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, 2008
|
|
|
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 INTERIM STATEMENT OF
OPERATIONS
For the three months and nine month periods ending December
31, 2008 and 2007
|
|
|
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 INTERIM STATEMENT OF CASH
FLOWS
For the three months and nine month periods ending December
31, 2008 and 2007
|
|
|
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 INTERIM STATEMENT OF SHAREHOLDERS’
EQUITY (DEFICIENCY)
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
Exhibit
|
|
|
No.
|
Description
|
|
2.0
|
Acquisition
Agreement and Plan of Merger dated May 24, 2005 *
|
|
3.1
|
Certificate
of Incorporation for Conforce International, Inc.
*
|
|
3.1.1
|
Certificate
of Incorporation for Conforce Container Corporation *
|
|
3.1.2
|
Certificate
of Incorporation for Conforce 1 Container Terminals, Inc.
*
|
|
3.2
|
Bylaws
*
|
|
10.1
|
Canada
Small Business Financial Loan dated November 26, 2008*
|
|
10.2
|
Sea
Box, Inc. Purchase Order dated November 25, 2009 *
|
|
10.3
|
Letter
of Agreement in Connection with the Strategic Partnership Between Conforce
International, Inc. and Bayer MaterialScience, LLC. dated February 2, 2009
*
|
|
10.4
|
Advisory
Agreement between WorldWide Associates, Inc. and Conforce International,
Inc. dated April 2, 2007 *
|
|
10.5
|
Employment
Renewal Proposal for Joseph DeRose dated October 31, 2008
*
|
|
10.6
|
Employment
Proposal for Joseph DeRose dated Octobe 27, 2006 *
|
|
10.7
|
Employment
Renewal Proposal for Joseph DeRose dated October 31, 2007
*
|
*
Denotes previously filed exhibits with Conforce International, Inc.’s Form
10-12G.
SIGNATURES
Pursuant
to the requirements of Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
|
|
Conforce
International, Inc.
|
|
|
|
|
|
|
|
April
7 ,
2010
|
By:
|
/s/ Marino
Kulas
|
|
|
|
|
Marino
Kulas
|
|
|
|
|
President
& CEO
|
|
|
|
|
|
|
