SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) September 8, 2000
NEW HILARITY, INC.
(Exact name of Registrant as specified in its charter)
Nevada 001-03323 91-197860
(State or other jurisdiction Commission (I.R.S. Employer
of incorporation or File number) Identification
organization) Number)
22nd Floor, 161 Bay Street
Canada Trust Tower, BCE Place
Toronto, Ontario, Canada M5J 2S1
(Address of principal (Postal Code)
executive offices)
Registrant's telephone number, including area code: (416) 304-0694
EXPLANATORY NOTE
New Hilarity, Inc. is filing this Amendment No. 1 on Form 8-K/A to
its Current Report on Form 8-K, dated September 8, 2000, solely for the
purpose of filing the financial statements and pro forma financial
information required to be filed in connection with the acquisition of
Orbit Canada, Inc. effected as of September 8, 2000.
Item 7. Financial Statements and Exhibits.
Financial Statements of Businesses Acquired and Pro Forma Financial
Information:
The financial statements and pro forma financial information
required to be filed are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NEW HILARITY, INC.
(Registrant)
Dated: November 21, 2000 By: /s/ Daniel N. Argiros
Name: Daniel N. Argiros
Title: Vice President and
Chief Financial
Officer
ORBIT CANADA INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION TO JULY 31, 2000
(EXPRESSED IN UNITED STATES DOLLARS)
ORBIT CANADA INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION TO JULY 31, 2000
(EXPRESSED IN UNITED STATES DOLLARS)
CONTENTS
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AUDITORS' REPORT 2
FINANCIAL STATEMENTS
Balance Sheet 3
Statement of Operations 4
Statement of Shareholders' Equity 5
Statement of Cash Flows 6
Summary of Significant Accounting Policies 7
Notes to Financial Statements 10
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AUDITORS' REPORT
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF
ORBIT CANADA INC.
We have audited the balance sheet of Orbit Canada Inc. (a development stage
company) as at July 31, 2000 and the statements of operations, shareholders'
equity and cash flows for the period from October 7, 1999 (date of inception) to
July 31, 2000. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards
in the 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 financial statements present fairly, in all material
respects, the financial position of the Company as at July 31, 2000 and the
results of its operations and its cash flows for the period from inception to
July 31, 2000 in accordance with generally accepted accounting principles in the
United States.
(signed) BDO Dunwoody LLP
Chartered Accountants
Toronto, Ontario
November 13, 2000
2
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ORBIT CANADA INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(EXPRESSED IN UNITED STATES DOLLARS)
JULY 31, 2000
- --------------------------------------------------------------------------------
PRO FORMA
(UNAUDITED)
(NOTE 5)
ASSETS
CURRENT
Cash and cash equivalents $ 745,295 $ 357,178
Prepaid expenses 52,361 52,361
GST receivable 72,208 72,208
----------- -----------
869,864 481,747
CAPITAL ASSETS (Note 1) 743,725 743,725
----------- -----------
$ 1,613,589 $ 1,225,472
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable (Note 2) $ 647,251 $ 647,251
Accrued liabilities 26,896 26,896
----------- -----------
674,147 674,147
----------- -----------
SHARES TO BE ISSUED (Note 3) 20,172 20,172
----------- -----------
SHAREHOLDERS' EQUITY
Share capital (Note 3) 66,934 1,137,609
Additional paid in capital 1,458,792 --
Deficit accumulated during development stage (602,508) (602,508)
Accumulated other comprehensive loss - foreign
currency translation (3,948) (3,948)
----------- -----------
919,270 531,153
----------- -----------
$ 1,613,589 $ 1,225,472
================================================================================
On behalf of the Board:
/s/ DOUGLAS LLOYD
- ----------------------------
Douglas Lloyd
Director
/s/ GORDON MCMEHEN
- ----------------------------
Gordon McMehen
Director
The accompanying notes are an integral part of these financial statements
3
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ORBIT CANADA INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(EXPRESSED IN UNITED STATES DOLLARS)
FOR THE PERIOD FROM INCEPTION TO JULY 31, 2000
- --------------------------------------------------------------------------------
REVENUE $ --
-----------
