ITEM 17. | FINANCIAL STATEMENTS |
We have elected to provide financial statements pursuant to Item 18.
REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders of ZIM Corporation
We have audited the accompanying consolidated balance sheets of ZIM Corporation and subsidiaries as of March 31, 2009 and 20082011 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the periodyear ended March 31, 2009.2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The consolidated financial statements as at March 31, 2010 and for the years ended March 31, 2010 and March 31, 2009 were audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) by other auditors who expressed an opinion without reservation on those statements in their report dated June 24, 2010.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ZIM Corporation as of March 31, 2011 and the consolidated results of its operations and its cash flows for the year ended March 31, 2011 in conformity with U.S. generally accepted accounting principles. /s/ Ernst and Young LLP --------------------------------------------- Ernst and Young LLP Ottawa, Canada July 19, 2011
REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders of ZIM Corporation
We have audited the accompanying consolidated balance sheets of ZIM Corporation and subsidiaries as of March 31, 2010 and 2009 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended March 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ZIM Corporation and subsidiaries as of March 31, 20092010 and 20082009 and the results of their operations and their cash flows for each of the three years in the period ended March 31, 20092010 in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 2, the 2008 and 2007 consolidated financial statements have been restated to correct a misstatement.
/s/Raymond Chabot Grant Thornton LLP Raymond Chabot Grant Thornton LLP --------------------------------------------- Raymond Chabot Grant Thornton LLP Ottawa, Canada July 3, 2009June 24, 2010
Consolidated Statements of Operations (Expressed in US dollars) | | Year ended March 31, 2009 | | | Year ended March 31, 2008 | | | Year ended March 31, 2007 | | | Year ended March 31, 2011 | | | Year ended March 31, 2010 | | | Year ended March 31, 2009 | | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | Revenue | | | | | | | | | | | | | | | | | | | Mobile | | | 367,723 | | | | 843,162 | | | | 1,116,740 | | | | 280,339 | | | | 320,784 | | | | 367,723 | | Software | | | 1,463,818 | | | | 1,147,518 | | | | 1,078,444 | | | Software and related | | | | 1,729,432 | | | | 1,276,681 | | | | 1,463,818 | | Total revenue | | | 1,831,541 | | | | 1,990,680 | | | | 2,195,184 | | | | 2,009,771 | | | | 1,597,465 | | | | 1,831,541 | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | | Cost of revenue | | | 256,694 | | | | 384,166 | | | | 928,818 | | | | 261,437 | | | | 178,462 | | | | 256,694 | | Selling, general and administrative | | | 1,213,709 | | | | 1,654,269 | | | | 2,156,049 | | | | 1,114,610 | | | | 1,047,627 | | | | 1,213,709 | | Research and development | | | 457,979 | | | | 512,287 | | | | 382,146 | | | | 629,258 | | | | 482,629 | | | | 457,979 | | Amortization of intangible assets | | | - | | | | - | | | | 972,209 | | | | 4,251 | | | | - | | | | - | | Total operating expenses | | | 1,928,382 | | | | 2,550,722 | | | | 4,439,222 | | | | 2,009,556 | | | | 1,708,718 | | | | 1,928,382 | | | | | | | | | | | | | | | | | | | | | | | | | | | Loss from operations | | | (96,841 | ) | | | (560,042 | ) | | | (2,244,038 | ) | | Income (loss) from operations | | | | 215 | | | | (111,253 | ) | | | (96,841 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Other income: | | | | | | | | | | | | | | | | | | | | | | | | | Gain on disposition of assets | | | 247 | | | | 134,267 | | | | - | | | | - | | | | 43 | | | | 247 | | Gain on settlement of liability | | | - | | | | 77,385 | | | | - | | | Interest income (expense), net | | | 10,563 | | | | (1,174 | ) | | | 5,296 | | | Gain on settlement | | | | - | | | | 171,400 | | | | - | | Interest income, net | | | | 108,278 | | | | 30,615 | | | | 10,563 | | Total other income | | | 10,810 | | | | 210,478 | | | | 5,296 | | | | 108,278 | | | | 202,058 | | | | 10,810 | | | | | | | | | | | | | | | | | | | | | | | | | | | Loss before income taxes | | | (86,031 | ) | | | (349,564 | ) | | | (2,238,742 | ) | | Income (loss) before income taxes | | | | 108,493 | | | | 90,805 | | | | (86,031 | ) | Income tax benefit | | | 239,544 | | | | 432,100 | | | | 302,555 | | | | 258,304 | | | | 213,962 | | | | 239,544 | | Net income (loss) | | | 153,513 | | | | 82,536 | | | | (1,936,187 | ) | | Net income | | | | 366,797 | | | | 304,767 | | | | 153,513 | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic and diluted income (loss) per share | | | 0.002 | | | | 0.001 | | | | (0.023 | ) | | Basic and diluted income per share | | | | 0.003 | | | | 0.003 | | | | 0.002 | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted average number of shares outstanding | | | 96,337,579 | | | | 90,326,103 | | | | 83,376,475 | | | | 123,125,251 | | | | 113,132,100 | | | | 96,337,579 | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. ZIM Corporation Consolidated Statements of Sharesholders' Equity (Expressed in US dollars)
| | | | | | | | | | | | | | | | Number of common shares issued | | Common shares | | Additional paid- in-capital | | Accumulated Deficit | | Accumulated other comprehensive income | | Total shareholders' equity | | | | | | $ | | $ | | $ | | $ | | $ | | Balance a at March 31, 2008 | | 95,460,867 | | 19,111,789 | | 2,625,365 | | (21,388,608) | | 313,888 | | 622,434 | | | | | | | | | | | | | | | | Shares issued on debt conversion | | 10,000,000 | | 20,000 | | | | | | | | 20,000 | | | | | | | | | | | | | | | | Stock options granted | | | | | | 20,220 | | | | | | 20,220 | | | | | | | | | | | | | | | | Comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | | | | | | 153,513 | | | | 153,513 | | | | | | | | | | | | | | | | Cumulative translation adjustment | | | | | | | | | | (78,977 | ) | | | | | | | | | | | | | | | | | Total comprehensive income | | | | | | | | | | | | 74,536 | | | | | | | | | | | | | | | | Balance as at March 31, 2009 | | 105,460,867 | | 19,131,789 | | 2,645,585 | | (21,235,095 | ) | 234,911 | | 777,190 | | | | | | | | | | | | | | | | Shares issued in lieu of compensation | | 10,000,000 | | 31,007 | | | | | | | | 31,007 | | | | | | | | | | | | | | | | Stock options granted | | | | | | 81,177 | | | | | | 81,177 | | | | | | | | | | | | | | | | Comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | | | | | | 304,767 | | | | | | | | | | | | | | | | | | | | Cumulative translation adjustment | | | | | | | | | | 232,407 | | | | | | | | | | | | | | | | | | Total comprehensive income | | | | | | | | | | | | 537,174 | | | | | | | | | | | | | | | | Balance as at March 31, 2010 | | 115,460,867 | | 19,162,796 | | 2,726,762 | | (20,930,327 | ) | 467,317 | | 1,426,548 | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated Statements of Shareholders'Sharesholders' Equity (continued) (Expressed in US dollars)
| | Number of common shares issued | | Common shares | | Additional paid- in-capital | | Accumulated Deficit | | Accumulated other comprehensive income | | Total shareholders' equity | | | | | | $ | | $ | | $ | | $ | | $ | | Balance a at March 31, 2010 | | 115,460,867 | | 19,162,796 | | 2,726,762 | | (20,930,327 | ) | 467,317 | | 1,426,548 | | | | | | | | | | | | | | | | Shares issued in lieu of compensation | | 10,000,000 | | 100,000 | | | | | | | | 100,000 | | | | | | | | | | | | | | | | Stock options granted | | | | | | 71,513 | | | | | | 71,513 | | | | | | | | | | | | | | | | Comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | | | | | | 366,797 | | | | | | | | | | | | | | | | | | | | Cumulative translation adjustment | | | | | | | | | | 132,291 | | | | | | | | | | | | | | | | | | Total comprehensive income | | | | | | | | | | | | 499,088 | | | | | | | | | | | | | | | | Balance as at March 31, 2011 | | 125,460,867 | | 19,262,796 | | 2,798,275 | | (20,563,530 | ) | 599,608 | | 2,097,149 | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of the consolidated financial statements.
ZIM Corporation Consolidated Balance Sheets Consolidated Statements of Cash Flows (Expressed in US dollars)
| | Number of common shares issued | | | Common shares | | | Additional paid-in- capital | | | Accumulated deficit | | | Accumulated other comprehensive income | | | Total shareholders' equity | | | | | | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | Balance as at March 31, 2006 as originally reported | | | 59,561,569 | | | | 17,658,435 | | | | 2,129,398 | | | | (19,602,173 | ) | | | 271,360 | | | | 457,020 | | Adjustment to reverse professional fee accrual (See Note 2) | | | | | | | | | | | | | | | 67,216 | | | | | | | | 67,216 | | Balance as at March 31, 2006 as restated | | | 59,561,569 | | | | 17,658,435 | | | | 2,129,398 | | | | (19,534,957 | ) | | | 271,360 | | | | 524,236 | | Shares issued through the exercise of options | | | 135,000 | | | | 4,800 | | | | | | | | | | | | | | | | 4,800 | | Shares issued through private placements | | | 18,365,386 | | | | 734,615 | | | | | | | | | | | | | | | | 734,615 | | Shares issued through private placement for a business acquisition | | | 10,000,000 | | | | 650,000 | | | | | | | | | | | | | | | | 650,000 | | Stock options granted | | | | | | | | | | | 326,154 | | | | | | | | | | | | 326,154 | | Comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | | | Net loss | | | | | | | | | | | | | | | (1,936,187 | ) | | | | | | | | | Cumulative translation adjustment | | | | | | | | | | | | | | | | | | | 32,527 | | | | | | Total comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | (1,903,660 | ) | Balance as at March 31, 2007 as restated | | | 88,061,955 | | | | 19,047,850 | | | | 2,455,552 | | | | (21,471,144 | ) | | | 303,887 | | | | 336,145 | |
| | Year ended March 31, 2011 | | | Year ended March 31, 2010 | | | Year ended March 31, 2009 | | | | $ | | | $ | | | | $ | | OPERATING ACTIVITIES | | | | | | | | | | | Net income | | | 366,797 | | | | 304,767 | | | | 153,513 | | Items not involving cash: | | | | | | | | | | | | | Depreciation of property and equipment | | | 37,943 | | | | 51,038 | | | | 57,183 | | Amortization of intangible asset | | | 4,251 | | | | - | | | | - | | Gain on disposition of assets | | | - | | | | (43 | ) | | | (247 | ) | Stock-based compensation | | | 171,513 | | | | 112,184 | | | | 40,220 | | Changes in operating working capital: | | | | | | | | | | | | | Decrease (increase) in accounts receivable | | | 106,015 | | | | (67,630 | ) | | | 45,408 | | Decrease (increase) in investment tax credits | | | (36,861 | ) | | | (16,160 | ) | | | 208,697 | | Increase in other tax credits | | | (53,107 | ) | | | - | | | | - | | Decrease (increase) in prepaid expenses | | | 10,441 | | | | (359 | ) | | | 20,766 | | (Increase) in long term deposits | | | (9,722 | ) | | | - | | | | - | | Increase (decrease) in accounts payable | | | 4,116 | | | | 9,526 | | | | (23,575 | ) | Increase (decrease) in accrued liabilities | | | 41,776 | | | | 791 | | | | (90,390 | ) | Increase (decrease) in deferred revenue | | | (73,554 | ) | | | 23,481 | | | | 19,076 | | Cash flows provided by operating activities | | | 569,608 | | | | 417,595 | | | | 430,651 | | INVESTING ACTIVITIES | | | | | | | | | | | | | Purchase of property and equipment | | | (10,978 | ) | | | (6,117 | ) | | | (19,581 | ) | Proceeds on sale of assets | | | - | | | | 43 | | | | 247 | | Purchase of intangible asset | | | (51,451 | ) | | | - | | | | - | | Purchase of investment | | | (10,290 | ) | | | (95,147 | ) | | | - | | Cash flows used in investing activities | | | (72,719 | ) | | | (101,221 | ) | | | (19,334 | ) | FINANCING ACTIVITIES | | | | | | | | | | | | | Proceeds from loan from related party | | | - | | | | - | | | | - | | Cash flows provided by financing activities | | | - | | | | - | | | | - | | Effect of changes in exchange rates on cash | | | 113,220 | | | | 204,293 | | | | (71,046 | ) | Increase in cash and cash equivalents | | | 610,109 | | | | 520,667 | | | | 340,271 | | Cash and cash equivalents, beginning of year | | | 1,160,881 | | | | 640,214 | | | | 299,943 | | Cash and cash equivalents, end of year | | | 1,770,990 | | | | 1,160,881 | | | | 640,214 | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Shareholders' Equity (Continued)Balance Sheets (Expressed in US dollars) | | Number of common shares issued | | | Common shares | | | Additional paid-in- capital | | | Accumulated deficit | | | Accumulated other comprehensive income | | | Total shareholders' equity | | | | | | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | Balance as at March 31, 2007 as restated | | | 88,061,955 | | | | 19,047,850 | | | | 2,455,552 | | | | (21,471,144 | ) | | | 303,887 | | | | 336,145 | | Shares issued on debt conversion | | | 7,398,912 | | | | 63,939 | | | | | | | | | | | | | | | | 63,939 | | | | | | | | | | | | | 132,822 | | | | | | | | | | | | 132,822 | | Warrants issued on debt conversion | | | | | | | | | | | 36,991 | | | | | | | | | | | | 36,991 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | | | | | | | | | | | | | 82,536 | | | | | | | | | | Cumulative translation adjustment | | | | | | | | | | | | | | | | | | | 10,001 | | | | | | Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | 92,537 | | Balance as at March 31, 2008 as restated | | | 95,460,867 | | | | 19,111,789 | | | | 2,625,365 | | | | (21,388,608 | ) | | | 313,888 | | | | 662,434 | | Common shares issued | | | 10,000,000 | | | | 20,000 | | | | | | | | | | | | | | | | 20,000 | | | | | | | | | | | | | 20,220 | | | | | | | | | | | | 20,220 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | | | | | | | | | | | | | 153,513 | | | | | | | | | | Cumulative translation adjustment | | | | | | | | | | | | | | | | | | | (78,977 | ) | | | | | Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | 74,536 | | Balance as at March 31, 2009 | | | 105,460,867 | | | | 19,131,7899 | | | | 2,645,585 | | | | (21,235,095 | ) | | | 234,911 | | | | 777,190 | |
