ECHOGRAPHES NOVEKO INC

Consolidated Financial
Statements for the
Six Months Ended
November 30, 2005
INTERIM FINANCIAL REPORT
AS AT NOVEMBER 30, 2005
CONSOLIDATED FINANCIAL STATEMENTS
Statement of income
1
Balance sheet
2
Deficit and contributed surplus
3
Statement of cash flows
4
Notes to financial statements
5-8
Supplementary information
9 - 10
1
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED NOVEMBER 30, 2005
(unaudited)
(3 months)
(6 months)
(unaudited)
(unaudited)
$
206,224 $
369,930
REVENUES
COST OF GOODS SOLD
GROSS PROFIT
166,218
272,578
40,006
97,352
312,090
169,834
13,427
874,664
297,132
24,846
495,351
1,196,642
(455,345)
(1,099,290)
-
-
OPERATING EXPENSES
Administrative expenses
Selling expenses
Financial expenses
LOSS BEFORE INCOME TAXES
FUTURE INCOME TAXES
NET LOSS
$
(455,345) $
(1,099,290)
BASIC AND DILUTED EARNINGS PER SHARE
$
(0.015) $
(0.042)
WEIGHTED AVERAGE NUMBER OF OUTSTANDING
COMMON SHARES
29,500,000
Supplementary information is an integral part of the consolidated financial statements.
Consolidated Financial Statements for the Six Months Ended November 30, 2005
25,937,500
2
CONSOLIDATED BALANCE SHEET
AS AT NOVEMBER 30, 2005
(unaudited)
November 30
2005
(unaudited)
May 31
2005
(audited)
ASSETS
CURRENT ASSETS
Cash
Guaranteed investment certificate, 2,70 %
Accounts receivable (Note 3)
Inventory
Prepaid expenses
$
175,245 $
156,215
291,266
271,263
65,239
46,920
124,971
161,200
15,135
959,228
181,401
2,947,016
989,224
14,236
142,301
348,226
36,831
2,942,441
836,637
14,236
45,709
$
5,233,406 $
4,224,080
$
58,205 $
50,000
507,035
164,178
32,186
50,000
237,336
99,249
779,418
357,327
587,548
200,000
418,771
307,129
611,007
-
1,924,293
1,336,907
4,495,616
412,600
(1,599,103)
3,349,199
(462,026)
3,309,113
2,887,173
5,233,406 $
4,224,080
FIXED ASSETS
INTANGIBLE ASSETS
OTHER ASSETS
FUTURE INCOME TAXES
GOODWILL
LIABILITIES
CURRENT LIABILITIES
Bank overdraft
Demand loan
Accounts payable (Note 4)
Current portion of long-term debt
LONG-TERME DEBT
FUTURE INCOME TAXES
MINORITY INTEREST
SHAREHOLDERS’ EQUITY
SHARE CAPITAL (Note 5)
CONTRIBUTED SURPLUS
DEFICIT
$
ON BEHALF OF THE BOARD
____________________________________ Director
____________________________________ Director
Consolidated Financial Statements for the Six Months Ended November 30, 2005
3
CONSOLIDATED STATEMENT OF DEFICIT AND CONTRIBUTED SURPLUS
FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED NOVEMBER 30, 2005
(unaudited)
(3 months)
(unaudited)
(6 months)
(unaudited)
DEFICIT
BALANCE, BEGINNING OF PERIOD
$ (1,082,512) $
Net loss
Deferred financial fees
(455,345)
(1,099,290)
(61,246)
(61,246)
-
23,459
Impact of reverse takeover on future income taxes
due to fluctuation in income tax rates
BALANCE, END OF PERIOD
(462,026)
$ (1,599,103) $ (1,599,103)
CONTRIBUTED SURPLUS
BALANCE, BEGINNING OF PERIOD
$
412,600 $
-
Fair market value of stock options from the
reverse takeover
-
124,600
Fair market value of stock options granted
-
288,000
BALANCE, END OF PERIOD
$
412,600 $
Consolidated Financial Statements for the Six Months Ended November 30, 2005
412,600
4
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED NOVEMBER 30, 2005
(unaudited)
(3 months)
(unaudited)
(6 months)
(unaudited)
OPERATING ACTIVITIES
Net loss
Amortization
Stock-based compensation
$
(455,345) $
8,576
-
(1,099,290)
11,912
288,000
(446,769)
(799,378)
119,615
145,133
(327,154)
(654,245)
(85,808)
(121,118)
INVESTING ACTIVITIES
Acquisition of a guaranteed investment certificate
Cash flows issued from reverse takeover
Acquisition of other assets
Acquisition of tangible assets
Proceeds from disposal of tangible assets
Increase in deferred development costs
(1,215)
(6,240)
(144,917)
3,200
(110,752)
(156,215)
1,359,123
(10,890)
(156,682)
3,200
(160,867)
Cash flow from investing activities
(259,924)
877,669
CASH AND CASH EQUIVALENTS INCREASE
(672,886)
102,306
Net change in non-cash working capital
Cash flow used in operating activities
FINANCING ACTIVITIES
Repayment of long-term debt and cash flows used in financing
activities
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
$
789,926 $
14,734
CASH AND CASH EQUIVALENTS, END OF PERIOD
$
117,040 $
117,040
Cash flows related to operating activities include interest paid of $6,071 for the 3 months period and
$11,249 for the 6 month period.
