Exhibit 99.2
Horwath Orenstein LLP
DOCUCOM LIMITED PARTNERSHIP
Financial Statements
Year Ended October 31, 2005
Horwath Orenstein LLP
AUDITORS' REPORT
To the Partners of DocuCom Limited Partnership
We have audited the balance sheet of DocuCom Limited Partnership as at October 31, 2005 and the statements of income, partners' capital and cash flow for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material respects, the financial position of the partnership as at October 31, 2005 and the results of its operations and its cash flows far the year then ended in accordance with Canadian generally accepted accounting principles.
Toronto, Ontario
December 21, 2005 CHARTERED ACCOUNTANTS
1
DOCUCOM LIMITED PARTNERSHIP
Balance Sheet
October 31, 2005
2005 | 2004 | |||||||
ASSETS | ||||||||
CURRENT | ||||||||
Accounts receivable | $ | 1,879,956 | $ | 2,288,165 | ||||
Inventories | 899,955 | 1,463,474 | ||||||
Prepaid expenses | 47,569 | 42,045 | ||||||
Due from partners (Note 3) | - | 400,000 | ||||||
2,827,480 | 4,193,684 | |||||||
CAPITAL ASSETS (Note 4) | 539,757 | 685,124 | ||||||
$ | 3,367,237 | $ | 4,878,808 | |||||
LIABILITIES AND PARTNERS' CAPITAL | ||||||||
CURRENT | ||||||||
Bank indebtedness (Note 5) | $ | 51,244 | $ | 1,406,898 | ||||
Accounts payable and accrued liabilities | 1,455,761 | 1,290,635 | ||||||
Current portion of obligations under capital lease | - | 73,190 | ||||||
Deferred income | 637,003 | 560,954 | ||||||
Current portion of long term debt (Note 6) | - | 11,667 | ||||||
2,144,008 | 3,343,344 | |||||||
LONG TERM DEBT (Note 6) | 200,000 | 339,722 | ||||||
2,344,008 | 3,683,066 | |||||||
PARTNERS' CAPITAL | 1,023,229 | 1,195,742 | ||||||
$ | 3,367,237 | $ | 4,878,808 |
APPROVED BY THE GENERAL PARTNER
See the accompanying notes
2
DOCUCOM LIMITED PARTNERSHIP
Statement of Income
Year Ended October 31, 2005
2005 | 2004 | |||||||
SALES | $ | 13,396,833 | $ | 13,567,879 | ||||
COST OF SALES | 9,823,487 | 9,985,059 | ||||||
GROSS PROFIT | 3,573,346 | 3,582,820 | ||||||
OPERATING EXPENSES (Schedule 1) | ||||||||
Selling | 1,502,288 | 1,638,141 | ||||||
General and administrative | 1,334,049 | 1,374,169 | ||||||
Distribution | 167,020 | 204,819 | ||||||
Financing | 97,518 | 163,657 | ||||||
Amortization | 75,886 | 224,337 | ||||||
3,176,761 | 3,605,123 | |||||||
NET INCOME (LOSS) | $ | 396,585 | $ | (22,303 | ) |
See the accompanying notes
3
DOCUCOM LIMITED PARTNERSHIP
Statement of Partners' Capital
Year Ended October 31, 2005
2004 Balance | Net Income | Withdrawals | 2005 Balance | |||||||||||||
PARTNERS' CAPITAL | $ | 1,195,742 | $ | 396,585 | $ | (569,096 | ) | $ | 1,023,229 | |||||||
$ | 1,195,742 | $ | 396,585 | $ | (569,096 | ) | $ | 1,023,229 |
See the accompanying notes
4
DOCUCOM LIMITED PARTNERSHIP
Statement of Cash Flow
Year Ended October 31, 2005
2005 | 2004 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income (loss) | $ | 396,585 | $ | (22,303 | ) | |||
Item not affecting cash: | ||||||||
Amortization | 238,511 | 283,232 | ||||||
635,096 | 260,929 | |||||||
Changes in non-cash working capital: | ||||||||
Accounts receivable | 408,209 | (6,029 | ) | |||||
Inventories | 563,519 | 1,638,314 | ||||||
Accounts payable and accrued liabilities | 165,126 | (555,471 | ) | |||||
Deferred income | 76,049 | (38,277 | ) | |||||
Prepaid expenses | (5,524 | ) | 19,433 | |||||
Due from partners | 400,000 | (210,000 | ) | |||||
1,607,379 | 847,970 | |||||||
Cash flow from operating activities | 2,242,475 | 1,108,899 | ||||||
INVESTING ACTIVITY | ||||||||
