U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
For the transition period from ___________ to __________
Commission file number 0-27953
COLUMBUS NETWORKS CORPORATION
(Exact name of small business issuer as specified in its charter)
NEVADA 98-0187538
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
#305 - 478 BERNARD AVENUE, KELOWNA, BRITISH COLUMBIA, CANADA V1Y 6N7
(Address of principal executive offices)
(250) 860-6476
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date:
24,889,323 SHARES OF COMMON STOCK, $.001 PAR VALUE, AS OF
MARCH 31, 2002
Transitional Small Business Disclosure Format (check one); Yes [ ] No [ X ]
COLUMBUS NETWORKS CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(A DEVELOPMENT STAGE ENTERPRISE)
MARCH 31, 2002
2
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
(Expressed in United States Dollars)
=============================================================================================================================
March 31, June 30,
2002 2001
- ------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
CURRENT
Accounts receivable $ 27,094 $ 92,412
Receivable from directors 10,713 20,131
Prepaid expenses and deposits 56,498 15,378
--------------- ---------------
Total current assets 94,305 127,921
FIXED ASSETS 167,178 112,952
WEB-SITE DEVELOPMENT 52,635 25,797
--------------- ---------------
TOTAL ASSETS $ 314,118 $ 266,670
==============================================================================================================================
- CONTINUED -
The accompanying notes are an integral part of these consolidated
financial statements.
3
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
(Expressed in United States Dollars)
==============================================================================================================================
March 31, June 30,
2002 2001
- ------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
CONTINUED...
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT
Bank indebtedness (Note 3) $ 22,102 $ 7,084
Accounts payable and accrued liabilities 307,854 254,794
Unearned revenue 160,769 153,969
Debt 60,350 80,165
Loans payable - 77,939
Convertible promissory notes (Note 4) 224,715 183,778
--------------- ---------------
Total current liabilities 775,790 757,729
--------------- ---------------
COMMITMENTS (Note 7)
STOCKHOLDERS' DEFICIENCY
Capital stock (Note 5)
Authorized
1,000,000 preferred shares with a par value of $0.01 per share
50,000,000 common shares with a par value of $0.001 per share
Issued
24,889,323 common shares (June 30, 2001 - 20,859,323) 24,889 20,859
Additional paid-in capital 1,396,520 641,033
Subscription for shares 42,677 250,000
Deficit accumulated during the development stage (1,930,235) (1,407,428)
Accumulated other comprehensive income 4,477 4,477
--------------- ---------------
Total stockholders' deficiency (461,672) (491,059)
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 314,118 $ 266,670
==============================================================================================================================
NATURE OF OPERATIONS (Note 1)
The accompanying notes are an integral part of these
consolidated financial statements.
4
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
(Unaudited)
==============================================================================================================================
Period From
Inception on
March 3, Three Month Three Month Nine Month Nine Month
1999 to Period Ended Period Ended Period Ended Period Ended
March 31, March 31, March 31, March 31, March 31,
2002 2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------
REVENUE
Fees $ 311,836 $ 70,485 $ 37,956 $ 156,301 $ 90,176
Interest and other income 2,352 - - - 327
-------------- -------------- -------------- -------------- --------------
314,188 70,485 37,956 156,301 90,503
EXPENSES (Schedule) (2,244,243) (147,563) (366,537) (679,108) (861,090)
-------------- -------------- -------------- -------------- --------------
LOSS FOR THE PERIOD $ (1,930,235) $ (77,078) $ (328,581) $ (522,807) $ (770,587)
==============================================================================================================================
BASIC AND DILUTED LOSS PER SHARE $ (0.01) $ (0.02) $ (0.02) $ (0.05)
==============================================================================================================================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 24,889,323 20,859,323 23,447,170 15,252,518
==============================================================================================================================
The accompanying notes are an integral part of these
consolidated financial statements.
