SUNGOLD INTERNATIONAL HOLDINGS CORP.
INTERIM FINANCIAL STATEMENTS
FOR THE SECOND QUARTER ENDED FEBRUARY 28, 2005
(A Development Stage Company)
(Presented in Canadian Dollars)
(Unaudited – Prepared by Management)
NOTICE TO READER
In accordance with Canadian Securities Administrators National Instrument 51-102, Sungold International Holdings Corp. discloses that these unaudited financial statements for the second financial quarter ended February 28, 2005 have not been reviewed by our auditors, Loewen, Stronach & Co., Chartered Accountants.
SUNGOLD INTERNATIONAL HOLDINGS CORP.
INTERIM CONSOLIDATED BALANCE SHEET
FEBRUARY 28, 2005
(A Development Stage Company)
(Presented in Canadian Dollars)
(Unaudited - Prepared by Management)
(Unaudited) | (Audited) | |||
February 28 | August 31 | |||
2005 | 2004 | |||
$ | $ | |||
ASSETS | ||||
CURRENT ASSETS | ||||
Cash and GST receivable | 156,103 | 185,657 | ||
Prepaid expenses and deposits | 32,725 | 58,768 | ||
188,828 | 244,425 | |||
PRE-DEVELOPMENT COSTS (Note 4) | 408,377 | 825,154 | ||
EQUIPMENT (Note 5) | 429,275 | 522,455 | ||
1,026,480 | 1,592,034 | |||
LIABILITIES | ||||
CURRENT LIABILITIES | ||||
Accounts payable and accrued liabilities | 162,794 | 200,334 | ||
Loans payable | - | 9,696 | ||
Leases payable | 24,098 | - | ||
186,892 | 210,030 | |||
SHAREHOLDERS’ EQUITY | ||||
SHARE CAPITAL (Note 6) | 20,567,545 | 19,959,566 | ||
CONTRIBUTED SURPLUS | 51,922 | 51,922 | ||
DEFICIT | (19,779,879 | ) | (18,629,484 | ) |
839,588 | 1,382,004 | |||
1,026,480 | 1,592,034 |
APPROVED BY THE DIRECTORS: | |
“Art Cowie” | |
Art Cowie, Director | |
“Donald Harris” | |
Donald Harris, Director |
SUNGOLD INTERNATIONAL HOLDINGS CORP.
INTERIM CONSOLIDATED STATEMENT OF LOSS
FOR THE SECOND QUARTER ENDED FEBRUARY 28, 2005
(A Development Stage Company)
(Presented in Canadian Dollars)
(Unaudited – Prepared by Management)
Second quarter ended | Year-to-date | ||||||
February 28 | February 29 | February 28 | February 29 | ||||
2005 | 2004 | 2005 | 2004 | ||||
$ | $ | $ | $ | ||||
REVENUE | |||||||
Sales | - | - | - | - | |||
Interest income and miscellaneous | - | - | - | - | |||
Gain on disposition of marketable securities | - | - | - | - | |||
- | - | - | - | ||||
EXPENSES | |||||||
Advertising and promotion | 19,191 | 20,676 | 24,817 | 46,317 | |||
Management fees | - | 91,564 | - | 164,608 | |||
Professional and consulting fees | 119,878 | 67,843 | 246,664 | 147,141 | |||
Investor relations | 58,095 | - | 76,484 | - | |||
Travel and conference | 39,867 | 20,318 | 69,203 | 67,968 | |||
Office and miscellaneous | 18,195 | 32,264 | 34,653 | 42,776 | |||
Internet services | 5,805 | 10,632 | 9,675 | 10,632 | |||
Amortization | 26,029 | 31,317 | 50,561 | 64,266 | |||
Office rent and services | 8,353 | 18,177 | 20,629 | 37,361 | |||
Transfer agent and filing fees | 9,162 | 13,912 | 12,418 | 27,222 | |||
Insurance | 250 | 187 | 333 | 375 | |||
Interest and bank charges | 20 | 285 | 289 | 2,109 | |||
Interest on capital leases | - | 299 | - | 1,005 | |||
Loss on disposition of capital assets | - | 823 | - | 823 | |||
Foreign exchange loss (gain) | (23,599 | ) | 2,649 | (23,575 | ) | 774 | |
281,246 | 310,946 | 522,151 | 613,377 | ||||
Impairment write-down of pre-development costs and investment | 628,246 | - | 628,246 | - | |||
909,492 | 310,946 | 1,150,397 | 613,377 | ||||