Purchase of equipment | (93,144 | ) | (72,905 | ) | ||||
Cash flow used by investing activities | (93,144 | ) | (72,905 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Reduction of bank indebtedness | (1,355,654 | ) | (450,136 | ) | ||||
Repayment of long term debt | (151,389 | ) | (11,667 | ) | ||||
Repayment of obligations under capital lease | (73,190 | ) | (73,191 | ) | ||||
Partners' drawings | (569,098 | ) | (501,000 | ) | ||||
Cash flow used by financing activities | (2,149,331 | ) | (1,035,994 | ) | ||||
INCREASE IN CASH FLOW | ||||||||
Cash - beginning of year | ||||||||
CASH - END OF YEAR | $ | - | $ | - | ||||
CASH FLOW SUPPLEMENTARY INFORMATION | ||||||||
Interest paid | $ | 97,518 | $ | 163,657 |
See the accompanying notes
5
DOCUCOM LIMITED PARTNERSHIP
Notes to Financial Statements
Year Ended October 31, 2005
1. DESCRIPTION OF OPERATIONS
DocuCom Limited Partnership ("the Partnership'') sells and services systems for the capture, storage and retrieval of document images using micrographic and digital technologies throughout Canada.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements, which have been prepared in accordance with Canadian generally accepted accounting principles, reflect the accounting policies set out below.
Measurement uncertainty
The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from these estimates. These estimates are reviewed periodically, and, as adjustments become necessary they are reported in earnings in the period in which they become known.
Unincorporated business
Since this business is unincorporated, the accompanying financial statements do not provide for taxes on income and do not include all the assets, liabilities, revenues or expenses of the partners. No provision has been made for salaries, interest or similar items accruing to the partners.
Revenue recognition
a) | Sales are normally recognized when the products are shipped, at which time title passes to the customer. |
b) | Revenue derived from the sale of service contracts is initially recorded as deferred revenue when billed. Billings commonly occur two months before the contract commences. Deferred revenue represents approximately two months worth of advance service billings. |
Inventories
Inventories of finished goods and service parts are valued at the lower of cost or net realizable value, on a first-in first-out basis.
(continues)
6
DOCUCOM LIMITED PARTNERSHIP
Notes to Financial Statements
Year Ended October 31, 2005
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Capital assets
Capital assets are stated at cost less accumulated amortization. Capital assets are amortized over their estimated useful lives at the following rates and methods:
Rental assets | 3 years | straight-line method |
Computer software | 100% | declining balance method |
Computer equipment | 30% | declining balance method |
Equipment | 20% | declining balance method |
Leasehold improvements | 5 years | straight-line method |
For assets acquired or brought into use during the year, other than rental assets, amortization is calculated at 50% of the full year's amortization. For rental assets, amortization is calculated from the month following that in which additions come into operation. During the year, the Partnership recorded amortization on capital assets of $238,511. $162,625 was included in cost of sales and $75,886 was included in operating costs.
3. DUE FROM PARTNER
2005 | 2004 | |||||||
Due from partner | $ | - | $ | 400,000 |
Amount due from partner is non interest bearing.