| | March 31, 2011 | | | March 31, 2010 | | | March 31, 2009 | | ASSETS | | | | | | | | | | Current assets | | | | | | | | | | Cash and cash equivalents | | $ | 1,770,990 | | | $ | 1,160,881 | | | $ | 640,214 | | Accounts receivable, net | | | 118,429 | | | | 224,444 | | | | 156,814 | | Investment tax credits receivable | | | 273,096 | | | | 236,235 | | | | 220,075 | | Other tax credits | | | 53,107 | | | | - | | | | - | | Prepaid expenses | | | 34,627 | | | | 45,068 | | | | 44,709 | | | | | 2,250,249 | | | | 1,666,628 | | | | 1,061,812 | | | | | | | | | | | | | | | Long term deposits | | | 9,722 | | | | - | | | | - | | Investments | | | 113,190 | | | | 95,147 | | | | - | | Intangible assets | | | 47,200 | | | | - | | | | - | | Property and equipment, net | | | 38,880 | | | | 65,844 | | | | 95,119 | | | | | 2,459,241 | | | | 1,827,619 | | | | 1,156,931 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | | | | | Current liabilities | | | | | | | | | | | | | Accounts payable | | | 30,974 | | | | 26,858 | | | | 17,332 | | Accrued liabilities | | | 89,333 | | | | 47,557 | | | | 46,766 | | Deferred revenue | | | 241,785 | | | | 315,339 | | | | 291,858 | | | | | 362,092 | | | | 389,754 | | | | 355,956 | | Deferred rent | | | - | | | | 11,317 | | | | 23,785 | | | | | | | | | | | | | | | Commitments and contingencies [note 19] | | | | | | | | | | | | | | | | | | | | | | | | | | Shareholders' equity: | | | | | | | | | | | | | Preferred shares, no par value, non-cumulative dividend at a rate to be determined by the Board of Directors redeemable for CDN $1 per share. Unlimited authorized shares; issued and outstanding NIL shares at March 31, 2011 and 2010. | | | - | | | | - | | | | - | | Common shares, no par value, | | | | | | | | | | | | | Unlimited authorized shares; 125,460,867 shares issued and outstanding as at March 31, 2011 and 115,460,867 shares as at March 31, 2010. | | | 19,262,796 | | | | 19,162,796 | | | | 19,131,789 | | Additional paid-in capital | | | 2,798,275 | | | | 2,726,762 | | | | 2,645,585 | | Accumulated deficit | | | (20,563,530 | ) | | | (20,930,327 | ) | | | (21,235,095 | ) | Accumulated other comprehensive income | | | 599,608 | | | | 467,317 | | | | 234,911 | | | | | 2,097,149 | | | | 1,426,548 | | | | 777,190 | | | | | 2,459,241 | | | | 1,827,619 | | | | 1,156,931 | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. ZIM Corporation
Consolidated Statements of Cash Flows
(Expressed in US dollars)
| | Year ended March 31, 2009 | | | Year ended March 31, 2008 | | | Year ended March 31, 2007 | | | | $ | | | $ | | | $ | | OPERATING ACTIVITIES | | | | | | | | | | Net income (loss) | | | 153,513 | | | | 82,536 | | | | (1,936,187 | ) | Items not involving cash: | | | | | | | | | | | | | Depreciation of property and equipment | | | 57,183 | | | | 87,107 | | | | 100,242 | | Amortization of intangible assets | | | - | | | | - | | | | 972,209 | | Gain on disposition of assets | | | (247 | ) | | | (134,267 | ) | | | - | | Gain on settlement of liability | | | - | | | | (77,385 | ) | | | - | | Interest accrued | | | - | | | | - | | | | 563 | | Stock-based compensation | | | 40,220 | | | | 132,822 | | | | 313,954 | | Write off of accounts receivable | | | - | | | | 21,461 | | | | - | | Write off of accounts payable | | | - | | | | (196,403 | ) | | | - | | Changes in operating working capital, net of effect from acquisition: | | | | | | | | | | | | | Decrease in accounts receivable | | | 45,408 | | | | 92,192 | | | | 1,014,805 | | Decrease (increase) in investment tax credits | | | 208,697 | | | | (279,260 | ) | | | 266,643 | | Decrease (increase) in prepaid expenses | | | 20,766 | | | | (1,855 | ) | | | (3,680 | ) | Increase (decrease) in accounts payable | | | (23,575 | ) | | | 17,736 | | | | (327,339 | ) | Increase (decrease) in accrued liabilities | | | (90,390 | ) | | | 8,757 | | | | (218,233 | ) | Increase (decrease) in deferred revenue | | | 19,076 | | | | (68,899 | ) | | | 15,166 | | Cash flows provided by (used in) operating activities | | | 430,651 | | | | (315,458 | ) | | | 198,143 | | INVESTING ACTIVITIES | | | | | | | | | | | | | Purchase of property and equipment | | | (19,581 | ) | | | - | | | | (49,624 | ) | Proceeds on sale of assets | | | 247 | | | | 137,139 | | | | - | | Business acquisition, net of cash received | | | - | | | | - | | | | (37,778 | ) | Cash flows provided by (used in) investing activities | | | (19,334 | ) | | | 137,139 | | | | (87,402 | ) | FINANCING ACTIVITIES | | | | | | | | | | | | | Proceeds from the exercise of options | | | - | | | | - | | | | 4,800 | | Repayment of note payable | | | - | | | | - | | | | (250,000 | ) | Proceeds from shares issued through a private placement | | | - | | | | - | | | | 280,422 | | Payments to bank indebtedness | | | - | | | | - | | | | (29,967 | ) | Proceeds from loan from related party | | | - | | | | 48,260 | | | | 43,305 | | Cash flows provided by financing activities | | | - | | | | 48,260 | | | | 48,560 | | Effect of changes in exchange rates on cash | | | (71,046 | ) | | | (11,635 | ) | | | 45,301 | | Increase (decrease) in cash and cash equivalents | | | 340,271 | | | | (141,694 | ) | | | 204,602 | | Cash and cash equivalents, beginning of year | | | 299,943 | | | | 441,637 | | | | 237,035 | | Cash and cash equivalents, end of year | | | 640,214 | | | | 299,943 | | | | 441,637 | |
The accompanying notes are an integral part of these consolidated financial statements.
ZIM Corporation
Consolidated Balance Sheets
(Expressed in US dollars)
| | March 31, 2009 | | | March 31, 2008 Restated | | | | $ | | | $ | | ASSETS | | | | | | | Current assets | | | | | | | Cash and cash equivalents | | | 640,214 | | | | 299,943 | | Accounts receivable, net | | | 156,814 | | | | 202,222 | | Investment tax credits receivable | | | 220,075 | | | | 428,772 | | Prepaid expenses | | | 44,709 | | | | 65,475 | | | | | 1,061,812 | | | | 996,412 | | Property and equipment, net | | | 95,119 | | | | 162,738 | | | | | 1,156,931 | | | | 1,159,150 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | Current liabilities | | | | | | | | | Accounts payable | | | 17,332 | | | | 40,906 | | Accrued liabilities | | | 46,766 | | | | 137,156 | | Deferred revenue | | | 291,858 | | | | 272,782 | | | | | 355,956 | | | | 450,844 | | Deferred rent | | | 23,785 | | | | 45,872 | | | | | | | | | | | Commitments and contingencies | | | | | | | | | | | | | | | | | | Shareholders' equity: | | | | | | | | | Preferred shares, no par value, non-cumulative dividend at a rate to be determined by the Board of Directors redeemable for CDN $1 per share. Unlimited authorized shares; issued and outstanding NIL shares at March 31, 2009 and 2008. | | | - | | | | - | | Special shares, no par value, non-voting, participating, convertible into common shares on a one-for-one basis at any time at the option of the holder and automatically on the earlier of (i) the fifth day following the date of issuance of a receipt for a final prospectus qualifying the common shares issuable upon conversion of the special shares; or (ii) June 1, 2004. Unlimited authorized shares; issued and outstanding NIL shares at March 31, 2009 and 2008. | | | | | | | | | Common shares, no par value, Unlimited authorized shares; 105,460,867 shares issued and outstanding as at March 31, 2009 and 95,460,867 shares as at March 31, 2008. | | | 19,131,789 | | | | 19,111,789 | | Additional paid-in capital | | | 2,645,585 | | | | 2,625,365 | | Accumulated deficit | | | (21,235,095 | ) | | | (21,388,608 | ) | Accumulated other comprehensive income | | | 234,911 | | | | 313,888 | | | | | 777,190 | | | | 662,434 | | | | | 1,156,931 | | | | 1,159,150 | |
The accompanying notes are an integral part of these consolidated financial statements.
ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) 1 - NATURE OF OPERATIONS
COMPANY OVERVIEW
ZIM Corporation (“ZIMZIM” or the “Company”) is a provider of software products and services for the database and mobile markets. ZIM products and services are used by enterprises in the design, development and management of business, database and mobile applications. ZIM also provides mobile content to the consumer market.
BUSINESS DEVELOPMENT
ZIM was formed under the laws of Canada on October 17, 2002 in order to purchase ZIM Technologies International Inc. (“ZIM Technologies”), which was formed in 1997 to acquire the software technology now called the ZIM Integrated Development Environment (the “Zim“ZIM IDE software”). On February 10, 2004, ZIM purchased UK-based short messaging service (SMS)(“SMS”) firms EPL Communications Limited and E-Promotions Limited (together referred to as “EPL”). During the fiscal year ended March 31, 2006, EPL was dissolved and all operations were transferred to ZIM Corporation in Canada. ZIM is also the sole shareholder of ZIM Technologies do Brazil Ltda., a company incorporated in Brazil that distributes the ZimZIM IDE Software, and PCI Merge, Inc., a Florida based holding company with no operations. Until March 31, 2004, ZIM was the sole shareholder of ZIM Technologies, a Canadian federal corporation and the chief operating company of the ZIM group of companies. On April 1, 2004, ZIM Corporation and ZIM Technologies amalgamated into ZIM Corporation. On April 1, 2006, ZIM purchased a US-based mobile content company called Advanced Internet Inc. (“AIS”).
BUSINESS OF THE COMPANY
ZIM started operations as a developer and provider of database software known as ZIM IDE software. ZIM IDE software is used by companies in the design, development, and management of information databases and mission critical applications. The Company continues to provide this software and support services to its client base.
Beginning in 2002, the Company expanded its business to include opportunities associated with mobile products. Prior to fiscal 2007, the Company focused on developing products and services for the wireless data network infrastructure known as SMS or text messaging. Although SMS will continue to provide a minimal amount of revenue within the mobile segment of ZIM’s operations, with the acquisition of AIS, the Company shifted its corporate focus to include offering mobile content directly to end users. In fiscal 2008, ZIM added the ZIM TV service and in partnership with the International Table Tennis Federation (ITTF)(“ITTF”) provided development and hosting services for IPTV to ITTF end users. However, due to low sales volumes ZIM exited this market in fiscal 2009. ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements as of March 31, 2009.
2 - RESTATEMENT Prior to March 31, 2006, the Company incorrectly accrued professional fees of $67,216. The Company has corrected the error by adjusting the accumulated deficit balance as of March 31, 2006 and has also restated its balance sheet as at March 31, 2008 in an amount of $67,216. The table below presents the impact of this restatement:
| | As reported | | | Adjustment | | | As restated | | As at March 31, 2007 | | | | | | | | | | Accumulated deficit | | $ | (21,538,360 | ) | | $ | 67,216 | | | $ | (21,471,144 | ) | | | | | | | | | | | | | | As at March 31, 2008 | | | | | | | | | | | | | Accrued liabilities | | $ | 204,372 | | | $ | (67,216 | ) | | $ | 137,156 | | Accumulated deficit | | $ | (21,455,824 | ) | | $ | 67,216 | | | $ | (21,388,608 | ) |
3 - SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") applied on a consistent basis..
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. The results of operations for acquisitions are included in these consolidated financial statements from the date of acquisition. Inter-company transactions and balances are eliminated upon consolidation.
USE OF ESTIMATES
The preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts recorded inof assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the notes toreported amount of revenue and expenses during the financial statements.period. Estimates have been made by management in several areas, including, but not limited to, the realizability of accounts receivable, the valuation allowance associated with deferred income tax assets, investment tax credits, expected useful life of property and equipment, the fair value calculation with respect to the stock options, and the accrued accounts receivable and accrued accounts payable related to our premium SMS business. These estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future. Actual results may differ from those estimates. ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) includes net loss and other comprehensive income (loss) ("OCI"). OCI refers to changes in net assets from transactions and other events and circumstances other than transactions with shareholders. These changes are recorded directly as a separate component of shareholders' equity and excluded from net income. The only other comprehensive income item for the Company relates to foreign currency translation adjustments relating to the translation of the financial statements from their functional currency into the reporting currency. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are recorded at the invoiced amount net of an allowance for doubtful accounts. The Company determines its allowance for doubtful accounts by considering a number of factors, including the age of the receivable, the financial stability of the customer, discussions that may have occurred with the customer and management's judgment as to the overall collectibilitycollectability of the receivable from that customer. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtfulselling, general and administration accounts in the period of recovery.
REVENUE RECOGNITION
The Company derives revenue from two sources: enterprise software, including maintenance and consulting services and mobile services and applications. Enterprise software involves providing enterprise software for designing, developing and manipulating database systems and applications. Mobile services involve providing SMS and other content applications and services. The Company presents revenues net of sales tax and other related taxes.
ENTERPRISE SOFTWARE REVENUE RECOGNITION
ZIM records revenues from the perpetual license of the Company's software products and the sale of related maintenance and consulting. The Company's standard license agreement provides a license to use the Company's products based on the number of licensed users. The Company may license its software in multiple element arrangements if the customer purchases any combination of maintenance, consulting or training services in conjunction with the license.