Cash and cash equivalents include cash less bank overdraft.
Consolidated Financial Statements for the Six Months Ended November 30, 2005
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT NOVEMBER 30, 2005
(unaudited)
1.
IDENTIFICATION AND INDUSTRY
The Company was incorporated under Canada business Corporations’ Act on February 24, 2005.
Until July 27, 2005 the Company carried on business as a “Capital Pool Company”, as this term is
defined in the policies of the TSX Venture Exchange. On July 27, 2005, with the acquisition of the
totality of outstanding Class A shares of “9103-8240 Quebec Inc. (Recyc-Med 2000)”, the Company
completed its qualifying transaction pursuant to the rules of the Exchange. According to Canadian
generally accepted accounting principles, these consolidated financial statements are recognized
as being the continuity of 9103-8240 Quebec Inc. (Recyc-Med 2000).
The Company is now the reporting issuer resulting from the reverse takeover, and operates mainly
in recycling, revaluation and retail of medical equipments and develops a medical equipment
management system as well as a prescribing software using the Web technology.
2.
BASIS OF PRESENTATION
These interim consolidated financial statements should be read in conjunction with the annual
audited financial statements of ZoomMed Inc. and the annual audited consolidated financial
statements of 9103-8240 Quebec Inc. (Recyc-Med 2000) and related notes to financial statements.
The interim consolidated financial statements are presented in accordance with Canadian generally
accepted accounting principles and follow the same accounting policies as those stated in the
annual audited financial statements for the year ended May 31, 2005. The interim consolidated
financial statements are not representative of a twelve-month period consolidated financial
statements and real results might differ from those included in these financial statements.
3.
ACCOUNTS RECEIVABLE
November 30
2005
(unaudited)
Accounts receivable
Advance to a shareholder, without interest
Sales tax receivable
4.
May 31
2005
(audited)
$
82,945
208,321
$
45,289
5,617
74,065
$
291,266
$
124,971
ACCOUNTS PAYABLE
November 30
2005
(unaudited)
Accounts payable and accrued expenses
Wages and deductions at source
Advance from a shareholder, without interest
May 31
2005
(audited)
$
464,186
18,699
24,150
$
189,217
15,969
32,150
$
507,035
$
237,336
Consolidated Financial Statements for the Six Months Ended November 30, 2005
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT NOVEMBER 30, 2005
(unaudited)
5.
SHARE CAPITAL
a) Authorized
An unlimited number of common shares, voting, participating, without par value;
b) Declared
November 30
2005
(unaudited)
29,500,000 common shares (11,500,000,
see Note 5 d))
- Class B shares (200 000 as at May 31, 2005)
May 31
2005
(audited)
$
4,495,616
-
$
3,149,199
200,000
$
4,495,616
$
3,349,199
c) Transaction during the period
Issuance of 18,000,000 common shares pursuant to the reverse takeover.
Pursuant to the reverse takeover, 9103-8240 Quebec Inc. (Recyc-Med 2000) Class B shares
were not exchanged against the Company’s common shares. Therefore, these shares represent
the minority interest disclosed in the balance sheet under liabilities items.
d) Share capital break-down
Number
Declared
Common shares
11,500,000
$ 1,346,017
Issued as of reverse takeover *
18,000,000
3,149,199
29,500,000
$ 4,495,216
Balance, as at June 1, 2005:
Balance as at November 30, 2005
*
As at reverse takeover date, 18,000,000 common shares were issued from the treasury in
payment for 2,633,000 Class A shares of 9103-8240 Quebec Inc. (Recyc-Med 2000)
acquired.
6. STOCK OPTION PLAN
The Company initiated a fixed stock option plan according to which awards can be granted to its
managers, directors, employees and some of its consultants. Under terms of this plan, 10% of
issued Class A shares were reserved. Under the plan terms, the exercise price of the options will be
determined by the administrators of the Company limited to the extend of other restrictions
described in the plan and some requirements of the TSX Inc. Venture Exchange. The maximum
period for which an option is issued is limited to five years and the exercise price of these options
must be paid in full before the issue of the related shares.
