UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 20-F/A
Amendment No. 1
(Mark One)
[_] | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year endedDecember 31, 2004 |
OR
[_] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
[_] | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring the shell company report _______________ |
For the transition period from _______________________ to _______________________
Commission file number 0-15276
CLEARLY CANADIAN
BEVERAGE CORPORATION
(exact name of Registrant as specified in its charter)
Incorporated in the Province of British Columbia, Canada
(Jurisdiction of incorporation or organization)
2489 Bellevue Avenue, West Vancouver, British Columbia, Canada V7V 1E1
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class N/A N/A | Name of each exchange on which registered |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Common Shares With No Par Value
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2004
10,338,682 Common Shares with no par value
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No
Indicate by check mark which financial statement item the Registrant has elected to follow.
Item 17 Item 18 [X]
EXPLANATORY NOTE
This Annual Report on Form 20-F/A Amendment No. 1 for the period ending December 31, 2004 is being filed to include the financial statements under Item 18, which were inadvertently omitted from the our filing on June 30, 2005, as a result of an error by our filing agent. Except as otherwise noted, we have only amended our Annual Report on Form 20-F to include our financial statements for the years ended December 31, 2004, 2003 and 2002. This Amendment incorporates the information included in our initial Annual Report on Form 20-F as originally filed on June 30, 2005 and you should read our Annual Report in conjunction with this Amendment.
2
ITEM 15. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were adequately designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms. Our annual report on Form 20-F for the year ended December 31, 2004, inadvertently omitted our audited consolidated financial statements for the years ended December 31, 2004, 2003 and 2002. This omission was due to an error by our filing agent. Procedures have been adopted to prevent future occurrences of such errors.
During the year ended December 31, 2004, covered by this report, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures or internal controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
ITEM 18. FINANCIAL STATEMENTS
The following financial statements are filed as part of this annual report:
• | Auditors’ Report |
• | Consolidated Balance Sheets as at December 31, 2004 and 2003 |
• | Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2004, 2003 and 2002 |
• | Consolidated Statements of Operations for the Years Ended December 31, 2004, 2003 and 2002 |
• | Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002 |
• | Notes to Consolidated Financial Statements |
3
February 10, 2005
Management’s Responsibility for Financial Reporting
The accompanying consolidated financial statements of the Company and all the information in this annual report are the responsibility of management.
The financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles. Financial statements are not precise since they include certain amounts based on estimates and judgement. Management has determined such amounts on a reasonable basis in order to ensure that the financial statements are presented fairly, in all material respects. Management has prepared the financial information presented elsewhere in the annual report and has ensured that it is consistent with that in the financial statements.
The Company maintains systems of internal accounting and administrative controls of high quality, consistent with reasonable cost. Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and the Company’s assets are appropriately accounted for and adequately safeguarded.
The Board of Directors is responsible for ensuring that management fulfills it responsibilities for financial reporting and is ultimately responsible for reviewing and approving the financial statements. The Board carries out this responsibility principally through the Audit Committee which consists of directors appointed by the Board. The Committee meets periodically with management as well as with the independent external auditors to discuss internal controls over the financial reporting process, auditing matters and financial reporting issues. The Committee reviews the consolidated financial statements and the external auditors’ report thereon and reports its findings to the Board for consideration when the Board approves the financial statements for issuance to the Company’s shareholders. The Committee also considers, for review by the Board and approval by the shareholders, the engagement or re-appointment of the external auditors. The external auditors have free and full access to the Audit Committee.
![]() “Douglas L. Mason” Chief Executive Officer | ![]() “Stuart R. Ross” Chief Financial Officer |
4
Auditors’ Report
To the Shareholders of
Clearly Canadian Beverage Corporation
We have audited the consolidated balance sheets ofClearly Canadian Beverage Corporation as at December 31, 2004 and 2003 and the consolidated statements of operations, changes in shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2004. 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 Canadian generally accepted auditing standards and standards of the Public Company Accounting Oversight Board (United States). 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 consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2004 and 2003 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2004 in accordance with Canadian generally accepted accounting principles.
Chartered Accountants
Vancouver, British Columbia
February 10, 2005
(except for note 20, which is as at February 17, 2005)
5
Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Difference
In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the consolidated financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in note 1 to the financial statements. Our report to the shareholders dated February 10, 2005, except for note 20, which is as at February 17, 2005, is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors’ report when they are adequately disclosed in the consolidated financial statements.
Chartered Accountants
Vancouver, British Columbia
February 10, 2005
6
Clearly Canadian Beverage Corporation
Consolidated Balance Sheets
As at December 31, 2004 and 2003
(in thousands of United States dollars, except where indicated)
2004 $ | 2003 $ | ||||
---|---|---|---|---|---|
Assets | |||||
Current assets | |||||
Cash and cash equivalents | 78 | 127 | |||
Accounts receivable | 600 | 863 | |||
Inventories | 524 | 630 | |||
Prepaid expenses, deposits and other assets | 167 | 152 | |||
1,369 | 1,772 | ||||
Long-term investments (note 7) | 29 | 112 | |||
Assets held for sale (note 6) | 415 | 987 | |||
Property, plant and equipment (note 6) | 2,252 | 2,726 | |||
Distribution rights (note 8) | — | 1,502 | |||
Prepaid contracts (note 15(c)) | 116 | 257 | |||
4,181 | 7,356 | ||||
Liabilities | |||||
Current liabilities | |||||
Bank indebtedness (note 5) | 272 | 478 | |||
Accounts payable and accrued liabilities (note 6) | 4,150 | 3,453 | |||
Related party liability (note 14) | — | 200 | |||
Customer deposits (note 6) | 69 | 167 | |||
Short-term debt (note 6) | 1,248 | 134 | |||
5,739 | 4,432 | ||||
Long-term debt (note 9) | 1,957 | 1,799 | |||
7,696 | 6,231 | ||||
Shareholders' (Deficiency) Equity | |||||
Capital stock (notes 11 and 12) | |||||
Authorized | |||||
200,000,000 common shares without par value | |||||
10,000,000 preferred shares with a par value of CA$1 each | |||||
Issued - 10,338,682 (2003 - 7,168,682) common shares without par value | |||||
Outstanding - 9,965,682 (2003 - 6,795,682) common shares without par value | 58,590 | 58,272 | |||
Warrants - 815,000 (2003 - 1,527,500) | 165 | 190 | |||
Options - 1,694,336 (2003 - 1,619,336) | 36 | 13 | |||
Equity component of convertible debenture (note 10) | 26 | 26 | |||
Contributed surplus (note 3) | 810 | 256 | |||
Cumulative translation account | (1,253 | ) | (1,352 | ) | |
Deficit | (61,889 | ) | (56,280 | ) | |
(3,515 | ) | 1,125 | |||
4,181 | 7,356 | ||||
Going concern(note 1)
Commitments and contingencies(note 15)
Subsequent events(note 20)
Approved by the Board of Directors
![]() Nigel Woodall, Director | ![]() Philip Langridge, Director |
The accompanying notes form an integral part of these consolidated financial statements.
