INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN UNITED CORP, INC.
(formally Vectoria, Inc.)
Unaudited
September 30th, 2003
REVIEW ENGAGEMENT REPORT
To the Directors of
American United Corp, Inc.
We have reviewed the interim consolidated balance sheet ofAmerican United Corp, Inc.as at September 30, 2003 and the interim consolidated statements of income, retained earnings and changes in financial position for the year then ended. Our review was made in accordance with generally accepted standards for review engagements in Canada and accordingly consisted primarily of enquiry, analytical procedures and discussion related to information supplied to us by the company.
A review does not constitute an audit and consequently we do not express an audit opinion on these interim consolidated financial statements.
Based on our review, nothing has come to our attention that causes us to believe that these interim consolidated financial statements are not, in all material respects, in accordance with generally accepted accounting principles of Canada.
& nbsp; Pontbriand, Roy, Ethier
Saint-Lambert, Canada General Partnership
October 10, 2003 Chartered Accountants
American United Corp, Inc.
[Incorporated under the General Corporation law of Delaware]
INTERIM CONSOLIDATED BALANCE SHEET
As at
30-09-2003 31-12-2002
$ $
ASSETS
Current assets
Cash &nb sp; 3,218 20,829
3,218 20,829
Fixed assets[note 3] 832,986 899,651
836,204 920,480
LIABILITIES
Accounts payable and accrued liabilities 1,752,669 2,094,551
Current portion of obligations under capital leases[note 4] 180,219 180,219
1,932,888 2,274,770
Obligations under capital leases[note 4] 273,871 &n bsp; 321,693
Due to parent company 628,542 & nbsp; 269,311
Due to an administrator 166,783 ; 130,000
Shareholders’ equity
Capital stock[note 5] 100 100
Retained earnings (2,165,980) (2,075,394)
(2,165,880) (2,075,294)
836,204 920,480
See accompanying notes to the interim consolidated financial statements
American United Corp, Inc.
INTERIM CONSOLIDATED RETAINED EARNING
As at
30-09-2003 31-12-2002
$ $
[9 months]
Balance, beginning the year (2,075,394) &nb sp; 357,201
Net Earnings (Net loss) (90,586) (2,432,595)
Balance, end of year (2,165,980) (2,075,394)
See accompanying notes to the interim consolidated financial statements
American United Corp, Inc.
INTERIM CONSOLIDATED STATEMENTS OF INCOME
As at
30-09-2003 31-12-2002
$ $
[9 months]
Sales &nb sp; 47,081 378,812
Operating expenses[note 8] ; 91 879,120
Earnings before the following items 46,990 &nbs p; (500,308)
Expenses
Administrative expenses[note 8] 133,954 1,848,180
Financial expenses[note 8] &nb sp;3,622 84,107
137,576 1,932,287
Net earnings (Net loss) (90,586) (2,432,595)
See accompanying notes to the interim consolidated financial statements
American United Corp, Inc.
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
As at
30-09-2003 31-12-2002
$ $
[9 months]
Operating activities
Net earnings from continuing operations for the year (90,586) (2,432,595)
Items not affecting cash :
Depreciation – Fixed assets 66,665 &nbs p; 359,903
Loss of disposal of fixed assets — &nbs p; 24,550
Write off of goodwill — 689,577
&nb sp; (23,921) (1,358,565)
Changes in non-cash working capital balances related to operations :
Accounts receivable — 176,292
Prepaid expenses — 12,383
Accounts payable and accrued liabilities (341,882) ; 1,597,306
Cash provided by operating activities (365,803) &nbs p; 427,416
Investing activities
Proceed of sales of a subsidiary assets — &nbs p; 105,000
Acquisition of fixed assets — &nbs p; (77,084)
Cash provided by investing activities — &nbs p; 27,916
Financing activities
Obligations under capital leases — ; 22,423
Due to a parent company 359,231 &nb sp; (30,739)
Due to an administrator 36,78 3 130,000
Disbursement on obligations under capital leases (47,822) (556,686)
Cash provided by financing activities 348,192 (435,002)
Cash (and cash equivalents) increase (17,611) 20,330
Cash and cash equivalents, beginning 20,829 &nb sp; 499
Cash and cash equivalents, end 3,218 &nb sp; (20,829)
See accompanying notes to the interim consolidated financial statements
Vectoria, Inc.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the period ended & nbsp; Unaudited
1) NATURE AND CONTINUANCE OF OPERATIONS
The company American United Corp, Inc. is incorporated under theGeneral Corporation Law of Delawareon October 1st2001, and is a holding company.
2) SIGNIFICANT ACCOUNTING POLICIES
The Company’s Interim Consolidated financial statements are stated in Canadian dollars and have been prepared in accordance with generally accepted accounting principles in Canada (GAAP).
Basis of presentation
These Interim Consolidated financial statements have been prepared using accounting principles applicable to a going concern, which assume that the Company will continue its operations in the foreseeable future and be able to realize its assets and discharge its liabilities in the normal course of operations.
During the last fiscal year, the Company incurred operating losses and has an accumulated deficit of $2,165,980 at September 30, 2003.