The Company recognizes revenue pursuant to the requirements of the American Institute of Certified Public Accountants ("AICPA") Statement of Position ("SOP 97-2")ASC 985-605 "Software Revenue Recognition", as amended by SOP 98-9 "Software Revenue Recognition with Respect to Certain Transactions.". Revenue is recognized using the residual method when Company-specificVendor-specific objective evidence of fair value exists for all of the undelivered elements in the arrangement, but does not exist for one or more delivered elements. The Company allocates revenue to each undelivered element based on its respective fair value determined by the price charged when that element is sold separately. The Company defers revenue for the undelivered elements and recognizes the residual amount of the arrangement fee, if any,any. The separate elements of the arrangements are considered to be separate units of accounting.
Under ASC 958-605, revenue is recognized when the basicfollowing four criteria in SOP 97-2 have been met.met:
| ● | persuasive evidence of an arrangement exists; |
| ● | the fee is fixed and determinable; and |
| ● | collectability is probable. |
ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) Under SOP 97-2, revenue is recognized when the following four criteria have been met:
● | persuasive evidence of an arrangement exists;
| ● | delivery has occurred;
| ● | the fee is fixed and determinable; and
| ● | collectibility is probable.
|
The Company records revenue as earned as evidenced by contracts or invoices for its services at prices established by contract, price list and/or fee schedule less applicable discounts. If at the outset of an arrangement the Company determines that the arrangement fee is not fixed or determinable, revenue is deferred until the arrangement fee becomes due. If at the outset of an arrangement the Company determines that the collectibilitycollectability is not probable, revenue is deferred until payment is received.
CollectibilityCollectability is assessed based on the collection history of the client, current economic trends, customer concentrations and customer credit worthiness. Delivery of the software has occurred once the customer has accepted the product or has been provided with permanent keys to the file transfer protocol ("FTP") site. If an arrangement allows for customer acceptance of the software or services, the Company defers revenue recognition until the earlier of customer acceptance or when the acceptance right lapses.
MAINTENANCE AND CONSULTING REVENUE RECOGNITION
Maintenance revenues are recognized equally over the term of the maintenance contract. The liability relating to the received but unearned portion of maintenance revenues is recognized as deferred revenues.
Consulting revenue, which represents services provided on a per diem basis to customers, is recognized as the services are performed as there are no customer acceptance provisions involved in these types of arrangements.
In general, credit terms of 30 days are extended to customers.
MOBILE REVENUE RECOGNITION
Revenues from the Company’s mobile segment are derived principally from providing aggregation services and from ourtheir mobile content portals.
Aggregation services. Aggregation services occur when ZIM sends messages from its customers through mobile operators to end users on their cell phones. In this situation, the Company contracts with its customers that cannot connect directly to the mobile operators and with the third party mobile operators or other aggregators directly for the transmission of the messages. Net revenues are recognized in the month in which the service is performed, provided no significant ZIM obligations remain. ZIM relies on a number of mobile network operators and other aggregators globally to deliver ourits services. Generally, (i) within 15 to 45 days after the end of each month, ZIM receives a statement from each of the operators or aggregators confirming the amount of charges billed to that operator's mobile phone users and (ii) within 30 to 90 days after delivering a monthly statement, each operator or aggregator remits the fees for the month to ZIM. ZIM arranges to pay the mobile content provider a set amount per message under a revenue sharing arrangement. ZIM nets this revenue share fee against the revenue it receives from the mobile operators in accordance with EITF 99-19.ASC 605. ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) Revenues are recorded on a net basis as the mobile content provider is the primary obligor in the transaction as they manage and market the content, which ZIM then distributes. ZIM’s role within the transaction is limited to providing transportation and a billing mechanism for the mobile content provider.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
Mobile content portals. On April 1, 2006 ZIM acquired two internet portals offering mobile content (see Note 6).content. Consumers are able to download ring tones and wallpapers directly from the internet sites to their mobile phones. The majority of consumers choose to pay for the content with their credit card with the balance of consumers paying through the use of a premium message. If they use a premium message to pay for their content, the charge is paid on their cell phone bill.
Revenues from all sales are recorded on a gross basis as ZIM manages and markets the content ZIM distributes. Revenue on mobile content is recognized at the point of sale, when the customer purchases content from the websites. MAINTENANCE AND CONSULTING REVENUE RECOGNITION
Maintenance revenues are recognized equally over the term of the maintenance contract.
Consulting revenue, which represents services provided on a per diem basis to customers, is recognized as the services are performed as there are no customer acceptance provisions involved in these types of arrangements.
In general, credit terms of 30 days are extended to customers.
RESEARCH AND DEVELOPMENT EXPENSES
Costs related to research, design and development of products and applications are charged to research and development expense as incurred. Software development costs are capitalized beginning when a product's technological feasibility has been established, which generally occurs upon completion of a working model, and ending when a product is available for general release to customers. All subsequent costs are expensed as incurred. To date, completing a working model of the Company's products and the general release of the products has substantially coincided. The Company has not capitalized any software development costs since such costs have not been significant.
ADVERTISING
Advertising costs are expensed as incurred. Advertising costs amounted to $NIL for the year ended March 31, 20092011 ($8,586NIL for the year ended March 31, 2008 and $26,1202010, $NIL for the year ended March 31, 2007)2009). INVESTMENT TAX CREDITS
The Company qualifies for scientific research and development expenditures. Refundable investment tax credits are recorded as a reduction of income tax expense when it is more likely than not that the credits will be realized. Other non-refundable investment tax credits not utilized in the current year can be used to offset income taxes in future years.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
TRANSLATION OF FOREIGN CURRENCIES
The Company's reporting currency is the US dollar and the functional currency is the Canadian dollar.dollar for ZIM Corporation and Brazilian Reals for ZIM do Brazil .
The accounts of the Company's subsidiaries that are recorded in the Company's functional currency, the Canadian dollar, translateremeasure their foreign currency transactions as follows: gains or losses from foreign currency transactions such as those resulting from the settlement of receivables or payables denominated in foreign currency, are translatedremeasured at the weighted average exchange rates for the period and are included in the statement of operations of the current period. For the years ended March 31, 2009, 20082011, 2010, and 2007,2009, the Company recognized a foreign exchange loss of $37,655,$1,914, a foreign exchange gainloss of $22,307$27,167, and ana foreign exchange gainloss of $7,285$37,655, respectively, in the accompanying consolidated statements of operations.operations in the selling, general and administration line.
The translation of the Company's financial statements from the functional currency to its reporting currency is performed as follows: Allall assets and liabilities are translated into US dollars at the rate of exchange in effect at the balance sheet date. Equity transactions are translated at the exchange rate in effect at the date of the transaction. Revenues, expenses and cash flow amounts are translated at the weighted average exchange rates for the period. The resulting translation adjustments are included in other comprehensive income in shareholders' equity. The translation adjustments did not result in a tax impact. ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. When necessary, a valuation allowance is recorded to reduce the tax assets to an amount for which realization is more likely than not. The effect of changes in tax rates is recognized in the period in which the rate change occurs.
The Company qualifies for scientific research and development expenditures. Refundable investment tax credits are recorded as a reduction of income tax expense when it is more likely than not that the credits will be realized. Other non-refundable investment tax credits not utilized in the current year can be used to offset income taxes in future years.
EARNINGS PER SHARE
Basic earnings per share are computed by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share are calculated giving effect to the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted to such shares at the later of the beginning of the period or the issuance date. This method is used to determine the dilutive effect of common shares. The treasury stock method is used to determine the dilutive effect of warrants and stock options. The treasury stock method assumes that proceeds received from the exercise of in-the-money share purchase warrants and stock options are used to repurchase common shares at the average market price during the period. ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
STOCK OPTIONS AND GRANTS
ZIM adoptedutilizes the provisions of SFAS No. 123(R) effective April 1, 2006, using the modified-prospective transition method, whichASC 718 and ASC 505 to account for stock-based awards granted to employees and consultants, respectively. ASC 718 requires measurement of compensation cost for all stock-based awards at fair value on the date of grant and recognition of compensation expense over the service period for awards expected to vest. The company Under ASC 505, stock-based awards granted to consultants are measured at fair value and compensation expense is recognized the following expense relating to stock options and grants:
| | Year ended March 31, 2009 | | | Year ended March 31, 2008 | | | Year ended March 31, 2007 | | | | $ | | | $ | | | $ | | Options compensation expense for employees | | | 5,905 | | | | 110,331 | | | | 301,829 | | Options compensation expense for consultants | | | 14,315 | | | | 22,491 | | | | 12,125 | | Stock grant compensation expense for executive officers | | | 20,000 | | | | - | | | | - | | Total expense | | | 40,220 | | | | 132,822 | | | | 313,954 | |
All options granted vested on the day ofdate at which the grant resulting inconsultant's performance is complete which, for the Company, not having any non-vested awards asis on the date of March 31, 2009, March 31, 2008 or March 31, 2007.grant.
The fair value of stock options is determined using the Black Scholes valuationScholes-Merton option pricing model. The expected dividend yield is based on historical dividend payouts, the expected volatility is based on historical volatilities of company stock for a period approximating the expected life; the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option; and the expected life represents the period of time the options are expected to be outstanding and is based on historical trends. The weighted average assumptions used in the computations are as follows: | | Year ended March 31, 2009 | | | Year ended March 31, 2008 | | | Year ended March 31, 2007 | | | | | | | Risk-free interest rates | | | 2.24 | % | | | 3.19 | % | | | 5.00 | % | Expected volatility | | | 140 | % | | | 80 | % | | | 80 | % | Dividend yield | | | - | | | | - | | | | - | | Expected life of options (years) | | | 2.0 | | | | 2.0 | | | | 2.0 | |
ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS)
| | Year ended March 31, 2011 | | | Year ended March 31, 2010 | | | Year ended March 31, 2009 | | | | | | | Risk-free interest rates | | | 1.00 | % | | | 0.93 | % | | | 2.24 | % | Expected volatility | | | 120 | % | | | 207 | % | | | 140 | % | Dividend yield | | | - | | | | - | | | | - | | Expected life of options (years) | | | 2.5 | | | | 2.0 | | | | 2.0 | |
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the underlying assets using the following methods and rates: Computer equipment | 40% | Declining balance | Software | 40% | Declining balance | Office furniture and equipment | 40% | Declining balance | Voice communications equipment | 20% | Declining balance | Leasehold improvements | 5 Yearsyears | Straight line over the lesser of 5 years or the term of the underlying lease |
ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) LEASES
Leases are classified as either capital or operating in nature. Capital leases are those that substantially transfer the benefits and risks of ownership to the Company. Assets acquired under capital leases are amortized at the same rates as those described for property and equipment. Obligations recorded under capital leases are reduced by the principal portion of lease payments. The imputed interest portion of lease payments is charged to expense. Operating leases are expensed as incurred.
LONG-LIVED ASSETSIMPAIRMENT OF PROPERTY AND EQUIPMENT
Long-lived assets areProperty and equipment is tested for impairment when evidence of a decline in value exists, and are adjustedadjustments to estimated fair value are made if the asset is impaired. Financial Accounting Standards Board Statement of Financial Accounting Standards No. 144,ASC 360-10-35 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“FAS 144”) requires that, whenever events and circumstances indicate that the Company may not be able to recover the net book value of its productive assets, FAS 144 requires that the assets are deemed impaired and are to be written down to their estimated fair value through a charge to earnings. FAS 144The guidance states that fair values may be estimated using discounted cash flow analysis or quoted market prices, together with other available information. Under the provisions of FAS 144,ASC 360-10-35, the Company reviewed its long-livedproperty and equipment assets for impairment to determine if there were events or changes in circumstances that would indicate that the carrying amount of the assets may not be recoverable through future cash flows. It was determined that no impairment was evident.
INTANGIBLE ASSETS
Intangible assets that are determined to have finite lives are amortized on the straight-line method over their estimated useful lives.lives, which is 60 months.
Intangible assets are tested for impairment when evidence of a decline in value exists, and adjustments to estimated fair value are made if the asset is impaired. ASC 360-10-35 “Accounting for the Impairment or Disposal of Long-Lived Assets” requires that, whenever events and circumstances indicate that the Company may not be able to recover the net book value of its productive assets, that the assets are deemed impaired and are to be written down to their estimated fair value through a charge to earnings. The guidance states that fair values may be estimated using discounted cash flow analysis or quoted market prices, together with other available information. Under the provisions of ASC 360-10-35, the Company reviewed its intangible assets for impairment to determine if there were events or changes in circumstances that would indicate that the carrying amount of the assets may not be recoverable through future cash flows. It was determined that no impairment was evident. ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) On April 1, 2006, ZIM acquired intangible assets in connection with the acquisition of AIS. Given the nature of the intangible assets acquired, ZIM applied both the cost approach and the income approach to the valuation of the assets. The customer list was valued using the income approach. The projected income was based upon the most likely future revenue generated by the existing customer base, as estimated by management. The core technology and the corporate relationships were valued using the cost approach. The fair value of these assets was determined by measuring the current cost to purchase or reproduce the asset. All the intangible assets acquired were fully amortized at March 31, 2007.
In July 2001, the Financial Accounting Standards Board issued SFAS No. 142, Goodwill and Other Intangible Assets. The Company adopted SFAS No. 142. SFAS No. 142 requires intangible assets, that do not have a finite life, to be subject to an assessment of impairment on an annual basis, or more frequently if circumstances indicate that a possible impairment has occurred. The assessment of impairment involves a two-step process prescribed in SFAS No. 142, whereby an initial assessment for potential impairment is performed, followed by a measurement of the amount of impairment, if any. The Company performs an impairment test on intangible assets each year to determine if possible impairment has occurred. However, as at March 31, 2009 and March 31, 2008 all intangible assets were fully amortized therefore no impairment tests were performed.
OTHER
Except for the 5,000,000 shares of common stock, valued at $10,000, issued on February 27, 2009 (See Note 13), no remuneration has been recorded in these financial statements for the services of the Chief Executive Officer (CEO). The CEO is also a director and the controlling shareholder.
4 - ACCOUNTING FOR UNCERTAIN TAX POSITIONS
The Company recognizes any interest accrued related to unrecognized tax benefits in interest and penalties in income tax expense in the Consolidated Statement of Operations.
At March 31, 2009, the Company had $50,139 in unrecognized tax benefits, related to estimated Investment Tax Credits for research and development in Canada, which would favorably impact the Company’s effective tax rate if subsequently recognized. The unrecognized tax benefits as at March 31, 2008, that were subsequently realized in fiscal 2009, were $37,032. The unrecognized tax benefits as at March 31, 2007, related to fiscal years 2007 and 2006, that were subsequently realized in fiscal 2008, were $170,503.