5
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
CONSOLIDATED SCHEDULE OF EXPENSES
(Expressed in United States Dollars)
(Unaudited)
==============================================================================================================================
Period From
Inception on
March 3, Three Month Three Month Nine Month Nine Month
1999 to Period Ended Period Ended Period Ended Period Ended
March 31, March 31, March 31, March 31, March 31,
2002 2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------
Advertising and promotion 59,539 19 13,092 3,513 29,430
Amortization - fixed assets 71,180 11,493 7,169 37,126 18,225
Amortization
- web-site development 43,069 5,936 4,151 11,987 8,139
Automotive 72,738 6,857 3,700 16,201 25,199
Bank charges 6,744 (949) 770 3,542 1,940
Conferences 77,625 - 29,975 4,490 56,130
Consulting 191,771 6,839 33,145 104,713 59,209
Exchange gain (7,399) 317 (969) (5,686) (969)
Inducement fee 18,996 - - - -
Insurance 1,878 385 247 654 318
Interest 40,169 10,669 29,500 10,669 29,500
Internet fees 67,583 10,422 6,946 22,846 22,142
Licences, fees and dues 4,318 - 466 - 835
Loss on settlement of liabilities 12,874 - - 12,874 -
Office 107,485 1,882 8,503 8,387 33,807
Professional fees 236,400 21,610 23,487 58,861 111,438
Rent 84,669 15,072 8,836 39,924 21,871
Repairs and maintenance 7,523 238 2,913 1,302 7,032
Telephone 43,345 3,702 11,088 12,748 17,099
Training 1,022 - - - -
Travel 91,403 1,000 33,477 5,861 58,290
Wages and benefits 1,008,933 52,071 150,041 329,096 361,455
Web-site development 2,558 - - - -
-------------- -------------- -------------- -------------- --------------
$ 2,244,423 $ 147,563 $ 366,537 $ 679,108 $ 861,090
==============================================================================================================================
The accompanying notes are an integral part of these
consolidated financial statements.
6
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(Expressed in United States Dollars)
(Unaudited)
====================================================================================================================================
Capital Stock
--------------------------- Deficit
Accumulated Accumulated Total
Number of Additional During the Comprehensive Stockholders'
Common Paid-in Subscription Development Other Equity
Shares Amount Capital for Shares Stage Income (Deficiency)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 3, 1999 - $ - $ - $ - $ - $ - $ -
Shares issued for
acquisition of assets 7,867,514 7,868 (7,866) - - - 2
Shares issued for cash 2,574,822 2,575 301,355 - - - 303,930
Shares issued for cash 114,437 114 13,394 - - - 13,508
Subscription for shares - - - 1,689 - - 1,689
Share issue costs - - (24,262) - - - (24,262)
Cumulative translation
adjustment - - - - - 2,036 2,036
Loss for the period - - - - (241,191) - (241,191)
------------ ------------ ------------ ------------ ----------- ------------ ------------
BALANCE, JUNE 30, 2000 10,556,773 10,557 282,621 1,689 (241,191) 2,036 55,712
Shares issued for
acquisition of assets 143,046 143 16,678 - - - 16,821
Shares issued upon conversion
of share subscriptions 14,305 14 1,675 (1,689) - - -
Shares issued for cash 812,214 812 94,695 - - - 95,507
Shares issued for services 429,137 429 50,035 - - - 50,464
Shares issued for services 3,000,000 3,000 349,784 - - - 352,784
Shares issue costs - - (404,507) - - - (404,507)
Share held by Golden River
shareholders prior to
recapitalization 5,903,848 5,904 176,152 - - - 182,056
transaction
Subscriptions for shares - - - 250,000 - - 250,000
Warrants granted to share
subscribers - - 44,400 - - - 44,400
Warrants issued as discount
on loans payable - - 29,500 - - - 29,500
Cumulative translation
adjustment - - - - - 2,441 2,441
Loss for the year - - - - (1,166,237) - (1,166,237)
------------ ------------ ----------- ------------ ----------- ------------ ------------
BALANCE, JUNE 30, 2001 20,859,323 20,859 641,033 250,000 (1,407,428) 4,477 (491,059)
Share issue costs - - (9,738) - - - (9,738)
Subscription for units - - - 508,401 - - 508,401
Shares cancelled (400,000) (400) 400 - - - -
Shares issued for
acquisition
of web-site 250,000 250 12,250 - - - 12,500
Shares issued for services
and services to be
rendered 600,000 600 40,431 - - - 41,031
Shares issued upon
conversion of share
subscriptions 3,580,000 3,580 712,144 (715,724) - - -
Loss for the period - - - - (522,807) - (522,807)
------------ ------------ ----------- ------------ ----------- ------------ -------------
BALANCE, MARCH 31, 2002 24,889,323 $ 24,889 $ 1,396,520 $ 42,677 $(1,930,235) $ 4,477 $ (461,672)
====================================================================================================================================
The accompanying notes are an integral part of these
consolidated financial statements.