7
Clearly Canadian Beverage Corporation
Consolidated Statements of Changes in Shareholders’ Equity
For the years ended December 31, 2004, 2003 and 2002
(in thousands of United States dollars, except where indicated)
Capital stock | Warrants | Options | |||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Number of common shares outstanding | Amount $ | Number of warrants outstanding | Amount $ | Number of options outstanding | Amount $ | Equity component of convertible debenture $ | Contributed surplus $ | Cumulative translation account $ | Deficit $ | Share- holders' equity (deficiency) $ | |||||||||||||||||||||||||
Balance - | |||||||||||||||||||||||||||||||||||
December 31, 2001 | 6,640,682 | 58,208 | 692,740 | 423 | 1,371,291 | -- | -- | -- | (1,358 | ) | (48,984 | ) | 8,289 | ||||||||||||||||||||||
Shares issued upon | |||||||||||||||||||||||||||||||||||
exercise of warrants | 30,000 | 29 | (30,000 | ) | (8 | ) | -- | -- | -- | -- | -- | -- | 21 | ||||||||||||||||||||||
Issuance of convertible | |||||||||||||||||||||||||||||||||||
debenture (note 10) | -- | -- | 837,500 | -- | -- | -- | 26 | -- | -- | -- | 26 | ||||||||||||||||||||||||
Issued during the year | -- | -- | -- | -- | 410,000 | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Expired during the year | -- | -- | -- | -- | (95,489 | ) | -- | -- | -- | -- | -- | -- | |||||||||||||||||||||||
Loss for the year | -- | -- | -- | -- | -- | -- | -- | -- | -- | (3,583 | ) | (3,583 | ) | ||||||||||||||||||||||
Exchange difference | -- | -- | -- | -- | -- | -- | -- | -- | (30 | ) | -- | (30 | ) | ||||||||||||||||||||||
Balance - | |||||||||||||||||||||||||||||||||||
December 31, 2002 | 6,670,682 | 58,237 | 1,500,240 | 415 | 1,685,802 | -- | 26 | -- | (1,388 | ) | (52,567 | ) | 4,723 | ||||||||||||||||||||||
Private placement issued | |||||||||||||||||||||||||||||||||||
February 28, 2003 at | |||||||||||||||||||||||||||||||||||
CA$0.80 per unit | |||||||||||||||||||||||||||||||||||
(note 11) | 125,000 | 35 | 125,000 | 31 | -- | -- | -- | -- | -- | -- | 66 | ||||||||||||||||||||||||
Issued during the year - | |||||||||||||||||||||||||||||||||||
non-employees | -- | -- | -- | -- | 35,000 | 13 | -- | -- | -- | -- | 13 | ||||||||||||||||||||||||
Issued during the year | -- | -- | -- | -- | 535,000 | -- | -- | -- | -- | -- | -- | ||||||||||||||||||||||||
Expired during the year | -- | -- | -- | -- | (636,466 | ) | -- | -- | -- | -- | -- | -- | |||||||||||||||||||||||
Expired during the year | -- | -- | (97,740 | ) | (256 | ) | -- | -- | -- | 256 | -- | -- | -- | ||||||||||||||||||||||
Loss for the year | -- | -- | -- | -- | -- | -- | -- | -- | -- | (3,713 | ) | (3,713 | ) | ||||||||||||||||||||||
Exchange difference | -- | -- | -- | -- | -- | -- | -- | -- | 36 | -- | 36 | ||||||||||||||||||||||||
Balance - December 31, | |||||||||||||||||||||||||||||||||||
2003 carried forward | 6,795,682 | 58,272 | 1,527,500 | 190 | 1,619,336 | 13 | 26 | 256 | (1,352 | ) | (56,280 | ) | 1,125 |
The accompanying notes form an integral part of these consolidated financial statements.
8
Clearly Canadian Beverage Corporation
Consolidated Statements of Changes in Shareholders’ Equity
For the years ended December 31, 2004, 2003 and 2002
(in thousands of United States dollars, except where indicated)
Capital stock | Warrants | Options | |||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Number of common shares outstanding | Amount $ | Number of warrants outstanding | Amount $ | Number of options outstanding | Amount $ | Equity component of convertible debenture $ | Contributed surplus $ | Cumulative translation account $ | Deficit $ | Share- holders' equity (deficiency) $ | |||||||||||||||||||||||||
Balance - December 31, | |||||||||||||||||||||||||||||||||||
2003 brought forward | 6,795,682 | 58,272 | 1,527,500 | 190 | 1,619,336 | 13 | 26 | 256 | (1,352 | ) | (56,280 | ) | 1,125 | ||||||||||||||||||||||
Adoption of new | |||||||||||||||||||||||||||||||||||
accounting standards | |||||||||||||||||||||||||||||||||||
(note 3) | -- | -- | -- | -- | -- | -- | -- | 523 | -- | (523 | ) | -- | |||||||||||||||||||||||
Issued during the year - | |||||||||||||||||||||||||||||||||||
bonus shares (note 11) | 2,135,000 | 102 | 250,000 | 6 | 100,000 | 23 | -- | -- | -- | -- | 131 | ||||||||||||||||||||||||
Private placement issued | |||||||||||||||||||||||||||||||||||
December 10, 2004 at | |||||||||||||||||||||||||||||||||||
CA$0.25 per unit | |||||||||||||||||||||||||||||||||||
(note 11) | 1,035,000 | 216 | -- | -- | -- | -- | -- | -- | -- | -- | 216 | ||||||||||||||||||||||||
Expired during the year | |||||||||||||||||||||||||||||||||||
(note 12) | -- | -- | (962,500 | ) | (31 | ) | (25,000 | ) | -- | -- | 31 | -- | -- | -- | |||||||||||||||||||||
Loss for the year | -- | -- | -- | -- | -- | -- | -- | -- | -- | (5,086 | ) | (5,086 | ) | ||||||||||||||||||||||
Exchange difference | -- | -- | -- | -- | -- | -- | -- | -- | 99 | -- | 99 | ||||||||||||||||||||||||
Balance - December 31, 2004 | 9,965,682 | 58,590 | 815,000 | 165 | 1,694,336 | 36 | 26 | 810 | (1,253 | ) | (61,889 | ) | (3,515 | ) | |||||||||||||||||||||
The accompanying notes form an integral part of these consolidated financial statements.
9
Clearly Canadian Beverage Corporation
Consolidated Statements of Operations
For the years ended December 31, 2004, 2003 and 2002
(in thousands of United States dollars, except where indicated)
2004 $ | 2003 $ | 2002 $ | |||||
---|---|---|---|---|---|---|---|
Sales | 11,586 | 13,270 | 20,205 | ||||
Cost of sales | 8,048 | 9,960 | 14,535 | ||||
Gross profit | 3,538 | 3,310 | 5,670 | ||||
Selling, general and administration expenses | 5,587 | 5,554 | 8,018 | ||||
Amortization of property, plant and equipment | 130 | 294 | 422 | ||||
Royalty revenue (note 4) | (133 | ) | (163 | ) | (242 | ) | |
Other expense | 270 | 161 | 73 | ||||
Financing costs | 208 | -- | -- | ||||
Interest on short-term debt (note 6) | 174 | 141 | 58 | ||||
Interest on long-term debt (note 9) | 52 | 4 | -- | ||||
Loss on sale of assets held for sale (note 6) | 56 | 328 | 97 | ||||
Stock-based compensation | 23 | 13 | -- | ||||
Writedown of property, plant and equipment (note 6) | 721 | 272 | 942 | ||||
Writedown of distribution rights (note 8) | 1,536 | 500 | -- | ||||
Gain on settlement of convertible debenture (note 10) | -- | (81 | ) | -- | |||
8,624 | 7,023 | 9,368 | |||||
Loss before income taxes | (5,086 | ) | (3,713 | ) | (3,698 | ) | |
Recovery of income taxes (note 13 | -- | -- | 115 | ||||
Loss for the year | (5,086 | ) | (3,713 | ) | (3,583 | ) | |
Basic and diluted loss per share | |||||||
(expressed in dollars) | (0.66 | ) | (0.55 | ) | (0.54 | ) | |
Going concern(note 1)
The accompanying notes form an integral part of these consolidated financial statements.
10
Clearly Canadian Beverage Corporation
Consolidated Statements of Cash Flows
For the years ended December 31, 2004, 2003 and 2002
(in thousands of United States dollars, except where indicated)
2004 $ | 2003 $ | 2002 $ | |||||
---|---|---|---|---|---|---|---|
Cash flows from operating activities | |||||||
Loss for the year | (5,086 | ) | (3,713 | ) | (3,583 | ) | |
Items not involving cash (note 17(a)) | 2,534 | 1,921 | 1,786 | ||||
Changes in non-cash working capital balances related to | |||||||
operations (note 17(b)) | 1,094 | 2,005 | (1,253 | ) | |||
(1,458 | ) | 213 | (3,050 | ) | |||
Cash flows from investing activities | |||||||
Proceeds from sale of property, plant and equipment | 543 | 202 | 324 | ||||
Proceeds from sale of long-term investment | 85 | -- | -- | ||||
Purchase of property, plant and equipment | (44 | ) | -- | (140 | ) | ||
Net proceeds from sale of production facility | -- | -- | 1,675 | ||||
584 | 202 | 1,859 | |||||
Cash flows from financing activities | |||||||
Proceeds on issuance of short-term debt | 1,943 | -- | -- | ||||
Proceeds from issuance of capital stock and warrants | 216 | 66 | 21 | ||||
(Decrease) increase in bank indebtedness | (206 | ) | (224 | ) | 702 | ||
Repayment of short-term debt | (1,081 | ) | (6 | ) | (7 | ) | |
Repayment of long-term debt | -- | -- | (161 | ) | |||
Proceeds from issuance of convertible debenture | -- | -- | 424 | ||||
872 | (164 | ) | 979 | ||||
Effect of exchange rates on cash and cash equivalents | (47 | ) | (124 | ) | (14 | ) | |
(Decrease) increase in cash and cash equivalents | (49 | ) | 127 | (226 | ) | ||
Cash and cash equivalents - Beginning of year | 127 | -- | 226 | ||||
Cash and cash equivalents - End of year | 78 | 127 | -- | ||||
Interest paid | 226 | 145 | 58 | ||||
Income taxes paid | -- | -- | -- | ||||
Supplementary cash flow information(note 17(c))
The accompanying notes form an integral part of these consolidated financial statements.