5 - GAIN ON DISPOSITION OF ASSETS
On July 16, 2007, ZIM Corporation signed an agreement to sell ZIM's Canadian mobile gateway technology, proprietary web to text applications and related customer contracts. Total consideration received was $137,139 and the net book value of assets given up was $2,872. A gain of $134,267 was recognized as the conditions of the agreement have been settled.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
6 - ACQUISITION OF ADVANCED INTERNET INC.
Effective April 1, 2006, ZIM acquired all of the issued and outstanding common shares of Advanced Internet Inc. (“AIS”). AIS owns and operates two Internet mobile content sites and was part of ZIM’s move into offering mobile content. The acquisition has been accounted for using the purchase method of accounting and accordingly, the purchase price has been allocated to the identifiable assets acquired and liabilities assumed using estimates of their fair value. The results of operations of AIS are included in the consolidated financial statements beginning on the acquisition date. The total purchase price of $951,434 included a note payable of $250,000, acquisition costs of $37,778, 500,000 stock options with a value of $13,656 and 10,000,000 common shares valued at $650,000. The non-interest bearing note payable had a one-year term, with payments each month of $20,833, and was paid in the one-year term.
The basis for the determination of the fair value of the common stock of $0.065 was the average daily closing price of the Company's common stock on the four days prior to and following the acquisition announcement date of April 1, 2006. 1,000,000 of the 10,000,000 common shares were held in escrow for one year and have been released. The stock options were valued using the Black-Scholes method with an option price of $0.071, a dividend yield of 0.00%, a risk free rate of 3.5%, volatility of 80% and an expected option life of 2 years. These options expired March 31, 2009.
The aggregate purchase price for this acquisition has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition as follows:
| | | $ | | | Useful lives (in months) | | | | | | | | | | Working capital | | | 10,000 | | | | N/A | | Core technology | | | 712,488 | | | | 12 | | Customer list | | | 67,449 | | | | 5 | | Corporate relationships | | | 161,497 | | | | 12 | | | | | 951,434 | | | | | | | | | | | | | | |
The weighted average amortization period was 11 months for the intangible assets and the intangible assets were fully amortized as at March 31, 2007.
7 – GAIN ON SETTLEMENT OF LIABILITY
During fiscal 2008, after a two-year period, ZIM abandoned its efforts to locate a supplier which, according to internal estimates of the Company, was owed an amount of $77,385. Management is of the opinion that it made every reasonable effort to contact this supplier, and since the statute of limitations for this liability expired December 31, 2007 the Company de-recognized the accrued liability to this supplier and recorded a gain on settlement of liabilities.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
8 - ACCOUNTS RECEIVABLE
| | March 31, 2009 | | | March 31, 2008 | | | | | $ | | | | $ | | Trade accounts receivable | | | 140,557 | | | | 200,199 | | Unbilled trade accounts receivable | | | 9,098 | | | | 11,003 | | Allowance for doubtful accounts | | | (3,913 | ) | | | (13,459 | ) | Other | | | 11,072 | | | | 4,479 | | | | | 156,814 | | | | 202,222 | |
9 - PROPERTY AND EQUIPMENT
March 31, 2009 | | Cost | | | Accumulated depreciation | | | Net book value | | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | | | | Computer equipment | | | 819,783 | | | | 783,537 | | | | 36,246 | | Software | | | 74,688 | | | | 69,692 | | | | 4,996 | | Office furniture and equipment | | | 176,172 | | | | 165,262 | | | | 10,910 | | Voice communications equipment | | | 20,943 | | | | 16,509 | | | | 4,434 | | Leasehold improvements | | | 121,683 | | | | 83,150 | | | | 38,533 | | | | | 1,213,269 | | | | 1,118,150 | | | | 95,119 | |
March 31, 2008 | | Cost | | | Accumulated depreciation | | | Net book value | | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | | | | Computer equipment | | | 1,010,130 | | | | 955,210 | | | | 54,920 | | Software | | | 92,385 | | | | 82,644 | | | | 9,741 | | Office furniture and equipment | | | 210,442 | | | | 194,906 | | | | 15,536 | | Voice communications equipment | | | 5,695 | | | | 2,301 | | | | 3,394 | | Leasehold improvements | | | 154,169 | | | | 75,022 | | | | 79,147 | | | | | 1,472,821 | | | | 1,310,083 | | | | 162,738 | |
10 – LINE OF CREDIT
During fiscal 2009, a working capital line of credit was available at approximately $39,641 (equivalent to $50,000 Canadian, the Company’s functional currency) from the Company’s major financial institution. This credit facility is secured by the Company’s assets. In addition, $396,410 (equivalent to $500,000 Canadian, the Company’s functional currency) was available from the Company’s CEO and principal shareholder as an unsecured revolving facility. Amounts drawn on either of these credit facilities bear interest at the prime rate, as published by the Royal Bank of Canada, plus 1.75%.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
In order maintain the working capital line of credit the Company must maintain a Tangible Net Worth of greater than $150,000 Canadian dollars and a ratio of current assets to current liabilities greater than 1.10:1.
As at March 31, 2008 and March 31, 2009 nothing was drawn down on these lines of credit.
11 - ACCRUED LIABILITIES
| | March 31, 2009 | | | March 31, 2008 (Restated) | | | | | $ | | | | $ | | | | | | | | | | | Employee related accruals | | | 20,537 | | | | 37,930 | | Professional fees | | | - | | | | 15,590 | | Withholding tax accrual | | | 2,442 | | | | 2,499 | | Trade | | | 23,787 | | | | 81,137 | | | | | 46,766 | | | | 137,156 | |
12 - RELATED PARTY TRANSACTIONS
Related party transactions not disclosed elsewhere in these financial statements are:
On June 30, 2006, ZIM’s Chief Executive Officer and controlling shareholder participated in a private placement of common shares in which he purchased 18,024,591 units, each consisting of one common share and one warrant to purchase common shares for $0.04, through a cash investment of approximately $267,000 with the balance satisfied through the conversion of debt (due to shareholder) in the amount of $454,193. In addition, the brother of the Chief Executive Officer purchased 90,795 units. The units were priced at $0.04 per unit, which represents the closing market price on the OTCBB on June 29, 2006. The warrants expired on September 30, 2007.
On December 4, 2007, ZIM’s Chief Executive Officer and controlling shareholder acquired 7,398,912 units, each consisting of one common share and one warrant to purchase common shares for $0.014 through the conversion of debt and accumulated interest (due to shareholder) in the amount of $103,585. The debt was the accumulation of the funds loaned to the Company by the Chief Executive Officer as part of the ongoing credit facility. Refer to Note 10.
13 - SHAREHOLDERS' EQUITY
The Company issued 135,000 common shares for proceeds of $4,800 in the year ended March 31, 2007 pursuant to the exercise of stock options by employees and non-employees.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
The Company did not issue any common shares during the year ended March 31, 2009 or March 31, 2008 pursuant to the exercise of stock options by employees.
Effective April 1, 2006, ZIM acquired all of the issued and outstanding common shares of Advanced Internet Inc. (“AIS”) for a total purchase price of $951,434. $650,000 of the total purchase price was paid with 10,000,000 common shares of ZIM corporation.
On June 30, 2006, the Company completed a non-brokered private placement of 18,365,386 units at market value of $0.04 per unit, for total gross proceeds of $734,615, consisting of cash of $280,422 and through the conversion of debt of $454,193. 18,024,591 of the units were purchased by the Company’s Chief Executive Officer and controlling shareholder. Each unit consists of one common share and one common share purchase warrant. Each warrant may have been exercised at $0.04 at any time prior to September 30, 2007. These warrants have now expired.
On December 4, 2007, ZIM’s Chief Executive Officer and controlling shareholder acquired 7,398,912 units through the conversion of debt and accumulated interest (due to shareholder) in the amount of $103,585. The units were priced at $0.014 per unit, which represented the closing market price of ZIM’s common stock on the OTCBB on December 3, 2007, with each unit consisting of one common share and one warrant to purchase common shares for $0.014 per share. The warrants expired on March 3, 2009. The warrants have been valued using the same Black-Scholes methodology as the Company’s stock options and have been valued at $36,991. This amount has been accounted for as additional paid in capital with the remaining amount of $63,939 being allocated to common shares.
On February 27, 2009, the Company issued 10,000,000 common shares to executive officers in lieu of compensation for services provided. 5,000,000 shares were issued to Dr. Michael Cowpland and 5,000,000 shares were issued to Mr. James Stechyson on approval of the Board of Directors. The share value at the time of the issue was $0.002 and compensation expense of $20,000 was recognized.
ADDITIONAL PAID IN CAPITAL
During the year ended March 31, 2009 the Company issued options to employees and non-employees, and as a result, additional paid in capital has been increased by $20,220.
During the year ended March 31, 2008 the Company issued options to employees and non-employees, and as a result, additional paid in capital has been increased by $132,822. In addition, $36,991 of additional paid in capital was recognized for the warrants issued on the December 4th, 2007 debt conversion.
During the year ended March 31, 2007, the Company issued options to non-employees, in consideration for advisory services, and as a result, additional paid in capital has been increased by $326,154.
The increase in additional paid in capital is the value associated with the vesting of options, which is recorded as compensation expense in the statement of operations.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
14 - STOCK OPTIONS
Under ZIM’s Employee Stock Option Plan, the Company may grant options to its officers, directors and employees for up to 27,200,000 common shares. As at March 31, 2009, 21,383,073 (March 31, 2008, 23,717,089) options were outstanding under the Employee Stock Option Plan. In addition, 6,010,000 (March 31, 2008, 6,010,000) options were issued in prior periods outside of ZIM’s Employee Stock Option Plan and are outstanding. Stock options are granted with an exercise price equal to the common share’s fair market value at the date of grant. Options are granted periodically and both the maximum term of an option and the vesting period are set at the Board's discretion. All options granted vest on the day of the grant.
A summary of the status of the stock options is as follows:
| | March 31, 2009 | | | March 31, 2008 | | | | Number of options outstanding | | | Weighted average exercise price | | | Number of options outstanding | | | Weighted average exercise price | | | | | | | $ | | | | | | | | $ | | Options outstanding, beginning of year | | | 29,727,089 | | | | 0.069 | | | | 27,253,743 | | | | 0.200 | | Granted | | | 5,693,595 | | | | 0.006 | | | | 10,780,028 | | | | 0.028 | | Exercised | | | - | | | | - | | | | - | | | | - | | Expired | | | (8,027,611 | ) | | | 0.141 | | | | (8,306,682 | ) | | | 0.417 | | Options outstanding, end of year | | | 27,393,073 | | | | 0.034 | | | | 29,727,089 | | | | 0.069 | |
The following table represents a summary of the options outstanding as at March 31, 2009:
| | | Options outstanding and exercisable | | | | | Range of exercise prices | | | Number outstanding at March 31, 2009 | | | Weighted average remaining contractual life | | | Weighted average exercise price | | $ | | | | | | | Years | | | | $ | | | | | | | | | | | | | | | | 0.002-0.009 | | | | 5,693,595 | | | | 2.34 | | | | 0.006 | | | 0.010-0.024 | | | | 6,582,969 | | | | 1.81 | | | | 0.020 | | | 0.032-0.047 | | | | 3,849,402 | | | | 1.18 | | | | 0.040 | | | 0.050-0.067 | | | | 9,760,733 | | | | 0.67 | | | | 0.051 | | | 0.071-0.080 | | | | 1,506,374 | | | | 0.77 | | | | 0.080 | | | | | | | 27,393,073 | | | | 1.37 | | | | 0.034 | |
The weighted average fair value of options granted in fiscal 2009, 2008 and 2007 were $0.004, $0.012 and $0.024 respectively.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
EMPLOYEE AND NON-EMPLOYEE OPTIONS
During the year ended March 31, 2009, 1,505,000 options were granted to employees. In fiscal 2008, 8,195,183 options were granted to employees.
During the year ended March 31, 2009, 4,188,595 options were granted to non-employees. In fiscal 2008, 2,584,845 options were granted to non-employees.
No options have been granted with exercise prices below the market price on the respective grant dates during the year ended March 31, 2009, March 31, 2008 or March 31, 2007.
During the years ended March 31, 2009 and March 31, 2008 certain employees were terminated and are no longer providing any services to ZIM. Under their termination agreements, their option grants were modified and the options were retained and extended to their original term. The options are accounted for in accordance with FASB statement No. 123 (R), Share-Based Payment. The intrinsic values of the modified options are to be recognized as compensation expense on the date of termination, which is considered the measurement date. The compensation expense recorded due to the modification of terminated employees’ options was $NIL, as all modified options had no intrinsic value.
WARRANTS
As at March 31, 2009, NIL (March 31, 2008, 8,548,918) warrants were outstanding. 1,150,006 of the warrants outstanding on March 31, 2008 were issued to investors in January 2004 as part of private placements. On December 4, 2007 the Company issued 7,398,912 warrants as part of a debt conversion. Of the 8,548,918 warrants outstanding as of March 31, 2008, 1,150,006 expired on May 30, 2008 and 7,398,912 expired on March 3, 2009.
No warrants have exercised in fiscal 2009 or 2008.
15- INTEREST
| | Year ended March 31, 2009 | | | Year ended March 31, 2008 | | | Year ended March 31, 2007 | | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | | | | Interest income | | | 10,611 | | | | 7,750 | | | | 20,865 | | Interest expense | | | (48 | ) | | | (8,924 | ) | | | (15,569 | ) | Total | | | 10,563 | | | | (1,174 | ) | | | 5,296 | |
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
16 - INCOME TAXES
In June 2006, FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes”, was issued, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. This Interpretation requires that the Company recognize in its financial statements the impact of a tax position if that position is more likely than not of not being sustained on an audit, based on the technical merits of the position.
The Company adopted the provisions of this Interpretation on April 1, 2007. No adjustment was required to the amount of the unrecognized tax benefits.
The Company and its subsidiaries file income tax returns in Canadian, Brazil and U.S. federal jurisdictions, and various provincial jurisdictions. The Company’s federal income tax returns are generally subject to examination for a period of three years after filing of the respective return in the U.S. and four years in Canada and five years in Brazil.