EXPENSES
Advertising and promotion 4,185
Communication 158,020
General and office 90,217
Management fees 151,291
Professional fees 83,134
Rent and occupancy costs 7,487
Travel 40,310
Amortizaton 68,482
-----------
603,126
-----------
LOSS FROM OPERATIONS (603,126)
OTHER
Interest income 618
-----------
NET LOSS FOR THE PERIOD $ (602,508)
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The accompanying notes are an integral part of these financial statements
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ORBIT CANADA INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
(EXPRESSED IN UNITED STATES DOLLARS)
FOR THE PERIOD FROM INCEPTION TO JULY 31, 2000
- --------------------------------------------------------------------------------
ACCUMULATED
COMMON SHARES OTHER
-------------------------- COMPREHENSIVE COMPREHENSIVE
NUMBER AMOUNT DEFICIT LOSS TOTAL LOSS
- -----------------------------------------------------------------------------------
SHARES ISSUED TO FOUNDERS 6,000,001 $ 1 $ -- $ -- $ 1
SHARES ISSUED FOR CASH CONSIDERATION 5,027,401 1,137,608 -- -- 1,137,608
SHARES ISSUED FOR SERVICES RENDERED 390,000 195,000 -- -- 195,000
ISSUE COSTS -- (195,000) -- -- (195,000)
---------------------------------------------------------------------
11,417,402 1,137,609 -- -- 1,137,609
COMPREHENSIVE LOSS
Net loss (602,508) -- (602,508) $(602,508)
Foreign currency translation
adjustments -- -- -- (3,948) (3,948) (3,948)
- -----------
COMPREHENSIVE LOSS $(606,456)
---------------------------------------------------------------------
===========
BALANCE AT JULY 31, 2000 11,417,402 $ 1,137,609 $ (602,508) $ (3,948) $ 531,153
========================================================================================================================
The accompanying notes are an integral part of these financial statements.
5
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ORBIT CANADA INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(EXPRESSED IN UNITED STATES DOLLARS)
FOR THE PERIOD FROM INCEPTION TO JULY 31, 2000
- --------------------------------------------------------------------------------
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net loss for the period $ (602,508)
Adjustments to reconcile net income to net cash
provided by operating activities
Amortization 68,482
Changes in assets and liabilities relating to operations
GST receivable (72,208)
Prepaid expenses (52,361)
Accounts payable 647,251
Accrued liabilities 26,896
Effect of exchange rate changes on cash (3,948)
-----------
11,604
-----------
INVESTING ACTIVITIES
Purchase of capital assets (812,207)
-----------
FINANCING ACTIVITIES
Issuance of common shares 1,137,609
Amount received for shares to be issued 20,172
-----------
1,157,781
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS DURING PERIOD 357,178
CASH AND CASH EQUIVALENTS, beginning of period --
-----------
CASH AND CASH EQUIVALENTS, end of period $ 357,178
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REPRESENTED BY
Cash $ 131,672
Term deposits 225,506
-----------
$ 357,178
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SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid for interest $ 585
SUPPLEMENTARY SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Shares issued for services rendered 195,000
$ 357,178
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The accompanying notes are an integral part of these financial statements.
6
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ORBIT CANADA INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(EXPRESSED IN UNITED STATES DOLLARS)
JULY 31, 2000
- --------------------------------------------------------------------------------
NATURE OF BUSINESS Orbit Canada Inc. (the "Company") was
incorporated on October 7, 1999 in Ontario,
Canada. Since inception the Company's
efforts have been devoted to the
development of its principal products and
raising capital. The Company has not
received any revenues from the sale of its
products or services. Accordingly, through
the date of these financial statements, the
Company is considered to be in the
development stage and the accompanying
financial statements represent those of a
development stage enterprise. The Company
intends to market an internet based long
distance telephone system to Canadian
businesses and individuals. The Company
plans to use the latest radio transmission
technologies for wireless, high speed and
secure Internet access.
