container Terminal and EKO-FLOR. The Container Terminal operations
are organized as Conforce 1 Container Terminals, Inc., a 50.1% owned subsidiary
of the Company. The subsidiary is responsible for all container
terminal operations. EKO-FLOR is organized as Conforce Container
Corporation a 100% owned subsidiary of the Company. This subsidiary
is responsible for the development, manufacturing and marketing of the Company’s
EKO-FLOR product. Operations to date have been research and
development and an order from one customer.
Business Segments –For the nine month period ended
December 31, 2008 (restated):
|
|
|
Container
|
|
|
|
|
|
|
|
|
|
|
Terminals
|
|
|
EKO-FLOR
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,333,772
|
|
|
$
|
-
|
|
|
$
|
1,333,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost of Sales
|
|
|
697,091
|
|
|
|
-
|
|
|
|
697,091
|
|
|
Interest expense
|
|
|
19,584
|
|
|
|
1,834
|
|
|
|
21,418
|
|
|
Amortization of long lived
assets
|
|
|
17,444
|
|
|
|
99,356
|
|
|
|
116,800
|
|
|
Income tax recovery
|
|
|
5,885
|
|
|
|
-
|
|
|
|
5,885
|
|
|
Other expenses
|
|
|
597,335
|
|
|
|
140,625
|
|
|
|
737,960
|
|
|
Net loss
|
|
$
|
(3,567)
|
|
|
$
|
(241,815
|
)
|
|
$
|
(245,382)
|
|
Total Assets, December 31, 2008
|
Container
Terminals
|
|
$
|
353,864
|
|
|
EKO-FLOR
|
|
|
551,363
|
|
|
Consolidated Total Assets
|
|
$
|
905,227
|
|
For the period ended December 31, 2008, 93% of the
Container Terminal revenue is generated by three major
customers.
Business Segments –For the nine month period ended December
31, 2007 (restated)
|
|
|
Container
|
|
|
|
|
|
|
|
|
|
|
Terminals
|
|
|
EKO-FLOR
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,636,194
|
|
|
$
|
-
|
|
$
|
1,636,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost of Sales
|
|
|
878,509
|
|
|
|
-
|
|
|
878,509
|
|
|
Interest expense
|
|
|
18,840
|
|
|
|
-
|
|
|
18,840
|
|
|
Amortization of long lived
assets
|
|
|
22,087
|
|
|
|
-
|
|
|
22,087
|
|
|
Income tax expense
|
|
|
43,224
|
|
|
|
-
|
|
|
43,224
|
|
|
Other expenses
|
|
|
703,303
|
|
|
|
101,072
|
|
|
804,375
|
|
|
Income (Loss)
|
|
$
|
(29,769
|
)
|
|
$
|
(101,072
|
)
|
$
|
(130,841
|
)
|
Total Assets, December 31, 2007
|
Container Terminals
|
|
$
|
730,335
|
|
|
EKO-FLOR
|
|
|
-
|
|
|
|
|
|
|
|
|
Consolidated Total
Assets
|
|
$
|
730,335
|
|
For the period ended December 31, 2007, 91% of the
Container Terminal revenue is generated by three customers.
Business Segment – For three month period ended December
31, 2008
|
|
|
Container
|
|
|
|
|
|
|
|
|
|
|
Terminals
|
|
|
EKO-FLOR
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
327,785
|
|
|
$
|
-
|
|
|
$
|
327,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost of Sales
|
|
|
181,116
|
|
|
|
-
|
|
|
|
181,116
|
|
|
Interest expense
|
|
|
7,396
|
|
|
|
965
|
|
|
|
8,361
|
|
|
Amortization of long lived
assets
|
|
|
6,457
|
|
|
|
66,131
|
|
|
|
72,588
|
|
|
Income tax recovery
|
|
|
(44,134)
|
|
|
|
-
|
|
|
|
(44,134)
|
|
|
Other expenses
|
|
|
225,394
|
|
|
|
54,144
|
|
|
|
279,538
|
|
|
Net loss
|
|
$
|
(48,444)
|
|
|
$
|
(121,240
|
)
|
|
$
|
(169,684
|
)
|
Business Segments – For the three month period ended
December 31, 2007:
|
|
|
Container
|
|
|
|
|
|
|
|
|
|
|
Terminals
|
|
|
EKO-FLOR
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
681,102
|
|
|
$
|
-
|
|
|
$
|
681,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost of Sales
|
|
|
385,219
|
|
|
|
-
|
|
|
|
385,219
|
|
|
Interest expense
|
|
|
6,332
|
|
|
|
-
|
|
|
|
6,332
|
|
|
Amortization of long lived
assets
|
|
|
7,518
|
|
|
|
-
|
|
|
|
7,518
|
|
|
Income tax recovery
|
|
|
35,870
|
|
|
|
-
|
|
|
|
35,870
|
|
|
Other expenses
|
|
|
218,790
|
|
|
|
49,113
|
|
|
|
267,903
|
|
|
Net loss
|
|
$
|
27,373
|
|
|
$
|
(49,113
|
)
|
|
$
|
(21,740)
|
|
|
|
11.
|
CHANGES IN NON-CASH WORKING
CAPITAL
|
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
|
December
|
|
|
December
|
|
|
December
|
|
|
December
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
(restated)
|
|
|
2007
(restated)
|
|
|
|
|
|
|
|
|
|
|
(see note 5)
|
|
|
(see note 5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
8,115
|
|
|
|
(83,906
|
)
|
|
|
333,047
|
|
|
|
(172,443
|
)
|
|
Accounts payable and accrued
liabilities
|
|
|
551
|
|
|
|
(30,423
|
)
|
|
|
15,542
|
|
|
|
30,723
|
|
|
Income taxes payable
|
|
|
(44,134
|
)
|
|
|
30,960
|
|
|
|
39,926
|
|
|
|
29,071
|
|
|
Deferred Rent
|
|
|
8,676
|
|
|
|
-
|
|
|
|
6,383
|
|
|
|
(2,025
|
)
|
|
|
|
|
(26,792
|
)
|
|
|
(83,369
|
)
|
|
|
394,898
|
|
|
|
(114,674
|
)
|
|
|
12.
|
COMPARATIVE
STATEMENTS
|
The restated comparative figures have been reclassified to
conform with the current year’s presentation.