Income tax expense varies from the amount that would be computed by applying the basic federal and provincial income tax rates to loss before taxes, as follows:
| | Year ended March 31, 2009 | | | Year ended March 31, 2008 | | | Year ended March 31, 2007 | | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | | | | Tax Rate, comprised of a federal rate of 11.00% and a provincial rate of 5.5% | | | 16.50 | % | | | 18.09 | % | | | 18.62 | % | | | | | | | | | | | | | | Expected Canadian Income Tax (Recovery) | | | (14,195 | ) | | | (63,236 | ) | | | (416,854 | ) | Change in valuation allowance | | | 146,724 | | | | (781,786 | ) | | | 136,146 | | Losses expired during the year | | | 186,564 | | | | 585,933 | | | | 146,186 | | Permanent differences | | | 61,677 | | | | 96,127 | | | | 71,283 | | Effect of changes in rates | | | - | | | | 177,694 | | | | 52,875 | | Difference between Canadian and foreign tax rates | | | 1,171 | | | | (14,732 | ) | | | 10,364 | | Adjustments to deferred tax assets | | | (363,427 | ) | | | - | | | | - | | Refundable tax credits | | | (258,058 | ) | | | (432,100 | ) | | | (302,555 | ) | | | | (239,544 | ) | | | (432,100 | ) | | | (302,555 | ) |
The change in valuation allowance for originating temporary differences and losses available for carry forward, is calculated using an effective tax rate of 16.50%, based on the application of the Small Business Deduction. The rate at which such amounts may be realized as disclosed as part of a deferred tax asset and related valuation allowance takes into account the enacted tax rate decreases over the expected period of realization.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
Income tax recoveries of $239,544, $432,100 and $302,555 for the years ended March 31, 2009, March 31, 2008 and March 31, 2007 respectively relate to refundable income tax credits for research and development in Canada, net of the tax expense on account of income in Brazil. The investment tax credits are subject to review and approval by taxation authorities and it is possible that the amounts granted will be different from the amounts recorded by the Company.
The Company’s investment tax credit recovery for the years ended March 31, 2009 and March 31, 2008 were positively affected as a result of revisions to amounts previously estimated and recorded for credits related to fiscal years ended March 31, 2007 and March 31, 2008. The investment tax credit recoveries for the year ended March 31, 2008 was increased by $124,339 and the year ended March 31, 2009 was increased by $37,032.
Deferred income taxes reflect the impact of temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. The tax effects of temporary differences that gave rise to significant portions of the deferred tax asset and deferred tax liability are as follows:
| | March 31, 2009 | | March 31, 2008 | | March 31, 2007 | | | | $ | | $ | | | $ | | Temporary differences | | | | | | | | | Losses available for carry forward | | | 714,392 | | | 1,184,576 | | | 1,931,026 | | Property and equipment - differences in net book value and unamortized capital cost | | | 115,341 | | | 131,154 | | | 130,693 | | Intangible assets - differences in net book value and tax basis | | | 230,685 | | | 283,456 | | | 319,877 | | Unused scientific research and experimental development amounts deductible and investment tax credits available for carry forward | | | 894,830 | | | 535,048 | | | 644,483 | | Gross deferred tax asset | | | 1,955,248 | | | 2,134,234 | | | 3,026,079 | | Valuation allowance | | | (1,955,248 | ) | | (2,134,234 | ) | | (3,026,079 | ) | Net deferred tax asset | | | - | | | - | | | - | |
The Company has federal and provincial non-capital losses available to reduce taxable income in Canada, which expire in the following years:
| | Federal | | | Provincial | | | | | $ | | | | $ | | | | | | | | | | | 2010 | | | 583,783 | | | | 583,783 | | 2014 | | | 1,227,181 | | | | 1,227,181 | | 2015 | | | 1,299,883 | | | | 1,299,883 | | 2026 | | | 796,710 | | | | 796,710 | | 2027 and thereafter | | | 422,094 | | | | 422,094 | | | | | 4,329,651 | | | | 4,329,651 | | | | | | | | | | |
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
As at March 31, 2009, the Company had accumulated unclaimed federal and provincial scientific research and experimental development deductions of approximately $2,729,432 and $2,729,432 respectively ($3,085,965 and $4,158,934 in 2008), ($2,513,615 and $3,541,041 in 2007). This amount can be carried forward indefinitely to reduce income taxes payable in future years.
The Company has federal scientific research and experimental development credits available to reduce income taxes in Canada, which expire in the following years:
2018 | 1,083 | 2019 | 5,836 | 2021 | 14,333 | 2022 | 280,838 | 2023 | 1,803 | 2034 | 2,258 | Thereafter | 6,578 | | 312,729 |
17 - INCOME (LOSS) PER SHARE
For the purposes of the income (loss) per share computation, the weighted average number of common shares outstanding has been used. Had the treasury stock method been applied to the unexercised share options the effect on the loss per share for the year ended March 31, 2007, would be antidilutive.
The following securities are considered "in the money" and could potentially dilute basic income (loss) per share in the future but have not been included in diluted income (loss) per share because their effect was negligible:
| | March 31,
2009
| | | March 31,
2008
| | | March 31,
2007
| | | | | | | | | | | | Stock options | | | - | | | | - | | | | 510,843 | | Warrants | | | - | | | | - | | | | - | |
Total options outstanding at March 31, 2009, 2008 and 2007 were 27,393,073, 29,727,089 and 27,253,743, respectively. Total warrants outstanding at March 31, 2009, 2008 and 2007 were NIL, 8,548,918 and 19,515,392, respectively.
18 - FINANCIAL RISKS
FOREIGN EXCHANGE RISK
The Company operates internationally, giving rise to significant exposure to market risks from changes in foreign exchange rates. The Company is exposed to exchange risk due to the following financial instruments denominated in foreign currencies.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
Cash and cash equivalents of $640,214 are comprised of $154,460 cash and $485,754 cash equivalents. The cash equivalents of $485,754 at March 31, 2009 ($94,169 at March 31, 2008) are comprised of:
Held in Canada:
30 day GIC at 0.75% - $118,925 ($150,000 CDN) – Mature April 13, 2009
Held in Brazil:
Bank Deposit Certificate (CDB) at 8% per annum plus inflation- $366,829 - No Maturity
Cash includes the following amounts in their source currency:
| | March 31, 2009 | | | March 31, 2008 | | | | | | | | | Canadian dollars | | | 195,128 | | | | 67,532 | | US dollars | | | 24,089 | | | | 48,383 | | Brazilian reals | | | 1,044,602 | | | | 297,311 | | British pounds | | | 4,425 | | | | 4,569 | | Euros | | | 993 | | | | 4,198 | |
Accounts receivable include the following amounts receivable in their source currency:
| | March 31, 2009 | | | March 31, 2008 | | | | | | | | | Canadian dollars | | | 31,455 | | | | 51,702 | | US dollars | | | 62,944 | | | | 33,092 | | Brazilian reals | | | 147,730 | | | | 139,328 | | British pounds | | | 589 | | | | 14,689 | | Euros | | | 2,953 | | | | 7,387 | |
Accounts payable include the following amounts payable in their source currency:
| | March 31, 2009 | | | March 31, 2008 | | | | | | | | | Canadian dollars | | | 1,798 | | | | 7,114 | | US dollars | | | 3,801 | | | | 5,298 | | Brazilian reals | | | 27,317 | | | | 23,210 | | British pounds | | | 166 | | | | - | | Euros | | | - | | | | 10,469 | |
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
Accrued liabilities include the following accruals in their source currency:
| | March 31, 2009 | | | March 31, 2008 Restated | | | | | | | | | Canadian dollars | | | 35,789 | | | | 96,261 | | US dollars | | | 10,247 | | | | 10,013 | | Brazilian reals | | | 18,747 | | | | 31,812 | | British pounds | | | - | | | | 238 | |
The Company does not enter into any derivative financial instruments to partially cover the foreign exchange risk.
CREDIT RISK
The Company is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments. Credit exposure is minimized by dealing with only creditworthy counterparties in accordance with established credit approval policies.
Concentrations of credit risk in accounts receivable are indicated below by the percentage of the total balance receivable from customers in the specified geographic area:
| | March 31, 2009 | | | March 31, 2008 | | | | | | | | | Canada | | | 16 | % | | | 25 | % | North America, excluding Canada | | | 40 | % | | | 29 | % | South America | | | 41 | % | | | 39 | % | Great Britain | | | 1 | % | | | 1 | % | Europe, excluding Great Britain | | | 2 | % | | | 6 | % | | | | 100 | % | | | 100 | % | | | | | | | | | |
FAIR VALUE
The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the relatively short periods to maturity of the instruments.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
19 – COMMITMENTS AND CONTINGENCIES
OPERATING LEASE COMMITMENTS
The Company has the following lease commitments relating to facilities:
| $ | 2010 | 58,935 | 2011 | 34,802 | | 93,737 |
For the year ended March 31, 2009, facilities expense was $127,917 ($123,786 for the year ended March 31, 2008, $119,891 for the year ended March 31, 2007).
OTHER
The Company is committed to pay an arm's length third party $75,000 upon the listing of ZIM Corporation’s common shares on a national securities exchange.
20. SUPPLEMENTAL CASH FLOW DISCLOSURE
| | | | | | | | | | Year ended March 31, 2009 | | Year ended March 31, 2008 | | Year ended March 31, 2007 | | | | $ | | $ | | $ | | Interest paid | | (48) | | (8,924) | | (8,721) | | Income taxes paid | | - | | - | | 77,968 | | Income taxes received | | 360,470 | | 204,847 | | 247,918 | |
Non-Cash Financing Activities:
On December 4, 2007, the Company’s Chief Executive Officer and majority shareholder converted debt of $99,980 and cumulative interest of $3,605 into equity.
In connection with the Company’s April 1st, 2006 acquisition of Advanced Internet Inc., the Company issued 10 million common shares, valued at $650,000, 500,000 stock options valued at $13,656 and issued a $250,000 note payable.
In conjunction with the private placement on June 30, 2006, the Company’s Chief Executive Officer and majority shareholder converted debt of $435,757 and cumulative interest of $18,437 into equity. On December 4, 2007, the Company’s Chief Executive Officer and majority shareholder converted debt of $99,980 and cumulative interest of $3,605 into equity.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
21. SEGMENT REPORTING
Management has determined that the Company operates in two reportable segments: mobile applications and enterprise software. Mobile applications involve providing SMS and other content applications and services for mobile devices and Internet TV. Enterprise software involves providing enterprise software for designing, developing and manipulating database systems and applications.
The Company considers all revenues and expenses to be of an operating nature and accordingly, allocates them to the segments. Costs specific to a segment are charged directly to the segment. Company office expenses are allocated to either of the segments based on gross revenues. Significant assets of the Company include working capital and property and equipment. The accounting policies of the reportable segments are the same as those described in the summary of the significant accounting policies.
Our premium SMS messaging revenue went from $142,774 in fiscal 2007 to $202,356 in fiscal 2008 and to $3,877 in fiscal 2009. The anomaly of the increase in the fiscal 2008 year is due to the fact that our monthly reconciliation process with one of our suppliers was delayed due to inabilities to obtain the required reports and reconciliations. At the completion of this reconciliation process we had determined we over-accrued the amounts owing by approximately $120,000 and upon receiving the documentation from the supplier on our actual accrued liability we reversed this entry. Since we record revenue for this segment on a net basis, the reversal of this payable generated income in this segment. The actual trend when the above factor is removed is $142,774 for fiscal 2007 to $81,793 in fiscal 2008 and to $3,877 in fiscal 2009.