BASIS OF FINANCIAL STATEMENTS The accompanying financial statements are
stated in United States dollars, "the
reporting currency". The transactions of
the Company have been recorded during the
period in Canadian dollars, "the functional
currency". The translation of Canadian
dollars in United States dollars amounts
have been made at the period end exchange
rates for the balance sheet items and the
average exchange rate for the period for
revenues, expenses, gains and losses.
Translation adjustments to reporting
currency are included in equity.
These financial statements have been
prepared by management in accordance with
generally accepted accounting principles in
the United States.
ACCOUNTING ESTIMATES The preparation of financial statements in
conformity with generally accepted
accounting principles requires management
to make estimates and assumptions that
affect the reported amounts of assets and
liabilities and disclosure of contingent
assets and liabilities at the date of the
financial statements and the reported
amounts of revenues and expenses during the
reporting period. Actual results could
differ from those estimated.
CAPITAL ASSETS Capital assets are recorded at cost less
accumulated amortization. Amortization is
based on the estimated useful life of the
asset as follows:
Equipment - 20% declining balance basis
Computer equipment - 30% declining balance basis
Furniture and fixtures - 20% declining balance basis
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ORBIT CANADA INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(EXPRESSED IN UNITED STATES DOLLARS)
JULY 31, 2000
- --------------------------------------------------------------------------------
IMPAIRMENT OF ASSETS Management reviews assets for impairment
whenever events or changes in circumstances
indicate that the carrying amount of an
asset may not be recoverable. Management
assesses impairment by comparing the
carrying amount to individual cash flows.
If deemed impaired, measurement and
recording of an impairment loss is based on
the fair value of the asset.
CASH AND CASH EQUIVALENTS Cash and cash equivalents are defined as
highly liquid investments with original
maturities of three months or less and
consist of term deposits.
FAIR VALUES The carrying amounts of financial
instruments of the Company, including cash
and cash equivalents, GST receivable,
accounts payable and accrued liabilities
approximate fair value because of their
short maturity.
INCOME TAXES The Company accounts for income taxes under
the asset and liability method as required
by SFAS No. 109, "Accounting for Income
Taxes", issued by the Financial Accounting
Standards Board ("FASB"). Under this
method, deferred income tax assets and
liabilities are recognized for the future
tax consequences attributable to
differences between the financial reporting
and tax bases of assets and liabilities.
Deferred tax assets and liabilities are
measured using enacted tax rates expected
to apply to taxable income in the years in
which those temporary differences are
expected to be recovered or settled.
EARNINGS PER SHARE Basic earnings (loss) per share is computed
using the weighted average number of common
shares that are outstanding during the
period. Diluted earnings (loss) per share
is computed using the weighted average
number of common and common equivalent
shares outstanding during the period.
Common equivalent shares consist of the
incremental common shares issuable upon the
exercise of the warrants.
CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially
subject the Company to significant
concentration of credit risk consist
primarily of cash and cash equivalents.
These instruments are held at one major
financial institution.
COMPREHENSIVE INCOME In June 1997, the FASB issued SFAS No. 130,
"Reporting Comprehensive Income", which was
adopted by the Company. SFAS No. 130
establishes standards for reporting and
display of comprehensive income and its
components in an entity's financial
statements. Comprehensive income as defined
includes all changes in equity (net assets)
during a period from non-owner sources.