7
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
(Unaudited)
==============================================================================================================================
Period From
Inception on
March 3, Nine Month Nine Month
1999 to Period Ended Period Ended
March 31, March 31, March 31,
2002 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (1,930,235) $ (522,807) $ (770,587)
Non-cash items:
Amortization 114,249 49,113 26,364
Loss on settlement of liabilities 12,874 12,874 -
Warrants issued as discount on loans payable recorded as interest 29,500 - 29,500
Shares issued for services 6,500 6,500 -
Changes in non-cash working capital items:
Accounts receivable (27,094) 65,318 (7,024)
Prepaid expenses and deposits 31,229 (6,589) 32,240
Accounts payable and accrued liabilities 181,773 57,684 59,640
Unearned revenue 160,769 6,800 15,470
--------------- -------------- --------------
Net cash used in operating activities (1,420,435) (331,107) (614,397)
--------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in payable to directors - - (825)
Issuance of common shares, net of share issue costs 292,377 (9,738) 88,184
Proceeds from subscriptions for shares 775,807 444,873 250,000
Proceeds from debt 19,815 - 19,032
Loans payable 26,215 (51,724) 30,451
Issuance of convertible promissory notes 224,715 40,937 -
Bank indebtedness 22,102 15,018 -
--------------- -------------- --------------
Net cash provided by financing activities 1,361,031 439,366 386,842
--------------- -------------- --------------
- CONTINUED -
The accompanying notes are an integral part of these
consolidated financial statements.
8
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
(Unaudited)
==============================================================================================================================
Period From
Inception on
March 3, Nine Month Nine Month
1999 to Period Ended Period Ended
March 31, March 31, March 31,
2002 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------
CONTINUED...
CASH FLOWS FROM INVESTING ACTIVITIES
Business combination 362,632 - 362,632
Receivable from directors (10,713) 9,418 (25,743)
Purchase of fixed assets (230,609) (91,352) 76,199)
Web-site development costs capitalized (66,383) (26,325) (12,739)
--------------- -------------- --------------
54,927 (108,259) 247,951
--------------- -------------- --------------
EFFECT OF CHANGE IN EXCHANGE RATES ON CASH BALANCES 4,477 - 2,441
--------------- -------------- --------------
INCREASE IN CASH FOR THE PERIOD - - 22,837
CASH, BEGINNING OF PERIOD - - 31,986
--------------- -------------- --------------
CASH, END OF PERIOD $ - $ - $ 54,823
==============================================================================================================================
SUPPLEMENTARY INFORMATION:
Interest paid $ 10,669 $ 10,669 $ -
Income taxes paid - - -
==============================================================================================================================
SUPPLEMENTAL DISCLOSURE FOR NON-CASH FINANCING AND INVESTING ACTIVITIES (Note 6)
The accompanying notes are an integral part of these
consolidated financial statements.
9
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
NINE MONTH PERIOD ENDED MARCH 31, 2002
================================================================================
1. NATURE OF OPERATIONS
The Company was incorporated on June 17, 1997 under the laws of the
State of Nevada and its principal business activity is developing
electronic recruitment web-sites including educationcanada.com,
educationamerica.net and globalesl.net. The Company earns subscription
fees paid by the employers that use the web-sites to recruit teaching
professionals and is considered to be a development stage company in
accordance with Statement of Financial Accounting Standards No. 7.
Effective November 30, 2000, the Company acquired 100% of the
outstanding common shares of Columbus B.C. As the shareholders of
Columbus B.C. obtained control of the Company through the exchange of
their shares of Columbus B.C. for shares of the Company, the
acquisition of Columbus B.C. has been accounted for in these
consolidated financial statements as a recapitalization of Columbus
B.C. effectively representing an issuance of shares by Columbus B.C.
for the net assets of the Company. Consequently, the consolidated
statements of operations, stockholders' deficiency and cash flows
reflect the results from operations and cash flows of Columbus B.C.,
the legal subsidiary, for the period from its incorporation on March 3,
1999 to June 30, 2001 combined with those of the Company, the legal
parent, from November 30, 2000.