4. CAPITAL ASSETS
Cost | Accumulated amortization | 2005 Net book value | 2004 Net book value | |||||||||||||
Rental assets | $ | 499,592 | $ | 234,958 | $ | 264,634 | $ | 411,606 | ||||||||
Equipment | 416,114 | 271,620 | 144,494 | 115,002 | ||||||||||||
Computer equipment | 566,972 | 439,362 | 127,610 | 155,091 | ||||||||||||
Leasehold improvements | 6,850 | 4,795 | 2,055 | 3,425 | ||||||||||||
Computer software | 1,801 | 837 | 964 | - | ||||||||||||
$ | 1,491,329 | $ | 951,572 | $ | 539,757 | $ | 685,124 |
7
DOCUCOM LIMITED PARTNERSHIP
Notes to Financial Statements
Year Ended October 31, 2005
5. BANK INDEBTEDNESS
The Partnership has available $1,400,000 (2004 - $2,000,000) credit facilities by way of a combination of:
1. | Account overdraft which is due on demand and bearing interest at bank prime plus 1.25%. As of the year-end, $51,244 of the facility is utilized (2004 - $406,898). |
2. | Bank Acceptance which is renewable monthly, bearing interest at the bankers acceptance monthly rate with a 2.35% annual fee. As of the year-end, $0 of the facility is utilized (2004 - $1,000,000). |
The account overdraft and bankers acceptance are secured by a general assignment of book debts, a security agreement over inventories, a first ranking general security agreement over all assets, an assignment of fire insurance and the guarantees of two directors of the partner corporations aggregating $800,000.
The credit facilities agreement requires maintenance of certain covenants, including a minimum current ratio of 1.15:1, a minimum net worth of $1,000,000 and a maximum debt to net worth ratio of 3.00:1. At the year-end, the Partnership is not in violation of any covenants.
6. LONG TERM DEBT
2005 | 2004 | |||||||
Revolving loan bearing interest at prime plus 1.25%, monthly interest payable at end of subsequent month. | $ | 200,000 | $ | 330,000 | ||||
Term loan bearing interest at prime plus .75% per annum, repayable in monthly blended payments of $972. The loan matures on August 31, 2006 . | 21,389 | |||||||
200,000 | 351,389 | |||||||
Less portion relating to interest on long term debt | (11,667 | ) | ||||||
$ | 200,000 | $ | 339,722 |
The Partnership has available $500,000 demand revolving loan, for which the principal repayment terms are determined by a formula based on the net book value of rental assets. To the extent that 75% of the net book value of the rental assets exceed the loan outstanding, no principal repayments are required. Interest incurred on long term debt amounted to approximately $15,000.
7. GUARANTEE FOR PARTNER
The Partnership has guaranteed the bank indebtedness of a partner to an amount not exceeding $300,000. Such a bank indebtedness bears interest at bank prime rate and is secured by a general assignment of the assets of the Partnership.
8
DOCUCOM LIMITED PARTNERSHIP
Notes to Financial Statements
Year Ended October 31, 2005
8. | LEASE COMMITMENTS |
The Partnership is committed to the following future payments under operating leases for premises of $398,170, automobiles of $163,399, and equipment of $10,176:
2006 | $ | 231,865 | ||
2007 | 158,711 | |||
2008 | 135,118 | |||
2009 | 46,051 | |||
$ | 571,745 |
9. FINANCIAL INSTRUMENTS
Credit risk
The Partnership's financial instruments consist of accounts receivable, bank indebtedness, accounts payable and accrued liabilities, and long term debt. The partnership is exposed to credit risk on accounts receivable from its customers. It has adopted credit policies which include the analysis of the financial position of its customers and the regular review of credit limits.
Fair Value
The fair value of these financial instruments approximate their carrying values due to their short-term maturity. The fair value of long-term debt approximate their carrying value as the instruments bear interest at current market rates.