11
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
1 | Going concern |
The accompanying financial statements have been prepared using Canadian generally accepted accounting principles applicable to a going concern. |
While these accompanying financial statements have been prepared on the assumption that the Company is a going concern and will be able to realize its assets and discharge its liabilities in the normal course of business, certain events and conditions cast substantial doubt on this assumption. The Company had a loss of $5,086,000 for the year ended December 31, 2004 and a working capital deficit of $4,370,000, an accumulated deficit of $61,889,000 and a shareholders’ deficiency of $3,515,000 at year-end. Operations for the year ended December 31, 2004 have been funded primarily from the issuance of capital stock, the net proceeds of short-term debt financing of $862,000, the continued support of creditors, net changes in working capital balances and the net proceeds of $543,000 on disposition of the Company’s property located in Burlington, Washington, USA. |
Management has continued to take steps to try to improve the Company’s financial results and cash flows. These steps include listing for sale its land and water rights in Formosa, Ontario. Subsequent to December 31, 2004, the Company raised an additional US$1,000,000 of debt financing (note 20) and management is currently seeking further debt and/or equity financing to fund working capital requirements. The Company’s ability to continue operations is contingent on its ability to obtain this financing. Management believes that it will be able to secure the necessary financing; however, there is no assurance that management will be successful in achieving these objectives. |
These financial statements do not reflect adjustments to the carrying value of assets and liabilities, the reported revenues and expenses and balance sheet classifications used that would be necessary if the going concern assumption were not appropriate. Such adjustments could be material. |
2 | Summary of significant accounting policies |
Nature of operations |
The Company produces, distributes and markets beverage products and flavoured beverages. The Company’s products are sold principally in the United States and Canada. |
Principles of accounting |
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada (Canadian GAAP). These principles differ in certain respects from those accounting principles and practices that the Company would have followed had its consolidated financial statements been prepared in accordance with accounting principles and practices generally accepted in the United States (U.S. GAAP). The differences as they affect the Company are described in note 19. |
12
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
Consolidation |
These consolidated financial statements include the accounts of Clearly Canadian Beverage Corporation and its wholly owned subsidiaries, Clearly Canadian Beverage (International) Corporation, CC Beverage (US) Corporation, 546274 Alberta Ltd., and Blue Mountain Springs Ltd. |
In view of the consolidated nature of these financial statements, the term “Company”, as used herein, is sometimes used to refer to all of the consolidated companies collectively and, where the context or specific transactions require, is sometimes used to refer to certain of the consolidated companies individually. |
Foreign currency translation |
The Company uses the United States dollar as its reporting currency. The assets and liabilities of the Canadian operations are translated into United States dollars at the rates of exchange at the balance sheet dates, and revenue and expenses are translated at the average rates of exchange for the periods of operation. Unrealized gains and losses arising on translation are recorded as a separate component of shareholders’ equity. |
Realized gains and losses on foreign currency transactions are included in the determination of loss for the year. |
Revenue recognition |
Revenue is recognized at the time that shipment of product to the customer is confirmed by the shipper, which is the point at which the customer takes ownership of the product, provided that collectibility is reasonably assured. The Company does not engage in bill and hold transactions. Distributors are contractually obligated to the Company for complete payment of products sold to them regardless of their ability to sell to retailers. A provision for returns is recorded in the period management becomes aware that it is probable that the product may be returned. |
Royalty revenue is recognized as the Company is notified of the sale of the licensed product and when collectibility is reasonably assured. |
Funds received in advance of revenues being recognized are recorded as customer deposits. |
Inventories |
Inventories consist of raw materials and finished goods. Raw materials are valued at the lower of cost and market. Finished goods are valued at the lower of cost and net realizable value. |
Long-term investments |
Long-term investments are recorded at cost less writedowns for impairments in value that are other than temporary. |
13
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
Distribution rights |
Distribution rights, relating to the acquisition of certain territorial rights to distribute beverage products, have an indefinite life and are recorded at cost. Management reviews the carrying value of the distribution rights at least annually for impairment. Distribution rights are written down when declines in value are considered to be other than temporary based upon forecast future cash flows. |
Property, plant and equipment |
Property, plant and equipment are recorded at cost less accumulated amortization. Amortization is provided on a straight-line basis over the following periods which represent estimated useful life: |
Buildings | 30 years | ||
Equipment | 5 - 15 years | ||
Leasehold improvements | term of the lease |
These assets will be written down to the recoverable amount if carrying value exceeds that amount. |
Stock-based compensation plan |
The Company has a stock option plan which is described in note 12. Stock options issued to employees and directors are expensed based on their fair value. |
Consideration paid for stock on exercise of stock options is credited to capital stock. |
Cash and cash equivalents |
Cash and cash equivalents consist of cash on hand and short-term investments with original maturities of 90 days or less at the time of purchase. |
Use of estimates |
The preparation of financial statements in accordance with Canadian generally accepted accounting principles requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant areas requiring the use of management estimates relate to the assessment of the fair market value of stock options, land and water sources ($2 million) and the accrual for marketing fees ($534,000). Actual results could differ materially from those estimates. |
14
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
Financial instruments |
a) | Fair value of financial instruments |
The fair value of cash and cash equivalents, accounts receivable, bank indebtedness, and accounts payable and accrued liabilities corresponds to their carrying value due to their short-term nature. |
The carrying value of long-term debt approximates its fair value based upon the discount rates applied. See note 9. |
b) | Concentration of credit risk |
The Company grants credit to its customers in the normal course of business. Credit valuations are performed on a regular basis and the financial statements take into account an allowance for bad debts. At December 31, 2004, two customers represented 32% (2003 —one customer represented 21%) of total accounts receivable. |
c) | Interest rate risk |
The short-term bank credit facility bears interest at U.S. prime rate plus 4%. The long-term debt bears interest at a fixed rate as disclosed in note 9. |
The Company does not use derivative instruments to manage its exposure to interest rate risk. |
d) | Foreign exchange rate risk |
The majority of the Company’s revenues and selling and production costs are incurred in United States dollars. However, general and administration costs are incurred in Canadian dollars and the Company is therefore subject to risk due to fluctuations in exchange rates. The Company does not use derivative instruments to manage its exposure to foreign exchange rate risk. |
Income taxes |
Income taxes are calculated using the liability method of accounting. Temporary differences arising from the difference between tax basis of an asset or a liability and its carrying value on the balance sheet are used to calculate future income tax liabilities or assets. Future income tax liabilities or assets are calculated using income tax rates that are expected to apply to taxable income in the periods that the temporary differences are expected to reverse. The measurement of future tax assets is reduced, if necessary, by a valuation allowance where, based upon evidence, the probability of realization of the future tax asset does not meet a more likely than not criterion. |