The accompanying consolidated financial statements have been prepared
by the Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary
to present fairly the consolidated financial position, results of
operations, changes in stockholders' deficiency and cash flows at March
31, 2002 and for the period then ended have been made. These
consolidated financial statements should be read in conjunction with
the audited consolidated financial statements of the Company for the
year ended June 30, 2001. The results of operations for the nine month
period ended March 31, 2002 are not necessarily indicative of the
results to be expected for the year ending June 30, 2002.
2. GOING CONCERN
These consolidated financial statements have been prepared in
accordance with United States generally accepted accounting principles
applicable to a going concern which contemplates the realization of
assets and the satisfaction of liabilities and commitments in the
normal course of business. The general business strategy of the Company
is to continue pursuing debt and equity financing to support operations
until the billing of subscribers of educationcanada.com and
educationamerica.net is sufficient to meet cash flow requirements. The
continued operations of the Company is dependent upon the ability of
the Company to obtain the necessary financing to and upon future
profitable operations. The Company has incurred operating losses and
requires additional funds to meet its obligations and maintain its
operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. These consolidated
financial statements do not include any adjustments that might result
from this uncertainty.
=====================================================================================--=========
March 31, June 30,
2002 2001
------------------------------------------------------------------------------------------------
Deficit accumulated during the development stage $ 1,930,235 $ 1,407,428
Working capital (deficiency) (681,485) (629,808)
================================================================================================
10
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
NINE MONTH PERIOD ENDED MARCH 31, 2002
================================================================================
3. BANK INDEBTEDNESS
=======================================================================
March 31, June 30,
2002 2001
-----------------------------------------------------------------------
Operating line of credit $ 15,936 $ -
Cheques issued in excess of funds on deposit 6,166 7,084
------------------------
22,102 7,084
=======================================================================
The operating line of credit has a maximum of CDN$30,000, bears
interest at prime plus two percent per annum and is secured by a
general security agreement which includes a floating charge over all
the assets of the Company.
4. CONVERTIBLE PROMISSORY NOTES
During the nine month period ended March 31, 2002, the Company issued a
convertible promissory note for proceeds of $50,029 (CDN$80,000). The
note is unsecured, non-interest bearing and due on demand. The note
will bear interest at 15% per annum commencing January 1, 2002. At the
option of the holders, the note can be converted into common shares of
the Company at a price of $0.10 per share. The note does not contain a
beneficial conversion feature as it was convertible at a price greater
than the market price of the Company's common shares at the commitment
date.
The existing convertible promissory notes of $174,686 (CDN$278,240) due
on or before December 31, 2001 have not been repaid by the Company.
Accordingly, the notes will bear interest at 10% per annum commencing
January 1, 2002.
5. CAPITAL STOCK
During the nine month period ended March 31, 2002, the Company entered
into the following capital stock transactions:
a) Issued 250,000 common shares at an agreed value of $12,500 for the
acquisition of a web-site and domain name.
b) Issued 250,000 common shares for services rendered relating to
equity financing of the Company. The fair value of the shares
issued was $25,000. Since these services are considered share
issue costs, the net effect of the transaction is to increase
capital stock by $250 and decrease additional paid-in capital by
$250.
c) Issued 130,000 common shares for services relating to salaries and
wages. The fair value of the shares issued was $6,500.
d) Issued 220,000 common shares for rental services to be provided
relating to the Company's lease of new premises. The fair value of
the shares issued was $34,531 which has been recorded as a prepaid
expense and is being expensed over the term of the lease.
11
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
NINE MONTH PERIOD ENDED DECEMBER 31, 2002
================================================================================
5. CAPITAL STOCK (cont'd...)
e) Issued 3,580,000 common shares of an agreed value of $715,724
in exchange for share subscriptions of $715,724.
f) Cancelled 400,000 common shares voluntarily returned to treasury
for $Nil consideration. The net effect of the transaction is to
decrease capital stock by $400 and increase additional paid-in
capital by $400.