9
DOCUCOM LIMITED PARTNERSHIP
Schedule of Expenses
Year Ended October 31, 2005
(Schedule 1) | ||||||||
2005 | 2004 | |||||||
SELLING | ||||||||
Salaries, commissions and benefits | $ | 1,147,003 | $ | 1,226,303 | ||||
Travel, automobile and meetings | 226,880 | 214,743 | ||||||
Office and general | 97,162 | 136,518 | ||||||
Advertising | 31,243 | 60,577 | ||||||
$ | 1,502,288 | $ | 1,638,141 | |||||
DISTRIBUTION | ||||||||
Salaries and benefits | $ | 158,146 | $ | 197,836 | ||||
General and office | 8,862 | 11,065 | ||||||
Freight (net of recoveries) | 12 | (4,082 | ) | |||||
$ | 167,020 | $ | 204,819 | |||||
GENERAL AND ADMINISTRATIVE | ||||||||
Salaries, fees and benefits | $ | 361,821 | $ | 365,857 | ||||
Rent and Occupancy | 299,863 | 428,938 | ||||||
Travel, automobile and meetings | 192,200 | 173,583 | ||||||
Office and general | 190,843 | 209,344 | ||||||
Severance cost | 147,925 | 25,639 | ||||||
Profit sharing | 66,226 | 60,078 | ||||||
Legal, audit and professional fees | 59,999 | 93,891 | ||||||
Public relations | 15,172 | 16,839 | ||||||
$ | 1,334,049 | $ | 1,374,169 | |||||
AMORTIZATION | ||||||||
Computer software | $ | 28,661 | $ | 153,012 | ||||
Furniture and Fixtures | 25,780 | 23,796 | ||||||
Computer equipment | 20,075 | 28,960 | ||||||
Leasehold improvements | 1,370 | 18,569 | ||||||
$ | 75,886 | $ | 224,337 | |||||
FINANCING | ||||||||
Interest and bank charges | $ | 77,434 | $ | 124,421 | ||||
Interest on capital lease | 20,084 | 39,236 | ||||||
$ | 97,518 | $ | 163,657 |
See the accompanying notes
10
Horwath Orenstein LLP
DOCUCOM LIMITED PARTNERSHIP
Financial Statements
Year Ended October 31, 2006
Horwath Orenstein LLP
AUDITORS' REPORT
To the Partners of DocuCom Limited Partnership
We have audited the balance sheet of DocuCom Limited Partnership as at October 31, 2006 and the statements of loss, partners' capital and cash flow for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material respects, the financial position of the partnership as at October 31, 2006 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.
Toronto, Ontario December 20, 2006 Except for note 5, which is as of February 22, 2007 | CHARTERED ACCOUNTANTS |
1
DOCUCOM LIMITED PARTNERSHIP
Balance Sheet
October 31, 2006
2006 | 2005 | |||||||
ASSETS | ||||||||
CURRENT | ||||||||
Accounts receivable | $ | 1,897,230 | $ | 1,879,956 | ||||
Inventories (Note 3) | 203,272 | 899,955 | ||||||
Prepaid expenses | 50,069 | 47,569 | ||||||
2,150,571 | 2,827,480 | |||||||
CAPITAL ASSETS (Note 4) | 331,382 | 539,758 | ||||||
$ | 2,481,953 | $ | 3,367,238 | |||||
LIABILITIES AND PARTNERS' CAPITAL | ||||||||
CURRENT | ||||||||
Bank indebtedness (Note 5) | $ | 245,008 | $ | 51,244 | ||||
Accounts payable and accrued liabilities | 1,486,016 | 1,455,762 | ||||||
Deferred income | 566,980 | 637,003 | ||||||
2,298,004 | 2,144,009 | |||||||
LONG TERM DEBT (Note 6) | - | 200,000 | ||||||
2,298,004 | 2,344,009 | |||||||
PARTNERS' CAPITAL | 183,949 | 1,023,229 | ||||||
$ | 2,481,953 | $ | 3,367,238 |
APPROVED BY THE GENERAL PARTNER
See the accompanying notes
2
DOCUCOM LIMITED PARTNERSHIP
Statement of Income
Year Ended October 31, 2006