LOSS | 909,492 | 310,946 | 1,150,397 | 613,377 | |||
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE – BEGINNING | 18,870,387 | 17,720,197 | 18,629,482 | 17,417,766 | |||
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE – ENDING | 19,779,879 | 18,031,143 | 19,779,879 | 18,031,143 | |||
Weighted average number of shares | 109,464,740 | 87,098,256 | 107,431,407 | 87,098,256 | |||
Loss per share | 0.0083 | 0.0034 | 0.0107 | 0.0069 |
(See accompanying notes to interim consolidated financial statements)
SUNGOLD INTERNATIONAL HOLDINGS CORP.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE SECOND QUARTER ENDED FEBRUARY 28, 2005
(A Development Stage Company)
(Presented in Canadian Dollars)
(Unaudited – Prepared by Management)
Second quarter ended | Year-to-date | |||||||
February 28 | February 29 | February 28 | February 29 | |||||
2005 | 2004 | 2005 | 2004 | |||||
$ | $ | $ | $ | |||||
OPERATING ACTIVITIES | ||||||||
Loss | (909,492 | ) | (310,946 | ) | (1,150,397 | ) | (613,377 | ) |
Items not involving cash: | ||||||||
Amortization | 26,029 | 31,317 | 50,561 | 64,266 | ||||
Debt settled by issuance of private placement units | 418,229 | 364,226 | 607,979 | 683,390 | ||||
Loss on disposition of capital assets | - | 823 | - | 823 | ||||
Write-down of pre-development costs and investment | 628,246 | - | 628,246 | - | ||||
163,012 | 85,420 | 136,389 | 135,102 | |||||
Cash provided by changes in non-cash working capital items: | ||||||||
Prepaid expenses | 40,387 | (10,504 | ) | 26,043 | (9,160 | ) | ||
Accounts payable and accrued liabilities | 53,950 | (85,901 | ) | (37,540 | ) | (117,523 | ) | |
Loans payable (repaid) | (222,232 | ) | (4,663 | ) | (9,696 | ) | (7,463 | ) |
35,117 | (15,648 | ) | 115,196 | 956 | ||||
INVESTING ACTIVITIES | ||||||||
Pre-development costs | (2,254 | ) | (18,777 | ) | (141,888 | ) | (18,977 | ) |
Acquisition of capital assets | (26,961 | ) | - | (26,961 | ) | - | ||
(29,215 | ) | (18,777 | ) | (168,849 | ) | (18,977 | ) | |
FINANCING ACTIVITIES | ||||||||
Proceeds (repayment) of capital leases | 24,098 | (11,713 | ) | 24,098 | (17,253 | ) | ||
Proceeds of disposition of capital assets | - | 23,685 | - | 23,685 | ||||
24,098 | 11,972 | 24,098 | 6,432 | |||||
INCREASE (DECREASE) IN CASH | 30,000 | (22,453 | ) | (29,555 | ) | (11,589 | ) | |
CASH – beginning | 126,103 | 58,792 | 185,657 | 47,928 | ||||
CASH – ending | 156,103 | 36,339 | 156,102 | 36,339 |
Notes to statement of cash flow:
1) During the period, the Company issued 7,200,000 private placement units to settle $418,229 of debts (year-to-date 9,700,000 private placement units to settle $607,979 of debts)
(See accompanying notes to interim consolidated financial statements)
SUNGOLD INTERNATIONAL HOLDINGS CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER ENDED FEBRUARY 28, 2005
(A Development Stage Company)
(Presented in Canadian Dollars)
(Unaudited – Prepared by Management)
Note 1 | BASIS OF PRESENTATION |