Advertising costs |
The Company expenses all advertising costs as incurred. These costs are included in selling, general and administration expenses. |
15
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
Earnings (loss) per share |
Basic earnings (loss) per share are computed by dividing the earnings (loss) for the year by the weighted average number of common shares outstanding during the year of 7,750,122 (2003 — 6,774,107; 2002 — 6,662,682). Diluted earnings (loss) per share are computed using the treasury method by including other potential common stock from exercise of stock options and warrants in the weighted average number of common shares outstanding for a period, if dilutive. |
Diluted earnings (loss) per share is the same as basic earnings (loss) per share since the conversion of the convertible debenture and exercise of stock options and warrants would be anti-dilutive. |
Prior year comparatives |
Certain comparative figures have been reclassified to conform to the current year’s presentation. |
3 | Changes in accounting policies |
The Company has a stock option plan which is described in note 12. Effective January 1, 2004, the Company adopted the new provisions of the Canadian Institute of Chartered Accountants (CICA) Handbook Section 3870 on “Stock-Based Compensation and Other Stock-Based Payments”, which now requires companies to adopt the fair value based method for all stock-based awards granted on or after January 1, 2002. As a result, the Company is required to expense stock options issued to employees and directors. Previously, the Company was only required to disclose the pro forma effect of stock options issued to employees and directors in the notes to the financial statements. |
The Company has applied the new provisions retroactively by a charge to retained earnings and a corresponding increase to contributed surplus in the amount of $523,000 on January 1, 2004 with respect to employee stock options granted in 2003 and 2002 (refer to note 12). |
4 | Royalty revenue |
a) | Cascade Clear brand |
The Company received $18,900 in royalty revenue during the year ended December 31, 2004 (2003 - $100,000; 2002 - $126,000). |
b) | Co-pack business |
The Company received $114,100 in royalty revenue during the year ended December 31, 2004 (2003 — $62,500; 2002 — $116,000). |
16
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
5 | Bank indebtedness |
The Company’s subsidiary, CC Beverage (US) Corporation (CC Beverage), has an operating line of credit available with a United States bank, which bears interest at U.S. prime rate plus 4% with a 12-month term ending August 24, 2005 and is collateralized by a first lien on all accounts receivable and inventories of CC Beverage. CC Beverage can borrow up to the lesser of $1,000,000 and 80% of trade accounts receivable outstanding less than 60 days (as at December 31, 2004 - $406,000, 2003 — $503,000). The weighted average interest rate for 2004 was 8.49% (2003 — 8.125%; 2002 — 8.75%). At December 31, 2004, $272,000 (2003 — $478,000) has been drawn on this line of credit. This operating line of credit is also secured by a corporate guarantee from the Company. |
6 | Balance sheet components |
Accounts receivable |
2004 $ | 2003 $ | ||||
---|---|---|---|---|---|
Trade accounts receivable - net of allowance of $25,000 | |||||
(2003 - $91,000) | 525 | 657 | |||
Other receivables | 75 | 206 | |||
600 | 863 | ||||
Inventories |
2004 $ | 2003 $ | ||||
---|---|---|---|---|---|
Finished goods | 247 | 396 | |||
Raw materials | 277 | 234 | |||
524 | 630 | ||||
During 2003, the Company received an insurance settlement of $500,000 for defective packaging valued at $600,000. The write-off of inventory and the insurance settlement have been recorded in cost of sales. |
During 2001, Reebok International Ltd. (Reebok) granted a licence to the Company to distribute a Reebok branded beverage in the United States, Canada and the Caribbean. The licence agreement was for an initial term of three years, together with three two-year renewal terms, and was subject to certain performance obligations. Under the licence agreement, the Company paid Reebok a royalty based on a percentage of net sales of the Reebok branded beverage. The agreement with Reebok expired as at December 31, 2003 and was not renewed; $542,000 of Reebok inventory was written down in 2003 and included in cost of sales (2002 — $307,000). |
17
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
Property, plant and equipment and assets held for sale |
2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|
Cost $ | Accumulated amortization $ | Writedown $ | Net $ | ||||||
Land and water sources | 2,291 | -- | 721 | 1,570 | |||||
Buildings | 1,285 | 923 | -- | 362 | |||||
Equipment | 1,109 | 892 | -- | 217 | |||||
Leasehold improvements | 153 | 50 | -- | 103 | |||||
4,838 | 1,865 | 721 | 2,252 | ||||||
Held for sale | |||||||||
Land and water sources | 415 | -- | -- | 415 | |||||
5,253 | 1,865 | 721 | 2,667 | ||||||
2003 | |||||||||
---|---|---|---|---|---|---|---|---|---|
Cost $ | Accumulated amortization $ | Writedown $ | Net $ | ||||||
Land and water sources | 1,994 | -- | -- | 1,994 | |||||
Buildings | 1,197 | 822 | -- | 375 | |||||
Equipment | 4,105 | 3,588 | 272 | 245 | |||||
Leasehold improvements | 143 | 31 | -- | 112 | |||||
7,439 | 4,441 | 272 | 2,726 | ||||||
Held for sale | |||||||||
Land and water sources | 387 | -- | -- | 387 | |||||
Buildings | 709 | 109 | -- | 600 | |||||
1,096 | 109 | -- | 987 | ||||||
8,535 | 4,550 | 272 | 3,713 | ||||||
Included in the table above are changes arising from the change in the exchange rate between the Canadian and U.S. dollar. |
In 2003, the Company wrote down equipment by $272,000 to its estimated net recoverable amount. In 2004, land and water sources, buildings and equipment were written down by $721,000 (2003 — $nil; 2002 — $942,000). The carrying value represents management’s best estimate of the net recoverable amount of the land and water sources, buildings and equipment. If the assumptions used by management are not borne out, the net recoverable amount of the assets may differ materially from the recorded amount. |
During the year ended December 31, 2004, the Company sold certain assets previously classified as held for sale and incurred a loss on disposal of $56,000 (2003 — $328,000; 2002 — $97,000). |
18
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
Accounts payable and accrued liabilities |
2004 $ | 2003 $ | ||||
---|---|---|---|---|---|
Trade accounts payable | 3,278 | 2,765 | |||
Marketing fees | 534 | 352 | |||
Refundable deposits on assets held for sale | 29 | 27 | |||
Other accrued liabilities | 309 | 309 | |||
4,150 | 3,453 | ||||
Customer deposits |
As at December 31, 2004, the Company had received $69,000 (2003 — $167,000) in deposits on international sales orders. These deposits have been recorded as a customer deposit liability. |
Short-term debt |
During the year, the Company raised gross proceeds of CA$2,744,000, of which CA$394,000 was raised from certain directors and officers of the Company (related parties). The loans require monthly interest payments of 1% (annual rate of 12%). The additional cost of the financing included the issuance of 2,135,000 common shares and warrants to purchase up to 250,000 common shares at an exercise price of CA$0.34 for a term of two years (refer to note 11). The debt is secured by a mortgage charge against certain of the Company’s properties and by a general security agreement over assets. The discount on the face value of the short-term debt (CA$126,000) was accreted on a straight-line basis over the initial term of the debt. |
2004 $ | 2003 $ | ||||
---|---|---|---|---|---|
Mortgage payable with land and buildings pledged as collateral, bearing | |||||
interest at 3.60%, repayable at CA$1,101 per month, maturing in | |||||
August 2005 | 141 | 134 | |||
Quest Capital Corporation (Original loan CA$1,350,000 less CA$685,000 | |||||
repaid on July 6, 2004 and CA$665,000 repaid on November 23, 2004) | -- | -- | |||
Global (GMPC) Holdings Inc. (CA$1,000,000 less accretion of CA$50,000), | |||||
bearing interest of 12% per annum compounded and payable monthly, | |||||
repayable November 2005 | 789 | -- | |||
Clearly Canadian management group (CA$394,000 less accretion of | |||||
CA$11,000) (note 14), bearing interest at 12% per annum compounded | |||||
and payable monthly, repayable November 2005 | 318 | -- | |||
1,248 | 134 | ||||
7 | Long-term investments |
Long-term investments comprise common shares in publicly traded companies. |
19
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
In 2003, included in long-term investments was $85,000 related to an investment in a limited partnership of which certain directors of the Company and a company with common directors own limited partnership interests. During the year, the Company sold its interest in the limited partnership to a company controlled by a director of the Company. The Company received proceeds of $85,000, which is equal to the carrying value of the investment as at December 31, 2003. |