2006 | 2005 | |||||||
SALES | $ | 13,190,245 | $ | 13,396,833 | ||||
COST OF SALES | 10,093,973 | 9,823,487 | ||||||
GROSS PROFIT | 3,096,272 | 3,573,346 | ||||||
OPERATING EXPENSES (Schedule 1) | ||||||||
Selling | 1,616,990 | 1,502,288 | ||||||
General and administrative | 1,433,150 | 1,334,049 | ||||||
Distribution | 187,195 | 167,020 | ||||||
Financing | 75,453 | 97,518 | ||||||
Amortization | 72,448 | 75,886 | ||||||
3,385,236 | 3,176,761 | |||||||
NET INCOME (LOSS) | $ | (288,964 | ) | $ | 396,585 |
See the accompanying notes
3
DOCUCOM LIMITED PARTNERSHIP
Statement of Partners' Capital
Year Ended October 31, 2006
2005 Balance | Net Loss | Withdrawals | 2006 Balance | |||||||||||||
PARTNERS' CAPITAL (Note 7) | $ | 1,023,229 | $ | (288,964 | ) | $ | (550,316 | ) | $ | 183,949 | ||||||
$ | 1,023,229 | $ | (288,964 | ) | $ | (550,316 | ) | $ | 183,949 |
See the accompanying notes
4
DOCUCOM LIMITED PARTNERSHIP
Statement of Cash Flow
Year Ended October 31, 2006
2006 | 2005 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income (loss) | $ | (288,964 | ) | $ | 396,585 | |||
Items not affecting cash: | ||||||||
Amortization | 241,299 | 238,511 | ||||||
Provision for obsolete inventory | 425,800 | |||||||
378,135 | 635,096 | |||||||
Changes in non-cash working capital: | ||||||||
Accounts receivable | (17,274 | ) | 408,209 | |||||
Inventories | 270,883 | 563,519 | ||||||
Prepaid expenses | (2,500 | ) | (5,524 | ) | ||||
Accounts payable and accrued liabilities | 30,254 | 165,126 | ||||||
Deferred income | (70,023 | ) | 76,049 | |||||
Due from partners | 400,000 | |||||||
211,340 | 1,607,379 | |||||||
Cash flow from operating activities | 589,475 | 2,242,475 | ||||||
INVESTING ACTIVITY | ||||||||
Purchase of equipment | (32,923 | ) | (93,144 | ) | ||||
Cash flow used by investing activity | (32,923 | ) | (93,144 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Advances (repayment) of bank indebtedness | 193,764 | (1,355,654 | ) | |||||
Repayment of long term debt | (200,000 | ) | (151,389 | ) | ||||
Partners' drawings | (550,316 | ) | (569,098 | ) | ||||
Repayment of obligations under capital lease | (73,190 | ) | ||||||
Cash flow used by financing activities | (556,552 | ) | (2,149,331 | ) | ||||
INCREASE IN CASH FLOW | ||||||||
Cash - beginning of year | ||||||||
CASH - END OF YEAR | ||||||||
CASH FLOW SUPPLEMENTARY INFORMATION | ||||||||
Interest paid | $ | 75,453 | $ | 97,518 |
See the accompanying notes
5
DOCUCOM LIMITED PARTNERSHIP
Notes to Financial Statements
Year Ended October 31, 2006
1. | DESCRIPTION OF OPERATIONS |
DocuCom Limited Partnership ("the Partnership") sells and services systems for the capture, storage and retrieval of document images using micrographic and digital technologies throughout Canada.
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Unincorporated business
Since this business is unincorporated, the accompanying financial statements do not provide for taxes on income and do not include all the assets, liabilities, revenues or expenses of the partners. No provision has been made for salaries, interest or similar items accruing to the partners.