8
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ORBIT CANADA INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(EXPRESSED IN UNITED STATES DOLLARS)
JULY 31, 2000
- --------------------------------------------------------------------------------
RECENTLY ISSUED ACCOUNTING In June 1998, the FASB issued SFAS No. 133,
STANDARDS "Accounting for Derivative Instruments and
Hedging Activities". SFAS No. 133 requires
companies to recognize all derivative
contracts as either assets or liabilities
in the balance sheet and to measure them at
fair value. If certain conditions are met,
a derivative may be specifically designated
as a hedge, the objective of which is to
match the timing of gain or loss
recognition on the hedging derivative with
the recognition of (i) the changes in the
fair value of the hedged asset or liability
that are attributable to the hedged risk or
(ii) the earnings' effect of the hedged
forecast transaction. For a derivative not
designated as a hedging instrument, the
gain or loss is recognized in income in the
period of change. SFAS No. 133, as amended,
is effective for the first fiscal quarter
of all fiscal years beginning after June
15, 2000.
Historically, the Company has not entered
into derivative contracts either to hedge
existing risks or for speculative purposes.
Accordingly, the new standards do not
affect these financial statements.
In March 2000, the Financial Accounting
Standard Board issued FASB Interpretation
No. 44, "Accounting for Certain
Transactions involving Stock Compensation",
an interpretation of APB Opinion No. 25.
Among other things, the Interpretation
requires that stock options that have been
modified to reduce the exercise price be
accounted for as variable. Adoption of this
standard is not expected to have a material
effect on the financial statements.
9
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ORBIT CANADA INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000
- --------------------------------------------------------------------------------
1. CAPITAL ASSETS
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
Equipment $ 791,789 $ 65,974 $ 725,815
Computer equipment 19,370 2,421 16,949
Furniture and fixtures 1,048 87 961
---------------------------------------------
$ 812,207 $ 68,482 $ 743,725
=============================================
- --------------------------------------------------------------------------------
2. ACCOUNTS PAYABLE
Included in accounts payable is approximately $475,000 owed for capital
assets purchased and $5,390 due to a director of the Company and a company
controlled by a shareholder. The remaining amounts included in accounts
payable relates to amounts due to suppliers for expenses incurred in the
course of operations.
- --------------------------------------------------------------------------------
3. SHARE CAPITAL
Authorized
Unlimited Common shares
Issued
11,417,402 Common shares, no par value $ 1,137,609
============
- --------------------------------------------------------------------------------
4. SUBSEQUENT EVENTS
(a) On August 15, 2000, 371,429 warrants were exercised resulting in
371,429 common shares being issued for cash consideration of $325,000.
(b) Effective September 5, 2000, the Company amended its articles of
incorporation to create 2,120,497 non-voting exchangeable shares as
well as an unlimited number of first preference shares. The
exchangeable shares are entitled to a preference over the common shares
and the preference shares with respect to the payment of dividends and
the distribution of assets. The holders of exchangeable shares are
entitled to receive dividends equivalent to dividends declared by New
Hilarity Inc. ("NHI") on its common shares. The holders are entitled at
any time to require the Company to retract any or all of the
exchangeable shares by delivering one NHI common share for each
exchangeable share.
10
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ORBIT CANADA INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000
- --------------------------------------------------------------------------------
4. SUBSEQUENT EVENTS (CONTINUED)
(c) Under a share exchange agreement which became effective September 8,
2000, New Hilarity, Inc, ("NHI"), a Nevada incorporated company that is
an SEC registrant and that trades on Over-the-Counter Bulletin Board,
issued 9,668,334 common shares in exchange for the same number of
common shares issued and outstanding of the Company. The Company also
exchanged its remaining 2,120,497 common shares for the same number of
exchangeable shares. Each exchangeable share can be exchanged into a
common share of NHI. This transactions resulted in a reverse take over,
therefore, giving the shareholders of the Company control of NHI. At
the time of exchange of shares, the existing board of directors of New
Hilarity, Inc. resigned and the directors of the Company were appointed
to the board of New Hilarity, Inc.
(d) In addition, the remaining 3,878,571 warrants of the Company were
exchanged for an equal number of warrants to acquire common shares of
New Hilarity, Inc. Each warrant entitles the holder thereof to acquire
no later than February 20, 2001 one share of New Hilarity's common
stock at an exercise price of $0.875 per share.