The book value of investments approximate market value. |
8 | Distribution rights |
During the preparation of the fourth quarter accounts in 2004, the Company undertook its annual review of the carrying value of distribution rights and determined that the value of the distribution rights was impaired. As a result, $1,536,000 (2004 — $500,000) was recorded as an impairment. See note 2. |
9 | Long-term debt |
2004 $ | 2003 $ | ||||
---|---|---|---|---|---|
Convertible promissory notes of CA$1,750,000, unsecured, | |||||
non-interest bearing, repayable in cash or equivalent value of | |||||
common shares at the option of the Company (see note 15(d)) | 1,454 | 1,354 | |||
Convertible debenture of CA$670,000, collateralized with a general | |||||
subordinated security interest, bearing interest at 10%, interest | |||||
paid monthly, the debenture units are repayable by December 1, 2006 | |||||
and convertible into common shares at the option of the holder at | |||||
any time prior to repayment at CA$0.80 per share (see note 10) | 503 | 445 | |||
1,957 | 1,799 | ||||
Long-term debt maturities in each of the next five years are as follows: |
2004 $ | 2003 $ | ||||
---|---|---|---|---|---|
Year ending December 31 | |||||
2005 | -- | 1,354 | |||
2006 | 1,957 | 445 | |||
2007 | -- | -- | |||
2008 | -- | -- | |||
2009 | -- | -- | |||
1,957 | 1,799 | ||||
20
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
10. | Convertible debenture |
During the year ended December 31, 2002, the Company issued 670 debenture units, raising gross proceeds of CA$670,000, of which CA$345,000 was raised from certain directors and officers of the Company (related parties). Each debenture unit consists of a convertible debenture of CA$1,000 and 1,250 share purchase warrants at CA$0.80 per share exercisable until December 2, 2004. The debenture units were originally repayable by December 1, 2003 and bear interest at 10% per annum. The debenture units are convertible into common shares at the option of the holder any time prior to repayment at CA$0.80 per share. |
The proceeds from the issuance of the debenture units were allocated to the convertible debenture, the equity conversion option and the share purchase warrants. The carrying amount of the financial liability of $398,000 at the time of issuance was determined by discounting the future stream of interest and principal payments at the prevailing market rate for a similar liability that does not have an associated equity component. The balance of $26,000 was allocated to the conversion option included in shareholders’ equity. The discount on the face value of the convertible debenture was accreted over the term of the debenture units. |
During the year ended December 31, 2003, the debenture holders consented to extend the term of the debenture to December 1, 2006. For accounting purposes, the term extension has been accounted for as a settlement and the difference in the fair value of the original terms of the debenture and the modified terms of $81,000 was been recorded as a gain on the statement of operations for the year ended December 31, 2003. The corresponding discount on the carrying value of the debenture will be accreted on a straight-line basis over the extended term of the debenture units. During the year ended December 31, 2004, $25,000 was accreted (2003 — $8,000; 2002 — $18,000). |
11 | Capital stock |
The Company holds 373,000 shares acquired under the normal course issuer bids at a total cost of $406,000. These shares have not been cancelled; however, they are excluded from outstanding shares. |
During the year ended December 31, 2000, the Company issued 595,000 units at a price of CA$0.88 (approximately US$0.59) per unit; each unit comprised one common share and one share purchase warrant. Each warrant is exercisable to acquire one share for CA$1.10 until November 24, 2005. The fair value of the warrants of $167,000 has been deducted from the total proceeds of $349,000 and the remainder of $182,000 is recorded as capital stock. During the year ended December 31, 2002, 30,000 of these warrants were exercised, leaving 565,000 warrants outstanding. |
During the year ended December 31, 2003, the Company completed a private placement of 125,000 units at CA$0.80 per unit raising CA$100,000. Each unit consisted of one common share of the Company and one share purchase warrant. Each warrant entitled the holder to purchase one additional common share at a price of CA$0.80 for one year. The warrants expired in February 2004 unexercised. |
21
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
On December 10, 2004, the Company completed a private placement of 1,035,000 shares at a price of CA$0.25 per share. Directors, officers and employees of the Company subscribed for all of the 1,035,000 shares. During the year ended December 31, 2004, the Company issued 2,135,000 shares in consideration for financing arrangements, of which 330,000 shares were issued to directors of the Company (note 6). |
A compensation expense of $102,000 was recorded in connection with the shares issued. |
See note 12. |
12 | Stock options, warrants and Shareholders’ Rights Plan |
Stock options |
The Company may grant options to purchase up to 1,750,000 common shares of the Company. Options may be issued under the stock option plan as determined at the sole discretion of the Company’s board of directors. Options may be issued for a term of up to 10 years at an exercise price to be determined by the Company’s board of directors, provided that the exercise price is not less than the average closing price of the Company’s shares for the 10 trading days preceding the date on which the options are granted. All options vest immediately on issuance. |
A summary of the status of the Company’s stock option plan is presented below: |
2004 | 2003 | 2002 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Number of options (000's) | Weighted average exercise price CA$ | Number of options (000's) | Weighted average exercise price CA$ | Number of options (000's) | Weighted average exercise price CA$ | |||||||||||||||
Outstanding - | ||||||||||||||||||||
Beginning of year | 1,619 | 0.91 | 1,686 | 1.43 | 1,371 | 1.49 | ||||||||||||||
Granted | 100 | 0.40 | 570 | 0.67 | 410 | 1.22 | ||||||||||||||
Expired | (25 | ) | 0.79 | (637 | ) | 1.47 | (95 | ) | 1.41 | |||||||||||
Options outstanding | ||||||||||||||||||||
and exercisable | ||||||||||||||||||||
- end of year | 1,694 | 0.87 | 1,619 | 0.91 | 1,686 | 1.43 | ||||||||||||||
The weighted average exercise price of options outstanding as at December 31, 2004 includes the effect of options repriced during the year. |
22
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
The following table summarizes information about options outstanding and exercisable: |
2004 |
Exercise prices CA$ | Number of options (000's) | Weighted average remaining contractual life (years) | Weighted average exercise price CA$ | ||||
---|---|---|---|---|---|---|---|
1.35 | 25 | 6.6 | 1.35 | ||||
1.25 | 370 | 7.3 | 1.25 | ||||
1.15 | 255 | 6.1 | 1.15 | ||||
1.05 | 25 | 5.9 | 1.05 | ||||
1.00 | 40 | 7.7 | 1.00 | ||||
0.70 | 230 | 8.1 | 0.70 | ||||
0.65 | 649 | 5.7 | 0.65 | ||||
0.40 | 100 | 1.3 | 0.40 | ||||
0.40 - 1.35 | 1,694 | 6.2 | 0.87 | ||||
2003 |
Exercise prices CA$ | Number of options (000's) | Weighted average remaining contractual life (years) | Weighted average exercise price CA$ | ||||
---|---|---|---|---|---|---|---|
1.35 | 30 | 7.6 | 1.35 | ||||
1.25 | 370 | 8.3 | 1.25 | ||||
1.15 | 255 | 7.1 | 1.15 | ||||
1.05 | 25 | 6.9 | 1.05 | ||||
1.00 | 40 | 8.7 | 1.00 | ||||
0.70 | 230 | 9.1 | 0.70 | ||||
0.65 | 669 | 6.7 | 0.65 | ||||
0.65 | 1,619 | 7.8 | 0.91 | ||||
23
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
During the year ended December 31, 2004, the Company granted 100,000 (2003 — 570,000; 2002 — 410,000) options under the stock option plan, 100,000 (2003 — 35,000) of which were granted to a consultant of the Company. The fair value of the options granted of $23,300 (2003 — $13,000 to non-employees) has been recorded as other expense. |
At the Company’s annual general meeting held on June 26, 2003, the shareholders approved the repricing of up to 415,395 previously granted stock options. Pursuant to the repricing, the exercise price of the stock options was reduced to approximately $0.48 (CA$0.65), representing an exercise price that was not less than the average closing price of the Company’s shares for the 10 trading days preceding the announcement of the repricing. The incremental increase in the fair value of these options as a result of the modification, calculated using the Black-Scholes valuation model, was nominal and therefore no additional pro forma stock-based compensation expense was recorded in the year. The fair value of each option granted or repriced was determined using the Black-Scholes option pricing model and the following weighted average assumptions: |
Weighted average grant or repricing date fair value | CA$0.56 | ||
Risk-free interest rate | 3.00% | ||
Expected life | 10 years | ||
Expected volatility in the market price of the shares | 120.5% | ||
Expected dividend yield | -- |