The following table sets forth external revenues, cost of revenues, operating expenses and other amounts attributable to these product lines:
Year ended March 31, 2009 | | Mobile | | | Software | | | Total | | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | | | | Revenue | | | 367,723 | | | | 1,463,818 | | | | 1,831,541 | | Cost of revenue | | | (109,549 | ) | | | (147,145 | ) | | | (256,694 | ) | Gross margin | | | 258,174 | | | | 1,316,673 | | | | 1,574,847 | | | | | | | | | | | | | | | Allocation of operating expenses | | | 274,050 | | | | 1,397,638 | | | | 1,671,688 | | Gain on disposition of assets | | | (247 | ) | | | - | | | | (247 | ) | Allocation of interest income, net | | | (1,732 | ) | | | (8,831 | ) | | | (10,563 | ) | Income tax benefit | | | (39,270 | ) | | | (200,274 | ) | | | (239,544 | ) | | | | 232,801 | | | | 1,188,533 | | | | 1,421,334 | | | | | | | | | | | | | | | Net income | | | 25,373 | | | | 128,140 | | | | 153,513 | |
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
Year ended March 31, 2008 | | Mobile | | | Software | | | Total | | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | | | | Revenue | | | 843,162 | | | | 1,147,518 | | | | 1,990,680 | | Cost of revenue | | | (232,185 | ) | | | (151,981 | ) | | | (384,166 | ) | Gross margin | | | 610,977 | | | | 995,537 | | | | 1,606,514 | | | | | | | | | | | | | | | Allocation of operating expenses | | | 964,387 | | | | 1,202,169 | | | | 2,166,556 | | Gain on disposition of assets | | | (134,267 | ) | | | - | | | | (134,267 | ) | Gain on settlement of liability | | | (77,385 | ) | | | - | | | | (77,385 | ) | Allocation of interest income, net | | | 528 | | | | 646 | | | | 1,174 | | Income tax benefit | | | (192,338 | ) | | | (239,762 | ) | | | (432,100 | ) | | | | 560,925 | | | | 963,053 | | | | 1,523,978 | | | | | | | | | | | | | | | Net income | | | 50,052 | | | | 32,484 | | | | 82,536 | |
Year ended March 31, 2007 | | Mobile | | | Software | | | Total | | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | | | | Revenue | | | 1,116,740 | | | | 1,078,444 | | | | 2,195,184 | | Cost of revenue | | | (766,468 | ) | | | (162,350 | ) | | | (928,818 | ) | Gross margin | | | 350,272 | | | | 916,094 | | | | 1,266,366 | | | | | | | | | | | | | | | Allocation of operating expenses | | | 1,291,237 | | | | 1,246,958 | | | | 2,538,195 | | Amortization of intangible assets | | | 972,209 | | | | - | | | | 972,209 | | Allocation of interest income (expense), net | | | (2,694 | ) | | | (2,602 | ) | | | (5,296 | ) | Income tax benefit | | | (172,179 | ) | | | (130,376 | ) | | | (302,555 | ) | | | | 2,088,573 | | | | 1,113,980 | | | | 3,202,553 | | | | | | | | | | | | | | | Net loss | | | (1,738,301 | ) | | | (197,886 | ) | | | (1,936,187 | ) |
No customers generated over 10% of revenue for the year ended March 31, 2008 and one customer generated over 10% of revenue for the year ended March 31, 2009 and 2007.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
The following table sets forth segment assets used by each product line:
TOTAL ASSETS | | March 31, 2009 | | | March 31, 2008 | | | | $ | | | | $ | | Mobile | | | 232,280 | | | | 515,966 | | Software | | | 924,651 | | | | 643,184 | | Total assets | | | 1,156,931 | | | | 1,159,150 | |
| | March 31, 2009 | | | March 31, 2008 | | | | | $ | | | | $ | | Long-lived assets | | | | | | | | | Canada | | | 89,322 | | | | 154,903 | | Brazil | | | 5,797 | | | | 7,835 | | Total long-lived assets | | | 95,119 | | | | 162,738 | |
The following table sets forth external revenues and long-lived assets attributable to geographic areas. External revenues are based on the location of the customer:
Total Revenue | | Year ended March 31, 2009 | | | Year ended March 31, 2008 | | | Year ended March 31, 2007 | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | | | United States | | | 410,908 | | | | 637,665 | | | | 315,130 | | United Kingdom | | | 19,713 | | | | 61,151 | | | | 184,070 | | Europe | | | 33,891 | | | | 60,599 | | | | 312,646 | | Brazil | | | 981,484 | | | | 977,240 | | | | 1,109,234 | | Canada | | | 350,938 | | | | 232,951 | | | | 260,926 | | Other | | | 34,607 | | | | 21,074 | | | | 13,178 | | Total revenue | | | 1,831,541 | | | | 1,990,680 | | | | 2,195,184 | |
Management evaluates each segment’s performance based upon revenues and margins achieved.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
22 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
FSP FAS 107 and APB 28-1:ASC 605-25:
In April 2009, FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” was issued to require, on an interim basis, disclosures about the fair value of financial instruments for public entities. FSP FAS 107-1 and APB 28-1 are effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity may early adopt this FSP only if it concurrently adopts both FSP FAS 157-4, and FSP FAS 115-2 and FAS 124-2. The Company intends to adopt FSP FAS 107-1 and APB 28-1 for its first quarter ending June 30, 2009. As a result of applying this FSP, the Company will include the required fair value disclosures on an interim basis beginning with the interim financial statements for the three months ended June 30, 2009. Adoption of this FSP will not have an effect on the Company’s financial position or results of operations. However, the Company believes its interim fair value disclosures may contain additional information compared to previous interim periods. FAS 141R-1
On April 1,October 2009, the FASB issued an amendment to Statement of Financial Accounting StandardsASU No. 141R (“SFAS 141R”), “Business Combinations.2009-13, “Revenue Recognition - Multiple-Deliverable Revenue Arrangements,” which amends guidance in ASC 605-25, “Revenue Recognition: Multiple-Element Arrangements.” The amendment was issuedguidance will allow companies to address application issues regarding accounting and disclosure provisions for contingencies. FAS 141R-1, “Accounting for Assets Acquired and Liabilities Assumedallocate arrangement consideration in multiple deliverable arrangements in a Business Combinations That Arise from Contingencies”, amends Statement 141R by replacingmanner that better reflects the transaction’s economics. It also provides principles and application guidance on whether multiple deliverables exist, how the initial recognitionarrangement should be separated, and measurement of assets and liabilities arising from contingencies acquired or assumed in a business combination with guidance similar to that in Statement 141, before the 2007 revision.consideration allocated. It also amends Statement 141R’s subsequent accountingrequires an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of the selling price. The guidance for contingent assetseliminates the use of the residual method, requires entities to allocate revenue using the relative-selling-price method and liabilities recognized at the acquisition date and amendssignificantly expands the disclosure requirements for contingencies. multiple-deliverable revenue arrangements.
The amendment appliesauthoritative guidance requires new and expanded disclosures and is applied prospectively to business combinations for which the acquisition date isrevenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 or retrospectively for all periods presented. ZIM will adopt the beginningauthoritative guidance on April 1, 2011. ASU 2010-13: In April, 2010, the FASB issued Accounting Standards Update 2010-13 (ASU 2010-13), "Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the first annual reporting periodMarket in Which the Underlying Equity Security Trades". This update addresses whether an employee stock option should be classified as a liability or as an equity instrument if the exercise price is denominated in the currency in which a substantial portion of the entity’s equity securities trade. That currency may differ from the entity’s functional currency and from the payroll currency of the employee receiving the option. The guidance requires equity treatment for share-based payment awards that have an exercise price denominated in the currency of the market in which a substantial portion of the company’s equity shares trade, assuming all other criteria for equity classification are met. The final consensus is consistent with the guidance in the proposed ASU on this Issue, except that it clarifies that an entity cannot choose to account for such awards as a liability if the award otherwise qualifies for equity classification. The amended guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning on or after December 15, 2008. ZIM will adopt and utilize the methods stipulated in FAS 141R-1 for all future transactions of this nature. ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
FAS 142-3
On April 25, 2008, the FASB issued a FASB Staff Position (FSP) “Determination of the Useful Life of Intangible Assets” 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 under FASB Statement No. 142, Goodwill and Other Intangible Assets. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under Statement 142 and2010. In the period of expected cash flows usedadoption, entities must record a cumulative effect adjustment to measure the fair valueopening balance of the asset under FASB Statement No. 141 (revised 2007), Business Combinations, and other U.S. generally accepted accounting principles (GAAP). ZIM does not currently have any intangible assets. However, ZIM will adopt and utilize the methods stipulated in FAS 142retained earnings for that year, presented separately for all future transactions that require the establishment of the useful life of intangible assets.
EITF 03-6-1
On June 16, 2008 EITF 03-6-1 “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” was issued. This EITF addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (EPS) under the two-class method described in paragraphs 60 and 61 of FASB Statement No. 128, Earnings per Share. Unvested share-based paymentoutstanding awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. ZIM does not currently have any unvested share-based payments and its share based payments do not contain dividend rights. As such EITF 03-6-1 has no impact on the calculation of ZIM’s EPS. However, ZIM will adopt and utilize the methods stipulated in EITF 03-6-1 for all future EPS calculation to ensure that the appropriate impacts are recognized as per EITF 03-6-1.
SFAS 157:
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurement" ("SFAS 157"). SFAS 157 addresses standardizing the measurement of fair value for companies that are required to use a fair value measure for recognition or disclosure purposes. The FASB defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." The new standard provides a single definition of fair value, together with a framework for measuring it and requires additional disclosure about the use of fair value to measure assets and liabilities. While the statement does not require any new fair value measurements, it does change certain current practices. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007.
The effective date of SFAS 157 has been delayed for all nonfinancial assets and liabilities except those that are recognized or disclosed at fair value in the financial statements on at least annual basis, for fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company has adopted SFAS 157 for financial assets and liabilities for the fiscal year beginning April 1, 2008 and its adoption did not have a material impact on its consolidated financial position results of operations or cash flows.
The Company does not anticipate that the adoption of SFAS 157, for all other nonfinancial assets and liabilities, will have a significant impact on its consolidated financial position, statement of operations or cash flows.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
SFAS 159:
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits companies the option, at specified election dates, to measure financial assets and liabilities at their current fair value, with the corresponding changes in fair value from period to period recognized in the income statement. Additionally, SFAS 159 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar assets and liabilities. Statement 159 is effective as of the beginning of the first fiscal year in which the new guidance is initially applied. Early adoption is permitted. If an entity elects early application and the period of adoption is not the first reporting period in the entity’s fiscal year, the amended guidance must be applied through retrospective application from the beginning of the entity’s fiscal year. Management is currently assessing the impact of that begins after November 15, 2007. The Company’s adoption of SFAS 159 did notthis authoritative guidance will have, a significant impact on its consolidated financial position, statement of operations or cash flows.
SFAS 162:
In May 2008 the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("FASB No. 162"). The new standard identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. The Company adoption of SFAS No. 162 did not have a material impactif any, on the Company's consolidated results of operations, cash flows and financial condition.
FAS 115-2 and FAS 124-2:
In April 2009, FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” was issued to make the guidance on other-than-temporary impairments of debt securities more operational and improve the financial statement disclosures related to other-than-temporary impairments for debt and equity securities. The FSP clarifies the interaction of the factors that should be considered when determining whether a debt security is other-than-temporarily impaired. To evaluate whether a debt security is other-than-temporarily impaired, an entity must first determine whether the fair value of the debt security is less than its amortized cost basis at the balance sheet date. If the fair value is less than the amortized cost basis, then the entity must assess whether it intends to sell the security and whether it is more likely than not that it will be required to sell the debt security before recovery of its amortized cost basis. If an entity determines that it will sell a debt security or that it more likely than not will be required to sell a debt security before recovery of its amortized cost basis, then it must recognize the difference between the fair value and the amortized cost basis of the debt security in earnings. Otherwise, the other-than-temporary impairment must be separated into two components: the amount related to the credit loss and the amount related to all other factors. The amount related to the credit loss must be recognized in earnings, while the other component must be recognized in other comprehensive income, net of tax.
ZIM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN US DOLLARS)
The portion of other-than-temporary impairment recognized in earnings would decrease the amortized cost basis of the debt security, and subsequent recoveries in the fair value of the debt security would not result in a write-up of the amortized cost basis. FSP FAS 115-2 and FAS 124-2 are effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. If an entity adopts either FSP FAS 157-4 or FSP FAS 107-1 and APB 28-1 for periods ending after March 15, 2009, then it must adopt this FSP at the same time. The Company intends to adopt FSP FAS 115-2 and FAS 124-2 for the year ended March 31, 2009. The Company’s adoption of FAS 115-2 and FAS 124-2 did not have a significant impact on its consolidated financial position, statement of operations or cash flows.statements.
From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company’s management believes that the impact of recently issued standards that are not yet effective will not have any significant impact on the consolidated financial statements upon adoption. ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) 3 - ACCOUNTING FOR UNCERTAIN TAX POSITIONS
The Company recognizes any interest accrued related to unrecognized tax benefits in interest and penalties in income tax benefit in the Consolidated Statement of Operations.
At March 31, 2011, the Company had $88,075 in unrecognized tax benefits, related to estimated Investment Tax Credits for research and development in Canada, which would favorably impact the Company’s effective tax rate if subsequently recognized. The unrecognized tax benefits as at March 31, 2010, that were subsequently realized in fiscal 2011, were $70,504. The unrecognized tax benefits as at March 31, 2009, that were subsequently realized in fiscal 2010, were $40,900.
The following table indicates the changes to the Company’s unrecognized tax benefits for the year ended March 31, 1010. Subsequent to
| | Unrecognized Tax Benefit | | Balance at April 1, 2010 | | $ | 70,349 | | Foreign exchange effects | | $ | 3,326 | | Settlement with taxing authorities in 2011 | | $ | (69,531 | ) | Addition based on tax position in 2011 | | $ | 83,931 | | Balance at March 31, 2011 | | $ | 88,075 | |
4 – GAIN ON SETTLEMENT
In the endfirst quarter of fiscal 2009,2010, the Company negotiated an out of court settlement of an unrecognized claim. The full amount of the settlement is $198,208,was $214,961, subject to certain terms. Due to the inherent uncertainty of this contingent gain, it will be recorded at the time funds are received. As of May 7, 2009, $158,567March 31, 2010, $171,400 has been received and will behas been recorded as other income during ZIM’s first quarter ended June 30, 2009.. It is uncertain if the company will receive the remainder of the settlement. 245 – COMPARATIVE FIGURESINVESTMENTS
CertainOn May 31, 2010 ZIM Corporation made a $10,290 investment in LW CPI through Investpro Securities.
The LW CPI program, through the listing of a series of capital pool companies on the comparative figures have been reclassifiedTSX (Toronto Stock Exchange) is aiming to conform withbecome the current year’s presentation.leading capital pool route to public capital market funding for burgeoning technology firms.
On October 21, 2009 ZIM Corporation made a $95,147 investment in Seregon Solutions Inc. ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) The investment consisted of the purchase of 61,480 common shares and 69,677 warrants. Depending on the fiscal 2010 results of Seregon each warrant was convertible, at no cost to ZIM, to a portion of a common share or would have expired with no action. The warrants converted during fiscal 2011 and ZIM gained an additional 69,677 common shares to a total of 131,157. With the additional shares provided to ZIM, ZIM will not gain significant influence, nor control, over Seregon.
There have been no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment in Seregon.
6 – INTANGIBLE ASSETS
On October 27th, 2010 ZIM purchased all of the technology assets of Torch Technologies for the sum of $50,000 Canadian dollars ($51,451 United States dollars).
The Company has recorded the acquired technology assets as intangible assets on the consolidated balance sheet. This asset is being amortized over 60 months on a straight line basis. Amortization expense for fiscal 2011 was $4,251 the net book value as at March 31, 2011, was $47,200.
7 - ACCOUNTS RECEIVABLE | | March 31, 2011 | | | March 31, 2010 | | | March 31, 2009 | | | | $ | | | $ | | | $ | | Trade accounts receivable | | | 114,299 | | | | 196,446 | | | | 140,557 | | Unbilled trade accounts receivable | | | 2,392 | | | | 37,754 | | | | 9,098 | | Allowance for doubtful accounts | | | (561 | ) | | | (10,654 | ) | | | (3,913 | ) | Other | | | 2,299 | | | | 898 | | | | 11,072 | | | | | 118,429 | | | | 224,444 | | | | 156,814 | |
ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) 8 - PROPERTY AND EQUIPMENT
March 31, 2011 | | Cost | | | Accumulated depreciation | | | Net book value | | | | $ | | | $ | | | $ | | | | | | | | | | | | Computer equipment | | | 1,024,046 | | | | 1,004,538 | | | | 19,508 | | Software | | | 93,262 | | | | 90,917 | | | | 2,345 | | Office furniture and equipment | | | 230,222 | | | | 215,914 | | | | 14,308 | | Voice communications equipment | | | 25,167 | | | | 22,448 | | | | 2,719 | | Leasehold improvements | | | 151,092 | | | | 151,092 | | | | - | | | | | 1,523,789 | | | | 1,484,909 | | | | 38,880 | |
March 31, 2010 | | Cost | | | Accumulated depreciation | | | Net book value | | | | $ | | | $ | | | $ | | | | | | | | | | | | Computer equipment | | | 1,024,046 | | | | 992,149 | | | | 31,897 | | Software | | | 93,262 | | | | 89,409 | | | | 3,853 | | Office furniture and equipment | | | 219,244 | | | | 210,166 | | | | 9,078 | | Voice communications equipment | | | 25,167 | | | | 21,778 | | | | 3,389 | | Leasehold improvements | | | 151,092 | | | | 133,464 | | | | 17,623 | | | | | 1,512,811 | | | | 1,446,966 | | | | 65,844 | |
Depreciation expense for the year ending March 31, 2011 was $37,943 ($51,038 for the year ending March 31, 2010, and $57,183 for the year ending March 31, 2009). These expenses are included in the cost of sales account and the selling, general, and administration account.