(e) On September 20, 2000, 610,000 warrants were exercised for cash
consideration of $533,750. On October 20, 2000, an additional 610,000
warrants were exercised for cash consideration of $533,750.
- --------------------------------------------------------------------------------
5. PRO FORMA
(a) The pro forma balance sheet gives effect to the following transactions
as if they occurred on July 31, 2000:
(i) The exercise of warrants as detailed in note 4 (a);
(ii) The share exchange with NHI as detailed in note 4(c);
(iii) The stock split by NHI as follows:
On September 5, 2000, NHI effected a one-for-five reverse stock split
(the "Reverse Stock Split") whereby the number of then outstanding
common shares of NHI was reduced from 7,989,560 to 1,597,912. As a
result of the Reverse Stock Split, the number of authorized common
shares was reduced from 100,000,000 shares, par value $0.001 per share,
to 20,000,000 shares, par value $0.005 per share.
11
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ORBIT CANADA INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000
- --------------------------------------------------------------------------------
5. PRO FORMA (CONTINUED)
(b) The effect of the above transactions on the pro forma balance sheet are
as follows:
(i) Cash and cash equivalents was increased by $63,117 being the cash
assumed from NHI. Plus $325,000 being the cash received on the
exercise of 371,429 warrants.
(ii) The pro-forma equity section changed as follows:
OTHER
EXCHANGE- COMPREH-
ABLE COMMON PAID IN ENSIVE
SHARES SHARES AMOUNT CAPITAL DEFICIT LOSS TOTAL
-----------------------------------------------------------------------------------------------
Orbit prior to reverse
acquisition (1) -- 11,417,402 $ 1,137,609 $ -- $ (602,508) $ (3,948) $ 535,101
Exercise of warrants
prior to reverse
acquisition (2) -- 371,429 325,000 -- -- -- 325,000
Recapitalization -- -- (1,403,665) 1,403,665 -- -- --
Exchange of common
shares (3) 2,120,497 (2,120,497) -- -- -- -- --
-----------------------------------------------------------------------------------------------
(4) 2,120,497 9,668,334 58,944 1,403,665 (602,508) (3,948) 860,101
NHI prior to reverse
acquisition (5) -- 1,597,912 7,990 55,127 -- -- 63,117
-----------------------------------------------------------------------------------------------
Total 2,120,497 11,266,246 $ 66,934 $ 1,458,792 $ (602,508) $ (3,948) $ 923,218
===============================================================================================
(1) Based on the Company's July 31, 2000 audited financial statements.
(2) Represents the exercise of warrants as per note 4 (a).
(b) (3) Represents the exchange of the Company's common shares for
exchangeable shares as per note 4 (c).
(4) The remaining 9,668,334 common shares of the Company were exchanged
for the same number of common shares of NHI as per note 4 (c).
(5) Based on NHI's unaudited financial statements as at June 30, 2000:
Common shares $ 7,990
Additional paid in capital 539,382
Deficit (484,255)
------------
Equity $ 63,117
============
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ORBIT CANADA INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000
- --------------------------------------------------------------------------------
5. PRO FORMA (CONTINUED)
(c) The weighted average common shares outstanding at July 31, 2000 as used
in the computation of basic earnings per share is represented by the
11,266,246 as shown above. The weighted average common shares
outstanding at July 31, 2000 as used in the computation of fully
diluted earnings per share is represented by the sum of the 11,266,246
as above and the weighted average number of shares of 3,878,571 which
assumes that the warrants were exercised at the Company's inception.
The pro-forma basic and diluted loss per share is $0.05.
The pro forma financial statements may not be indicative of the actual
results of the acquisition. The accompanying pro forma financial
statements should be read in connection with the historical financial
statements of NHI.
- --------------------------------------------------------------------------------
6. INCOME TAXES
The Company has provided a full valuation allowance against deferred tax
assets at July 31, 2000, due to uncertainties in the Company's ability to
utilize its net operating losses. The net operating loss carryforwards in
the amount of approximately $600,000 expire in the year 2007.
13