If the Company had applied the fair value method of accounting for employee stock options for the years ended December 31, 2003 and 2002, the Company would have recorded a compensation expense of $221,000 and $302,000 in respect of stock options granted and repriced in the year. Refer to note 3. The Company’s net loss and loss per share would have been as indicated in the pro forma amounts below: |
2003 $ | 2002 $ | ||||
---|---|---|---|---|---|
Loss for the year before stock-based compensation | (3,713 | ) | (3,583 | ) | |
Stock-based compensation | (221 | ) | (302 | ) | |
Pro forma loss for the year | (3,934 | ) | (3,885 | ) | |
Basic and diluted loss per share as reported | (0.55 | ) | (0.54 | ) | |
Per share impact of stock-based compensation | (0.03 | ) | (0.04 | ) | |
Pro forma loss per share | (0.58 | ) | (0.58 | ) | |
24
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
Warrants |
The following table summarizes information about common share purchase warrants outstanding: |
Exercise price per share | Balance - December 31, 2003 | Granted | Expired | Balance - December 31, 2004 | Expiry Date | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
US$0.85 (CA$1.10) | 565,000 | -- | -- | 565,000 | November 2005 | ||||||
US$0.62 (CA$0.80) | 837,500 | -- | (837,500 | ) | -- | December 2004 | |||||
US$0.62 (CA$0.80) | 125,000 | -- | (125,000 | ) | -- | February 2004 | |||||
US$0.28 (CA$0.34) | -- | 250,000 | -- | 250,000 | March 2006 | ||||||
1,527,500 | 250,000 | (962,500 | ) | 815,000 | |||||||
During March 2004, the Company issued 250,000 warrants in consideration for financing arrangements (note 6). Each unit consists of one common share of the Company and one share purchase warrant. Each warrant entitles the holder to purchase one additional common share at a price of CA$0.34 for two years. The warrants were estimated to have a fair value of $6,000 based upon the Black-Scholes model. |
On February 28, 2004, 125,000 warrants issued with the February 28, 2003 private placement expired. On December 2, 2004, 837,500 warrants issued with the convertible debentures on December 2, 2002 expired. |
Shareholders’Rights Plan |
The Company has a Shareholders’ Rights Plan which is contained within a Rights Agreement dated October 1, 1990, and a Supermajority Amendment, which forms part of the Company’s articles. The Rights Plan expires on December 31, 2009. |
In general terms, the rights issuable under the Rights Plan permit shareholders to purchase the Company’s shares at 50% of the market price at the time of the occurrence of certain Triggering Events. Generally, a Triggering Event is where a party (Acquiring Person) endeavours to merge, amalgamate, acquire assets or acquire greater than 20% of the voting shares of the Company without the approval of the Company’s directors. An Acquiring Person who causes the Triggering Event to occur is specifically excluded from acquiring shares under the adjustment formula provided for in the Rights Agreement. The rights adjustment does not occur where an offer to acquire shares is determined to be a Qualified Offer. A Qualified Offer is an offer for all outstanding shares on terms determined by a majority of the Company’s directors as being in the best interest of the Company and its shareholders. |
25
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
13 | Corporate income taxes payable |
a) | The following table reconciles income taxes calculated at a combined Canadian federal/provincial tax rate with the income tax recovery in the consolidated financial statements: |
2004 | 2003 | 2002 | |||||
---|---|---|---|---|---|---|---|
Combined statutory rate | 39 | % | 39 | % | 39 | % | |
$ | $ | $ | |||||
Income taxes at statutory rate | (1,984 | ) | (1,448 | ) | (1,442 | ) | |
Tax effect of | |||||||
Future tax asset not recognized | 1,984 | 1,448 | 1,435 | ||||
Recovery of income taxes from prior | |||||||
years | -- | -- | 115 | ||||
Non-deductible amounts and | |||||||
other - net | -- | -- | 7 | ||||
Recovery of income taxes | -- | -- | 115 | ||||
The Company has non-capital losses totalling approximately $24,885,575 (2003 —$31,025,910; 2002 — $25,032,000) that may be applied against future taxable income. The potential tax benefits arising from these losses have not been recorded in the financial statements to the extent that the Company believes that they are recoverable. The right to claim these losses began to expire in 2004. In addition, the Company has capital losses totalling approximately $4,038,042 available to offset future capital gains (2003 — $3,661,842; 2002 — $2,935,000). |
b) | The net future income tax balance comprises the following: |
2004 $ | 2003 $ | ||||
---|---|---|---|---|---|
Future income tax assets | |||||
Non-capital losses | 9,452 | 11,787 | |||
Capital losses | 745 | 694 | |||
Distribution rights | 2,055 | 1,399 | |||
Share issue costs | (73 | ) | -- | ||
Property, plant and equipment | 1,561 | 1,491 | |||
Net future income tax asset | 13,740 | 15,371 | |||
Less: Valuation allowance | (13,740 | ) | (15,371 | ) | |
- | - | ||||
14 | Related party transactions |
In the ordinary course of business, the Company enters into transactions with related parties. All related party transactions are recorded at their exchange amounts. |
26
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
During the year ended December 31, 2004, the Company paid $168,000 (2003 — $137,000; 2002 — $118,500) for the lease of its office premises to a limited partnership in which certain directors and a company with common directors own limited partnership interests. In addition, the Company in 2003 received a deposit of $200,000 from related parties on the building held for sale. In 2004, the building held for sale was sold to a non-related party and the $200,000 was reclassified to short-term debt. |
Also see notes 6 and 15(c). |
15 | Commitments and contingencies |
a) | Operating leases |
The Company has entered into operating leases for certain office equipment and premises (note 14). Total payments required under these leases are as follows: |
$ | |||
---|---|---|---|
2005 | 171 | ||
2006 | 131 | ||
2007 | 14 | ||
2008 | 14 | ||
2009 and thereafter | 22 |
b) | Purchase commitments |
At December 31, 2004, the Company has inventory purchase commitments of $nil (2003 — $131,299). |
c) | Consulting contracts |
The Company has contracts for terms of three to five years with certain senior officers, directors or companies controlled by them. These contracts require the Company to pay consulting fees totalling approximately $557,000 (2003 — $520,000) per year. The contracts also require the Company to assume certain monetary obligations to the senior officers, directors and/or companies controlled by them in the event of termination of the contracts by the Company without cause. During 2001, the shareholders approved the amendment of certain of the consulting contracts to reduce the ongoing fees payable. In exchange, the Company paid to the companies controlled by the applicable directors/officers a total of $418,000 in cash and $64,000 in common shares of a publicly traded company. The Company is recognizing the expense related to the deferred charge over five years, the term of the original contracts. During 2004, the Company expensed $106,000 (2003 — $106,000; 2002 — $80,000) of the deferred charge and recorded $128,000 (2003 — $119,000; 2002 — $97,000) as a current prepaid item, leaving a balance of $116,000 (2003 — $257,000; 2002 — $306,000) as long-term prepaid contracts. |
d) | Dispute with Ralph Moyal |
In April 1997, a claim was filed in the Ontario Supreme Court against the Company, the Company’s Ontario subsidiary, Blue Mountain Springs Ltd. (Blue Mountain), and Gerry McGrath. The plaintiff, Ralph Moyal (Moyal), is seeking various declaratory relief relating to his claim of entitlement to shares in |
27
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
Blue Mountain and certain property interests owned by Blue Mountain. In connection therewith, Moyal is seeking an order setting aside the share purchase agreement (the Share Purchase Agreement) pursuant to which the Company acquired Blue Mountain for CA$4,500,000, of which CA$1,750,000 remains outstanding (note 9) to the vendors thereof, Jeanette McGrath and Shari-Anne Dudart (the Vendors), who are the daughters of the defendant, Gerry McGrath. The Company is defending the action on the basis that it was not involved in, nor did it have any knowledge of, the events upon which Moyal makes his claim of entitlement to an interest in Blue Mountain or its properties, and on the basis that it is a bona fide purchaser for value of the shares in Blue Mountain without notice or knowledge of any defect or deficiency in title thereto. In addition, the Company has asserted a claim against the Vendors for contribution and indemnity in accordance with its rights under the Share Purchase Agreement by which it acquired the shares in Blue Mountain. The Company has delivered a statement of defence, counterclaim and crossclaim in which it has claimed damages against Moyal, as a result of the registration of the certificate of pending litigation, the right to set off any and all damages, costs and interests incurred as against amounts owing to the Vendors (in accordance with its rights under the Share Purchase Agreement) and declaratory relief against the lawyers for Gerry McGrath and Moyal who were involved in the transactions. In connection with the Share Purchase Agreement, the Company has withheld certain payments to the Vendors based on the Company’s indemnity and set off rights thereunder and as a result of certain undischarged encumbrances and outstanding matters that the Vendors have not attended to in connection with the Company’s purchase of Blue Mountain. The trial of these claims is presently scheduled to be heard in April 2005, however, in March 2005, Moyal obtained an adjournment of the trial to a date which has yet to be set, although it is anticipated that the trial will be rescheduled for the fall of 2006 or the spring of 2007. Based on the facts and the indemnity and set off rights that the Company has against the Vendors, the Company believes that no accrual is required. |