9 – LINE OF CREDIT
During fiscal 2011, a working capital line of credit was available at approximately $51,451 (equivalent to $50,000 Canadian, the Company’s functional currency) from the Company’s major financial institution. This credit facility is secured by the Company’s assets. In addition, $514,509 (equivalent to $500,000 Canadian, the Company’s functional currency) was available from the Company’s CEO and principal shareholder as an unsecured revolving facility. Amounts drawn on either of these credit facilities bear interest at the prime rate, as published by the Royal Bank of Canada, plus 1.75%.
In order to maintain the working capital line of credit the Company must maintain a Tangible Net Worth of greater than $150,000 Canadian dollars (equivalent to $154,353 US dollars) and a ratio of current assets to current liabilities greater than 1.10:1. During fiscal years 2009, 2010 and 2011 the Company has not been in violation of these covenants.
As at March 31, 2009, March 31, 2010 and March 31, 2011 nothing was drawn down on these lines of credit. The lines of credit do not have defined expiration or renewal dates. ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) 10 - ACCRUED LIABILITIES
| | March 31, 2011 | | | March 31, 2010 | | | March 31, 2009 | | | | $ | | | $ | | | $ | | Employee related accruals | | | 63,391 | | | | 39,552 | | | | 20,537 | | Withholding tax accrual | | | 2,852 | | | | 1,317 | | | | 2,442 | | Trade | | | 23,090 | | | | 6,688 | | | | 23,787 | | | | | 89,333 | | | | 47,557 | | | | 46,766 | |
11 – COMMON SHARE ISSUE
The Company did not issue any common shares during the years ended March 31, 2011, March 31, 2010 or March 31, 2009 pursuant to the exercise of stock options by employees.
On February 27, 2009, the Company issued 10,000,000 unrestricted common shares to executive officers in lieu of compensation for services provided. 5,000,000 shares were issued to Dr. Michael Cowpland and 5,000,000 shares were issued to Mr. James Stechyson on approval of the other members of the Board of Directors. The share value at the time of the issue was $0.002 and a compensation expense of $20,000 was recognized.
On June 24, 2009, the Company issued 10,000,000 unrestricted common shares to executive officers and consultants in lieu of compensation for services provided. 5,000,000 shares were issued to Dr. Michael Cowpland and 5,000,000 shares were issued to Mr. James Stechyson on approval of the other members of the Board of Directors. The share value at the time of the issue was $0.0031 and a compensation expense of $31,007 was recognized.
On June 24, 2010, the Company issued 10,000,000 common shares to executive officers and consultants in lieu of compensation for services provided. 5,000,000 shares were issued to Dr. Michael Cowpland and 5,000,000 shares were issued to a holding company controlled by Mr. James Stechyson on approval of the other members of the Board of Directors. The share value at the time of the issue was $0.01 and compensation expense of $100,000 was recognized.
On November 12, 2009, the Board of Directors approved a share repurchase plan. Shares may be repurchased by the company to a maximum of $200 per day and $12,000 per quarter. The repurchase program has no expiration date. As of March 31, 2011 no shares have been repurchased as part of this program. ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) 12 - RELATED PARTY TRANSACTIONS
Except for the 5,000,000 shares of common stock, valued at $15,504, issued on June 24, 2009 and for the 5,000,000 shares of common stock, valued at $10,000, issued on February 27, 2009 (See Note 10), no remuneration has been recorded in these financial statements for the services of the Chief Executive Officer (CEO) for the fiscal year 2010.
Except for the 5,000,000 shares of common stock, valued at $50,000 issued on June 24, 2010 (See Note 10) and for stock options issued through the year with a fair market value of $7,931 no remuneration has been recorded in these financial statements for the services of the Chief Executive Officer (CEO) for the fiscal year 2011. The CEO is also a director and the controlling shareholder.
13 - STOCK OPTIONS
During the year ended March 31, 2011, March 31, 2010 and March 31, 2009, the Company issued options to employees and non-employees, and as a result, additional paid in capital has been increased by $71,513, $81,177 and $20,220 respectively.
The increase in additional paid in capital is the value associated with the vesting of options, which is recorded as compensation expense in the statement of operations.
Under ZIM’s Employee Stock Option Plan, the Company may grant options to its officers, directors and employees for up to 27,200,000 common shares. As at March 31, 2011, 20,205,382 (March 31, 2010, 19,891,445 and March 31, 2009, 21,383,073) options were outstanding under the Employee Stock Option Plan. In addition, 6,010,000 (March 31, 2009, 6,010,000 and March 31, 2008, 6,010,000) options were issued outside of ZIM’s Employee Stock Option Plan and are outstanding. Stock options are granted with an exercise price equal to the common share’s fair market value at the date of grant. Options are granted periodically and both the maximum term of an option and the vesting period are set at the Board's discretion. All options granted in fiscal year 2011 vested on the day of the grant and have a three year term. The expected life of the grants due to forfeitures and exercise of options is estimated based on recent history and is 2.5 years.
The company recognized the following expense relating to stock options and grants:
| | Year ended March 31, 2011 | | | Year ended March 31, 2010 | | | Year ended March 31, 2009 | | | | $ | | | $ | | | $ | | Options compensation expense for employees | | | 26,428 | | | | 72,302 | | | | 5,905 | | Options compensation expense for consultants | | | 45,085 | | | | 8,875 | | | | 14,315 | | Stock grant compensation expense for executive officers | | | 100,000 | | | | 31,007 | | | | 20,000 | | Total expense | | | 171,513 | | | | 112,184 | | | | 40,220 | |
All options granted vested on the day of the grant resulting in the Company not having any non-vested awards as of March 31, 2011, March 31, 2010 or March 31, 2009. ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) A summary of the status of the stock options is as follows:
| | March 31, 2011 | | | March 31, 2010 | | | March 31, 2009 | | | | Number of options outstanding | | | Weighted average exercise price | | | Number of options outstanding | | | Weighted average exercise price | | | Number of options outstanding | | | Weighted average exercise price | | | | | | | $ | | | | | | $ | | | | | | $ | | Options outstanding, beginning of year | | | 25,901,445 | | | | 0.015 | | | | 27,393,073 | | | | 0.034 | | | | 29,727,089 | | | | 0.069 | | Granted | | | 10,311,528 | | | | 0.012 | | | | 10,891,822 | | | | 0.009 | | | | 5,693,595 | | | | 0.006 | | Exercised | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Expired | | | (9,997,591 | ) | | | 0.027 | | | | (12,383,450 | ) | | | 0.052 | | | | (8,027,611 | ) | | | 0.141 | | Options outstanding, end of year | | | 26,215,382 | | | | 0.009 | | | | 25,901,445 | | | | 0.015 | | | | 27,393,073 | | | | 0.034 | |
The following table represents a summary of the options outstanding as at March 31, 2011:
| | | Options outstanding and exercisable | | | | | Range of exercise prices | | | Number outstanding at March 31, 2010 | | | Weighted average remaining contractual life | | | Weighted average exercise price | | $ | | | | | | Years | | | $ | | 0.002-0.004 | | | | 3,040,843 | | | | 1.32 | | | | 0.0024 | | 0.004-0.008 | | | | 5,072,032 | | | | 0.31 | | | | 0.0061 | | 0.008-0.012 | | | | 14,958,412 | | | | 2.32 | | | | 0.0100 | | 0.012-0.016 | | | | - | | | | | | | | | | 0.016-0.020 | | | | 3,144,095 | | | | 2.26 | | | | 0.0197 | | | | | | 26,215,382 | | | | 1.81 | | | | 0.0095 | |
ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) The weighted average grant-date fair value of options granted in fiscal 2011, 2010, and 2009 were $0.0064, $0.008, and $0.004 respectively.
As at March 31, 2011 there were 8,112,875 options in the money with a total intrinsic value of $42,963.
EMPLOYEE AND NON-EMPLOYEE OPTIONS
During the year ended March 31, 2011, 2,339,183 options were granted to employees. In the year ended March 31, 2010, 9,259,319 options were granted to employees. In fiscal 2009, 1,505,000 options were granted to employees.
During the year ended March 31, 2011, 7,972,345 options were granted to non-employees. In the year ended March 31, 2010, 1,632,503 options were granted to non-employees. In fiscal 2009, 4,188,595 options were granted to non-employees.
No options have been granted with exercise prices below the market price on the respective grant dates during the year ended March 31, 2011, March 31, 2010 or March 31, 2009.
During the years ended March 31, 2011 and March 31, 2010, certain employees were terminated and are no longer providing any services to ZIM. Under their termination agreements, their option grants were modified and the options were retained and extended to their original term. The options are accounted for in accordance with ASC 718. The intrinsic values of the modified options are to be recognized as compensation expense on the date of modification, which is considered the measurement date. The compensation expense recorded due to the modification of terminated employees’ options was $NIL, as all modified options had no intrinsic value.
15 - INTEREST
| | Year ended March 31, 2011 | | | Year ended March 31, 2010 | | | Year ended March 31, 2009 | | | | $ | | | $ | | | $ | | Interest income | | | 112,496 | | | | 40,871 | | | | 10,611 | | Interest expense | | | (4,218 | ) | | | (10,256 | ) | | | (48 | ) | Total | | | 108,278 | | | | 30,615 | | | | 10,563 | |
ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) 16 - INCOME TAXES
ASC 740 requires that the Company recognize in its financial statements the impact of a tax position if that position is more likely than not of not being sustained on an audit, based on the technical merits of the position.
The Company and its subsidiaries file income tax returns in Canadian, Brazil and U.S. federal jurisdictions, and various provincial jurisdictions. The Company’s federal income tax returns are generally subject to examination for a period of three years after filing of the respective return in the U.S., four years in Canada and five years in Brazil.
Income tax expense varies from the amount that would be computed by applying the basic federal and provincial income tax rates to loss before taxes, as follows:
| | Year ended March 31, 2011 | | | Year ended March 31, 2010 | | | Year ended March 31, 2009 | | | | $ | | | $ | | | $ | | Tax Rate, comprised of a federal rate of 11.00% and a provincial rate of 4.87% (In 2010 and 2009, a federal rate of 11.00% and provincial rate of 5.5%) | | | 15.87 | % | | | 16.50 | % | | | 16.50 | % | | | | | | | | | | | | | | Expected Canadian Income Tax (Recovery) | | | 17,222 | | | | 14,983 | | | | (14,195 | ) | Change in valuation allowance | | | (91,831 | ) | | | (196,532 | ) | | | 146,724 | | Losses expired during the year | | | 0 | | | | 113,410 | | | | 186,564 | | Permanent differences | | | 27,744 | | | | 25,860 | | | | 61,677 | | Effect of changes in rates | | | (67 | ) | | | 96,375 | | | | - | | Difference between Canadian and foreign tax rates | | | 29,982 | | | | (9,465 | ) | | | 1,171 | | Adjustments to deferred tax assets | | | 91,898 | | | | (58,475 | ) | | | (363,427 | ) | Refundable tax credits | | | (327,760 | ) | | | (200,118 | ) | | | (258,058 | ) | Other | | | (5,492 | ) | | | - | | | | - | | | | | (258,304 | ) | | | (213,962 | ) | | | (239,544 | ) |
ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) The change in valuation allowance for originating temporary differences and losses available for carry forward, is calculated using an expected deferred tax rate of 15.50%, based on the application of the Small Business Deduction. The rate at which such amounts may be realized as disclosed as part of a deferred tax asset and related valuation allowance takes into account the enacted tax rate decreases over the expected period of realization.
Income tax recoveries of $258,304, $213,962, and $239,544 for the years ended March 31, 2011, March 31, 2010 and March 31, 2009, respectively, relate to refundable income tax credits for research and development in Canada, net of the tax expense on account of income in Brazil. The investment tax credits are subject to review and approval by taxation authorities and it is possible that the amounts granted will be different from the amounts recorded by the Company.
Deferred income taxes reflect the impact of temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. The tax effects of temporary differences that gave rise to significant portions of the deferred tax asset and deferred tax liability are as follows: | | March 31, 2011 | | | March 31, 2010 | | | March 31, 2009 | | | | $ | | | $ | | | $ | | Temporary differences | | | | | | | | | | Losses available for carry forward | | | 649,631 | | | | 720,932 | | | | 714,392 | | Property and equipment - differences in net book value and unamortized capital cost | | | 145,876 | | | | 143,234 | | | | 115,341 | | Intangible assets - differences in net book value and tax basis | | | 288,571 | | | | 269,077 | | | | 230,685 | | Unused scientific research and experimental development amounts deductible and investment tax credits available for carry forward | | | 1,139,930 | | | | 1,086,422 | | | | 894,830 | | Gross deferred tax asset | | | 2,223,007 | | | | 2,219,665 | | | | 1,955,248 | | Valuation allowance | | | (2,223,007 | ) | | | (2,219,665 | ) | | | (1,955,248 | ) | Net deferred tax asset | | | - | | | | - | | | | - | |
ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) The Company has federal and provincial non-capital losses available to reduce taxable income in Canada, which expire in the following years: | | Federal & Provincial | | | | $ | | | | | | 2014 | | | 915,766 | | 2015 | | | 1,687,120 | | 2026 | | | 1,034,050 | | 2027 and thereafter | | | 547,836 | | | | | 4,184,714 | |
As at March 31, 2011, the Company had accumulated unclaimed federal and provincial scientific research and experimental development deductions of approximately $3,861,735 ($3,326,074 in 2010), ($2,729,432 in 2009). This amount can be carried forward indefinitely to reduce income taxes payable in future years.