SHARE SUBSCRIPTIONS
During the nine month period ended March 31, 2002, the Company entered
into the following share subscription transactions:
a) Received $200,000 towards the sale of 1,000,000 units at $0.20 per
unit. Each unit consists of one common share and one share
purchase warrant. Each warrant entitles the holder to purchase one
common share at a price of $0.25 per share for a period of two
years from the date of issuance. The 1,000,000 units were issued
during the current nine month period.
b) Received $227,873 towards the sale of 1,380,000 units at $0.17 per
unit. Each unit consists of one common share and one share
purchase warrant. Each warrant entitles the holder to purchase one
common share at a price of $0.25 per share for a period of two
years from the date of issuance. The proceeds were used to prepay
leasehold improvements on the new premises of $66,050 and prepay
rent of $56,143. The remaining proceeds of $105,680 have been used
to fund operations. The 1,380,000 units were issued during the
current nine month period.
c) Converted $16,513 of the loans payable into subscriptions for
100,000 units. Each unit consists of one common share and one
share purchase warrant. Each warrant entitles the holder to
purchase one common share at a price of $0.25 per share for a
period of one year from the date of issuance. The 100,000 units
were issued during the current nine month period.
d) Converted $4,624 of accounts payable into subscriptions for 50,000
common shares with an approximate fair value of $8,500 resulting
in a loss on settlement of $3,876. The 50,000 common shares were
issued during the current nine month period.
e) Converted $19,815 of the debt into subscriptions for 120,000 units
with an approximate fair value of $38,515 resulting in a loss on
settlement of $18,700. Each unit consists of one common share and
one share purchase warrant. Of the 120,000 total share purchase
warrants, 50,000 and 70,000 of the warrants entitle the holder to
purchase one common share at a price of $0.17 and $0.25,
respectively, per share for a period of two years from the date of
issuance. Subscriptions of $12,828 were converted into 50,000
units during the nine month period ended March 31, 2002
consisting of 50,000 common shares and 50,000 warrants exercisable
at a price of $0.17 per share.
12
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
NINE MONTH PERIOD ENDED MARCH 31, 2002
================================================================================
5. CAPITAL STOCK (cont'd...)
SHARE SUBSCRIPTIONS (cont'd...)
f) Received $17,000 towards the sale of 170,000 units at $0.10 per
unit. Each unit consists of one common share and one share
purchase warrant. Each warrant entitles the holder to purchase one
common share at a price of $0.25 per share for a period of two
years from the date of issuance. The units have not yet been
issued.
As a result of settling the above amounts, a loss on settlement of
$22,576, being the fair value of the subscriptions for units and shares
in excess of the carrying amount of the liabilities settled has been
included in the loss for the period. The loss on settlement of $22,576
has been partially offset by $9,702 of loans payable that were forgiven
by the lender resulting in a net loss on settlement of $12,874.
WARRANTS
The following share purchase warrants are outstanding as of March 31,
2002:
=======================================================================
Number Exercise
of Shares Price Expiry Date
-----------------------------------------------------------------------
100,000 $ 0.25 July 27, 2002
50,000 0.17 March 30, 2003
200,000 0.25 July 13, 2003
1,180,000 0.25 July 14, 2003
1,000,000 0.25 July 23, 2003
=======================================================================
During the nine month period ended March 31, 2002, 1,205,000 share
purchase warrants exercisable at $0.40 per share expired.
The fair value of the warrants granted of $18,700 was determined using
the Black Scholes method using the life of the warrants, volatility
factor of 150%, risk free rate of 4% and no assumed dividend rate.
STOCK OPTIONS
There has been no change in the status of the Company's outstanding
stock options during the nine month period ended March 31, 2002.
13
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
(Unaudited)
NINE MONTH PERIOD ENDED MARCH 31, 2002
================================================================================
6. SUPPLEMENTAL DISCLOSURE FOR NON-CASH FINANCING AND INVESTING ACTIVITIES
During the nine month period ended March 31, 2002, the Company entered
into the following non-cash transactions:
a) Issued 250,000 (2001 - 143,046) common shares at an agreed value
of $12,500 (2001 - $16,821) to acquire a web-site and domain name.
b) Issued 3,580,000 (2001 - 14,305) common shares at an agreed value
of $715,724 (2001 - $1,689) in exchange for share subscriptions
received in advance.
c) Issued 600,000 (2001 - 3,429,137) common shares at a fair value of
$41,031 (2001 - $403,248) for services and services to be
provided.
d) Converted $4,624 (2001 - $Nil) of accounts payable into
subscriptions received of $8,500 (2001 - $Nil) resulting in a loss
on settlement of $3,876 (2001 - $Nil).
e) Converted $19,815 (2001 - $Nil) of debt into subscriptions
received of $38,515 (2001 - $Nil) resulting in a loss on
settlement of $18,700 (2001 - $Nil).
f) Converted $16,513 (2001 - $Nil) of loans payable into
subscriptions received of $16,513 (2001 - $Nil).
g) Loans payable of $9,702 (2001 - $Nil) were forgiven by the lender
and partially offset against losses on the settlement of accounts
payable and debt.