The accompanying unaudited interim financial statements have been prepared in accordance with Canadian generally accepted accounting principles for interim financial information and, accordingly, certain information and note disclosure normally included in financial statements prepared in accordance with Canadian generally accepted accounting principles has been condensed, or omitted. In the opinion of management, these financial statements include all adjustments necessary for the fair presentation of the results of the interim periods presented. These financial statements have been prepared using the same accounting policies as used in the annual financial statements and should be read in conjunction with the audited financial statements of the Company for the year ended August 31, 2004. The results of operations for any interim period are not necessarily indicative of the results of operations of any other interim period or full fiscal year. | |
Note 2 | GOING CONCERN AND NATURE OF OPERATIONS |
The principal activity is developing and promoting a proprietary pari-mutuel wagering virtual horseracing product, internet payment system and other internet related products. To date, the Company has not earned significant revenues and is considered to be in a development stage. | |
The recoverability of the amounts shown for pre-development costs is primarily dependent on the ability of the Company to put its pre-development projects into economically viable products in the future. The Company plans to meet anticipated financing needs in connection with its obligations by the exercise of stock options, share purchase warrants, and through private placements, public offerings or joint-venture participation by others. | |
These consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. | |
Note 3 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Consolidation | |
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Horsepower Broadcasting Network (HBN) International Ltd., SafeSpending Inc., and Racing Unified Network (R.U.N.) Inc. All inter-company transactions and balances have been eliminated. |
... /2
SUNGOLD INTERNATIONAL HOLDINGS CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER ENDED FEBRUARY 28, 2005
(A Development Stage Company)
(Presented in Canadian Dollars)
(Unaudited – Prepared by Management)
PAGE - 2 -
Note 4 | PRE-DEVELOPMENT COSTS | |
a) | Vancouver Racecourse / Richmond Equine Training Centre project | |
In July 2004, the Company obtained an option to purchase 126 acres of land southwest of No. 8 Road and Westminster Highway in Richmond, BC, Canada (“Land”) for the purpose of developing a horse training complex, subject to approval of all zoning and regulatory authorities. The agreement gave the Company the option to purchase the Land for $10,500,000 until January 2, 2005. As the Company did not exercise this option and is not pursuing the project at this time, it is expensing these development costs in this quarter. |
August 31 | Impairment | February 28 | ||||
2004 | Additions | Write off | 2005 | |||
$ | $ | $ | $ | |||
Consulting and legal fees | 616,718 | - | 616,718 | - | ||
Options | 10,000 | - | 10,000 | - | ||
Other direct costs | 1,528 | - | 1,528 | - | ||
628,246 | - | 628,246 | - |
b) | Horsepower project | |
Horsepower World Pool Virtual Horse Racing System is a proprietary, pari-mutual wagering product operated by Horsepower Broadcasting Network (HBN) International Ltd., a subsidiary of the Company. The product is being offered to Licensed facilities and Authorized Racetrack Affiliates. Development of this project is largely complete but there are no operating installations as of the date of this statement. Development costs related to this project of $206,224 are reclassified in this statement from Software – Horsepower where they were reported in the November 30, 2004 statement. See Note 5. |