Inventories
Inventories of finished goods and service parts are valued at the lower of cost or net realizable value, on a first-in first-out basis.
Capital assets
Capital assets are stated at cost less accumulated amortization. Capital assets are amortized over their estimated useful lives at the following rates and methods:
Rental assets | 3 years | straight-line method | |
Computer software | 100% | declining balance method | |
Computer equipment | 30% | declining balance method | |
Equipment | 20% | declining balance method | |
Leasehold improvements | 5 years | straight-line method |
For assets acquired or brought into use during the year, other than rental assets, amortization is calculated at 50% of the full year's amortization. For rental assets, amortization is calculated from the month following that in which additions come into operation. During the year, the Partnership recorded amortization on capital assets of $241,299 (2005- $238,511). $168,851 (2005 - $162,625) was included in cost of sales and $72,448 (2005- $75,886) was included in operating costs.
Impairment of long-lived assets
The Partnership reviews long-lived assets for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable. When indicators of impairment in the carrying value of the assets exist, and the carrying value is greater than the net recoverable value, an impairment loss is recognized to the extent that the fair value is below the carrying value. Recoverability is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.
(continues)
6
DOCUCOM LIMITED PARTNERSHIP
Notes to Financial Statements
Year Ended October 31, 2006
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue recognition
a) | Sales are normally recognized when the products are shipped, at which time title passes to the customer. |
b) | Revenue derived from the sale of service contracts is initially recorded as deferred revenue when billed. Billings commonly occur two months before the contract commences. Deferred revenue represents approximately two months worth of advance service billings. |
Measurement uncertainty
The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from these estimates. These estimates are reviewed periodically, and, as adjustments become necessary they are reported in earnings in the period in which they become known.
3. INVENTORIES
2006 | 2005 | |||||||
Finished goods | $ | 1,025,530 | $ | 1,386,201 | ||||
Service parts | 875,744 | 826,219 | ||||||
Subtotal | 1,901,274 | 2,212,420 | ||||||
Obsolescence reserve - Equipment | (845,936 | ) | (612,129 | ) | ||||
Obsolescence reserves - Parts | (852,067 | ) | (700,336 | ) | ||||
$ | 203,271 | $ | 899,955 |
During the year, the Partnership recorded a provision on obsolete inventory for $425,800 (2005 - $nil). The amount was included in the cost of sales.
7
DOCUCOM LIMITED PARTNERSHIP
Notes to Financial Statements
Year Ended October 31, 2006
4. CAPITAL ASSETS
Cost | Accumulated amortization | 2006 Net book value | 2005 Net book value | |||||||||||||
Rental assets | $ | 494,497 | $ | 378,943 | $ | 115,554 | $ | 264,634 | ||||||||
Equipment | 415,069 | 299,578 | 115,491 | 144,494 | ||||||||||||
Computer equipment | 564,008 | 464,356 | 99,652 | 127,611 | ||||||||||||
Leasehold improvements | 6,850 | 6,165 | 685 | 2,055 | ||||||||||||
Computer software | 228,328 | 228,328 | - | 964 | ||||||||||||
$ | 1,708,752 | $ | 1,377,370 | $ | 331,382 | $ | 539,758 |
5. BANK INDEBTEDNESS
The Partnership has available a $500,000 (2005 - $1,400,000) operating line by way of a combination of:
1. | Account overdraft which is due on demand and bears interest at bank prime plus 1.25%. As of the year-end, $245,008 of the facility is utilized (2005 - $51,244). |
2. | Documentary letters of credit which is due on demand and bears interest at bank prime plus 1.25%. As of the year-end, $nil of the facility is utilized (2005 - $nil). |
3. | Letters of guarantee which have a maximum term of one year and is subject to a fee of 2.25% per annum. As of the year-end, $nil of the facility is utilized (2005 - $nil). |
The operating line is secured by a general assignment of book debts, a security agreement over cash, credit balances and deposit instrument, an assignment of all risk insurance, and the guarantees of two directors of the partner corporations aggregating $800,000.