7. COMMITMENTS
The Company is committed to future minimum lease payments for operating
leases for premises as follows:
Year ended June 30
2002 $ 8,750
2003 35,000
2004 35,000
2005 35,000
2006 26,250
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Effective November 30, 2000, the Company completed the acquisition of 100% of
the outstanding common shares of Columbus B.C. As the Columbus B.C. shareholders
obtained effective control of the Company through the exchange of their shares
of Columbus B.C. for shares of the Company, the acquisition has been accounted
for in these consolidated financial statements as a reverse acquisition.
Consequently, the consolidated statements of operations and cash flows reflect
the results from operations and changes in financial position of Columbus B.C.,
the legal subsidiary, since inception combined with those of the Company, the
legal parent, from the date of acquisition on November 30, 2000, in accordance
with generally accepted accounting principles for reverse acquisitions. In
addition, the comparative figures are those of Columbus B.C., the legal
subsidiary.
RESULTS OF OPERATIONS
The Company's level of activity was greater during the nine months ended March
31, 2002 as compared to the same period in the prior year primarily due to the
aggressive marketing campaign during fiscal 2001.
During the past nine months, the Company has continued to focus its efforts on
developing and marketing its electronic recruitment websites including
educationcanada.com, educationamerica.net, globalesl.net and teachingjobs.com, a
website acquired in December 2001. Due to the success of the marketing campaign
the Company has discontinued offering the first year's membership free in an
effort to ensure quality of service as the Company grows and to improve the
negative cash position of the Company.
Fee revenue of $156,301 was earned in the nine months ended March 31, 2002 and a
further $160,769 of unearned revenue will be recognized as revenue over the next
fourteen months ended May, 2003. Fee revenue has risen 73% to $156,301 in the
nine months ended March 31, 2002 from $90,176 in the same period ended March 31,
2001 primarily due to expanding the customer base with aggressive marketing in
fiscal 2001 and due to the expiry of the free trial period for many customers.
During the three months ended March 31, 2002, revenues increased 86% from
$37,956 in 2001 to $70,485.
During the nine months ended March 31, 2002, the Company incurred a loss of
$522,807, compared to a loss of $770,587 during the comparable period in fiscal
2001. The loss for the three months ended March 31, 2002 of $77,078 was
significantly less than that of the comparable period of the preceding fiscal
year of $328,581, primarily as a result of the significant decrease in expenses.
The decrease in the loss for each of these respective periods was a result of
increasing revenues and decreasing expenses. A summary of the significant
changes in expenses follows.
During the periods ended March 31, 2002, advertising and promotion has decreased
significantly in fiscal 2002 over fiscal 2001 ($19 as compared to $13,092 for
three months and $3,513 as compared to $29,430 for nine months) as the Company
focused its marketing efforts on regional sales representatives rather than
direct advertising.
Accordingly, both travel costs and conference expenses have decreased
significantly. Travel costs decreased by $52,429 (90%) for the nine-month period
in fiscal 2002 over fiscal 2001 and $32,477 (97%) for the three-month period.
Conference expenses decreased by $51,640 (92%) for the nine-month period and
$29,975 (100%) for the three-month period.
Professional fees decreased in the current period, as compared to fiscal 2001,
since the business combination with Golden River Resources closed in December
2000, causing professional fees to be unusually high in fiscal 2001. The
decreases were $52,577 (47%) for the nine-month period and $1,877 (8%) for the
three-month period.
Consulting fees have increased by $45,504 for the current nine-month period and
decreased by $26,306 for the current three-month period, as compared to fiscal
2001, as the Company hired consultants for the first quarter of fiscal 2002 to
assist it with financing its operations.
Amortization expense has increased by $6,109 (54%) and $22,749 (86%) for the
three and nine-month periods in 2002 over 2001 as the Company continued to
acquire more fixed assets and capitalized website development during 2002.