August 31 | Impairment | February 28 | ||||
2004 | Additions | Write off | 2005 | |||
$ | $ | $ | $ | |||
Legal and consulting fees | 79,119 | 207,964 | - | 287,083 |
c) | SafeSpending project | |
In May 2001, a subsidiary of the Company, SafeSpending Inc., acquired all the rights to an internet payment system technology which is a spending system that can be used to make anonymous purchases online from merchants and individuals. The agreement provides SafeSpending Inc. with all copyrights, trademarks, source codes and intellectual property and the Company has patents pending in 105 countries for the SafeSpending Inc. anonymous payment system. |
August 31 | Impairment | February 28 | ||||
2004 | Additions | Write off | 2005 | |||
$ | $ | $ | $ | |||
Acquisition cost | 62,300 | - | - | 62,300 | ||
Legal and consulting fees | 55,489 | 3,504 | - | 58,993 | ||
117,789 | 3,504 | - | 121,293 |
SUNGOLD INTERNATIONAL HOLDINGS CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER ENDED FEBRUARY 28, 2005
(A Development Stage Company)
(Presented in Canadian Dollars)
(Unaudited – Prepared by Management)
PAGE - 3 -
Note 4 | PRE-DEVELOPMENT COSTS (continued) |
August 31 | Impairment | February 28 | |||
2004 | Additions | Write off | 2005 | ||
$ | $ | $ | $ | ||
TOTAL PRE-DEVELOPMENT COSTS | 825,154 | 211,468 | 628,246 | 408,376 |
Note 5 | EQUIPMENT |
(Unaudited) | (Audited) | ||||
February 28 | August 31 | ||||
2005 | 2004 | ||||
Cost | Less | Net Book | Net Book | ||
Accumulated | Value | Value | |||
Amortization | |||||
$ | $ | $ | $ | ||
Software – Horsepower | 761,104 | 421,482 | 339,622 | 446,938 | |
Computer equipment | 313,057�� | 248,867 | 64,190 | 75,517 | |
Leased equipment | 26,961 | 1,498 | 25,463 | - | |
1,101,122 | 671,847 | 429,275 | 522,455 |
Software – Horsepower costs of $761,104, reported in the November 30, 2004, statements as $967,328, are reduced by $206,224 which is reclassified as pre-development costs. See Note 4b. | |
Note 6 | SHARE CAPITAL |
(Unaudited) | (Audited) | ||
February 28 | August 31 | ||
2005 | 2004 | ||
$ | $ | ||
Authorized: | |||
Unlimited common shares without par value | |||
100,000,000 Class “A” preference shares | |||
without par value | |||
100,000,000 Class “B” preference shares | |||
without par value | |||
Issued and outstanding: | |||
113,064,740 common | |||
(August 31, 2004 – 103,364,740 common) | 20,567,545 | 19,959,566 |
a) | Shares issued during the period: |
Second quarter ended | Year-to-date | |||||
February 28, 2005 | February 28, 2005 | |||||
# | $ | # | $ | |||
For debt – private placements | 7,200,000 | 418,229 | 9,700,000 | 607,979 |
... /4
SUNGOLD INTERNATIONAL HOLDINGS CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER ENDED FEBRUARY 28, 2005
(A Development Stage Company)
(Presented in Canadian Dollars)
(Unaudited – Prepared by Management)
PAGE - 4 -
Note 6 | SHARE CAPITAL (continued) | |
b) | Share purchase warrants: |
Date of Grant | Price | Balance Aug 31, 2004 | Granted | Exercised | Expired / Cancelled | Balance Feb 28, 2005 | Expiration date |
September 7, 2001 | US$0.200 | 1,000,000 | - | - | 1,000,000 | - | Cancelled |
October 24, 2001 | US$0.150 | 420,000 | - | - | 420,000 | - | Cancelled |
November 4, 2001 | US$0.150 | 1,000,000 | - | - | 1,000,000 | - | Cancelled |