The Company’s ability to continue as a going concern is dependent upon its ability to pursue its debt restructuring, achieving profitable operations and upon generating positive cash flow operations. Accordingly, the going concern assumption may not be appropriate for these Interim Consolidated financial statements, in which case carrying value adjustments of reclassifications of assets, liabilities and reported results of operation might be necessary
Consolidation basis
The Interim Consolidated financial statements include the accounts American United Corp Inc. and its wholly owned subsidiary Vectoria Corp.
Vectoria, Inc.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the period ended & nbsp; Unaudited
2) SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Management believes that the estimates are reasonable.
Fixed assets
Capital assets are stated at cost, net of tax credits. Depreciation is provided over the useful life of assets, using the following methods and rates:
Methods Rates
Computer equipment
under capital leases Diminishing balance ; 30 %
Furniture and equipment Diminishing balance 20 %
Leasehold improvements Straight-line 20 %
Going concern
These financial statements have been prepared in accordance with accounting principles that apply to a going concern. This presupposes that the company will continue its operations in the foreseeable future and that will be able to realize its assets and discharge its liabilities in the normal course of operations.
Vectoria, Inc.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the period ended & nbsp; Unaudited
2) SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Going concern (Cont’d)
An unfavorable condition have left some doubt as to the appropriateness of this assumption. Its working capital is deficient. These financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate, because management feels that the measures described above that it took or intends to take will mitigate the effect of the conditions and facts that raise doubt about the appropriateness of this assumption.
Revenue Recognition
The company recognizes revenue from the sale of providing Internet access services and computer integration and technology security when the services have been rendered. The company’s new IP telephony service will be billed in advance on a monthly basis and deferred until earned.
3) FIXED ASSETS
2003 2002
Accumulated Net bookNet book
Cost & nbsp; depreciation value value
$ & nbsp; $ $ $
Furnitures and equipment 23,223 10,416 12,807 9
Leasehold improvements 1,939 646 &nb sp; 1,293 357
Computer equipment under
capital leases 1,247,185 428,299 818,886 883,445
1,272,347 ; 439,361 832,986 899,651
Vectoria, Inc.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the period ended & nbsp; Unaudited
4) OBLIGATIONS UNDER CAPITAL LEASES
30-09-2003 31-12-2002
$ $
Office furniture lease contract, of a total amount of $ 19,472, repayable in monthly
instalments of 764 $ including interest calculated at 19,61 % maturing from May 1, 2004. 11,460 13,752
Computer equipment lease contracts, of a total amount of $ 1,019,785, repayable in monthly
instalments of $ 15,287 including interest calculated at 13,30 %, with a purchase option of
264,389 $ at maturity, on March 27, 2004. 447,833 & nbsp; 493,694
Computer equipment lease contracts, of a total amount of $ 22,423 repayable in monthly
installments of 739 $ including interest calculated at 11,45 % at maturity on March 31, 2005. 17,732 19,949
Total amount of future minimum lease payments 477,025 &nb sp; 527,395
Interest included in instalments (22,935) ; (25,483)
& nbsp; 454,090 501,912
Current portion (180,219) (180,219)
273,871 321,693
Future minimum lease payments under the capital leases for subsequent years are as follows : 2004, $ 180,219; 2005, $ 273,871.
Vectoria, Inc.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the period ended & nbsp; Unaudited
5) CAPITAL STOCK
Authorized
An unlimited number of common shares without par value.
30-09-2003 31-12-2002
$ $
Issued
100 common shares 100 100
6) FINANCIAL INSTRUMENTS
Interest rate risk
The interest rate risk of the Company is limited. A variation of 1 % on interest rate do not have an important effect on the benefit, cash flows or the financial situation of the Company.
Credit risk
The company provides credit to its clients in the normal course of its operations. For the other debts, the company determines, on a continuing basis, the probable losses and sets up a provision for losses based on the estimated realizable value.
Vectoria, Inc.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the period ended & nbsp; Unaudited
7) STATEMENT OF INCOME
30-09-2003 31-12-2002
$ $
[9 months]
Operating expenses
Salaries and employee benefits — 622,414
Rent �� ; — 68,402
Repairs and maintenance — & nbsp; 13,172
Traveling expenses 91 39,330
Insurances — 7,395
Taxes and license — 23,294
Purchase — 100,843
Publicity &nbs p; — 4,270
91 879,120
Administrative expenses
Professional fees 5,155 15,000
Office expenses 1,443 195,110
Communications 38,531 399,464
Administrative expenses 22,160 & nbsp; 17,895
Entertainment expenses —&n bsp; 4,836
Depreciation – Fixed assets 66,665 &nbs p; 359,903
Bad debt — 141,845
Write off of goodwill — 689,577
Loss of disposal of fixed assets — &n bsp; 24,550
133,954 1,848,180
Financial expenses
Interests and bank charges 1,074 37,012
Long term interest 2,54 8 47,095
&nbs p; 3,622 84,107
Vectoria, Inc.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the period ended & nbsp; Unaudited
8) CONTINGENT LIABILITIES
A payable of $ 101,326 is presently under litigation. legal procedures have been instituted against the company. No provision has been recorded in the accounts.
