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
with some errors reflecting on the opening contributed surplus and accumulated deficit of for April 1, 2006.
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
|
)
|
|
Loss per share--basic and diluted
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
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
|
)
|
|
Loss per share - Basic and diluted
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
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.
|
The March 31, 2006 closing balances were restated by way of a prior period adjustment as a result of a number of errors applicable to 2006 resulting from timing of revenue recognition, and expenses and the recording of imputed interest on shareholder loans advanced during fiscal 2006.
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 Operations
|
|
|
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 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 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
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Sea Box, Inc. Purchase Order dated November 25, 2009 *
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10.3
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Letter of Agreement in Connection with the Strategic Partnership Between Conforce International, Inc. and Bayer MaterialScience, LLC. dated February 2, 2009 *
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10.4
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Advisory Agreement between WorldWide Associates, Inc. and Conforce International, Inc. dated April 2, 2007 *
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10.5
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Employment Renewal Proposal for Joseph DeRose dated October 31, 2008 *
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10.6
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Employment Proposal for Joseph DeRose dated Octobe 27, 2006 *
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10.7
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Employment Renewal Proposal for Joseph DeRose dated October 31, 2007 *
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* 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.
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Conforce International, Inc.
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July 19 , 2010
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By:
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/s/ Marino Kulas
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Marino Kulas
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Chairman & CEO
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