December 14, 2001 | US$0.060 | 2,333,334 | - | - | 2,333,334 | - | Cancelled |
January 7, 2002 | US$0.060 | 1,700,000 | - | - | 1,700,000 | - | Cancelled |
January 30, 2002 | US$0.060 | 1,000,000 | - | - | 1,000,000 | - | Cancelled |
March 1, 2002 | US$0.110 | 300,000 | - | - | - | 300,000 | March 1, 2005 |
March 26, 2002 | US$0.170 | 1,000,000 | - | - | - | 1,000,000 | March 26, 2005 |
April 4, 2002 | US$0.165 | 1,000,000 | - | - | - | 1,000,000 | April 4, 2005 |
May 7, 2002 | US$0.160 | 400,000 | - | - | - | 400,000 | May 7, 2005 |
May 30, 2002 | US$0.150 | 600,000 | - | - | - | 800,000 | May 30, 2005 |
July 10, 2002 | US$0.075 | 2,500,000 | - | - | - | 2,500,000 | July 10, 2005 |
July 24, 2002 | US$0.080 | 250,000 | - | - | - | 250,000 | July 24, 2005 |
July 23, 2002 | US$0.080 | 1,500,000 | - | - | - | 1,500,000 | July 23, 2005 |
August 21, 2002 | US$0.090 | 100,000 | - | - | - | 100,000 | August 21, 2005 |
September 27, 2002 | US$0.080 | 3,000,000 | - | - | - | 3,000,000 | September 27, 2005 |
November 1, 2002 | US$0.070 | 3,000,000 | - | - | - | 3,000,000 | November 1, 2005 |
March 26, 2003 | US$0.050 | 3,000,000 | - | - | - | 3,000,000 | March 26, 2006 |
April 10, 2003 | US$0.040 | 3,750,000 | - | - | - | 3,750,000 | April 10, 2006 |
May 16, 2003 | US$0.030 | 3,000,000 | - | - | - | 3,000,000 | May 16, 2006 |
June 11, 2003 | US$0.030 | 3,000,000 | - | - | - | 3,000,000 | June 11, 2006 |
July 7, 2003 | US$0.031 | 2,500,000 | - | - | - | 2,500,000 | July 7, 2006 |
August 21, 2003 | US$0.075 | 1,000,000 | - | - | - | 1,000,000 | August 21, 2006 |
September 5, 2003 | US$0.060 | 2,000,000 | - | - | - | 2,000,000 | September 5, 2006 |
October 31, 2003 | US$0.060 | 2,000,000 | - | - | - | 2,000,000 | October 31, 2006 |
February 10, 2004 | US$0.040 | 4,000,000 | - | - | - | 4,000,000 | February 10, 2007 |
February 18, 2004 | US$0.045 | 2,500,000 | - | - | - | 2,500,000 | February 18, 2007 |
March 30, 2004 | US$0.0525 | 1,500,000 | - | - | - | 1,500,000 | March 20, 2007 |
June 04, 2004 | US$0.060 | 3,000,000 | - | - | - | 3,000,000 | June 04, 2007 |
August 20, 2004 | US$0.060 | 4,500,000 | - | - | - | 4,500,000 | August 20, 2007 |
October 1, 2004 | US$0.060 | - | 2,500,000 | 2,500,000 | October 1, 2007 | ||
56,853,334 | 2,500,000 | - | 7,453,334 | 51,900,000 |
.../5
SUNGOLD INTERNATIONAL HOLDINGS CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SECOND QUARTER ENDED FEBRUARY 28, 2005
(A Development Stage Company)
(Presented in Canadian Dollars)
(Unaudited – Prepared by Management)
PAGE - 5 -
Note 7 | RELATED PARTY TRANSACTIONS | |
a) | During the quarter no management fees were paid to any director or officer. | |
b) | During the quarter consulting fees of $42,666 were paid to directors, a company with common director, and an officer of a subsidiary of the Company. The fees are in the normal course of business. | |
c) | In June 2004, the Company signed a $275,825 software development agreement with a consulting company for its HorsepowerTM program. During the previous quarter, the Company paid $206,224 as progress payments. As of August 31, 2004, the Company had paid $69,580 as progress payments. The owner of the consulting company is also the Information Technology Consultant of a subsidiary - Horsepower Broadcasting Network (HBN) International Ltd. The fees are in the normal course of business. |