The Company has federal scientific research and experimental development credits available to reduce income taxes in Canada, which expire in the following years: 2018 | | | 1,406 | | 2019 | | | 7,574 | | 2021 | | | 18,602 | | 2022 | | | 364,493 | | 2023 | | | 2,340 | | 2034 | | | 2,931 | | Thereafter | | | 8,538 | | | | | 405,884 | |
17 - EARNINGS (LOSS) PER SHARE
For the purposes of the earnings (loss) per share computation, the weighted average number of common shares outstanding has been used. Had the treasury stock method been applied to the unexercised share options, the effect on the earnings per share for the year ended March 31, 2011, would be negligible.
The following securities are considered "in the money" and could potentially dilute the basic earnings per share in the future but have not been included in diluted earnings per share because their effect was negligible:
| March 31, 2011 | March 31, 2010 | March 31, 2009 | | | | | Stock options | 8,112,875 | 8,529,438 | - |
ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) Total options outstanding at March 31, 2011, 2010 and 2009 were 26,215,382, 25,901,445, and 27,393,073 respectively.
18 - FINANCIAL RISKS
FOREIGN EXCHANGE RISK
The Company operates internationally, giving rise to significant exposure to market risks from fluctuations and the degree of volatility of foreign exchange rates. The Company is exposed to exchange risk due to the following financial instruments denominated in foreign currencies.
Cash and cash equivalents of $1,770,990 are comprised of $445,612 in cash and $1,325,378 in cash equivalents. The cash equivalents of $1,333,131 at March 31, 2011 (985,221 at March 31, 2010) are comprised of:
Held in Canada: Renaissance High Interest Savings at 0.70% - $51,646 ($50,190 CDN) – No Maturity
Held in Brazil:
Bank Deposit Certificate (CDB) at 8% per annum plus inflation - $1,273,732 - No Maturity. Of these deposits R$120,000 are secured by Government Deposit Insurance. Cash and cash equivalents includes the following amounts in their source currency:
| | March 31, 2011 | | | March 31, 2010 | | | | | | | | | Canadian dollars | | | 122,614 | | | | 225,807 | | US dollars | | | 59,464 | | | | 68,109 | | Brazilian reals | | | 2,548,542 | | | | 1,522,507 | | British pounds | | | 6,319 | | | | 4,520 | | Euros | | | 7,878 | | | | 4,353 | |
ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) Accounts receivable include the following amounts receivable in their source currency:
| | March 31, 2011 | | | March 31, 2010 | | | | | | | | | Canadian dollars | | | 16,083 | | | | 37,590 | | US dollars | | | 81,397 | | | | 102,627 | | Brazilian reals | | | 4,089 | | | | 133,105 | | British pounds | | | 774 | | | | 834 | | Euros | | | 11,797 | | | | 6,521 | |
Accounts payable include the following amounts payable in their source currency:
| | March 31, 2011 | | | March 31, 2010 | | | | | | | | | Canadian dollars | | | 13,423 | | | | 8,871 | | US dollars | | | 10,003 | | | | 2,893 | | Brazilian reals | | | 10,855 | | | | 26,964 | | British pounds | | | 309 | | | | - | |
Accrued liabilities include the following accruals in their source currency:
| | March 31, 2011 | | | March 31, 2010 | | | | | | | | | Canadian dollars | | | 76,727 | | | | 29,202 | | US dollars | | | 9,938 | | | | 6,622 | | Brazilian reals | | | 719 | | | | 21,694 | |
The Company does not use derivative financial instruments to reduce its foreign exchange risk exposure.
CREDIT RISK
The Company is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments. Credit exposure is minimized by dealing with only creditworthy counterparties in accordance with established credit approval policies. ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) Concentration of credit risk in accounts receivable is indicated below by the percentage of the total balance receivable from customers in the specified geographic area:
| | March 31, 2011 | | | March 31, 2010 | | | | | | | | | Canada | | | 7 | % | | | 16 | % | North America, excluding Canada | | | 30 | % | | | 46 | % | South America | | | 56 | % | | | 33 | % | Great Britain | | | 0 | % | | | 1 | % | Europe, excluding Great Britain | | | 7 | % | | | 4 | % |
FAIR VALUE
The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the relatively short periods to maturity of the instruments.
19 – COMMITMENTS AND CONTINGENCIES
OPERATING LEASE COMMITMENTS
The Company has the following financial commitments related to minimum rent expenses for facilities: | | $ | | | 2012 | 56,964 | | | 2013 | 56,964 | | | 2014 | 56,964 | | | 2015 | 56,964 | | | 2016 | 33,229 | | | Total | 261,085 | |
For the year ended March 31, 2011, facilities expense was $123,546 ($110,970 for the year ended March 31, 2010 and $127,917 for the year ended March 31, 2009). The lease was renewed for 5 years on November 1, 2010.
OTHER
The Company is committed to pay an arm's length third party $75,000 upon the listing of ZIM Corporation’s common shares on a national securities exchange. ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) 20 - SUPPLEMENTAL CASH FLOW DISCLOSURE
| | Year ended March 31, 2011 | | Year ended March 31, 2010 | | Year ended March 31, 2009 | | | $ | | $ | | $ | Interest paid | | $(4,218) | | (10,256) | | (48) | Income taxes paid | | (96,539) | | (26,514) | | - | Income taxes received | | 270,886 | | 260,433 | | 360,470 |
21- SEGMENT REPORTING
The Company operates in two reportable segments based on product differentiation: mobile and enterprise software. Mobile applications involve providing SMS and other content applications and services for mobile devices. Enterprise software involves providing enterprise software for designing, developing and manipulating database systems and applications.
The Company considers all revenues and expenses to be of an operating nature and accordingly, allocates them to the segments. Costs specific to a segment are charged directly to the segment. Company operating expenses are allocated to either of the segments based on gross revenues. Significant assets of the Company include working capital, an investment and property and equipment. The accounting policies of the reportable segments are the same as those described in the summary of the significant accounting policies.
The following table sets forth external revenues, cost of revenues (including depreciation expense), operating expenses (including depreciation expense) and other amounts attributable to these product lines:
Year ended March 31, 2011 | | Mobile | | | Software | | | Total | | | | $ | | | $ | | | $ | | | | | | | | | | | | Revenue | | | 280,339 | | | | 1,729,432 | | | | 2,009,771 | | Cost of revenue | | | 71,902 | | | | 189,535 | | | | 261,437 | | Gross margin | | | 208,437 | | | | 1,539,897 | | | | 1,748,334 | | | | | | | | | | | | | | | Allocation of operating expenses | | | 208,411 | | | | 1,539,708 | | | | 1,748,119 | | Allocation of interest income, net | | | (12,909 | ) | | | (95,369 | ) | | | (108,278 | ) | Income tax benefit | | | (30,795 | ) | | | (227,509 | ) | | | (258,304 | ) | | | | 164,707 | | | | 1,216,830 | | | | 1,381,537 | | | | | | | | | | | | | | | Net income | | | 43,730 | | | | 323,067 | | | | 366,797 | |
ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS)
Year ended March 31, 2010 | | Mobile | | | Software | | | Total | | | | $ | | | $ | | | $ | | | | | | | | | | | | Revenue | | | 320,784 | | | | 1,276,681 | | | | 1,597,465 | | Cost of revenue | | | 80,010 | | | | 98,452 | | | | 178,462 | | Gross margin | | | 240,774 | | | | 1,178,229 | | | | 1,419,003 | | | | | | | | | | | | | | | Allocation of operating expenses | | | 259,651 | | | | 1,270,605 | | | | 1,530,256 | | Gain on disposition of assets | | | (43 | ) | | | - | | | | (43 | ) | Other income | | | (171,400 | ) | | | - | | | | (171,400 | ) | Allocation of interest income, net | | | (5,195 | ) | | | (25,420 | ) | | | (30,615 | ) | Income tax benefit | | | (36,305 | ) | | | (177,657 | ) | | | (213,962 | ) | | | | 46,708 | | | | 1,067,528 | | | | 1,114,236 | | | | | | | | | | | | | | | Net income | | | 194,066 | | | | 110,701 | | | | 304,767 | |
Year ended March 31, 2009 | | Mobile | | | Software | | | Total | | | | $ | | | $ | | | $ | | | | | | | | | | | | Revenue | | | 367,723 | | | | 1,463,818 | | | | 1,831,541 | | Cost of revenue | | | 109,549 | | | | 147,145 | | | | 256,694 | | Gross margin | | | 258,174 | | | | 1,316,673 | | | | 1,574,847 | | | | | | | | | | | | | | | Allocation of operating expenses | | | 274,050 | | | | 1,397,638 | | | | 1,671,688 | | Gain on disposition of assets | | | (247 | ) | | | - | | | | (247 | ) | Allocation of interest income, net | | | (1,732 | ) | | | (8,831 | ) | | | (10,563 | ) | Income tax benefit | | | (39,270 | ) | | | (200,274 | ) | | | (239,544 | ) | | | | 232,801 | | | | 1,188,533 | | | | 1,421,334 | | | | | | | | | | | | | | | Net income | | | 25,373 | | | | 128,140 | | | | 153,513 | |
ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS)
No customers generated over 10% of revenue for the years ended March 31, 2011 or 2010 and one customer generated over 10% of revenue for the year ended March 31, 2009.
The following table sets forth total assets used by each segment:
TOTAL ASSETS | | March 31, 2011 | | | March 31, 2010 | | | March 31, 2009 | | | | $ | | | $ | | | $ | | Mobile | | | 343,035 | | | | 367,001 | | | | 232,280 | | Software | | | 2,116,206 | | | | 1,460,618 | | | | 924,651 | | Total assets | | | 2,459,241 | | | | 1,827,619 | | | | 1,156,931 | |
The following tables set forth external revenues and long-lived assets attributable to geographic areas. External revenues are based on the location of the customer:
| | March 31, 2011 | | | March 31, 2010 | | | March 31, 2009 | | | | $ | | | $ | | | $ | | Long-lived assets | | | | | | | | | | Canada | | | 34,940 | | | | 60,907 | | | | 89,322 | | Brazil | | | 3,940 | | | | 4,937 | | | | 5,797 | | Total long-lived assets | | | 38,880 | | | | 65,844 | | | | 95,119 | |
Total Revenue | | Year ended March 31, 2011 | | | Year ended March 31, 2010 | | | Year ended March 31, 2009 | | | | $ | | | $ | | | $ | | | | | | | | | | | | United States | | | 390,064 | | | | 360,795 | | | | 410,908 | | United Kingdom | | | 7,914 | | | | 45,663 | | | | 19,713 | | Europe | | | 58,583 | | | | 41,944 | | | | 33,891 | | Brazil | | | 1,320,805 | | | | 917,036 | | | | 981,484 | | Canada | | | 169,168 | | | | 209,578 | | | | 350,938 | | Other | | | 73,237 | | | | 22,449 | | | | 34,607 | | Total revenue | | | 2,009,771 | | | | 1,597,465 | | | | 1,831,541 | |
ZIM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) Management evaluates each segment’s performance based upon revenues and gross margins achieved.
22 – SUBSEQUENT EVENT
On June 29, 2011 ZIM Corporation made a $206,079 investment in Connecting People For health Cooperative Limited. The investment consisted of the purchase of 200 common shares.
ITEM 19. EXHIBITS.
The exhibits filed herewith are listed inSee the Exhibit Index immediately preceding such exhibits. The Exhibit Index is incorporated herein by reference.hereto.
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
ZIM Corporation (Registrant)
By /s//s/ Michael Cowpland ------------------------------------
Michael Cowpland (President and CEO) Date: July 15, 200919, 2011
EXHIBIT INDEX Exhibit Number | EXHIBIT | 1.1 | Articles of Incorporation of the Registrant (Incorporated by reference to the Registrant's Registration Statement on Form S-4 filed on November 1, 2002 (No. 333-100920)) | 1.2 | By-Laws of the Registrant (Incorporated by reference to the Registrant's Registration Statement on Form S-4 filed on November 1, 2002 (No. 333-100920)) | 4.10 † | Employee Stock Option Plan, as amended September 22, 2005 (Incorporated by reference to Appendix A to the Registrant’s Proxy Statement filed August 19, 2005) | 4.11 † | Form of Stock Option Agreement under Employee Stock Option Plan (Incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-KSB filed June 28, 2006) | 4.12 † | Form of Non-Qualified Stock Option Agreement between the Registrant and each of Michael Cowpland, James Stechyson, Steve Houck and Charles Saikaley, dated, 2001 (Incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-KSB filed June 28, 2006) | 4.13 | ZIM SMS Gateway Agreement with SIT Consulting, dated October 27, 2004 (Incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-KSB filed June 28, 2006) | 4.14 | Secured Senior Promissory Note dated March 31, 2006 between ZIM Corporation and Advanced Telecom Services, Inc. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed April 4, 2006) | 4.15 | Loan Agreement dated August 11, 2005 between ZIM Corporation and Dr. Michael Cowpland (Incorporated by reference to Exhibit 10.11 to the Registrant’s Current Report on Form 8-K filed August 11, 2005) | 4.16 | Surrender and Conversion Agreement by and between Michael Cowpland and ZIM Corporation dated December 4, 2007 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2007). | 4.17† | Consulting Agreement by and between Chapman CFO Resources Inc. and ZIM Corporation dated July 20, 2007 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2007). | 4.18 | Stock Purchase Agreement dated March 28, 2006 by and among ZIM Corporation, Advanced Telecom Services, Inc. and Advanced Internet, Inc. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed March 28, 2006) | 8.1 * | List of subsidiaries of the Registrant (*) | 12.1 * | Certification by the Chief Executive Officer, Michael Cowpland, pursuant to Exchange Act Rules 13(a)-14(a) and 15d-14(a) (*) | 12.2 * | Certification by the Chief Financial Officer, John Chapman, pursuant to Exchange Act Rules 13(a)-14(a) and 15d-14(a) (*) | 13.1 * | Certification by the Chief Executive Officer, Michael Cowpland, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*) | 13.2 * | Certification by the Chief Financial Officer, John Chapman, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*) | 15.1 * | Consent of Ernst and Young LLP, an independent registered public accounting firm | 15.2 * | Consent of Raymond Chabot Grant Thornton LLP, an independent registered public accounting firm (*) | (*)* | Filed herewith. | † | Management contract or compensatory plan or arrangement. |
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