The credit facilities agreement requires maintenance of certain covenants, including a minimum current ratio of 1.15:1, a minimum net worth of $500,000 and a maximum debt to net worth ratio of 2.50:1. At the year-end, the Partnership was in violation of certain covenants. The bank has agreed to forbear the breach of the financial covenants on February 22, 2007.
6. LONG TERM DEBT
2006 | 2005 | |||||||
Revolving loan bearing interest at prime plus 1.25%, monthly interest payable at end of subsequent month. | $ | - | 200,000 |
8
DOCUCOM LIMITED PARTNERSHIP
Notes to Financial Statements
Year Ended October 31, 2006
7. TRANSFER OF INTEREST BETWEEN LIMITED PARTNER AND GENERAL PARTNER
On October 31, 2006, the Partnership's Limited Partner sold, transferred and assigned its interest to the Partnership's General Partner (DocuCom Imaging Solutions Inc.) for $1. As a consequence, the Partnership ceased to exist effective that date and its assets, liabilities and operation were assumed by DocuCom Imaging Solutions Inc.
8. LEASE COMMITMENTS
The Partnership is committed to the following future payments under operating leases for premises of $312,457, automobiles of $136,083, and equipment of $1,830:
2007 | $ | 186,155 | ||
2008 | 170,387 | |||
2009 | 81,710 | |||
2010 | 12,118 | |||
$ | 450,370 |
9. FINANCIAL INSTRUMENTS
The Partnership's financial instruments consist of accounts receivable, bank indebtedness, accounts payable and accrued liabilities. The fair value of these financial instruments approximate their carrying values due to their short-term maturity. The Partnership is exposed to credit risk on accounts receivable from its customers. It has adopted credit policies which include the analysis of the financial position of its customers and the regular review of credit limits.
9
DOCUCOM LIMITED PARTNERSHIP
Schedule of Expenses
Year Ended October 31, 2006
(Schedule 1) | ||||||||
2006 | 2005 | |||||||
SELLING | ||||||||
Salaries, commissions and benefits | $ | 1,256,465 | $ | 1,147,003 | ||||
Travel, automobile and meetings | 241,860 | 226,880 | ||||||
Office and general | 82,453 | 97,162 | ||||||
Advertising | 36,212 | 31,243 | ||||||
$ | 1,616,990 | $ | 1,502,288 | |||||
DISTRIBUTION | ||||||||
Salaries and benefits | $ | 156,999 | $ | 158,146 | ||||
Freight (net of recoveries) | 21,705 | 12 | ||||||
General and office | 8,491 | 8,862 | ||||||
$ | 187,195 | $ | 167,020 | |||||
GENERAL AND ADMINISTRATIVE | ||||||||
Salaries, fees and benefits | $ | 669,734 | $ | 361,821 | ||||
Rent and occupancy | 305,693 | 299,863 | ||||||
Travel, automobile and meetings | 177,988 | 192,200 | ||||||
Office and general | 169,680 | 190,843 | ||||||
Profit sharing | 53,814 | 66,226 | ||||||
Legal, audit and professional fees | 39,930 | 59,999 | ||||||
Severance cost | 16,087 | 147,925 | ||||||
Public relations | 224 | 15,172 | ||||||
$ | 1,433,150 | $ | 1,334,049 | |||||
AMORTIZATION | ||||||||
Furniture and fixtures | $ | 28,900 | 25,780 | |||||
Computer software | 22,248 | 28,661 | ||||||
Computer equipment | 19,930 | 20,075 | ||||||
Leasehold improvements | 1,370 | 1,370 | ||||||
$ | 72,448 | $ | 75,886 | |||||
FINANCING | ||||||||
Interest and bank charges | $ | 51,557 | 77,434 | |||||
Other interest | 23,896 | 20,084 | ||||||
$ | 75,453 | $ | 97,518 |
See the accompanying notes
10