The Company has incurred approximately CA$963,000 to date, of which approximately CA$20,000 was incurred in the current year for legal fees in relation to this matter that the Company expects to be able to apply toward any amounts due upon settlement. The legal fees have been expensed in the periods in which they were incurred. |
e) | Dispute with D. Bruce Horton and Continental Consulting Ltd. |
In August 1999, a claim was filed against the Company in the Supreme Court of British Columbia by D. Bruce Horton and his company, Continental Consulting Ltd. (Continental). Mr. Horton is claiming compensation from the Company for allegedly constructively dismissing him as an officer of the Company. Continental is claiming compensation from the Company alleging that the Company terminated its management agreement without cause. Mr. Horton and Continental are claiming an aggregate of CA$2.4 million plus interest and costs. The Company does not accept Mr. Horton’s and Continental’s allegations, and has filed statements of defence and has further filed counterclaims against Mr. Horton and Continental for monies owed and damages. The Company has made an accrual based on its expected costs. |
f) | Ordinary course business proceedings |
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. Management is of the opinion that such claims will not have a material adverse effect on the Company’s future operations or financial position. |
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Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
g) | With respect to the long-term indebtedness assumed by the purchaser of the private label co-pack bottling business during the year ended December 31, 2001, the Company’s subsidiary, CC Beverage, still remains as the primary borrower; however, the purchaser is under an obligation to obtain a release of such indebtedness. The purchaser holds a letter of credit with a United States bank to secure the long-term indebtedness. The Company has assessed its liability under this guarantee and determined the fair value to be $nil. |
16 | Pension costs and obligations |
As of December 31, 2003, the Company discontinued its defined contribution pension plans for employees. The pension costs were charged to operations as the contributions became due. Contributions were based upon a set percentage of salary. |
Total pension expense for the year ended December 31, 2004 was $nil (2003 — $28,000; 2002 — $47,000). |
17 | Supplementary cash flow information |
2004 $ | 2003 $ | 2002 $ | |||||
---|---|---|---|---|---|---|---|
a) Items not involving cash | |||||||
Writedown of distribution rights (note 8) | 1,536 | 500 | -- | ||||
Loss on sale of assets held for sale | 56 | 328 | 97 | ||||
Inventory written down | -- | 542 | 307 | ||||
Property, plant and equipment written down | 721 | 272 | 942 | ||||
Amortization of property, plant and equipment | 130 | 294 | 422 | ||||
Stock-based compensation | 23 | 13 | -- | ||||
Interest accretion on convertible debenture | |||||||
and short-term debt | 68 | 53 | 18 | ||||
Gain on settlement of convertible debenture | |||||||
(note 10) | -- | (81 | ) | -- | |||
2,534 | 1,921 | 1,786 | |||||
b) Changes in non-cash working capital balances related to operations | |||||||
Accounts receivable | 263 | 328 | 1,143 | ||||
Inventories | 106 | 1,267 | (442 | ) | |||
Prepaid expenses, deposits and other assets | (15 | ) | 95 | (160 | ) | ||
Prepaid contracts | 141 | 73 | (242 | ) | |||
Accounts payable and accrued liabilities | 697 | 206 | (1,552 | ) | |||
Related party liability | -- | 200 | -- | ||||
Customer deposits | (98 | ) | (164 | ) | -- | ||
1,094 | 2,005 | (1,253 | ) | ||||
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Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
2004 $ | 2003 $ | 2002 $ | |||||
---|---|---|---|---|---|---|---|
c) Non-cash investing and financing activities | |||||||
Gain on the settlement of convertible debenture (note 10) | -- | 81 | -- | ||||
Debt assumed by purchase of Cascade Clear | -- | -- | 2,219 | ||||
Settlement of prepaid contracts from disposal | |||||||
of long-term investment (note 15(c)) | -- | -- | 64 | ||||
Related party liability reclassified to | |||||||
short-term debt | (200 | ) | -- | -- | |||
Prior period adjustment - stock options | 523 | -- | -- | ||||
Equity component of shares issued with | |||||||
short-term debt | 102 | -- | -- | ||||
Equity component of warrants issued with | |||||||
short-term debt | 6 | -- | -- | ||||
431 | 81 | 2,283 | |||||
18 | Segmented information |
The presentation of the segmented information is based on the way that management organizes the business for making operating decisions and assessing performance. The Company operates solely in the beverage industry, selling flavoured water and carbonated beverages, and management uses geographic areas to monitor the business. The “other” segment represents sales outside North America. Management evaluates the performance of each segment based on the earnings (loss) from operations before the writedown of property, plant and equipment. |
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Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
The transactions between segments are measured at the exchange value, which is the amount of consideration established and agreed to by each segment. |
2004 $ | 2003 $ | 2002 $ | |||||
---|---|---|---|---|---|---|---|
Sales | |||||||
Canada | |||||||
Total sales | 2,063 | 2,541 | 2,733 | ||||
Less: Sales to other segments | -- | -- | (2 | ) | |||
Sales to external customers | 2,063 | 2,541 | 2,731 | ||||
United States | |||||||
Total sales | 10,805 | 12,355 | 20,157 | ||||
Less: Sales to other segments | (1,942 | ) | (2,088 | ) | (2,668 | ) | |
Sales to external customers | 8,863 | 10,267 | 17,489 | ||||
Other | |||||||
Sales to external customers | 660 | 462 | 536 | ||||
Total sales to external customers | 11,586 | 13,270 | 20,756 | ||||
Interest expense on operating line of credit and | |||||||
long-term debt | |||||||
Canada | 160 | 53 | 15 | ||||
United States | 66 | 92 | 43 | ||||
226 | 145 | 58 | |||||
Amortization | |||||||
Canada | 52 | 182 | 315 | ||||
United States | 78 | 112 | 107 | ||||
130 | 294 | 422 | |||||
Loss before income taxes, amortization of | |||||||
intangible assets and writedown of property, | |||||||
plant and equipment | |||||||
Canada | (1,168 | ) | (1,213 | ) | (1,419 | ) | |
United States | (1,661 | ) | (2,107 | ) | (1,716 | ) | |
Other | -- | 379 | 379 | ||||
(2,829 | ) | (2,941 | ) | (2,756 | ) | ||
Writedown of property, plant and equipment | (721 | ) | (272 | ) | (942 | ) | |
Writedown of distribution rights | (1,536 | ) | (500 | ) | -- | ||
Loss for the year before income taxes | (5,086 | ) | (3,713 | ) | (3,698 | ) | |
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Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
2004 $ | 2003 $ | ||||
---|---|---|---|---|---|
Assets | |||||
Canada | 2,695 | 3,607 | |||
United States | 1,043 | 2,734 | |||
Other | 28 | 28 | |||
3,766 | 6,369 | ||||
Assets held for sale | |||||
Canada | 415 | 387 | |||
United States | -- | 600 | |||
415 | 987 | ||||
Total assets | 4,181 | 7,356 | |||
Property, plant and equipment additions | |||||
Canada | 2 | -- | |||
United States | 42 | -- | |||
44 | -- | ||||
With respect to third parties, the Company has two customers (2003 — one customer) that represent more than 10% of sales. Sales are on an unsecured open account basis under specific credit terms. The agreements allow the Company to make alternative distribution arrangements within the relevant territories under certain conditions, including a business failure of a distributor. |
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Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
19 | Reconciliation to accounting principles generally accepted in the United States of America |
As disclosed in the summary of significant accounting policies, these consolidated financial statements are prepared in accordance with Canadian GAAP which differs in certain respects from those principles and practices the Company would have followed had its consolidated financial statements been prepared in accordance with U.S. GAAP. |