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Rent has increased in fiscal 2002 over fiscal 2001 as the Company moved into new
larger premises effective October 1, 2001 and its previous lease did not expire
until October 31, 2001. The Company has recently subleased some of its premises
for a monthly rental fee of $750.
Wages and benefits show a decrease of $32,359 (9%) for the nine-month period in
fiscal 2002 over fiscal 2001, but the Company has recently reduced its staff.
Accordingly, wages and benefits decreased by $97,970 (65%) for the three months
ended March 31, 2002 as compared to the previous fiscal year.
FINANCIAL CONDITION
Since inception, the Company has financed its operations through the sale of
equity, membership fees received and short term financing.
In April 2001 the Company began its billing cycle for membership renewals for
educationcanada.com beginning in July 2001. Varying discounts were being offered
for early payment to generate cash flow to meet working capital needs. In
addition, during the nine months ended March 31, 2002 the Company began its
billing cycle for membership renewals for educationamerica.net beginning October
1, 2001 as the first free trial periods expired.
At March 31, 2002, the Company had a working capital deficiency of $681,485 as
compared to a working capital deficiency of $629,808 at June 30, 2001. The
increased deficiency is due primarily to cash outflows continuing to exceed cash
inflows. The negative cash flow from operations decreased from $(614,397) for
the nine-month period ended March 31, 2001 to $(331,107) for the nine-month
period ended March 31, 2002.
The Company's operating losses and working capital deficiency raise substantial
doubt about the Company's ability to continue as a going concern.
PLAN OF OPERATION
Of the current liabilities at March 31, 2002, $307,854 represents trade and
other obligations and $60,350 represents debt that does not have a fixed date
for repayment. The unearned revenue of $160,769 represents membership fees
received that pertain to various periods from April 1, 2002 to May 31, 2003. In
addition, the Company has convertible promissory notes of $174,686 due on or
before December 31, 2001, which have not been repaid. These notes bear interest
at 10% per annum. Another convertible promissory note for $50,029 is due on
demand.
At March 31, 2002 the Company had a balance on its operating line and cheques
issued in excess of funds on deposit totaling $22,102. Management plans to
obtain sufficient working capital from operations by continuing its marketing
efforts using regional sales representatives to attract new customers and by
obtaining external financing to meet the Company's liabilities and commitments
as they become payable over the next twelve months. Management may also attempt
to convert some of its liabilities into equity, as it has done during the six
months ended December 31, 2001. There can be no assurance that management plans
will be successful. Failure to obtain sufficient working capital will cause the
Company to curtail operations.
Management has implemented cost controls, while aggressively increasing its
selling efforts in an effort to achieve positive cash flow. For the nine months
ended March 31, 2002, cash flows from financing activities (principally the sale
of shares) were equal to cash used in operating and investing activities. In
addition, the Company has acquired its leading competitor in the United States,
primarily through the issuance of stock, thereby increasing its market share in
the United States. Accordingly, if the Company can survive its current working
capital deficiency, management believes that its prospects for the future are
promising.
FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-QSB and the Company's
Annual Report on Form 10-KSB for its fiscal year ended June 30, 2001, as well as
statements made by the Company in periodic press releases, oral statements made
by the Company's officials to analysts and shareholders in the course of
presentations about the Company, constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform
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Act of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by the forward looking
statements. Such factors include, among other things, (1) general economic and
business conditions; (2) interest rate changes; (3) the relative stability of
the debt and equity markets; (4) competition; (5) demographic changes; (6)
government regulations particularly those related to Internet commerce; (7)
required accounting changes; (8) equipment failures, power outages, or other
events that may interrupt Internet communications; (9) disputes or claims
regarding the Company's proprietary rights to its software and intellectual
property; and (10) other factors over which the Company has little or no
control.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS: None.
B) REPORTS ON FORM 8-K: On March 14, 2002, the registrant filed a
report on Form 8-K dated January 15, 2002, disclosing under
Item 4, the change in its certifying accountant. No financial
statements were required to be filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
COLUMBUS NETWORKS CORPORATION
(Registrant)
Date: May 17, 2002 By: /S/ DAN COLLINS
-------------------------------------------
Dan Collins, President
(Principal Financial and Accounting Officer)
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