Consolidated Financial Statements for the Six Months Ended November 30, 2005
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT NOVEMBER 30, 2005
(unaudited)
6. STOCK OPTION PLAN (CONT’D)
Subsequent to initial public offering, the Company placed with a broker non negotiable options which
award the holder to purchase 425,000 common shares for $0.20 per share. These options are valid for a
eighteen-month period starting May 18, 2005. This date corresponds to the date the Company placed
common shares with the broker on the TSX Inc. Venture Exchange.
The following table summarizes the changes in the plan position for the period ended on November
30, 2005:
2005
Average
exercice price
Options
Balance as at reverse takeover date
1,575,000
$
0.20
Awarded
1,800,000
$
0.25
Balance, end of period
3,375,000
$
0.23
Options exercisable, end of
period
3,375,000
$
0.23
The following table summarizes the information about the outstanding stock options as at
November 30, 2005:
Exercice price
Number
price
Outstanding options
Weighted average
Outstanding
maturity
Weighted average
(months)
exercice price
Exercisable options
Number
Weighted
average
exercice
$ 0.20
425,000
11
$ 0.20
425,000
$ 0.20
$ 0.20
1,150,000
55
$ 0.20
1,150,000
$ 0.20
$ 0.25
1,800,000
57
$ 0.25
1,800,000
$ 0.25
3,375,000
51
$ 0.23
3,375,000
$ 0.23
During the period, the Company granted 1,800,000 options awarding the holders to purchase
1,800,000 common shares for $0.25.
Consolidated Financial Statements for the Six Months Ended November 30, 2005
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT NOVEMBER 30, 2005
(unaudited)
6. STOCK OPTION PLAN (CONT’D)
The fair value of the options awarded during the period is $0.16 each. This fair value was estimated
upon options award date using the Black-Sholes' options pricing model with the following
assumptions:
Dividend yield
Expected volatility
Risk-free interest rate
Expected life
Nil
75%
3.47%
60 months
Payroll charge related to stock option plan amounts to $ 288,000 for the period ended November
30, 2005.
7.
COMPARATIVE FIGURES
Comparative figures for the period ended November 30, 2004 have not been disclosed given it
would have been impossible to reconcile the required information at the price of a reasonable effort
due to 9103-8240 Quebec Inc. (Recyc-Med 2000) not having to comply with these disclosure
requirements then.
Consolidated Financial Statements for the Six Months Ended November 30, 2005
9
SUPPLEMENTARY INFORMATION
FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED NOVEMBER 30, 2005
(unaudited)
(3 months)
(unaudited)
(6 months)
(unaudited)
COST OF GOODS SOLD
Raw material
Inventories beginning of year
Purchases
Inventories end of year
$
Direct labour and fringe benefits
Rent
Insurance
Energy
261,738 $
121,343
(271,263)
161,200
277,771
(271,263)
111,818
167,708
31,092
15,377
3,960
3,971
58,157
30,754
10,226
5,733
$
166,218 $
272,578
$
115,489 $
16,484
28,518
4,101
3,095
1,056
1,059
32
199,539
34,499
44,772
8,202
5,398
2,727
1,529
466
$
169,834 $
297,132
SELLING EXPENSES
Wages, commissions and fringe benefits
Traveling
Advertising and promotion
Rent
Telecommunications
Insurance
Energy
Supply and accessories
Consolidated Financial Statements for the Six Months Ended November 30, 2005
10
SUPPLEMENTARY INFORMATION
FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED NOVEMBER 30, 2005
(unaudited)
(3 months)
(unaudited)
(6 months)
(unaudited)
ADMINISTRATIVE EXPENSES
Stock-based compensation
Professional fees
Wage and fringe benefits
Communications with shareholders charges
Maintenance and repair
Office expenses
Telecommunications
Amortization – tangible assets
Insurance
Rent
Amortization – intangible assets
Energy
Taxes and permits
$
- $
161,130
47,840
56,992
1,063
11,251
9,749
6,651
7,188
8,449
833
265
679
288,000
372,323
80,697
69,772
6,719
14,569
12,055
8,909
9,206
9,688
1,665
382
679
$
312,090 $
874,664
6,264
6,071
1,092
12,259
11,249
1,338
FINANCIAL EXPENSES
Interest and bank charges
Interest on long-term debt
Amortization of long-term debt issue expenses
$
13,427 $
Consolidated Financial Statements for the Six Months Ended November 30, 2005
24,846