Under U.S. GAAP, the Company would report its consolidated financial statements as follows:
Consolidated balance sheets |
2004 | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|
Canadian GAAP $ | U.S. GAAP $ | Canadian GAAP $ | U.S. GAAP $ | ||||||
Assets | |||||||||
Current assets | 1,369 | 1,369 | 1,772 | 1,772 | |||||
Non-current assets (note a) | 2,812 | 2,826 | 5,584 | 5,584 | |||||
4,181 | 4,195 | 7,356 | 7,356 | ||||||
Liabilities | |||||||||
Bank indebtedness | 272 | 272 | 478 | 478 | |||||
Accounts payable and accrued liabilities | 4,150 | 4,150 | 3,453 | 3,453 | |||||
Related party liability | -- | -- | 200 | 200 | |||||
Customer deposits | 69 | 69 | 167 | 167 | |||||
Short-term debt | 1,248 | 1,248 | 134 | 134 | |||||
5,739 | 5,739 | 4,432 | 4,432 | ||||||
Long-term debt (note b) | 1,957 | 1,878 | 1,799 | 1,786 | |||||
7,696 | 7,617 | 6,231 | 6,218 | ||||||
Shareholders' (Deficiency) Equity | |||||||||
Capital stock | 58,590 | 58,590 | 58,272 | 58,272 | |||||
Warrants | 165 | 165 | 190 | 190 | |||||
Options granted to non-employees | 36 | 36 | 13 | 13 | |||||
Equity component of convertible debenture | |||||||||
(note b) | 26 | 155 | 26 | 155 | |||||
Contributed surplus (note b) | 810 | 965 | 256 | 411 | |||||
Cumulative translation account | (1,253 | ) | (1,253 | ) | (1,352 | ) | (1,352 | ) | |
Deficit | (61,889 | ) | (62,080 | ) | (56,280 | ) | (56,551 | ) | |
(3,515 | ) | (3,422 | ) | 1,125 | 1,138 | ||||
4,181 | 4,195 | 7,356 | 7,356 | ||||||
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Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
Consolidated statements of operations |
2004 $ | 2003 $ | 2002 $ | |||||
---|---|---|---|---|---|---|---|
Loss for the year under Canadian GAAP | (5,086 | ) | (3,713 | ) | (3,583 | ) | |
Gain on settlement of convertible debenture under | |||||||
Canadian GAAP (note b) | -- | (81 | ) | -- | |||
Loss on settlement of convertible debenture under | |||||||
U.S. GAAP (note b) | -- | (104 | ) | -- | |||
Difference in interest accretion under | |||||||
U.S. GAAP (note b) | 60 | (148 | ) | 5 | |||
Unrealized gain on long-term investment | |||||||
(note a) | 14 | -- | -- | ||||
Loss for the year under U.S. GAAP | (5,012 | ) | (4,046 | ) | (3,578 | ) | |
Recovery on disposal of investment (note c) | -- | -- | 48 | ||||
Foreign currency translation adjustments | 6 | 36 | (30 | ) | |||
Comprehensive loss under U.S. GAAP (note d) | (5,006 | ) | (4,010 | ) | (3,560 | ) | |
No differences arise between U.S. and Canadian GAAP in the presentation of the cash flow statement. |
a) | Unrealized holding gains (losses) |
Under U.S. GAAP, the long-term investments in publicly traded companies would be shown at fair market value. Unrealized holding gains or losses are recorded in other comprehensive income. Under Canadian GAAP, such long-term investments are recorded at cost less any impairment in value that is other than temporary. The difference between the carrying value and the fair market value of these investments was $14,000 at December 31, 2004 (2003 — $nil; 2002 — $nil). |
b) | Convertible debenture |
During 2002, under U.S. GAAP, the proceeds of $424,000 for the convertible debenture were allocated between the debt and detachable warrants based upon fair value using the Black-Scholes model. The assumptions used in calculating the fair value were the same as in note 12. The fair value of the warrants, $155,000, and the balance of $269,000 were allocated to the liability component and the beneficial conversion feature. |
Value was allocated to the beneficial conversion feature associated with the convertible debenture. Based upon the allocated proceeds, the intrinsic conversion price was less than the commitment price. As a result, $155,000 was attributed to the beneficial conversion feature and the balance of $115,000, at the date of issuance of the convertible debenture, was recorded as the liability component. The amount was fully accreted in the prior year. The conversion feature expired December 2004 and $155,000 has been reclassified to contributed surplus as a result. |
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Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
On December 1, 2003, the terms of the convertible debenture were modified; refer to note 10. As a result of the modification and the differences in allocations, as discussed above, a loss on settlement of $104,000 resulted under U.S. GAAP. The discount is being accreted over the term of the modified debt resulting in an interest recovery of $34,000 (2003 — $6,000; 2002 — $nil) under U.S. GAAP. |
c) | Recovery on disposal of investment |
During the year ended December 31, 2002, the Company disposed of an investment at net book value resulting in a recovery of $48,000. The investment had previously been marked to market with the unrealized loss recognized in comprehensive income (loss) by $48,000. |
d) | Comprehensive income (loss) |
Comprehensive income is defined as the change in equity from transactions and other events and circumstances other than those resulting from investments by owners and distributions to owners. Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). The accumulated balance of other comprehensive income is included in the equity section of the balance sheets. The Company’s other comprehensive income consists of foreign exchange adjustments. |
e) | Advertising costs |
U.S. GAAP requires separate disclosure of advertising costs. During the year ended December 31, 2004, the Company spent $1,493,213 on advertising (2003 — $1,461,842; 2002 — $2,158,000). |
f) | Stock-based compensation |
During the years ended December 31, 2000 and December 31, 2003, the Company repriced previously granted director, officer and employee options and, as a result, is required to use variable accounting for these stock options under U.S. GAAP. The exercise price exceeded the market value of the shares at the end of the year; therefore, no charge has been recorded since that time. Canadian GAAP did not require this treatment for those years. See notes 2 and 3. |
g) | Recent Accounting Pronouncements |
In December 2004, the Financial Accounting Standard Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 153 — Exchanges of Non-Monetary Assets —An amendment of APB 29. This statement amends APB 29, which is based on the principle that exchanges of non-monetary assets should be measured at the fair value of the assets exchanged with certain exceptions. SFAS 153 eliminates the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This statement is effective for non-monetary asset exchanges occurring in fiscal periods beginning on or after June 15, 2005. |
In December 2004, the FASB issued SFAS 123R — Accounting for Stock-Based Compensation. This statement supersedes APB 25 and eliminates the option to use the intrinsic value method for valuing stock-based compensation. |
35
Notes to Consolidated Financial Statements
December 31, 2004, 2003 and 2002 (amounts in tables are in thousands of United States dollars, except where indicated)
20 | Subsequent events |
a) | In January 2005, the Company issued 465,000 private placement shares at a price of CA$0.25 per share, generating proceeds of CA$116,250. |
b) | On February 9, 2005, the Company completed short-term financing arrangements with BG Capital Group Ltd. (BG Capital). BG Capital has advanced US$1,000,000 to the Company under a secured loan agreement and demand note (the BG Capital Loan). The BG Capital Loan bears interest at a rate of 10% per annum and is payable within 90 days, if demand for repayment is made by BG Capital. As well, from the Company’s perspective, if it chooses to seek additional financing from any third parties, then it will be required to pay a penalty or break fee to BG Capital. Such penalty would require the Company to pay all accrued and unpaid interest at the time of such prepayment of the BG Capital Loan at a rate of 50% per annum. |
c) | As of February 17, 2005, the Company’s common shares were listed and began trading on the Canadian Trading and Quotation System Inc. (CNQ) under the trading symbol “CCBC”. Concurrently, the Company voluntarily delisted its shares from the Toronto Stock Exchange (TSX). The TSX had previously advised the Company that it was not meeting the TSX’s continued listing requirements. The shares of the Company also trade in the United States on the OTC Bulletin Board under the trading symbol “CCBC”. |
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ITEM 19. EXHIBITS AND INDEX
EXHIBIT | DESCRIPTION |
31.1 | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-0xley Act of 2002 |
32.2 | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-0xley Act of 2002 |
37
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F/A and has duly caused and authorized the undersigned to sign this annual report on Form 20-F/A Amendment No. 1 on its behalf.
CLEARLY CANADIAN BEVERAGE CORPORATION
(Company)
(signed) "Douglas L. Mason"
Douglas L. Mason
Chairman
DATED October 11, 2005.
38